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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 20-F

|           |  |                                                                                               
|---------- |  | ----------------------------------------------------------------------------------------------
|(Mark One)
|[   ]      |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
|[X]        |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934          
|           |  | For the fiscal year ended: December 31, 2002                                                  
|[   ]      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934      
|           |  | For the transition period from     to                                                         

Commission file number

Hanaro Tongshin Chushik Hoesa

(Exact Name of Registrant as Specified in Its Charter)


Hanaro Telecom, Inc.

(Translation of Registrants Name Into English)


The Republic of Korea(Jurisdiction of Incorporation or Organization)

Kukje Electronics Center Bldg., 23rd Floor
Seocho-dong 1445-3
Seocho-gu
Seoul, Korea 137-728(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
N/A

Securities registered or to be registered pursuant to Section 12(g) of the Act:

|                                                                                                              |  |                                                                    
|------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------
|Title of each class                                                                                           |  | Name of each exchange on which registered                          
|                                                                                                              |  |                                                                    
|                                                                                                             
|Common Shares, par value Won 5,000 per share                                                                  |  | The Korea Securities Dealers Association Automated
Quotation Market
|                                                                                                              |  |                                                                    
|American Depositary Shares, evidenced by American
Depositary Receipts, each representing
one (1) Common Share |  | The Nasdaq National Market                                         

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: N/A

Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of December 31, 2002:

|                                            |  |                                                                                                        
|------------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|Common Stock, par value Won 5,000 per share |  | 279,322,680 Common Shares (including 1,056,699
Common Shares represented by American Depositary
Shares)



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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [   ]

Indicate by check mark which financial statement item the registrant has
selected to follow.
Item 17 [   ] Item 18 [X]



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TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Currency Translation                                                                 
|Forward-Looking Statements                                                           
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                      
|ITEM 3. KEY INFORMATION                                                              
|ITEM 4. INFORMATION ON THE COMPANY                                                   
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            
|ITEM 8. FINANCIAL INFORMATION                                                        
|ITEM 9. THE OFFER AND LISTING                                                        
|ITEM 10. ADDITIONAL INFORMATION                                                      
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|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. [RESERVED]                                                                  
|ITEM 17. FINANCIAL STATEMENTS                                                        
|ITEM 18. FINANCIAL STATEMENTS                                                        
|ITEM 19. EXHIBITS                                                                    
|SIGNATURE                                                                            
|EXHIBITS INDEX                                                                       
|EX-4.28 AGREEMENT FOR OUTSOURCING                                                    
|EX-4.29 AGREEMENT FOR OUTSOURCING                                                    
|EX-4.30 REAL ESTATE COLLATERAL TRUST AGREEMENT                                       
|EX-4.31 LOAN TRANSACTION AGREEMENT                                                   
|EX-8.1 LIST OF HANARO TELECOM'S SIGNIFICANT SUBSID                                   
|EX-12(A).1 CERTIFICATION OF CHIEF EXECUTIVE                                          
|EX-12(A).2 CERTIFICATION OF CHIEF FINANCIAL                                          
|EX-12(A).9 LICENSE FOR FACILITIES                                                    
|EX-4.28 AGREEMENT FOR OUTSOURCING                                                    
|EX-4.29 AGREEMENT FOR OUTSOURCING                                                    
|EX-4.30 REAL ESTATE COLLATERAL TRUST AGREEMENT                                       
|EX-4.31 LOAN TRANSACTION AGREEMENT                                                   
|EX-8.1 LIST OF HANARO TELECOM'S SIGNIFICANT SUBSID                                   
|EX-12(A).1 CERTIFICATION OF CHIEF EXECUTIVE                                          
|EX-12(A).2 CERTIFICATION OF CHIEF FINANCIAL                                          
|EX-12(A).9 LICENSE FOR FACILITIES                                                    



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##### Table of Contents



TABLE OF CONTENTS

|                           |  |                                                                              |   |  |    |  |  | 
|-------------------------- |  | ---------------------------------------------------------------------------- | - |  | -- |  |  | 
|Currency Translation       |  |                                                                              | 1 | 
|Forward-Looking Statements |  |                                                                              | 1 | 
|ITEM 1.                    |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |   |  | 2  | 
|ITEM 2.                    |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |   |  | 2  | 
|ITEM 3.                    |  | KEY INFORMATION                                                              |   |  | 2  | 
|ITEM 4.                    |  | INFORMATION ON THE COMPANY                                                   |   |  | 13 | 
|ITEM 5.                    |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |   |  | 32 | 
|ITEM 6.                    |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |   |  | 45 | 
|ITEM 7.                    |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |   |  | 54 | 
|ITEM 8.                    |  | FINANCIAL INFORMATION                                                        |   |  | 59 | 
|ITEM 9.                    |  | THE OFFER AND LISTING                                                        |   |  | 61 | 
|ITEM 10.                   |  | ADDITIONAL INFORMATION                                                       |   |  | 64 | 
|ITEM 11.                   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |   |  | 84 | 
|ITEM 12.                   |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |   |  | 86 | 
|ITEM 13.                   |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |   |  | 87 | 
|ITEM 14.                   |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |   |  | 87 | 
|ITEM 15.                   |  | CONTROLS AND PROCEDURES                                                      |   |  | 87 | 
|ITEM 16.                   |  | [RESERVED]                                                                   |   |  | 87 | 
|ITEM 17.                   |  | FINANCIAL STATEMENTS                                                         |   |  | 88 | 
|ITEM 18.                   |  | FINANCIAL STATEMENTS                                                         |   |  | 88 | 
|ITEM 19.                   |  | EXHIBITS                                                                     |   |  | 88 | 





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Currency Translation

We publish our financial statements in Korean Won. In this annual report,
references to Korean Won, Won or W are to the currency of Korea, and
references to U.S. dollars, U.S.$ or $ are to the currency of the United
States. This annual report contains translations of Korean Won amounts into
U.S. dollar amounts, solely for your convenience. Unless otherwise indicated,
the translations have been made at U.S.$1.00=Won 1,186.30, which was the noon
buying rate in The City of New York for cable transfers in Korean Won as
certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 2002. On May 30, 2002, the noon buying rate was U.S.$1.00=Won
1,210.00. You should not construe these translations as representations that
the Korean Won amounts actually represent such U.S. dollar amounts or could
have been or could be converted into U.S. dollars at the rates indicated or at
any other rates.




Forward-Looking Statements

This annual report contains forward-looking statements that are based on
our current expectations, assumptions, estimates and projections about our
company and our industry. The forward-looking statements are subject to
various risks and uncertainties. Generally, these forward-looking statements
can be identified by the use of forward-looking terminology such as
anticipate, believe, estimate, expect, intend, project, should
and similar expressions. Those statements include, among other things, the
discussions of our business strategy and expectations concerning our market
position, future operations, margins, profitability, liquidity and capital
resources, as well as statements concerning expansion of our network coverage
and increases in the number of subscribers to our services. We caution you
that reliance on any forward-looking statement involves risks and
uncertainties, and that although we believe that the assumptions on which our
forward-looking statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and, as a result, the forward-looking statements
based on those assumptions could be incorrect. The uncertainties in this
regard include, but are not limited to, those identified in the risk factors
set forth in Item 3Key InformationRisk Factors. In light of these and
other uncertainties, you should not conclude that we will necessarily achieve
any plans and objectives or projected financial results referred to in any of
the forward-looking statements. We do not undertake to release the results of
any revisions of these forward-looking statements to reflect future events or
circumstances.

References

All references to Korea herein are references to The Republic of Korea.
All references to Hanaro Telecom, we, us or our herein are references
to Hanaro Telecom, Inc.

1



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PART I




ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.




ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.




ITEM 3.  KEY INFORMATION



|3.A |  | SELECTED FINANCIAL DATA
|--- |  | -----------------------

The following selected consolidated financial data of Hanaro Telecom
should be read in conjunction with the audited consolidated balance sheets as
of December 31, 2001 and 2002, and the related audited consolidated statements
of operations, shareholders equity and cash flows for the fiscal years ended
December 31, 2000, 2001 and 2002, and the notes to the consolidated financial
statements, and with Item 5Operating and Financial Review and Prospects,
included in this annual report. The selected consolidated financial data set
forth below for the fiscal years ended December 31, 1998, 1999, 2000, 2001 and
2002 are derived from our audited consolidated financial statements. Our
consolidated financial statements as of December 31, 1998 and 1999 and for the
fiscal years ended December 31, 1998 and 1999 were audited by
PricewaterhouseCoopers, independent accountants. Our consolidated financial
statements as of December 31, 2000, 2001 and 2002 and for the fiscal years
ended December 31, 2000, 2001 and 2002 were audited by Anjin & Co., a member
firm of Deloitte Touche Tohmatsu, independent accountants, formerly, a member
firm of Andersen Worldwide SC. We commenced providing telecommunications
services on April 1, 1999.

Our consolidated financial statements are prepared in accordance with
Korean GAAP, which differs in significant respects from U.S. GAAP. See Note 26
to our consolidated financial statements.

|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           |                |  | 
|------------------------------------ | ---------------------- | - | ------- | ------------------------------------------------------------- |  | ------------- | -------- | ------ |  | ---- | -------- | ------- |  | ---- | --------- | ------- |  | - | --------- | ------- |  | - | --------- | -------------- |  | 
|                                     |                        |   |         | Year ended December 31,                                      
|                                     |                        |   |         | 1998                                                          |  | 1999          |          | 2000   |  | 2001 |          | 2002    |  | 2002
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |     
|                                     |                        |   |         | (millions of Won, except number of shares and per share data) |  | (thousands of
|                                     |                        |   |         |                                                               |  | U.S.$ except 
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           | number of     
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           | shares and per
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           | share data)   
|Statements of Operations Data:       |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           |               
|Korean GAAP:                         |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           |               
|Revenues                             |                        | W | 238     |                                                               |  | W             | 23,482   |        |  | W    | 342,804  |         |  | W    | 830,721   |         |  | W | 1,417,854 |         |  | $ | 1,195,190 |               
|                                     | Voice revenue(1)       |   |         |                                                              |  |               |          | 4,540  |  |      |          | 34,089  |  |      |           | 114,529 |  |   |           | 210,664 |  |   |           | 177,581        | 
|                                     | Leased line revenue(2) |   |         | 59                                                            |  |               |          | 1,766  |  |      |          | 8,767   |  |      |           | 17,706  |  |   |           | 111,813 |  |   |           | 94,253         | 
|                                     | Broadband revenue(3)   |   |         | 33                                                            |  |               |          | 16,520 |  |      |          | 284,159 |  |      |           | 641,544 |  |   |           | 969,635 |  |   |           | 817,361        | 
|                                     | Other                  |   |         | 146                                                           |  |               |          | 656    |  |      |          | 15,789  |  |      |           | 56,942  |  |   |           | 125,742 |  |   |           | 105,995        | 
|Operating expenses                   |                        |   | 61,534  |                                                               |  |               | 163,739  |        |  |      | 647,415  |         |  |      | 1,001,335 |         |  |   | 1,396,426 |         |  |   | 1,177,127 |               
|Operating income (loss)              |                        |   | (61,296 | )                                                             |  |               | (140,257 | )      |  |      | (304,611 | )       |  |      | (170,614  | )       |  |   | 21,428    |         |  |   | 18,063    |               
|Non-operating income
(expenses), net |                        |   | 98,957  |                                                               |  |               | 63,410   |        |  |      | (2,476   | )       |  |      | (78,194   | )       |  |   | (149,106  | )       |  |   | (125,690  | )             
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           |               
|Income (loss) before income
tax      |                        |   | 37,661  |                                                               |  |               | (76,847  | )      |  |      | (307,087 | )       |  |      | (248,808  | )       |  |   | (127,678  | )       |  |   | (107,627  | )             
|Income tax (expense) benefit         |                        |   | (10,502 | )                                                             |  |               | 5,568    |        |  |      | (57      | )       |  |      | (35       | )       |  |   | (1,083    | )       |  |   | (913      | )             
|Minority interest loss               |                        |   |        |                                                               |  |               |         |        |  |      | 1,974    |         |  |      | 2,941     |         |  |   | 3,736     |         |  |   | 3,149     |               
|                                     |                        |   |         |                                                               |  |               |          |        |  |      |          |         |  |      |           |         |  |   |           |         |  |   |           |               

2



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|                                                                       |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |      |          |          |      |   |          |          |      |   |          |                |       |  
|---------------------------------------------------------------------- | ----------------- | ---------------------------------------------------------------------- | ------- | ------------------------------------------------------------- | --- | ------------- | ------- | ------- | ---- | ---- | -------- | -------- | ------ | ---- | -------- | -------- | ---- | - | -------- | -------- | ---- | - | -------- | -------------- | ----- | -
|                                                                       |                   |                                                                        |         | Year ended December 31,                                      
|                                                                       |                   |                                                                        |         | 1998                                                          |     | 1999          |         | 2000    |      | 2001 |          | 2002     |        | 2002
|                                                                       |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |     
|                                                                       |                   |                                                                        |         | (millions of Won, except number of shares and per share data) |     | (thousands of
|                                                                       |                   |                                                                        |         |                                                               |     | U.S.$ except 
|                                                                       |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |      |          |          |      |   |          |          |      |   |          | number of     
|                                                                       |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |      |          |          |      |   |          |          |      |   |          | shares and per
|                                                                       |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |      |          |          |      |   |          |          |      |   |          | share data)   
|Net income (loss)                                                      |                   |                                                                        | 27,159  |                                                               |     |               | (71,279 | )       |      |      | (305,170 | )        |        |      | (245,902 | )        |      |   | (125,025 | )        |      |   | (105,391 | )             
|Weighted average number of
shares outstanding (in
thousands)  Basic   |                   |                                                                        | 149,947 |                                                               |     |               | 206,868 |         |      |      | 257,836  |          |        |      | 264,000  |          |      |   | 275,849  |          |      |   | 275,849  |               
|Weighted average number of
shares outstanding (in
thousands)  Diluted |                   |                                                                        | 149,947 |                                                               |     |               | 206,868 |         |      |      | 257,836  |          |        |      | 264,000  |          |      |   | 275,849  |          |      |   | 275,849  |               
|Basic and diluted earnings
(loss) pershare of
common share and ADS(4)  |                   |                                                                        | 181     |                                                               |     |               | (345    | )       |      |      | (1,184   | )        |        |      | (931     | )        |      |   | (453     | )        |      |   | (0.38    | )             
|U.S. GAAP:                                                             |                   |                                                                        |         |                                                               |     |               |         |         |      |      |          |          |        |      |          |          |      |   |          |          |      |   |          |               
|                                                                       | Net income (loss) |                                                                        |         | 21,149                                                        |     |               |         | (70,607 | )    |      |          | (298,351 | )      |      |          | (244,447 | )    |   |          | (162,525 | )    |   |          | (137,002       | )    
|                                                                       |                   | Basic and diluted
earnings (loss) per
share of common share
and ADS(4) |         |                                                               | 141 |               |         |         | (341 | )    |          |          | (1,157 | )    |          |          | (926 | ) |          |          | (582 | ) |          |                | (0.49 | )

|                    |                             |  |                    |           |                |  |      |           |      |  |      |           |          |  |   |           |   |  |   |           |   |  |   |           |  
|------------------- | --------------------------- |  | ------------------ | --------- | -------------- |  | ---- | --------- | ---- |  | ---- | --------- | -------- |  | - | --------- | - |  | - | --------- | - |  | - | --------- | -
|                    |                             |  | As of December 31, |           | As of December
|                    |                             |  | 1998               |           | 1999           |  | 2000 |           | 2001 |  | 2002 |           | 31, 2002
|                    |                             |  |                    |           |                |  |      |           |      |  |      |           |         
|                    |                             |  |                    |           | (thousands of 
|                    |                             |  | (millions of Won)  |           | U.S.$)        
|Balance Sheet Data: |                             |  |                    |           |                |  |      |           |      |  |      |           |          |  |   |           |   |  |   |           |   |  |   |          
|Korean GAAP:        |                             |  |                    |           |                |  |      |           |      |  |      |           |          |  |   |           |   |  |   |           |   |  |   |          
|                    | Working capital(5)          |  | W                  | 633,766   |                |  | W    | 717,778   |      |  | W    | (40,488   | )        |  | W | (303,936  | ) |  | W | (856,948  | ) |  | $ | (722,371  | )
|                    | Property and equipment,
net |  |                    | 331,620   |                |  |      | 832,452   |      |  |      | 2,438,865 |          |  |   | 3,146,589 |   |  |   | 3,134,314 |   |  |   | 2,642,092 |  
|                    | Total assets                |  |                    | 1,142,983 |                |  |      | 1,892,043 |      |  |      | 3,351,246 |          |  |   | 4,104,265 |   |  |   | 4,104,785 |   |  |   | 3,460,158 |  
|                    | Net assets                  |  |                    | 983,705   |                |  |      | 1,571,759 |      |  |      | 1,667,078 |          |  |   | 1,568,392 |   |  |   | 1,515,498 |   |  |   | 1,277,500 |  
|                    | Long-term debt(6)           |  |                    | 225       |                |  |      | 40,098    |      |  |      | 1,008,401 |          |  |   | 1,896,839 |   |  |   | 2,128,703 |   |  |   | 1,794,405 |  
|                    | Capital stock               |  |                    | 920,061   |                |  |      | 1,200,000 |      |  |      | 1,320,000 |          |  |   | 1,320,000 |   |  |   | 1,396,613 |   |  |   | 1,177,285 |  
|                    | Total shareholders equity  |  |                    | 983,705   |                |  |      | 1,571,759 |      |  |      | 1,667,078 |          |  |   | 1,568,392 |   |  |   | 1,515,498 |   |  |   | 1,277,500 |  
|                    | Dividends declared          |  |                    |          |                |  |      |          |      |  |      |          |          |  |   |          |   |  |   |          |   |  |   |          |  
|U.S. GAAP:          |                             |  |                    |           |                |  |      |           |      |  |      |           |          |  |   |           |   |  |   |           |   |  |   |          
|                    | Property and equipment,
net |  |                    | 331,620   |                |  |      | 832,452   |      |  |      | 2,438,865 |          |  |   | 2,727,091 |   |  |   | 2,703,850 |   |  |   | 2,279,230 |  
|                    | Total assets                |  |                    | 1,171,650 |                |  |      | 1,911,765 |      |  |      | 3,384,218 |          |  |   | 3,672,451 |   |  |   | 3,678,342 |   |  |   | 3,100,684 |  
|                    | Total shareholders equity  |  |                    | 1,001,947 |                |  |      | 1,582,647 |      |  |      | 1,681,712 |          |  |   | 1,476,683 |   |  |   | 1,399,589 |   |  |   | 1,179,793 |  



|(1) |  | Consists of revenues derived from services provided to fixed line
customers.                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Consists of revenues derived from services that give the subscriber the
right to use a private line exclusively.                                                                                                                            
|   
|(3) |  | Consists of revenues derived from high-speed data transmission services
and internet access services.                                                                                                                                       
|   
|(4) |  | Earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average number of shares outstanding.                                                                                                                 
|   
|(5) |  | Working capital means current assets minus current liabilities.                                                                                                                                                                             
|   
|(6) |  | Long-term debt includes long-term debt in local and foreign currencies,
debentures, long-term obligations under capital leases and advances
received from the transfer of beneficiary certificates in exchange for
future trade receivables.

|                          |       |          |       |        |  |         |         |         |  |         |           |           |  |  |           |  |  |  |           |  |  |  |           | 
|------------------------- | ----- | -------- | ----- | ------ |  | ------- | ------- | ------- |  | ------- | --------- | --------- |  |  | --------- |  |  |  | --------- |  |  |  | --------- | 
|                          | As of
|                          |       | April 30 |       | Dec 31 |  | Dec 31, |         | Dec 31, |  | Dec 31, |           | April 30,
|                          |       | (1999)   |       | 2000   |  | 2001    |         | 2002    |  | 2003   
|                          |       |          |       |        |  |         |         |         |  |        
|Other Data:               |       |          |       |        |  |         |         |         |  |         |           |           |  |  |           |  |  |  |           |  |  |  |           | 
|Residential subscribers   |       |          | 5,712 |        |  |         | 159,690 |         |  |         | 1,274,327 |           |  |  | 2,391,791 |  |  |  | 3,534,183 |  |  |  | 3,660,698 | 
|Corporate subscribers     |       |          | 2,806 |        |  |         | 35,231  |         |  |         | 208,682   |           |  |  | 355,977   |  |  |  | 283,195   |  |  |  | 312,618   | 
|Corporate leased lines(1) |       |          | 1     |        |  |         | 534     |         |  |         | 1,488     |           |  |  | 3,216     |  |  |  | 6,709     |  |  |  | 7,051     | 
|Employees                 |       |          | 644   |        |  |         | 889     |         |  |         | 1,501     |           |  |  | 1,519     |  |  |  | 1,576     |  |  |  | 1,581     | 

|                                                     |  |         |     |         |  |         |       |         |  |         |       |           |  |  |       |  |  |  |         |  |  |  |         | 
|---------------------------------------------------- |  | ------- | --- | ------- |  | ------- | ----- | ------- |  | ------- | ----- | --------- |  |  | ----- |  |  |  | ------- |  |  |  | ------- | 
|                                                     |  | As of  
|                                                     |  | Dec 31, |     | Dec 31, |  | Dec 31, |       | Dec 31, |  | Dec 31, |       | April 30,
|                                                     |  | 1998    |     | 1999    |  | 2000    |       | 2001    |  | 2002    |       | 2003     
|                                                     |  |         |     |         |  |         |       |         |  |         |       |          
|Network route kilometersowned(2)                    |  |         | 946 |         |  |         | 3,020 |         |  |         | 6,419 |           |  |  | 8,804 |  |  |  | 12,425  |  |  |  | 12,790  | 
|Network route kilometersleased(3)                   |  |         | 173 |         |  |         | 656   |         |  |         | 2,887 |           |  |  | 2,991 |  |  |  | 5,487   |  |  |  | 6,700   | 
|Office buildings connected with fiber optic lines    |  |         |    |         |  |         | 734   |         |  |         | 1,304 |           |  |  | 1,608 |  |  |  | 2,978   |  |  |  | 3,266   | 
|Apartment complexes connected with fiber optic lines |  |         |    |         |  |         | 1,404 |         |  |         | 3,827 |           |  |  | 4,972 |  |  |  | 6,470   |  |  |  | 6,599   | 
|Switches installed (voice)                           |  |         | 17  |         |  |         | 19    |         |  |         | 32    |           |  |  | 37    |  |  |  | 38      |  |  |  | 38      | 
|Switches Installed (data)(4)                         |  |         | 8   |         |  |         | 30    |         |  |         | 143   |           |  |  | 156   |  |  |  | 161/140 |  |  |  | 161/143 | 



|(1) |  | The 6,709 leased lines in service as of December 31, 2002 included 4,033
individual Internet dedicated lines connected to corporate subscribers and
2,641 individual traditional leased lines connected to corporate
subscribers. The 7,051 leased lines in service as of April 30, 2003
included 3,919 individual Internet dedicated lines connected to corporate
subscribers and 3,073 individual traditional leased lines connected to
corporate subscribers.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes owned fiber optic lines within cities we service, including
fiber optic last mile connections.                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) |  | Includes leased fiber optic lines within cities we service, including
portions of our backbone, but does not include inter-city connections.                                                                                                                                                                                                                                                                                                                    
|   
|(4) |  | The data as of December 31, 2002 and April 30, 2003, represents the
number of ATM/routers installed.                                                                                                                                                                                                                                                                                                                                                            

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Exchange Rate Information

The following table sets forth, for the periods and dates indicated,
certain information concerning the noon buying rate for Korean Won announced by
the Federal Reserve Bank of New York, expressed in Korean Won per U.S.$1.00.
We do not intend to imply that the Won or U.S. dollar amounts referred to
herein could have been or could be converted into U.S. dollars or Won, as the
case may be, at any particular rate, or at all.

|                        |  |                     |         |         |  |      |         |     |  |   |         |  |  |   |         | 
|----------------------- |  | ------------------- | ------- | ------- |  | ---- | ------- | --- |  | - | ------- |  |  | - | ------- | 
|                        |  | At End              |         | Average |  |      |         |     |  |   |         | 
|Year Ended December 31, |  | of Period           |         | Rate(1) |  | High |         | Low
|                        |  |                     |         |         |  |      |         |    
|                        |  | (Won per U.S.$1.00)
|1998                    |  | W                   | 1,206.0 |         |  | W    | 1,404.7 |     |  | W | 1,812.0 |  |  | W | 1,196.0 | 
|1999                    |  |                     | 1,136.0 |         |  |      | 1,187.7 |     |  |   | 1,241.8 |  |  |   | 1,124.5 | 
|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 (through May 30)   |  |                     | 1,210.0 |         |  |      | 1,207.2 |     |  |   | 1,262.0 |  |  |   | 1,164.6 | 

|                  |  |                     |         |      |  |     |         |  |  |   |         | 
|----------------- |  | ------------------- | ------- | ---- |  | --- | ------- |  |  | - | ------- | 
|                  |  | At End              |         |      |  |     |         |  |  |  
|Month Ending      |  | of Period           |         | High |  | Low
|                  |  |                     |         |      |  |    
|                  |  | (Won per U.S.$1.00)
|December 31, 2002 |  | W                   | 1,186.3 |      |  | W   | 1,221.0 |  |  | W | 1,186.3 | 
|January 31, 2003  |  |                     | 1,165.0 |      |  |     | 1,197.3 |  |  |   | 1,164.6 | 
|February 28, 2003 |  |                     | 1,193.7 |      |  |     | 1,206.0 |  |  |   | 1,173.0 | 
|March 31, 2003    |  |                     | 1,252.0 |      |  |     | 1,260.0 |  |  |   | 1,184.6 | 
|April 30, 2003    |  |                     | 1,215.5 |      |  |     | 1,262.0 |  |  |   | 1,204.0 | 
|May 30, 2003      |  |                     | 1,210.0 |      |  |     | 1,217.0 |  |  |   | 1,192.0 | 



|(1) |  | The average of the noon buying rates on the last date of each month (or a portion thereof) during the period.
|--- |  | -------------------------------------------------------------------------------------------------------------



|3.B |  | CAPITALIZATION AND INDEBTEDNESS
|--- |  | -------------------------------

Not applicable.



|3.C |  | REASONS FOR THE OFFER AND USE OF PROCEEDS
|--- |  | -----------------------------------------

Not applicable.

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3.D     RISK FACTORS

Our business, financial condition or results of operations are subject to
various changing competitive, economic, political and social conditions,
including the following factors. You should pay particular attention to the
fact that we are a Korean company and are governed by a legal and regulatory
environment which in some respects may differ from that which prevails in other
countries.

Risks Related to Our Company

We had experienced continuing operating losses and may have future losses.

We incurred substantial operating losses in each year since our
incorporation until the year ended December 31, 2001. For the years ended
December 31, 2000 and 2001, we had operating losses of Won 304.6 billion
(U.S.$256.8 million) and Won 170.6 billion (U.S.$143.8 million), respectively.
These operating income result from the significant infrastructure, marketing,
technology and other costs incurred in the development of our services. For
the year ended December 31, 2002, we recorded operating income of Won 21,428
million (US$18.1 million). We expect that, as we increase the number of our
subscribers, our operating income will increase. However, we cannot assure you
that we will achieve, sustain or increase operating income in the future. See
Item 5Operating and Financial Review and Prospects and our consolidated
financial statements for a discussion of our past operating performance.

Because currently available funds and cash flow from operations are not likely
to be sufficient to fund our operations or sustain our debt service and debt
repayment obligations, we will need to refinance certain indebtedness and are
likely to require additional capital which may not be available on acceptable
terms or at all.

Since we commenced our commercial operations on April 1, 1999, we have
been unable to generate sufficient cash flow from operations to meet our
operating needs and have principally relied on equity and debt financings to
fund our operations. In order to maintain our competitive position and
continue to meet the increasing demands for service quality, availability and
competitive pricing, we need to incur additional capital expenditures on
enhancing our networks and expanding our subscriber base. As a result of the
rapid expansion of our business and the continued operating losses since our
incorporation, we have now and will continue to have significant debt and debt
service and repayment obligations. As of March 31, 2003, on a non-consolidated
basis, we had Won 967 billion of long-term liabilities (excluding current
maturities) and Won 1,272 billion of current liabilities (including the current
portion of long-term debt).

We also currently anticipate making capital expenditures of approximately
Won 219 billion during the second half of 2003 and Won 290 billion during 2004.
Our debt service and debt repayment requirements relating to our outstanding
indebtedness, on a non-consolidated basis, are approximately Won 357 billion in
the second half of 2003 and Won 545 billion in 2004. Our actual future
financing requirements will depend on our future performance, market conditions
and other factors, many of which are beyond our control and cannot be predicted
with certainty. In addition, we may need to raise additional funds to acquire
complementary businesses, develop new products or otherwise respond to changing
business conditions or unanticipated competitive pressures or technological or
marketing hurdles. See Item 5Operating and Financial Review and
ProspectsLiquidity and Capital Resources for a more detailed discussion of
our historical and planned capital expenditures.

We plan to meet our currently anticipated debt repayment, capital
expenditure and debt service requirements and accounts payable in 2003 and 2004
through long-term borrowings, the proceeds of equity and corporate bond
offerings and vendor financing. Our ability to obtain such financing will
be

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dependant on our future performance and market conditions, among other
factors. We cannot assure you that long-term borrowings, vendor financing, or
any alternative financing will be available on favorable terms, or at all. If
we are unable to obtain sufficient new debt or equity financing, we may default
on our debt service and debt repayment obligations. In order to avoid
defaulting on our indebtedness, we may need to modify, delay or abandon
elements of our business plan, which could have a material adverse effect on
our business, financial condition and results of operations. Furthermore,
there is no assurance that any refinancings will be effected on satisfactory
terms.

Prices for communications services may fall and adversely affect our revenues
per subscriber.

We currently derive substantially all of our revenues from monthly
subscription fees for our high-speed Internet access services. The prices of
communications services and products in general have fallen historically, and
may continue to fall. We may be required to reduce prices for our high-speed
Internet access services to respond to competition and look for additional
revenue sources. The failure to achieve and sustain adequate pricing levels or
to replace lost revenues from falling subscription fees with other revenue
sources would have a material adverse effect on our revenues per subscriber,
the overall profitability of our business and our financial condition.

Certain existing shareholders are, or are affiliated with, entities that
compete with, or may compete in the future with, our company.

Our current largest shareholders include Dacom Corporation and its
affiliates, Samsung Electronics and its affiliate, SK Telecom and its
affiliates and Daewoo Securities. Many of our shareholders compete, directly
or indirectly, with our service offerings. Dacom provides high-speed Internet
access in limited areas in Korea and Dacom and Samsung Networks, Inc., an
affiliate of Samsung, operate ISPs in Korea, which compete with HanaroDream
Corp., an entity established in April 2002 by Dreamline Corporation, our
subsidiary, to provide our portal services. Dacom, SK Telecom and UDS are
currently developing or providing multimedia products comparable to those
available on HanaroDream. SK Global Co., Ltd. and Dacom are engaged in the
leased line business. In addition, some of our major shareholders belong to
conglomerates or chaebolthat dominate the Korean economy across multiple
industries. We therefore expect our largest shareholders or their affiliates to
engage in businesses that compete with our products and services.

We have several interconnection and office space lease agreements with our
shareholders and their affiliates. The conflicts of interest that currently
exist or may arise in the future through competition in our business markets
may impair or affect our relationship with our alliance shareholders.

Disruption in relations with vendors, suppliers, Powercomm, KEPCO, cable
network operators or system operators could materially affect our ability to
provide services.

We are dependent on third party suppliers of hardware components and
software to build and operate our network. Although we attempt to maintain a
minimum of two vendors for each required product, some components used by us in
providing our communications services may not be compatible with the products
of certain vendors. A failure by a supplier to deliver compatible products on
a timely basis, or our inability to develop alternative sources at a reasonable
cost, could result in delays, increased costs and subscriber cancellations
which could have a material adverse effect on us.

As of April 30, 2003, approximately 47.3% of our hybrid fiber coaxial
(HFC) subscribers currently use the cable lines for HFC access services from
Powercomm Co., Ltd., a subsidiary of Dacom, on a non-exclusive basis. The CATV
access network lease agreement with Powercomm expires in May 2005. The

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term is automatically renewable for another three years unless a party gives notice of
non-renewal at least three months prior to
expiration. However, Powercomm has the right to terminate the lease
agreement if it discontinues its cable network business. We believe that our
ability to provide services through Powercomms cable lines enhances our
profitability and revenues per subscriber. We also lease from KEPCO ancillary
facilities such as electric poles and conduit ducts for use in building our own
local fiber optic network and our own HFC networks. Our agreement with KEPCO to
lease its ancillary facilities allows us to expand our network coverage at a
lower cost. Accordingly, the termination of the lease agreements could have a
material adverse effect on our operations. Furthermore, failure by Powercomm
to properly maintain its network or KEPCO to properly maintain its ancillary
facilities could result in service disruptions or reduced data transmission
quality.

In order to secure access to last-mile connections in our subscriber areas
that are not covered by our network, which areas consist primarily of small
apartment buildings and single-family residences, we have entered into lease or
affiliation agreements with cable network operators and system operators. Our
competitors are also trying to establish relationships with cable network
operators and system operators. We cannot assure you that we will be able to
maintain our relationships with these operators. If we fail to maintain our
relationships with these operators, we may be unable to provide our services in
areas covered by such operators or may be required to make significant capital
expenditures to build our own last-mile connections in those areas.

We outsource a significant portion of our sales force needs. Our lack of
direct control over our sales forces actions may materially affect our sales
and marketing efforts.

As of December 31, 2002, we had 504 employees in our marketing and sales
department and directly operated 17 service centers. In order to rapidly
expand the coverage of our marketing and sales efforts in a cost-efficient
manner, we outsource a significant portion of our sales force needs. We
currently utilize 61 exclusive Hanaro Telecom customer centers, 36 cable system
operators in each service area in which we provide HFC connections to our
network and individual agents that target commercial and residential buildings
that are connected to our backbone network. The outside sales force and its
employees are not employees of Hanaro Telecom; therefore, the amount of control
we exercise over the sales force is necessarily limited. If our training,
compensation and monitoring programs fail to ensure the quality and performance
of our outside sales force, our sales and marketing efforts will be materially
affected and the performance of our company, including the number of new
subscribers, could suffer.

Any acquisitions or strategic investments we make could disrupt our business
and adversely affect our financial condition.

As part of our ongoing business development strategy, we may consider
acquisitions and strategic investments in complementary companies, products or
technologies. In the event of any purchases, we could issue stock that would
dilute our current stockholders percentage ownership, incur debt or assume
liabilities of the acquired business. Our operation of any acquired business
will involve numerous risks, including problems combining the purchased
operations, technologies or products and unanticipated costs. We cannot assure
you that we will be able to successfully integrate any businesses, products,
technologies or personnel that we might acquire in the future and any failure
to do so could disrupt our business and adversely affect our financial
condition.

We have not made all of the research and development expenditures we committed
to make as a condition to maintaining our perpetual license to operate local
telephony services.

As part of our Network Service Provider (NSP) license, we hold a perpetual
license to operate local

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telephony services on a nationwide basis in Korea. As a condition to maintaining this license, we agreed to make certain research and
development expenditures described in the business plan we submitted to the
Ministry of Information and Communication of Korea (MIC) as a part of our
license application. To date, we have not made all of such research and
development expenditures and the MIC has not requested that we fulfill our
research and
development commitments we made in our local telephony business license
application. We do not believe that the MIC is likely to require us to make
the remaining expenditures or suspend or revoke our local telephony business
license because of our failure to make such expenditures. However, we cannot
assure you that the MIC will not take any of these actions. If we are requested
by the MIC to make such expenditures and we fail to make the remaining
expenditures on a timely basis, the MIC may suspend or revoke our license to
operate our local telephony business. Suspension or revocation of our local
telephony business license would have a material adverse effect on our
business, financial condition and results of operations.

Risks Related to Our Industry

The telecommunications sector in Korea is evolving, which may lead to
additional competitors with significantly greater resources.

KEPCO transferred all of its cable assets to Powercomm, a subsidiary of
KEPCO, in 2000. KEPCO sold a 10.5% equity interest in Powercomm to several
Korean entities, including SK Telecom and Pohang Iron & Steel Co., Ltd. on July
24, 2000 and has agreed to sell 45.5% equity interest in Powercomm to a
consortium led by Dacom. The consortium led by Dacom may not be willing to
lease such assets on the terms and conditions set forth in the CATV access
network lease agreement we have with Powercomm, if at all.

We believe that the telecommunications sector in Korea is rapidly
evolving. The high-speed Internet access market is currently led by three
major service providers, two of which have acquired smaller high-speed Internet
service providers in 2001. We expect more small to medium-sized
telecommunications companies to merge and the number of service providers in
the market to continue to decrease. Future business combinations and alliances
in the telecommunications industry may create additional competitors with
resources far greater than ours. Any significant changes in the
telecommunications sector could have a material adverse effect on our business,
financial condition and results of operations.

The telecommunications market is very competitive.

High-speed Internet access.The high-speed Internet access market in
Korea is a relatively new market. KT is our main competitor in the market for
the Digital Subscriber Line (DSL) services, consisting of the Asymmetric
Digital Subscriber Line (ADSL) and Very high bit rate Digital Subscriber Line
(VDSL) services and Thrunet is our main competitor in the HFC market.

DSL (ADSL & VDSL).In providing DSL services, we primarily compete with
KT. KT has an extensive fiber optic backbone network throughout Korea and has
significantly greater capital resources than we do. KT currently provides DSL
services and we understand that KT is upgrading its last-mile connections and
related transmission facilities to provide DSL services to its subscribers at
speeds comparable to ours. We believe that KT is likely to focus its upgrading
process and marketing efforts in our targeted high density, high demand areas.
As of April 30, 2003, KT and Hanaro Telecom had market shares of approximately
79.7% and 20.3%, respectively, in the DSL services market in Korea.

HFC.Our primary competitor in providing high-speed Internet access via
cable networks is Thrunet. We, together with Thrunet, utilize almost all of
Powercomms cable network. Onse Telecom and

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Dacom are also competitors who have been providing their services through the lines of district cable network
operators, which are proprietors of smaller, localized cable networks. In
addition, we may face additional competition in the future from a variety of
sources, including long distance telecommunications companies, other cable
operators, direct broadcast satellite operators, wireless communications
providers, on-line service providers and resellers. As of
April 30, 2003, Hanaro Telecom, Thrunet and Onse Telecom had market shares of
approximately 38.0%, 29.6% and 11.6%, respectively, in the HFC services market
in Korea.

Multimedia services.In the Internet services sector, there are currently
81 commercial ISPs according to Korea Network Information Center (KRNIC) as of
December 31, 2002. We believe that there are several ISPs currently developing
high-end multimedia products comparable to those available through HanaroDream.

Internet Data Center services.In May 2000, we began providing
server-based support services to our corporate clients through N-GENE, our
Internet data center (IDC) in Seoul. The IDC services market in Korea is
highly competitive. There are currently five major IDC service providers in
Korea, namely, Korea Internet Data Center Inc., KT, Hanaro (N-GENE), Enterprise
Networks, Inc. (previously known as GNG Networks, Inc.) and Prism.

Local telephony.We are the only competitor to KT, the dominant local
incumbent, in the local telephony market. Prior to the commencement of our
operations in April 1999, KT was the sole provider of local telephony services
in Korea. As of April 30, 2003, KT and Hanaro Telecom had market shares of
approximately 96.0% and 4.0%, respectively, in the local telephony services
market in Korea.

As a result of having to compete with KT in all of our markets and the
increases in the number of additional competitors in the Internet access market
and the multimedia services market, we currently encounter and expect to
continue to encounter significant pricing pressure and other forms of
competitive pressures in the future. Advances in technology, as well as
changes in the marketplace and the regulatory environment, are constantly
occurring, and we cannot predict the effect that ongoing or future developments
may have on us or on the pricing of our products and services. Increased price
or other competition could adversely affect our business, financial condition
and results of operations. We cannot assure you that we will have the
financial resources, technical expertise or marketing and support capabilities
to compete successfully.

Risks Related to Ownership of ADSs or Common Shares

Ownership of shares may be subject to certain restrictions under Korean law,
including percentage ownership limitations.

Prior to making an investment in 10% or more of the outstanding voting
shares of a Korean company, foreign investors are generally required under the
Foreign Investment Promotion Law of Korea to submit a report to a foreign
exchange bank in Korea pursuant to a delegation by the Ministry of Commerce,
Industry and Energy. Failure to comply with this reporting requirement may
result in the imposition of criminal sanctions. Subsequent sales by such
investor of its shares in such company will also require a prior report to such
bank.

The Telecommunications Business Law of Korea restricts foreign ownership
in voting shares of a network service provider, including our company. At
present, foreign investors in the aggregate are not allowed to own more than
49% of the voting shares of any network service provider. In the event that
such foreign ownership restrictions are violated, the holders of shares in
excess of the legal limitations cannot

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exercise voting rights with respect to the shares exceeding such limit and the MIC may require that corrective
measures be taken to comply with the legal restrictions.

Any dividends paid on our common shares will be in Won and fluctuations in the
exchange rate between the Won and the U.S. dollar may affect the amount
received by holders of ADSs.

Under our Articles of Incorporation, we are permitted to pay dividends to
our shareholders beginning in the
fiscal year in which our aggregate carried-over loss, incurred since the
date of commencement of our local telephony services, has been made up in full.
We do not expect this to occur in the foreseeable future. However, if we do
declare cash dividends sometime thereafter, the dividends will be paid to the
depositary for the ADSs in Won and then converted by the depositary into U.S.
dollars. Fluctuations in the exchange rate between the Won and the U.S. dollar
will affect, among other things, the amounts a registered holder or beneficial
owner of ADSs will receive from the depositary as dividends.

Holders of ADSs outside Korea may not be able to exercise preemptive rights and
certain other rights.

The Commercial Code of Korea and our Articles of Incorporation require us,
with certain exceptions, to offer shareholders the right to subscribe for new
shares of our common shares in proportion to their existing ownership
percentage whenever new shares of our common shares are issued. Under the
deposit agreement governing the ADSs, if our company offers any rights to
subscribe for additional shares of our common shares, the depositary under the
deposit agreement, after consultation with us, may make such rights available
to the holders of ADSs or dispose of such rights on behalf of the holders and
make the net proceeds available to them or, if the depositary is unable to take
such actions, it may allow the rights to lapse with no consideration to be
received by the holders of the ADSs. The depositary is required to make
available any rights to subscribe for any securities only when a registration
statement under the United States Securities Act of 1933 is in effect with
respect to the securities or if the offering of the securities is exempt from
the registration requirements under the Securities Act. We are under no
obligation to file a registration statement under the Securities Act to enable
holders of the ADSs to exercise preemptive rights for our common shares
underlying the ADSs, and we cannot assure you that any registration statement
would be filed or that an exemption from the registration requirement under the
Securities Act would be available. Holders of ADSs that are not entitled to
exercise preemptive rights may thereby suffer dilution of their interests in
our company.

Shareholders may be subject to Korean tax.

Under the Korean tax laws, holders of the ADSs in the United States may be
subject to Korean withholding taxes on the capital gains and dividends in
respect of the ADSs unless an exemption or a reduction under the income tax
treaty between the United States and Korea exists. Under the U.S.-Korea tax
treaty, capital gains realized by holders that are residents of the United
States eligible for treaty benefits will not be subject to Korean taxation upon
the disposition of the ADSs, with certain exceptions. See Item 10Additional
InformationTaxationKorean Taxation for a more detailed discussion of the
effects of Korean tax laws on the holders of ADS. Generally, a non-Korean
registered holder or beneficial owner of ADSs who is not exempt under an
applicable tax treaty will be subject to withholding taxes (subject to
production of satisfactory evidence of the acquisition and transfer costs of
the ADSs) at the rate of the lesser of 27.5% of the net capital gains or 11.0%
of the gross sales proceeds on the capital gains and at the rate of 27.5% on
dividends.

The market price and trading volume of the ADSs may be volatile.

Under current Korean law, our common shares acquired in the open market or
withdrawn from the

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depositary facility for the ADSs may be deposited into the
depositary facility created under the deposit agreement governing the ADSs
without our consent up to the total number of shares withdrawn under the
deposit agreement. If the total number of shares to be deposited exceeds the
total number of shares withdrawn under the deposit agreement, our consent is
required for the excess amount. Moreover, under the terms of the deposit
agreement, the ADSs are freely exchangeable for our common shares, and the
number of outstanding ADSs will decrease to the extent that the number of our
common shares withdrawn from the depositary facility exceeds the number of
shares deposited under the depositary facility.

Future sales of ADSs and common shares could lower our share price.

If existing shareholders decide to sell large amounts of our shares, the
trading price for the ADSs and our shares could fall. We believe that some of
our five major shareholders are currently contemplating selling their shares of
our common shares. Any announcement of a sale by any major shareholders of our
shares or any such sale may have a material adverse effect on the price of our
common shares or the ADSs. We cannot assure you that such sales of our common
shares will or will not occur.

Risks Related to Korea

There are unique economic and political risks associated with investing in
Korean companies.

Recently there have been several adverse economic and political
developments in and around Korea. Because all of our revenues are derived from
services provided in Korea, these adverse developments may have a significant
impact on the demand for our services and our operations. The worldwide
recession and uncertainties surrounding the world economy have had a negative
effect on the Korean economy.

The confrontation with North Korea has been a constant source of tension
in the Korean peninsula, which has and will affect the expectations,
perceptions and status of the Korean economy. Moodys Investors Service, Inc.,
one of the worlds three largest credit-rating agencies, has downgraded its
rating outlook for South Korea by two notches to negative from positive
because of the increased uncertainty regarding North Koreas actions and
possible responses from the international community.

The Korean economy in 2003 is unlikely to show a big growth as domestic
demand and investments are expected to decrease. One cause of such decrease in
the domestic demand and deterioration in consumer sentiment is the record-high
household debt, which constrains any increases in consumption.

Furthermore, SK Global, an affiliate of Koreas third largest
conglomerate, the SK group, was charged with an accounting fraud in March 2003.
The SK Global scandal caused temporary disruptions to the financial market as
interest rates soared and investors withdrew their funds from investments in
bonds and commercial papers issued by SK Global.

The negative consequence of any or all of the above factors for the Korean
economy and the economic and social environments in which we operate could be
severe, and as a result, our business operations could be adversely affected.

Telecommunications laws and regulations in Korea may result in unanticipated
changes to the Korean regulatory regime and may adversely affect our business
operations.

Under Korean law, the government, primarily through the MIC, has authority
to regulate the telecommunications industry. The MIC has the responsibility
for monitoring the rates charged by our company. See Item 4Information on
the CompanyBusiness OverviewKorean

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Telecommunications Laws and Regulations for a more detailed description of the regulatory environment in Korea. Each
agreement for interconnection with other service providers is subject to
approval by, or reporting requirements to, the Korea Communications Commission.
Government policies relating to the telecommunications industry and the
regulatory environment in which we operate may change. Such changes may have a
material adverse effect on us.

We may be liable for information disseminated over our Internet services
network.

Korean law relating to liability of ISPs for information carried on or
disseminated through their networks is not completely settled. Decisions,
laws, regulations and other activities regarding content liability may
significantly affect the development and profitability of companies
offering on-line and Internet access services, including us. The imposition
upon ISPs of potential liability, such as liability for defamatory speech or
copyright infringement, for materials carried on or disseminated through their
systems could require us to implement measures to reduce our exposure to such
liability. Such measures may require that we spend substantial resources or
discontinue some services or content offerings. Any of these actions could have
a material adverse effect on our business, financial condition and results of
operations. We do not carry errors and omissions insurance.

Our pricing structure is subject to the supervision of the Korean government;
therefore, the government may interfere with any proposed changes to our
pricing scheme.

With respect to network-based services, we must report in advance any
changes in our pricing structure to the MIC. We are not required to obtain the
MICs approval prior to changing our pricing structure. However, the MIC may,
for any reason, find our revised pricing structure to be inappropriate and
request that we revise our pricing structure. In addition, if the Korea
Communications Commission finds that our pricing structure restricts fair
competition, it may order us to take corrective measures or impose an
administrative fine of up to 3% of our average annual revenues for the three
years preceding the violation. Therefore, it is the standard business practice
in the telecommunications industry in Korea to report to, and consult with, the
MIC prior to instituting any pricing changes. We cannot assure you that any
future changes in our prices and our pricing policy that we believe are
advantageous to our company will be acceptable to the MIC.

Exchange rate fluctuations may adversely affect our ability to meet debt
service and debt repayment obligations and to borrow funds.

Substantially all of our cash flow is denominated in Won. We are exposed
to foreign exchange risk related to foreign currency denominated liabilities.
Foreign currency denominated liabilities, principally in U.S. dollars, relate
primarily to foreign currency denominated debt. As of March 31, 2003, we had
aggregate outstanding foreign currency denominated liabilities of U.S.$136.6
million on a non-consolidated basis. Any depreciation of the Won relative to
the U.S. dollar increases our cost to meet our debt service and debt repayment
obligations. In addition, a depreciation of the Won has led and may lead in
the future to higher domestic interest rates. If interest rates rise in the
future, the debt costs of Korean borrowers would increase, which may have an
adverse effect on our future ability to borrow funds.

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ITEM 4. INFORMATION ON THE COMPANY

4.A     HISTORY AND DEVELOPMENT OF THE COMPANY

Hanaro Telecom, Inc. is a stock corporation organized under the laws of
the Republic of Korea. We were incorporated on September 26, 1997. Our legal
and commercial name is Hanaro Tongshin Chushik Hoesa in Korean, and Hanaro
Telecom, Inc. in English. Our registered office is located at Kukje
Electronics Center Bldg., 23rd Floor, Seocho-dong 1445-3, Seocho-gu, Seoul,
Korea 137-728, telephone number (82-2) 106 or (82-2) 6266-5114. Our agent for
U.S. federal securities law purposes is CT Corporation System, 111 Eighth
Avenue, New York, NY 10011.

Hanaro Telecom was established as Koreas second local call carrier.
Since our inception, we have been striving to become the leading provider of
high-speed Internet access, data and multimedia services in Korea. Some of the
important events in the development of our business are set forth below:



| |  |  | In October 1997, we received our perpetual license to provide
fixed-link local telephone service on a nationwide basis in Korea.                                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In June 1998, we registered as a specific service provider to
resell or provide the same type of telecommunication services as those
of domestic or foreign network service providers.                                                                                                                                      
|
| |  |  | In October 1998, we launched our CATV high-speed Internet access
services.                                                                                                                                                                                                                                                  
|
| |  |  | In April 1999, we launched our local call and high-speed Internet
access services in Seoul, Pusan, Inchon and Ulsan.                                                                                                                                                                                                        
|
| |  |  | In March 2000, we successfully completed a global offering of our
ADSs on the Nasdaq National Market.                                                                                                                                                                                                                       
|
| |  |  | In May 2000, we opened the Internet Data Center to provide
server-based support in the form of co-location, dedicated server
hosting and web hosting.                                                                                                                                                                       
|
| |  |  | In July 2000, we launched our commercial Local Multipoint
Distribution System (LMDS) service.                                                                                                                                                                                                                               
|
| |  |  | In December 2001, we acquired a controlling equity interest in
Dreamline, the fourth largest broadband access provider in Korea.                                                                                                                                                                                            
|
| |  |  | In February 2002, we launched our wireless Local Area Network (LAN)
services.                                                                                                                                                                                                                                               
|
| |  |  | In April 2002, we transferred our HanaNet portal business-related
assets and approximately 20 employees to a subsidiary of Dreamline,
DreamX.net Co., which subsequently changed its name to HanaroDream. We
currently own a 32.2% equity interest in Dreamline, which in turn owns
a 42.14% equity interest in HanaroDream.
|
| |  |  | In June 2002, we commenced providing commercial Broadband Wireless
Local Loop (B-WLL) high speed wireless Internet service, which is the
first of such services to be launched in Korea.                                                                                                                                    
|
| |  |  | In August 2002, we launched our Very high bit rate Digital
Subscriber Line (VDSL) service.                                                                                                                                                                                                                                  

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| |  |  | In October 2002, we acquired a 24.75% equity interest in Korea
Digital Cable Media Center, and the Fair Trade Commission of Korea
approved it as our affiliated company.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In January 2003, we received a perpetual license to provide long
distance telephony services, including inter-city and international
services.                          

See Item 5Operating and Financial Review and ProspectsLiquidity and
Capital Resources for a description of our principal capital expenditures.

We have not received any public takeover offers by third parties.

4.B     BUSINESS OVERVIEW

General

Hanaro Telecom is a provider of high-speed Internet access, local
telephony, multimedia, data and Internet data center services in Korea. We
offer our subscribers always-on, high-speed Internet access at speeds up to ten
Mbps over our own and leased networks. We also offer our subscribers local
telephony services as one of only two companies licensed to own and operate a
local telephony network in Korea, the other being KT, which is the local
incumbent. In addition, we provide leased line services and IDC services to
our corporate clients.

We commenced commercial operations of our high-speed Internet access and
local telephony services on April 1, 1999. We are currently focused on rapidly
deploying our state-of-the-art fiber optic backbone network in densely
populated metropolitan areas. As of April 30, 2003, we have deployed our fiber
optic backbone network in 40 cities and one district. As of April 30, 2003, we
provided high-speed Internet access services to 1,295,279 subscribers through
our fiber optic last-mile connections.

We also provide high-speed Internet access services through hybrid fiber
coaxial (HFC) cable lines, fixed wireless, or LMDS, connections and wireless
LAN connections. As of April 30, 2003, we provided high-speed Internet access
services to 1,633,497 subscribers in 98 districts through owned and leased
cable lines, to 36,399 subscribers through LMDS connections and to 11,445
subscribers through wireless LAN connections.

|            |  |              |  |         |  |             |         |           |           |  |         |  |           |  |           |  |           |  |           |  |           |  |         | 
|----------- |  | ------------ |  | ------- |  | ----------- | ------- | --------- | --------- |  | ------- |  | --------- |  | --------- |  | --------- |  | --------- |  | --------- |  | ------- | 
|            |  | Dec 31,      |  | Dec 31, |  | Dec 31,     |         | April 30,
|Description |  | 2000         |  | 2001    |  | 2002        |         | 2003     
|            |  |              |  |         |  |             |         |          
|            |  |              |  |         |  | VDSL        |         |           |          |  |         |  |          |  |           |  |          |  |           |  | 80,711    | 
|            |  | Residential  |  | ADSL    |  |             | 634,619 |           |           |  | 984,432 |  |           |  | 1,195,916 |  |           |  | 1,194,691 | 
|            |  |              |  |         |  | Cable Modem |         |           | 386,881   |  |         |  | 920,243   |  |           |  | 1,312,045 |  |           |  | 1,630,684 | 
|Broadband   |  | Corporate    |  | ADSL    |  |             | 17,195  |           |           |  | 30,247  |  |           |  | 25,673    |  |           |  | 19,877    | 
|            |  |              |  |         |  | Cable Modem |         |           | 54,577    |  |         |  | 80,357    |  |           |  | 77,735    |  |           |  | 2,813     | 
|            |  | LMDS         |  |         |  |             |         |           | 11,151    |  |         |  | 29,917    |  |           |  | 37,698    |  |           |  | 36,399    | 
|            |  | Wireless LAN |  |         |  |             |         |           |          |  |         |  |          |  |           |  | 376       |  |           |  | 11,445    | 
|            |  |              |  |         |  | Sum         |         |           | 1,104,423 |  |         |  | 2,045,196 |  |           |  | 2,649,443 |  |           |  | 2,976,620 | 
|            |  |              |  |         |  |             |         |           |           |  |         |  |           |  |           |  |           |  |           |  |           |  |         | 
|Voice       |  |              |  |         |  |             |         |           |           |  | 378,586 |  |           |  | 702,572   |  |           |  | 870,333   |  |           |  | 996,696 | 
|Leased Line |  |              |  |         |  |             |         |           |           |  | 1,488   |  |           |  | 3,216     |  |           |  | 5,861     |  |           |  | 7,051   | 
|            |  |              |  |         |  |             |         |           |           |  |         |  |           |  |           |  |           |  |           |  |           |  |         | 
|            |  | Total        |  |         |  |             |         |           | 1,484,497 |  |         |  | 2,750,984 |  |           |  | 3,525,637 |  |           |  | 3,980,367 | 
|            |  |              |  |         |  |             |         |           |           |  |         |  |           |  |           |  |           |  |           |  |           |  |         | 

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For the years ended 2000, 2001 and 2002, we had the following revenues and
total sales generated by our business segments (in millions of Won):

|     |  |           |         |       |  |             |         |       |  |       |         |  |  |  |         |  |  |  |           | 
|---- |  | --------- | ------- | ----- |  | ----------- | ------- | ----- |  | ----- | ------- |  |  |  | ------- |  |  |  | --------- | 
|     |  | Broadband |         | Voice |  | Leased line |         | Other |  | Total
|     |  |           |         |       |  |             |         |       |  |      
|2000 |  |           | 284,159 |       |  |             | 34,089  |       |  |       | 8,767   |  |  |  | 15,789  |  |  |  | 342,804   | 
|2001 |  |           | 641,544 |       |  |             | 114,529 |       |  |       | 17,706  |  |  |  | 56,942  |  |  |  | 830,721   | 
|2002 |  |           | 969,635 |       |  |             | 210,664 |       |  |       | 111,813 |  |  |  | 125,742 |  |  |  | 1,417,854 | 

Products and Services

We currently provide high-speed Internet access services, local telephony
services and leased line services in Korea pursuant to several wire-line based
options and wireless technologies. Until April 2002, we also offered a variety
of multimedia services through HanaNet, our ISP.

Access to our Data Network

We currently provide always-on, high-speed Internet access services
through several service offering options. We offer broadband Internet services
to subscribers in large residential and commercial buildings through fiber
optic networks, to subscribers in less densely populated residential areas
through HFC networks and to subscribers in small and medium-sized commercial
buildings as well as medium to low density housing complexes through LMDS
networks. Residential subscribers in areas in which we have built out our fiber
optic network have the choice of two types of DSL services, namely ADSL and
VDSL services. Corporate subscribers, generally, have the choice of ADSL,
VDSL, ISDN or our dedicated access line services. Subscribers in service
areas in which we lease or have built out HFC networks are generally limited to
HFC-connection based data services. Our high-speed Internet access services
are marketed under the brand name, HanaFos.

DSL (ADSL & VDSL) Services.DSL services are provided primarily over
existing copper lines in the subscribers premises, which are connected to our
backbone network through fiber optic last-mile connections. We believe our DSL
service is the best quality, high-speed Internet access service available to
residential subscribers. Our DSL service offering is targeted at high-volume
residential subscribers. ADSL services offer data transmission speeds of up to
eight Mbps and VDSL services offer data transmission speeds of up to 20 Mbps.
In addition, Internet users in Korea pursuant to traditional dial-up services
must pay local per minute telephony charges, whereas DSL subscribers pay a flat
fee. Therefore, we believe that subscribers that average over two hours a day
on the Internet realize cost savings through our ADSL services. As of April
30, 2003, we provided ADSL services to 1,295,279 subscribers, which consist of
1,194,691 residential subscribers and 19,877 corporate subscribers, and VDSL
services to 80,711 subscribers.

HFC Services.Our cable-network based services are currently available in
98 service areas. HFC connections to our data network allow for maximum speeds
of ten Mbps downstream and 700-800 Kbps upstream through the use of cable
modems installed at our subscribers premises. We have simultaneously entered
into a cable network based strategy while building our own fiber optic network
because the use of existing HFC lines allows our company to expand our coverage
area with low capital expenditure obligations. We have not invested in
building out our fiber optic network or pursuing affiliation or lease
agreements with district cable network operators in areas in which we have
agreements with Powercomm to use its cable lines. As of April 30, 2003, we
provided HFC services to 1,633,497 subscribers, which consist of 1,630,684
residential subscribers and 2,813 corporate subscribers.

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Wireless Services.Wireless services using wireless technologies such as
LMDS and LAN allow us to
connect subscribers to our backbone through wireless last mile
connections. We believe wireless offerings allow us to expand our coverage
area at a lower cost per subscriber and more rapidly than through connecting
subscribers to our backbone through fiber optic connections, thereby allowing
us to cope with the expected increase of the subscribers efficiently.

We commenced commercial services of high-speed Internet access and
multimedia and data services using LMDS communications technology in July 2000.
Services using LMDS are transmitted at a maximum speed of ten Mbps, a speed
that exceeds that currently possible through ADSL wire-line technology. LMDS
services are marketed primarily to medium-sized businesses and apartment
complexes. Our LMDS services are currently provided in eleven cities,
including Seoul and Pusan. As of April 30, 2003, we provided LMDS services to
36,399 subscribers.

On April 1, 2002, we commenced providing HanaFos AnyWay wireless LAN
services, which allow Internet access through mobile devices such as notebook
computers or personal digital assistant units equipped with a LAN card for
users within the coverage of our access points. Internet access services
using wireless LAN are transmitted at a maximum speed of eleven Mbps. We
currently provide wireless LAN services in approximately 330 access point areas
across the nation, including key public areas such as hotels, subway stations,
shopping malls, colleges and fast food stores. We provide our wireless LAN
services to residential and corporate subscribers as well as subscribers who
require Internet access on a temporary basis, particularly those subscribers
who need mobile Internet access. As of April 30, 2003, we provided wireless
LAN services to 11,445 subscribers.

Local Telephony Services

We are the sole competitor to KT in the local telephony market. In
addition to local dial tone service and other basic features such as call
forwarding, call waiting, dial back and voicemail services, we offer
value-added services such as wake-up call, unified messaging and
teleconferencing services in order to distinguish our services from those
available from the local incumbent.

As of April 30, 2003, we provided local telephony services to 706,768
residential subscribers and to 269,430 corporate subscribers. Most of our
residential subscribers receive local telephony services bundled with our ADSL
services.

We believe the ability to offer local telephony distinguishes our service
offerings from that of communication services providers, other than KT, because
it allows our subscribers to receive both data and local telephony services
through a single provider and thus receive one bill for both service offerings.

Voice over Internet Protocol (VoIP) Services.On April 1, 2002, we
commenced providing VoIP services bundled with cable modem-based broadband
Internet services under the name HanaFos cable + voice, which allow
simultaneous use of high-speed Internet and local telephony services. We
currently provide VoIP services in certain parts of Seoul and Kyunggi-do. As
of April 30, 2003, we provided HanaFos cable + voice services to 20,498
subscribers.

Internet and Related Support Services

On October 1, 1998, we launched HanaNet (hananet.net), our ISP, as the
primary vehicle for our content and multimedia service offerings. In April
2002, we transferred our HanaNet portal business-related assets and
approximately 20 employees to a subsidiary of Dreamline, DreamX.net Co., which

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operates the portal site, dreamx.net. We currently own a 32.2% equity interest in Dreamline.
DreamX.net subsequently changed its name to HanaroDream Corp., and launched a
new site, hanaFOS.com in July 2002, featuring a variety of basic on-line
services, including personal homepages, free email services, chatting services,
bulletin board and social communities, and multimedia contents including
movies, music, comics, animation, popular on-line games, on-line education,
sports, news and television dramas. In March 2002, we entered into an
agreement with HanaroDream under which HanaroDream provides the basic on-line
services and contents of its portal site to our subscribers, for a term of
three years. See Item 10Additional InformationMaterial ContractsInternet
Service Agreement between Hanaro Telecom and HanaroDream for a summary of the
terms of the agreement.

Until the transfer of our HanaNet business in April 2002, we offered
HanaNet subscribers traditional ISP services such as access to the world-wide
web, free e-mail and the ability to create homepages, and a variety of high-end
services that require high-speed data access. We also offered an Electronic
Software Delivery (ESD) service where members can purchase commercial software
including movies, games and music videos and download the software directly
onto their computer and obtain immediate access to the purchased software.

Internet Data Center. We opened N-GENE, our IDC, in May 2000 with a total area
of approximately 40,000 square meters. Through N-GENE, we provide our
corporate subscribers with server-based support in the form of co-location and
dedicated server hosting. As of April 30, 2003, N-GENE hosted approximately
7,000 servers.

Co-location. This service allows our customers to connect their servers
directly to our backbone network at Gbps rates, which are much faster than the
speed of leased Internet lines. This service is appropriate for corporate
customers with multiple servers and for those who need broadband circuit
capacity.

Dedicated server hosting. We provide our customers with servers with their
desired specifications, which are connected to our backbone network at Gbps
rates. By using our dedicated server hosting services, customers can have
access to dedicated servers without the burden of purchasing or maintaining the
servers.

Leased Line Services

We hold a license to operate leased line services on a nationwide basis in
Korea. We commenced providing dedicated leased line services in January 2000.
As of April 30, 2003, we had 7,051 traditional leased line subscribers. Our
leased line fees vary depending on the distance and bandwidth requirements of
our subscribers. As we upgrade the transmission capability of our inter-city
connections, we expect to expand the scope of our leased line services.

We, through Hanaro Telecom America, provide international data services in
Korea and the United States, respectively, initially targeting U.S.-based South
Korean companies.

Seasonality

Hanaro Telecom does not encounter seasonal changes in demand for its
services. For a description of factors that affect the demand for Hanaro
Telecoms services, see Item 3Key InformationRisk Factors.

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Sales and Marketing

Sales

We are focused on bringing our high-speed Internet access, data and
multimedia services, as well as our local telephony services, to both corporate
and residential users.

Sales to corporate subscribers are handled through our in-house sales
group. Our sales people initially focus on securing contracts with large
commercial complexes, thus allowing us to install our remote terminals at their
premises. After installation of our equipment, sales people focus their
attention on individual corporate clients located within the premises. Sales
people that secure contracts with corporate clients remain the main contact
person for all aspects of the subscribers needs, including installation,
customer service and follow-up service. Our in-house sales staff receives an
annual bonus which can equal up to 50% of the base rate for our company based
upon performance.

We currently outsource a significant portion of our sales force needs.
Our outside sales force receives a one to two week training session on how to
sell our products and services. The training includes basic instruction on
etiquette and selling techniques, as well as classes regarding our corporate
image and our products and services. Follow-up sessions are held to introduce
new products and services to the sales force. Our outside sales force sells our
services through the following channels:

Customer Centers.We have exclusive agreements with 61 Hanaro Telecom
customer centers, 16 of which are located in Seoul, four in Pusan and four in
Inchon. Each of the customer centers sells only our products and services.
Customer centers receive a commission from us for each service contract and
installation contract secured. Customer centers sub-contract out to smaller
distribution outlets within their area to increase their sales coverage.
Customer centers have also commenced sales through telemarketing.

CATV System Operators.The system operators in each of the areas covered
by our cable network leasing arrangements have the right to sell our services
within their respective areas. In the event a potential subscriber elects a
non-cable service, such as ADSL, that is available in that service area, the
subscriber is referred to one of our customer centers. The cable system
operators in each of the 36 service areas in which we have commenced operations
have started selling our services and products.

Agents.Once a commercial or residential building is wired for our
services, we employ tenants to sell our products and services within the
building. We also utilize other individual sales agents and small sales
agencies to sell our products and services in our coverage areas. Our agents
receive a sales commission for each new subscriber.

We also have agreements with other types of service providers in order to
further expand our sales coverage. We are a party to agreements with the
construction subsidiaries of certain of our affiliates pursuant to which we
install our network equipment in newly built commercial and residential
buildings, which in turn allows builders to advertise their new buildings as
cyber buildings. In alliance with Samsung Electronics, Sambo TriGem, Hyunju
Computer, Hyundai Multicap and LGIBM, leading PC manufacturers in Korea, we
offer desktop PCs and laptop PCs to our subscribers at a discount price. In
order to add more Internet network game players to our subscriber base, we
offer Game Plus, popular network games bundled with our high-speed Internet
access service.

Marketing

We use a variety of marketing programs and media to raise awareness of our
services and products.

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Our marketing programs include:



| |  |  | advertising in newspapers and magazines;                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------
|
| |  |  | advertising on television and radio;                                                                        
|
| |  |  | participating in trade shows;                                                                               
|
| |  |  | campaigns within service areas using direct mail,
telemarketing, leaflets, posters and vehicle stickers; and
|
| |  |  | creating alliances with key Internet content
providers.                                                     

We also organize special events to promote our products and services, such
as Internet seminars, campus events and joint presentations with Korean
securities firms. We spent a total of Won 39 billion for advertising in 2002.

Customer Service

We maintain an emphasis on customer care to differentiate us from our
competitors. We provide 24-hours-a-day, 365-days-a-year customer support
through our call center. We also have a customer claim center located within
our call center to handle subscriber claims regarding our service quality and
billing. Our trained customer service representatives handle all subscriber
calls. All service representatives receive a one-week orientation training and
on-site supervisors provide additional support. We believe it is important for
customer service representatives to have a thorough knowledge of our services
and products. All calls to the call centers are recorded and service
representatives are graded periodically based on performance. We strive to
answer all calls within 10 seconds. We are currently receiving approximately
45,000 calls per day into our call centers. We use automated answering
services to respond to routine inquiries, such as account balances. As of
April 30, 2003, we employed 1,100 workers in our call centers, each working
eight hour shifts. We anticipate that we will continue to hire additional
customer support personnel as the size of our subscriber base increases.

Subscribers can also voice their complaints through e-mail. Questions or
complaints that we feel are common issues arising among our subscribers are
posted, together with our response, on a bulletin board on our home page.

We believe it is important for subscribers to have face-to-face access to
our representatives. We have approximately 112 customer centers, including our
61 exclusive customer centers. Our sales staff at our customer centers receive
customer service training in addition to their sales training. Customer center
staff are trained to handle all subscriber complaints. Our in-house sales
people monitor the performance of the customer center employees during their
visits to the customer centers.

Information Systems and Billing

Information Systems

We currently utilize an information system network which consists of three
separate systems: the customer support system, the operational support system
and the business support system. The customer support system handles all
information related to an individual subscriber, including customer care and
billing information and marketing and sales data. The operational support
system handles all data regarding management of our operations and acts as the
interface to the network management system, which monitors the performance of
our network and delivery of services 24-hours-a-day, every day. This interface
allows for quick identification of network defaults and relays the information
to our customer support system. Finally, the business support system
handles data regarding internal business operations,

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including accounting
and personnel. Our information system is designed to integrate all of our
internal support services. The majority of the integration of our internal
support services has been completed.

We believe integration of our information system is important because it
permits customer care, sales engineering, service management, service delivery,
accounting and inventory sales management personnel to access a single
subscriber record. Accordingly, a subscriber will be able to get support for
any of our products and services with one phone call. By providing
comprehensive, real-time customer information, this system is designed to
enable our customer service representatives to respond faster to inquiries,
provide greater quality customer care and identify more opportunities to sell
additional products. In addition, credit history information regarding
potential and existing subscribers obtained from credit analysis organizations
is available through our integrated information system network. This allows
our sales and operational staff to block services to problem subscribers at an
early stage.

Billing

Our billing system has been designed to provide our sales and marketing
staff with flexibility to design innovative pricing plans and service offerings
and to make payment by our subscribers easy. We currently provide for joint
billing to our subscribers for our services with Dacoms long-distance and
international telephone services. The billing system is also capable of
immediately processing discounted billing rates for different types of calls.
In addition, the system allows subscribers to pay for our services over the
Internet or by monthly direct deposits from banks. Each subscriber may also
access on-line a detailed breakdown of services rendered to such subscriber.

Competition

High-speed Internet Access.In the high-speed, broadband Internet access
market, our competition comes from KT and Thrunet.

DSL (ADSL & VDSL).KT is our only competitor that is not limited in the
coverage of its services by the coverage of its network. KT, as the local
incumbent telecommunications carrier, has an extensive fiber optic backbone
network throughout Korea and has significantly greater capital resources than
we do. KT currently provides ADSL services and we understand that KT is
upgrading its last-mile connections and related transmission facilities to
provide DSL services to its subscribers at speeds comparable to ours. KT
launched digital subscriber line services in June 1999. Furthermore, we
believe that KT is likely to focus its upgrading process and marketing efforts
in our targeted high density, high demand areas. As of April 30, 2003, KT and
Hanaro Telecom had market shares of approximately 79.7% and 20.3%,
respectively, in the DSL services market in Korea.

HFC.Thrunet launched its cable-based services in July 1998. Our
agreement with Powercomm to use its cable network is not exclusive; therefore,
Powercomm may lease the cable network that we currently lease to additional
service providers. We, together with Thrunet, currently utilize almost all of
Powercomms cable networks. Onse Telecom, Dreamline and Dacom provide services
through the lines of district cable network operators, which are proprietors of
smaller, localized cable networks. KT also owns a large cable network;
however, its existing network does not have the two-way communication
capability that is necessary for the provision of high-speed Internet access.
We believe KT is currently focusing on upgrading its telephone lines, rather
than its cable network. As of April 30, 2003, Hanaro Telecom, Thrunet and Onse
Telecom had market shares of approximately 38.0%, 29.6% and 11.6%,
respectively, in the HFC market in Korea.

Multimedia Services.In the Internet services sector, there are
currently 81 commercial ISPs.

20



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Korea.com, a service provided by Thrunet,
Chollian, a service provided by Dacom and Kornet, a service provided by KT, are
currently developing and/or providing multimedia products comparable to those
available on HanaNet, which is now integrated with DreamX.net of Dreamline.

Internet Data Center Services.In the IDC services market, there are
currently five major IDC service providers in Korea: Korea Internet Data
Center, KT, Hanaro (N-GENE), Enterprise Networks and Prism. We commenced IDC
services in May 2000. Competition in this market is primarily based on price
and service quality. Some of these major providers are expanding their service
capacities. In addition, approximately 20 small and medium-sized data centers
provide IDC services similar to ours.

Local Telephony.In the local telephony market, we are the only
competitor of the local incumbent, KT. KT currently enjoys a 96% market share
in the local telephony market. Fees charged by KT for local telephony service
are currently regulated by the Korean government. We are only required to
report our fees charged for local telephony services to the government. KT, as
the local common carrier, must provide its local telephony services to all
subscribers requesting service. We do not have a universal service obligation.
Thus we are able to focus our roll-out on areas with higher density, greater
average disposable income and, therefore, stronger demand for our products and
services.

Leased Line Services.In the leased line services market there are
currently five primary service providers in Korea: KT, Powercomm, Dacom,
Dreamline and Enterprise Networks. We commenced leased line services in
September 1999. Competition in this market is primarily based on price,
network coverage and quality. KT is currently the leading provider of data
communications services in Korea. In order to provide leased line services,
the service provider must have a license to provide network services.

Intellectual property

We hold 83 registered trademarks, 13 registered patents and two registered
industrial design rights in Korea. As of April 30, 2003, we also had 23
trademark applications pending and 11 patent applications pending at the Korea
Industrial Property Office. While we consider all of our intellectual property
to be important, we do not consider any one or group of patents, trademarks or
industrial design rights to be so important that their expiration or
termination would materially affect our business.

In 1999, KT filed a claim with the Industrial Property Tribunal of the
Korea Industrial Property Office, seeking a declaratory decision that our use
of the name Hanaro Telecom falls within the scope of its right to the service
mark Hanaro Telecom. In 2001, the Patent Court concluded that our use of
Hanaro Telecom did not fall within the scope of KTs rights in the service
mark Hanaro Telecom. Accordingly, we may continue to use Hanaro Telecom as
our corporate name.

In 2000, KT filed another petition with the Industrial Property Tribunal
seeking a declaratory decision that our use of Hanaro Telecom falls within
the scope of its right to the service mark Hanaro. The Industrial Property
Tribunal subsequently dismissed KTs petition, holding that our use of Hanaro
Telecom did not fall within the scope of KTs right to the service mark
Hanaro.

Licenses

NSP License.Under the Telecommunications Basic Law, the
telecommunications services that an NSP may provide are restricted to those for
which it has received a license from the MIC. To date, we have received the
following types of NSP licenses from the MIC. In October 1997, we received our
perpetual license to provide
fixed-link local telephone service on a nationwide basis in Korea. The
founding shareholders of our company paid a one-time fee of Won 45.0 billion
for such license. In August 1999, we
21Table of Contents

obtained a perpetual license to provide
domestic leased line services, for which we paid a one-time fee of Won 1.9
billion. In February 2000, we obtained a perpetual license to provide
value-added telephone services relating to long distance telephone services and
international telephone services, for which we paid one-time fees of Won 0.3
billion and Won 0.1 billion, respectively. In August 2000, we obtained a
perpetual license to provide international leased line services for which we
paid a one-time fee of Won 0.2 billion. In January 2003, we obtained perpetual
license to provide long distance telephony services, including inter-city and
international services. Our licenses to provide such NSP services are subject
to satisfaction of certain terms and conditions, including the following:



| |  |  | The licenses required us to make annual contributions to the
Information Promotion Fund for the purpose of research and development
pursuant to the Telecommunications Business Law. On May 9, 2002, the
MIC announced that, effective from 2002, only the NSPs whose total
voice and leased line services revenue amount for the preceding year
was more than Won 30 billion and that realized a net profit in the
preceding year, are required to make annual payments for the purpose of
research and development in the amount of 0.5% of the total voice and
leased line services revenue, to the extent that the amount of such
payment does not exceed the amount of the net profit for the preceding
year.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | We must comply with the business plan submitted to the MIC in all
material respects. If necessary, the business plan may be revised in
accordance with the procedures set out in the Guidelines for Handling
of Change of Business Plan of Network Service Provider. The initial
service fee must be in compliance with the business plan. We must
submit an application to the MIC in order to increase the service fee,
together with supporting documentation.                                                                                                                                                                                                                                               

No fees are required to be paid to the government of Korea in connection
with its approval of us as a network service provider.

SSP License.In June 1998, we also registered as a specific service
provider. This registration is for an indefinite term. As a specific service
provider, we are permitted to provide the following services:



| |  |  | By utilizing our own switching facilities and other
telecommunications facilities owned by network service providers,
resell or provide the same types of telecommunications services as
those of domestic network service providers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | By leasing telecommunications facilities owned by other network
service providers, resell the same types of telecommunications services
as those of domestic network service providers.                                              
|
| |  |  | By utilizing our own facilities, provide telecommunications
services within a specific building.                                                                                                                                     

Our registration as a specific service provider contains the following
conditions:



| |  |  | The commencement of, and any changes in the terms of, service must
be announced in one or more daily newspapers published in Korea at
least one week prior to the effective date.                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In conducting our international telecommunications business, we
must refrain from any actions that may interfere with fair competition.                                                                                                                 
|
| |  |  | In the event our annual revenues for the previous year with respect
to the specific service provided exceeds the amount set by MIC, we must
make annual contributions to the Information Promotion Fund
pursuant to the Telecommunications Business Law.

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| |  |  | We should submit detailed information on the location of our major
facilities and the structure of our network to the MIC prior to the
commencement of our commercial operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

No fees are required to be paid to the government of Korea in connection
with our registration as a specific service provider.

Network Operator License.Pursuant to the Integrated Cable Broadcasting
Law (recently replaced by the Broadcasting Law), in June 1999, we were
designated by the MIC as a network operator in the cable television industry.
As a network operator, we are permitted to install, operate and lease network
facilities to system operators in 57 regions throughout Korea. No fees are
required to be paid to the government of Korea in connection with such
designation.

Our designation as a network operator requires that we establish the
transmission network in compliance with the technical standard set forth in
Article 25 of the Telecommunications Basic Law and obtain approval from the MIC
prior to providing network facilities to system operators.

Wireless Frequency Allocation.In February 1998, we obtained the right
to the WLL frequency of 2.3 GHz bandwidth for 20MHz down- and up-stream, and in
August 1999 we obtained the LMDS frequency of 26 GHz for 400 MHz down- and 160
MHz up-stream. These rights are for an indefinite term and no fees are required
to be paid to the government of Korea in connection with such rights.

Cable Landing License in the United States.In July 2000, Hanaro Telecom
America Inc., our U.S. subsidiary, obtained a Section 214 license from the U.S.
Federal Communications Commission. This license authorizes Hanaro Telecom
America to operate as a facilities-based international common carrier and to
resell the international services of authorized U.S. common carriers.

Interconnection

We have entered into interconnection agreements that allow for
interconnection of the telecommunication facilities of our company and other
telecommunication operators. These interconnection agreements allow our
customers to connect to the networks of other telecommunications operators and
receive telecommunications services, such as local, long distance and
international call and cellular phone call services, through our network.
Pursuant to the Telecommunications Basic Law, a telecommunication service
provider is required to enter into interconnection arrangement with any other
telecommunications service provider that requests interconnection. In
addition, the MIC issues guidelines regarding interconnection. The guidelines
generally require that interconnection charges be based on the rates set by the
MIC after examining the costs to regulated operators, such as KT and SK
Telecom, of carrying a call. The regulated operators are required to calculate
such costs every other year. In the event a dispute arises between
interconnecting parties, the Korea Communications Commission is to act as the
arbitrator.

We have entered into interconnection agreements with all major
telecommunication service providers in Korea. The chart below sets forth the
type and name of service providers that we have such agreements with.

|                       |  |                        
|---------------------- |  | -----------------------
|Type                   |  | Name of Providers      
|                       |  |                        
|Local                  |  | KT                     
|Domestic long-distance |  | KT; Dacom; Onse Telecom
|International          |  | KT; Dacom; Onse Telecom

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|                                         |  |                                                                                   
|---------------------------------------- |  | ----------------------------------------------------------------------------------
|Cellular                                 |  | SK Telecom                                                                        
|Personal communication service providers |  | KT Freetel Co., Ltd.; LG Telecom Co., Ltd.                                        
|Wireless paging services                 |  | Real Telecom Ltd.; Seoul Mobile Telecom,
Inc.; Eyesvision Corp.; Selim i tec, Inc.

Korean Telecommunications Laws and Regulations

Overview

Koreas telecommunications industry is subject to comprehensive regulation
by the MIC pursuant to provisions of the Telecommunications Basic Law (Law No.
4393 of August 10, 1991, as amended), the Telecommunications Business Law (Law
No. 4394 of August 10, 1991, as amended), and the Radiowave Act (Law No. 6197
of January 21, 2000) (collectively, the Telecommunications Laws). In
addition to the Telecommunications Laws, industry participants are subject to
regulation under various laws of general application. The Telecommunications
Laws empower the MIC to regulate and supervise, among other things, entry into
the telecommunications industry, allocation of radio spectrum, the scope of
permissible business of telecommunications service providers, technologies used
by telecommunications service providers, rate-setting, deposit requirements,
the focus and budget of research and development, and interconnection
revenue-sharing between telecommunications service providers.

The Ministry of Information and Communication

The MIC is responsible for information and telecommunications policy,
radio and broadcasting technology, postal service and postal finance.

Telecommunications Laws

Under the Telecommunications Basic Law and the Telecommunications Business
Law, telecommunications service providers are currently classified into three
categories: Network Service Providers (NSPs), Specific Service Providers (SSPs)
and Value-added Service Providers (VSPs). We are classified as an NSP and also
registered as an SSP. An NSP provides specified types of telecommunications
services as licensed by the MIC, in most cases with its own telecommunication
networks and related facilities. As an NSP, we have licenses to provide local
telephony services, leased line services (domestic and international), long
distance and international telephony services. These licenses are for
indefinite terms.

The telecommunications services provided by an NSP may include local, long
distance and international telephone services, leased line services, cellular
communications services, paging services, PCS services, services using
frequencies allocated by the MIC, trunked radio system services and such other
services as designated by the MIC. VSPs provide telecommunications services
other than those services specified for NSPs, such as data communications using
facilities leased from an NSP following notification to the MIC. The newest
category of service providers, the SSPs, is intended to occupy a middle ground
between NSPs and VSPs. The Telecommunications Business Law provides that there
are three types of SSP licenses:



| |  |  | type 1 reseller licenses for entities that have their own switching
facilities and resell or provide the same types of telecommunications
services as those of NSPs;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | type 2 reseller licenses for entities that do not have their own
switching facilities and resell the same type of telecommunications
services as those of NSPs; and 

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| |  |  | intra-building telecommunications service provider licenses for
entities that provide telecommunications
services within a specific building through their own facilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under the current Telecommunications Basic Law and the Telecommunications
Business Law, an NSP, such as Hanaro Telecom, must be an entity incorporated in
Korea in order to qualify for a license from the MIC. In addition, the
Telecommunications Laws restrict the ownership of NSPs by certain shareholders.
Ownership interests in NSPs are subject to the following ownership
restrictions:



| |  |  | a foreign government, foreigner or any entity that has 80% or more of
its outstanding shares owned by a foreign government or foreigner (15%,
if the largest shareholder (determined on the basis of voting shares) of
such entity is a foreigner or foreign government) may not own more than
49% of the aggregate number of the entitys issued and outstanding
voting shares; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an entity whose largest shareholder (determined on the basis of
voting shares) is a government (other than KT) or a local government
cannot qualify for an NSP license.                                                                                                                                                                                                             

In the event that an NSP at any time violates the shareholding
restrictions, the holders of shares in excess of such limitations cannot
exercise voting rights and the MIC may require that corrective measures be
taken to comply with such restrictions.

The MIC has the authority to recommend to NSPs that they provide funds for
national research and development of telecommunications technology and related
projects. In the past, the MIC has recommended that industry participants
contribute a percentage of their total revenues to research and development,
including for national research and development projects. Currently, we are
required to contribute 0.5% of the total annual service revenues derived from
our voice and leased line services in the event that we have net income for the
preceding year.

The MIC may revoke an NSPs license. The grounds for revocation include
fraud in obtaining the license, failure to perform in accordance with any
condition imposed by the MIC upon issuance of the NSP license, violation of the
rules restricting beneficial ownership and control, failure to commence
business within the time period designated by the MIC, failure to abide by the
general terms for service either reported to or approved by the MIC, and
violation of the Telecommunications Laws. If an NSP wants to cease its business
or dissolve, such NSP must obtain MIC approval.

The Korea Communications Commission also has the authority to monitor
unfair business practices among telecommunication service providers in
accordance with the Telecommunications Business Law. The MIC has promulgated
guidelines which specify fair competition among telecommunications companies
under the Telecommunications Business Law. If an NSP or any telecommunication
service provider is in violation of these guidelines, the MIC may order such
telecommunication service provider to take certain actions, including (i)
separating the service providing organization, (ii) changing its internal
accounting regulations, (iii) disclosing certain company service related
information, (iv) changing its articles of incorporation, the terms of any
service contracts and any interconnection agreement, (v) suspending the act
that violates fair competition, (vi) making a public announcement of the
violation and (vii) measures necessary for the rectification of any violation,
such as removal of telecommunications facilities which gave rise to the
violation. In addition, the MIC may impose upon such telecommunication
service provider fines, subject to certain exceptions, up to 3% of the entitys
average sales revenues generated from the service in violation of such
guidelines during the three years preceding such violation.

The Telecommunications Business Law requires us to permit other service
providers to interconnect
25Table of Contents

to our networks for purposes of offering other
services. In the event an agreement with a new service provider desiring
interconnection is not reached within 90 days, a service provider can appeal to
the Korea Communications
Commission. We have entered into interconnection arrangements with most
major service providers in Korea, including KT, Dacom, Onse and other NSPs, and
expect that we will enter into more interconnection agreements as additional
license for telecommunications services are issued.

Rate Setting

As an NSP, we must report to the MIC the rates and the contractual terms
for each type of service we provide. In addition, an NSP that has a dominant
market share for a specified type of service must obtain approval from the MIC
for the rates charged and the general terms for such service if its revenues
from such service for the previous year exceed a specific revenue amount set by
the MIC.

Each year, the MIC may designate, pursuant to regulations, the NSPs and
the rates and general terms of services provided by such NSPs that require MIC
approval. On May 22, 2002, the MIC designated the local telephone service of
KT and the mobile service of SK Telecom as requiring MIC approval. The MIC
requires fees and charges, in terms of the methods of their calculation, to be
adequate, fair and objective. The MIC may order changes in the rates if it
deems the rates to be unreasonable and against public policy.

Licensing

Under the Telecommunications Business Law, the MIC promulgated a
regulation specifying a detailed standard of review, application method and
application period for each new NSP license. Upon receipt of the application,
the MIC considers various factors in its approval process, including
reasonableness of the service provision plan, size of facilities for the
services, financial and technical soundness of the applicant, results of
development of technology and plans for new technological developments.

Frequency Allocation

The MIC has the discretion to allocate and adjust the frequency band for
each type of service. Upon allocation of new frequency bands or adjustment of
frequency bands, the MIC is required to give public notice. The MIC also
regulates the frequency to be used by each radio station. We have been
allocated the frequency of 2.3 GHz bandwidth for 20 MHz downstream and upstream
and the frequency of 26 GHz bandwidth for 360 MHz downstream and 150 MHz
upstream.

Other Laws

Companies that operate line facilities for cable broadcasting are required
to register with the MIC under the Broadcasting Act (Law No. 6139 of January
12, 2000). We are registered as a service provider under such Act.

If we are deemed a market-dominating business entity, we may be subject to
certain regulations under the Monopoly Regulation and Fair Trade Act. In
determining whether an entity is a market-dominating business, the Korean Fair
Trade Commission reviews the entitys market share, the existence and severity
of barriers to entry to the concerned market, the relative size of the entitys
competitors and other factors.

In the case of abusive business practices by a market-dominating business
entity, the Korean Fair Trade Commission may order such entity to cease and
desist from such business practices, publicly announce that it has engaged in
abusive business practices and/or take other corrective measures it deems
26Table of Contentsfit.
The Korean Fair Trade Commission may also impose fines of up to 3% of the
entitys average sales revenues during the three years preceding the violation.
In addition, a violation of the Monopoly Regulation and Fair Trade Act can
bring about criminal sanctions. The violating entity may be fined up to Won
200.0 million or its representative(s) may receive imprisonment of up to three
years, although imprisonment is rarely, if ever, imposed.The Foreign Exchange Transaction Law, the Foreign Investment Promotion Law
and their regulations require companies, such as Hanaro Telecom, to obtain
approval from, or file a report with, a foreign exchange authority in
connection with any foreign direct investment. The authority may be the
Ministry of Finance and Economy (MOFE), the Bank of Korea or the designated
foreign exchange bank. The type of approval or report required depends on the
type of business engaged in by the investor and/or the amount of the investment
being made.4.C     ORGANIZATIONAL STRUCTUREAs of April 1, 2002, we and our Korean affiliates have been designated as
member companies of a business group subject to restrictions on debt
guarantees as well as a business group subject to restrictions on mutual
shareholding by the Korean Fair Trade Commission based on the new criteria
prescribed by the amended Monopoly Regulation and Fair Trade Act. Under the
amended Monopoly Regulation and Fair Trade Act, a member company of both the
business group subject to restrictions on debt guarantees and the business
group subject to restrictions on mutual shareholding is subject to, among
others, the following restrictions: subject to certain exceptions, such
company (i) shall not acquire or own shares of an affiliate company which
acquires or owns its shares; nevertheless, for newly designated companies, the
application of this restriction is waived for one year from the date of such
designation; and (ii) shall not provide payment guarantees with respect to bank
loans for its domestic affiliates for two years from the designation date.The following table lists information concerning the significant
subsidiaries of Hanaro Telecom:

|                                                 |  |                 |  |                      |       |                      |  |  |       |    
|------------------------------------------------ |  | --------------- |  | -------------------- | ----- | -------------------- |  |  | ----- | ---
|                                                 |  |                 |  | Percentage of        |       | Percentage of       
|                                                 |  |                 |  | Ownership and        |       | Ownership and Voting
|                                                 |  |                 |  | Voting Interest held |       | Interest held by    
|                                                 |  | Jurisdiction of |  | by Hanaro Telecom    |       | Hanaro Telecom      
|Name                                             |  | Incorporation   |  | as of Dec 31, 2002   |       | as of April 30, 2003
|                                                 |  |                 |  |                      |       |                     
|Hanaro Telecom America, Inc.                     |  | Delaware, USA   |  |                      | 100   | %                    |  |  | 100   | %  
|M-Commerce Co., Ltd.                             |  | Korea           |  |                      | 30.29 | %                    |  |  | 30.29 | %  
|Hanaro WEB(n)TV Co., Ltd.                        |  | Korea           |  |                      | 90.91 | %                    |  |  | 90.91 | %  
|Hanaro Realty Development &
Management Co., Ltd. |  | Korea           |  |                      | 99.99 | %                    |  |  | 99.99 | %  
|Hanaro Telephone & Internet
Information, Inc.    |  | Korea           |  |                      | 99.99 | %                    |  |  | 99.99 | %  
|Dreamline Corporation                            |  | Korea           |  |                      | 32.18 | %                    |  |  | 32.18 | %  
|HanaroDream Corp.1                               |  | Korea           |  |                      | 42.14 | % 1                  |  |  | 42.14 | % 1
|Korea Digital Cable Media Center2                |  | Korea           |  |                      | 24.75 | %                    |  |  | 24.75 | %  



|1 |  | Previously known as DreamX.net Co. Such percentage of ownership and
voting interest represents the percentage held by Dreamline Corporation.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | In October 2002, we acquired a 24.75% equity interest in Korea Digital Cable Media Center.                                                  

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4.D     PROPERTY, PLANTS AND EQUIPMENT

Facilities

Our principal properties consist of transmission facilities and
telecommunications equipment and information centers located throughout Korea.
We own two central telecommunication centers in Seoul, for the purposes of
managing our nationwide network. The area of each such center is approximately
15,000 square meters. We also own four regional telecommunication centers in
Pusan, Taegu, Kwang-ju and Taejeon, to manage the networks in those regions.
The area in square meters of such centers is approximately 5,800, 6,900, 7,600
and 4,300, respectively. Those centers are equipped with exchange and
transmission equipments.

We also have 28 exchange offices equipped with exchange equipments in 24
cities including Seoul, Pusan, Taegu, Taejeon and Kwang-ju. We own 23 of those
offices and lease the remaining four offices. We also have 29 transmission
offices equipped with transmission equipments in 20 cities including Seoul,
Pusan, Taegu, Taejeon and Kwang-ju. We own 23 of those offices and lease the
remaining six offices.

We lease our executive offices located in the Kukje Electronics Center
Building in Seocho-gu, Seoul.

Of the net book value of our total plant, property and equipment as of
December 31, 2002 (excluding construction in progress), transmission facilities
and telecommunication equipment represented 81.6%, buildings and real property
represented 14.5% and other assets represented 3.9%. As of December 31, 2002,
our fiber optic network consisted of 19,331 kilometers of owned and leased
lines.

We believe that our existing facilities are adequate for current
requirements and that additional space can be obtained on commercially
reasonable terms to meet future requirements.

Network

We believe that in order to become the leading provider of high-speed
Internet access, data and multimedia services to subscribers in Korea, it is
vital to design and install a network that utilizes state-of-the-art
technology. We believe our technologically advanced backbone network allows us
to provide services that are not possible over traditional networks.
Subscribers are connected to our network either through fiber optic lines to
the subscribers premises or through the use of HFC lines in areas in which we
have built or leased cable networks. We began delivery of commercial services
through wireless last-mile connections in Seoul in July 2000.

Backbone Network

Our always-on, high-speed Internet access and multimedia services and our
local telephony services are currently provided over our fiber optic backbone
network and last-mile connections consisting of 12,871 kilometers of owned and
leased fiber optic cable. Our backbone network is a SDH-based ring type
backbone with duplicate routers to ensure high system reliability. We utilize
the latest switches and other technologies in our backbone network to ensure
high quality and fast transmission. Our state-of-the-art system utilizes
technologies that offer the following advantages over traditional networks:

Deployment of Gigabit IP Network over WDM Backbone Systems.Our data
network utilizes Gigabit IP routers over 40 Gbps wavelength division multiplex
(WDM) systems, which offer greater transmission speed capability than
traditional backbone network. The maximum transmission speed currently is 2.5
Gbps with transmission speeds expected to increase to 10 Gbps by the end of
this year and

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this will allow us to offer quality-guaranteed high-speed Internet access.
We also deploy ATM switch which aggregate ADSL and dedicated access lines.

CCS7 Signaling Method.Our voice network utilizes the CCS7 signaling
method, which offers two principal advantages over traditional signaling
methods. First, the CCS7 signaling method allows our network to accommodate
certain value-added services such as number portability. Second, the CCS7
signaling method provides for shorter post-dialing delays. A call completed
over our network only requires a 0.4 second delay whereas one over a
traditional voice network requires a 1.9 to 2.9 seconds delay.

V5.2 Protocol to Increase Voice Network Efficiency.We are the first in
Korea to provide services using the V5.2 protocol. This protocol allows us to
efficiently connect multiple subscribers to our fiber optic network through a
single fiber optic connection by using remote terminals that are installed at
the subscribers premises.

Our network lines have been installed using existing infrastructure,
including subway routes and electrical poles, in order to minimize the cost of
our roll-out. Our backbone network has been built using technologies of
multiple vendors, including Lucent Technologies and NEC Corporation. We
believe that network telecommunications technologies have been standardized and
are generally compatible such that equipment and hardware provided by different
vendors can be used within an integrated network and we are not captive to any
one vendor for important equipment for our network.

We have our own points of presence (POP) in Palo Alto, San Jose and Los
Angeles in California, U.S.A. Our backbone network also has a direct link of
1.8 Gbps to these POPs in the United States via our own cable capacity and
leased circuit. In addition, we are working with all Korean Internet exchanges
and major ISPs for domestic Internet interconnection, including DACOM IX,
Korea-Internet Neutral Exchange and KT-IX.

We have an indefeasible right to use the following international leased
lines on various submarine cables connecting the United States and Asia, for 15
years or until the end of the economically useful life of such cables.

|              |  |                                                                    |  |             |  |                  |        | 
|------------- |  | ------------------------------------------------------------------ |  | ----------- |  | ---------------- | ------ | 
|              |  |                                                                    |  | Bandwidth   |  | Acquisition Cost
|Connecting    |  |                                                                    |  | Capacity    |  | (in millions of 
|Points        |  | Providers                                                          |  | Quantity    |  | Won)            
|              |  |                                                                    |  |             |  |                 
|Korea  US    |  | Iljin C2C Ltd.; Onse
Telecom; Asia Global
Crossing; Dacom Crossing |  | 10 x STM-1  |  |                  | 31,000 | 
|Japan  US    |  | Teleglobe USA, Inc.                                                |  | 13 x STM-1  |  |                  | 9,735  | 
|Korea  Japan |  | Dacom; Onse Telecom;
Teleglobe                                     |  | 12 x STM-1  |  |                  | 6,840  | 
|Korea  Asia  |  | Onse Telecom, Iljin C2C                                            |  | 4.6 x STM-1 |  |                  | 4,582  | 
|Korea  Asia  |  | Dacom                                                              |  | 4 x E-1     |  |                  | 396    | 



---

|(1) |  | Each STM-1 represents a bandwidth capacity of 155Mbps.
|--- |  | ------------------------------------------------------
|   
|(2) |  | Each E-1 represents a bandwidth capacity of 2Mbps.    

In addition to the above, we have an agreement with Flag Telecom Island
Ltd. under which we lease an aggregate of four Korea - Japan international
leased lines, each supporting a bandwidth capacity of 155 Mbps, until August
2003.

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Our backbone network has been deployed in 80 cities and 47 districts,
including Seoul, Pusan, Inchon, Taegu and Ulsan. Each of the ten local loops
is interconnected by 40 Gbps WDM backbone network using fiber optic lines
leased from Dacom. The interconnections between these other backbone networks
will also be leased from other network service providers.

We have expanded our voice network by installing voice switches in 30
cities and launched VoIP services in April 2002.

Fiber to the Office and the Curb

We connect subscribers in large commercial buildings and apartment
complexes with over 300 units to our backbone network through fiber optic
connections directly to the premises. These subscribers have two basic options
in the mode of service to be used to secure access to our data network.

Services over copper lines.Subscribers in large buildings can receive
our services by installing ADSL modems in their offices or homes that allow our
services to be provided through existing copper lines within the building. Our
subscribers premises are then connected to our backbone network through fiber
optic last-mile connections. Single-family homes and small apartment buildings
located within a one kilometer radius of certain of these large buildings can
also receive ADSL services through copper connections we install from the
remote terminals located in the large buildings. These additional services are
provided in order to maximize the return on expensive remote terminals and
other equipment installed in connection with our fiber optic connection
services. ADSL services operate at a maximum speed of eight Mbps downstream
and 768 Kbps upstream.

Internet Direct service.Large corporate subscribers often find
dedicated line service to be the most cost effective means of securing
high-speed data transmission capability. Our dedicated line service, which we
call Internet Direct service, is provided through our ATM-based network and
Gigabit routers at maximum speeds of up to 2.5 Gbps.

We believe direct connections to our state-of-the-art backbone network
through fiber optic lines offer the highest level of system reliability and
transmission speed capability.

Hybrid Fiber Coaxial

We currently provide our high-speed Internet access through hybrid fiber
coaxial connections in 115 service areas. These HFC connection services are
provided over our own cable network in 46 service areas, Powercomms cable
network in 41 service areas and other system operators cable networks in 28
areas. The approximate number of homes passed in these areas is 8.3 million.

We have agreements with cable system operators in 28 service areas. Each
of these system operators is responsible for maintaining subscriber lines and
subscriber relationships within its service area. The system operators in the
service areas in which we own a network also provide cable television services
to subscribers. We receive a portion of the revenues generated by the system
operators cable television services. Most of the agreements are for one-year
terms that are automatically renewed absent termination by either party.

The head-end of each system operator is connected to our regional data
center at a maximum speed of 1 Gbps, either through self-constructed fiber
optic lines or through lines leased from Dacom. We currently provide services
using HFC lines at a maximum speed of ten Mbps downstream and 600-700 Kbps

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upstream.
As of April 30, 2003, we provided our services to 8,255,032 subscribers
through our HFC connection services. As of April 30, 2003, our network was
connected to 1,040 cells through HFC connections.

Wireless Connections

We also provide the use of wireless last-mile connections to our fiber
optic network. We expect wireless connections to allow us to expand the
coverage of our network at a lower cost per subscriber than through building
wire-line connections to our backbone network. In addition, wireless
connection equipment and infrastructure are easier and quicker to install than
wire-line connections to our backbone network.

LMDS services.Services utilizing LMDS technology are marketed to small
corporate subscribers and small apartment complexes. LMDS services are
available in ten cities, including Seoul and Pusan. LMDS technology is a
technology used around the world in broadband wireless telecommunications
systems. As of April 30, 2003, our network was connected to 865 buildings
through LMDS connections.

Internet Data Center

In May 2000, we opened N-GENE, our IDC, in Seoul with a total area of
40,000 square meters. N-GENE has the capacity to accommodate 150,000 servers.
As of April 30, 2003, N-GENE hosted approximately 8,346 servers.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion together with the rest of this
annual report, including the financial statements and related notes included
elsewhere in this annual report. Our financial statements have been prepared
in Korean Won and prepared in accordance with Korean GAAP. The results
discussed below are not necessarily indicative of the results to be expected in
any future periods.

5.A      OPERATING RESULTS

Results of Operations

We commenced commercial operations of our high-speed Internet access
services and voice services on April 1, 1999 through fiber optic connections in
the cities of Seoul, Pusan, Ulsan and Inchon. We currently provide our
high-speed Internet access services in 80 cities and 47 districts and voice
services in 32 major cities. As of April 30, 2003, we had 1,581 employees and
had 2,976,620 high-speed internet access service subscribers, 996,696 local
call service subscribers and 7,051 leased line service subscribers.

Year ended December 31, 2002 compared to the year ended December 31, 2001

In 2002, we reclassified our business segments along the lines of
broadband services, voice services and leased line services. For example,
voice services that were bundled with our broadband services were included in
our broadband services until 2001 but in 2002, those services were included in
our voice services. Our business segment information for the year ended
December 31, 2001 was changed to reflect such reclassification. See Notes 25
and 26(21) to our financial statements for more information on our business
segments.

Operating Revenues.Our total revenues for the year ended December 31,
2002 were Won 1,417,854 million (U.S.$1,195.2 million), an increase of Won
587,133 million, compared to total revenue of Won 830,721 million in 2001. The
increase in total revenue in 2002 was primarily due to revenue increases of
(i) Won 328,091 million from our broadband services from Won 641,544 million in
2001 to Won 969,635 million in 2002, (ii) Won 96,135 million from our voice
services from Won 114,529 million in 2001 to Won 210,664 million in 2002, and
(iii) Won 94,107 million from our leased line services from Won 17,706 million
in 2001 to Won 111,813 million in 2002. The increase in our broadband services
revenues was primarily due to an increase in the number of our broadband
services subscribers from 2,045,196 as of December 31, 2001 to 2,877,526 as of
December 31, 2002. The increase in our local telephony services revenues was
primarily due to an increase in the number of customers from 332,679 as of
December 31, 2001 to 639,530 as of December 31, 2002. The increase in our
leased line services revenues was primarily due to an increase in the number of
customers from 3,216 as of December 31, 2001 to 5,861 as of December 31, 2002.

Operating Expenses.Our total operating expenses for the year ended
December 31, 2002 was Won 1,396,426 million (U.S.$1,177.1 million), an increase
of Won 395,091 million, compared to total operating expenses of Won 1,001,335
million in 2001. The increase in operating expenses in 2002 was primarily due
to increases of (i) Won 116,001 million in depreciation expenses, primarily due
to our investment in additional telecommunication equipment and facilities,
(ii) Won 82,280 million in telecommunication equipment lease expenses, due
primarily to an increase in payments related to leased fiber optic and cable
lines, (iii) Won 74,030 million in sales commissions paid to our sales agents,
primarily from an increase in the number of our subscribers, (iv) Won 38,974
million in commissions, primarily from an increase in payments for outsourcing
services and (v) Won 27,745 million in interconnection charges, primarily due
to an increase in the number of our local telephony services

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subscribers.

Operating Income. Our total operating income for the year ended December
31, 2002 was Won 21,428 million (U.S.$18.1 million), compared to a total
operating loss of Won 170,614 million in 2001. We recorded total operating
income in 2002 as a result of a larger increase in our operating revenues than
our expenses in 2002, as compared to 2001.

Non-Operating Income.Our non-operating income for the year ended
December 31, 2002 was Won 70,365 million (U.S.$59.3 million), an increase of
Won 20,858 million, compared to non-operating income of Won 49,507 million in
2001. The increase in non-operating income in 2002 was primarily due to
increases in gain on foreign currency translations and interest income, offset
in part by decreases in gain on valuation of marketable securities and gain on
foreign currency transactions. Our gain on foreign currency translations
increased by Won 16,526 million from Won 538 million in 2001 to Won 17,064
million in 2002, primarily due to the appreciation of Korean Won against U.S.
dollars from Won 1,313.50 to U.S.$1.00 as of December 31, 2001 to Won 1,186.30
to U.S.$1.00 as of December 31, 2002. Our interest income increased by Won
6,255 million from Won 26,506 million in 2001 to Won 32,761 million in 2002,
primarily due to an increase in our interest bearing financial instruments.
Our gain on valuation of marketable securities decreased by 5,266 million from
Won 5,271 million in 2001 to Won 5 million in 2002, primarily due to the
downturn of Korean securities market. Our gain on foreign currency
transactions decreased by 4,962 million from Won 6,522 million in 2001 to Won
1,560 million in 2002, primarily due to the appreciation of Korean Won against
U.S. dollars from Won 1,313.50 to U.S.$1.00 as of December 31, 2001 to a range
of Won 1,201.20 ~ 1,316.00 to U.S.$1.00 as of the period during which we made
the foreign currency payments.

Non-Operating Expenses.Our non-operating expenses for the year ended
December 31, 2002 were Won 219,471 million (U.S.$185.0 million), an increase of
Won 91,770 million, compared to non-operating expenses of Won 127,701 million
in 2001. The increase in non-operating expenses in 2002 was primarily due to
increases in interest expenses and loss on disposal of trade receivables. Our
interest expenses increased by Won 62,181 million from Won 107,231 million in
2001 to Won 169,412 million in 2002, primarily from an increase in our
borrowings. See Note 15 to our financial statements for a more detailed
analysis of our long-term debt and debentures. Our loss on disposal of trade
receivables increased by Won 18,193 million from Won 4,100 million in 2001 to
Won 22,293 million in 2002, primarily due to the recognition of the difference
between the trade receivables and the long-term advances received in connection
with the asset backed securities issued by Hanafos Securitization Specialty
Co., Ltd. and 1st Dreamline Securitization Specialty Co., Ltd. See Note 16 to
our financial statements for more information.

Income Taxes.Our statutory income tax rate for 2002 was 29.7%. For the
year ended December 31, 2002, we reported income taxes of Won 1,083 million
(U.S.$0.9 million), an increase of Won 1,048 million, compared to income taxes
of Won 35 million in 2001. See Note 21 to our financial statements for a more
detailed analysis of our income taxes and deferred income taxes.

Net Loss.Our net loss for the year ended December 31, 2002 was Won
125,025 million (U.S.$105.4 million), a decrease of Won 120,877 million,
compared to a net loss of Won 245,902 million in 2001.

Year ended December 31, 2001 compared to the year ended December 31, 2000

In 2002, we reclassified our business segments along the lines of
broadband services, voice services and leased line services. However, our
business segment information for the years ended December 31, 2000 and 2001, as
used in this section, does not reflect such reclassification.

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Operating Revenues.Our total revenues for the year ended December 31,
2001 were Won 830,721 million (U.S.$700.3 million), an increase of Won 487,917
million, compared to total revenue of Won 342,804
million in 2000. The increase in total revenue in 2001 was primarily due
to revenue increases of (i) Won 357,385 million from our broadband services
from Won 284,159 million in 2000 to Won 641,544 million in 2001, (ii) Won
80,440 million from our local telephony services from Won 34,089 million in
2000 to Won 114,529 million in 2001, and (iii) Won 25,259 million from our
intelligent network services from Won 2,702 million in 2000 to Won 27,961
million in 2001. The increase in our broadband services revenues was primarily
due to an increase in the number of our broadband services subscribers from
1,104,423 as of December 31, 2000 to 2,045,196 as of December 31, 2001. The
increase in our local telephony services revenues was primarily due to an
increase in the number of customers from 127,352 as of December 31, 2000 to
274,429 as of December 31, 2001. The increase in our intelligent network
services revenues was primarily due to an increase in the number of services
offered on our intelligent network.

Operating Expenses.Our total operating expenses for the year ended
December 31, 2001 was Won 1,001,335 million (U.S.$844.1 million), an increase
of Won 353,920 million, compared to total operating expenses of Won 647,415
million in 2000. The increase in operating expenses in 2001 was primarily due
to increases of (i) Won 132,284 million in depreciation expenses, primarily due
to our investment in additional telecommunication equipment and facilities,
(ii) Won 54,793 million in telecommunication equipment lease expenses, due
primarily to an increase in payments related to leased fiber optic and cable
lines, (iii) Won 38,815 million in sales commissions paid to our sales agents,
primarily from an increase in the number of our subscribers, (iv) Won 34,006
million in interconnection charges, primarily due to an increase in the number
of our local telephony services subscribers and (v) Won 33,043 million in
commissions, primarily from an increase in payments for outsourcing services.

Operating Loss. Our total operating loss for the year ended December 31,
2001 was Won 170,614 million (U.S.$143.8 million), a decrease of Won 133,997
million, compared to a total operating loss of Won 304,611 million in 2000.
The decrease in operating loss in 2001 was a result of a larger increase in our
operating revenues than our expenses in 2001, as compared to 2000.

Non-Operating Income.Our non-operating income for the year ended
December 31, 2001 was Won 49,507 million (U.S.$41.7 million), a decrease of Won
12,033 million, compared to non-operating income of Won 61,540 million in 2000.
The decrease in non-operating income in 2001 was primarily due to a decrease
of Won 31,072 million in interest income, offset in part by an increase of Won
5,257 million in our gain on valuation of marketable securities. Our interest
income decreased by Won 31,072 million from Won 57,578 million in 2000 to Won
26,506 million in 2001, primarily due to a decrease in our interest bearing
financial instruments. Our gain on valuation of marketable securities
increased by 5,257 million from Won 14 million in 2000 to Won 5,271 million in
2001, primarily due to increases in value of beneficial certificates held by
us.

Non-Operating Expenses.Our non-operating expenses for the year ended
December 31, 2001 were Won 127,701 million (U.S.$107.6 million), an increase of
Won 63,685 million, compared to non-operating expenses of Won 64,016 million in
2000. The increase in non-operating expenses in 2001 was primarily due to an
increase of Won 63,220 million in interest expenses, primarily from an increase
in our borrowings.

Income Taxes.Our statutory income tax rate for 2001 was 29.7%. For the
year ended December 31, 2001, we reported income taxes of Won 35 million
(U.S.$0.030 million), a decrease of Won 22 million, compared to income taxes of
Won 57 million in 2000. See Note 21 to our financial statements for a more

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detailed analysis of our income taxes and deferred income taxes.

Net Loss.Our net loss for the year ended December 31, 2001 was Won
245,902 million (U.S.$207.3 million), a decrease of Won 59,268 million,
compared to a net loss of Won 305,170 million in 2000.

Impact of Inflation

In view of our operating history, we believe that inflation in Korea has
not had a material impact on our results of operations. Inflation in Korea in
1999, 2000, 2001 and 2002 was 0.8%, 2.3%, 4.1% and 2.7% respectively.

Impact of Foreign Currency Fluctuations

See Item 11  Quantitative and Qualitative Disclosures about Market
RiskForeign Currency Risk.

Governmental, Economic, Fiscal, Monetary or Political Policies or Factors

See Item 3  Risk FactorsRisks Related to Korea and Item 10 
Additional Information  Taxation.

5.B     LIQUIDITY AND CAPITAL RESOURCES

For the first time since our inception, we had positive cash flows from
operating activities of Won 52,473 million in 2002, compared to significant
negative cash flows from operating activities in 2000 and 2001. Net cash used
in operating activities totaled Won 129,902 million and Won 34,306 million in
2000 and 2001, respectively. Net cash provided by or used in operating
activities in 2000, 2001 and 2002 primarily reflected net loss, adjusted for
depreciation.

Since our inception, we have met our working capital and other capital
requirements principally from equity and debt financings. Net cash provided by
financing activities totaled Won 1,466,655 million, Won 498,008 million and Won
273,818 million for the fiscal years ended December 31, 2000, 2001 and 2002,
respectively. The following is a summary of our major financing transactions:



| |  |  | On February 29, 2000, we entered into a four-year term loan agreement
with Hewlett-Packard Korea Ltd., under which we borrowed U.S.$44 million.                                                                                                                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On April 4, 2000, we issued 24 million American Depositary Shares, at a
price per ADS of U.S.$15.51, which resulted in aggregate proceeds of up
to U.S.$359.21 million.                                                                                                                   
|
| |  |  | On March 6, 2001, we issued U.S.$100 million zero coupon bonds due 2006
with warrants attached, which resulted in aggregate proceeds of U.S.$97.4
million. On March 6, 2002, bondholders exercised their put option and we
repaid the bonds in full.                                      
|
| |  |  | On July 20, 2001, Dreamline, our consolidated subsidiary, issued U.S.$30
million zero coupon bonds with warrants with a guaranteed interest rate
of 8.0% per annum after one year from issuance, which resulted aggregate
proceeds of Won 38,561 million.                                 
|
| |  |  | On October 23, 2001, we transferred beneficiary certificates of Won
341,000 million representing our future trade receivables to Hanafos
Securitization Speciality Co., Ltd., a special purpose vehicle
established in Korea, which resulted in aggregate proceeds of Won 309,000
million.

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| |  |  | On December 24, 2001, we issued Won 27,800 million convertible bonds with
a coupon interest rate of 1.0% per annum and a guaranteed interest rate
on maturity of 2.0% per annum.                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On February 26, 2002, we issued U.S.$100 million zero coupon bonds due
2007 with warrants
attached, which resulted in aggregate proceeds of U.S.$97.8 million.                                                                                                
|
| |  |  | On April 18, 2002, we transferred our beneficiary certificates of Won
226,800 million representing our future receivables to HanaDream Co.,
Ltd., a special purpose vehicle established in Korea, which resulted in
aggregate proceeds of Won 207,000 million.
|
| |  |  | On August 2, 2002, we disposed of all of our shares in Hanaro
Technologies, Inc., our consolidated subsidiary, for Won 1,037 million.                                                                                                                         
|
| |  |  | On December 24, 2002, we redeemed convertible bonds issued to Cheil
Jedang and Jae-Hyun Lee on December 24, 2001, for an aggregate amount of
Won 28,080 million.                                                                                              

We have also satisfied a portion of our capital requirements through
income derived from investments made principally with the proceeds of our
equity investments. Our interest income derived from short-term financial
instruments and gains realized from the sale of beneficiary certificates in
2000, 2001 and 2002 was Won 57,578 million, Won 26,696 million and Won 34,479
million, respectively.

Short-term financial instruments consist primarily of time deposits and
repurchase agreements that invest in short-term highly liquid securities.
These investments generate fixed rates of return. Beneficiary certificates are
interests in funds consisting primarily of fixed-rate corporate bonds of Korean
companies. The estimated fair values of our investments in beneficial
certificates fluctuate based upon prevailing interest rates in Korea. We
expect interest income and gains from the sale of marketable securities to
decrease as we continue to use our funds from cash and cash equivalents,
short-term financial instruments and marketable securities to satisfy our debt
repayment and debt service obligations.

As of December 31, 2002, we had outstanding corporate debentures
(excluding the current portion thereof) in the amount of Won 617,647 million.
The creditors include The Korea Development Bank and various other domestic
financial institutions. The term of such instruments range from one and a half
to five years and the interest rates range from 6.00% to 12.46%.

As of December 31, 2002, we had outstanding long-term debt (excluding the
current portion thereof) in the aggregate amount of Won 213,233 million. Of
that amount, 98.0% was denominated in Won and 2.0% was denominated in Dollars.
The Won-denominated long-term debt consisted of amounts borrowed from the
Information Promotion Fund established by the Korean government, asset backed
loans and general loans borrowed from various domestic financial institutions.
The Information Promotion Fund consists of amounts paid into
government-sponsored funds by Korean telecommunications companies as required
by the terms of telecommunications licenses. Our debt from the Information
Promotion Fund bears interest rates ranging from 5.91% to 7.25%, a rate
slightly lower than the rate currently charged by Korean commercial banks. The
terms of the loans are for five years, with principal repaid in installments
over the last three years of such terms (including two-year grace period). Our
asset backed loans bear the interest rate of 8.40%, with the term of two years.
Our long-term debt from domestic financial institutions bears interest rates
ranging from 6.00% to 9.94%, with the terms ranging from two to five years.
The dollar-denominated long-term debt consisted of amounts borrowed from
Hewlett-Packard. Our debt from Hewlett-Packard bears an interest of 9.16%. As
of December 31, 2002, our ratio of long-term liabilities to shareholders
equity was 64.9% and our ratio of total liabilities to shareholders equity was
170.9%.

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On March 6, 2001, we issued zero coupon bonds with warrants in the amount
of U.S.$100.0 million. Each bond was issued with one warrant attached thereto,
which entitles the holder to subscribe our common share at an initial exercise
price of Won 6,500 per common share, subject to certain adjustments. On June
6, 2001, the exercise price of these warrants was adjusted to Won 5,000. The
rights under the warrants are
exercisable from and including June 6, 2001 up to the close of banking
business in Seoul on February 6, 2006. On March 6, 2002, bondholders exercised
their put option and we repaid the bonds in full. As of April 30, 2003,
15,322,680 out of 24,714,000 warrants were exercised. The warrants are listed
on the Luxembourg Stock Exchange.

On July 20, 2001, Dreamline, our consolidated subsidiary, issued U.S.$30
million zero coupon bonds with warrants with a guaranteed interest rate of 8.0%
per annum after one year from issuance. The warrants entitle the holder to
subscribe Dreamline common shares at Won 5,000 per common share and may be
exercised from and including October 20, 2001 until and including July 13,
2004. On July 22, 2002, bondholders exercised their put option and we repaid
the bonds in full. As of April 30, 2003, none of the warrants was exercised
and 7,869,600 warrants remained outstanding.

On October 23, 2001, we entered into a Trust Deed with Shinhan Bank, to
establish a trust with assets comprising of our future trade receivables
originating from service fees paid by our subscribers for the period commencing
on October 2001 until April 2004. Shinhan Bank issued to us beneficiary
certificates with a total value of Won 341,000.0 million. On October 23, 2001,
we also entered into an Asset Transfer Agreement with Hanafos Securitization
Speciality Co., Ltd., a special purpose vehicle established in Korea, pursuant
to which we agreed to transfer such beneficiary certificates to Hanafos
Securitization in consideration for Won 309,000.0 million. Hanafos
Securitization issued asset-backed securities in the aggregate amount of Won
309,000.0 million. We received Won 9,000.0 million, and third party investors
purchased Won 300,000.0 million, of such securities. Hanafos Securitization
remitted the cash proceeds of Won 300,000.0 million to us on October 31, 2001.
We recorded Won 309,000 million as long-term advances received. In connection
with this transaction, Hanafos Securitization entered into an agreement with
Shinhan Bank to establish a credit line of up to Won 200 billion available
until April 30, 2004, under which Shinhan Bank has agreed to advance a loan of
an amount up to the credit limit to Hanafos Securitization if required for
payment of expenses related to the performance of the asset transfer agreement.
See Note 16 to our consolidated financial statements for more information
about our sale of future trade receivables.

On December 24, 2001, we issued Won 27,800.0 million convertible bonds
with a coupon interest rate of 1.0% per annum and a guaranteed interest rate on
maturity of 2.0% per annum. The bonds may be converted to our common shares
from December 24, 2002 until December 23, 2004 at a conversion price of Won
5,000 per common share. On December 24, 2002, we redeemed all of such
convertible bonds, for an aggregate amount of Won 28,080 million.

On February 26, 2002, we issued U.S.$100.0 million zero coupon bonds with
warrants to subscribe in aggregate for shares of our common stock up to U.S.$15
million at an exercise price of Won 7,388 per common share, subject to certain
adjustments. On May 27, 2002, the exercise price of these warrants was
adjusted to Won 5,977. On August 26, 2002, there was another adjustment to the
exercise price of warrants to Won 5,000 per share. The rights under the
warrants are exercisable from and including May 26, 2002 up to the close of
banking business in Seoul on January 26, 2007. Unless previously redeemed or
purchased and in each case cancelled, the bonds will be redeemed at 146.9328%
of their principal amount on February 26, 2007. The bonds and warrants are
listed on the Luxembourg Stock Exchange.

On April 18, 2002, we entered into a Trust Deed with Kookmin Bank, to
establish a trust with assets

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comprising of certain of our future trade
receivables originating from service fees paid by our subscribers for 24 months
commencing from April 2002 until April 2004. Kookmin Bank issued to us
beneficiary certificates with a total face value of Won 226,800.0 million. On
April 18, 2002, we also entered into an Asset Transfer Agreement with HanaDream
Co., Ltd., a special purpose vehicle established in Korea, under which we
agreed to transfer such beneficiary certificates to HanaDream in consideration
for Won 207,000.0 million. HanaDream assumed asset-backed loans in the
aggregate amount of Won 207,000.0 million. We granted
Won 7,000.0 million, and other banks granted Won 200,000.0 million, of
such loans. HanaDream remitted the cash proceeds of Won 200,000.0 million to
us on April 25, 2002.

We currently have in place agreements with Korea Exchange Bank for the
issuance of letters of credit in connection with the procurement of equipment
from foreign suppliers in the aggregate amount of U.S.$10 million. As of
December 31, 2002, we had no letters of credit issued for our benefit.

As of December 31, 2002, we had provided four blank promissory notes as
collateral to KDB Capital Corp., Samsung Card Co., Ltd. and LG Card Services
Corp. in connection with our borrowings from and lease agreements with such
financial institutions. As of December 31, 2002, Dreamline, our consolidated
subsidiary, had provided five promissory notes and one blank check,
respectively, to KDB Capital Corp., Cisco Systems Capital Korea Ltd., Samsung
Life Insurance Co., Ltd. and Jeil Mutual Savings Bank in connection with their
borrowings from and lease agreements with such financial institutions. It is
common practice for Korean companies to issue blank promissory notes with a
maximum note amount to financial institutions as collateral in credit
transactions. In the event a holder of a blank promissory note attempts to
claim an amount in excess of the maximum note amount, the issuer of such
promissory note will be required to pay the entire note amount. However, in
such event, the issuer has a right of indemnification from such holder with
respect to the excess amount.

On March 20, 2003, we entered into a trust agreement with Korea Real
Estate Investment Trust Co., Ltd., pursuant to which we assigned to Korea Real
Estate Investment Trust, title to our information center at Ilsan-ku,
Koyang-shi, Kyunggi-do, valued at Won 57.5 billion as of the end of March 2003.
Korea Real Estate Investment Trust issued to us beneficiary securities
amounting to Won 65 billion, which we may provide to financial institutions as
collateral for loans from such institutions. On November 14, 2002, we obtained
from Korea Exchange Bank, or KEB, a one-year loan facility of Won 30 billion,
at an interest rate of 6.8% per annum. As security for our obligations under
the loans drawn down pursuant to this loan agreement, we provided to KEB the
securities we received pursuant to such Real Estate Collateral Trust Agreement.
See Item 10Additional InformationMaterial ContractsReal Estate Collateral
Trust Agreement between Hanaro Telecom and Korea Real Estate Investment Trust
Co., Ltd.

Our contractual obligations, including commitments for future payments
under non-cancelable lease arrangements and short-term and long-term debt
arrangements, are summarized below and are fully disclosed in Notes 13, 15 and
16 to our financial statements.

|                                                              |  |                        |           |        |  |           |           |           |  |       |           |  |  |  |        |        |  |      |   | 
|------------------------------------------------------------- |  | ---------------------- | --------- | ------ |  | --------- | --------- | --------- |  | ----- | --------- |  |  |  | ------ | ------ |  | ---- | - | 
|                                                              |  | Payments due by period
|                                                              |  |                       
|                                                              |  |                        |           |        |  |           |           |           |  |       |           |  |  |  |        |        |  | More
|                                                              |  |                        |           |        |  | Less than |           |           |  |       |           |  |  |  |        | than 5
|Contractual Obligations                                       |  | Total                  |           | 1 year |  | 1-3 years |           | 3-5 years |  | years
|                                                              |  |                        |           |        |  |           |           |           |  |      
|                                                              |  | (in millions of Won)  
|Long-Term Debt                                                |  |                        | 401,841   |        |  |           | 188,210   |           |  |       | 169,129   |  |  |  | 44,502 |        |  |      |  | 
|Debentures                                                    |  |                        | 1,460,780 |        |  |           | 821,530   |           |  |       | 639,250   |  |  |  |       |        |  |      |  | 
|Capital Lease Obligations                                     |  |                        | 74,232    |        |  |           | 36,145    |           |  |       | 35,666    |  |  |  | 2,421  |        |  |      |  | 
|Operating Lease                                               |  |                        | 111,867   |        |  |           | 46,510    |           |  |       | 65,238    |  |  |  | 119    |        |  |      |  | 
|Long-term Advances Received
(trade receivable securitization) |  |                        | 355,093   |        |  |           | 256,424   |           |  |       | 98,669    |  |  |  |       |        |  |      |  | 
|Total Contractual Cash Obligations                            |  |                        | 2,403,813 |        |  |           | 1,348,819 |           |  |       | 1,007,952 |  |  |  | 47,042 |        |  |      |   | 

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As explained in Note 26(2), we do not participate in, nor secure,
financings for any unconsolidated, special purpose entities under U.S. GAAP.

Our capital expenditure on property and equipment in 2002 totaled Won 379
billion, compared to Won 603 billion in 2001 and Won 1,787 billion in 2000.
Capital expenditures consisted primarily of purchasing and deploying
switchboards, fiber optic cable lines and other telecommunication equipment.
The following table sets forth the amount of our capital expenditures incurred
in 2000, 2001 and 2002:

|                     |       |  |                      |         |      |  |       |       |  |  |       |       | 
|-------------------- | ----- |  | -------------------- | ------- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                     |       |  | 2000                 |         | 2001 |  | 2002 
|                     |       |  |                      |         |      |  |      
|                     |       |  | (in billions of Won)
|Backbone network     |       |  | 551.8                |         |      |  | 200.2 |       |  |  | 128.5 |      
|Last mile connection |       |  | 1,029.3              |         |      |  | 348.9 |       |  |  | 205.9 |      
|Internet             |       |  | 138.4                |         |      |  | 12.8  |       |  |  | 3.1   |      
|Others               |       |  | 55.4                 |         |      |  | 40.9  |       |  |  | 41.3  |      
|                     |       |  |                      |         |      |  |       |       |  |  |       |      
|                     | Total |  |                      | 1,774.9 |      |  |       | 602.8 |  |  |       | 378.8 | 

Our current capital expenditure plan calls for the following expenditures:

| |   |  |                                    
| | - |  | -----------------------------------
|
| |  |  | Won 3 billion in the year 2003; and
|
| |  |  | Won 290.1 billion in the year 2004.

Percentage Break-down of Capital Expenditures

|                |  |                 |    |                  |  |              |    |   |  |  |    |  
|--------------- |  | --------------- | -- | ---------------- |  | ------------ | -- | - |  |  | -- | -
|                |  | Roll-out of     |    | Building Last-   |  | Other       
|Year            |  | BackboneNetwork |    | Mile Connections |  | Expenditures
|                |  |                 |    |                  |  |             
|2003 (expected) |  |                 | 33 | %                |  |              | 40 | % |  |  | 27 | %
|2004 (expected) |  |                 | 33 | %                |  |              | 41 | % |  |  | 26 | %

We, as well as other license holders, are required to make annual
contributions to public research and development funds under the terms of the
licenses granted to us by the Korean government to operate our business. On
May 9, 2002, the MIC announced that, effective from 2002, only the NSPs whose
total voice and leased line services revenue amount for the preceding year was
more than Won 30 billion and that realized a net profit in the preceding year,
are required to make annual payments for the purpose of research and
development in the amount of 0.5% of the total voice and leased line services
revenue, to the extent that the amount of such payment does not exceed the
amount of the net profit for the preceding year. In 2002, we did not realize a
net profit and are not required to make any contribution for 2002 in 2003.

Under Korean law, an employee with more than one year of service is
entitled to receive from its company a lump-sum payment upon termination of its
employment, based on the length of service and the rate of pay at the time of
termination. In 2002, we made severance payments of Won 5,786 million. Our
accrued severance indemnities as of December 31, 2002 was Won 24,094 million.

At December 31, 2002, we had provided loans to our employees in the amount
of Won 16,373 million for the purchase of our common shares through our
employee stock ownership association. The loans are secured by the shares
purchased. As of December 31, 2002, we had also provided housing loans

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and
other loans for medical expenses and dependent educational expenses to our
employees in the amount of Won 7,888 million and Won 209 million, respectively.
These loans are secured by accrued severance benefits of the borrowing
employees. As of December 31, 2002, we had not experienced any defaults under
these loans. The loans are provided as a perk to our employees and are not
required by Korean law. Our officers and directors are not eligible for these
loans.

In 2000 and 2001, we had a program pursuant to which we provided secured
or guaranteed interest-free loans to cable network operators. The terms of
each of those loans require repayment after three years from the date of the
loan by equal installments on a quarterly basis for two years. As of April 30,
2003, we had outstanding interest-free loans to eight cable network operators
in the aggregate amount of Won 6.7 billion. The loan agreements require the
cable network operators to use the loan proceeds to upgrade their systems so
that our services can be provided over their networks. The loan agreements
also require the borrower to lease to us its cable network for our HFC-based
Internet access services upon completion of the system upgrade.

On October 18, 2002, we acquired a 24.8% equity interest in Korea Digital
Cable Media Center at Won 500 million.

Until such time as funds are required in accordance with our capital
expenditure plans or payments are required to be made under our obligations,
substantially all of our funds are held either in bank deposits, short-term
money market instruments, short-term financial instruments and beneficiary
certificates. The following table sets forth the amount of our funds in
short-term financial instruments, beneficiary certificates and money market
funds held by us at the end of each of December 31, 2000, December 31, 2001 and
December 31, 2002.

|                                 |  |                      |         |      |  |      |         |  |  |  |         | 
|-------------------------------- |  | -------------------- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                 |  | 2000                 |         | 2001 |  | 2002
|                                 |  |                      |         |      |  |     
|                                 |  | (in millions of Won)
|Money market funds               |  |                      | 240,865 |      |  |      | 160,262 |  |  |  | 214,100 | 
|Short-term financial investments |  |                      | 141,734 |      |  |      | 150,040 |  |  |  | 150,499 | 
|Beneficiary certificates         |  |                      | 15,318  |      |  |      | 50,586  |  |  |  | 17,630  | 

Historically, we have been unable to generate sufficient cash flow from
operations to meet our operating needs and have principally relied on equity
and debt financings to fund our operations. In order to meet our currently
anticipated capital expenditure, operating needs, debt service and debt
repayment requirements and accounts payable, we need to raise approximately Won
250 billion and Won 800 billion during the second half of 2003 and 2004,
respectively. We plan to meet such funding requirements through long-term
borrowings, the proceeds of equity and corporate bond offerings and vendor
financing. Our ability to obtain such financing will be dependent upon our
future performance and market conditions, among other factors. We cannot
assure you that long-term borrowings, vendor financing or any alternative
financing will be available on favorable terms, or at all. If we are unable to
obtain sufficient new debt or equity financing, we may default on our debt
service and debt repayment obligations. In order to avoid defaulting on our
indebtedness, we may need to modify, delay or abandon elements of our business
plan, which could have a material adverse effect on our business, financial
condition and results of operations. Furthermore, there is no assurance that
any refinancings will be effected on satisfactory terms. See Item 3Key
InformationRisk FactorsBecause currently available funds and cash flow from
operations are not likely to be sufficient to fund our operations or sustain
our debt service and debt repayment obligations, we will need to refinance
certain indebtedness and are likely to require additional capital which may not
be available on acceptable terms.

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5.C      RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Our research and development division consists of a quality control
center, a new technology development center, an Internet related development
center, four R&D planning teams and a digital economy research team. We spent
approximately Won 19,009 million, Won 17,782 million and Won 11,417 million in
2000, 2001 and 2002, respectively, on R&D activities. In 1999, most of our R&D
projects were outsourced
to Dacoms R&D division. In 2001 and 2002, our in-house R&D center
conducted most of our R&D activities. We have the following major projects
currently in process: quality assurance system, network management system
(private and enterprise) and intelligence network service, data network
management system, system management information exchange between network
operators and development of gateway technology, digital subscriber line
asymmetric multiplexer (DSLAM) network, cable television network, customer
network management system (CNMS) network management systems, WLL and B-WLL
systems, next generation wireless system, microwave satellite system, VoIP,
home networking and power line communication systems.

5.D      TREND INFORMATION

Korea, as in most parts of Asia, has seen substantial growth in the number
of Internet users. The government of Korea is supporting this growth as
evidenced in its Cyber Korea 21 Policy and e-Korea Vision 2006, which
outlines the governments plan to prepare Korea for the next information age.
The number of Internet users climbed from approximately 10.9 million as of
December 1999 to 26.3 million as of December 2002, according to the Korea
Network Information center. We are targeting Koreas fast growing Internet
user population with our high-speed Internet access services.

We generate, and expect to continue to generate, most of our operating
revenues from the monthly fees paid by our subscribers for high-speed Internet
access services. We also believe that as our voice services subscriber base
grows, we will also generate more revenues from our voice services.

Our operating expenses consist primarily of depreciation expenses, sales
commissions paid to our sales agents and telecommunication equipment lease
expenses. As we have reached our target business and] network coverage, we do
not expect substantial increases in our future operating expenses. However, we
expect moderate increases in depreciation expenses associated with additional
deployment of infrastructure and interconnection charges resulting generally
from greater amounts of traffic over our network.

For the first time since our inception, we recorded operating income of
Won 21,428 million in 2002. Until 2002, the total operating loss resulted from
the significant infrastructure, marketing, technology and other costs incurred
in the development of our services. Although we cannot assure you that we will
continue generating operating profits in the future, we believe that as the
number of subscribers to our services increases, our operating margins will
improve.

We generate revenues primarily from the monthly fees paid by our
high-speed Internet access services subscribers, our local telephony services
customers and our leased line services customers. In 2002, we generated
approximately 68.4%, 14.9% and 7.9% of our total revenues from our high-speed
Internet access services, our local telephony services and our leased line
services, respectively.

Our ability to generate future revenues will depend on a number of
factors, certain of which are beyond our control. The prices of communications
services and products in general have fallen historically, and may continue to
fall. In order to achieve and maintain profitability, we will need to increase
the number of our subscribers. See Item 3Key InformationRisk FactorsWe
have

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experienced continuing operating losses and expect future losses. In
addition, we currently intend to continue to make capital expenditures and
marketing and sales expenditures in order to enhance our networks and broaden
our subscriber base. To the extent that such expenses are not accompanied or
followed by increased revenues, our business, operating results and financial
condition will be materially adversely affected. See
Item 3  Key Information
 Risk Factors for a detailed discussion of the risks involved in any
investment in our company.

5.E     OTHER INFORMATION

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting
principles that are generally accepted in Korea. The preparation of these
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses as
well as the disclosure of contingent assets and liabilities. Management bases
its estimates and judgments on historical experience and other factors that are
believed to be reasonable under the circumstances. We believe the following
represents our critical accounting polices.

Revenue recognition

Revenue related to installation of service and sales of customer premises
equipment is recognized when the equipment is delivered and installation is
completed. Our customer activation fees are recorded as revenues when billed
and revenue for local call and high-speed Internet access is recognized monthly
as the services are provided. We recognize revenue from other services
including leased line services when the services are provided in accordance
with the contract terms.

Accounting practice and guidance with respect to the accounting treatment
of the above transactions is evolving. Any changes in the accounting treatment
could affect the manner in which we account for revenue and expenses associated
with these transactions in the future.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts for estimated losses, which
result from the inability of our customers to make the required payments. We
base our allowance on the likelihood of recoverability of accounts receivable
based on past experience and taking into account current collection trends that
are expected to continue. If economic or specific industry trends worsen beyond
our estimates, actual losses could exceed estimated losses, and we would need
to increase our allowance for doubtful accounts by recording additional
expense.

Estimated useful lives of property and equipment

We estimate the useful lives of property and equipment in order to
determine the amount of depreciation expense to be recorded during each
reporting period. The useful lives are estimated at the time the asset is
acquired and are based on historical experience with similar assets as well as
taking into account anticipated technological or other changes. If
technological changes were to occur more rapidly than anticipated or in a
different form than anticipated, the useful lives assigned to these assets may
need to be shortened, resulting in the recognition of increased depreciation
expense in future periods. Alternatively, these types of technological changes
could result in the recognition of an impairment charge to reflect the
write-down in value of the asset. We review these types of assets for
impairment annually, or when events or circumstances indicate that the carrying
amount may not be recoverable over the remaining

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lives of the assets.

Investments in non-listed equity securities

We have investments in non-listed equity securities that are stated at
acquisition cost. If we determine that a decline in the net asset value below
the book value of an investee is temporary and recoverable, such unrecognized
valuation loss is reflected as a reduction of shareholders equity. If the net
asset value of an investee declines compared to the acquisition cost and is not
expected to recover, the carrying value of the
non-listed equity security is adjusted to the net asset value, with the
resulting valuation loss charged to current operations. As part of this
evaluation, we consider the investees results of operations, the investees
performance forecast and general market conditions. If economic or specific
industry trends worsen beyond the Companys estimates, valuation losses
previously determined to be recoverable may need to be charged as a valuation
loss in current operations.

Deferred income taxes

We calculate our deferred tax assets and liabilities using the enacted tax
rates for the effect of temporary differences between the book and tax bases of
assets and liabilities. If the enacted tax rates change, we would need to
adjust our calculation of deferred tax assets and liabilities. Changes in the
amount of recorded deferred tax assets and liabilities would be recognized as a
change in the provision for income taxes in the period of change, to reflect
the enacted tax rate expected to be in effect when the deferred tax items
reverse. We record deferred tax assets to reflect the expected future tax
benefits to be realized. In determining the appropriate amount, we take into
account the level of expected future taxable income. As of December 31, 2001
and 2002, we did not recognize deferred tax assets for temporary difference and
tax effects of net loss carry forwards due to the uncertainty of the future
realization of the deferred tax benefits.

U.S. GAAP Reconciliation

The principal differences between Korean GAAP and U.S. GAAP as they relate
to us are the accounting for development costs, the revenue recognition for
activation fee, the treatment of pre-operating expenses, the recognition of the
license fee paid for on our behalf by our major shareholders, the recognition
of detachable stock warrants and the deferred tax effects of these differences.
In addition, under U.S. GAAP, certain subsidiaries, including Dreamline
Corporation and M-commerce Co., Ltd., would be accounted for under the equity
method and special purpose entities would be consolidated.

In 2000, we recorded a net loss of Won 298,351 million under U.S. GAAP
compared to a net loss of Won 305,170 million under Korean GAAP, primarily
because of the reconciliation of the licensing cost and the different
accounting treatments of development costs, activation fees and stock
compensation expense. In 2001, we recorded a net loss of Won 244,447 million
under U.S. GAAP compared to a net loss of Won 245,902 million under Korean
GAAP, primarily because of changes in consolidated subsidiaries and the
different accounting treatment of detachable stock warrants except for the GAAP
difference carried over from prior years. In 2002, we recorded a net loss of
Won 162,525 million under U.S. GAAP compared to a net loss of Won 125,025
million under Korean GAAP, primarily because of the different accounting
treatment of detachable stock warrants except for the GAAP difference carried
over from prior years.

The shareholders equity under U.S. GAAP is higher than under Korean GAAP
by Won 91,709 million and lower by Won 115,909 million at December 31, 2001 and
2002, respectively, primarily as a result of:

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| |  | the difference in the presentation of minority interest;                 
|- |  | -------------------------------------------------------------------------
| 
| |  | the difference in the treatment of affiliates and special-purpose entity;
| 
| |  | the difference in the treatment of loans to employees;                   
| 
| |  | the difference in the treatment of licensing costs;                      
| 
| |  | the difference in the treatment of detachable stock warrants;            
| 
| |  | the difference in the treatment of activation fees; and                  
| 
| |  | the difference in the treatment of goodwill.                             

For further discussion of the principal differences between Korean GAAP
and U.S. GAAP as they relate to us, see Note 26 to the consolidated financial
statements.

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ITEM 6.      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A     DIRECTORS AND SENIOR MANAGEMENT

The current members of the board of directors and senior executive
officers (whose business addresses are at 726, Janghang 2-dong, Ilsan-ku,
Koyang-shi, Kyunggi-do, Korea are as follows:

|                |  |     |    |          |  |                                                            
|--------------- |  | --- | -- | -------- |  | -----------------------------------------------------------
|Name            |  | Age |    | Position
|                |  |     |    |         
|In-Haeng Lee    |  |     | 49 |          |  | Representative Director and Senior Executive Vice President
|Jong Myung Lee  |  |     | 49 |          |  | Senior Executive Vice President                            
|Jin Duck Kim    |  |     | 49 |          |  | Director and Executive Vice President                      
|Jin-Ha Kim      |  |     | 47 |          |  | Executive Vice President                                   
|Hong Yeol Joo   |  |     | 47 |          |  | Senior Vice President                                      
|Taek Min Kwon   |  |     | 44 |          |  | Senior Vice President                                      
|Hyung-Keun Song |  |     | 48 |          |  | Senior Vice President                                      
|Jin-Woong Kho   |  |     | 39 |          |  | Senior Vice President                                      
|Young Ho Cho    |  |     | 56 |          |  | Senior Vice President                                      
|Kyoung Lim Yun  |  |     | 39 |          |  | Senior Vice President                                      
|Matt Lee        |  |     | 44 |          |  | Vice President                                             
|Sung-Chan Son   |  |     | 48 |          |  | Vice President                                             
|Gap Seok Oh     |  |     | 46 |          |  | Vice President                                             
|Hyun Chul Shin  |  |     | 50 |          |  | Vice President                                             
|Young Wan Cho   |  |     | 44 |          |  | Vice President                                             
|Young-Woo Nam   |  |     | 51 |          |  | Non-standing Director                                      
|Soon-Ho Hong    |  |     | 50 |          |  | Non-standing Director                                      
|Sung Kyou Park  |  |     | 64 |          |  | Outside Director & Member of Audit Committee               
|Yong Hwan Kim   |  |     | 60 |          |  | Outside Director & Member of Audit Committee               
|Woong Hae Lee   |  |     | 61 |          |  | Outside Director & Member of Audit Committee               
|Sun Woo Kim     |  |     | 61 |          |  | Outside Director & Member of Audit Committee               
|Hang-Gu Bahk    |  |     | 56 |          |  | Outside Director                                           
|Sa Hyeon Seo    |  |     | 57 |          |  | Outside Director                                           
|Shin-Bae Kim    |  |     | 48 |          |  | Outside Director                                           

In-Haeng Leehas served as a Director and Senior Executive Vice President
of Hanaro Telecom since December 2001 and is currently also a Representative
Director. From 1997 until December 2001, he held various positions at Hanaro
Telecom, including the Head of Network and Sales. From 1983 until 1997, he
held various positions at Dacom. He received a bachelor of science in computer
science from Seoul National University in 1978, masters in industrial science
from The Graduate School of Industry, Hanyang University in 1989 and a Ph.D. in
computer science from Chungbuk University in 2002.

Jong Myung Leehas served as a Senior Executive Vice President and the
Head of the R&D center of Hanaro Telecom since November 1999, and was the Head
of the IMT-2000 Business Division. He received a bachelor of science in
electronic engineering in 1976 and masters in electronic engineering in 1978,
both from Seoul National University. He acquired a Ph.D. in electronic
engineering from North Carolina University in 1987 and obtained a
post-doctorate standing from the University of Massachusetts in the area of
designing DS-CDMA in 1995.

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Jin-Duck Kimhas served as an Executive Vice President and Head of the
Marketing Unit of Hanaro Telecom since February 2001, a Director and Senior
Vice President of Hanaro Telecom since January 2000 and the Head of the Sales
Group of Hanaro Telecom since September 1997. From 1983 until 1997, he served
as the Head of the Human Development Division of Dacom. Mr. Kim has also
served as a non-standing director of Hanaro T&I, our consolidated subsidiary,
since November 2001. Mr. Kim received a bachelor of arts in political and
diplomatic science from Youngnam University in 1981.

Jin Ha Kimhas served as an Executive Vice President of Hanaro Telecom
since April 2002 and Head of the Network Facilities Division of Hanaro Telecom
since November 1999. From 1982 until 1997, he served as the Head of the Local
Network Facility Division and a Senior Managing Director of Dacom. He received
masters in electrical engineering from Yonsei University in 1989.

Hong Yeol Joohas served as a Senior Vice President of Hanaro Telecom
since April 2002 and is currently the Head of the Business Sales Unit II. He
previously served as the Head of the Business Solution Division, the Special
Business Division and as Managing Director and the Head of the Technology
Planning Division of Hanaro Telecom. He also served as a Senior Manager of the
Telecommunication Network Planning Division of Dacom. Mr. Joo received a
bachelor of electronic engineering from Hanyang University in 1978.

Taek Min Kwonhas served as a Senior Vice President of Hanaro Telecom
since April 2002 and is currently the Head of the Corporate Support Unit. He
previously served as the Head of the Strategy and Planning Division of Hanaro
Telecom and as a Senior Manager of the Public Relations and Advertising Team of
Dacom. Mr. Kwon received a bachelor of English literature from Dongguk
University in 1984, and masters of international business administration from
the Sogang University Business School in 1994.

Hyung-Keun Songhas served as a Senior Vice President of Hanaro Telecom
since April 2002 and is currently the Head of the Sales Unit. Previously, he
served as the Head of the Corporate Support Division, the President and CEO of
our wholly owned subsidiary, Hanaro WEB(n)TVCo., Ltd., and the Head of the
External Affairs Unit of Hanaro Telecom. Mr. Song received a bachelor of
business administration from Sungkyunkwan University in 1982, and masters in
economics from the Helsinki School of Economics and Business Administration in
1999.

Jin-Woong Khohas served as a Senior Vice President of Hanaro Telecom
since April 2002 and is currently the Head of the Business Incubation Unit and
Head of the Wireless Network Business Planning Unit. Previously, he served as
the Head of the Engineering Planning Unit. Mr. Kho received a bachelor of
electronic engineering from Seoul National University in 1986, and masters in
electrical engineering and electronics from Korea Institute of Science &
Technologies in 1988.

Young Ho Chohas served as a Senior Vice President of Hanaro Telecom since
August 2002 and is currently the Head of the Corporate Sales I and Corporate
Business Divisions of Hanaro Telecom. From January 1973 until March 1997, he
served as a Chief Officer of the Korean National Intelligence Service. From
August 1997 until August 2002, he served as an Executive Vice President and
Senior Manager of the Sales Division of Dreamline. Mr. Cho received a bachelor
of science in electronics from the Korean Military Academy in 1969 and masters
in business administration from Dongguk University in 1981.

Kyoung Lim Yunhas served as a Vice President of Hanaro Telecom in charge
of business planning and marketing since January 2000. From December 1998
until December 1999, he served as a Managing Director of the Marketing Unit of
Hanaro Telecom. He acquired a Ph.D. in management policy in 1997 and a
masters degree in management science in 1988 from Korea Advanced Institute of
Science and Technology. He also received a bachelor of arts in business
administration from Seoul National University

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in 1986.

Matt Leehas served as a Vice President of the Corporate Planning Unit of
Hanaro Telecom since November 2001. He previously served as Vice President of
Nokia Networks, Managing Director of Excel Tech, General Manager of Hyundai
Electronics, and Member of Technical Staff in AT&T Bell Laboratories. Mr. Lee
received a bachelor of arts in mathematics in 1984, masters in mathematics in
1985 and masters in statistics in 1986 from the University of Illinois,
Urbana-Champaign.

Sung-Chan Sonhas served as a Vice President of Hanaro Telecom since
January 2002 and is currently the Head of the Wireless LAN Business Division of
Hanaro Telecom. From January 2002 until May 2002, he served as the Head of the
Network Operation Division of Hanaro Telecom. From November 2000 until December
2001, he served as a Managing Director and the Head of the Network Management
Team of Hanaro Telecom. From May 1998 until April 2000, he served as a Managing
Director and the Head of the Business Incubation Unit of Hanaro Telecom. Mr.
Son received a bachelor degree in telecommunications engineering from Hankuk
Aviation University in 1979, masters in electronics and electrical engineering
from The Graduate School of Industry, Hanyang University in 1992 and masters in
information technology from Hankuk Aviation University Graduate School in 2000.

Gap Seok Ohhas served as a Vice President of Hanaro Telecom since
November 2002 and is currently the Head of the Corporate Support Unit of Hanaro
Telecom. From January 2002 until November 2002, he served as a Managing
Director and the Head of the Sales Planning & Support Team of Hanaro Telecom.
From February 2001 until December 2001, he served as a Managing Director and
the Head of the Corporate Sales I Unit of Hanaro Telecom. From November 1999
until February 2001, he served as a Managing Director and the Head of the
Internet Business Unit of Hanaro Telecom. From July 1983 until November 1999,
he served as a Managing Director and the Head of the External Affairs Unit of
Dacom. Mr. Oh received a bachelor of arts in psychology from Seoul National
University in 1979, masters in business administration from Seoul National
University in 1981 and masters in business administration from the Helsinki
School of Economics and Business Administration in 2001.

Hyun Chul Shinhas served as a Vice President of Hanaro Telecom since
November 2002 and is currently the Head of the Corporate Sales II Division of
Hanaro Telecom. From January 2002 until November 2002, he served as a Managing
Director and the Head of the Corporate Sales I Unit of Hanaro Telecom. From
November 2000 until December 2001, he served as a Managing Director and the
Head of the Corporate Sales Unit of Hanaro Telecom. From April 2000 until
October 2000, he served as a Managing Director and the Head of the Sales I Unit
of Hanaro Telecom. From January 1998 until March 2000, he served as a Senior
Manager and the Head of the Sales I Unit of Hanaro Telecom. From February 1985
until December 1997, he served as a Senior Manager of the Sales Unit of Dacom.
From September 1977 until January 1985, he served as an associate at Korea
Telecom. From May 1976 until August 1977, he was employed with Daewoo Motor
Sales Corporation. Mr. Shin received a bachelor of arts in economics from
Chunju University in 1992 and masters in business administration from The
Graduate School of Business Administration, Chunbuk University in 1999.

Young Wan Chohas served as a Vice President of Hanaro Telecom since
December 2002 and is currently the Head of the Financial Strategy Unit of
Hanaro Telecom. From January 2002 until December 2002, he served as a Managing
Director and the Head of the Finance Team of Hanaro Telecom. From April 2000
until December 2001, he served as a Managing Director and the Head of the
Financial Strategy Unit of Hanaro Telecom. From September 1997 until March
2000, he served as a Senior Manager and the Head of the Finance Unit of Hanaro
Telecom. From January 1985 until September 1997, he served as a Senior Manager
of the Finance Unit of Dacom. From July 1983 until November 1984, he was
employed with Goldstar LG Electronics Inc. (then known as Goldstar). Mr. Cho
received a bachelor of arts in

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business administration from Korea University in
1983 and masters in business administration from the Helsinki School of
Economics
and Business Administration in 2000.

Young-Woo Namhas served as a non-standing Director of Hanaro Telecom
since March 2000. From 1996 until 1999, he served as an executive vice
president in charge of corporate administration at LG Information &
Communications, Ltd. In 1995, he also served as a managing director of LG
Information & Communications, Ltd. in charge of finance and public relations.
In 1973, Mr. Nam received a bachelor of arts in business administration from
Seoul National University. He also received masters in international business
from Sogang University in 1992.

Soon-Ho Honghas served as a non-standing Director of Hanaro Telecom since
March 2002. From 2001 until 2002, he served as the Executive Vice President in
charge of IMT-2000 System R&D team at Samsung Electronics Co., Ltd. and is
currently the Executive Vice President in charge of Network Business Unit of
Samsung Electronics. Mr. Hong received a bachelor of electronic engineering
from Sogang University.

Sung Kyou Parkhas served as an outside Director and member of the audit
committee of Hanaro Telecom since March 2000. From 1998 until 1999, he served
as Chairman and Chief Executive Officer of Daewoo Maghreb S.A. From 1996 until
1998, Dr. Park served as Chairman of Telecommunications Industry Association of
Korea. He received a bachelor of electrical engineering from MIT. He also
received masters in electrical engineering from Northeastern University in 1966
and a Ph.D. in electrical engineering from the University of Texas at Austin in
1971.

Yong Hwan Kimhas served as an outside Director and member of the audit
committee of Hanaro Telecom since November 1999. From 1969 until 1978, he was
a district prosecutor in Seoul, Taegu and Kwang-ju. He received masters in law
from Seoul National University in 1966 and masters in comparative law and
international law from New York University Law School in 1984. He is a member
of the Korean Bar and the New York State Bar.

Woong Hae Leehas served as an outside Director and member of the audit
committee of Hanaro Telecom since March 2000. From 1998 until 2001, Mr. Lee
served as an outside Director of Honam Petrochemical Corporation. Since 2001,
he has served as a Vice Chairman of Sungto Corporation. In 1965, he received a
bachelor of arts in business administration from Pusan National University. He
also received masters in management accounting from Pusan National University
in 1967.

Sun Woo Kimhas served as an outside Director and member of the audit
committee of Hanaro Telecom since March 2003. Since 2000, he has served as a
director of Korea Broadcasting System and is a member of the Korean
Broadcasting Commission. From 1997 until 2001, he was a member of the Advisory
Council on Democratic and Peaceful Unification. Since 1992, he served as an
Executive Director of Pusan Daily. Mr. Kim received a bachelor of arts in
political science from the Seoul National University in 1965 and masters in
business administration from Dankook University in 1983.

Hang-Gu Bahkhas served as an outside Director of Hanaro Telecom since
February 1999. From 1997 until 2001, Mr. Park served as an Executive Vice
President of Hyundai Electronics Co., Ltd., and is currently the President of
Hyundai Syscomm, Inc. Mr. Park received a bachelor of science in electronic
science from Hanyang University in 1970 and a Ph.D. in computer engineering
from the Postgraduate School of Korea University. Mr. Park is serving as a
Director of Hanaro Telecom as Hyundais designee to our board of directors.

Sa Hyeon Seohas served as an outside Director of Hanaro Telecom since
March 2003. Since 1983,

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he has served in the Ministry of Commerce, Industry and
Energy of the Korean government. Mr. Seo received a bachelor of arts in law
from Korea University in 1968 and completed an advanced management program at
the Seoul National University in 1999. He also received a Ph.D. in
business administration from Soonchunhyang University in 2001.

Shin-Bae Kimhas served as an outside Director of Hanaro Telecom since
March 2002. Since 2001, he served as an Executive Vice President in charge of
Information System Unit at Shinsegi Telecom and is currently as an Executive
Vice President of Strategy and Planning Division at SK Telecom. Mr. Kim
received a bachelor of industry engineering at Seoul National University in
1978 and masters in business administration at University of Pennsylvania.

There are no family relationships between our directors and officers.

Young-Woo Nam, Shin Bae Kim and Soon Ho Hong were nominated for
directorship by LG, SK Telecom and Samsung Electronics, our major shareholders.

6.B     COMPENSATION

We paid an aggregate of Won 869.9 million as compensation during 2002 to
our directors and officers as a group. At the shareholders meeting held on
March 28, 2003, our shareholders authorized payment of amounts up to an
aggregate of Won 2,500.0 million to our directors (excluding officers) as
compensation for the year 2003.

We also granted to our directors and executive officers 161,100 stock
options during 2000 under our stock purchase option plan. For a detailed
description of the stock options, as well as the stock purchase option plan,
see Item 6  Directors, Senior Management and
EmployeesShare OwnershipStock
Purchase Option Plan.

The aggregate amount we set aside or accrued during the year ended
December 31, 2002 to provide retirement and severance benefits for our
directors and executive officers (including our statutory auditor) was Won
1,900 million. During 2002, we paid retirement allowances of Won 1,480 million
to retiring directors and executive officers.

6.C     BOARD PRACTICES

Board of Directors

General.The board of directors has the ultimate responsibility for the
administration of the affairs of Hanaro Telecom. Our Articles of
Incorporation, as currently in effect, provide for a board of directors
comprised of standing directors and non-standing directors, including outside
directors. Non-standing directors have the same rights and duties as those of
standing directors, but are not officers, or otherwise employees, of Hanaro
Telecom. Under the Korean Commercial Code and our Articles of Incorporation,
directors serve a three-year term but if the term ends prior to the date of the
ordinary general meeting of shareholders in the last fiscal year of their term,
the term will be extended until the close of the ordinary general meeting of
shareholders. Our Articles of Incorporation provide for a board of directors
of not less than three standing directors and three non-standing directors and
not more than 15 directors in total. The directors are elected at a general
meeting of shareholders by a majority of the vote of the shareholders present
or represented, subject to such majority equaling at least one-quarter of all
issued and outstanding shares with voting rights. The attendance of at least
one-third of the issued and outstanding shares, whether in person or by proxy,
is required for a quorum. None of our directors is party to a service

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contract with our company that provides for benefits upon
termination of employment.

Shareholders Agreement.The seven original major shareholders of our
company were parties to a consortium and joint venture agreement governing the
terms of their investments in our company. Young-Woo Nam, Byung-Moon Suh,
Hang-Gu Bahk, Jin-Chan Kim, Meyung-Uk Park, In-Ho Song and Do-Jin Kim were
appointed to the board of directors of Hanaro Telecom pursuant to the terms of
the agreement. This agreement was terminated on September 5, 1999. Do Jin
Kim, Jin Chan Kim and In Ho Song completed their respective terms of office and
are no longer directors of Hanaro Telecom. Meyung-Uk Park and Byung-Moon Suh
resigned from the board of directors. The term of office for Young-Woo Nam
ended in March 2003. Mr. Nam was re-appointed as a non-standing director for
another term of three years at our shareholders meeting held on March 28,
2003.

Under the Korean Commercial Code and our board regulations, any director
that has a special interest with respect to the agenda of a board meeting may
not exercise his voting rights in such board meeting.

Audit Committee.Under the Commercial Code, a company may establish an
audit committee instead of appointing a statutory internal auditor. Our
Articles of Incorporation provide that the Audit Committee, which must consist
of three or more outside directors, is responsible for examining internal
transactions and potential conflicts of interest and reviewing accounting and
other relevant matters. The Audit Committee has the right to request the board
of directors to convene a shareholders meeting by providing a document that
sets forth the agenda and reasons.

Our board of directors established the Audit Committee on March 17, 2000
in accordance with our Articles of Incorporation. Our Audit Committee consists
of four outside directors: Yong Hwan Kim, Sung Kyou Park, Woong Hae Lee and
Sun Woo Kim. Mr. Yong Hwan Kim serves as the chairman of the Audit Committee.

Outside Directors

Our Articles of Incorporation provide that no less than half the total
number of directors must be outside directors, in order to enhance our internal
controls and to protect our investors. The outside directors are appointed
from among those persons who do not have a special relationship with us that
would interfere with the exercise of their independent judgment. Our Articles
of Incorporation prohibit (i) a person who does not have the qualifications
under the Securities and Exchange Act or any other statutes or (ii) a person
who does not have the qualifications required for an outside director under
applicable laws and regulations of the country where our shares or ADSs are
listed or transacted on a stock exchange or the rules and regulations of
relevant supervisory authorities in such country, from being appointed as an
outside director, and in the event that an outside director falls under one of
these categories, then he or she will be disqualified from office.

Yong Hwan Kim, Sung Kyou Park, Woong Hae Lee, Sun Woo Kim, Hang-Gu Bahk,
Sa Hyeon Seo and Shin-Bae Kim currently serve on the board of directors as
outside directors.

6.D     EMPLOYEES

As of December 31, 2002, we had a total of 1,426 employees and an
additional 116 full-time employees employed on a contractual basis. The
following chart shows the number of permanent employees by functional areas.

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|                        |       |                   |     |                   |  |                   |                     |       |  |  |     |       | 
|----------------------- | ----- | ----------------- | --- | ----------------- |  | ----------------- | ------------------- | ----- |  |  | --- | ----- | 
|                        |       |                   |     |                   |  |                   | Number of Employees |       |  |  |    
|                        |       |                   |     |                   |  |                   |                     |       |  |  |    
|Division                |       | December 31, 2000 |     | December 31, 2001 |  | December 31, 2002
|                        |       |                   |     |                   |  |                  
|Planning & Management   |       |                   | 183 |                   |  |                   | 189                 |       |  |  | 132 |      
|Information Technology  |       |                   | 39  |                   |  |                   | 58                  |       |  |  | 65  |      
|Internet Division       |       |                   | 77  |                   |  |                   |                    |       |  |  | 115 |      
|Marketing and Sales     |       |                   | 389 |                   |  |                   | 458                 |       |  |  | 480 |      
|Network and Engineering |       |                   | 711 |                   |  |                   | 643                 |       |  |  | 560 |      
|Research & Development  |       |                   | 102 |                   |  |                   | 65                  |       |  |  | 74  |      
|                        |       |                   |     |                   |  |                   |                     |       |  |  |     |      
|                        | Total |                   |     | 1,501             |  |                   |                     | 1,413 |  |  |     | 1,426 | 

None of our employees is represented by a labor union. There is an
employee consultative committee consisting of both management and employee
representatives to address any labor issues. We have not experienced any work
stoppages. We consider our relations with employees to be good.

As with most other Korean companies, our employees are granted wage
increases annually. In addition, we provide other benefits to our employees,
including subsidized housing, medical care and financial assistance with the
education of their children.

In accordance with Korean labor laws, employees who terminate their
employment with more than one year of service are entitled to receive a lump
sum payment based on the length of their service and their rate of pay at the
time of leaving our employment. They do not receive a pension annuity from us.

As of December 31, 2002, we have provided loans to our employees in the
amount of Won 16,373 million for the purchase of our common shares through our
employee stock ownership association. The loans are secured by the shares
purchased. As of December 31, 2002, we have also provided housing loans to our
employees in the amount of Won 7,888 million. These loans are secured by
accrued severance benefits of the borrowing employees. As of December 31,
2002, we have not experienced any defaults under these loans. The loans are
provided as a benefit to our employees and are not required under Korean law.
Our officers and directors are not eligible for these loans.

During 2002, we averaged 24 part-time employees at the end of each month.

6.E     SHARE OWNERSHIP

No director or member of senior management beneficially owns 1% or more of
our shares on an individual basis.

Stock Purchase Option Plan

We may, by special resolution of the shareholders, grant stock purchase
options to our officers and employees who have contributed or are qualified to
contribute to the establishment, management and technical innovation of our
company pursuant to our Articles of Incorporation and the Korean Securities and
Exchange Act, exercisable for up to an aggregate of 10% of our total number of
issued and outstanding shares. However, stock purchase options may not be
granted to (1) our largest shareholder or its related parties, (2) any
shareholder or its related parties who owns, directly or indirectly, 10% or
more of our outstanding shares having voting rights or certificates of capital
contribution of paid-in capital, or (3) an officer or employee who becomes a
major shareholder as described in paragraph (2) above upon exercise of the
stock purchase option.

According to our Articles of Incorporation, the stock purchase options are
exercisable for our common shares at an exercise price per share determined
according to relevant laws and regulations. The stock
purchase option must be exercised within five years from the third anniversary
of the date of the

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special resolution of the shareholders granting the stock
purchase option.

The stock purchase option may be cancelled by a resolution of our board of
directors (1) if the officer or employee holding the option resigns voluntarily
or is discharged from office; (2) if the officer or employee holding the option
by willful misconduct or by negligence inflicts substantial or material damage
to our company, or (3) in the event of the occurrence of any cause for
cancellation of stock purchase options specified in the stock purchase option
agreement between our company and the officer or employee.

On March 1, 1999, we granted stock purchase options to our then Director,
President and Chief Executive Officer, Mr. Yun-Sik Shin. Mr. Shin resigned
from his offices on March 28, 2003. Until his options are cancelled by a
resolution of our board of directors, Mr. Shin may exercise his options to
purchase 50,000 shares of common shares at the price of Won 5,630 per share
during the period beginning on March 1, 2002 and ending February 27, 2007. On
October 1, 1999, we granted stock options to some of our directors, officers
and statutory internal auditor to purchase 120,000 shares of common shares at
the price of Won 19,910 during the period beginning on October 1, 2002 and
ending on September 30, 2007. The exercise price per share was set at the
minimum price permitted under the working rules of the Korean Securities and
Exchange Act applicable at the time the options were granted. Pursuant to the
working rules of the Korean Securities and Exchange Act, the formula for
determining permissible price for the stock purchase options granted on March
1, 1999 and October 1, 1999 was the higher of (i) the average of the closing
prices of the common shares during a three month period prior to the date of
the special resolution of the shareholders granting the stock purchase option
and (ii) the par value of the common shares.

On March 17, 2000, we granted 882 of our employees (including certain
directors and officers), employed by us as of December 31, 1999, stock purchase
options to purchase a total of 1,771,566 common shares at a price of Won 17,750
per share during the period beginning March 18, 2003 and ending March 17, 2008.
We allocated the stock purchase options based on employee seniority and
position. The employees exercise price per share was set at the minimum price
permitted under the amendment of the working rules of the Korean Securities and
Exchange Act, effective from March 15, 2000. Under the price formula currently
in effect, the option price per share shall be the higher of (i) the average of
(x) the weighted average of the closing prices of the common shares during a
two-month period immediately preceding the option granting date, (y) the
weighted average of the closing prices of the common shares during the
one-month period immediately preceding the option granting date, and (z) the
weighted average of closing prices of the common shares during the one-week
period immediately preceding the option granting date, and (ii) the par value
of the common shares.

As of December 31, 2002, we had outstanding employee stock options to
purchase a total of 1,551,153 common shares.

No stock options were granted at the shareholders meetings held in 2001,
2002 and 2003.

Stock Ownership Association

An employee stock ownership association under the Korea Securities and
Exchange Act is an association formed by the employees of a corporation for the
purpose of acquiring and managing stocks issued by such corporation. Only
full-time workers of a corporation may join the employee stock ownership
association and officers elected by a shareholders meeting, shareholders of
such corporation (excluding certain minority shareholders), and part-time
workers are not qualified to become a member of the association. The right to
become a member of the employee stock ownership association must be available
to all full-time employees and the regulations governing the association must
contain certain
52Table of Contents

matters relating to the operation and management of the association.

We established our employee stock ownership association in November 1997.
As of December 31, 2002, 561 employees of Hanaro Telecom were depositing
members of the employee stock ownership association and the association held
2,990,149 shares of our common shares. As of April 30, 2003, 558 employees of
Hanaro Telecom were members of the employee stock ownership association and the
association held 2,976,698 shares of our common shares.

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A     MAJOR SHAREHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common shares, on a fully diluted basis, as of December 31,
2002, by (1) each person known to us to own beneficially more than five percent
(5%) of our common shares and (2) all of our directors and executive officers
as a group.

|                                                         |  |                           |            |         |  |  |        |  
|-------------------------------------------------------- |  | ------------------------- | ---------- | ------- |  |  | ------ | -
|                                                         |  | Shares Beneficially Owned
|                                                         |  | as of December 31, 2002  
|                                                         |  |                          
|Name                                                     |  | Number                    |            | Percent
|                                                         |  |                           |            |        
|Dacom and its affiliated companies                       |  |                           | 36,354,777 |         |  |  | 13.02  | %
|Samsung Electronics Co., Ltd. and its affiliated company |  |                           | 23,723,407 |         |  |  | 8.49   | %
|SK Telecom Co., Ltd. and its affiliated company          |  |                           | 15,376,462 |         |  |  | 5.50   | %
|Directors and Executive Officers                         |  |                           | 40,399     |         |  |  | 0.0145 | %

The number of shares held by Dacom includes shares directly held by LGEI
Inc. and LG Telecom Co., Ltd. Dacom and the other two companies are members of
the LG chaebol. As of December 31, 2002, Dacom directly owned 19,754,656
common shares, LGEI directly owned 11,175,047 common shares and LG Telecom
directly owned 5,397,574 common shares.

The number of shares held by Samsung Electronics includes shares directly
held by Seoul Commtech Co., Ltd. Both companies are members of the Samsung
chaebol. As of December 31, 2002, Samsung Electronics directly owned
23,542,281 common shares and Seoul Commtech directly owned 181,126 common
shares.

The number of shares held by SK Telecom includes shares directly held by
SK Engineering & Construction Co., Ltd. Both companies are members of the SK
chaebol. As of December 31, 2002, SK Telecom directly owned 15,117,710 common
shares and SK Engineering & Construction directly owned 258,752 common shares.

The following table describes transactions known to Hanaro Telecom through
publicly available information involving holders of over 5% of Hanaro Telecoms
outstanding common stock during the period beginning on January 1, 2000 and
ending on April 30, 2003 that resulted in a change of greater than 1% in the
percentage ownership by that shareholder of Hanaro Telecoms outstanding
shares.

|                                         |  |                     |  |             |            |              |  |                  |      |             |  |                  |             |           |  |              |            |  |  |  |      |   |  | 
|---------------------------------------- |  | ------------------- |  | ----------- | ---------- | ------------ |  | ---------------- | ---- | ----------- |  | ---------------- | ----------- | --------- |  | ------------ | ---------- |  |  |  | ---- | - |  | 
|                                         |  |                     |  |             |            | Shares Owned |  |                  |      |             |  |                  |             |           |  | Shares Owned |            |  |  | 
|                                         |  |                     |  |             |            | Prior to     |  |                  |      |             |  | Number of Shares |             | After the |  |              |            | 
|Name of Shareholder                      |  | Date of Transaction |  | Transaction |            | Percentage   |  | Purchased (Sold) |      | Transaction |  | Percentage      
|                                         |  |                     |  |             |            |              |  |                  |      |             |  |                 
|Hyundai Electronics Industries Co., Ltd. |  | December 27, 1999   |  |             | 10,584,129 |              |  |                  | 4.41 | %           |  |                  | 6,932,170   |           |  |              | 17,516,299 |  |  |  | 7.29 | %
|                                         |  | November 4, 2000    |  |             | 17,516,299 |              |  |                  | 7.29 | %           |  |                  | (17,516,299 | )         |  |              |           |  |  |  | 0.0  | %
|Korea Thrunet Co., Ltd.                  |  | June 2000 to        |  |             | 12,678,866 |              |  |                  | 4.8  | %           |  |                  | (12,678,866 | )         |  |              |           |  |  |  | 0.0  | %
|                                         |  | November 2001       |  |             |            |              |  |                  |      |             |  |                  |             |           |  |              |            |  |  |  |      |  

None of Hanaro Telecoms common shares entitles the holder to any
preferential voting rights.

According to Deutsche Bank, depositary for Hanaro Telecoms ADSs, as of
December 31, 2002, 1,056,699 shares of Hanaro Telecoms common shares were held
in the form of ADRs and there were 6 ADR holders of record in the United
States. According to Hanaro Telecoms register of shareholders, as of December
31, 2002, there were 151,116 holders of common shares of record worldwide. As
of April

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30, 2003, there were approximately 73 record holders of Hanaro Telecoms
common shares who are nominees in the United States, whose shareholdings
represented approximately 0.45% of the outstanding common shares on that date.
Accordingly, the number of such record holders does not represent the number of
beneficial owners of our common shares in the United States. We expect that the
number of beneficial owners of our common shares in the United States exceeds
1,000.

As of April 1, 2002, we and our Korean affiliates have been designated as
member companies of a business group subject to restrictions on debt
guarantees as well as a business group subject to restrictions on mutual
shareholding by the Korean Fair Trade Commission based on the new criteria
prescribed by the amended Monopoly Regulation and Fair Trade Act.

Hanaro Telecom knows of no arrangements the operation of which may at a
later time result in a change of control.

7.B     RELATED PARTY TRANSACTION

Relationship with Dacom

As of December 31, 2002, Dacom and its affiliated companies beneficially
owned 13.02% of our common shares.

In December 1998, we entered into an interconnection agreement with Dacom,
under which we interconnect to Dacoms domestic and international long-distance
networks. The interconnection charges are based on the standard rates
established by the Korean government. In January 1999, we entered into an
interconnection agreement with respect to the data communications network of
Dacom. In July 2001, we entered into an interconnection agreement with Dacom
with respect to our new local telephony service areas. The interconnection
charges are based on the standard rates established by the Korean government.
In September 2001, we entered into an agreement with Dacom with respect to the
interconnection of telecommunication facilities and the provision of
information, for a term of two years and renewable for another two years in the
absence of any request for an amendment to the agreement by any party.

We are a party to an agreement concerning combined billing with Dacom.
Under the agreement, our subscribers that use Dacom for domestic and
international long-distance services receive only one monthly statement for
local, long-distance and international call charges.

In addition, we acquired from Dacom an indefeasible right to use two Korea
 Japan international leased lines for US$7.28 million in April 2001, each
supporting a bandwidth capacity of 155Mbps and three Korea  Asia international
leased lines (half circuits), each supporting a bandwidth capacity of 2Mbps,
for approximately US$396.07 million in March 2002.

We also lease from Dacom office space for our branch offices located in
Pusan, Kwachoen, Youngdeungpo-Ku in Seoul and Namdong-Ku in Inchon.

Relationship with LG chaebol

The LG chaebol includes Dacom, LGEI and LG Telecom and their affiliated
companies. In February 2001, we entered into an interconnection agreement with
LG Telecom under which LG Telecoms personal communications network is
connected to our local telephone network. The interconnection charges are based
on the standard rates established by the Korean government. Pursuant to that
agreement, we entered into a further agreement with LG Telecom in July 2001,
under which LG Telecoms personal
55Table of Contents

communications network is connected to our local telephone network in the following
cities: Jeon-ju, Chang-won/Masan, Chung-ju, Chun-ahn and Su-chun.

In October 2001, we entered into an agreement with LG Telecom on the usage
of telecommunication facilities in accordance with the terms of our Specific
Service Provider License.

In December 2001, we acquired 1,035,652 shares of the common stock of LG
Telecom, representing 0.37% of the issued and outstanding shares of LG Telecom,
for Won 5,396 million.

Relationship with Samsung chaebol

As of December 31, 2002, Samsung Electronics and its affiliated company
beneficially owned 8.49% of our outstanding shares.

From time to time, we enter into agreements with Samsung for the supply of
telecommunications equipment. We had an agreement with Samsung Card under
which Samsung Card agreed to lease to us certain cable modems amounting to Won
50,000,000,000 (which may be increased by 10% if necessary) for a term of 48
months from May 2000.

We also leased office space in two buildings in Dongjak-Ku, Seoul from
Samsung Corporation for which we paid a total rental deposit of Won 1,541.4
million for one year from October 21, 2001 until October 21, 2002. The term of
this agreement has been extended until June 20, 2003.

Relationship with SK chaebol

As of December 31, 2002, SK Telecom and its affiliated companies
beneficially owned 5.50% of our outstanding shares. In December 1998 and in
February 2001, we entered into an interconnection agreement with SK Telecom,
under which we interconnect to SK Telecoms mobile telecommunication network
and wireless paging service network. The interconnection charges are based on
the standard rates established by the Korean government. Pursuant to the
February 2001 agreement, we entered into a further agreement with SK Telecom in
July 2001, under which SK Telecoms mobile telecommunication network is
connected to our local telephone network in the following cities: Jeon-ju,
Chang-won/Masan, Chung-ju, Chun-ahn and Su-chun.

We also lease our office space of a building in Bundang-Ku, Sungnam from
SKT Corporation for which we paid a rental deposit of Won 2,061.9 million for a
term of five years from May 3, 1999 until May 2, 2004.

Relationship with Major Shareholders

In addition to the above, we have entered into other agreements with our
major shareholders and their respective affiliates in the ordinary course of
our business and strategic alliances under which we agree to cooperate on
developing technological, marketing and customer service expertise and
providing additional service offerings. All our transactions with our major
shareholders and their respective affiliates have been on an arms length
basis.

Relationship with System Operators

As of April 30, 2003, we also owned a 90.91% equity interest in Hanaro
WEB(n)TV, a 10.0% equity interest in Korea Cable TV Chung-buk System and a 3.0%
equity interest in Chungnam Cable TV
56Table of ContentsBroadcasting, our system operators.Since 2000, we have a program pursuant to which we provide secured or
guaranteed interest-free loans to cable network operators. The terms of each
of those loans require repayment after three years from the date of the loan by
equal installments on a quarterly basis for two years. As of April 30, 2003,
we had outstanding interest-free loans to eight cable network operators in the
aggregate amount of Won 6.7 billion. The loan agreements require the cable
network operators to use the loan proceeds to upgrade their systems so that our
services can be provided over their networks. The loan agreements also require
the borrower to lease to us its cable network for our HFC-based Internet access
services upon completion of the system upgrade.Relationship with Hanaro T&IIn January 2002, Hanaro Customer Service and Hanaro Internetdesk, our
subsidiaries, merged to form Hanaro T&I. Prior to the merger, we had an
agreement with Hanaro Customer Service under which we outsourced to it our
customer service business, the scope of which includes customer support,
handling customer complaints, subscription service and other outbound business.
Hanaro T&I has assumed the rights and obligations under this agreement as of
January 2002.Relationship with Hanaro Realty Development & ManagementIn March 2003, we entered into an agreement with Hanaro Realty Development
& Management, our subsidiary, to outsource to it the business of our building
management and the management of various facilities and equipment in our
telecommunication center. The initial term of such agreements commenced on
January 1, 2003 and will expire on December 31, 2003, and is automatically
renewable for one year unless a party gives notice of intention to terminate
the agreement at least 30 days prior to expiration. See Item 10Additional
InformationMaterial ContractsAgreement for Outsourcing of Building Office
Management between Hanaro Telecom and Hanaro Realty Development
& Management
and Agreement for Outsourcing of Telecommunication Center Management between
Hanaro Telecom and Hanaro Realty Development & Management for a summary of the
terms of the agreements.Relationship with Hanaro Telecom AmericaIn October 2000, we entered into an agreement with Hanaro Telecom America,
our wholly owned subsidiary, to provide international telecommunication
services (including the interconnection of private leased circuit for the
international transmission of voice and/or data) between Korea and U.S. This
agreement is effective from October 1, 2000, and will continue until terminated
by either party in accordance with the agreement. Hanaro Telecom America is
responsible for providing to us Internet connectivity services for connecting
the Internet backbone in the U.S., and co-location services to accommodate our
requests for maintenance and management services. We agreed to pay Hanaro
Telecom America interconnection handling and marketing commissions and
consulting charges based on the number of hours worked and costs incurred.Relationship with Hanaro WEB(n)TVIn March 2001, we entered into a strategic alliance agreement with our
wholly owned subsidiary, Hanaro WEB(n)TV, which operates our business of
providing HFC network in Kwang-ju area. Hanaro
WEB(n)TVs duties include placing advertisements, customer service,
subscription service, handling complaints, installation of leased lines,
trouble-shooting and network maintenance. We provide computer equipment,
uniform and other facilities necessary for the operation of this business. The
agreement is57Table of Contentseffective for one year commencing on March 1, 2001, and is
renewable for another year unless terminated by either party for a material
breach under the agreement. We must pay Hanaro WEB(n)TV a fixed fee on a per
subscriber basis, and a monthly maintenance fee calculated as a percentage of
subscriber fees collected in the relevant month, which percentage varies
according to our rating of their service.Relationship with DreamlineIn December 2001, we acquired a 32.2% equity interest in Dreamline. In
January 2002, we entered into an agreement with Dreamline to outsource to it
our subscriber sales business. The scope of the outsourced business includes
management of our subscribers, attracting new subscribers, receipt of
subscriptions and handling other subscription related operations. In April
2002, we also entered into an agreement with Dreamline to outsource to it the
business of managing our marketing channels and regional sales offices and to
provide installation and customer services to our subscribers in our HFC
service areas. The term of each of these agreements is one year, and is
automatically renewable for another year unless a party notifies otherwise at
least one month prior to expiration. See Item 10Additional
InformationMaterial ContractsAgreement for Outsourcing of Business Operation
between Hanaro Telecom and Dreamline and Business Outsourcing Agreement
between Hanaro Telecom and Dreamline for a summary of the terms of the
agreements. We also have an agreement with Dreamline pursuant to which we
agreed to allow Dreamlines use of our brand names, Hanafos, Cytobahn and
Zyttan, effective as of April 1, 2002.See Note 22 to our consolidated financial statements for more information
about our related party transactions.7.C     INTERESTS OF EXPERTS AND COUNSELNot applicable.58Table of Contents
ITEM 8. FINANCIAL INFORMATION8.A     CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATIONSee Item 18Financial Statements and pages F-1 to F-42 following
Glossary.Legal ProceedingsThere are several legal proceedings to which we are a party. However, such
pending legal proceedings involve minor claims, none of which is likely to have
a material adverse effect on our business.Dividend PolicyUnder our Articles of Incorporation, we are permitted to pay dividends to
our shareholders beginning in the first fiscal year in which our aggregate
carried-over loss incurred since the date of commencement of our local
telephony services has been made up in full. We do not expect to pay dividends
for the foreseeable future. In addition, we currently intend to retain any
future earnings to finance our business and to fund growth and, therefore, do
not expect to pay any cash dividends for the foreseeable future. However, if we
declare cash dividends, the dividends will be paid to the depositary for the
ADSs in Won and then converted by the depositary into U.S. dollars.8.B     SIGNIFICANT CHANGESAcquisition and Disposal of Shares in Korea Thrunet Co., Ltd.On December 30, 2002, we entered into a share purchase agreement (the
Share Purchase Agreement) and a Convertible Bonds Subscription Agreement (the
CB Agreement) with TriGem Computer, Inc., Naray & Company, Inc., Naray D&C,
Inc., TriGem Ventures, Inc., TriGem InfoNet, Inc., Solvit Media Inc., TG
Information Consulting, Inc. and AI Leaders, Inc. (collectively, the
Sellers), pursuant to which we agreed to purchase from the Sellers an
aggregate of 55,864,431 shares of the common stock of Korea Thrunet Co., Ltd.
(the Shares) in two tranches as follows (the Transaction). On January 3,
2003, we purchased the first tranche of Shares, being 24,653,333 Shares, in
consideration for the issue by us to the Sellers of Won 43 billion zero coupon
convertible bonds due 18 months from the date of issuance (CB1) and Won 43
billion zero coupon convertible bonds due 60 months from the date of issuance
(CB2) for a total subscription price of Won 86 billion. The second tranche
was scheduled to close on February 7, 2003, on which date we had agreed to
purchase the remaining 31,211,098 Shares.However, on January 15, 2003, we exercised our right to terminate the
Share Purchase Agreement on the basis that the disclosure schedules provided by
the Sellers were not satisfactory to us. On the same date, we exercised our
right to sell to the Sellers all of the first tranche of Shares, being
24,653,333 Shares, in exchange for all of the CB1s and CB2s we issued to them
on January 3, 2002, and the Sellers also exercised their right to require us to
redeem from them all of the CB1s and CB2s in exchange for all of the first
tranche of Shares, in accordance with the terms of the Share Purchase Agreement
and the CB Agreement. The closing of such sale and purchase of the first
tranche of Shares and the redemption of the CB1s and CB2s took place on the
same date. As a result of the termination of the Share Purchase Agreement, the
CB Agreement was also terminated.In connection with the Share Purchase Agreement, we had also entered into
a Warrant Purchase Agreement with SB Thrunet Pte. Ltd. (SB Thrunet) on
December 30, 2002 (the Warrant Purchase59Table of Contents

Agreement) to purchase from SB
Thrunet warrants to subscribe for an aggregate of 26,056,338 shares of
the common stock of Korea Thrunet in consideration for a total purchase
price of US$2,000,000. However, as a result of the termination of the Share
Purchase Agreement, the Warrant Purchase Agreement was also terminated.

Significant Change in the Board of Directors

At the annual general meeting of our shareholders held on March 28, 2003,
Mr. Yun-Sik Shin who has served as our Representative Director, President and
Chief Executive Officer since September 1997, resigned from his offices upon
the expiration of the term of such offices.

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ITEM 9. THE OFFER AND LISTING

9.A     OFFER AND LISTING DETAILS

Market Price Information

Our common shares are traded on the Korea Securities Dealers Association
Automated Quotation Market (KOSDAQ), under the symbol 33630. Our shares were
listed on KOSDAQ in November 1998.

The KOSDAQ market index is computed by taking the aggregate market
capitalization of all companies included in the index as a percentage of the
market capitalization of the base date (July 1, 1996), multiplied by 100.

The most widely followed price index of stocks quoted on stock exchanges
in Korea is the Korea Composite Stock Price Index, or KOSPI, an index of all
equities listed on the Korea Stock Exchange. The KOSPI is computed by
aggregating the market capitalization of all listed companies and (subject to
certain adjustments) by expressing this aggregate as a percentage of the
aggregate market capitalization of all listed companies as of the base date
(January 4, 1980).

The following table sets forth, for the periods indicated, (i) the high
and low sales price for our common shares as reported on KOSDAQ, (ii) the
average daily trading volume of our shares, (iii) the highs and lows of the
KOSDAQ Index and (iv) the highs and lows of the KOSPI:

|                               |                    |  |                 |        |           |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        |  |  |   |        |  |  |   |          | 
|------------------------------ | ------------------ |  | --------------- | ------ | --------- |  | ---------- | ----- | ----- |  | ------- | --------- | --- |  | ---- | ----- |  |  | - | ------ |  |  | - | ------ |  |  | - | -------- | 
|                               |                    |  |                 |        |           |  |            |       |       |  | Average |           |     |  |      |       |  |  |   |        |  |  |   |        |  |  |  
|                               |                    |  | Price per share |        | Average   |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        | 
|                               |                    |  | of our          |        | daily     |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        | 
|                               |                    |  | common shares   |        | trading   |  | KOSDAQ     |       | KOSPI
|                               |                    |  |                 |        | volume of |  |            |       |      
|                               |                    |  | High            |        | Low       |  | our shares |       | Low   |  | High    |           | Low |  | High
|                               |                    |  |                 |        |           |  |            |       |       |  |         |           |     |  |     
|Fiscal year Ending December 31 |                    |  |                 |        |           |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        |  |  |   |        |  |  |   |         
|                               | 1998               |  | W               | 5,850  |           |  | W          | 3,930 |       |  |         | 260,780   |     |  |      | 61.59 |  |  |   | 75.58  |  |  |   | 403.52 |  |  |   | 579.86   | 
|                               | 1999               |  |                 | 23,500 |           |  |            | 5,200 |       |  |         | 1,827,356 |     |  |      | 70.87 |  |  |   | 273.32 |  |  |   | 498.42 |  |  |   | 1,028.07 | 
|                               | 2000               |  |                 | 23,700 |           |  |            | 2,210 |       |  |         | 2,612,052 |     |  |      | 52.58 |  |  |   | 283.44 |  |  |   | 500.60 |  |  |   | 1,059.04 | 
|                               | 2001               |  |                 | 5,580  |           |  |            | 1,930 |       |  |         | 6,508,725 |     |  |      | 46.05 |  |  |   | 87.65  |  |  |   | 468.76 |  |  |   | 704.50   | 
|                               | 2002               |  |                 | 7,850  |           |  |            | 3,120 |       |  |         | 5,082,647 |     |  |      | 43.67 |  |  |   | 94.30  |  |  |   | 584.04 |  |  |   | 937.61   | 
|Financial Quarter Ending       |                    |  |                 |        |           |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        |  |  |   |        |  |  |   |         
|                               | March 31, 2001     |  | W               | 4,130  |           |  | W          | 2,470 |       |  | W       | 7,527,847 |     |  | W    | 55.70 |  |  | W | 87.65  |  |  | W | 520.95 |  |  | W | 627.45   | 
|                               | June 30, 2001      |  |                 | 4,640  |           |  |            | 2,870 |       |  |         | 7,597,011 |     |  |      | 64.34 |  |  |   | 83.81  |  |  |   | 491.21 |  |  |   | 632.05   | 
|                               | September 30, 2001 |  |                 | 3,750  |           |  |            | 1,930 |       |  |         | 2,496,453 |     |  |      | 46.05 |  |  |   | 77.65  |  |  |   | 468.76 |  |  |   | 597.25   | 
|                               | December 31, 2001  |  |                 | 5,580  |           |  |            | 2,160 |       |  |         | 8,544,003 |     |  |      | 53.55 |  |  |   | 75.30  |  |  |   | 496.13 |  |  |   | 704.50   | 
|                               | March 31, 2002     |  |                 | 7,850  |           |  |            | 5,190 |       |  |         | 7,910,470 |     |  |      | 72.02 |  |  |   | 94.30  |  |  |   | 708.47 |  |  |   | 902.46   | 
|                               | June 30, 2002      |  |                 | 6,790  |           |  |            | 4,880 |       |  |         | 4,787,824 |     |  |      | 69.72 |  |  |   | 88.42  |  |  |   | 795.16 |  |  |   | 937.61   | 
|                               | September, 2002    |  |                 | 5,170  |           |  |            | 3,400 |       |  |         | 3,178,036 |     |  |      | 46.71 |  |  |   | 67.45  |  |  |   | 646.42 |  |  |   | 801.99   | 
|                               | December 31, 2002  |  |                 | 4,210  |           |  |            | 3,120 |       |  |         | 4,923,691 |     |  |      | 43.67 |  |  |   | 53.78  |  |  |   | 584.04 |  |  |   | 736.57   | 
|                               | March 31, 2003     |  |                 | 3,430  |           |  |            | 2,100 |       |  |         | 3,280,361 |     |  |      | 34.64 |  |  |   | 48.85  |  |  |   | 515.24 |  |  |   | 666.71   | 
|                               | May 30, 2003       |  |                 | 3,100  |           |  |            | 2,340 |       |  |         | 4,826,749 |     |  |      | 38.25 |  |  |   | 47.25  |  |  |   | 538.56 |  |  |   | 633.42   | 
|Month Ending                   |                    |  |                 |        |           |  |            |       |       |  |         |           |     |  |      |       |  |  |   |        |  |  |   |        |  |  |   |         
|                               | December 31, 2002  |  | W               | 3,760  |           |  | W          | 3,210 |       |  |         | 4,804,788 |     |  |      | 44.36 |  |  |   | 53.78  |  |  |   | 627.55 |  |  |   | 736.57   | 
|                               | January 31, 2003   |  |                 | 3,430  |           |  |            | 2,510 |       |  |         | 2,982,858 |     |  |      | 42.52 |  |  |   | 48.85  |  |  |   | 583.35 |  |  |   | 666.71   | 
|                               | February 28, 2003  |  |                 | 2,650  |           |  |            | 2,300 |       |  |         | 2,199,795 |     |  |      | 41.78 |  |  |   | 44.32  |  |  |   | 575.24 |  |  |   | 616.29   | 
|                               | March 31, 2003     |  |                 | 2,720  |           |  |            | 2,100 |       |  |         | 4,606,975 |     |  |      | 34.64 |  |  |   | 42.06  |  |  |   | 515.24 |  |  |   | 590.04   | 
|                               | April 30, 2003     |  |                 | 3,100  |           |  |            | 2,690 |       |  |         | 5,014,386 |     |  |      | 38.25 |  |  |   | 45.46  |  |  |   | 538.56 |  |  |   | 624.77   | 
|                               | May 30, 2003       |  |                 | 2,980  |           |  |            | 2,340 |       |  |         | 4,609,486 |     |  |      | 43.11 |  |  |   | 47.25  |  |  |   | 595.38 |  |  |   | 633.42   | 

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On May 30, 2003, the sale price of our common shares was Won 2,420 per
share. On May 30, 2003, the closing KOSDAQ Index was 47.18 and the KOSPI was
633.42.

As of December 31, 2002, we had 151,116 shareholders of record.

Our ADSs are quoted on the Nasdaq National Market under the symbol HANA
since March 29, 2000. The price of our ADSs on Nasdaq as of its close of
trading on May 30, 2003 was U.S.$2.03
per ADS. The table below shows the high
and low closing prices of the ADSs on Nasdaq since listing.

|                               |                    |  |           |       |            |  |   |      |  |  |         |         | 
|------------------------------ | ------------------ |  | --------- | ----- | ---------- |  | - | ---- |  |  | ------- | ------- | 
|                               |                    |  |           |       |            |  |   |      | 
|                               |                    |  |           |       |            |  |   |      |  |  | Average
|                               | Price per share    |  | daily    
|                               | of our ADS         |  | trading  
|                               |                    |  | volume of
|                               | High               |  | Low       |       | our shares
|                               |                    |  |           |       |            |  |  
|Fiscal year Ending December 31 |                    |  |           |       |            |  |   |      |  |  |         |        
|                               | 2000               |  | $         | 15.50 |            |  | $ | 1.63 |  |  |         | 349,284 | 
|                               | 2001               |  |           | 4.20  |            |  |   | 1.42 |  |  |         | 39,940  | 
|                               | 2002               |  |           | 5.68  |            |  |   | 2.50 |  |  |         | 8,872   | 
|Financial Quarter Ending       |                    |  |           |       |            |  |   |      |  |  |         |        
|                               | March 31, 2001     |  | $         | 3.25  |            |  | $ | 1.94 |  |  |         | 92,729  | 
|                               | June 30, 2001      |  |           | 3.58  |            |  |   | 1.94 |  |  |         | 16,827  | 
|                               | September 30, 2001 |  |           | 2.75  |            |  |   | 1.42 |  |  |         | 21,931  | 
|                               | December 31, 2001  |  |           | 4.20  |            |  |   | 1.68 |  |  |         | 28,155  | 
|                               | March 31, 2002     |  |           | 5.68  |            |  |   | 3.80 |  |  |         | 14,847  | 
|                               | June 30, 2002      |  |           | 5.35  |            |  |   | 3.85 |  |  |         | 13,298  | 
|                               | September 30, 2002 |  |           | 4.19  |            |  |   | 2.78 |  |  |         | 4,995   | 
|                               | December 31, 2002  |  |           | 3.24  |            |  |   | 2.50 |  |  |         | 2,806   | 
|                               | March 31, 2003     |  |           | 2.90  |            |  |   | 1.74 |  |  |         | 4,067   | 
|                               | May 30, 2003       |  |           | 2.40  |            |  |   | 1.90 |  |  |         | 1,233   | 
|Month Ending                   |                    |  |           |       |            |  |   |      |  |  |         |        
|                               | December 31, 2002  |  | $         | 3.04  |            |  | $ | 2.55 |  |  |         | 3,257   | 
|                               | January 31, 2003   |  |           | 2.90  |            |  |   | 2.38 |  |  |         | 6,257   | 
|                               | February 28, 2003  |  |           | 2.39  |            |  |   | 1.95 |  |  |         | 4,257   | 
|                               | March 31, 2003     |  |           | 2.08  |            |  |   | 1.74 |  |  |         | 1,705   | 
|                               | April 30, 2003     |  |           | 2.40  |            |  |   | 2.02 |  |  |         | 1,162   | 
|                               | May 30, 2003       |  |           | 2.39  |            |  |   | 1.90 |  |  |         | 1,305   | 

9.B     PLAN OF DISTRIBUTION

Not Applicable.

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9.C     MARKETS

Description of KOSDAQ

The KOSDAQ was launched on July 1, 1996 as an alternative investment
market to the Korea Stock Exchange, the principal stock exchange in Korea.
KOSDAQ is modeled after the Nasdaq National Market; however, unlike Nasdaq,
shares listed on KOSDAQ are traded by KOSDAQ participants and their brokers
through market-makers at a physical exchange located in Seoul, Korea. The
participants also use a central electronic trading system designed to increase
the speed at which orders are matched. The trading hours for the KOSDAQ market
are 9:00 a.m. to 3:00 p.m. Margin trading is not permitted on KOSDAQ and daily
price changes are limited to a range of 12% of the closing price for the
previous trading day.

The KOSDAQ market has grown significantly since its inception. As of May
30, 2003, 855 companies were listed on KOSDAQ with an aggregate market
capitalization of Won 41.4 trillion (U.S.$34.2 billion). The average daily
turnover for 2002 was Won 1.2 trillion (U.S.$1.0 billion). Market
capitalization on KOSDAQ is heavily concentrated in the larger companies, with
the top 10 companies comprising approximately 36.74% of total market
capitalization and the top 25 companies comprising approximately 50.50% of
total market capitalization, as of May 30, 2003. Companies listing on KOSDAQ
must meet its listing requirements and register with the Financial Supervisory
Commission of Korea.

9.D     SELLING SHAREHOLDERS

Not applicable.

9.E     DILUTION

Not applicable.

9.F     EXPENSES OF THE ISSUE

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION

10.A     SHARE CAPITAL

Not applicable.

10.B     ARTICLES OF INCORPORATION

The section below provides summary information relating to the material
terms of the capital stock of our company and our Articles of Incorporation.
It also includes a brief summary of certain provisions of the Securities and
Exchange Act, the Commercial Code and related laws of Korea, all as currently
in effect.

Objectives

Article 2 of our Articles of Incorporation states our objectives as
follows:



| |  |  | to play a leading role in the nations efforts to accomplish a
society of multimedia super-highway telecommunication industry by
efficient performance of telecommunication business;                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | to establish and operate the nations second basic communication
service network, as a preparation against any national disaster or
calamity, by establishing diversified communication channels and an
automatic recovery system; and
|
| |  |  | to enhance the improvement of end users convenience and public
welfare.                                                                                                                                                              

General

Currently, we are authorized to issue 480,328,800 shares of stock. Under
our Articles of Incorporation, we are authorized to issue only one class of
stock. Our issued common shares constitute such authorized class of stock.

Currently, we have a total of 279,322,680 shares issued and outstanding.
All of the issued and outstanding shares are fully paid and non-assessable and
are in registered form. We may issue additional shares without further
shareholders approval as provided in our Articles of Incorporation. The
unissued shares remain authorized until an amendment to our Articles of
Incorporation changes the status of the authorized shares to unauthorized
shares. We can issue share certificates in denominations of up to 10,000
shares. Our common shares have a par value of Won 5,000 per share.

Directors

No director who has a special interest in a matter for resolution can
exercise his vote upon such matter. A resolution of the board of directors is
required for borrowing money except as otherwise provided for in separate
regulations under which the Representative Director/President is authorized to
borrow money in an amount not exceeding a certain limit.

Dividends

Under our Articles of Incorporation, we may pay dividends to our
shareholders beginning in the first fiscal year in which our aggregate
carried-over losses incurred since the date of commencement of our local
telephony services have been made up in full. From such fiscal year, we may
distribute dividends to

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our shareholders in proportion to the number of shares owned by each
shareholder following the approval by the shareholders at an annual general
meeting of shareholders. The shares represented by the ADSs have the same
dividend rights as common shares. We will pay full annual dividends on shares
issued during such fiscal year.

We may declare dividends at the annual general meeting of shareholders,
which is held within three months after the end of a fiscal year. Dividends
will be paid shortly after the annual general meeting declaring such dividends.
We may distribute dividends in cash or in shares. However, a dividend in
shares must be distributed at par value. If the market price of the shares is
less than par value, dividends in shares may not exceed one-half of the annual
dividends. We have no obligation to pay any dividend unclaimed for five years
from the payment date.

Under the Commercial Code, we may pay an annual dividend only out of the
excess of our net assets, on a non-consolidated basis, over the sum of (1) our
stated capital, (2) the total amount of our capital surplus reserve and legal
reserve accumulated up to the end of the relevant dividend period and (3) the
legal reserve to be set aside for the annual dividend. In addition, we may not
pay an annual dividend unless we have set aside as legal reserve an amount
equal to at least 10% of the cash portion of the annual dividend or unless we
have accumulated a legal reserve of not less than one-half of our stated
capital. We may not use legal reserves to pay cash dividends but may transfer
amounts from legal reserves to reduce an accumulated deficit.

Distribution of Free Shares

In addition to paying dividends in shares out of our retained or current
earnings, we may also distribute to our shareholders an amount transferred from
our capital surplus or legal reserve to our stated capital in the form of free
shares. We must distribute such free shares to all our shareholders in
proportion to their existing shareholdings.

Preemptive Rights and Issuance of Additional Shares

We may issue authorized but unissued shares at the times and, unless
otherwise provided in the Commercial Code, on such terms as our board of
directors may determine. We must offer new shares on uniform terms to all
shareholders who have preemptive rights and are listed on our shareholders
register as of the relevant record date.

Our shareholders are entitled to subscribe for any newly issued shares in
proportion to the number of shares they own, except that under our Articles of
Incorporation, if the new shares will be (1) issued to the public or to certain
subscribers in accordance with the Securities and Exchange Act, (2) issued by
public offering in accordance with the Securities and Exchange Act, (3) issued
to our employee stock ownership association as provided in the Securities and
Exchange Act, (4) represented by depositary receipts, (5) issued upon the
exercise of stock options which are provided in accordance with relevant
provision of the Securities and Exchange Act, or (6) issued to a foreign
telecommunication company pursuant to the foreign investment procedures, or to
a foreign financial or investment company for the purpose of a strategic
alliance relating to our business pursuant to relevant laws and regulations,
our board of directors may pass a resolution to issue the new shares to persons
other than existing shareholders.

We must give public notice of preemptive rights regarding new shares and
their transferability at least two weeks before the relevant record date. We
will notify shareholders who are entitled to subscribe for newly issued shares
of the deadline for subscription at least two weeks prior to such deadline. If
a shareholder fails to subscribe by the deadline, the shareholders preemptive
rights will lapse. Our board of

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directors may determine how to distribute shares for which preemptive rights
have not been exercised and fractional shares.

Under the Securities and Exchange Act, employee stock ownership
associations of the companies that are listed or will be listed on the Korea
Stock Exchange generally have a preemptive right to subscribe for up to 20% of
the shares publicly offered. Although we are not a company whose shares are
listed on the Korea Stock Exchange, we have by our Articles of Incorporation
opted to grant a right of preemption to our employee stock ownership
association on the same terms as are applicable to companies listed on the
Korea Stock Exchange.

General Meeting of Shareholders

We hold the annual general meeting of shareholders within three months
after the end of each fiscal year. Subject to a board resolution or court
approval, we may hold an extraordinary general meeting of shareholders:



| |  |  | as necessary;                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | at the request of holders of an aggregate of 3% or more of our
outstanding shares;                                       
|
| |  |  | at the request of shareholders holding an aggregate of 1.5% or more of
our outstanding shares for at least six months; or
|
| |  |  | at the request of our audit committee.                                                                                   

We must give shareholders written notice setting out the date, place and
agenda of the meeting at least two weeks prior to the general meeting of
shareholders. However, for holders of less than 1% of the total number of
issued and outstanding voting shares, we may give notice by placing a notice in
The Korean Daily at least two weeks in advance of the meeting. Shareholders
not on the shareholders register as of the record date are not entitled to
receive notice of the general meeting of shareholders or attend or vote at the
meeting.

Our shareholders meetings are held in Seoul, Korea.

Voting Rights

Holders of our shares are entitled to one vote for each share. However,
shares held by us (i.e., treasury shares) or by any corporate entity in which
we have, directly or indirectly, greater than a 10% interest, do not exercise
voting rights. The Commercial Code permits cumulative voting pursuant to which
each share entitles the holder thereof to multiple voting rights equal to the
number of directors to be elected at such time. A holder of shares may
exercise all voting rights with respect to his or her shares cumulatively to
elect one director, unless the Articles of Incorporation provide otherwise.
However, our Articles of Incorporation do not provide for cumulative voting.

Under our Articles of Incorporation, the attendance of at least one-third
of the outstanding shares is required, whether in person or by proxy, in order
to constitute a quorum.

Our shareholders may adopt resolutions by an affirmative vote of the
voting shares present or represented at the meeting, where the affirmative
votes also represent at least one-fourth of our total voting shares then issued
and outstanding. However, under the Commercial Code and our Articles of

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Incorporation, the following matters require approval by the holders of at
least two-thirds of the voting shares present or represented at a meeting,
where the affirmative votes also represent at least one-third of our total
voting shares then issued and outstanding:



| |  |  | amending our articles of incorporation;                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | removing a director;                                                                                               
|
| |  |  | effecting a capital reduction;                                                                                     
|
| |  |  | effecting any dissolution, merger or consolidation with respect to our
company;                                    
|
| |  |  | transferring all or any significant part of our business;                                                          
|
| |  |  | the acquisition of all of the business of any other company;                                                       
|
| |  |  | the acquisition of a part of the business of any other company, which
significantly affects our companys business;
|
| |  |  | issuing new shares at a price below par value; or                                                                  
|
| |  |  | any other matters for which a resolution is required under relevant laws
and regulations.                          

Shareholders may exercise their voting rights by proxy. Under our
Articles of Incorporation, the person exercising the proxy does not have to be
a shareholder. A person with a proxy must present a document evidencing its
power of attorney in order to exercise such voting rights.

Holders of ADRs exercise their voting rights through the ADR depositary.
Subject to the provisions of the deposit agreement, ADR holders are entitled to
instruct the depositary as to how to vote the shares underlying their ADSs.

Rights of Dissenting Shareholders

In some limited circumstances, including the transfer of all or any
significant part of our business and our merger or consolidation with another
company, dissenting shareholders have the right to require us to purchase their
shares. To exercise this right, shareholders must submit to us a written
notice of their intention to dissent before the applicable general meeting of
shareholders. Within 20 days after the relevant resolution is passed, the
dissenting shareholders must request us in writing to purchase their shares.
We are obligated to purchase the shares of dissenting shareholders within two
months after the expiration of the 20-day period. The purchase price for the
shares is required to be determined through negotiations between the dissenting
shareholders and us. If an agreement on the purchase price for the shares is
not made within 30 days from the date of our receipt of the dissenting
shareholders request, we or such dissenting shareholder may request a court in
Korea to determine the purchase price. Holders of ADSs will not be able to
exercise dissenters rights unless they withdraw the underlying common shares
and become our direct shareholders.

Register of Shareholders and Record Dates

Our transfer agent maintains the register of our shareholders at its
office in Seoul, Korea. It registers transfers of shares on the register of
shareholders on presentation of the share certificates.

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The record date for annual dividends is December 31 of each year. For the
purpose of determining shareholders entitled to annual dividends, the register
of shareholders may be closed for the period from the day after the record date
to the next annual general meeting of shareholders. Further, for the purpose
of determining the shareholders entitled to some other rights pertaining to the
shares, we may, on at least two weeks public notice, set a record date and/or
close the register of shareholders for not more than three months. The trading
of shares and the delivery of share certificates may continue while the
register of shareholders is closed.

Annual Report

At least one week before the annual general meeting of shareholders, we
must make our annual report and audited non-consolidated financial statements
available for inspection at our principal office and at all of our branch
offices. In addition, copies of annual reports, the audited consolidated
financial statements and any resolutions adopted at the general meeting of
shareholders will be available to our shareholders.

Under the Securities and Exchange Act, we must file with the Financial
Supervisory Commission and Korea Securities Dealers Association (1) an annual
report within 90 days after the end of our fiscal year, (2) a half year report
within 45 days after the end of the first six months of our fiscal year and (3)
quarterly reports within 45 days after the end of the third month and the ninth
month of our fiscal year. Copies of these reports are or will be available for
public inspection at the FSC and the KSDA.

Transfer of Shares

Under the Commercial Code, the transfer of shares is effected by delivery
of share certificates. However, to assert shareholders rights against us, the
transferee must have his name and address registered on our register of
shareholders. For this purpose, a shareholder is required to file his name,
address and seal with our transfer agent. A non-Korean shareholder may file a
specimen signature in place of a seal, unless he is a citizen of a country with
a sealing system similar to that of Korea. In addition, a non-resident
shareholder must appoint an agent authorized to receive notices on his behalf
in Korea and file a mailing address in Korea. The above requirement does not
apply to the holders of ADSs.

Under current regulations, Korean securities companies and banks,
including licensed branches of non-Korean securities companies and banks,
investment management companies, an entity licensed to be engaged in futures
transaction business under the Korean Futures Transaction Law, internationally
recognized foreign custodians and the Korea Securities Depository may act as
agents and provide related services for foreign shareholders. Certain foreign
exchange controls and securities regulations apply to the transfer of shares by
non-residents or non-Koreans.

Our transfer agent is Korea Securities Depository, located at 34-6,
Yoido-dong, Youngdeungpo-ku, Seoul, Korea.

Acquisition of Shares by Hanaro Telecom

We may not acquire our own shares except in limited circumstances, such as
reduction in capital and acquisition of our own shares for the purpose of
granting stock purchase options to our officers and employees. Under the
Commercial Code and the Korean Securities and Exchange Act, except in the case
of a reduction of capital (in which case we must retire the shares
immediately), we must resell any shares acquired by us to a third party within
a reasonable time. Notwithstanding the foregoing restrictions, under the
Securities and Exchange Act, we may acquire our own shares through purchases on
the KOSDAQ

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market or through a tender offer. The aggregate purchase price for the shares
may not exceed the total amount available for distribution of dividends at the
end of the preceding fiscal year less the amounts of dividends and legal
reserves required to be set aside for that fiscal year, subject to certain
procedural requirements.

Corporate entities in which we own a 50% or greater equity interest may
not acquire our shares.

Liquidation Rights

In the event of our liquidation, after payment of all debts, liquidation
expenses and taxes, our remaining assets will be distributed among shareholders
in proportion to their shareholdings.

Inspection of Books and Records

Under the Commercial Code, any individual shareholder or shareholders
having at least 3% of all outstanding shares (irrespective of voting or
non-voting shares) of a Korean corporation may inspect the books and records of
the corporation. Under the Securities and Exchange Act, any individual
shareholder or shareholders holding an aggregate of 0.1% or more of all
outstanding shares (irrespective of voting or non-voting shares) of a Korean
corporation for at least six months may inspect the books and records of the
corporation.

Effect of Korean Law

For a description of the effect of relevant Korean laws applicable to
Hanaro Telecom, see Item 4 Information on the CompanyBusiness
OverviewKorean Telecommunications Laws and Regulations, Item 10Additional
InformationExchange Controls and Item 10Additional InformationTaxationKorean Taxation.

10.C     MATERIAL CONTRACTS

Agreement on Provision and Usage of Fiber Optic Cable Network for High-speed
Internet Access Service between Hanaro Telecom and Powercomm

On March 23, 2001, we entered into an agreement with Powercomm under which
Powercomm agreed to provide its fiber optic cable network and related
facilities as we request for the purposes of our high-speed Internet service in
fifteen designated areas including Kangnam-gu, Seoul for five years from the
date of this agreement. The appendix to the agreement also sets out the
facilities already provided by Powercomm as of the date of this agreement. The
monthly fee for our use of Powercomms facilities is calculated as follows:
(basic fee + usage fee) x 30% + Won 200,000 for each optical network unit per
month, where the basic fee and usage fee are as set out in the agreement on
provision and usage of transmission network facilities dated July 10, 2000.
Powercomm agreed to exempt the basic fee until October 31, 2000.

Equipment Lease Agreement between Hanaro Telecom and LG Card Co., Ltd.
(formerly known as LG Capital)

On June 26, 2001, we entered into an agreement with LG Card Co., Ltd.,
pursuant to which LG Card agreed to lease to us certain machinery and equipment
supplied by LG Electronics in the amount of up to Won 50,000,000,000 for a term
of 48 months as and when we make such a request. Interest is calculated by
using the three-year corporate bond rate published by the Korea Securities
Dealers Association plus

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0.85%. As of May 31, 2002, LG Card has leased to us machinery and equipment
worth Won 22.1 billion.

Stock Purchase Agreement and Convertible Bond Purchase Agreement between Hanaro
Telecom and Cheil Jedang Co., Ltd.

On November 30, 2001, we entered into a stock purchase agreement with
Cheil Jedang Co., Ltd. to purchase from Cheil Jedang 6,843,841 shares of common
stock of Dreamline, each with a par value of Won 5,000, for a total purchase
price of Won 35,587,973,200, of which Won 10,587,973,200 was payable in cash
and the remainder of the purchase price of Won 25,000,000,000 was payable by
the issuance of convertible bonds on December 24, 2001, the closing date.

On December 24, 2001, we entered into a convertible bond purchase
agreement with Cheil Jedang pursuant to which we issued to Cheil Jedang, Won
25,000,000,000 convertible bonds with a coupon interest rate of 1.0% per annum
and a guaranteed interest rate on maturity of 2.0% per annum. The bonds may be
converted to our common shares at any time from December 24, 2002 until
December 23, 2004 at a conversion price of Won 5,000 per common share. Cheil
Jedang has a right to request, on giving not less than two weeks prior notice,
that we prepay the bonds on December 24, 2002 at 101.008% of their principal
amount. Unless previously prepaid or converted into common shares, the bonds
will be repaid at 103.084% of their principal amount on December 24, 2004.

Stock Purchase Agreement and Convertible Bond Purchase Agreement between Hanaro
Telecom and Jae-Hyun Lee

On November 30, 2001, we entered into a stock purchase agreement with
Jae-Hyun Lee to purchase from him 758,028 shares of common stock of Dreamline,
each with a par value of Won 5,000, for a total purchase price of Won
3,941,745,600, of which Won 1,141,745,600 was payable in cash and the remainder
of the purchase price of Won 2,800,000,000 was payable by the issuance of
convertible bonds on December 24, 2001, the closing date.

On December 24, 2001, we entered into a convertible bond purchase
agreement with Jae-Hyun Lee pursuant to which we issued to Mr. Lee, Won
2,800,000,000 convertible bonds with a coupon interest rate of 1.0% per annum
and a guaranteed interest rate on maturity of 2.0% per annum. The bonds may be
converted to our common shares at any time from December 24, 2002 until
December 23, 2004 at a conversion price of Won 5,000 per common share. Mr. Lee
has a right to request, on giving not less than two weeks prior notice, that
we prepay the bonds on December 24, 2002 at 101.008% of their principal amount.
Unless prepaid or converted into common shares, the bonds will be repaid at
103.084% of their principal amount on December 24, 2004.

Agreement for Outsourcing of Business Operation between Hanaro Telecom and
Dreamline

In January 2002, we entered into an agreement with Dreamline, our
subsidiary, to outsource to it our subscriber sales business. The scope of the
outsourced business includes management of our subscribers, attracting new
subscribers, receipt of subscriptions and handling other subscription related
operations. We must pay the following commissions to Dreamline: (i) a
subscriber commission of an amount set out in an attachment to this agreement
in the month following activation of a new subscriber line, (ii) for corporate
products, a management commission of 5% to 10% of the total charges for the
current month per product, (iii) for residential products, a sales promotion
commission of 1.5% to 4.5% of the charges for the net cumulative number of
lines activated, (iv) an optical termination station subscription commission in
the month following the activation of such station and (v) an automatic
transfer commission of
Won 1,000 for each subscriber who requests direct debits of his or her
bill. The initial term of this agreement is one year

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from the execution date, and is automatically renewable for one year unless a
party notifies otherwise at least one month prior to expiration.

Business Outsourcing Agreement between Hanaro Telecom and Dreamline

On April 1, 2002, we entered into an agreement with Dreamline, our
subsidiary, to outsource to it the business of managing our marketing channels
and regional sales offices and to provide installation and customer services to
our subscribers in our HFC service areas. The scope of the outsourced business
includes acquiring residential and corporate customers for local telephony and
broadband access services within our HFC service areas, providing installation
and customer services. The calculation of the commissions payable to Dreamline
is based on the type of service provided to the subscribers, the number of
subscriber lines and the amount of subscription fees generated. The initial
term of this agreement is one year, and is automatically renewable for one year
unless a party notifies otherwise at least one month prior to expiration.

Agreement for the Transfer of HanaNet Business between Hanaro Telecom and
HanaroDream

On March 22, 2002, we entered into an agreement with DreamX.net Co.
(subsequently renamed as HanaroDream Corp.) to transfer to it our HanaNet
portal business-related assets and 20 employees as of March 1, 2002, for a
purchase price of Won 289,312,748, which was subsequently determined by the
parties.

Internet Service Agreement between Hanaro Telecom and HanaroDream

On March 22, 2002, we entered into an agreement with DreamX.net Co.
(subsequently renamed as HanaroDream Corp.), under which HanaroDream is
required to provide basic on-line services, including personal homepages, free
email services and free contents page for our subscribers via the HanaroDream
portal site, provide customer support and on-line marketing support for us and
manage our www.hanaro.com site, for a total price of Won 1,625,000,000
(exclusive of value-added tax). We are required to pay HanaroDream specified
incentive payments per month based on the ranking of our hananet.net website
(or hanaFOS.com after it is launched in July 2002) in Korea, and the mail
receiving rate of our subscribers. The term of the agreement is three years,
however, the parties have agreed to renegotiate the terms and conditions of the
agreement on an annual basis.

Underwriting Agreement between Hanaro Telecom, Bridge Securities, Korea
Development Bank, Daewoo Securities, CJ Investment Trust & Securities and Mirae
Asset Securities

On April 24, 2002, we entered into an underwriting agreement with Bridge
Securities, Korea Development Bank, Daewoo Securities, CJ Investment Trust &
Securities and Mirae Asset Securities (collectively, the Underwriters)
pursuant to which the Underwriters agreed to underwrite our issue of
non-guaranteed floating rate notes in the aggregate amount of Won 100 billion
on May 2, 2002. Interest is payable at the rate of 1.95% over the 3-year
Korean Treasury Bond rate. The principal amount of the floating rate notes is
redeemable in lump sum on May 2, 2005.

Interest Rate Swap Agreement between Hanaro Telecom and the Industrial Bank of
Korea

On April 16, 2002, we entered into an agreement with the Industrial Bank
of Korea regarding an interest rate swap transaction, under which we agreed to
pay interest at a fixed rate of 7.95% payable quarterly in arrears on the
notional amount of Won 100 billion in exchange for interest payable by the
Industrial Bank of Korea at the 3-year Korean Treasury Bond rate on a quarterly
basis in arrears

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commencing on May 2, 2002 and terminating on May 2, 2005, subject to certain
adjustments.

Kun-Pledge Creation Agreement between Hanaro Telecom and the Industrial Bank of
Korea

On April 16, 2002, we entered into an agreement with the Industrial Bank
of Korea to create in favor of the Industrial Bank of Korea, a Kun-pledge over
the deposits in two accounts we have with the Bank to secure all our
obligations arising out of the Interest Rate Swap Agreement dated April 16,
2002. The maximum security amount is Won 9 billion.

Trust Deed and Special Terms of the Trust Deed between Hanaro Telecom and
Shinhan Bank as amended

On October 23, 2001, we entered into a Trust Deed and Special Terms of the
Trust Deed with Shinhan Bank as amended by agreements dated December 3, 2001
and April 9, 2002, to establish a trust with assets comprising of our future
trade receivables originating from service fees paid by our subscribers for the
period commencing on October 2001 until April 2004. Shinhan Bank issued to us
beneficiary certificates with a total face value of Won 341,000.0 million.

Asset Transfer Agreement between Hanaro Telecom and Hanafos Securitization
Speciality Co., Ltd

On October 23, 2001, we entered into an agreement with Hanafos
Securitization Speciality Co., Ltd., a special purpose vehicle established in
Korea, pursuant to which we transferred to Hanafos Securitization, the
beneficiary certificates issued by Shinhan Bank with a total face value of Won
341,000.0 million in consideration for Won 309,000.0 million.

Trust Deed between Hanaro Telecom and Kookmin Bank

On April 18, 2002, we entered into a Trust Deed with Kookmin Bank, to
establish a trust with assets comprising of certain of our future trade
receivables originating from service fees paid by our subscribers for the
period commencing on April 2002 until April 2004. Kookmin Bank issued to us
beneficiary certificates with a total face value of Won 226,800.0 million.

Asset Transfer Agreement between Hanaro Telecom and HanaDream

On April 18, 2002, we entered into an Asset Transfer Agreement with
HanaDream Co., Ltd., a special purpose vehicle established in Korea, pursuant
to which we agreed to transfer to HanaDream, the beneficiary certificates
issued by Kookmin Bank with a total face value of Won 226,800.0 million in
consideration for Won 207,000.0 million.

Agreement for Outsourcing of Office Building Management between Hanaro Telecom
and Hanaro Realty Development & Management

On March 25, 2003, we entered into an agreement with Hanaro Realty
Development & Management, our subsidiary, to outsource to it the business of
our building management. The scope of the outsourced business includes the
maintenance and preservation of our buildings, management of cleaning
sanitation, safety and security, utilities and prevention of disasters. The
initial term of this agreement commenced on January 1, 2003 and expires on
December 31, 2003, and is automatically renewable for one year unless a party
gives notice of intention to terminate the agreement at least 30 days prior to
expiration. We must pay a total fixed monthly service fee of Won
1,123,664,331.

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Agreement for Outsourcing of Telecommunication Center Management between Hanaro
Telecom and Hanaro Realty Development & Management

On March 25, 2003, we entered into an agreement with Hanaro Realty
Development & Management, our subsidiary, to outsource to it the business of
the management of our telecommunication center. The scope of the outsourced
business includes the inspection and repair management of various facilities
and equipment in the telecommunication center, such as rectifiers, inverters,
de-humidifiers and air-conditioners. The initial term of this agreement
commenced on January 1, 2003 and expires on December 31, 2003, and is
automatically renewable for one year unless a party gives notice of intention
to terminate the agreement at least 30 days prior to expiration. We must pay a
total fixed monthly service fee of Won 169,135,167.

Real Estate Collateral Trust Agreement between Hanaro Telecom and Korea Real
Estate Investment Trust Co., Ltd.

On March 20, 2003, we entered into a trust agreement with Korea Real
Estate Investment Trust Co., Ltd., pursuant to which we assigned to Korea Real
Estate Investment Trust, title to our information center at Ilsan-ku,
Koyang-shi, Kyunggi-do, valued at Won 57.5 billion as of the end of March 2003.
Korea Real Estate Investment Trust issued to us beneficiary securities
amounting to Won 65 billion, which we may provide to financial institutions as
collateral for loans from such institutions. The term of the trust is 2.5 years
from the date of the agreement.

Loan Transaction Agreement between Hanaro Telecom and Korea Exchange Bank

On November 14, 2002, we obtained from Korea Exchange Bank, or KEB, a
one-year loan facility of Won 30 billion, at an interest rate of 6.8% per
annum. As security for our obligations under the loans drawn down pursuant to
this loan agreement, we provided to KEB the securities we received pursuant to
the above Real Estate Collateral Trust Agreement.

10.D    EXCHANGE CONTROLS

General

The Foreign Exchange Transaction Law and the Presidential Decree and
regulations under such Act and Decree (collectively, the Foreign Exchange
Transaction Laws) regulate investment in Korean securities by non-residents
and issuance of securities outside Korea by Korean companies. Under the
Foreign Exchange Transaction Laws, non-residents may invest in Korean
securities only to the extent specifically allowed by such laws or otherwise
permitted by the MOFE. The FSC has also adopted, pursuant to its authority
under the Korean Securities and Exchange Act, regulations that restrict
investment by foreigners in Korean securities.

Under the Foreign Exchange Transaction Laws, if the government deems that
certain emergency circumstances, including, but not limited to, extreme
difficulty in stabilizing the balance of payments or substantial disturbance in
the Korean financial and capital markets, are likely to occur, it may impose
any necessary restrictions, such as requiring foreign investors to obtain prior
approval from the MOFE for the acquisition of Korean securities or for the
repatriation of dividends or sales proceeds arising from Korean securities or
from disposition of such securities.

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Reporting Requirements for Holders of Substantial Interests

Any person whose direct or beneficial ownership of shares (whether in the
form of shares or ADSs), certificates representing the right to subscribe for
shares and certain equity-related debt securities, such as convertible bonds
and bonds with warrants (collectively, the Equity Securities), together with
the Equity Securities beneficially owned by certain related persons or by any
person acting in concert with such person that account for 5% or more of the
total outstanding Equity Securities, is required to report the status of such
holding to the FSC and the Korea Securities Dealers Association within five
business days after reaching the 5% ownership interest level. In addition, any
change in the ownership interest subsequent to such report which equals or
exceeds 1% of the total outstanding Equity Securities is required to be
reported to the FSC and the Korea Securities Dealers Association within five
business days from the date of such change.

Violation of these reporting requirements may subject a person to criminal
sanctions, such as fines or imprisonment, and may result in a loss of voting
right with respect of the ownership of Equity Securities exceeding 5%.
Furthermore, the FSC may issue an order to dispose of such non-reported Equity
Securities.

Restrictions Applicable to ADSs

No Korean governmental approval is necessary for the sale and purchase of
ADSs in the secondary market outside Korea or for the withdrawal of shares
underlying ADSs and the delivery inside Korea of shares in connection with such
withdrawal, provided that a foreigner who intends to acquire such shares must
obtain an Investment Registration Card from the Financial Supervisory Service
as described below. The acquisition of such shares by a foreigner must be
reported immediately by the foreigner or his standing proxy in Korea to the
Governor of the Financial Supervisory Service (the Governor).

Persons who have acquired shares as a result of the withdrawal of shares
underlying the ADSs may exercise their preemptive rights for new shares,
participate in free distributions and receive dividends on shares without any
further governmental approval.

Restrictions Applicable to Shares

As a result of amendments to the Foreign Exchange Transaction Laws and FSC
regulations (together, the Investment Rules) adopted in connection with the
stock market opening from January 1992 and after that date, foreigners may
invest, with certain exceptions and subject to certain procedural requirements,
in all shares of Korean companies, whether listed on the Korea Stock Exchange
or registered on KOSDAQ, unless prohibited by specific laws. Foreign investors
may trade shares listed on the Korea Stock Exchange or registered with KOSDAQ
only through the Korea Stock Exchange or KOSDAQ, except in limited
circumstances, including:



| |  |  | odd-lot trading of shares;                                                                                                                                                                                   
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | acquisition of shares by exercise of warrant, conversion right under
equity-linked securities or withdrawal right under depositary receipts
issued outside of Korea by a Korean company (Converted Shares);
|
| |  |  | acquisition of shares by foreign companies as a result of merger;                                                                                                                                            
|
| |  |  | acquisition of shares as a result of inheritance, donation, bequest or
exercise of shareholders                                                                                                             

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| |   |  | rights, including preemptive rights or rights to participate in free
distributions and receive dividends;                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | over-the-counter transactions between foreigners of a class of shares for
which the ceiling on aggregate acquisition by foreigners, as explained
below, has been reached or exceeded;
|
| |  |  | acquisition or disposition of shares through a tender offer; and                                                                                                                     
|
| |  |  | acquisition or disposition of shares through the electronic
over-the-counter market brokerage companies.                                                                             

For over-the-counter transactions of shares between foreigners outside the
Korea Stock Exchange or KOSDAQ for shares with respect to which the limit on
aggregate foreign ownership has been reached or exceeded, a securities company
licensed in Korea must act as an intermediary. Odd-lot trading of shares
outside the Korea Stock Exchange or KOSDAQ must involve a licensed securities
company in Korea as the other party. Foreign investors are prohibited from
engaging in margin transactions by using securities borrowed from securities
companies in Korea with respect to shares that are subject to a foreign
ownership limit.

The Investment Rules require a foreign investor who wishes to invest in
shares on the Korea Stock Exchange or KOSDAQ (including Converted Shares) to
register its identity with the FSS prior to making any such investment;
however, such registration requirement does not apply to foreign investors who
acquire Converted Shares with the intention of selling such Converted Shares
within three months from the date of acquisition thereof. Upon registration,
the FSS will issue to the foreign investor an Investment Registration Card
which must be presented each time the foreign investor opens a brokerage
account with a securities company. Foreigners eligible to obtain an Investment
Registration Card include foreign nationals who are individuals residing abroad
for more than six months, foreign governments, foreign municipal authorities,
foreign public institutions, international financial institutions or similar
international organizations, corporations incorporated under foreign laws and
any person in any additional category designated by decree of the MOFE. All
Korean offices of a foreign corporation as a group are treated as a separate
foreigner from the offices of the corporation outside Korea. However, a
foreign corporation or depositary issuing depositary receipts may obtain one or
more Investment Registration Cards in its name in certain circumstances as
described in the relevant regulations.

Upon a foreign investors purchase of shares through the Korea Stock
Exchange or the KOSDAQ, no separate report by the investor is required because
the Investment Registration Card system is designed to control and oversee
foreign investment through a computer system. However, a foreign investors
acquisition or sale of shares outside the Korea Stock Exchange (as discussed
above) must be reported by the foreign investor or his standing proxy to the
Governor at the time of each such acquisition or sale; provided, however, that
a foreign investor must ensure that any acquisition or sale by it of shares
outside the Korea Stock Exchange or the KOSDAQ, in the case of trades in
connection with a tender offer, odd-lot trading of shares or trades of a class
of shares for which the aggregate foreign ownership limit has been reached or
exceeded, is reported to the Governor by the securities company engaged to
facilitate such transaction. A foreign investor must appoint one or more
standing proxies from among the Korea Securities Depository, foreign exchange
banks (including domestic branches of foreign banks), investment trust
companies, internationally recognized foreign custodians, the entity licensed
to be engaged in futures transaction business under Korean Futures Transaction
Law, and securities companies (including domestic branches of foreign
securities companies) which have obtained a license to act as a standing proxy
to exercise shareholders right, place an order to sell or purchase shares or
perform any matter related to the foregoing activities if the foreign investor
does not perform these activities himself. However, a foreign

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investor may be exempted from complying with these standing proxy rules with
the approval of the Governor in cases deemed inevitable by reason of conflict
between laws of Korea and the home country of such foreign investor.

Certificates evidencing shares of Korean companies must be kept in custody
with an eligible custodian in Korea. Only foreign exchange banks (including
domestic branches of foreign banks), securities companies (including domestic
branches of foreign securities companies), investment trust companies, entities
licensed to be engaged in futures transaction business under Korean Futures
Transaction Law, internationally recognized foreign custodians and the Korea
Securities Depository are eligible to act as a custodian of shares for a
nonresident or foreign investor. A foreign investor must ensure that his
custodian deposits such shares with the Korea Securities Depository. However,
a foreign investor may be exempted from complying with this deposit requirement
with the approval of the Governor in circumstances where such compliance is
made impracticable, including cases where such compliance would contravene the
laws of the home country of such foreign investor.

Under the Investment Rules, with certain exceptions, foreign investors may
acquire shares of a Korean company without being subject to any foreign
investment ceiling. As one such exception, designated public corporations are
subject to a 40% ceiling on the acquisition of shares by foreigners in the
aggregate. Furthermore, an investment by a foreign investor of not less than
10% of the outstanding shares of a Korean company is defined as a direct
foreign investment under the Foreign Investment Promotion Law, which is, in
general, subject to the report to, and acceptance by, the Ministry of Commerce,
Industry and Energy which delegates its authority to Korea Trade-Investment
Promotion Agency, or foreign exchange banks (including domestic branches of
foreign banks) under the relevant regulations. The acquisition of shares of a
Korean company by a foreign investor may also be subject to certain foreign
shareholding restrictions in the event that such restrictions are prescribed in
each specific law which regulates the business of such Korean company. For
example, we are currently subject to a foreign shareholding ceiling of 49%
pursuant to the Telecommunications Business Law. A foreigner who has acquired
shares in excess of such ceiling may not exercise his voting rights with
respect to the shares exceeding such limit, and the MIC may take corrective
action pursuant to the Telecommunications Business Law.

Under the Foreign Exchange Transaction Laws, a foreign investor who
intends to acquire shares must designate a foreign exchange bank at which he
must open a foreign currency account and a Won account exclusively for stock
investments. No approval is required for remittance into Korea and deposit of
foreign currency funds in the foreign currency account. Foreign currency funds
may be transferred from the foreign currency account at the time required to
place a deposit for, or settle the purchase price of, a stock purchase
transaction to a Won account opened at a securities company. Funds in the
foreign currency account may be remitted abroad without any governmental
approval.

Dividends on shares are paid in Won. No governmental approval is required
for foreign investors to receive dividends on, or the Won proceeds of the sale
of, any such shares to be paid, received and retained in Korea. Dividends paid
on, and the Won proceeds of the sale of, any such shares held by a nonresident
of Korea must be deposited either in a Won account with the investors
securities company or his Won account. Funds in the investors Won account may
be transferred to his foreign currency account or withdrawn for local living
expenses up to certain limitations. Funds in the Won account may also be used
for future investment in shares or for payment of the subscription price of new
shares obtained through the exercise of preemptive right.

Securities companies (including domestic branches of foreign securities
companies) in Korea are allowed to open foreign currency accounts and Won
accounts with foreign exchange banks exclusively for

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accommodating foreign investors stock investments in Korea. Through such
accounts, these securities companies may enter into foreign exchange
transactions on a limited basis, such as conversion of foreign currency funds
and Won funds, either as a counterparty to or on behalf of foreign investors,
without such investors having to open their own accounts with foreign exchange
banks.

10.E     TAXATION

Korean Taxation

The following is a summary of the principal Korean tax consequences to
owners of our shares that are non-resident individuals or non-Korean
corporations without a permanent establishment in Korea to which the relevant
income is attributable (non-resident holders). The statements regarding
Korean tax laws set forth below are based on the laws in force and as
interpreted by the Korean taxation authorities as of the date hereof. This
summary is not exhaustive of all possible tax consideration which may apply to
a particular investor, and prospective investors are advised to satisfy
themselves as to the overall tax consequences of the acquisition, ownership and
disposition of our shares, including specifically the tax consequences under
Korean law, the laws of the jurisdiction of which they are resident, and any
tax treaty between Korea and their country of residence, by consulting their
own tax advisors.

Dividends on the Shares or ADSs

We will deduct Korean withholding tax from dividends paid to you at a rate
of 27.5%. If you are a resident in a country that has entered into a tax
treaty with Korea, you may qualify for a reduced rate of Korean withholding
tax. For example, if you are a qualified resident of the United States for
purposes of the tax treaty between the United States and Korea and you are the
beneficial owner of a dividend, a reduced withholding tax rate of 16.5%,
including local surtax, generally will apply. If you are a beneficial owner of
ADSs, you will generally be entitled to benefits under the tax treaty between
the United States and Korea if you:



| |  |  | are an individual U.S. resident, a U.S. corporation or a partnership or
trust to the extent your income is subject to taxation in the United
States as the income of a U.S. resident;    
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | are not also a resident of Korea for purposes of the tax treaty between
the United States and Korea;                                                                                     
|
| |  |  | are not subject to any anti-treaty shopping article that applies in
limited circumstances; and                                                                                           
|
| |  |  | do not hold ADSs in connection with the conduct of business in Korea
through a permanent establishment or the performance of independent
personal services in Korea through a fixed base.

In order to obtain the benefits of a reduced withholding tax rate under a
tax treaty, you must submit to us, prior to the dividend payment date, such
evidence of tax residence as may be required by the Korean tax authorities.
Evidence of tax residence may be submitted to us through the Korea Securities
Depository. Excess taxes withheld generally are not recoverable even if you
subsequently produce evidence that you were entitled to have tax withheld at a
lower rate.

If we distribute to you free shares representing a transfer of certain
capital reserves or asset revaluation reserves into paid-in capital, that
distribution may be subject to Korean tax.

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Taxation of Capital Gains

You are exempt from Korean taxation if you have owned, together with
certain related parties, less than 25% of our total issued and outstanding
shares at any time during the year of sale and the five calendar years before
the year of sale, provided that you have no permanent establishment in Korea
(whether or not such capital gains are attributable to the permanent
establishment). If you are a resident of the United States for purposes of the
tax treaty between the United States and Korea, you will be exempt from Korean
taxation on the capital gains realized by the disposition of ADSs. Further,
the Korean taxation authorities have issued a tax ruling confirming that
capital gains earned by a non-Korean holder (whether or not it has a permanent
establishment in Korea) from the transfer of ADSs outside of Korea are exempt
from Korean taxation by virtue of the Tax Exemption Limitation Law.

If you are subject to tax on capital gains with respect to the sale of
ADSs, or of shares which you acquired as a result of a withdrawal, your gain
will be calculated based on your cost of acquiring the ADSs representing such
shares, although there are no specific Korean tax provisions or rulings on this
issue. In the absence of the application of a tax treaty which exempts or
reduces the rate of tax on capital gains, the amount of Korean tax imposed on
your capital gains will be the lesser of 11% of the gross realization proceeds
and, subject to the production of satisfactory evidence of the acquisition and
transfer costs of the ADSs, 27.5% of the net capital gains. The gain is
calculated as the gross realization proceeds less the acquisition cost and
transfer expenses.

If you sell your shares or ADSs, the purchaser or, in the case of the sale
of shares on the Korea Stock Exchange or through a licensed securities company
in Korea, the licensed securities company is required to withhold Korean tax
from the sales price in an amount equal to 11% of the gross realization
proceeds and to make payment thereof to the Korean tax authority, unless you
establish your entitlement to an exemption or lower rate of taxation under an
applicable tax treaty or produce satisfactory evidence of its acquisition and
transfer costs for the ADSs. In order to obtain the benefit of an exemption or
reduced rate of tax pursuant to a tax treaty, you must submit to the purchaser
or the securities company (or through the Korea Securities Depository), as the
case may be, prior to or at the time of payment, such evidence of your tax
residence as the Korean tax authorities may require in support of its claim for
treaty protection. Excess taxes withheld are generally not recoverable even if
you subsequently produce evidence that you were entitled to have taxes withheld
at a lower rate.

Because the Korean taxation authorities have issued a tax ruling that the
trading of the ADSs on the Nasdaq National Market will be regarded as the
transfer of the ADSs outside Korea under the Tax Exemption Limitation Law, it
is likely that a non-Korean seller of the ADSs on the Nasdaq National Market
will not be required to make any withholdings as described.

Inheritance Tax and Gift Tax

If you die while holding an ADS or transfer an ADS as a gift, it is
unclear whether, for Korean inheritance and gift tax purposes, you will be
treated as the owner of the shares underlying the ADSs. If you are treated as
the owner of the shares, the heir or the donee (or you, if the donee fails to
pay) will be subject to Korean inheritance or gift tax presently at the rate of
10% to 50%, provided that the value of such ADSs or shares is greater than a
specified amount.

Securities Transaction Tax

You will not pay a securities transaction tax on your transfer of ADSs.
If you transfer shares, you will be subject to a securities transaction tax at
the rate of 0.15% and an agriculture and fishery special tax at

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the rate of 0.15% of the sale price of the share when traded on the Korea Stock
Exchange. If you transfer shares through KOSDAQ, you will be subject to a
securities transaction tax at the rate of 0.3% of the sales price of the
shares. If your transfer of shares is not made on the Korea Stock Exchange or
KOSDAQ, subject to certain exceptions, you will be subject to a securities
transaction tax at the rate of 0.5% and will not be subject to an agriculture
and fishery special tax.

U.S. Federal Income Tax Considerations

The following discussion describes the material U.S. federal income tax
considerations that may be relevant to a prospective purchaser of our common
shares or ADSs that is a U.S. Holder (as defined below) with respect to the
receipt of distributions on, and the disposition of, common shares or ADSs.
This discussion is based on the Internal Revenue Code of 1986, as amended (the
Code), existing and proposed Treasury regulations, revenue rulings,
administrative interpretations and judicial decisions (all as of the date
hereof and all of which are subject to change, possibly with retroactive
effect, and different interpretations). Except as specifically set forth
herein, this discussion deals only with common shares and ADSs held by a U.S.
Holder as capital assets within the meaning of Section 1221 of the Code. This
discussion pertains only to U.S. Holders that are entitled to the benefits of
the income tax treaty between the United States and Korea and does not address
all of the tax consequences that may be relevant to prospective purchasers of
common shares or ADSs in light of their particular circumstances or to persons
subject to special tax rules, such as insurance companies, banks, financial
institutions, dealers in securities or foreign currencies, tax-exempt
investors, persons holding common shares or ADSs as a position in a straddle,
as a part of a short-sale, or as part of a hedging, conversion or other
integrated transaction, persons owning, directly, indirectly or constructively,
10% or more of the voting stock of Hanaro Telecom or persons whose functional
currency (as defined in Section 985 of the Code) is not the U.S. dollar.
Prospective purchasers of common shares or ADSs should consult with their own
tax advisors regarding the application of the U.S. federal income tax laws to
their particular situations as well as to any additional tax consequences of
purchasing, holding or disposing of common shares or ADSs, including the
applicability and effect of the tax laws of any state, local or foreign
jurisdiction.

As used in this section, the term U.S. Holder means a beneficial owner
of a common share or ADS who or that is for U.S. federal income tax purposes
(i) a citizen or individual resident of the United States, (ii) a corporation
or other entity treated as a corporation for U.S. federal income tax purposes
created or organized in or under the laws of the United States or of any state
or political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
trust if (A) a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (B) the trust has a valid
election in effect under applicable U.S. Treasury regulations to be treated as
a U.S. person.

In general, for U.S. federal income tax purposes, U.S. Holders of ADRs
evidencing ADSs will be treated as the owners of the common shares represented
by the ADSs.

Cash Distributions

Except as otherwise noted in the passive foreign investment company, or
PFIC, discussion below, to the extent that a distribution on common shares or
ADSs is paid to a U.S. Holder out of our current or accumulated earnings and
profits (as determined for U.S. federal income tax purposes), such distribution
will be includible in the U.S. Holders gross income as foreign source dividend
income in an amount equal to the U.S. dollar value of such distribution
(without reduction for any applicable foreign withholding tax). A corporate
U.S. Holder will not be entitled to a dividends received deduction with respect
to distributions on common shares or ADSs by Hanaro Telecom.

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Therefore, in the event that any Korean tax is withheld from a
distribution on common shares or ADSs, a U.S. Holder generally will be required
to report gross income in an amount greater than the cash received. However,
subject to certain conditions and limitations (including certain minimum
holding period requirements), the U.S. dollar value of the Korean income taxes,
if any, withheld from a distribution to a U.S. Holder on the common shares or
ADSs may be claimed as a credit against the U.S. Holders U.S. federal income
tax liability. Alternatively, a U.S. Holder may claim a deduction for such
amount of Korean income taxes withheld in a taxable year, but only if such U.S.
Holder does not elect to claim a foreign tax credit in respect of any foreign
taxes paid by it in the taxable year. Dividends on common shares or ADSs
generally will constitute passive income or, in the case of certain U.S.
Holders, financial services income for U.S. foreign tax credit purposes.
Special rules apply to certain individuals whose foreign source income during
the taxable year consists entirely of qualified passive income and whose
creditable foreign taxes paid or accrued during the taxable year do not exceed
$300 ($600 in the case of a joint return).

To the extent that the amount of any distribution on the common shares or
ADSs exceeds the current and accumulated earnings and profits of Hanaro Telecom
(as determined for U.S. federal income tax purposes), a U.S. Holders pro rata
share of such excess amount would be treated first as a nontaxable return of
capital that would be applied against and would reduce the U.S. Holders tax
basis in its common shares or ADSs (but not below zero), and then as capital
gain. Distributions in excess of our current and accumulated earnings and
profits (as determined for U.S. federal income tax purposes) generally will not
give rise to foreign source income and a U.S. Holder may be unable to claim a
foreign tax credit in respect of any foreign withholding tax imposed on such
distributions unless (subject to applicable limitations) the U.S. Holder has
other foreign source income in the appropriate category for foreign tax credit
purposes.

The rules relating to foreign tax credits are extremely complex and the
availability of a foreign tax credit depends on numerous factors. Prospective
purchasers of common shares or ADSs should consult their own tax advisors
concerning the application of the U.S. foreign tax credit rules to their
particular situations.

The U.S. dollar value of any distribution to a U.S. Holder on common
shares or ADSs that is paid in a foreign currency will be calculated by
reference to the exchange rate in effect at the time the distribution is
received by the U.S. Holder (or a depositary nominee, custodian or other agent
of the U.S. Holder). A U.S. Holder generally should not recognize any foreign
currency gain or loss if such foreign currency is converted into U.S. dollars
on the day received. If a U.S. Holder does not convert such foreign currency
into U.S. dollars on the date of receipt, however, such Holder may recognize
foreign currency gain or loss (which generally will be taxable as United States
source ordinary income or loss) upon a subsequent sale or other disposition of
the foreign currency.

Sale of Common Shares and ADSs

A U.S. Holder generally will recognize gain or loss upon a sale or other
disposition of common shares or ADSs in an amount equal to the difference
between the U.S. dollar value of the amount realized on the sale or other
disposition and the U.S. Holders adjusted tax basis in the common shares or
ADSs. Subject to the PFIC discussion below, such gain or loss generally will
be capital gain or loss and, in the case of certain non-corporate U.S. Holders,
may be subject to U.S. federal income tax at a preferential rate where the U.S.
Holders holding period exceeds one year. Any gain or loss recognized by a
U.S. Holder on a sale or other disposition of common shares or ADSs generally
will be treated as United States source gain or loss for foreign tax credit
purposes. A U.S. Holders ability to deduct capital losses in respect of
common shares and ADSs is subject to limitations.

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Securities Tax

Holders should note that any Korean securities transaction tax will not be
treated as a creditable foreign tax for U.S. federal income tax purposes,
although U.S. Holders may be entitled to deduct such taxes, subject to
applicable limitations under the Code.

Passive Foreign Investment Company

In general, a foreign corporation is a PFIC for any taxable year in which
(i) 75% or more of its gross income consists of passive income (such as
dividends, interest, rents and royalties) or (ii) 50% or more of the average
quarterly value of its assets consists of assets that produce, or are held for
the production of, passive income. Based on the composition of our income and
valuation of our assets, we were not a PFIC for the year 2002, and we do not
expect to be a PFIC in the future although we can provide no assurance in that
regard.

Subject to the discussion of the mark-to-market election below, if we were
a PFIC for any taxable year, a U.S. Holder that held common shares or ADSs in
that taxable year generally would be subject to special rules with respect to
certain excess distributions (as defined in Section 1291 of the Code) made by
us on the common shares or ADSs and with respect to gains from dispositions of
common shares or ADSs. In general, such a U.S. Holder would be required to
allocate such distributions or gains (as the case may be) ratably over its
holding period for such common shares or ADSs. That portion of any such
distributions or gains allocated to a prior taxable year (other than a year
prior to the first year in which we were a PFIC) would be taxed at the highest
U.S. federal income tax rate in effect for such year with respect to ordinary
income and the U.S. Holder would be subject to an interest charge on the
resulting tax liability (determined as if such tax liability had been due with
respect to the particular taxable year). That portion, if any, of such
distributions or gains allocated to the taxable year in which the U.S. Holder
received the excess distribution or realized the gain will be taxed as ordinary
income.

In certain circumstances, a U.S. Holder, in lieu of being subject to the
PFIC rules discussed above, may make an election to include gain on the stock
of a PFIC as ordinary income under a mark-to-market method provided that such
stock is regularly traded on a qualified exchange. Under current law, the
mark-to-market election may be available to a U.S. Holder since the ADSs are
listed on the Nasdaq National Market, which constitutes a qualified exchange as
designated in the Code. There can be no assurances, however, that the ADSs
have been or will continue to be regularly traded on such exchange. The
common shares are listed on the Korea Securities Dealers Automated Quotation
System Market, which must meet certain trading, listing, financial disclosure
and other requirements to be treated as a qualified exchange under applicable
Treasury regulations for purposes of the mark-to-market election. If such
exchange is treated as a qualified exchange, no assurance can be given that the
shares have been or will continue to be regularly traded for purposes of the
mark-to-market election.

If a U.S. Holder makes an effective mark-to-market election, the U.S.
Holder will recognize as ordinary income or loss each year an amount equal to
the difference as of the close of the taxable year between the fair market
value of the PFIC shares or ADSs and the U.S. Holders adjusted tax basis in
such shares or ADSs. Losses would be allowed only to the extent of net
mark-to-market gain previously included by the U.S. Holder under the election
for prior taxable years.

A U.S. Holders adjusted tax basis in PFIC shares or ADSs will be
increased by the amount of any income inclusion and decreased by the amount of
any deductions under the mark-to-market rules. If a U.S. Holder makes a
mark-to-market election, it will be effective for the taxable year for which
the election is

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made and all subsequent taxable years unless the shares or ADSs are no longer
regularly traded on a national securities exchange or the Internal Revenue
Service consents to the revocation of the election. A mark-to-market election
is subject to complex and specific rules and requirements, and U.S. Holders are
urged to consult their tax advisors about the availability of the
mark-to-market election and whether making the election would be advisable in
their particular circumstances.

If Hanaro Telecom is a PFIC in any year, a U.S. Holder would be required
to make an annual return on Internal Revenue Service Form 8621 regarding
distributions received with respect to the shares or ADSs and any gain realized
from the disposition of the common shares or ADSs.

If we determine at the end of any taxable year that we are a PFIC for such
taxable year, we will notify the registered owners of the common shares and
ADSs. We urge you to consult your own tax advisors regarding the consequences
of an investment in a PFIC.

Backup Withholding

Backup withholding and information reporting requirements may apply to
payments made within the United States of dividends on common shares or ADSs
and to certain payments of proceeds of a sale or redemption of a common share
or ADS paid to a U.S. Holder. Hanaro Telecom, our agent, a broker, the Trustee
or any paying agent, as the case may be, may be required to withhold tax from
any payment that is subject to backup withholding at a current rate of 30%
(subject to reduction in future years) of such payment if the U.S. Holder fails
to furnish the U.S. Holders taxpayer identification number, to certify that
such U.S. Holder is not subject to backup withholding, or to otherwise comply
with the applicable requirements of the backup withholding rules. Certain U.S.
Holders (including, among others, corporations) are not subject to the backup
withholding and information reporting requirements. Any amounts withheld under
the backup withholding rules from a payment to a U.S. Holder generally may be
claimed as a credit against such U.S. Holders U.S. federal income tax
liability, provided that the required information is furnished to the U.S.
Internal Revenue Service.

Estate and Gift Tax

As discussed in Korean TaxationInheritance Tax and Gift Tax, Korea may
impose an estate tax on a descendent who owns our common shares (and possibly
ADSs), even if the descendent is a non-resident. Subject to certain conditions
and limitations, the amount of any inheritance tax paid to Korea may be
eligible for credit against the amount of U.S. federal estate tax imposed on
the estate of a U.S. Holder. The Korean gift tax generally will not be treated
as a creditable foreign tax for U.S. tax purposes. Prospective purchasers
should consult their personal tax advisors regarding the consequences of the
imposition of the Korean inheritance or gift tax.

10.F     DIVIDENDS AND PAYING AGENTS

Not applicable.

10.G     STATEMENTS BY EXPERTS

Not applicable.

10.H     DOCUMENTS ON DISPLAY

Hanaro Telecom files annual reports on Form 20-F and reports on Form 6-K
with the SEC. You may

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read and copy this information at the SECs Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can also request copies of the
documents, upon payment of a duplicating fee, by writing to the Public
Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the Public Reference Room. The SEC
also maintains a website at http://www.sec.gov that contains reports and other
information regarding issuers that file electronically with the SEC.

You may request a copy of these filings, at no cost, by writing or
telephoning us at 4/F, Ilsan Information Center, 726 Janghang 2-dong, Ilsan-ku,
Koyang-shi, Kyunggi-do, Korea, Attention: Investor Relations Team, telephone
number: (822) 6266-2380.

10.I     SUBSIDIARY INFORMATION

Not applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes, foreign currency
fluctuations and changes in the estimated fair values of our investments.

We place our investments with high credit quality issuers. It is our
policy to limit the amount of our credit exposure to any one issuer. We are
adverse to principal loss and seek to preserve our invested funds by limiting
default risk, market risk and reinvestment risk. We mitigate default risk by
investing only in high credit quality securities that we believe to be low risk
and by positioning our portfolio to respond appropriately to a significant
reduction in the credit rating of any investment issuer or guarantor.

Interest Rate Risk

Our exposure to risk for changes in interest rates relates primarily to
our investments in short-term financial investments and floating rate note
(FRN). On April 16, 2002, we entered into a swap contract to hedge against
the risk of floating interest rates.

Investments in both fixed rate and floating rate interest earning
investments carry some interest rate risk. The fair value of fixed rate
securities may fall due to a rise in interest rates, while floating rate
securities may produce less income than expected if interest rates fall.
Partly as a result of this, our future interest income may fall short of
expectations due to changes in interest rates or we may suffer losses in
principal if we are forced to sell securities, which have fallen in estimated
fair value due to changes in interest rates.

Our cash and cash equivalents consist of cash on hand, checking account
balances, time deposits, very short-term money market funds, specified money
trust and other fixed interest instruments. We do not expect any material loss
with respect to our cash and cash equivalents as a result of interest rate
changes, and the estimated fair value of our cash and cash equivalents
approximates original cost.

Our short-term financial investments consist of time deposits, specified
money trust and repurchase agreement securities. As our short-term financial
investments are readily convertible to known amounts of cash and have short
maturities, we do not expect material loss with respect to our short-term
financial investments as a result of interest rate changes.

We pay floating interest on our FRN. The risk of exposure to variable
interest rate has been hedged by entering into a swap contract under which we
buy variable interest rate and pay fixed interest rate. We do not expect any
material loss with respect to our FRN as a result of interest rate changes.

Foreign Currency Risk

Most of our expenses and all of our revenues are incurred in Korean Won,
which is our functional currency. As of December 31, 2002, Won 147.5 billion,
representing 6.7% of our total debt, is denominated in U.S. dollars. Of this
amount, Won 118.6 billion represented our zero coupon bonds with warrants
issued on March 6, 2001, which were repaid in full on February 26, 2002, Won
20.6 billion and Won 8.3 billion represented the amounts outstanding under a
term loan agreement and an equipment lease agreement, respectively, with
Hewlett-Packard.

On February 29, 2000, we entered into a term loan agreement with
Hewlett-Packard, pursuant to

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which we borrowed U.S.$44.0 million at a fixed interest rate of 9.16%. As of
December 31, 2002, the outstanding principal amount was U.S.$17.3 million. The
loan agreement expires in February 2004. In conjunction with the loan
agreement, we also entered into a master lease agreement, pursuant to which we
committed to purchase from Hewlett-Packard up to U.S.$24 million worth of
Internet servers, network management and other equipment to be used at our IDC.
As of December 31, 2002, the outstanding lease payments were U.S.$7.0 million.

On February 26, 2002, we issued U.S.$100.0 million zero coupon bonds due
2007 with warrants. Unless previously redeemed or purchased and in each case
cancelled, the bonds will be redeemed at 146.9328% of their principal amount on
February 26, 2007. The bonds and warrants are listed on the Luxembourg Stock
Exchange.

We currently have no other significant foreign currency denominated
liabilities. Because all of our revenues are denominated in Won, any
significant changes in exchange rates between the Won and the U.S. dollar will
affect us due to the effect of such changes on the amount of funds required by
us to make interest and principal payments on our U.S. dollar denominated debt.
We do not currently have any hedge agreements.

Assuming the Won/U.S. dollar exchange rate was initially Won 1,186.30 to
one U.S. dollar, which was the market exchange rate as of December 31, 2002, if
the Won depreciates against the U.S. dollar by 10% and all other variables are
held constant from their levels at December 31, 2002, we estimate that our loss
before income taxes resulting from the loan from Hewlett-Packard will be
approximately Won 2.9 billion in 2002.

Assuming the Won/U.S. dollar exchange rate of Won 1,186.30 to one U.S.
dollar, which was the market exchange rate as of December 31, 2002, if the Won
depreciates against the U.S. dollar by 10% and all other variables are held
constant from their levels at December 31, 2002, we estimate that our loss
before income taxes resulting from our bonds issued on February 26, 2002, with
the swap contract for up to US$50 million in effect, will be approximately Won
5.9 billion in 2002. See Note 17 to our financial statements for more
information on the swap contract.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II




ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.




|         |  |                                                                             
|-------- |  | ----------------------------------------------------------------------------
|ITEM 14. |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

14.A to D      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

None.

14.E             USE OF PROCEEDS

Not applicable.




ITEM 15. CONTROLS AND PROCEDURES

Mr. In-Haeng Lee, our Representative Director and Senior Executive Vice
President (who currently performs functions similar to those of a chief
executive officer) and Mr. Young Wan Cho, our Vice President and Head of our
Financial Strategy Unit (who currently performs functions similar to those of a
chief financial officer), are responsible for establishing and maintaining
disclosure controls and procedures (as defined in the Exchange Act Rules 13a-14
and 15d-14). Within 90 days prior to the date of this report, our management
carried out an evaluation, under the supervision and with the participation of
Mr. Lee and Mr. Cho, of the effectiveness of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation,
they have concluded that our disclosure controls and procedures are effective
to ensure that material information required to be included in our periodic SEC
reports relating to us, is made known to them.

There have been no significant changes in internal controls, or in factors
that could significantly affect internal controls, subsequent to the date our
management completed such evaluation.




ITEM 16. [RESERVED]

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PART III




ITEM 17. FINANCIAL STATEMENTS

We have elected to provide the financial statements and related
information specified in Item 18 in lieu of 17.




ITEM 18. FINANCIAL STATEMENTS

See pages F-1 to F-42 following Glossary.




ITEM 19. EXHIBITS

Documents filed as exhibits to this annual report:

|        |  |                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                    
|1.1     |  | Articles of Incorporation of Hanaro Telecom as amended on March 29, 2002 (including
English translation).3                                                                                         
|       
|4.1     |  | CATV Access Network Lease Agreement dated May 10, 1999, between Hanaro Telecom and
KEPCO (including English translation). 1                                                                        
|       
|4.2     |  | Contract Assignment Agreement dated January 17, 2000, between Hanaro Telecom and KEPCO
(including English translation).1                                                                           
|       
|4.3     |  | Contract Assignment Agreement dated February 17, 2000, between Hanaro Telecom and
Powercomm (including English translation).1                                                                      
|       
|4.4     |  | Agreement on Provision and Usage of HFC Network dated May 22, 2000, between Hanaro
Telecom and Powercomm (including English translation).2                                                         
|       
|4.5     |  | Agreement on Provision and Usage of Transmission Network Facilities dated July 10,
2000, between Hanaro Telecom and Powercomm (including English translation).2                                    
|       
|4.6     |  | Agreement on Provision and Usage of Fiber Optic Cable Network for High-Speed Internet
Access Service dated March 23, 2001, between Hanaro Telecom and Powercomm (including
English translation).2  
|       
|4.7     |  | Loan Agreement dated February 29, 2000, between Hanaro Telecom and Hewlett-Packard
(including English translation).1                                                                               
|       
|4.8     |  | Master Lease Agreement dated February 29, 2000, between Hanaro Telecom and
Hewlett-Packard (including English translation).2                                                                       
|       
|4.9     |  | Equipment Lease Agreement dated May 29, 2000, between Hanaro Telecom and Samsung Card
Co., Ltd (including English translation).2                                                                   
|       
|4.10    |  | Equipment Lease Amendment Agreement dated July 3, 2000, between Hanaro Telecom and
Samsung Card Co., Ltd (including English summary). 3                                                            
|       
|4.11    |  | Equipment Lease Agreement dated June 26, 2001, between Hanaro Telecom and LG Card Co.,
Ltd (formerly known as LG Capital) (including English translation).3                                        
|       
|4.12    |  | Service Agreement dated January 4, 1999, between Hanaro Telecom and Hanaro Customer
Service (including English translation).2                                                                      
|       
|4.13    |  | KDBC-Hanaro Internet Venture Fund No.1 Partnership Agreement dated January 27, 2000,
between Hanaro Telecom, KDB Capital Co., Ltd and Hyundai Finance Corporation
(including English translation).2

88



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|        |  |                                                                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                 
|Number  |  | Description                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                 
|4.14    |  | Agreement for Outsourcing of Business Operation dated January 2002, between Hanaro
Telecom and Dreamline Corporation (including English translation).3                                                                          
|       
|4.15    |  | Business Outsourcing Agreement dated April 1, 2002, between Hanaro Telecom and
Dreamline Corporation (including English summary).3                                                                                              
|       
|4.16    |  | Agreement for the transfer of HanaNet Business dated March 22, 2002, between Hanaro
Telecom and DreamX.net Co. (including English translation).3                                                                                
|       
|4.17    |  | Internet Service Agreement dated March 22, 2002, between Hanaro Telecom and DreamX.net
Co. (including English summary).3                                                                                                        
|       
|4.18    |  | Underwriting Agreement dated April 24, 2002, between Hanaro Telecom, Bridge
Securities, Korea Development Bank, Daewoo Securities, CJ Investment
Trust &
Securities and Mirae Asset Securities (including English translation).3
|       
|4.19    |  | Interest Rate Swap Agreement dated April 16, 2002, between Hanaro Telecom and the
Industrial Bank of Korea.3                                                                                                                    
|       
|4.20    |  | Kun-Pledge Creation Agreement dated April 16, 2002, between Hanaro Telecom and the
Industrial Bank of Korea (including English translation).3                                                                                   
|       
|4.21    |  | Trust Deed dated October 23, 2001, between Hanaro Telecom and Shinhan Bank (including
English translation).3                                                                                                                    
|       
|4.22    |  | Special Terms of the Trust Deed dated October 23, 2001, between Hanaro Telecom and
Shinhan Bank (including English translation).3                                                                                               
|       
|4.23    |  | Amendment to the Special Terms of the Trust Deed dated December 3, 2001, between
Hanaro Telecom and Shinhan Bank (including English translation).3                                                                              
|       
|4.24    |  | Amendment to the Special Terms of the Trust Deed dated April 9, 2002, between Hanaro
Telecom and Shinhan Bank (including English translation).3                                                                                 
|       
|4.25    |  | Asset Transfer Agreement dated October 23, 2001, between Hanaro Telecom and Hanafos
Securitization Speciality Co., Ltd. (including English translation).3                                                                       
|       
|4.26    |  | Trust Deed dated April 18, 2002, between Hanaro Telecom and Kookmin Bank (including
English translation).3                                                                                                                      
|       
|4.27    |  | Asset Transfer Agreement dated April 18, 2002, between Hanaro Telecom and HanaDream
Co., Ltd. (including English translation).3                                                                                                 
|       
|4.28    |  | Agreement for Outsourcing of Office Building Management dated 2003 between Hanaro
Telecom and Hanaro Realty Development & Management (English translation).                                                                     
|       
|4.29    |  | Agreement for Outsourcing of Telecommunication Center Management dated 2003 between
Hanaro Telecom and Hanaro Realty Development & Management (English translation).                                                            
|       
|4.30    |  | Real Estate Collateral Trust Agreement dated March 20, 2003 between Hanaro Telecom and
Korea Real Estate Investment Trust Co., Ltd (English translation).                                                                       
|       
|4.31    |  | Loan Transaction Agreement dated November 14, 2002 between Hanaro Telecom and Korea
Exchange Bank (English translation).                                                                                                        
|       
|8.1     |  | List of Hanaro Telecoms significant subsidiaries.                                                                                                                                                                              
|       
|12(a).1 |  | Certification of Chief Executive Officer or Equivalent pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                
|       
|12(a).2 |  | Certification Chief Financial Officer or Equivalent pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                   
|       
|12(a).3 |  | Network Service Provider License dated February 12, 2000 (including English
translation).2                                                                                                                                      
|       
|12(a).4 |  | Network Service Provider License dated August 17, 2000 (including English
translation).2                                                                                                                                        
|       
|12(a).5 |  | Specific Service Provider License dated June 19, 1998 (including English translation).2                                                                                                                                         
|       
|12(a).6 |  | Network Operator License Letter dated June 28, 1999 (including English translation).2                                                                                                                                           
|       
|12(a).7 |  | Public Notice regarding grant of International Telecommunications Certificate from
U.S. Federal Communications Commission dated July 6, 2000.2                                                                                  
|       
|12(a).8 |  | Letter from Hanaro Telecom to the U.S. Securities and Exchange Commission.3                                                                                                                                                     

89



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|        |  |                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                         
|Number  |  | Description                                                                                                             
|        |  |                                                                                                                         
|12(a).9 |  | License for Facilities Based Telecommunications Business (Network Service) dated
January 28, 2003 (English translation).



---

|1 |  | Previously filed with the registration statement relating to our
initial public offering (No.333-11614) dated March 28, 2000.
|- |  | -----------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Previously filed with the annual report on Form 20-F for the fiscal
year ended December 31, 2000.                            
| 
|3 |  | Previously filed with the annual report on Form 20-F for the fiscal
year ended December 31, 2001.                            

90



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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all the requirements for
filing on Form 20-F and has duly caused and authorized the undersigned to
sign this annual report on its behalf.

| |  |  |                      |                                                
| |  |  | -------------------- | -----------------------------------------------
| |  |  | HANARO TELECOM, INC.
| |  |  |                      |                                                
| |  |  | By:                  | /s/ Kyu June Hwang                             
| |  |  |                      |                                                
| |  |  |                      | Name: Kyu June Hwang
Title:   Managing Director

Date: June 5, 2003

91



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CERTIFICATION OF CHIEF EXECUTIVE OFFICER OR EQUIVALENT

I, In-Haeng Lee, certify that:



| | 1. |  | I have reviewed this annual report on Form 20-F of Hanaro Telecom,
Inc. (the Company).                                                                                                                                                                                                                                
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report.
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in
this annual report.                      
|
| | 4. |  | The Companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
have:                                                                                                        

| |  |     |  |                                                                                                                                                                                                                                                                                          
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| |  |     |  |                                                                                                                                                                                                                                                                                          
| |  | (b) |  | evaluated the effectiveness of the Companys disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
| |  |     |  |                                                                                                                                                                                                                                                                                          
| |  | (c) |  | presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.                                                                                                                     



| | 5. |  | The Companys other certifying officers and I have disclosed, based
on our most recent evaluation, to the Companys auditors and the audit
committee of the Companys board of directors (and persons performing
the equivalent function):
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |     |  |                                                                                                                                                                                                                                                                                         
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the Companys
ability to record, process, summarize and report financial data
and have identified for the Companys auditors any material
weaknesses in internal controls; and
| |  |     |  |                                                                                                                                                                                                                                                                                         
| |  | (b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Companys internal controls.                                                                                                                                         



| | 6. |  | The Companys other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or any other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           
|-----------------------------------------------------------
|/s/ In-Haeng
Lee         In-Haeng Lee                      
|Representative Director/Senior Executive Vice President    
|(performing similar functions of a chief executive officer)
|June 5, 2003                                               

92



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CERTIFICATION OF CHIEF FINANCIAL OFFICER OR EQUIVALENT

I, Young Wan Cho, certify that:



| | 1. |  | I have reviewed this annual report on Form 20-F of Hanaro Telecom,
Inc. (the Company).                                                                                                                                                                                                                                
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report.
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in
this annual report.                      
|
| | 4. |  | The Companys other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
have:                                                                                                        

|    |  |                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
|   
|(b) |  | evaluated the effectiveness of the Companys disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|   
|(c) |  | presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.                                                                                                                     



| | 5. |  | The Companys other certifying officers and I have disclosed, based
on our most recent evaluation, to the Companys auditors and the audit
committee of the Companys board of directors (and persons performing
the equivalent function):
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    |  |                                                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the Companys
ability to record, process, summarize and report financial data
and have identified for the Companys auditors any material
weaknesses in internal controls; and

|    |  |                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Companys internal controls.



| | 6. |  | The Companys other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or any other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           
|-----------------------------------------------------------
|/s/ Young Wan
Cho             Young Wan Cho                
|Vice President/Head of the Financial Strategy Unit         
|(performing similar functions of a chief financial officer)
|June 5, 2003                                               

93



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GLOSSARY

Set forth below are definitions of some of the terms used in this annual
report.

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ADSL           |  | Asymmetric Digital Subscriber Line. ADSL is a technology that allows more data to be sent over existing
copper telephone lines. ADSL supports data rates of 1.5 to 9.0 Mbps when receiving data (known as the
downstream rate), and 16 to 640 Kbps when sending data (known as the upstream rate). ADSL requires a
special ADSL modem.                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ATM            |  | Asynchronous Transfer Mode. ATM is a high bandwidth, low-delay, high-speed transmission technology. ATM
is a communication standard that provides for information transfer in the form of fixed-length cells of
53 bytes each. The ATM format can be used to deliver voice, video and data traffic at varying rates.                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|backbone       |  | A centralized high-speed network that interconnects smaller, independent networks.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|bandwidth      |  | The number of bits of information which can move over a communication medium in a given amount of time.
Typically measured in Kbps and Mbps.                                                                                                                                                                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|bps            |  | Bits per second. A measure of digital information transmission rates. A rate of one bps can transmit
one bit in a second.                                                                                                                                                                                                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|cable modem    |  | A modem designed to operate over cable television lines. Because cable lines used by cable television
generally provides much greater bandwidth than telephone lines, a cable modem can be used to achieve
faster access to the world wide web.                                                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|dedicated line |  | Telecommunication lines dedicated or reserved for use by particular subscribers along predetermined
routes.                                                                                                                                                                                                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|dial-up access |  | Refers to connecting a device to a network via a modem and public telephone network. Dial-up access is
really just like a phone connection, except the parties at the two ends are computer devices rather than
people.                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|DSLAM          |  | Digital Subscriber Line Access Multiplexer. DSLAM is a box that sits at the network end of a DSL line
which gathers together all the data to send over the backbone network.                                                                                                                                                                                                                                                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|fiber optics   |  | A technology that uses glass (or plastic) threads (fibers) to transmit data. A fiber optic line consists
of a bundle of glass threads, each of which is capable of transmitting messages modulated onto light
waves.                                                                                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Gbps           |  | Gigabits per second. A measure of digital information transmission rates. One Gbps equals 1,000 Mbps,
one million Kbps, or one billion bps.                                                                                                                                                                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|HFC            |  | Hybrid Fiber Coaxial. HFC cable is used in broadband telecommunication systems. HFC can transmit
between 500 MHz to 1,000 MHz of bandwidth in both directions.                                                                                                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|IDC            |  | Internet data center.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|IMT-2000       |  | International Mobile Telecommunications 2000. IMT-2000, or 3G, is an initiative of the International
Telecommunication Union to unify the diverse second-generation systems in the global wireless industry
that are currently largely incompatible by establishing certain global standards for third-generation
systems that will provide a common air interface capable of offering wireless multimedia service globally
at transmission speeds of up to 348 Kbps on the move and 2 Mbps when stationary or indoors.
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Internet       |  | A global network connecting millions of computers. More than 100 countries are linked into exchanges of
data, news and opinions.                                                                                                                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ISDN           |  | Integrated Services Digital Network. ISDN is an international communications standard for sending voice,
video and data over digital telephone lines.                                                                                                                                                                                                                                                                                                                                                                    

i



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##### Table of Contents



|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ISP                |  | Internet Service Provider. An ISP is a company that provides access to the Internet. For a monthly fee,
the service provider provides a software package, user name, password and access phone number. Equipped
with a modem, the user can then log on to the Internet and browse the world wide web.                                                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|internet telephony |  | A category of hardware and software that enables people to use the Internet as the transmission medium
for telephone calls.                                                                                                                                                                                                                                                                                        
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|Kbps               |  | Kilobits per second. A measure of digital information transmission rates. One Kbps equals 1,000 bps.                                                                                                                                                                                                                                                                                                               
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|LAN                |  | Local Area Network. A LAN is a group of computers and associated devices that share a common
communications line and typically share the resources of a single processor or server within a small
geographic area (for example, within an office building). Usually, the server has applications and data
storage that are shared in common by multiple                                                            
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|computer users     |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|leased line        |  | A permanent telephone connection between two points set up by a network service provider. Typically,
leased lines are used by businesses to connect geographically distant offices. The fee for the
connection is usually a fixed monthly rate.                                                                                                                                                                    
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|LMDS               |  | Local Multi-point Distribution System. LMDS is a terrestrial wireless local-loop network that operates
using microwave transmission links to provide a wireless last-mile connection to the subscriber.                                                                                                                                                                                                            
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|Mbps               |  | Megabits per second. A measure of digital information transmission rates. One Mbps equals 1,000 Kbps or
one million bps.                                                                                                                                                                                                                                                                                           
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|MIC                |  | Ministry of Information and Communication of Korea.                                                                                                                                                                                                                                                                                                                                                                
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|NSP                |  | Network Service Provider.                                                                                                                                                                                                                                                                                                                                                                                          
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|remote terminal    |  | A system that multiplexes voice and data signals into synchronous data streams and transmits them as
optical signals.                                                                                                                                                                                                                                                                                              
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|router             |  | A device that forwards data packets between interconnected network segments.                                                                                                                                                                                                                                                                                                                                       
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|SDH                |  | Synchronous Digital Hierarchy. A set of standard fiber optic based serial standards planned for use with
ATM and other standards.                                                                                                                                                                                                                                                                                  
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|VDSL               |  | Very high bit rate Digital Subscriber Line. VDSL is a technology that allows final delivery of data over
existing copper telephone lines. VDSL supports data rates of up to 52 Mbps when receiving data (known as
the downstream rate).                                                                                                                                                                            
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|VoIP               |  | Voice over Internet Protocol (that is, voice delivered using the Internet Protocol) is a term used in
Internet Protocol telephony for a set of facilities for managing the delivery of voice information using
the Internet Protocol. This means sending voice information in digital form in discrete packets rather
than in the traditional circuit-committed protocols of the public switched telephone network.
|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|WLL                |  | Wireless Local Loop. A local loop using fixed radio access technology to provide low to medium speed
Internet services.                                                                                                                                                                                                                                                                                            

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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                     |  |      |      | 
|---------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                     |  | Page
|Independent Auditors Report of Anjin & Co.                                                          |  |      | F-2  | 
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                         |  |      | F-3  | 
|Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002           |  |      | F-5  | 
|Consolidated Statements of Shareholders Equity for the years ended December 31, 2000,
2001 and 2002 |  |      | F-6  | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002           |  |      | F-7  | 
|Notes to Consolidated Financial Statements                                                           |  |      | F-10 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of
Hanaro Telecom, Inc.:

We have audited the accompanying consolidated balance sheets of Hanaro Telecom,
Inc. and its subsidiaries (collectively referred to as the Company) as of
December 31, 2001 and 2002, and the related consolidated statements of
operations, shareholders equity and cash flows for the years ended December
31, 2000, 2001 and 2002, all expressed in Korean won. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hanaro Telecom, Inc. and its
subsidiaries as of December 31, 2001 and 2002, and the results of their
operations, changes in shareholders equity and their cash flows for the years
ended December 31, 2000, 2001 and 2002 in conformity with financial accounting
standards in the Republic of Korea.

The translated amounts in the accompanying financial statements have been
translated into U.S. dollars, solely for the convenience of the reader, on the
basis set forth in Note 2.

Accounting practices used by the Company in preparing the accompanying
financial statements conform with generally accepted accounting principles in
the Republic of Korea, but do not conform with generally accepted accounting
principles in the United States of America. The description of the significant
differences and the reconciliation of net loss and shareholders equity to U.S.
generally accepted accounting principles are set forth in Note 26.

/s/ Anjin & Co.

Anjin & Co.
(A former member firm of Andersen Worldwide.
Anjin & Co. became an associate member firm of
Deloitte Touche Tohmatsu effective July 2, 2002.)

Seoul, Korea    
April 10, 2003

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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2001 AND 2002

|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |           | 
|------------------- | -------------------------------------------------------------------------------------------------------------------------------- | ------------ | --------- | ------------- | --------- | --------------------- | --------- | --------- | --------- |  | --------- | ---------------- | --------- | 
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           | Translation into
|                    |                                                                                                                                  |              |           | Korean Won    |           | U.S. Dollars (Note 2)
|                    |                                                                                                                                  |              |           |               |           |                      
|ASSETS              |                                                                                                                                  | 2001         |           | 2002          |           | 2002                 
|                    |                                                                                                                                  |              |           |               |           |                      
|                    |                                                                                                                                  |              |           | (In millions) |           | (In thousands)       
|CURRENT ASSETS:     |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                 
|                    | Cash and cash equivalents (Note 3)                                                                                               |              | W         | 298,692       |           |                       | W         | 306,118   |           |  | $         | 258,044          |          
|                    | Short-term financial instruments (Notes 4 and 5)                                                                                 |              |           | 150,040       |           |                       |           | 150,499   |           |  |           | 126,864          |          
|                    | Marketable securities (Note 6)                                                                                                   |              |           | 50,744        |           |                       |           | 17,811    |           |  |           | 15,014           |          
|                    | Trade receivables, net of allowance for doubtful
accounts of W4,880 million in 2001 and W18,137
million in 2002 (Notes 2 and 16) |              |           | 150,889       |           |                       |           | 229,867   |           |  |           | 193,768          |          
|                    | Short-term loans, net of discount on present value of
W444 million in 2001 and W189 million in 2002 (Note 8)                     |              |           | 10,705        |           |                       |           | 7,194     |           |  |           | 6,064            |          
|                    | Accounts receivable-other, net of allowance for
doubtful accounts of W142 million in 2001 and W3,033
million in 2002             |              |           | 6,952         |           |                       |           | 7,032     |           |  |           | 5,928            |          
|                    | Accrued income                                                                                                                   |              |           | 4,067         |           |                       |           | 5,319     |           |  |           | 4,484            |          
|                    | Prepaid expenses (Note 9)                                                                                                        |              |           | 31,339        |           |                       |           | 8,980     |           |  |           | 7,570            |          
|                    | Prepaid income tax                                                                                                               |              |           | 5,684         |           |                       |           | 4,458     |           |  |           | 3,758            |          
|                    | Advanced payments                                                                                                                |              |           | 2,955         |           |                       |           | 261       |           |  |           | 220              |          
|                    | Forward exchange contracts                                                                                                       |              |           | 2,519         |           |                       |           |          |           |  |           |                 |          
|                    | Inventories                                                                                                                      |              |           | 14,691        |           |                       |           | 10,880    |           |  |           | 9,171            |          
|                    | Other current assets                                                                                                             |              |           | 4,800         |           |                       |           |          |           |  |           |                 |          
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |          
|                    |                                                                                                                                  |              | 734,077   |               |           |                       | 748,419   |           |           |  | 630,885   |                 
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |          
|NON-CURRENT ASSETS: |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                 
|                    | Long-term financial instruments (Notes 4 and 5)                                                                                  |              |           | 1,261         |           |                       |           | 23        |           |  |           | 20               |          
|                    | Investment securities (Note 7)                                                                                                   |              |           | 63,606        |           |                       |           | 57,668    |           |  |           | 48,612           |          
|                    | Long-term loans, net of discount on present value of
W6,594 million in 2001 and W5,194 million in 2002
(Note 8)                  |              |           | 50,080        |           |                       |           | 48,478    |           |  |           | 40,865           |          
|                    | Key-money deposits (Note 22)                                                                                                     |              |           | 86,490        |           |                       |           | 79,530    |           |  |           | 67,040           |          
|                    | Long-term prepaid expenses (Note 9)                                                                                              |              |           | 20,951        |           |                       |           | 13,990    |           |  |           | 11,793           |          
|                    | Deferred income tax assets (Note 21)                                                                                             |              |           | 269           |           |                       |           | 181       |           |  |           | 152              |          
|                    | Property and equipment, net (Notes 2, 10, 13, 15 and 25)                                                                         |              |           | 3,146,589     |           |                       |           | 3,134,314 |           |  |           | 2,642,092        |          
|                    | Intangibles (Notes 11, 12 and 25)                                                                                                |              |           | 942           |           |                       |           | 22,182    |           |  |           | 18,699           |          
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |          
|                    |                                                                                                                                  |              | 3,370,188 |               |           |                       | 3,356,366 |           |           |  | 2,829,273 |                 
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |          
|                    |                                                                                                                                  | Total Assets |           | W             | 4,104,265 |                       |           | W         | 4,104,785 |  |           | $                | 3,460,158 | 
|                    |                                                                                                                                  |              |           |               |           |                       |           |           |           |  |           |                  |          

(continued)

F-3



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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED)

AS OF DECEMBER 31, 2001 AND 2002

|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                  |           | 
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | --------- | ------------- | --------- | --------------------- | --------- | ------ | --------- | --------- | --------- | ---------------- | --------- | 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           | Translation into
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           | Korean Won    |           | U.S. Dollars (Note 2)
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                      
|LIABILITIES AND SHAREHOLDERS' EQUITY    |                                                                                                                                                                                                                                        | 2001                                                |                                            | 2002      |               | 2002     
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |          
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           | (In millions) |           | (In thousands)       
|CURRENT LIABILITIES:                    |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |          
|                                        | Trade payables                                                                                                                                                                                                                         |                                                     | W                                          | 104,763   |               |           | W                     | 77,332    |        |           | $         | 65,188    |                 
|                                        | Other accounts payable                                                                                                                                                                                                                 |                                                     |                                            | 368,141   |               |           |                       | 181,196   |        |           |           | 152,741   |                 
|                                        | Short-term borrowings (Note 14)                                                                                                                                                                                                        |                                                     |                                            | 70,613    |               |           |                       | 63,000    |        |           |           | 53,106    |                 
|                                        | Current maturities of long-term debt, net of discount
on debentures of W1,032 million in 2001 and W5,249
million in 2002 and accrued interest of W8,245
million and present value discount of W7,538 million
in 2002 (Notes 13 and 15) |                                                     |                                            | 326,217   |               |           |                       | 1,041,343 |        |           |           | 877,807   |                 
|                                        | Advances received (Note 16)                                                                                                                                                                                                            |                                                     |                                            | 117,127   |               |           |                       | 152,516   |        |           |           | 128,564   |                 
|                                        | Accrued expenses                                                                                                                                                                                                                       |                                                     |                                            | 37,087    |               |           |                       | 47,922    |        |           |           | 40,396    |                 
|                                        | Withholdings                                                                                                                                                                                                                           |                                                     |                                            | 5,127     |               |           |                       | 16,531    |        |           |           | 13,935    |                 
|                                        | Other current liabilities                                                                                                                                                                                                              |                                                     |                                            | 8,938     |               |           |                       | 25,527    |        |           |           | 21,519    |                 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        |                                                     | 1,038,013                                  |           |               |           | 1,605,367             |           |        |           | 1,353,256 |          
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|LONG-TERM LIABILITIES:                  |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |          
|                                        | Long-term debt, net of current portion (Note 15)                                                                                                                                                                                       |                                                     |                                            | 230,643   |               |           |                       | 213,233   |        |           |           | 179,746   |                 
|                                        | Debentures, net (Note 15)                                                                                                                                                                                                              |                                                     |                                            | 1,029,371 |               |           |                       | 617,647   |        |           |           | 520,650   |                 
|                                        | Long-term obligations under capital leases, net of
current portion (Note 13)                                                                                                                                                           |                                                     |                                            | 57,508    |               |           |                       | 38,087    |        |           |           | 32,106    |                 
|                                        | Long-term advances received (Note 16)                                                                                                                                                                                                  |                                                     |                                            | 155,482   |               |           |                       | 87,873    |        |           |           | 74,073    |                 
|                                        | Accrued severance indemnities, net (Note 2)                                                                                                                                                                                            |                                                     |                                            | 17,740    |               |           |                       | 24,094    |        |           |           | 20,310    |                 
|                                        | Guarantee deposits received                                                                                                                                                                                                            |                                                     |                                            | 7,116     |               |           |                       | 2,569     |        |           |           | 2,165     |                 
|                                        | Deferred income tax liabilities (Note 21)                                                                                                                                                                                              |                                                     |                                            |          |               |           |                       | 417       |        |           |           | 352       |                 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        |                                                     | 1,497,860                                  |           |               |           | 983,920               |           |        |           | 829,402   |          
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        |                                                     | Total Liabilities                          |           |               | 2,535,873 |                       |           |        | 2,589,287 |           |           |                  | 2,182,658 | 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|COMMITMENTS AND CONTINGENCIES (Note 23) |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |          
|SHAREHOLDERS EQUITY (Note 18):         |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |          
|                                        | Capital stock                                                                                                                                                                                                                          |                                                     |                                            | 1,320,000 |               |           |                       | 1,396,613 |        |           |           | 1,177,285 |                 
|                                        | Paid-in capital in excess of par value                                                                                                                                                                                                 |                                                     |                                            | 689,175   |               |           |                       | 688,951   |        |           |           | 580,756   |                 
|                                        | Other capital surplus                                                                                                                                                                                                                  |                                                     |                                            | 257       |               |           |                       | 807       |        |           |           | 680       |                 
|                                        | Accumulated deficit (net loss of W245,902 million in
2001 and W125,025 million in 2002)                                                                                                                                                |                                                     |                                            | (590,365  | )             |           |                       | (710,804  | )      |           |           | (599,177  | )               
|                                        | Capital adjustments:                                                                                                                                                                                                                   |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        | Stock compensation (Note 19)                        |                                            |           | 2,890         |           |                       |           | 4,541  |           |           |           | 3,828            |          
|                                        |                                                                                                                                                                                                                                        | Valuation loss on investments, net (Note 7)         |                                            |           | (669          | )         |                       |           | (4,430 | )         |           |           | (3,734           | )        
|                                        |                                                                                                                                                                                                                                        | Valuation loss on interest swap                     |                                            |           |              |           |                       |           | (5,633 | )         |           |           | (4,748           | )        
|                                        |                                                                                                                                                                                                                                        | Foreign-based operations translation credit (debit) |                                            |           | 6             |           |                       |           | (24    | )         |           |           | (20              | )        
|                                        | Minority interest                                                                                                                                                                                                                      |                                                     |                                            | 147,098   |               |           |                       | 145,477   |        |           |           | 122,630   |                 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        |                                                     | Total Shareholders Equity                 |           |               | 1,568,392 |                       |           |        | 1,515,498 |           |           |                  | 1,277,500 | 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 
|                                        |                                                                                                                                                                                                                                        |                                                     | Total Liabilities and Shareholders Equity |           | W             | 4,104,265 |                       |           | W      | 4,104,785 |           |           | $                | 3,460,158 | 
|                                        |                                                                                                                                                                                                                                        |                                                     |                                            |           |               |           |                       |           |        |           |           |           |                 

See accompanying notes to consolidated financial statements.

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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |         | 
|----------------------------------------- | ---------------------------------------------------------- | - | -------------------------------------- | ------ | -------------------- | - | --------- | ------- | ---- | - | --------- | ------- |  | - | --------------------- | ------- | 
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   | Translation into     
|                                          |                                                            |   | Korean Won                             |        | U.S. Dollars(Note 2)
|                                          |                                                            |   |                                        |        |                     
|                                          |                                                            |   | 2000                                   |        | 2001                 |   | 2002      |         | 2002
|                                          |                                                            |   |                                        |        |                      |   |           |         |     
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   | (In thousands, except
|                                          |                                                            |   | (In millions, except per share amount) |        | per share amount)   
|OPERATING REVENUE (Notes 23 and 25)       |                                                            | W | 342,804                                |        |                      | W | 830,721   |         |      | W | 1,417,854 |         |  | $ | 1,195,190             |        
|OPERATING EXPENSES (Note 20)              |                                                            |   | 647,415                                |        |                      |   | 1,001,335 |         |      |   | 1,396,426 |         |  |   | 1,177,127             |        
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|OPERATING INCOME (LOSS)                   |                                                            |   | (304,611                               | )      |                      |   | (170,614  | )       |      |   | 21,428    |         |  |   | 18,063                |        
|NON-OPERATING INCOME:                     |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|                                          | Interest income                                            |   |                                        | 57,578 |                      |   |           | 26,506  |      |   |           | 32,761  |  |   |                       | 27,616  | 
|                                          | Dividend income                                            |   |                                        |       |                      |   |           | 98      |      |   |           | 2,935   |  |   |                       | 2,474   | 
|                                          | Gain on valuation of marketable securities                 |   |                                        | 14     |                      |   |           | 5,271   |      |   |           | 5       |  |   |                       | 4       | 
|                                          | Gain on disposal of marketable securities                  |   |                                        |       |                      |   |           | 190     |      |   |           | 1,718   |  |   |                       | 1,448   | 
|                                          | Gain on disposal of investments                            |   |                                        |       |                      |   |           | 1,387   |      |   |           | 2,681   |  |   |                       | 2,260   | 
|                                          | Gain on foreign currency transactions                      |   |                                        | 2,011  |                      |   |           | 6,522   |      |   |           | 1,560   |  |   |                       | 1,315   | 
|                                          | Gain on foreign currency translation                       |   |                                        | 21     |                      |   |           | 538     |      |   |           | 17,064  |  |   |                       | 14,384  | 
|                                          | Gain on valuation of forward exchange contract             |   |                                        |       |                      |   |           | 2,519   |      |   |           |        |  |   |                       |        | 
|                                          | Gain on transaction of forward exchange contract
(Note 17) |   |                                        |       |                      |   |           |        |      |   |           | 186     |  |   |                       | 157     | 
|                                          | Gain on disposal of intangible assets                      |   |                                        |       |                      |   |           |        |      |   |           | 1,646   |  |   |                       | 1,388   | 
|                                          | Gain on realization of negative goodwill (Note 12)         |   |                                        |       |                      |   |           |        |      |   |           | 3,093   |  |   |                       | 2,607   | 
|                                          | Other                                                      |   |                                        | 1,916  |                      |   |           | 6,476   |      |   |           | 6,716   |  |   |                       | 5,662   | 
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|                                          |                                                            |   | 61,540                                 |        |                      |   | 49,507    |         |      |   | 70,365    |         |  |   | 59,315                |        
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|NON-OPERATING EXPENSES:                   |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|                                          | Interest expense (Note 15)                                 |   |                                        | 44,011 |                      |   |           | 107,231 |      |   |           | 169,412 |  |   |                       | 142,807 | 
|                                          | Loss on valuation of marketable securities                 |   |                                        | 9,682  |                      |   |           |        |      |   |           | 2,838   |  |   |                       | 2,392   | 
|                                          | Loss on disposal of marketable securities                  |   |                                        | 2,200  |                      |   |           | 5       |      |   |           | 15      |  |   |                       | 13      | 
|                                          | Loss on disposal of trade receivables (Note 16)            |   |                                        |       |                      |   |           | 4,100   |      |   |           | 22,293  |  |   |                       | 18,792  | 
|                                          | Loss on disposal of property and equipment                 |   |                                        | 16     |                      |   |           | 936     |      |   |           | 5,606   |  |   |                       | 4,726   | 
|                                          | Loss on disposal of investments                            |   |                                        |       |                      |   |           |        |      |   |           | 1,140   |  |   |                       | 961     | 
|                                          | Loss on early redemption of debentures (Note 15)           |   |                                        |       |                      |   |           |        |      |   |           | 5,072   |  |   |                       | 4,275   | 
|                                          | Loss on foreign currency transactions                      |   |                                        | 163    |                      |   |           | 4,781   |      |   |           | 428     |  |   |                       | 361     | 
|                                          | Loss on foreign currency translation                       |   |                                        | 7,143  |                      |   |           | 7,031   |      |   |           | 260     |  |   |                       | 219     | 
|                                          | Loss on valuation of forward exchange contract
(Note 17)   |   |                                        |       |                      |   |           |        |      |   |           | 1,888   |  |   |                       | 1,592   | 
|                                          | Impairment loss on investment securities (Note 7)          |   |                                        |       |                      |   |           | 2,115   |      |   |           | 6,957   |  |   |                       | 5,864   | 
|                                          | Impairment loss on development costs (Note 11)             |   |                                        |       |                      |   |           | 612     |      |   |           |        |  |   |                       |        | 
|                                          | Provision for doubtful accounts, other                     |   |                                        |       |                      |   |           |        |      |   |           | 2,899   |  |   |                       | 2,444   | 
|                                          | Donations                                                  |   |                                        | 726    |                      |   |           | 743     |      |   |           | 335     |  |   |                       | 282     | 
|                                          | Other                                                      |   |                                        | 75     |                      |   |           | 147     |      |   |           | 328     |  |   |                       | 277     | 
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|                                          |                                                            |   | 64,016                                 |        |                      |   | 127,701   |         |      |   | 219,471   |         |  |   | 185,005               |        
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|LOSS BEFORE INCOME TAX                    |                                                            |   | (307,087                               | )      |                      |   | (248,808  | )       |      |   | (127,678  | )       |  |   | (107,627              | )      
|INCOME TAX EXPENSE (Note 21)              |                                                            |   | (57                                    | )      |                      |   | (35       | )       |      |   | (1,083    | )       |  |   | (913                  | )      
|MINORITY INTEREST SHARE OF LOSS           |                                                            |   | 1,974                                  |        |                      |   | 2,941     |         |      |   | 3,736     |         |  |   | 3,149                 |        
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|NET LOSS                                  |                                                            | W | (305,170                               | )      |                      | W | (245,902  | )       |      | W | (125,025  | )       |  | $ | (105,391              | )      
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        
|BASIC AND DILUTED LOSS PER SHARE (Note 2) |                                                            | W | (1,184                                 | )      |                      | W | (931      | )       |      | W | (453      | )       |  | $ | (0.38                 | )      
|                                          |                                                            |   |                                        |        |                      |   |           |         |      |   |           |         |  |   |                       |        

See accompanying notes to consolidated financial statements.

F-5



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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  
|--------------------------------------------------------------------------- |  | ------------------------ | --------- | ------- |  | --------- | ------- | ----------- |  | --------- | -------- | ----- |  | - | ------ | - |  | - | ------- | - |  | - | --------- | -
|                                                                            |  | Korean Won (In millions)
|                                                                            |  |                         
|                                                                            |  |                          |           |         |  |           |         |             |  | Retained  |          |       |  |   |        |   |  |   |         |   |  |  
|                                                                            |  | Common                   |           | Capital |  | Earnings  |         | Capital     |  | Minority  |          |       |  |  
|                                                                            |  | Stock                    |           | Surplus |  | (Deficit) |         | adjustments |  | Interests |          | Total
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |      
|Balance at December 31,
1999                                                |  | W                        | 1,200,000 |         |  | W         | 410,427 |             |  | W         | (38,863  | )     |  | W | 195    |   |  | W |        |   |  | W | 1,571,759 |  
|Issuance of common stock
on March 29, 2000 for cash (W17,200 won per share) |  |                          | 120,000   |         |  |           | 278,748 |             |  |           |         |       |  |   |       |   |  |   | 3,431   |   |  |   | 402,179   |  
|Net loss for 2000                                                           |  |                          |          |         |  |           |        |             |  |           | (305,170 | )     |  |   |       |   |  |   | (1,974  | ) |  |   | (307,144  | )
|Cumulative effect on prior
years of accounting
changes                      |  |                          |          |         |  |           |        |             |  |           | 494      |       |  |   |       |   |  |   |        |   |  |   | 494       |  
|Compensation expense
incurred in connection
with stock options              |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 1,607  |   |  |   |        |   |  |   | 1,607     |  
|Loss on valuation of
investment securities                                  |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | (1,820 | ) |  |   |        |   |  |   | (1,820    | )
|Foreign-based operations
translation credit                                 |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 3      |   |  |   |        |   |  |   | 3         |  
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  
|Balance at December 31,
2000                                                |  |                          | 1,320,000 |         |  |           | 689,175 |             |  |           | (343,539 | )     |  |   | (15    | ) |  |   | 1,457   |   |  |   | 1,667,078 |  
|Net loss for 2001                                                           |  |                          |          |         |  |           |        |             |  |           | (245,902 | )     |  |   |       |   |  |   | (2,047  | ) |  |   | (247,949  | )
|Deficit - minority interest                                                 |  |                          |          |         |  |           |        |             |  |           | (894     | )     |  |   |       |   |  |   |        |   |  |   | (894      | )
|Effect of changes in
consolidated subsidiaries                              |  |                          |          |         |  |           |        |             |  |           |         |       |  |   |       |   |  |   | 147,098 |   |  |   | 147,098   |  
|Effect of changes in
ownership interest                                     |  |                          |          |         |  |           | 204     |             |  |           | (29      | )     |  |   |       |   |  |   | 559     |   |  |   | 734       |  
|Disposal of investment
securities in subsidiaries                           |  |                          |          |         |  |           | 53      |             |  |           | (1       | )     |  |   |       |   |  |   | 31      |   |  |   | 83        |  
|Compensation expense incurred in connection
with stock options              |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 1,088  |   |  |   |        |   |  |   | 1,088     |  
|Gain on valuation of
investment securities                                  |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 1,151  |   |  |   |        |   |  |   | 1,151     |  
|Foreign-based operations
translation credit                                 |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 3      |   |  |   |        |   |  |   | 3         |  
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  
|Balance at December 31,
2001                                                |  |                          | 1,320,000 |         |  |           | 689,432 |             |  |           | (590,365 | )     |  |   | 2,227  |   |  |   | 147,098 |   |  |   | 1,568,392 |  
|Net loss for 2002                                                           |  |                          |          |         |  |           |        |             |  |           | (125,025 | )     |  |   |       |   |  |   | (3,736  | ) |  |   | (128,761  | )
|Issuance of common stock
by exercise of stock
warrants                      |  |                          | 76,613    |         |  |           | (390    | )           |  |           |         |       |  |   |       |   |  |   |        |   |  |   | 76,223    |  
|Effect of changes in
consolidated subsidiaries                              |  |                          |          |         |  |           | (207    | )           |  |           | 4,586    |       |  |   |       |   |  |   |        |   |  |   | 4,379     |  
|Effect of changes in
ownership interest                                     |  |                          |          |         |  |           | 116     |             |  |           |         |       |  |   |       |   |  |   | 2,115   |   |  |   | 2,231     |  
|Disposal of investment
securities in subsidiaries                           |  |                          |          |         |  |           | 807     |             |  |           |         |       |  |   |       |   |  |   |        |   |  |   | 807       |  
|Compensation expense
incurred in connection with stock options (Note
19)    |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | 1,651  |   |  |   |        |   |  |   | 1,651     |  
|Loss on valuation of
investment securities                                  |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | (3,761 | ) |  |   |        |   |  |   | (3,761    | )
|Loss on valuation of
interest swap (Note 17)                                |  |                          |          |         |  |           |        |             |  |           |         |       |  |   | (5,633 | ) |  |   |        |   |  |   | (5,633    | )
|Foreign-based operations
translation credit                                 |  |                          |           |         |  |           |        |             |  |           |         |       |  |   | (30    | ) |  |   |        |   |  |   | (30       | )
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  
|Balance at December 31,
2002                                                |  | W                        | 1,396,613 |         |  | W         | 689,758 |             |  | W         | (710,804 | )     |  | W | (5,546 | ) |  | W | 145,477 |   |  | W | 1,515,498 |  
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  
|Translation into U.S
Dollars (In thousands)
(Note 2)                        |  | W                        | 1,177,285 |         |  | W         | 581,436 |             |  | W         | (599,177 | )     |  | W | (4,674 | ) |  | W | 122,630 |   |  | W | 1,277,500 |  
|                                                                            |  |                          |           |         |  |           |         |             |  |           |          |       |  |   |        |   |  |   |         |   |  |   |           |  

See accompanying notes to consolidated financial statements.

F-6



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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

|                                      |                                                                                           |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                  |          |  
|------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  | ---------- | -------- | -------------------- |  | ------------- | ------- | ---- |  | ---------- | -------- | -------------- |  | ---------------- | -------- | -
|                                      |                                                                                           |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  | Translation into
|                                      |                                                                                           |                                                                    |  | Korean Won |          | U.S. Dollars(Note 2)
|                                      |                                                                                           |                                                                    |  |            |          |                     
|                                      |                                                                                           |                                                                    |  | 2000       |          | 2001                 |  | 2002          |         | 2002
|                                      |                                                                                           |                                                                    |  |            |          |                      |  |               |         |     
|                                      |                                                                                           |                                                                    |  |            |          |                      |  | (In millions) |         |      |  |            |          | (In thousands)
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                           |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                 
|                                      | Net loss                                                                                  |                                                                    |  | W (305,170 | )        |                      |  | W (245,902    | )       |      |  | W (125,025 | )        |                |  | W (105,391       | )       
|                                      | Adjustments to reconcile net loss to net cash provided
by (used in) operating activities: |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                  |         
|                                      |                                                                                           | Stock compensation expense                                         |  |            | 1,802    |                      |  |               | 1,088   |      |  |            | 1,651    |                |  |                  | 1,392    |  
|                                      |                                                                                           | Depreciation and amortization                                      |  |            | 187,269  |                      |  |               | 327,498 |      |  |            | 433,555  |                |  |                  | 365,468  |  
|                                      |                                                                                           | Provision for severance indemnities                                |  |            | 6,906    |                      |  |               | 12,572  |      |  |            | 13,646   |                |  |                  | 11,503   |  
|                                      |                                                                                           | Provision for doubtful accounts                                    |  |            | 734      |                      |  |               | 2,760   |      |  |            | 16,589   |                |  |                  | 13,984   |  
|                                      |                                                                                           | Amortization of discount on debentures                             |  |            | 3,411    |                      |  |               | 7,873   |      |  |            | 26,787   |                |  |                  | 22,580   |  
|                                      |                                                                                           | Recognition of long-term accrued interest                          |  |            |         |                      |  |               | 4,700   |      |  |            | 8,246    |                |  |                  | 6,951    |  
|                                      |                                                                                           | Employee fringe benefits                                           |  |            | 2,179    |                      |  |               | 397     |      |  |            | 2,070    |                |  |                  | 1,745    |  
|                                      |                                                                                           | Loss on foreign currency translation                               |  |            | 7,143    |                      |  |               | 7,031   |      |  |            | 260      |                |  |                  | 219      |  
|                                      |                                                                                           | Loss on disposal of marketable securities                          |  |            | 2,200    |                      |  |               | 5       |      |  |            | 15       |                |  |                  | 13       |  
|                                      |                                                                                           | Loss on valuation of marketable securities                         |  |            | 9,682    |                      |  |               |        |      |  |            | 2,838    |                |  |                  | 2,392    |  
|                                      |                                                                                           | Loss on disposal of property and equipment                         |  |            | 17       |                      |  |               | 936     |      |  |            | 5,606    |                |  |                  | 4,726    |  
|                                      |                                                                                           | Loss on early redemption of debentures                             |  |            |         |                      |  |               |        |      |  |            | 5,072    |                |  |                  | 4,275    |  
|                                      |                                                                                           | Loss on valuation of forward exchange contract                     |  |            |         |                      |  |               |        |      |  |            | 1,888    |                |  |                  | 1,592    |  
|                                      |                                                                                           | Impairment loss on investment securities                           |  |            |         |                      |  |               | 2,115   |      |  |            | 6,957    |                |  |                  | 5,864    |  
|                                      |                                                                                           | Gain on valuation of marketable securities                         |  |            | (14      | )                    |  |               | (5,271  | )    |  |            | (5       | )              |  |                  | (4       | )
|                                      |                                                                                           | Gain on disposal of investments                                    |  |            |         |                      |  |               | (1,387  | )    |  |            | (2,681   | )              |  |                  | (2,260   | )
|                                      |                                                                                           | Gain on disposal of marketable securities                          |  |            |         |                      |  |               | (190    | )    |  |            | (1,718   | )              |  |                  | (1,448   | )
|                                      |                                                                                           | Gain on disposal of intangibles                                    |  |            |         |                      |  |               |        |      |  |            | (1,646   | )              |  |                  | (1,388   | )
|                                      |                                                                                           | Gain on foreign currency translation                               |  |            |         |                      |  |               | (115    | )    |  |            | (17,064  | )              |  |                  | (14,384  | )
|                                      |                                                                                           | Gain on realization of negative goodwill                           |  |            |         |                      |  |               |        |      |  |            | (3,093   | )              |  |                  | (2,607   | )
|                                      |                                                                                           | Amortization of present value discount                             |  |            | (1,683   | )                    |  |               | (2,116  | )    |  |            | (3,744   | )              |  |                  | (3,156   | )
|                                      |                                                                                           | Minority interests loss                                            |  |            | (1,974   | )                    |  |               | (2,941  | )    |  |            | (3,736   | )              |  |                  | (3,149   | )
|                                      |                                                                                           | Other, net                                                         |  |            | (275     | )                    |  |               | (1,967  | )    |  |            | 867      |                |  |                  | 731      |  
|                                      | Changes in assets and liabilities resulting from
operations:                              |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                  |         
|                                      |                                                                                           | Increase in trade receivables                                      |  |            | (68,887  | )                    |  |               | (53,766 | )    |  |            | (91,397  | )              |  |                  | (77,044  | )
|                                      |                                                                                           | Increase in accounts receivable-other                              |  |            | (48      | )                    |  |               | (5,230  | )    |  |            | (2,816   | )              |  |                  | (2,374   | )
|                                      |                                                                                           | Decrease (Increase) in accrued income                              |  |            | (2,388   | )                    |  |               | 6,069   |      |  |            | 1,643    |                |  |                  | 1,385    |  
|                                      |                                                                                           | Decrease (Increase) in prepaid expenses                            |  |            | 17,153   |                      |  |               | (2,046  | )    |  |            | 22,260   |                |  |                  | 18,764   |  
|                                      |                                                                                           | Decrease in prepaid income tax                                     |  |            | 2,756    |                      |  |               | 7,459   |      |  |            | 1,306    |                |  |                  | 1,101    |  
|                                      |                                                                                           | Decrease (Increase) in advanced payments                           |  |            | 21,504   |                      |  |               | 9,382   |      |  |            | (11,860  | )              |  |                  | (9,997   | )
|                                      |                                                                                           | Increase in inventories                                            |  |            | (286,018 | )                    |  |               | (78,145 | )    |  |            | (55,892  | )              |  |                  | (47,115  | )
|                                      |                                                                                           | Decrease (Increase) in other current assets                        |  |            | (9,298   | )                    |  |               | 13,769  |      |  |            | 5,905    |                |  |                  | 4,978    |  
|                                      |                                                                                           | Decrease in long-term prepaid expenses                             |  |            | 3,938    |                      |  |               | 11,941  |      |  |            | 6,961    |                |  |                  | 5,868    |  
|                                      |                                                                                           | Decrease (Increase) in deferred income tax assets                  |  |            | 50       |                      |  |               | (72     | )    |  |            | 100      |                |  |                  | 84       |  
|                                      |                                                                                           | Increase (Decrease) in trade payables                              |  |            | 55,590   |                      |  |               | (14,104 | )    |  |            | (27,016  | )              |  |                  | (22,773  | )
|                                      |                                                                                           | Increase (Decrease) in other accounts payable                      |  |            | 205,548  |                      |  |               | (69,683 | )    |  |            | (186,839 | )              |  |                  | (157,497 | )
|                                      |                                                                                           | Increase in accrued expenses                                       |  |            | 13,449   |                      |  |               | 8,608   |      |  |            | 7,361    |                |  |                  | 6,205    |  
|                                      |                                                                                           | Increase (Decrease) in withholdings                                |  |            | 2,680    |                      |  |               | (420    | )    |  |            | 3,593    |                |  |                  | 3,029    |  
|                                      |                                                                                           | Increase in other current liabilities                              |  |            | 3,628    |                      |  |               | 22,382  |      |  |            | 21,470   |                |  |                  | 18,098   |  
|                                      |                                                                                           | Increase(Decrease) in other long-term liabilities                  |  |            |         |                      |  |               | 5,873   |      |  |            | (4,308   | )              |  |                  | (3,632   | )
|                                      |                                                                                           | Increase in deferred income tax liabilities                        |  |            |         |                      |  |               |        |      |  |            | 407      |                |  |                  | 343      |  
|                                      |                                                                                           | Increase (Decrease) in foreign based operations
translation credit |  |            | 3        |                      |  |               | 3       |      |  |            | (30      | )              |  |                  | (25      | )
|                                      |                                                                                           | Decrease in payments to National Pension                           |  |            | 135      |                      |  |               | 112     |      |  |            | 76       |                |  |                  | 64       |  
|                                      |                                                                                           | Payments of severance indemnities                                  |  |            | (1,924   | )                    |  |               | (3,524  | )    |  |            | (5,786   | )              |  |                  | (4,878   | )
|                                      |                                                                                           |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                 
|                                      | Net cash flows provided by (used in) operating activities                                 |                                                                    |  | (129,902   | )        |                      |  | (34,306       | )       |      |  | 52,473     |          |                |  | 44,232           |         
|                                      |                                                                                           |                                                                    |  |            |          |                      |  |               |         |      |  |            |          |                |  |                 

(continued)

F-7



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##### Table of Contents



HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------- | ------- | ---------- | ---------- | -------------------- | ------- | ------------- | -------- | ---- | ------- | -------- | -------- | -------------- | ------- | ---------------- | -------- | -
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         | Translation into
|                                                              |                                                 |                                                         |         | Korean Won |            | U.S. Dollars(Note 2)
|                                                              |                                                 |                                                         |         |            |            |                     
|                                                              |                                                 |                                                         |         | 2000       |            | 2001                 |         | 2002          |          | 2002
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |     
|                                                              |                                                 |                                                         |         |            |            |                      |         | (In millions) |          |      |         |          |          | (In thousands)
|CASH FLOWS FROM INVESTING ACTIVITIES:                         |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                 
|                                                              |                                                 | Disposal of marketable securities                       |         | W          | 2,867,516  |                      |         | W             | 630      |      |         | W        | 101,908  |                |         | $                | 85,904   |  
|                                                              |                                                 | Collection of short-term financial instruments          |         |            | 2,478,483  |                      |         |               | 502,754  |      |         |          | 483,510  |                |         |                  | 407,578  |  
|                                                              |                                                 | Redemption of short-term loans                          |         |            | 771        |                      |         |               | 787      |      |         |          | 1,150    |                |         |                  | 969      |  
|                                                              |                                                 | Redemption of long-term loans                           |         |            | 1,683      |                      |         |               | 332      |      |         |          | 16,044   |                |         |                  | 13,524   |  
|                                                              |                                                 | Withdrawal of long-term financial instruments           |         |            | 1,449      |                      |         |               | 27,496   |      |         |          | 1,220    |                |         |                  | 1,028    |  
|                                                              |                                                 | Refund of key-money deposits                            |         |            | 1,383      |                      |         |               | 192      |      |         |          | 16,045   |                |         |                  | 13,525   |  
|                                                              |                                                 | Proceeds from disposal of property and equipment        |         |            | 154        |                      |         |               | 1,328    |      |         |          | 4,494    |                |         |                  | 3,788    |  
|                                                              |                                                 | Proceeds from disposal of intangibles                   |         |            |           |                      |         |               |         |      |         |          | 1,800    |                |         |                  | 1,517    |  
|                                                              |                                                 | Disposal of investment securities                       |         |            |           |                      |         |               | 3,708    |      |         |          | 8,528    |                |         |                  | 7,189    |  
|                                                              |                                                 | Withdrawal of severance insurance deposits              |         |            |           |                      |         |               | 84       |      |         |          | 1,673    |                |         |                  | 1,410    |  
|                                                              |                                                 | Acquisition of short-term financial instruments         |         |            | (2,116,710 | )                    |         |               | (497,811 | )    |         |          | (484,050 | )              |         |                  | (408,033 | )
|                                                              |                                                 | Purchase of marketable securities                       |         |            | (2,575,766 | )                    |         |               | (30,444  | )    |         |          | (70,098  | )              |         |                  | (59,090  | )
|                                                              |                                                 | Payment of short-term loans                             |         |            | (266       | )                    |         |               | (27      | )    |         |          | (572     | )              |         |                  | (482     | )
|                                                              |                                                 | Purchase of investment securities                       |         |            | (24,932    | )                    |         |               | (56,734  | )    |         |          | (3,348   | )              |         |                  | (2,822   | )
|                                                              |                                                 | Acquisition of long-term financial instruments          |         |            | (27,312    | )                    |         |               | (262     | )    |         |          | (85      | )              |         |                  | (72      | )
|                                                              |                                                 | Payment of long-term loans                              |         |            | (8,030     | )                    |         |               | (1,750   | )    |         |          | (2,855   | )              |         |                  | (2,407   | )
|                                                              |                                                 | Payment of key-money deposits                           |         |            | (27,830    | )                    |         |               | (3,972   | )    |         |          | (9,111   | )              |         |                  | (7,680   | )
|                                                              |                                                 | Acquisition of property and equipment                   |         |            | (1,587,276 | )                    |         |               | (506,000 | )    |         |          | (363,174 | )              |         |                  | (306,140 | )
|                                                              |                                                 | Acquisition of intangibles                              |         |            | (42,422    | )                    |         |               | (12,293  | )    |         |          | (18,447  | )              |         |                  | (15,550  | )
|                                                              |                                                 | Payment of severance insurance deposits                 |         |            |           |                      |         |               | (1,954   | )    |         |          | (2,764   | )              |         |                  | (2,328   | )
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|                                                              | Net cash flows used in investing activities     |                                                         |         | (1,059,105 | )          |                      |         | (573,936      | )        |      |         | (318,132 | )        |                |         | (268,172         | )       
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                         |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                 
|                                                              |                                                 | Proceeds from short-term borrowings                     |         |            | 108,918    |                      |         |               | 63,653   |      |         |          | 63,000   |                |         |                  | 53,106   |  
|                                                              |                                                 | Proceeds from long-term debt                            |         |            | 79,394     |                      |         |               | 129,306  |      |         |          | 236,424  |                |         |                  | 199,295  |  
|                                                              |                                                 | Proceed from issuance of debentures                     |         |            | 812,238    |                      |         |               | 205,947  |      |         |          | 603,972  |                |         |                  | 509,122  |  
|                                                              |                                                 | Proceeds from long-term obligation under capital leases |         |            | 69,111     |                      |         |               | 43,407   |      |         |          | 20,526   |                |         |                  | 17,302   |  
|                                                              |                                                 | Proceeds from issuance of common stock                  |         |            | 398,797    |                      |         |               |         |      |         |          | 76,223   |                |         |                  | 64,253   |  
|                                                              |                                                 | Receipt of long-term advances                           |         |            |           |                      |         |               | 309,000  |      |         |          | 81,000   |                |         |                  | 68,280   |  
|                                                              |                                                 | Proceeds from issuance of minority interests            |         |            | 3,431      |                      |         |               | 794      |      |         |          |         |                |         |                  |         |  
|                                                              |                                                 | Repayment of short-term borrowings                      |         |            | (1,300     | )                    |         |               | (111,327 | )    |         |          | (64,695  | )              |         |                  | (54,535  | )
|                                                              |                                                 | Repayment of current portion of long-term debt          |         |            | (603       | )                    |         |               | (141     | )    |         |          | (77,333  | )              |         |                  | (65,188  | )
|                                                              |                                                 | Repayment of long-term debt and debentures              |         |            | (3,357     | )                    |         |               | (86,570  | )    |         |          | (546,896 | )              |         |                  | (461,010 | )
|                                                              |                                                 | Refund of long-term advances                            |         |            |           |                      |         |               | (55,900  | )    |         |          | (117,207 | )              |         |                  | (98,800  | )
|                                                              |                                                 | Other, net                                              |         |            | 26         |                      |         |               | (161     | )    |         |          | (1,196   | )              |         |                  | (1,008   | )
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|                                                              | Net cash flows provided by financing activities |                                                         |         | 1,466,655  |            |                      |         | 498,008       |          |      |         | 273,818  |          |                |         | 230,817          |         
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|INCREASE (DECREASE) FROM CHANGES IN CONSOLIDATED SUBSIDIARIES |                                                 |                                                         | 70      |            |            |                      | 49,869  |               |          |      | (733    | )        |          |                | (617    | )               
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          |                                                 |                                                         | 277,718 |            |            |                      | (60,365 | )             |          |      | 7,426   |          |          |                | 6,260   |                 
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                  |                                                 |                                                         | 81,339  |            |            |                      | 359,057 |               |          |      | 298,692 |          |          |                | 251,784 |                 
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                        |                                                 | W                                                       | 359,057 |            |            | W                    | 298,692 |               |          | W    | 306,118 |          |          | $              | 258,044 |                 
|                                                              |                                                 |                                                         |         |            |            |                      |         |               |          |      |         |          |          |                |         |                  |          |  

(continued)

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HANARO TELECOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

|                             |                                                                                         |   |            |         |                      |   |               |         |      |   |         |         |                |   |                  |         |  
|---------------------------- | --------------------------------------------------------------------------------------- | - | ---------- | ------- | -------------------- | - | ------------- | ------- | ---- | - | ------- | ------- | -------------- | - | ---------------- | ------- | -
|                             |                                                                                         |   |            |         |                      |   |               |         |      |   |         |         |                |   | Translation into
|                             |                                                                                         |   | Korean Won |         | U.S. Dollars(Note 2)
|                             |                                                                                         |   |            |         |                     
|                             |                                                                                         |   | 2000       |         | 2001                 |   | 2002          |         | 2002
|                             |                                                                                         |   |            |         |                      |   |               |         |     
|                             |                                                                                         |   |            |         |                      |   | (In millions) |         |      |   |         |         | (In thousands)
|CASH PAID FOR INTEREST       |                                                                                         | W | 45,144     |         |                      | W | 101,395       |         |      | W | 140,137 |         |                | $ | 118,129          |        
|CASH REFUNDED FOR INCOME TAX |                                                                                         | W | 2,726      |         |                      | W | 7,352         |         |      | W | 2,289   |         |                | $ | 1,930            |        
|NON-CASH TRANSACTIONS:       |                                                                                         |   |            |         |                      |   |               |         |      |   |         |         |                |   |                  |        
|                             | Transfer of long-term loans to current portion                                          |   | W          | 589     |                      |   | W             | 11,146  |      |   | W       | 6,842   |                |   | $                | 5,768   |  
|                             | Transfer of advanced payments to property and equipment                                 |   |            |        |                      |   |               |        |      |   |         | 14,390  |                |   |                  | 12,130  |  
|                             | Transfer of short-term loans to long-term loans                                         |   |            |        |                      |   |               |        |      |   |         | 10,028  |                |   |                  | 8,453   |  
|                             | Transfer of long-term accounts receivable to current
portion                            |   |            | 465     |                      |   |               |        |      |   |         |        |                |   |                  |        |  
|                             | Transfer of long-term accounts receivable to key- money
deposits                        |   |            |        |                      |   |               | 1,004   |      |   |         |        |                |   |                  |        |  
|                             | Transfer of inventories to prepaid expenses                                             |   |            | 41,287  |                      |   |               |        |      |   |         |        |                |   |                  |        |  
|                             | Transfer of inventories to long-term prepaid expenses                                   |   |            | 29,398  |                      |   |               |        |      |   |         |        |                |   |                  |        |  
|                             | Transfer of inventories to property and equipment                                       |   |            | 204,592 |                      |   |               | 94,826  |      |   |         | 59,374  |                |   |                  | 50,050  |  
|                             | Transfer of property and equipment to inventories                                       |   |            | 12,923  |                      |   |               |        |      |   |         |        |                |   |                  |        |  
|                             | Transfer of construction-in-progress to property and
equipment                          |   |            | 468,163 |                      |   |               | 320,136 |      |   |         | 173,444 |                |   |                  | 146,206 |  
|                             | Transfer of construction-in-progress to intangibles                                     |   |            |        |                      |   |               |        |      |   |         | 16,429  |                |   |                  | 13,849  |  
|                             | Transfer of debentures to current portion                                               |   |            | 43,750  |                      |   |               | 181,500 |      |   |         | 849,330 |                |   |                  | 715,949 |  
|                             | Transfer of long-term debt to current portion                                           |   |            | 21,117  |                      |   |               | 32,767  |      |   |         | 187,454 |                |   |                  | 158,016 |  
|                             | Transfer of long-term obligation under capital leases to
current portion                |   |            | 21,703  |                      |   |               | 35,733  |      |   |         | 38,376  |                |   |                  | 32,349  |  
|                             | Transfer of long-term advances received to current portion                              |   |            |        |                      |   |               | 97,618  |      |   |         | 146,024 |                |   |                  | 123,092 |  
|                             | Recognition of gain (loss) on valuation of investment
securities as capital adjustments |   |            | (1,820  | )                    |   |               | 1,151   |      |   |         | (3,761  | )              |   |                  | (3,170  | )

See accompanying notes to consolidated financial statements.

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HANARO TELECOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000, 2001 AND 2002

1. GENERAL:

(1) Hanaro Telecom, Inc.

Hanaro Telecom, Inc. (Hanaro) was incorporated on September 26, 1997 pursuant
to the laws of the Republic of Korea (Korea). Hanaro was formed following
its selection by the Ministry of Information and Communication (MIC) on June
13, 1997 as the second carrier to provide local telephony services in Korea.
Hanaro commenced providing local call and high- speed data access, including
internet and multimedia access, on April 1, 1999 in the cities of Seoul, Pusan,
Ulsan and Incheon.

On November 11, 1998, Hanaro was listed on the Korea Securities Dealers
Automated Quotation System (KOSDAQ). Hanaro issued ADRs (American Depository
Receipts) on April 4, 2000, which are traded on the National Association of
Securities Dealers Automated Quotation System (NASDAQ).

On December 12, 2002, Hanaro received a license to provide domestic long
distance calls and international calls from the MIC and plans to begin
providing service in October 2003.

Hanaros headquarters is located in Seocho-Gu, Seoul. The Company has 10
domestic branches. Hanaro has invested in the following companies in order to
facilitate and strengthen its services: Hanaro Telecom America, Inc., Hanaro
Realty Development & Management Co., Ltd., Hanaro Telephone & Internet
Information, Inc., and Dreamline Corporation

As of December 31, 2002, the shareholders of the Company are as follows:

|                                                   |  |                  |             |               |  |               |        | 
|-------------------------------------------------- |  | ---------------- | ----------- | ------------- |  | ------------- | ------ | 
|                                                   |  |                  |             |               |  | Percentage of
|                                                   |  | Number of shares |             | ownership (%)
|                                                   |  |                  |             |              
|Samsung Electronics Co., Ltd.                      |  |                  | 23,542,281  |               |  |               | 8.43   | 
|Dacom Corporation                                  |  |                  | 19,754,656  |               |  |               | 7.07   | 
|SK Telecom                                         |  |                  | 15,117,710  |               |  |               | 5.41   | 
|Daewoo Securities Co., Ltd.                        |  |                  | 12,000,000  |               |  |               | 4.30   | 
|LG Electronics, Inc.                               |  |                  | 11,175,047  |               |  |               | 4.00   | 
|LG Insurance Co., Ltd.                             |  |                  | 8,025,156   |               |  |               | 2.87   | 
|LG Telecom Co., Ltd.                               |  |                  | 5,397,574   |               |  |               | 1.93   | 
|Onse Telecom                                       |  |                  | 3,472,533   |               |  |               | 1.24   | 
|Doosan Heavy Industries and Construction Co., Ltd. |  |                  | 2,942,874   |               |  |               | 1.05   | 
|Employee stock ownership association               |  |                  | 2,995,840   |               |  |               | 1.07   | 
|Others                                             |  |                  | 174,899,009 |               |  |               | 62.63  | 
|                                                   |  |                  |             |               |  |               |        | 
|                                                   |  |                  | 279,322,680 |               |  |               | 100.00 | 
|                                                   |  |                  |             |               |  |               |        | 

In response to general unstable economic conditions, the Korean government and
the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming
the banking industry. The Korean government continues to apply pressure to
Korean companies to restructure into more efficient and profitable firms. The
Company may be either directly or indirectly affected by these general unstable
economic conditions and the reform program described above. The accompanying
financial statements reflect managements assessment of the impact to date of
the economic situation on the financial position of the Company. Actual
results may differ materially from managements current assessment.

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(2)  Consolidated Subsidiaries

The consolidated financial statements include the accounts of Hanaro and its
controlled subsidiaries (collectively referred to as the
Company).
Controlled subsidiaries include majority-owned entities and entities of which
Hanaro owns more than 30 percent of the total outstanding voting stock and is
the largest shareholder. Significant inter-company accounts and transactions
have been eliminated in the consolidation. The ownership percentages disclosed
in the following table relate to the period that such entities were
consolidated.

|                                                 |  |  |      |             |      |                |        |      |  |                  |        |  |  |                                                                                 |  |  |  | 
|------------------------------------------------ |  |  | ---- | ----------- | ---- | -------------- | ------ | ---- |  | ---------------- | ------ |  |  | ------------------------------------------------------------------------------- |  |  |  | 
|                                                 |  |  |      | Year        |      | Ownership      |        |      |  |                 
|                                                 |  |  |      | control was |      | percentage (%) |        |      |  |                 
|                                                 |  |  |      | obtained    |      |                |        |      |  |                 
|Subsidiaries                                     |  |  |      |             | 2001 |                |        | 2002 |  | Primary business
|                                                 |  |  |      |             |      |                |        |      |  |                 
|Hanaro Realty Development & Management Co., Ltd. |  |  | 1999 |             |      |                | 99.99  |      |  |                  | 99.99  |  |  | Property management
of Hanaro Telecom, Inc.                                    
|Hanaro Telephone & Internet
Information, Inc     |  |  | 2002 |             |      |                |       |      |  |                  | 99.99  |  |  | Customer Q & A and service                                                     
|Hanaro Customer Service, Inc.                    |  |  | 1999 |             |      |                | 99.99  |      |  |                  |       |  |  | Customer Q&A and service                                                       
|Hanaro
WEBnTV                                    |  |  | 2000 |             |      |                | 100.00 |      |  |                  | 90.91  |  |  | Broadcasting & telecommunication                                               
|Hanaro Internetdesk Co., Ltd.                    |  |  | 2000 |             |      |                | 99.99  |      |  |                  |       |  |  | Customer service                                                               
|Hanaro Technologies, Inc.                        |  |  | 2000 |             |      |                | 99.99  |      |  |                  |       |  |  | Installation, trouble
shooting and maintenance of Hanaro Telecom Inc.s service
|M-commerce Co., Ltd.                             |  |  | 2000 |             |      |                | 45.80  |      |  |                  | 30.29  |  |  | Mobile E-commerce                                                              
|Hanaro Telecom America, Inc.                     |  |  | 2000 |             |      |                | 100.00 |      |  |                  | 100.00 |  |  | Telecommunication service                                                      
|Dreamline Corporation                            |  |  | 2001 |             |      |                | 32.18  |      |  |                  | 32.18  |  |  | Leased line and high-speed data access service                                 
|HanaroDream Inc.                                 |  |  | 2001 |             |      |                | 82.44  |      |  |                  | 42.14  |  |  | On-line distribution of digital                                                
|(formerly, DreamX.net Co.)                     |  |  |      |             |      |                |        |      |  |                  |        |  |  | contents                                                                       

On December 24, 2001, Hannaro acquired 32.18% of Dreamline Corporations common
stock and, accordingly, included Dreamline Corporation and HanaroDream Inc., an
82.4 percent-owned subsidiary of Dreamline Corporation in the 2001 consolidated
financial statements. As a result, the Companys consolidated assets and
equity increased by W521,238 million and W147,908 million, respectively, as
of December 31, 2001. Revenues and expenses of Dreamline Corporation and
HanaroDream Inc. in 2001 were not included in the consolidated statements of
operations for the year ended December 31, 2001 as the acquisition date of
controlling interest was deemed to be on December 31, 2001, which is the
nearest book-closing date from the actual acquisition date.

On January 16, 2002, Hanaro Customer Service, Inc. merged with Hanaro
Internetdesk Co., Ltd. and changed its name to Hanaro Telephone & Internet
Information, Inc. During 2002, the Company liquidated Hanaro Technologies,
Inc. and disposed of a portion of its ownership of M-commerce Co., Ltd.: as a
result, both companies are excluded from the consolidated financial statements
as of December 31, 2002.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

Hanaro and its domestic subsidiaries maintain their official accounting records
in Korean won and prepare statutory consolidated financial statements in the
Korean language (Hangul) in conformity with the accounting principles generally
accepted in the Republic of Korea (Korean GAAP). Certain accounting
principles applied by the Company that conform with financial accounting
standards and accounting principles in the Republic of Korea may not conform
with generally accepted accounting principles in other countries. Accordingly,
these financial statements are intended for use by those who are informed about
Korean accounting principles and practices. The accompanying financial
statements have been condensed, restructured and translated into English with
certain expanded descriptions from the Korean language financial statements.

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The U.S. dollar amounts presented in these financial statements were computed
by translating the Korean won into U.S. dollars at the rate of W1,186.30 to US
$1.00, the noon buying rate in the City of New York for cable transfers in won
as certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 2002, solely for the convenience of the reader. This convenience
translation into U.S. dollars should not be construed as representations that
the Korean won amounts have been, could have been, or could in the future be,
converted at this or any other rate of exchange.

The significant accounting policies followed by the Company in preparing the
accompanying consolidated financial statements are summarized as follows:

Use of Estimates

The preparation of financial statements in accordance with Korean GAAP requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. The most
significant estimates and assumptions relate to revenue recognition, allowance
for doubtful accounts, depreciation, investments in non-listed equity
securities and deferred income taxes. Actual results could differ from those
estimates and may affect amounts reported in future periods. Management
believes that the estimates are reasonable.

Revenue Recognition

Revenue related to installation of service and sales of customer premises
equipment is recognized when the equipment is delivered and installation is
completed. The customer activation fees are recorded as revenues when billed
and revenue for local call and high-speed Internet access is recognized monthly
as the services are provided. Revenue from other services including leased line
services are recognized when the services are provided in accordance with the
contract terms.

Cash and Cash Equivalents

Cash and cash equivalents consist of bank deposits and short-term money market
instruments that can be easily converted into cash and whose risk of value
fluctuation arising from changes of interest rates is not material. Only
investments with maturities of three months or less at the acquisition date are
included in cash equivalents. Restricted deposits and current portion of
long-term deposits are classified as short-term financial instruments.

Short-term Financial Instruments

Short-term financial instruments primarily consist of time deposits with
original maturities of less than one year and repurchase agreements that invest
in short-term highly liquid securities. Short-term financial instruments are
recorded at cost. Interest income on short-term financial instruments is
accrued as earned.

Marketable Securities

Marketable securities are stated at acquisition cost plus incidental expenses.
If the fair value of marketable securities differs from the book value
determined by the individual moving average method, marketable securities are
stated at fair value and the unrealized gain or loss is reflected in current
operations.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is provided based on the estimated loss on
uncollectible individual accounts and historical bad debt experience.

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The increase in the provision and allowance is consistent with the Companys
increase in operating revenues.

Changes in allowance for doubtful accounts of trade receivables and accounts
receivables-other for the years ended December 31, 2000, 2001 and 2002 are as
follows (won in millions):

|                                     |  |        |       |      |  |      |       |   |  |   |        |  
|------------------------------------ |  | ------ | ----- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                     |  | Amount
|                                     |  |       
|                                     |  | 2000   |       | 2001 |  | 2002
|                                     |  |        |       |      |  |     
|Beginning of period                  |  | W      | 95    |      |  | W    | 1,013 |   |  | W | 5,022  |  
|Provision                            |  |        | 734   |      |  |      | 2,760 |   |  |   | 16,589 |  
|Write-offs                           |  |        |      |      |  |      | (25   | ) |  |   | (440   | )
|Changes in consolidated subsidiaries |  |        | 184   |      |  |      | 1,274 |   |  |   | (1     | )
|                                     |  |        |       |      |  |      |       |   |  |   |        |  
|End of period                        |  | W      | 1,013 |      |  | W    | 5,022 |   |  | W | 21,170 |  
|                                     |  |        |       |      |  |      |       |   |  |   |        |  

Inventories

Inventories consist primarily of modems and local area network equipment to be
leased to customers. Inventories are stated at the lower of cost or net
realizable value, cost being determined by the average cost method. If the net
realizable value of inventories is lower than cost, inventories are adjusted to
net realizable value and the difference between cost and revalued amount is
charged to current operations.

Investment Securities

(1)  Equity Securities

Equity securities held for investment (excluding those of affiliates and
subsidiaries discussed in the next paragraph) that are not actively quoted
(unlisted security) are stated at acquisition cost. Actively quoted (listed
security) securities, including those traded over-the-counter, are stated at
fair value with a valuation gain or loss recorded as a capital adjustment. If
the fair value of a listed equity security or the net equity value of an
unlisted equity security held for investment declines compared to acquisition
cost and is not expected to recover (an impaired investment security), the
value of the equity security is adjusted to fair value or net equity value,
with the valuation loss charged to current operations.

Equity securities held for investment in companies in which the Company is able
to exercise significant influence over the investees are accounted for using
the equity method. The Companys share in net income or net loss of investees
is reflected in current operations. Changes in the retained earnings, capital
surplus or other capital accounts of investees are accounted for as an
adjustment to retained earnings or to capital adjustment.

(2)  Debt Securities

Debt securities held for investment are classified as either held-to-maturity
investment debt securities or available-for-sale investment debt securities at
the time of purchase. Investments in debt securities of the types indicated
below are classified as available-for-sale investment debt securities.



| |  | All held-to-maturity investment debt securities if some portion was sold during the current period
|- |  | --------------------------------------------------------------------------------------------------
| 
| |  | Securities obliged to be sold before maturity by legal regulations                                
| 
| |  | Securities accounted for as investment securities impairment loss                                 

Held-to-maturity investment debt securities are stated at acquisition cost, as
determined by the individual moving average method. When the face value of a
held-to-maturity investment debt security differs from its acquisition cost,
the effective interest method is applied to amortize the difference over the
remaining term of the security. Available-for-sale investment debt securities
are stated at fair value, with resulting valuation gains or losses recorded as
a capital adjustment. If the fair value of a held-to-maturity or a
available-for-sale investment debt security declines compared to the
acquisition cost and is not expected to recover (an impaired investment
security), the carrying value of the debt security is adjusted to fair value
with the resulting valuation loss charged to current operations.

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(3)  Gain or Loss on Valuation of Investment Securities

The net unrealized gain or loss is presented as gain or loss on valuation of
investment securities in capital adjustments. An unrealized valuation gain or
loss of investment securities incurred in subsequent periods is deducted from
or added to the previous balance of unrealized valuation gain or loss of
investment securities. When investment securities are sold, the unrealized
valuation gain or loss of investment securities included in the capital
adjustment account is added to or deducted from the gain or loss on disposal.
With respect to an impaired investment security, any unrealized valuation gain
or loss on the security previously included in the capital adjustment account
is reversed.

(4)  Recovery of Impaired Investment Securities

For commercial companies, the recovery of previously impaired investment
securities is accounted for as follows:
For marketable equity securities and available for sale debt securities, the
recovery is recorded in capital adjustment. For unlisted equity securities and
held-to-maturity debt securities, the recovery is recorded in current
operations up to the amount of previously recognized impairment loss.

(5)  Reclassification of Securities

If the Companys objectives change, a trading security can be reclassified to
investment securities, but only as of a balance sheet date. The difference
between the fair value of the security as of the balance sheet date and the
book value is recognized as gain or loss on valuation of trading securities and
credited or charged to current operations. Investment securities cannot be
reclassified to trading securities.

Valuation of Assets and Liabilities at Present Value

Long-term accounts receivable and long-term accounts payable are valued at
their present value as discounted at an appropriate discount rate. Discounts
are amortized using the effective interest rate method and recognized as
interest expense or interest income over the term of the related accounts.

Property and Equipment

Property and equipment are stated at cost. Expenditures that result in the
enhancement of the value or extension of the useful life of the facilities
involved are capitalized as additions to property and equipment. Interest
expense, discount expense and other financial charges, including certain
foreign exchange translation gains and losses on borrowings associated with the
manufacture, purchase, or construction of property and equipment, incurred
prior to the completing the acquisition, are capitalized. Interest
capitalization for the years ended December 31, 2000, 2001 and 2002 are as
follows (won in millions):

|                        |  |        |         |      |  |      |          |   |  |   |          |  
|----------------------- |  | ------ | ------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                        |  | Amount
|                        |  |       
|                        |  | 2000   |         | 2001 |  | 2002
|                        |  |        |         |      |  |     
|Total interest incurred |  | W      | 50,733  |      |  | W    | 112,649  |   |  | W | 171,196  |  
|Charge to expense       |  |        | (44,011 | )    |  |      | (107,231 | ) |  |   | (167,025 | )
|                        |  |        |         |      |  |      |          |   |  |   |          |  
|Interest capitalized    |  | W      | 6,722   |      |  | W    | 5,418    |   |  | W | 4,171    |  
|                        |  |        |         |      |  |      |          |   |  |   |          |  

Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets as follows:

|                                              |  |                        |  | 
|--------------------------------------------- |  | ---------------------- |  | 
|                                              |  | Estimated Useful Lives
|                                              |  |                       
|Buildings, building facilities and structures |  | 50 years              
|Machinery                                     |  | 8 years               
|Vehicles and other                            |  | 5 ~ 8 years           

Impairment of Long-Lived Assets

Long-lived assets are subject to review for impairment. When the book value of
a long-lived asset exceeds its recoverable value, due to obsolescence, damage
or abrupt decline in market value, the decline in value is deducted from the
assets book value and expensed in the year it occurs. Recoverable value is
the greater of net realizable value or useful value.

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Leases

Lease agreements that include a bargain purchase option, result in the transfer
of ownership by the end of the lease term, have a term equal to at least 75% of
the estimated economic life of the leased property or where the present value
of the minimum lease payments at the beginning of the lease term equals or
exceeds 90% of the fair value of the leased property are accounted for as
financial or capital leases. All other leases are accounted for as operating
leases. Assets and liabilities related to financial leases are recorded as
property and equipment and long-term debt, respectively, and the related
interest is calculated using the effective interest rate method. In respect to
operating leases, the future minimum lease payments are expensed ratably over
the lease term while contingent rentals are expensed as incurred.

Intangibles

Intangibles are stated at cost, net of amortization. Amortization is computed
using the straight-line method, based on the estimated useful lives of the
assets as described below.

|                            |  |                        |  | 
|--------------------------- |  | ---------------------- |  | 
|                            |  | Estimated Useful Lives
|                            |  |                       
|Goodwill                    |  | 5 years               
|Property rights of industry |  | 5-10 years            
|Cable line usage rights     |  | 15-20 years           
|Land rights                 |  | 20 years              
|Development costs           |  | 1 year                

Convertible Bonds and Bonds with Warrants

Interest expense on convertible bonds and bonds with warrants is recognized
using the effective interest rate, which equalizes the issued amount of bonds
to the present value of the future cash outflow of the bonds. Accordingly, the
differences between accrued interest and interest paid are presented as an
addition to the nominal value of the bonds as a long-term accrued interest
account.

Discounts on Debentures

Discounts on debentures are amortized over the redemption period of the
debenture using the effective interest rate method. Amortization of discounts
is recognized as interest expense.

Accrued Severance Indemnities

All employees with more than one year of service are entitled to receive a
lump-sum payment upon termination of their employment with the Company, based
on their length of service and rate of pay at the time of termination. The
severance indemnities that would be payable assuming all employees were to
resign amount to W21,419 million and W28,027 million, as of December 31, 2001
and 2002, respectively.

Funding for this liability is not required by law, however, the Company has
insured a portion of its obligations for severance indemnities, in order to
obtain the related tax benefits, by making deposits with insurance companies.
Withdrawal of these deposits, with a balance of W1,135 million as of December
31, 2001, is restricted to the payment of severance indemnities. The amounts
funded under this insurance plan are classified as long-term financial
instruments.

Before April 1999, the Company and its employees paid 3 percent and 6 percent,
respectively, of monthly pay (as defined) to the National Pension Fund in
accordance with the National Pension Law of Korea. The Company paid half of
the employees 6 percent portion and is paid back at the termination of service
by offsetting the receivable against the severance payments. Such receivables,
with a balance of W371 million and W295 million as of December 31, 2001 and
2002, are presented as deduction from accrued severance indemnities. Starting
April 1999, the Company and its employees each pay 4.5 percent of monthly pay
to the National Pension Fund under the revised National Pension Law of Korea.

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##### Table of Contents



The Company has entered into a severance insurance plan in accordance with the
Labor Standard Law of Korea promulgated in 2000. This plan restricts severance
payments directly to the eligible employees and directors, and meets the
funding requirement for tax deduction purposes. The amount funded under this
severance insurance plan of W 3,308 million and W 3,638 million as of December
31, 2001 and 2002, respectively, is presented as a deduction from accrued
severance indemnities.

Changes in accrued severance indemnities for the years ended December 31, 2000,
2001 and 2002 are as follows (won in millions):

|                                     |  |        |        |      |  |      |        |   |  |   |        |  
|------------------------------------ |  | ------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                     |  | Amount
|                                     |  |       
|                                     |  | 2000   |        | 2001 |  | 2002
|                                     |  |        |        |      |  |     
|Beginning of period                  |  | W      | 5,842  |      |  | W    | 10,832 |   |  | W | 21,419 |  
|Severance payments                   |  |        | (1,924 | )    |  |      | (3,524 | ) |  |   | (5,786 | )
|Provision                            |  |        | 6,906  |      |  |      | 12,572 |   |  |   | 13,646 |  
|Changes in consolidated subsidiaries |  |        | 8      |      |  |      | 1,539  |   |  |   | (1,252 | )
|                                     |  |        |        |      |  |      |        |   |  |   |        |  
|                                     |  |        | 10,832 |      |  |      | 21,419 |   |  |   | 28,027 |  
|                                     |  |        |        |      |  |      |        |   |  |   |        |  
|National Pension Fund for employees  |  |        | (466   | )    |  |      | (371   | ) |  |   | (295   | )
|Severance insurance deposits         |  |        | (609   | )    |  |      | (3,308 | ) |  |   | (3,638 | )
|                                     |  |        |        |      |  |      |        |   |  |   |        |  
|End of period                        |  | W      | 9,757  |      |  | W    | 17,740 |   |  | W | 24,094 |  
|                                     |  |        |        |      |  |      |        |   |  |   |        |  

Accounting for Foreign Currency Transactions and Translation

The Company maintains its accounts in Korean won. Transactions in foreign
currencies are recorded in Korean won based on the prevailing rates of exchange
on the transaction date. Monetary accounts with balances denominated in
foreign currencies are recorded and reported in the accompanying financial
statements at the exchange rates prevailing at the balance sheet date and the
translation gains or losses are reflected in current operations. The balances
have been translated using the rate announced by the Korea Exchange Bank, which
was W 1,313.50 and W 1,186.30 to US $1.00 at December 31, 2001 and 2002,
respectively.

Income Tax

The provision for income tax consists of the corporate income tax and resident
surtax currently payable and the changes in deferred income taxes for the year.
The Company recognizes deferred income taxes arising from temporary
differences between amounts reported for financial accounting and income tax
purposes. Deferred income taxes will be offset against those incurred in the
future, if any. Deferred income taxes will be recalculated based on the tax
rate in effect at each balance sheet date.

Stock Compensation Expense

The Company records the difference between the present value of the exercise
price and the stock price at the grant date as compensation expense with a
corresponding credit to the capital adjustment account (using the minimum value
method). The computed deferred compensation expenses are allocated over the
contracted vesting period. When the stock options are exercised with the
issuance of new shares, the difference between the exercise price plus the
stock option cost recorded in the capital adjustment account and the par value
of the new shares issued is recorded as additional paid-in capital. However,
for the stock options granted in 1999, compensation expense was calculated as
the difference between the stock price at year-end and the exercise price
multiplied by the number of stock options (see Note 19).

Net Loss Per Share

Loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding during the period.

Basic and diluted loss per share for the years ended December 31, 2000, 2001
and 2002 are computed as follows:

|                                                                    |  |        |          |      |  |      |          |   |  |   |          |  
|------------------------------------------------------------------- |  | ------ | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                    |  | Amount
|                                                                    |  |       
|                                                                    |  | 2000   |          | 2001 |  | 2002
|                                                                    |  |        |          |      |  |     
|Net loss (won in millions)                                          |  | W      | (305,170 | )    |  | W    | (245,902 | ) |  | W | (125,025 | )
|Weighted average number of
common shares outstanding (In
thousands) |  |        | 257,836  |      |  |      | 264,000  |   |  |   | 275,849  |  
|                                                                    |  |        |          |      |  |      |          |   |  |   |          |  
|Basic and diluted loss per share                                    |  | W      | (1,184   | )    |  | W    | (931     | ) |  | W | (453     | )
|                                                                    |  |        |          |      |  |      |          |   |  |   |          |  

F-16



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##### Table of Contents



Bonds with warrants and stock options were not included in computing diluted
loss per share in 2000, 2001 and 2002, respectively, because their effects were
antidilutive.

Comparative Presentation

Certain accounts of prior years financial statements are reclassified to
conform to the current years presentation. This reclassification does not
affect the net loss and net assets of the prior periods.

3.     CASH AND CASH EQUIVALENTS:

Cash and cash equivalents as of December 31, 2001 and 2002 are as follows (won
in millions):

|                                  |  |                             |           |        |  |      |         |  |  |   |         | 
|--------------------------------- |  | --------------------------- | --------- | ------ |  | ---- | ------- |  |  | - | ------- | 
|                                  |  | Interest rate per annum (%) |           | Amount
|                                  |  |                             |           |       
|                                  |  | 2002                        |           | 2001   |  | 2002
|                                  |  |                             |           |        |  |     
|Cash on hand                      |  |                             |          |        |  | W    | 17      |  |  | W | 14      | 
|Passbook accounts                 |  |                             | 1.0       |        |  |      | 5,178   |  |  |   | 6,327   | 
|Time deposits                     |  |                             | 4.3 ~ 4.7 |        |  |      | 22,300  |  |  |   | 21,171  | 
|Time deposits in foreign currency |  |                             |          |        |  |      | 12,482  |  |  |   |        | 
|Money Market Funds                |  |                             | 3.7 ~ 4.8 |        |  |      | 160,262 |  |  |   | 214,100 | 
|Repurchase agreements             |  |                             | 4.7 ~ 5.0 |        |  |      | 11,740  |  |  |   | 10,000  | 
|Specified money trust             |  |                             | 4.6 ~ 5.1 |        |  |      | 53,000  |  |  |   | 42,740  | 
|Fixed interest instruments        |  |                             | 5.1       |        |  |      | 28,000  |  |  |   | 10,000  | 
|Money Market Deposit Account      |  |                             | 3.8       |        |  |      | 5,713   |  |  |   | 1,766   | 
|                                  |  |                             |           |        |  |      |         |  |  |   |         | 
|                                  |  |                             |           |        |  | W    | 298,692 |  |  | W | 306,118 | 
|                                  |  |                             |           |        |  |      |         |  |  |   |         | 

4.     SHORT-TERM AND LONG-TERM FINANCIAL INSTRUMENTS:



|(1) |  | Short-term financial instruments as of December 31, 2001 and 2002 are as
follows (won in millions):
|--- |  | ---------------------------------------------------------------------------------------------------

|                      |  |                             |           |        |  |      |         |  |  |   |         | 
|--------------------- |  | --------------------------- | --------- | ------ |  | ---- | ------- |  |  | - | ------- | 
|                      |  | Interest rate per annum (%) |           | Amount
|                      |  |                             |           |       
|                      |  | 2002                        |           | 2001   |  | 2002
|                      |  |                             |           |        |  |     
|Time deposits         |  |                             | 4.0 ~ 6.2 |        |  | W    | 82,040  |  |  | W | 104,476 | 
|Repurchase agreements |  |                             | 4.6 ~ 5.1 |        |  |      | 68,000  |  |  |   | 25,067  | 
|Specified money trust |  |                             | 5.1       |        |  |      |        |  |  |   | 20,956  | 
|                      |  |                             |           |        |  |      |         |  |  |   |         | 
|                      |  |                             |           |        |  | W    | 150,040 |  |  | W | 150,499 | 
|                      |  |                             |           |        |  |      |         |  |  |   |         | 



|(2) |  | Long-term financial instruments as of December 31, 2000 and 2001 are as
follows (won in millions):
|--- |  | --------------------------------------------------------------------------------------------------

|                                       |  |                             |   |        |  |      |       |  |  |   |    | 
|-------------------------------------- |  | --------------------------- | - | ------ |  | ---- | ----- |  |  | - | -- | 
|                                       |  | Interest rate per annum (%) |   | Amount
|                                       |  |                             |   |       
|                                       |  | 2002                        |   | 2001   |  | 2002
|                                       |  |                             |   |        |  |     
|Deposits for checking accounts         |  |                             |  |        |  | W    | 31    |  |  | W | 23 | 
|Severance indemnity insurance
deposits |  |                             |  |        |  |      | 1,135 |  |  |   |   | 
|Accident insurance deposits            |  |                             |  |        |  |      | 95    |  |  |   |   | 
|                                       |  |                             |   |        |  |      |       |  |  |   |    | 
|                                       |  |                             |   |        |  | W    | 1,261 |  |  | W | 23 | 
|                                       |  |                             |   |        |  |      |       |  |  |   |    | 

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##### Table of Contents



5.     RESTRICTED DEPOSITS:

As of December 31, 2001 and 2002, the following deposits are subject to
withdrawal restrictions as guarantees for checking accounts, severance payments
and other reasons (won in millions).

|                                  |                                        |   |        |        |      |   |        |        | 
|--------------------------------- | -------------------------------------- | - | ------ | ------ | ---- | - | ------ | ------ | 
|                                  |                                        |   | Amount
|                                  |                                        |   |       
|                                  |                                        |   | 2001   |        | 2002
|                                  |                                        |   |        |        |     
|Short-term financial instruments: |                                        |   |        |        |      |   |        |       
|                                  | Time deposits                          |   | W      | 53,630 |      |   | W      | 79,749 | 
|                                  | Repurchase agreements                  |   |        | 5,000  |      |   |        | 14,000 | 
|                                  |                                        |   |        |        |      |   |        |       
|                                  |                                        |   | 58,630 |        |      |   | 93,749 |       
|                                  |                                        |   |        |        |      |   |        |       
|Long-term financial instruments:  |                                        |   |        |        |      |   |        |       
|                                  | Deposits for checking accounts         |   |        | 31     |      |   |        | 23     | 
|                                  | Severance indemnity insurance deposits |   |        | 1,135  |      |   |        |       | 
|                                  | Accident insurance deposits            |   |        | 95     |      |   |        |       | 
|                                  |                                        |   |        |        |      |   |        |       
|                                  |                                        |   | 1,261  |        |      |   | 23     |       
|                                  |                                        |   |        |        |      |   |        |       
|                                  |                                        | W | 59,891 |        |      | W | 93,772 |       
|                                  |                                        |   |        |        |      |   |        |        | 

6.     MARKETABLE SECURITIES:

Marketable securities as of December 31, 2001 and 2002 are as follows (won in
millions):

|                                             |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 
|-------------------------------------------- |  | ---------------- | ------ | ---------- |  | ---------------- | ------ | ---------- |  | - | ------ |  |  | - | ------ | 
|                                             |  | 2001             |        | 2002      
|                                             |  |                  |        |           
|                                             |  | Acquisition cost |        | Fair value |  | Acquisition cost |        | Fair value
|                                             |  |                  |        |            |  |                  |        |           
|Beneficiary certificates (Equity securities) |  | W                | 25,000 |            |  | W                | 20,468 |            |  | W | 25,000 |  |  | W | 17,630 | 
|Beneficiary certificates (Debt securities)   |  |                  | 30,000 |            |  |                  | 30,118 |            |  |   |       |  |  |   |       | 
|Government bonds                             |  |                  | 143    |            |  |                  | 158    |            |  |   | 153    |  |  |   | 181    | 
|                                             |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 
|                                             |  | W                | 55,143 |            |  | W                | 50,744 |            |  | W | 25,153 |  |  | W | 17,811 | 
|                                             |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 

7.     INVESTMENT SECURITIES:



|(1) |  | Investment securities as of December 31, 2001 and 2002 consist of the
following (won in millions):
|--- |  | --------------------------------------------------------------------------------------------------

|                             |  |        |        |      |  |   |        | 
|---------------------------- |  | ------ | ------ | ---- |  | - | ------ | 
|                             |  | Amount
|                             |  |       
|                             |  | 2001   |        | 2002
|                             |  |        |        |     
|Listed equity securities     |  | W      | 9,336  |      |  | W | 4,735  | 
|Non-listed equity securities |  |        | 37,419 |      |  |   | 31,473 | 
|Debt securities              |  |        | 16,851 |      |  |   | 21,460 | 
|                             |  |        |        |      |  |   |        | 
|                             |  | W      | 63,606 |      |  | W | 57,668 | 
|                             |  |        |        |      |  |   |        | 



|(2) |  | Listed equity securities as of December 31, 2001 and 2002 are as follows
(won in millions):
|--- |  | -------------------------------------------------------------------------------------------

|                           |  |                  |       |            |  |                  |       |            |  |   |       |  |  |   |       | 
|-------------------------- |  | ---------------- | ----- | ---------- |  | ---------------- | ----- | ---------- |  | - | ----- |  |  | - | ----- | 
|                           |  | 2001             |       | 2002      
|                           |  |                  |       |           
|                           |  | Acquisition cost |       | Fair value |  | Acquisition cost |       | Fair value
|                           |  |                  |       |            |  |                  |       |           
|LG Telecom Co., Ltd.       |  | W                | 5,396 |            |  | W                | 8,534 |            |  | W | 5,396 |  |  | W | 4,505 | 
|Netsecure Technology, Inc. |  |                  | 1,399 |            |  |                  | 802   |            |  |   | 1,399 |  |  |   | 166   | 
|IMRI Co., Ltd.             |  |                  |      |            |  |                  |      |            |  |   | 800   |  |  |   | 64    | 
|                           |  |                  |       |            |  |                  |       |            |  |   |       |  |  |   |       | 
|                           |  | W                | 6,795 |            |  | W                | 9,336 |            |  | W | 7,595 |  |  | W | 4,735 | 
|                           |  |                  |       |            |  |                  |       |            |  |   |       |  |  |   |       | 

F-18



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##### Table of Contents





|(3) |  | Non-listed equity securities as of December 31, 2001 and 2002 are as
follows (won in millions):
|--- |  | -----------------------------------------------------------------------------------------------

|                                                        |  |               |       |            |  |               |        |                  |  |                 |       |            |  |   |        |  |  |   |        |  |  |   |        | 
|------------------------------------------------------- |  | ------------- | ----- | ---------- |  | ------------- | ------ | ---------------- |  | --------------- | ----- | ---------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                        |  | 2001          |       | 2002      
|                                                        |  |               |       |           
|Company                                                 |  | Ownership (%) |       | Book value |  | Ownership (%) |        | Acquisition cost |  | Net asset value |       | Book value
|                                                        |  |               |       |            |  |               |        |                  |  |                 |       |           
|Korea Information Assurance, Inc.                       |  |               | 0.50  |            |  | W             | 100    |                  |  |                 | 0.47  |            |  | W | 100    |  |  | W | 83     |  |  | W | 100    | 
|Media Valley, Inc.                                      |  |               | 5.40  |            |  |               | 497    |                  |  |                 | 5.44  |            |  |   | 900    |  |  |   | 256    |  |  |   | 256    | 
|CCR Inc.                                                |  |               | 9.64  |            |  |               | 1,780  |                  |  |                 | 2.08  |            |  |   | 1,780  |  |  |   | 2,445  |  |  |   | 1,780  | 
|C.C.S. Inc.                                             |  |               | 10.00 |            |  |               | 4,500  |                  |  |                 | 10.00 |            |  |   | 4,500  |  |  |   | 2,071  |  |  |   | 4,500  | 
|Dauinternet, Inc.                                       |  |               | 1.11  |            |  |               | 1,100  |                  |  |                 | 0.63  |            |  |   | 1,100  |  |  |   | 62     |  |  |   | 1,100  | 
|Korea Cable Television Suh-kyung
Broadcasting Co., Ltd. |  |               | 18.18 |            |  |               | 3,999  |                  |  |                 | 18.18 |            |  |   | 3,999  |  |  |   | 2,229  |  |  |   | 3,999  | 
|Korea Cable Television Suwon
Broadcasting Co., Ltd.     |  |               | 2.25  |            |  |               | 1,894  |                  |  |                 |      |            |  |   |       |  |  |   |       |  |  |   |       | 
|Korea Cable Television Kyung-nam
Broadcasting Co., Ltd. |  |               | 8.31  |            |  |               | 4,311  |                  |  |                 | 8.31  |            |  |   | 4,311  |  |  |   | 2,185  |  |  |   | 4,311  | 
|Nae-Il network Co., Ltd.                                |  |               | 16.19 |            |  |               | 3,400  |                  |  |                 | 16.19 |            |  |   | 3,400  |  |  |   | 2,312  |  |  |   | 3,400  | 
|Engineering Benevolent Association                      |  |               | 0.03  |            |  |               | 14     |                  |  |                 | 0.03  |            |  |   | 14     |  |  |   | 14     |  |  |   | 14     | 
|KDBC-Hanaro Interventure Fund                           |  |               | 31.00 |            |  |               | 3,100  |                  |  |                 | 31.00 |            |  |   | 3,100  |  |  |   | 2,865  |  |  |   | 3,100  | 
|Dream Venture Fund 1                                    |  |               | 50.00 |            |  |               | 3,000  |                  |  |                 | 50.00 |            |  |   | 3,000  |  |  |   | 2,713  |  |  |   | 3,000  | 
|Other                                                   |  |               |       |            |  |               | 9,724  |                  |  |                 |       |            |  |   | 14,973 |  |  |   | 4,651  |  |  |   | 5,913  | 
|                                                        |  |               |       |            |  |               |        |                  |  |                 |       |            |  |   |        |  |  |   |        |  |  |   |        | 
|                                                        |  |               |       |            |  | W             | 37,419 |                  |  |                 |       |            |  | W | 41,177 |  |  | W | 21,886 |  |  | W | 31,473 | 
|                                                        |  |               |       |            |  |               |        |                  |  |                 |       |            |  |   |        |  |  |   |        |  |  |   |        | 



| |  |  | Non-listed equity securities of which the net asset value declined compared
to acquisition cost and is not expected to recover were adjusted to net
asset value, with the impairment loss charged to current operations.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Debt securities as of December 31, 2001 and 2002 are as follows (won in
millions):
|--- |  | ----------------------------------------------------------------------------------

|                  |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 
|----------------- |  | ---------------- | ------ | ---------- |  | ---------------- | ------ | ---------- |  | - | ------ |  |  | - | ------ | 
|                  |  | 2001             |        | 2002      
|                  |  |                  |        |           
|                  |  | Acquisition cost |        | Book value |  | Acquisition cost |        | Book value
|                  |  |                  |        |            |  |                  |        |           
|Government bond   |  | W                | 8      |            |  | W                | 8      |            |  | W | 4      |  |  | W | 4      | 
|Corporate bond    |  |                  | 240    |            |  |                  | 240    |            |  |   | 240    |  |  |   | 240    | 
|Subordinate bonds |  |                  | 19,937 |            |  |                  | 16,603 |            |  |   | 23,386 |  |  |   | 21,216 | 
|                  |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 
|                  |  | W                | 20,185 |            |  | W                | 16,851 |            |  | W | 23,630 |  |  | W | 21,460 | 
|                  |  |                  |        |            |  |                  |        |            |  |   |        |  |  |   |        | 



| |  |  | Subordinate bonds were acquired by transfer of asset backed securities and
issuance of collateralized bond obligation.
| |  |  | ----------------------------------------------------------------------------------------------------------------------

8.     LOANS TO EMPLOYEES:

Short-term and long-term loans to employees as of December 31, 2001 and 2002
are as follows (won in millions):

|                                       |                                 |  |              |  |            |   |           |      |            |   |           |        |   |   |       |     |   |   |        |        |  
|-------------------------------------- | ------------------------------- |  | ------------ |  | ---------- | - | --------- | ---- | ---------- | - | --------- | ------ | - | - | ----- | --- | - | - | ------ | ------ | -
|                                       |                                 |  |              |  |            |   | Amount   
|                                       |                                 |  |              |  |            |   |          
|                                       |                                 |  |              |  |            |   | 2001      |      | 2002      
|                                       |                                 |  | Interest per |  |            |   |          
|                                       |                                 |  | annum %      |  | Short-term |   | Long-term |      | Short-term |   | Long-term
|                                       |                                 |  |              |  |            |   |           |      |            |   |          
|Loans to employees for share ownership |                                 |  |             |  |            | W | 10,199    |      |            | W | 6,978     |        |   | W |      |     |   | W | 16,373 |       
|Loans to employees for housing         |                                 |  | 2.0          |  |            |   | 880       |      |            |   | 5,086     |        |   |   | 1,148 |     |   |   | 6,740  |       
|Other                                  |                                 |  |             |  |            |   | 70        |      |            |   | 54        |        |   |   | 109   |     |   |   | 99     |       
|                                       |                                 |  |              |  |            |   |           |      |            |   |           |        |   |   |       |     |   |   |        |       
|                                       |                                 |  |              |  |            |   | 11,149    |      |            |   | 12,118    |        |   |   | 1,257 |     |   |   | 23,212 |       
|                                       | Less: discount on present value |  |              |  |            |   |           | (444 | )          |   |           | (2,260 | ) |   |       | (25 | ) |   |        | (3,357 | )
|                                       |                                 |  |              |  |            |   |           |      |            |   |           |        |   |   |       |     |   |   |        |       
|                                       |                                 |  |              |  |            | W | 10,705    |      |            | W | 9,858     |        |   | W | 1,232 |     |   |   | 19,855 |       
|                                       |                                 |  |              |  |            |   |           |      |            |   |           |        |   |   |       |     |   |   |        |       

9.     PREPAID EXPENSES AND LONG-TERM PREPAID EXPENSES:

The acquisition cost of personal computers, which are related to the Companys
PC-PLUS I and II program, are recorded as prepaid expenses at the time of sales
and recognized as expense over the three-year term of the agreement. W5,836
million is recorded as long-term prepaid expense as of December 31, 2001 and W27,056
million and W5,836 million are recorded as prepaid expenses as of December 31,
2001 and 2002, respectively.

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10.     PROPERTY AND EQUIPMENT:

Property and equipment as of December 31, 2001 and 2002 are as follows (won in
millions):

|                               |            |   |           |          |      |   |            |          |  
|------------------------------ | ---------- | - | --------- | -------- | ---- | - | ---------- | -------- | -
|                               |            |   | Amount   
|                               |            |   |          
|                               |            |   | 2001      |          | 2002
|                               |            |   |           |          |     
|Land                           |            | W | 153,703   |          |      | W | 157,962    |         
|Buildings                      |            |   | 237,251   |          |      |   | 256,692    |         
|Structures                     |            |   | 3,574     |          |      |   | 3,607      |         
|Machinery                      |            |   | 3,186,381 |          |      |   | 3,589,543  |         
|Vehicles                       |            |   | 859       |          |      |   | 788        |         
|Other                          |            |   | 66,596    |          |      |   | 57,901     |         
|Construction in progress       |            |   | 101,601   |          |      |   | 85,121     |         
|Machinery in transit           |            |   | 268       |          |      |   | 460        |         
|                               |            |   |           |          |      |   |            |         
|                               |            |   | 3,750,233 |          |      |   | 4,152,074  |         
|                               |            |   |           |          |      |   |            |         
|Less: Accumulated depreciation |            |   |           |          |      |   |            |         
|                               | Buildings  |   |           | (11,302  | )    |   |            | (16,613  | )
|                               | Structures |   |           | (230     | )    |   |            | (319     | )
|                               | Machinery  |   |           | (568,651 | )    |   |            | (971,848 | )
|                               | Vehicles   |   |           | (375     | )    |   |            | (403     | )
|                               | Other      |   |           | (23,086  | )    |   |            | (28,577  | )
|                               |            |   |           |          |      |   |            |         
|                               |            |   | (603,644  | )        |      |   | (1,017,760 | )       
|                               |            |   |           |          |      |   |            |         
|                               |            | W | 3,146,589 |          |      | W | 3,134,314  |         
|                               |            |   |           |          |      |   |            |         

Depreciable assets are insured for fire and other casualty losses up to W2,068,311 million and W2,315,810 million as of December 31, 2001 and 2002,
respectively.

The market value of the Companys land based on the official price of land
(published by Ministry of Construction and Traffic) is W135,516 million and
W139,010 million as of December 31, 2001 and 2002, respectively.

11.     INTANGIBLES:



|(1) |  | Intangibles as of December 31, 2001 and 2002 are as follows (won in
millions):
|--- |  | ------------------------------------------------------------------------------

|                            |  |        |         |      |  |   |         |  
|--------------------------- |  | ------ | ------- | ---- |  | - | ------- | -
|                            |  | Amount
|                            |  |       
|                            |  | 2001   |         | 2002
|                            |  |        |         |     
|Goodwill                    |  | W      | 11,329  |      |  | W | 6,742   |  
|Property rights of industry |  |        | 168     |      |  |   | 111     |  
|Cable line usage rights     |  |        | 13,680  |      |  |   | 39,757  |  
|Development costs           |  |        | 3,113   |      |  |   | 999     |  
|Land rights                 |  |        | 74      |      |  |   | 70      |  
|Organization costs          |  |        | 1       |      |  |   |        |  
|Other                       |  |        | 2,515   |      |  |   | 1,348   |  
|Negative goodwill (Note 12) |  |        | (29,938 | )    |  |   | (26,845 | )
|                            |  |        |         |      |  |   |         |  
|                            |  | W      | 942     |      |  | W | 22,182  |  
|                            |  |        |         |      |  |   |         |  



|(2) |  | Amortization of intangibles for the years ended December 31, 2000, 2001
and 2002 is as follows (won in millions):
|--- |  | -----------------------------------------------------------------------------------------------------------------

|                            |  |        |        |      |  |      |        |  |  |   |       | 
|--------------------------- |  | ------ | ------ | ---- |  | ---- | ------ |  |  | - | ----- | 
|                            |  | Amount
|                            |  |       
|                            |  | 2000   |        | 2001 |  | 2002
|                            |  |        |        |      |  |     
|Goodwill                    |  | W      | 3,697  |      |  | W    | 3,751  |  |  | W | 481   | 
|Property rights of industry |  |        |       |      |  |      | 17     |  |  |   | 7     | 
|Cable line usage rights     |  |        | 623    |      |  |      | 715    |  |  |   | 1,825 | 
|Development costs           |  |        | 6,840  |      |  |      | 13,990 |  |  |   | 6,886 | 
|Land rights                 |  |        |       |      |  |      | 4      |  |  |   | 4     | 
|Other                       |  |        | 145    |      |  |      | 309    |  |  |   | 510   | 
|                            |  |        |        |      |  |      |        |  |  |   |       | 
|                            |  | W      | 11,305 |      |  | W    | 18,786 |  |  | W | 9,713 | 
|                            |  |        |        |      |  |      |        |  |  |   |       | 

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|(3) |  | Changes in development costs (intangibles) for the years ended December
31, 2000, 2001 and 2002 are as follows (won in millions):
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------

|                                     |  |        |        |      |  |      |         |   |  |   |        |  
|------------------------------------ |  | ------ | ------ | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                     |  | Amount
|                                     |  |       
|                                     |  | 2000   |        | 2001 |  | 2002
|                                     |  |        |        |      |  |     
|Beginning of year                    |  | W      | 2,396  |      |  | W    | 7,066   |   |  | W | 3,113  |  
|Increase                             |  |        | 11,510 |      |  |      | 10,649  |   |  |   | 6,633  |  
|Amortization                         |  |        | (6,840 | )    |  |      | (13,990 | ) |  |   | (6,886 | )
|Recognition of impairment loss       |  |        |       |      |  |      | (612    | ) |  |   |       |  
|Changes in consolidated
subsidiaries |  |        |       |      |  |      |        |   |  |   | (1,861 | )
|                                     |  |        |        |      |  |      |         |   |  |   |        |  
|End of year                          |  | W      | 7,066  |      |  | W    | 3,113   |   |  | W | 999    |  
|                                     |  |        |        |      |  |      |         |   |  |   |        |  



|(4) |  | W7,499 million, W7,133 million and W4,784 million of ordinary research
and development costs were charged to expense as incurred for the years
ended December 31, 2000, 2001 and 2002, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12.     NEGATIVE GOODWILL:

On December 24, 2001, HANARO acquired 32.18% of Dreamline Corporation
(Dreamline)s common stock for W39,530 million. The acquisition was accounted
for in accordance with the purchase method, with the W29,938 million excess of
the fair value of Dreamlines net assets over the acquisition cost being
assigned to negative goodwill. Negative goodwill is being recognized as income
over the remaining weighted average useful life of the identifiable acquired
depreciable or amortizable assets.

Change in negative goodwill for the year ended December 31, 2002 is as follows
(won in millions):

|                    |  |                      |        |                        |  |       |       |   |  |   |        |  
|------------------- |  | -------------------- | ------ | ---------------------- |  | ----- | ----- | - |  | - | ------ | -
|                    |  | Amounts allocated to
|                    |  |                     
|                    |  | Depreciable assets   |        | Non-depreciable assets |  | Total
|                    |  |                      |        |                        |  |      
|Beginning of period |  | W                    | 27,860 |                        |  | W     | 2,078 |   |  | W | 29,938 |  
|Amortization        |  |                      | (2,786 | )                      |  |       | (307  | ) |  |   | (3,093 | )
|                    |  |                      |        |                        |  |       |       |   |  |   |        |  
|End of period       |  | W                    | 25,074 |                        |  | W     | 1,771 |   |  | W | 26,845 |  
|                    |  |                      |        |                        |  |       |       |   |  |   |        |  

13.     LEASES:



|(1) |  | The Company has operating lease agreements for the rights to use various
underground facilities to house its fiber-optic cable network, leased
lines, telecommunication equipments and automobiles with Metropolitan
Subway Corp., Powercomm Corp., Dacom Corp., Cisco Systems Capital Korea
Ltd. and AVIS RENT A CAR Co. The payment schedule for the operating
leases is as follows (won in millions):
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |  |                        |       |              |  |            |        |             |  |                   |        |  |  |   |       |  |  |   |         | 
|---- |  | ---------------------- | ----- | ------------ |  | ---------- | ------ | ----------- |  | ----------------- | ------ |  |  | - | ----- |  |  | - | ------- | 
|     |  | Amount                
|     |  |                       
|     |  |                        |       |              |  |            |        |             |  | Telecommunication |        |  |  |   |       |  |  |  
|Year |  | Underground facilities |       | Leased lines |  | equipments |        | Automobiles |  | Total            
|     |  |                        |       |              |  |            |        |             |  |                  
|2003 |  | W                      | 5,017 |              |  | W          | 17,157 |             |  | W                 | 23,518 |  |  | W | 818   |  |  | W | 46,510  | 
|2004 |  |                        | 2,851 |              |  |            | 14,936 |             |  |                   | 22,787 |  |  |   | 236   |  |  |   | 40,810  | 
|2005 |  |                        | 232   |              |  |            | 14,936 |             |  |                   | 9,222  |  |  |   | 38    |  |  |   | 24,428  | 
|2006 |  |                        | 116   |              |  |            |       |             |  |                   |       |  |  |   | 3     |  |  |   | 119     | 
|     |  |                        |       |              |  |            |        |             |  |                   |        |  |  |   |       |  |  |   |         | 
|     |  | W                      | 8,216 |              |  | W          | 47,029 |             |  | W                 | 55,527 |  |  | W | 1,095 |  |  | W | 111,867 | 
|     |  |                        |       |              |  |            |        |             |  |                   |        |  |  |   |       |  |  |   |         | 



|(2) |  | The Company also has capital lease agreements with Korea Hewlett Packard
Co., LG Card Services Corp.,
Samsung Card Co., Ltd., Shinhan Capital Co., Ltd., Yonhap Capital Co., Ltd.,
and Cisco Systems Capital Korea Ltd. for certain machinery and equipment. As
of December 31, 2002 and 2001, the acquisition cost of machinery and
equipment under capital leases was W95,729 million and W75,203 million,
respectively, and depreciation expenses related to the these capital leases
for the years ended December 31, 2002 and 2001 amount to W11,071 million and
W4,920 million, respectively.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | The future annual payments under
these capital lease agreements as of December 31, 2002 are as follows (won in
millions and dollar in thousands):

|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|---- |  | --------------------- | ------ | ---------- |  | -------------- | ----- | ---------- | - | ---------- | ------ | -------------- |  | ------------- | ----- |  |  | - | --- |  |  | - | ----- |  |  | - | ------ | 
|     |  | Principal             |        | Interest   |  |               
|     |  |                       |        |            |  | Total         
|Year |  | Korean won            |        | US dollars |  | Won equivalent |       | Korean won |   | US dollars |        | Won equivalent |  | lease payment
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |              
|2003 |  | W                     | 31,260 |            |  | $              | 4,118 |            |   | W          | 4,885  |                |  | W             | 4,191 |  |  | $ | 499 |  |  | W | 591   |  |  | W | 40,927 | 
|2004 |  |                       | 20,861 |            |  |                | 2,733 |            |   |            | 3,242  |                |  |               | 1,987 |  |  |   | 127 |  |  |   | 151   |  |  |   | 26,241 | 
|2005 |  |                       | 11,389 |            |  |                | 147   |            |   |            | 174    |                |  |               | 619   |  |  |   | 3   |  |  |   | 4     |  |  |   | 12,186 | 
|2006 |  |                       | 2,421  |            |  |                |      |            |   |            |       |                |  |               | 72    |  |  |   |    |  |  |   |      |  |  |   | 2,493  | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  | W                     | 65,931 |            |  | $              | 6,998 |            |   |            | 8,301  |                |  | W             | 6,869 |  |  | $ | 629 |  |  |   | 746   |  |  | W | 81,847 | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   |            | 65,931 |                |  |               |       |  |  |   |     |  |  |   | 6,869 |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   |            | 74,232 |                |  |               |       |  |  |   |     |  |  | W | 7,615 |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  | Less: Current portion |        |            |  |                |       | (36,145    | ) |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   | W          | 38,087 |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 
|     |  |                       |        |            |  |                |       |            |   |            |        |                |  |               |       |  |  |   |     |  |  |   |       |  |  |   |        | 



|14. |  | SHORT-TERM BORROWINGS:
|--- |  | ----------------------



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Short-term borrowings as of December 31, 2001 and 2002 are as follows (won in
millions):

|                               |  |                             |             |        |  |      |                |   |  |   |        | 
|------------------------------ |  | --------------------------- | ----------- | ------ |  | ---- | -------------- | - |  | - | ------ | 
|                               |  | Interest rate per annum (%) |             | Amount
|                               |  |                             |             |       
|                               |  | 2002                        |             | 2001   |  | 2002
|                               |  |                             |             |        |  |     
|Bank overdraft                 |  |                             |            |        |  | W    | 2,899          |   |  | W |       | 
|General loans                  |  |                             | 6.80 ~ 8.20 |        |  |      | 3,019          |   |  |   | 55,000 | 
|Issuance of commercial paper   |  |                             | 9.00        |        |  |      | 55,000         |   |  |   | 8,000  | 
|Collateralized Bond Obligation |  |                             |            |        |  |      | 9,600          |   |  |   |       | 
|Loans in foreign currency      |  |                             |            |        |  |      | 95             |   |  |   |       | 
|                               |  |                             |             |        |  |      | (JPY 9,400,000 | ) |  |   |        | 
|                               |  |                             |             |        |  |      |                |   |  |   |        | 
|                               |  |                             |             |        |  | W    | 70,613         |   |  | W | 63,000 | 
|                               |  |                             |             |        |  |      |                |   |  |   |        | 



|15. |  | LONG-TERM DEBT AND DEBENTURES:                                                                    
|--- |  | --------------------------------------------------------------------------------------------------
|   
|(1) |  | Long-term debt in local currency as of December 31, 2001 and 2002 is as
follows (won in millions):

|                           |                           |  |                             |  |        |   |         |   |  |   |          |      |  
|-------------------------- | ------------------------- |  | --------------------------- |  | ------ | - | ------- | - |  | - | -------- | ---- | -
|                           |                           |  | Interest rate per annum (%) |  | Amount
|                           |                           |  |                             |  |       
|                           |                           |  | 2002                        |  | 2001   |   | 2002   
|                           |                           |  |                             |  |        |   |        
|Information promotion fund |                           |  | 5.91 ~ 7.25                 |  |        | W | 159,727 |   |  | W | 180,590  |     
|General loans              |                           |  | 6.00 ~ 9.94                 |  |        |   | 66,712  |   |  |   | 63,985   |     
|Asset backed loan (ABL)    |                           |  | 8.40                        |  |        |   |        |   |  |   | 136,700  |     
|                           |                           |  |                             |  |        |   |         |   |  |   |          |     
|                           |                           |  |                             |  |        |   | 226,439 |   |  |   | 381,275  |     
|Less: Current portion      |                           |  |                             |  |        |   | (18,568 | ) |  |   | (171,945 | )   
|                           | Discount on present value |  |                             |  |        |   |         |  |  |   |          | (398 | )
|                           |                           |  |                             |  |        |   |         |   |  |   |          |     
|                           |                           |  |                             |  |        | W | 207,871 |   |  | W | 208,932  |     
|                           |                           |  |                             |  |        |   |         |   |  |   |          |     



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On April 18, 2002, Hanaro transferred beneficiary certificates of W 207,000
million for the amount of W 226,800 million issued by KB Bank to Hana Dream
Limited Co.(Hanadream) in exchange for the right to receive certain of
Hanaros future trade receivables, which are expected to be incurred from
April 2002 to April 2004. Hanadream issued Asset Backed Loans (ABL) amounting
to W 207,000 million on April 25, 2002, of which the subordinate
loan of W7,000 million was loaned by the Company and W 200,000 million was
loaned by the banks. The proceeds of W200,000 million were remitted to
Hanaro. In relation to the issuance of ABL, Hanaro recognizes the difference
between the trade receivables and the reduced long-term debt as interest
expense. The balance of long-term debt and current portion of long-term debt
as of December 31, 2002 amounts to W 26,300 million and W 110,400 million,
respectively, and W 11,864 million was recorded as
interest expense for the year ended December 31, 2002.

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|(2) |  | Long-term debt in foreign currency as of December 31, 2001 and 2002 is as
follows (won in millions, dollars in thousands):
|--- |  | --------------------------------------------------------------------------------------------------------------------------

|                      |  |                             |      |            |  |                |         |      |  |      |         |      |  |   |         |   |  |   |         |  
|--------------------- |  | --------------------------- | ---- | ---------- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                      |  | Interest rate per annum (%) |      | US dollars |  | Won equivalent
|                      |  |                             |      |            |  |               
|                      |  |                             | 2002 |            |  | 2001           |         | 2002 |  | 2001 |         | 2002
|                      |  |                             |      |            |  |                |         |      |  |     
|Facility loans        |  |                             | 9.16 |            |  | $              | 29,860  |      |  | $    | 17,337  |      |  | W | 39,221  |   |  | W | 20,566  |  
|Less: Current portion |  |                             |      |            |  |                | (12,523 | )    |  |      | (13,711 | )    |  |   | (16,449 | ) |  |   | (16,265 | )
|                      |  |                             |      |            |  |                |         |      |  |      |         |      |  |   |         |   |  |   |         |  
|                      |  |                             |      |            |  | $              | 17,337  |      |  | $    | 3,626   |      |  | W | 22,772  |   |  | W | 4,301   |  
|                      |  |                             |      |            |  |                |         |      |  |      |         |      |  |   |         |   |  |   |         |  



|(3) |  | Debentures as of December 31, 2001 and 2002 are as follows (won in
millions and dollars in thousands):
|--- |  | ------------------------------------------------------------------------------------------------------

|                                |           |                        |                    |      |      |              |          |                             |         |         |             |   |         |           |             |   |  | 
|------------------------------- | --------- | ---------------------- | ------------------ | ---- | ---- | ------------ | -------- | --------------------------- | ------- | ------- | ----------- | - | ------- | --------- | ----------- | - |  | 
|                                |           |                        |                    |      |      |              |          | Interest rate per annum (%) |         | Amount 
|                                |           |                        |                    |      |      |              |          |                             |         |        
|Debtor                          |           | Category               |                    | 2002 |      | 2001         |          | 2002                       
|                                |           |                        |                    |      |      |              |          |                            
|                                | Hanaro    |                        | General debentures |      |      | 6.00 ~ 9.67  |          |                             | W       | 845,250 |             |   | W       | 1,133,750 |            
|                                |           | Bonds with warrants    |                    |      | 8.00 |              |          |                             | 131,350 |         |             |   | 118,630 |          
|                                |           |                        |                    |      |      |              |          |                             |         |         | (US$100,000 | ) |         |           | (US$100,000 | )
|                                |           | Convertible bonds      |                    |      |     |              |          |                             | 27,800  |         |             |   |        |          
|                                | Dreamline |                        | General debentures |      |      | 6.06 ~ 12.46 |          |                             |         | 252,000 |             |   |         | 208,400   |            
|                                |           | Bonds with warrants    |                    |      |     |              |          |                             | 39,348  |         |             |   |        |          
|                                |           |                        |                    |      |      |              |          |                             |         |         |             |   |         |           |             |  
|                                |           |                        |                    |      |      |              |          |                             |         |         | 1,295,748   |   |         |           | 1,460,780   |  
|Less: Current portion           |           |                        |                    |      |      |              | (256,500 | )                           |         |         | (821,530    | )
|                                |           | Discount on debentures |                    |      |      |              |          |                             | (14,577 | )       |             |   | (21,603 | )        
|Add: Long-term accrued interest |           |                        |                    |      |      |              | 4,700    |                             |         |         |            |  
|                                |           |                        |                    |      |      |              |          |                             |         |         |             |   |         |           |             |  
|                                |           |                        |                    |      |      |              |          |                             |         | W       | 1,029,371   |   |         | W         | 617,647     |  
|                                |           |                        |                    |      |      |              |          |                             |         |         |             |   |         |           |             |  



|(4) |  | On March 6, 2001, Hanaro issued bonds with stock warrants (13th
debenture) denominated in foreign currency of US$ 100,000 thousand with a
zero coupon interest rate and a guaranteed interest rate of 4.5% after one
year from issuance. The warrants may be exercised from June 6, 2001 to
February 6, 2006. The exercise price is W 5,000 at an exchange rate of
W1,235.70 to US$ 1.00. Up to 24,714,000 shares cha be issued if all
warrants are exercised.                                                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On February 26, 2002, Hanaro issued bonds with stock warrants (18th
debenture) with a zero coupon interest rate and a guaranteed interest rate
on maturity of 8.0% for the purpose of early repayment of the 13th bonds
with stock warrants. The warrants on the bonds with stock warrants is 15%
or US$ 15,000 thousands and may be exercised from May 26, 2002 to January
26, 2007. The exercise price is W5,000 at an exchange rate of W1,321.20 to
US$1.00 and the exercise price is scheduled to change quarterly based on the
market price of the related stock.
|   
|    |  | The above bonds with stock warrants have a right to require early repayment
on August 26, 2003 at 112.2% of the principal of the bonds with stock
warrants. Hanaro recorded W8,246 million of accrued interest for possible
early repayment as a current liability.                                                                                                                                                                                                                                                                                                     
|   
|    |  | On July 20, 2001, Dreamline
issued bonds with stock warrants (25th debenture) of W39,348 million with a zero coupon interest rate and a
guaranteed interest rate of 8.0% after one year from issuance. The warrants
may be exercised from October 20, 2001 to July 13, 2004. The exercise price
is W5,000 and up to 7,869,600 shares can be issued if all warrants are
exercised.                                                                                                                                                                                     
|   
|    |  | On March 6, 2002 and July 22, 2002, Hanaro and Dreamline repaid the full
amount of the 13th and the 25th bonds with warrants, respectively, and
recognized a loss on early redemption of W4,265 million and W807 million,
respectively, for the year ended December 31, 2002.                                                                                                                                                                                                                                                                                           
|   
|    |  | As of December 31, 2002, US$ 62,000 thousand (15,322,680 shares) has been
exercised for the 13th bonds with warrants, and US$ 38,000 thousand
(9,391,320 shares) and 7,869,600 shares remain unexercised for the 13th and
25th bonds with warrants, respectively.                                                                                                                                                                                                                                                                                                       
|   
|    |  | On December 24, 2002, Hanaro repaid the full amount of the 16th convertible
bonds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-23



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##### Table of Contents





|(5) |  | The schedule of principal payments of debentures and long-term debt
(excluding capital lease obligations explained in Note 13) as of December
31, 2002 is as follows (won in millions and dollars in thousands):
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |  |            |           |                |  |           |         |                |  |                                    |        |  |  |   |        |  |  |   |           | 
|---- |  | ---------- | --------- | -------------- |  | --------- | ------- | -------------- |  | ---------------------------------- | ------ |  |  | - | ------ |  |  | - | --------- | 
|     |  |            |           |                |  |           |         |                |  | Long-term debt in foreign currency |        |  |  |  
|     |  | Debentures |           | Long-term debt |  |           |         |                |  |                                   
|Year |  | Korean won |           | Korean won     |  | US dollar |         | Won equivalent |  | Total                             
|     |  |            |           |                |  |           |         |                |  |                                   
|2003 |  | W          | 821,530   |                |  | W         | 171,945 |                |  | $                                  | 13,711 |  |  | W | 16,265 |  |  | W | 1,009,740 | 
|2004 |  |            | 305,500   |                |  |           | 107,447 |                |  |                                    | 3,626  |  |  |   | 4,301  |  |  |   | 417,248   | 
|2005 |  |            | 333,750   |                |  |           | 57,381  |                |  |                                    |       |  |  |   |       |  |  |   | 391,131   | 
|2006 |  |            |          |                |  |           | 41,404  |                |  |                                    |       |  |  |   |       |  |  |   | 41,404    | 
|2007 |  |            |          |                |  |           | 3,098   |                |  |                                    |       |  |  |   |       |  |  |   | 3,098     | 
|     |  |            |           |                |  |           |         |                |  |                                    |        |  |  |   |        |  |  |   |           | 
|     |  | W          | 1,460,780 |                |  | W         | 381,275 |                |  | $                                  | 17,337 |  |  | W | 20,566 |  |  | W | 1,862,621 | 
|     |  |            |           |                |  |           |         |                |  |                                    |        |  |  |   |        |  |  |   |           | 



|(6) |  | Property and equipment of W861,702 million, short-term financial
instruments of W70,249 million and investments securities of W11,404
million are pledged as collateral for long-term debt and debentures as of
December 31, 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|16. |  | ADVANCES RECEIVED AND LONG-TERM ADVANCES RECEIVED:                                                                                                                                                                                

In 2001 and 2002, the Company transferred the beneficiary certificates of W
391,500 million for the trust amount of W434,500 million issued by a trustee
bank to Hanafos Securitization Speciality Co., Ltd.
(Hanafos) and 1st Dreamline Securitization Specialty Co., Ltd.(DSS) in exchange for the right
to receive certain amount of the Companys future trade receivables, which are
expected to be incurred from October 2001 to May 2005. Hanafos and DSS then
issued Asset Backed Securities (ABS) amounting to W309,000 million on October
31, 2001 and ABS of W82,500 million on May 16, 2002, respectively, of which
subordinate debt investments of W9,000 million and W1,500 million,
respectively, were purchased by the Company and W381,000 million was purchased
by third party investors. The proceeds of W381,000 million from the issuance
of ABS by Hanafos and DSS were remitted to the Company and recorded as
long-term advances received. The long-term advances received are deducted
against trade receivables as incurred. The Company recognizes the difference
between the trade receivables and the eliminated long-term advances received as
loss on disposal of trade receivables. In relation to the issuance of ABS, the
balance of long-term advances and advances received (current) as of December
31, 2002 amounts to W72,369 million and W146,024 million, respectively, and
W22,293 million was recorded as loss on disposal of trade receivables in 2002.



|17. |  | DERIVATIVES: 
|--- |  | -------------
|   
|(1) |  | Swap Contract

With reference to the Companys issuance of the 20th debenture, which are
Floating Rate Notes (FRN), on April 16, 2002, the Company entered into a Swap
contract (fixed interest rate) with Industrial Bank of Korea to hedge the risk
of floating interest rates. In relation to this Swap contract, the Company
recorded W5,633 million of valuation loss as a capital adjustment as of
December 31, 2002.



|(2) |  | Forward Exchange Contract
|--- |  | -------------------------

On July 3, 2001, the Company entered into a foreign currency forward contract
with Woori Bank to hedge the exposure to changes in the foreign currency
exchange rate, in case of early repayment of bonds with stock warrants
denominated in foreign currency. The Company recorded W1,888 million of loss
on valuation of forward exchange contract and W186 million of gain on
transaction of forward exchange contract in 2002, and W2,519 million of gain
on valuation of forward exchange contract in 2001.

F-24



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|18. |  | SHAREHOLDERS EQUITY:                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | The Company has authorized 480,328,800 shares of W5,000 par value common
stock, of which 264,000,000 shares and 279,322,680 shares have been issued
as of December 31, 2001 and 2002, respectively.                                                                                                                                             
|   
|(2) |  | The Company issued American Depository Shares based on 24,000 thousand
common shares as authorized by the Board of Directors on March 29, 2000.
Cash proceeds of W120,000 million were recorded as common stock and
W278,797 million cash proceeds in excess of par value, net of common
stock issuance costs, were recorded as capital surplus.
|   
|19. |  | STOCK OPTION PLAN:                                                                                                                                                                                                                                                                                                                              

The Company has stock option agreements with the Chief Executive Officer,
senior managers and employees of the Company. The details of the stock options
granted as of December 31, 2002 are as follows (won in millions):

|          |  |            |           |        |  |             |           |          |  |                 |         |  |  |                 |  |  |                      |  |  | 
|--------- |  | ---------- | --------- | ------ |  | ----------- | --------- | -------- |  | --------------- | ------- |  |  | --------------- |  |  | -------------------- |  |  | 
|          |  |            |           |        |  | Number of   |           | Exercise |  |                 |         |  |  |                 |  | 
|          |  | Grant Date |           | shares |  | price/share |           | Method   |  | Exercise period
|          |  |            |           |        |  |             |           |          |  |                
|HANARO    |  |            | 1999.3.1  |        |  |             | 50,000    |          |  | W               | 5,630   |  |  | New stock issue |  |  | 2002. 3. 1~2007.2.28 | 
|          |  |            | 1999.10.1 |        |  |             | 120,000   |          |  |                 | 19,910  |  |  | New stock issue |  |  | 2002.10.1~2007. 9.30 | 
|          |  |            | 2000.3.17 |        |  |             | 1,640,642 |          |  |                 | 17,750  |  |  | New stock issue |  |  | 2003.3.18~2008. 3.17 | 
|Dreamline |  |            | 2000.3.21 |        |  |             | 13,000    |          |  |                 | 108,169 |  |  | New stock issue |  |  | 2003.3 22~2010. 3.21 | 

The Company values stock options granted based on the minimum value method (see
Note 2). Total compensation expense of W8,062 million was allocated over the
vesting period, and the compensation expense charged to current operations with
the credit account of capital adjustments for the year ended December 31, 2002
is W1,651 million.

In relation to the stock options granted in 1999, the Company did not recognize
compensation expense, which was calculated as the difference between the stock
price at year-end and the exercise price multiplied by the number of stock
options due to downward movement of the stock price.

Had the compensation cost for the Companys stock option plans, which were
granted in 2000, been determined based on the fair value method at the grant
dates for awards, the Companys ordinary loss, net loss, ordinary loss per
share and net loss per share would have been reduced as follows (won in
millions, except per share amount):

|                        |  |      |         |      |  |   |         | 
|----------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                        |  | 2001 |         | 2002
|                        |  |      |         |     
|Ordinary loss           |  | W    | 251,103 |      |  | W | 130,060 | 
|Net loss                |  | W    | 248,198 |      |  | W | 127,406 | 
|Ordinary loss per share |  | W    | 951     |      |  | W | 471     | 
|Net loss per share      |  | W    | 940     |      |  | W | 462     | 

The fair value of the option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000: dividend yield of nil, expected volatility
of 93.8 percent, risk-free interest rate of 9.0 percent, expected exercise
lives of 3 to 7 years and expected forfeitures per year of 3%. Total
compensation cost based on the fair value method was calculated as W18,389
million.

F-25



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##### Table of Contents





|20. |  | OPERATING EXPENSES:
|--- |  | -------------------

Significant accounts of operating expenses for the years ended December 31,
2000, 2001 and 2002 are as follows (won in millions):

|                                           |  |        |         |      |  |      |           |  |  |   |           | 
|------------------------------------------ |  | ------ | ------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                           |  | Amount
|                                           |  |       
|                                           |  | 2000   |         | 2001 |  | 2002
|                                           |  |        |         |      |  |     
|Salaries and wages                         |  | W      | 66,406  |      |  | W    | 81,487    |  |  | W | 97,715    | 
|Provision for severance indemnities        |  |        | 5,562   |      |  |      | 11,388    |  |  |   | 11,959    | 
|Welfare                                    |  |        | 14,538  |      |  |      | 18,795    |  |  |   | 22,274    | 
|Rent                                       |  |        | 1,408   |      |  |      | 2,669     |  |  |   | 19,624    | 
|Depreciation                               |  |        | 175,477 |      |  |      | 307,761   |  |  |   | 423,762   | 
|Advertising                                |  |        | 30,201  |      |  |      | 40,032    |  |  |   | 42,487    | 
|Ordinary research and development cost     |  |        | 7,499   |      |  |      | 7,133     |  |  |   | 4,784     | 
|Utilities                                  |  |        | 6,451   |      |  |      | 13,505    |  |  |   | 17,578    | 
|Telecommunication equipment lease expenses |  |        | 51,794  |      |  |      | 106,587   |  |  |   | 188,867   | 
|Bad debt                                   |  |        | 734     |      |  |      | 2,760     |  |  |   | 13,690    | 
|Maintenance                                |  |        | 23,440  |      |  |      | 40,307    |  |  |   | 46,274    | 
|Selling expenses                           |  |        | 42,329  |      |  |      | 47,090    |  |  |   | 47,259    | 
|Sales commissions                          |  |        | 107,491 |      |  |      | 146,306   |  |  |   | 220,336   | 
|Interconnection charges                    |  |        | 34,132  |      |  |      | 68,138    |  |  |   | 95,883    | 
|Commissions                                |  |        | 11,857  |      |  |      | 44,900    |  |  |   | 83,874    | 
|Outsourcing services                       |  |        | 13,917  |      |  |      | 15,539    |  |  |   | 15,607    | 
|Amortization                               |  |        | 11,305  |      |  |      | 18,786    |  |  |   | 9,713     | 
|Other                                      |  |        | 42,874  |      |  |      | 28,152    |  |  |   | 34,740    | 
|                                           |  |        |         |      |  |      |           |  |  |   |           | 
|                                           |  | W      | 647,415 |      |  | W    | 1,001,335 |  |  | W | 1,396,426 | 
|                                           |  |        |         |      |  |      |           |  |  |   |           | 



|21. |  | INCOME TAX AND DEFERRED INCOME TAXES:
|--- |  | -------------------------------------

Income Tax

The statutory corporate income tax rate (including resident surtax) applicable
to the Company is approximately 30.8 percent in 2000 and 2001, and 29.7% in
2002. Income tax is calculated as follows (won in millions):

|                                 |  |        |    |      |  |      |     |   |  |   |       | 
|-------------------------------- |  | ------ | -- | ---- |  | ---- | --- | - |  | - | ----- | 
|                                 |  | Amount
|                                 |  |       
|                                 |  | 2000   |    | 2001 |  | 2002
|                                 |  |        |    |      |  |     
|Income taxes currently payable   |  | W      | 7  |      |  | W    | 107 |   |  | W | 578   | 
|Changes in temporary differences |  |        | 50 |      |  |      | (72 | ) |  |   | 505   | 
|                                 |  |        |    |      |  |      |     |   |  |   |       | 
|Income tax expense               |  | W      | 57 |      |  | W    | 35  |   |  | W | 1,083 | 
|                                 |  |        |    |      |  |      |     |   |  |   |       | 

Deferred Income Taxes

Deferred income taxes reflect the tax effects on prior years tax losses, tax
credits, and temporary differences between the carrying amount of assets and
liabilities for financial accounting purposes and the amounts used for income
tax purposes.

F-26



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##### Table of Contents



Accumulated temporary differences and deferred taxes as of December 31 2001 and
2002 are as follows (won in millions):

|                                        |                                               |   |          |      |      |   |          |      |  
|--------------------------------------- | --------------------------------------------- | - | -------- | ---- | ---- | - | -------- | ---- | -
|                                        |                                               |   | Amount  
|                                        |                                               |   |         
|                                        |                                               |   | 2001     |      | 2002
|                                        |                                               |   |          |      |     
|Accrued severance indemnities           |                                               | W | 8,132    |      |      | W | 14,876   |     
|Valuation loss on marketable securities |                                               |   | 4,415    |      |      |   | 7,370    |     
|Bad debts                               |                                               |   | 2,843    |      |      |   | 17,807   |     
|Present value discount                  |                                               |   | 7,038    |      |      |   | 4,195    |     
|Valuation loss on investment securities |                                               |   | 3,594    |      |      |   | 10,430   |     
|Long-term accrued interest              |                                               |   | 4,700    |      |      |   | 8,246    |     
|Forward contracts                       |                                               |   | (2,519   | )    |      |   |         |     
|Development costs                       |                                               |   | (1,251   | )    |      |   |         |     
|Accrued income                          |                                               |   | (4,058   | )    |      |   | (5,314   | )   
|Depreciation                            |                                               |   | 1,832    |      |      |   | 210      |     
|Accrued expenses and other              |                                               |   | 2,177    |      |      |   | 942      |     
|                                        |                                               |   |          |      |      |   |          |     
|                                        |                                               |   | 26,903   |      |      |   | 58,762   |     
|Loss carryforward                       |                                               |   | 428,801  |      |      |   | 739,561  |     
|Less: Temporary differences excluded    |                                               |   | (454,798 | )    |      |   | (799,117 | )   
|                                        |                                               |   |          |      |      |   |          |     
|                                        |                                               |   | 906      |      |      |   | (794     | )   
|                                        | Tax rate (%)                                  |   |          | 29.7 |      |   |          | 29.7 |  
|                                        |                                               |   |          |      |      |   |          |     
|                                        | Deferred income tax assets (liabilities), net |   | W        | 269  |      |   | W        | (236 | )
|                                        |                                               |   |          |      |      |   |          |     



As of December 31, 2001 and 2002, Hanaro and Dreamline did not recognize
deferred income tax assets for temporary differences due to the uncertainty
of future realization of the deferred tax benefits.


22. RELATED PARTY TRANSACTIONS:



|(1) |  | Significant transactions between Hanaro and its subsidiaries during 2001
and 2002 are as follows (won in millions):
|--- |  | -------------------------------------------------------------------------------------------------------------------

|                                                 |  |         |     |          |  |                    |        |          |  |   |       |  |  |   |       | 
|------------------------------------------------ |  | ------- | --- | -------- |  | ------------------ | ------ | -------- |  | - | ----- |  |  | - | ----- | 
|2001                                             |  |         |     |          |  |                    |        |          |  |   |       |  |  |   |       | 
|                                                 |  |         |     |          |  |                    |        |          |  |   |       |  |  |   |       | 
|                                                 |  | Revenue |     | Expenses |  | Key-money deposits |        | Payables
|                                                 |  |         |     |          |  |                    |        |         
|Hanaro Realty Development &
Management Co., Ltd. |  | W       | 27  |          |  | W                  | 14,144 |          |  | W | 1,409 |  |  | W | 1,307 | 
|Hanaro Telephone & Internet
Information, Inc.    |  |         | 53  |          |  |                    | 26,701 |          |  |   |      |  |  |   | 2,908 | 
|Hanaro Technologies, Inc.                        |  |         | 18  |          |  |                    | 12,286 |          |  |   |      |  |  |   | 655   | 
|Hanaro
WEBnTV                                    |  |         | 91  |          |  |                    | 4,971  |          |  |   | 305   |  |  |   | 61    | 
|M-commerce Co., Ltd.                             |  |         |    |          |  |                    | 3      |          |  |   |      |  |  |   |      | 
|Hanaro Telecom America, Inc.                     |  |         |    |          |  |                    | 4,720  |          |  |   |      |  |  |   |      | 
|                                                 |  |         |     |          |  |                    |        |          |  |   |       |  |  |   |       | 
|                                                 |  | W       | 189 |          |  | W                  | 62,825 |          |  | W | 1,714 |  |  | W | 4,931 | 
|                                                 |  |         |     |          |  |                    |        |          |  |   |       |  |  |   |       | 

|                                                 |  |         |       |          |  |                    |        |          |  |   |       |  |  |   |        | 
|------------------------------------------------ |  | ------- | ----- | -------- |  | ------------------ | ------ | -------- |  | - | ----- |  |  | - | ------ | 
|2002                                             |  |         |       |          |  |                    |        |          |  |   |       |  |  |   |        | 
|                                                 |  |         |       |          |  |                    |        |          |  |   |       |  |  |   |        | 
|                                                 |  | Revenue |       | Expenses |  | Key-money deposits |        | Payables
|                                                 |  |         |       |          |  |                    |        |         
|Hanaro Realty Development &
Management Co., Ltd. |  | W       | 53    |          |  | W                  | 14,278 |          |  | W | 1,412 |  |  | W | 1,652  | 
|Hanaro Telephone & Internet
Information, Inc.    |  |         | 122   |          |  |                    | 27,165 |          |  |   | 122   |  |  |   | 2,702  | 
|Hanaro Technologies, Inc.                        |  |         | 11    |          |  |                    | 9,562  |          |  |   |      |  |  |   |       | 
|Hanaro
WEBnTV                                    |  |         | 138   |          |  |                    | 5,567  |          |  |   | 189   |  |  |   | 8      | 
|Dreamline Corporation                            |  |         | 2,773 |          |  |                    | 3,401  |          |  |   | 28    |  |  |   | 429    | 
|Hanaro Telecom America, Inc.                     |  |         |      |          |  |                    | 11,502 |          |  |   |      |  |  |   | 925    | 
|Hanaro Dream, Inc.                               |  |         | 4,884 |          |  |                    | 24,330 |          |  |   | 172   |  |  |   | 6,992  | 
|                                                 |  |         |       |          |  |                    |        |          |  |   |       |  |  |   |        | 
|                                                 |  | W       | 7,981 |          |  | W                  | 95,805 |          |  | W | 1,923 |  |  | W | 12,708 | 
|                                                 |  |         |       |          |  |                    |        |          |  |   |       |  |  |   |        | 

Related party transactions with Hanaro Customer Service, Inc and Hanaro
Interdesk Co., Ltd., which were merged into Hanaro Telephone & Internet
Information, Inc. on January 16, 2002, are aggregated into related party
transactions with Hanaro Telephone & Internet Information, Inc.

F-27



---



##### Table of Contents





|(2) |  | Transactions with shareholders for the years ended December 31, 2001 and
2002 are as follows (won in millions):
|--- |  | ---------------------------------------------------------------------------------------------------------------

|             |  |             |   |      |        |        |        |   |       |   |        | 
|------------ |  | ----------- | - | ---- | ------ | ------ | ------ | - | ----- | - | ------ | 
|Revenues:    |  |             |   |      |        |        |        |   |       |   |        | 
|             |  |             |   |      |        |        |        |   |       |   |        | 
|             |  |             |   |      |        | Amount
|             |  |             |   |      |        |       
|             |  | Transaction |   | 2001 |        | 2002  
|             |  |             |   |      |        |       
|Samsung      |  | Service fee |   | W    | 12,251 |        |        | W | 4,565 |  
|Dacom        |  |             | " |      |        |        | 12,839 |   |       |   | 17,202 | 
|SK Telecom   |  |             | " |      |        |        | 17,983 |   |       |   | 9,804  | 
|Onse Telecom |  |             | " |      |        |        | 3,594  |   |       |   | 9,768  | 
|LG           |  |             | " |      |        |        | 3,151  |   |       |   | 2,272  | 
|             |  |             |   |      |        |        |        |   |       |   |        | 
|             |  |             |   |      |        | W      | 49,818 |   |       | W | 43,611 | 
|             |  |             |   |      |        |        |        |   |       |   |        | 

|                  |  |                                            |  |      |        |        |         |   |        |   |         | 
|----------------- |  | ------------------------------------------ |  | ---- | ------ | ------ | ------- | - | ------ | - | ------- | 
|Purchases:        |  |                                            |  |      |        |        |         |   |        |   |         | 
|                  |  |                                            |  |      |        |        |         |   |        |   |         | 
|                  |  |                                            |  |      |        | Amount
|                  |  |                                            |  |      |        |       
|                  |  | Transaction                                |  | 2001 |        | 2002  
|                  |  |                                            |  |      |        |       
|Samsung           |  | Purchase of machinery and equipment, other |  | W    | 43,346 |        |         | W | 19,995 |  
|Dacom             |  | R&D expenses and other                     |  |      | 55,720 |        |         |   | 50,595 |  
|SK Telecom        |  | Interconnection charges, other             |  |      | 18,217 |        |         |   | 26,787 |  
|Onse Telecom      |  | Rental fee for submarine cable             |  |      | 5,671  |        |         |   | 6,233  |  
|LG                |  | Purchase of machinery and equipment, other |  |      | 25,844 |        |         |   | 13,069 |  
|Daewoo Securities |  | Purchase of land and buildings             |  |      | 2,144  |        |         |   |       |  
|                  |  |                                            |  |      |        |        |         |   |        |   |         | 
|                  |  |                                            |  |      |        | W      | 150,942 |   |        | W | 116,679 | 
|                  |  |                                            |  |      |        |        |         |   |        |   |         | 



| |  | Balances with shareholders as of December 31, 2001 and 2002 are as follows
(won in millions):
| |  | ---------------------------------------------------------------------------------------------

|             |  |        |       |             |  |      |   |      |  |   |        |  |  |   |        | 
|------------ |  | ------ | ----- | ----------- |  | ---- | - | ---- |  | - | ------ |  |  | - | ------ | 
|             |  | Assets |       | Liabilities
|             |  |        |       |            
|             |  | 2001   |       | 2002        |  | 2001 |   | 2002
|             |  |        |       |             |  |      |   |     
|Samsung      |  | W      |      |             |  | W    |  |      |  | W | 34,842 |  |  | W | 12,324 | 
|Dacom        |  |        | 285   |             |  |      |  |      |  |   | 5,468  |  |  |   | 1,391  | 
|Onse Telecom |  |        |      |             |  |      |  |      |  |   |       |  |  |   | 624    | 
|LG           |  |        | 2,834 |             |  |      |  |      |  |   | 11,721 |  |  |   | 6,993  | 
|             |  |        |       |             |  |      |   |      |  |   |        |  |  |   |        | 
|             |  | W      | 3,119 |             |  | W    |  |      |  | W | 52,031 |  |  | W | 21,332 | 
|             |  |        |       |             |  |      |   |      |  |   |        |  |  |   |        | 

23. COMMITMENTS AND CONTINGENCIES:



|(1) |  | As of December 31, 2002, the Company has been provided US$ 10,000
thousand of payment guarantees by Korea Exchange Bank in connection with
the issuance of letters of credit.                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Company has provided nine blank promissory notes and one blank check
as collateral to KDB Capital Corp., LG Card Services Corp. and Samsung
Card Co., Ltd., Cisco Systems Capital Korea Ltd., Jeil Mutual Savings Bank
and Samsung Life Insurance Co., Ltd. in connection with its borrowings and
lease agreements.
|   
|(3) |  | As of December 31, 2002, the Company has overdraft agreements with Woori
Bank and others with a maximum line of credit of W11,000 million.                                                                                                                                                                             

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24. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE:

The Company issued general debentures
and obtained loans amounting to W255,600
million subsequent to the balance sheet date for payment of debts that will be
due and for operating funds as follows (won in millions):

|          |                         |  |                             |       |     |  |        |           |  |   |         |         | 
|--------- | ----------------------- |  | --------------------------- | ----- | --- |  | ------ | --------- |  | - | ------- | ------- | 
|          |                         |  | Interest rate per annum (%) |       | Due |  | Amount
|          |                         |  |                             |       |     |  |       
|HANARO    |                         |  |                             |       |     |  |        |           |  |   |         |        
|          | 23rd general debentures |  |                             | 6.00  |     |  |        | 2006      |  |   | W       | 190,000 | 
|          | General loan            |  |                             | 6.99  |     |  |        | 2005      |  |   |         | 40,000  | 
|          |                         |  |                             |       |     |  |        |           |  |   |         |        
|          |                         |  |                             |       |     |  |        |           |  |   | 230,000 |        
|          |                         |  |                             |       |     |  |        |           |  |   |         |        
|Dreamline |                         |  |                             |       |     |  |        |           |  |   |         |        
|          | 29th general debentures |  |                             | 10.54 |     |  |        | 2005      |  |   |         | 8,000   | 
|          | 30th general debentures |  |                             | 13.17 |     |  |        | 2003~2005 |  |   |         | 17,600  | 
|          |                         |  |                             |       |     |  |        |           |  |   |         |        
|          |                         |  |                             |       |     |  |        |           |  |   | 25,600  |        
|          |                         |  |                             |       |     |  |        |           |  |   |         |        
|          |                         |  |                             |       |     |  |        |           |  | W | 255,600 |        
|          |                         |  |                             |       |     |  |        |           |  |   |         |        

In relation to the above general loan,
Hanaro pledged W57,690 million of
property and equipment as collateral.

25. SEGMENT INFORMATION:

The Companys reportable segments are strategic business units that offer
different products and services. The segments are managed separately based on
the difference in products and services, technology and marketing strategies.
The Company has three reportable operating segments: voice services, leased
line and broadband services. Voice services include all services provided to
fixed line customers, including local services. Leased line services consist
of the leasing of dedicated fiber optic lines over which customers transmit
voice and data. Broadband services include high-speed data transmission
services over ADSL (Asymmetrical Digital Subscriber Line) and internet access
services. The operations of all other operating segments, which fall below the
reporting thresholds, are included in the other segment below, and include
entities providing real estate management services and customer services. The
accounting policies of the segments are the same as those described in Note 2.

Segment information for the years ended December 31, 2000, 2001 and 2002 is as
follows (won in millions):

|                                                                      |  |       |         |             |  |           |        |        |  |       |           |  |  |   |        |  |  |   |           | 
|--------------------------------------------------------------------- |  | ----- | ------- | ----------- |  | --------- | ------ | ------ |  | ----- | --------- |  |  | - | ------ |  |  | - | --------- | 
|2000                                                                  |  | Voice |         | Leased Line |  | Broadband |        | Others |  | Total
|                                                                      |  |       |         |             |  |           |        |        |  |      
|Revenue                                                               |  | W     | 34,089  |             |  | W         | 8,767  |        |  | W     | 284,159   |  |  | W | 15,789 |  |  | W | 342,804   | 
|Operating loss                                                        |  |       | 28,121  |             |  |           | 33,621 |        |  |       | 234,412   |  |  |   | 8,457  |  |  |   | 304,611   | 
|Tangible and intangible assets                                        |  |       | 499,289 |             |  |           | 94,016 |        |  |       | 1,840,113 |  |  |   | 41,762 |  |  |   | 2,475,180 | 
|Capital expenditures and
advanced payments for
property and equipment |  |       | 365,088 |             |  |           | 68,746 |        |  |       | 1,345,521 |  |  |   | 10,583 |  |  |   | 1,789,938 | 
|Depreciation and amortization                                         |  |       | 37,198  |             |  |           | 7,004  |        |  |       | 137,093   |  |  |   | 5,974  |  |  |   | 187,269   | 

|                                                                      |  |       |         |             |  |           |         |        |  |       |           |  |  |   |         |  |  |   |           | 
|--------------------------------------------------------------------- |  | ----- | ------- | ----------- |  | --------- | ------- | ------ |  | ----- | --------- |  |  | - | ------- |  |  | - | --------- | 
|2001                                                                  |  | Voice |         | Leased Line |  | Broadband |         | Others |  | Total
|                                                                      |  |       |         |             |  |           |         |        |  |      
|Revenue                                                               |  | W     | 114,529 |             |  | W         | 17,706  |        |  | W     | 641,544   |  |  | W | 56,942  |  |  | W | 830,721   | 
|Operating loss                                                        |  |       | 24,986  |             |  |           | 4,558   |        |  |       | 117,745   |  |  |   | 23,325  |  |  |   | 170,614   | 
|Tangible and intangible assets                                        |  |       | 295,534 |             |  |           | 375,647 |        |  |       | 2,330,975 |  |  |   | 145,376 |  |  |   | 3,147,532 | 
|Capital expenditures and
advanced payments for
property and equipment |  |       | 73,113  |             |  |           | 2,391   |        |  |       | 490,226   |  |  |   | 46,676  |  |  |   | 612,406   | 
|Depreciation and amortization                                         |  |       | 35,024  |             |  |           | 11,096  |        |  |       | 263,509   |  |  |   | 16,918  |  |  |   | 326,547   | 

|                                                                      |  |       |         |             |  |           |         |        |  |       |           |  |  |   |         |   |  |   |           | 
|--------------------------------------------------------------------- |  | ----- | ------- | ----------- |  | --------- | ------- | ------ |  | ----- | --------- |  |  | - | ------- | - |  | - | --------- | 
|2002                                                                  |  | Voice |         | Leased Line |  | Broadband |         | Others |  | Total
|                                                                      |  |       |         |             |  |           |         |        |  |      
|Revenue                                                               |  | W     | 210,664 |             |  | W         | 111,813 |        |  | W     | 969,635   |  |  | W | 125,742 |   |  | W | 1,417,854 | 
|Operating income (loss)                                               |  |       | (12,822 | )           |  |           | 7,498   |        |  |       | 29,094    |  |  |   | (2,342  | ) |  |   | 21,428    | 
|Tangible and intangible assets                                        |  |       | 161,178 |             |  |           | 311,798 |        |  |       | 2,519,596 |  |  |   | 163,925 |   |  |   | 3,156,497 | 
|Capital expenditures and
advanced payments for
property and equipment |  |       | 77,827  |             |  |           | 56,703  |        |  |       | 285,878   |  |  |   | 35,000  |   |  |   | 455,408   | 
|Depreciation and amortization                                         |  |       | 46,969  |             |  |           | 37,540  |        |  |       | 311,733   |  |  |   | 37,233  |   |  |   | 433,475   | 

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26. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES:

Accounting practices used by the Company in preparing the accompanying
financial statements conform with accounting principles generally accepted in
the Republic of Korea (Korean GAAP), but do not conform with accounting
principles generally accepted in the United States of America (U.S. GAAP).
The significant differences applicable to the Company are described below.
Other differences do not have a significant effect on either net loss or
shareholders equity.



|(1) |  | Companies Included in the Consolidation
|--- |  | ---------------------------------------

Under Korean GAAP, all majority-owned subsidiaries and entities of which the
Company owns more than 30% of total outstanding voting stock and is the largest
stockholder are included in the consolidation. Under U.S. GAAP, entities of
which the Company owns twenty to fifty percent of total outstanding voting
stock are not consolidated; rather those entities should be accounted for under
the equity method.

Accordingly, Dreamline Corporation (Dreamline), of which Hanaro owns 32.18 %
and Hanarodream Inc. (Hanarodream), a 42.14%-owned subsidiary of Dreamline, are
excluded from consolidation under U.S. GAAP. Dreamline and Hanarodream are
accounted for under the equity method as of December 31, 2002.

As of December 31, 2001, M-commerce Co., Ltd. (M-commerce) and Dreamline, of
which Hanaro owns 45.8% and 32.18%, respectively, and Hanarodream (formerly
DreamX.net Co.), an 82.44%-owned subsidiary of Dreamline, are excluded from
consolidation under U.S. GAAP; rather M-commerce and Dreamline are accounted
for under the equity method.

Summarized combined financial information of M-commerce, Dreamline and
Hanarodream as of December 31, 2001, and Dreamline and Hanarodream as of
December 31, 2002, which is included in the consolidated financial statements
under Korean GAAP, is as follows (won in millions):

|                        |  |      |         |      |  |   |         |  
|----------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                        |  | 2001 |         | 2002
|                        |  |      |         |     
|Current assets          |  | W    | 86,931  |      |  | W | 75,120  |  
|Non-current assets      |  |      | 513,575 |      |  |   | 505,350 |  
|                        |  |      |         |      |  |   |         |  
|Total assets            |  | W    | 600,506 |      |  | W | 580,470 |  
|                        |  |      |         |      |  |   |         |  
|Current liabilities     |  | W    | 133,902 |      |  | W | 284,523 |  
|Non-current liabilities |  |      | 248,430 |      |  |   | 82,824  |  
|                        |  |      |         |      |  |   |         |  
|Total liabilities       |  | W    | 382,332 |      |  | W | 367,347 |  
|                        |  |      |         |      |  |   |         |  
|Net assets              |  | W    | 218,174 |      |  | W | 213,123 |  
|                        |  |      |         |      |  |   |         |  
|Operating revenue       |  | W    | 1,522   |      |  | W | 192,934 |  
|Operating income (loss) |  |      | (4,525  | )    |  |   | 16,417  |  
|Net loss                |  |      | (5,495  | )    |  |   | (6,523  | )



|(2) |  | Consolidation of Special-Purpose Entities (SPE)
|--- |  | -------------------------------------------------

Under Korean GAAP, Hanafos and Hanadream, the SPEs described in Notes 15 and
16, are excluded from the consolidation as Hanaro does not have control over
the SPEs management and operations.

Under U.S. GAAP, the operations of Hanafos and Hanadream are included in the
consolidation of the Company in accordance with Statement of Financial
Accounting Statements (SFAS) No.140, Accounting for Transfer and Servicing
of Financial Assets and Extinguishments of Liabilities due to the fact that
the asset transfers did not qualify as a true sale.

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Summarized financial information of Hanafos as of December 31, 2001 and Hanafos
and Hanadream as of December 31, 2002, and for the years then ended is as
follows (won in millions):

|                        |  |      |         |      |  |   |         |  
|----------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                        |  | 2001 |         | 2002
|                        |  |      |         |     
|Current assets          |  | W    | 163,454 |      |  | W | 41,236  |  
|Non-current assets      |  |      | 150,534 |      |  |   | 284,858 |  
|                        |  |      |         |      |  |   |         |  
|Total assets            |  | W    | 313,988 |      |  | W | 326,094 |  
|                        |  |      |         |      |  |   |         |  
|Current liabilities     |  | W    | 135,010 |      |  | W | 227,682 |  
|Non-current liabilities |  |      | 178,963 |      |  |   | 99,720  |  
|                        |  |      |         |      |  |   |         |  
|Total liabilities       |  | W    | 313,973 |      |  | W | 327,402 |  
|                        |  |      |         |      |  |   |         |  
|Net assets              |  | W    | 15      |      |  | W | (1,308  | )
|                        |  |      |         |      |  |   |         |  
|Operating revenue       |  | W    | 6,534   |      |  | W | 28,425  |  
|Operating income (loss) |  |      | 2,664   |      |  |   | (2,325  | )
|Net income (loss)       |  |      | 2,904   |      |  |   | (1,333  | )

(3) Accrued Severance Benefits

Under the Korean labor law, employees with more than one year of service are
entitled to receive a lump sum payment upon voluntary or involuntary
termination of their employment. The amount of the benefit is based on the
terminated employees length of employment and rate of pay prior to
termination. Korean GAAP requires that a company record the vested benefit
obligation at the balance sheet date assuming all employees were to terminate
their employment as of that date. The change in the vested benefit obligation
during the year is recorded as the current years severance expense.

The severance benefits program in the Republic of Korea is similar to a defined
benefit plan in the United States. Generally, in the United States, plan
assets are maintained by an independent trustee and therefore, the benefit
obligation is recorded net of plan assets, while in Korea, the Company records
the plan assets in its financial statements.

Under U.S. GAAP, for employee benefit plans with the characteristics of the
Korean plans, if the assumption for salary progression is less than the
assumption for the discount rate, it is acceptable to assume that the vested
benefit obligation is larger than the present value of the projected benefit
obligation and the Company may record a pension liability equal to the vested
benefit obligation at the balance sheet date. Under these circumstances, the
periodic pension expense is equal to the change in the vested benefit
obligation during the year and there is no significant difference between
Korean GAAP and U.S. GAAP. The Companys management believes that the
liability and expense recorded under Korean GAAP in the accompanying financial
statements do not differ from that required under U.S. GAAP.

(4) Licensing Cost

In August 1997, the Companys shareholders (members of the Consortium
Agreement) collectively paid W45,000 million to the Ministry of Information
and Communication (MIC) representing a one-time charge to obtain a perpetual
license to provide fixed-link local telephone service on a nationwide basis in
Korea. Under Korean GAAP, such fees paid by the major shareholders on behalf
of the Company are not required to be recorded. Under U.S. GAAP, such
transaction is a capital contribution by the shareholders. Under U.S. GAAP,
the license was capitalized as an intangible asset and amortized over a 20
year, estimated economic useful life through 2001. In connection with the
adoption of SFAS No. 142 (See Note 26(7)), licensing cost is deemed to have an
indefinite life. A deferred tax liability calculated using the Companys
statutory income tax rate of 29.7% has also been recorded, as the license
asset has no tax basis to the Company.

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##### Table of Contents





|(5) |  | Marketable Securities and Investment Securities
|--- |  | -----------------------------------------------

under Korean GAAP, marketable securities in listed companies that the Company
does not expect to hold for long-term investment purposes are reported at fair
value with unrealized gains and losses included in earnings. Investments in
other listed companies held for long-term investment purposes are reported at
fair value with unrealized gains and losses reported in a separate component
of shareholders equity. If the fair value of a listed equity security or the
net equity value of an unlisted equity security held for investment declines
compared to acquisition cost and is not expected to recover (an impaired
investment security), the value of the equity security is adjusted to fair
value or net equity value, with the valuation loss charged to current
operations. Investments in unlisted companies are reported at cost unless
there is a decline in value and the value is not expected to recover.
Investments in debt securities are carried at amortized cost. Under U.S.
GAAP, marketable equity securities and all debt securities are classified into
three categories and are accounted for as follows:



|(i)   |  | Debt securities that a company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.                                                                                                                                     
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with the unrealized gains and
losses included in current operations.                                                   
|     
|(iii) |  | 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 the unrealized gains and
losses excluded from income and reported as a separate component of
shareholders equity.

Under U.S.GAAP, the Company classified its marketable securities as trading
securities and its debt securities included in investment securities (except
investments in debt securities, which the Company intends to hold to maturity),
as shown in Note 7 as available-for-sale securities. Investments in debt
securities that the Company intends to hold to maturity are classified as
held-to-maturity. Accounting for impairment under U.S. GAAP is substantially
the same under Korean GAAP.

Information with respect to those investments included in marketable securities
and investment securities at December 31, 2001 and 2002 is as
follows (won in
millions):

|                            |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |        | 
|--------------------------- | ----------------- | - | --------------- | ------ | ---------------- | - | ----------------- | ----- | ---------- | - | - | ----- |  | - | ------ | ------ | 
|                            |                   |   | Carrying amount |        | Unrealized gains |   | Unrealized losses |       | Fair value
|                            |                   |   |                 |        |                  |   |                   |       |           
|2001:                       |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |       
|(1) Marketable

securities: |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |       
|                            | Debt securities   |   | W               | 30,155 |                  |   | W                 | 121   |            |   | W |      |  |   | W      | 30,276 | 
|                            | Equity securities |   |                 | 15,318 |                  |   |                   | 5,150 |            |   |   |      |  |   |        | 20,468 | 
|                            |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |       
|                            |                   | W | 45,473          |        |                  | W | 5,271             |       |            | W |  |       |  | W | 50,744 |       
|                            |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |       
|(2) Investment

securities: |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |       
|                            | Debt securities   |   | W               | 18,365 |                  |   | W                 |      |            |   | W | 1,514 |  |   | W      | 16,851 | 
|                            |                   |   |                 |        |                  |   |                   |       |            |   |   |       |  |   |        |        | 

|                            |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |        | 
|--------------------------- | ----------------- | - | --------------- | ------ | ---------------- | - | ----------------- | - | ---------- | - | ----- | ----- |  | - | ------ | ------ | 
|                            |                   |   | Carrying amount |        | Unrealized gains |   | Unrealized losses |   | Fair value
|                            |                   |   |                 |        |                  |   |                   |   |           
|2002:                       |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |       
|(1) Marketable

securities: |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |       
|                            | Debt securities   |   | W               | 176    |                  |   | W                 | 5 |            |   | W     |      |  |   | W      | 181    | 
|                            | Equity securities |   |                 | 20,468 |                  |   |                   |  |            |   |       | 2,838 |  |   |        | 17,630 | 
|                            |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |       
|                            |                   | W | 20,644          |        |                  | W | 5                 |   |            | W | 2,838 |       |  | W | 17,811 |       
|                            |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |        | 
|(2) Investment

securities: |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |       
|                            | Debt securities   |   | W               | 22,060 |                  |   | W                 |  |            |   | W     | 600   |  |   | W      | 21,460 | 
|                            |                   |   |                 |        |                  |   |                   |   |            |   |       |       |  |   |        |        | 



|(6) |  | Development costs
|--- |  | -----------------

Development costs are deferred under Korean GAAP. Under U.S.GAAP,
development costs are charged to expenses when incurred and are classified
as operating expenses.

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|(7) |  | Goodwill and other intangibles
|--- |  | ------------------------------

Under Korean GAAP, all intangibles
including goodwill are amortized over
their estimated useful lives and an impairment loss is recognized when their
carrying amount exceeds their fair value.

Under U.S. GAAP, following the introduction of SFAS No. 142, Goodwill and
Intangible Assets, intangible assets with finite lives continue to be
amortized over their useful economic lives. Goodwill and intangible assets
with indefinite lives are not amortized, but tested for impairment, at least
annually, in accordance with SFAS No.142.

In the first quarter of 2002, the Company completed the transitional impairment
test required upon adoption of SFAS No. 142 and determined that there was no
indication of impairment. The Company completed the annual tests for impairment
of its goodwill and indefinite life intangible assets based on the carrying
values at September 30, 2002 and recorded no impairment loss. The impairment
tests were completed using fair value measurement techniques as required under
SFAS No. 142. In testing goodwill, the Company used a discounted cash flow
approach to determine enterprise fair value. The Company assessed the
reasonableness of its valuations by considering other information available
such as the market capitalization of other carriers and associated implied
enterprise fair values, projected industry trends and investment analyst
reports on the Company and other carriers, and information regarding recent
acquisitions in the industry.

The Companys intangible assets with finite lives, and intangible assets
with indefinite lives including goodwill explained in Note 11 for the years
ended December 31, 2001 and 2002 are as follows:

|                                        |  |                                         
|--------------------------------------- |  | ----------------------------------------
|Intangible assets with finite lives     |  | Property rights of industry             
|                                        |  | Cable line usage rights
Land right
Other
|Intangible assets with indefinite lives |  | Goodwill
License cost (see Note 26 (4)) 

The following table reconciles reported net loss under U.S. GAAP to adjusted
net loss, which excludes amortization expense related to goodwill and
indefinite-life intangibles, assuming the adoption of SFAS No. 142 had
occurred on January 1 of each year presented:

|                                  |  |            |          |      |  |               |          |   |  |   |          |  
|--------------------------------- |  | ---------- | -------- | ---- |  | ------------- | -------- | - |  | - | -------- | -
|                                  |  | Korean Won
|                                  |  |           
|                                  |  | 2000       |          | 2001 |  | 2002         
|                                  |  |            |          |      |  |              
|                                  |  |            |          |      |  | (In millions) |          |   |  |  
|Reported net loss under U.S. GAAP |  | W          | (298,351 | )    |  | W             | (244,447 | ) |  | W | (162,525 | )
|Add: Amortization, net of tax     |  |            | 3,697    |      |  |               | 3,751    |   |  |   |         |  
|                                  |  |            |          |      |  |               |          |   |  |   |          |  
|Adjusted net loss                 |  | W          | (294,654 | )    |  | W             | (240,696 | ) |  | W | (162,525 | )
|                                  |  |            |          |      |  |               |          |   |  |   |          |  

In the future, the Company will complete the annual assessment for impairment
of the value of its goodwill and indefinite life intangible assets at the end
of the third quarter of each fiscal year, or when indications of impairment
exist. Such indications of impairment would include the impacts of significant
adverse changes in legal factors, market and economic conditions, the results
of its operational performance and strategic plans; adverse actions by
regulators; unanticipated changes in competition and market share; the
potential for the sale or disposal of all or a significant portion of our
business.

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|(8) |  | Bonds with Stock Warrants
|--- |  | -------------------------

Under Korean GAAP, all the proceeds from the issuance of bonds with stock
warrants are accounted for as debt securities, regardless of whether the
warrants are detachable or non-detachable.

Under U.S.GAAP, the proceeds from the issuance of bonds with detachable
stock warrants are allocated between the debt securities and the warrants
based on their relative fair values at the time of issuance. The portion
allocated to warrants is accounted for as paid-in capital.



|(9) |  | Stock Compensation Expense
|--- |  | --------------------------

Under Korean GAAP, the difference between the present value of the exercise
price and the stock price at the grant date is recorded as compensation expense
with a corresponding credit to the capital adjustment account (using the
minimum value method).

Under U.S. GAAP, as permissible under SFAS No.123- Accounting for Stock Based
Compensation, the Company accounts for stock options, granted in 1999, in
accordance with the methodology prescribed under Accounting Principles Board
Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, which
recognizes compensation cost based on the intrinsic value of the equity award.

In December2002, the Financial Accounting Standards Board (FASB) issued SFAS
No.148  Accounting for Stock-Based Compensation  Transition and Disclosure
 an amendment of FASB Statement No.123. SFAS No.148 provides alternative
methods of transition for a voluntary change to fair value-based methods of
accounting for stock-based employee compensation. The Statement also amends
the disclosure requirements of SFAS No.123 to require prominent disclosures
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The provisions of the Statement
are effective for financial statements for fiscal years ending after
December15, 2002.

In adopting SFAS No. 148, the Company adopted the modified prospective method
in order to voluntarily change to the fair-value based method of accounting for
stock-based employee compensation and as a result, the compensation cost
recognized in 2002 under U.S. GAAP is the same as what would have been
recognized had the recognition provisions of SFAS No. 123 been applied from its
original effective date. Results for prior years are not restated and the
effects of accounting transition are as follows;

|                                                                                                          |  |            |          |      |  |               |          |   |  |   |          |  
|--------------------------------------------------------------------------------------------------------- |  | ---------- | -------- | ---- |  | ------------- | -------- | - |  | - | -------- | -
|                                                                                                          |  | Korean Won
|                                                                                                          |  |           
|                                                                                                          |  | 2000       |          | 2001 |  | 2002         
|                                                                                                          |  |            |          |      |  |              
|                                                                                                          |  |            |          |      |  | (In millions) |          |   |  |  
|Reported net loss under U.S. GAAP                                                                         |  | W          | (298,351 | )    |  | W             | (244,447 | ) |  | W | (162,525 | )
|Add: Stock-based employee
compensation expense included in
reported net loss                              |  |            |         |      |  |               |         |   |  |   | 2,890    |  
|Deduct: Stock-based employee
compensation expense determined
under fair value based method
for all awards |  |            | (1,802   | )    |  |               | (1,088   | ) |  |   |         |  
|                                                                                                          |  |            |          |      |  |               |          |   |  |   |          |  
|Adjusted net loss under U.S. GAAP                                                                         |  | W          | (300,153 | )    |  | W             | (245,535 | ) |  | W | (159,635 | )
|                                                                                                          |  |            |          |      |  |               |          |   |  |   |          |  

A summary of status of Hanaros stock option plans as of December 31, 2000,
2001 and 2002, and the changes during the years ending on those dates is
presented below:

|                                                               |  |        |           |                |  |          |        |                |  |        |           |                |  |   |        |  |  |           |           |  |  |   |        | 
|-------------------------------------------------------------- |  | ------ | --------- | -------------- |  | -------- | ------ | -------------- |  | ------ | --------- | -------------- |  | - | ------ |  |  | --------- | --------- |  |  | - | ------ | 
|                                                               |  | 2000   |           | 2001           |  | 2002    
|                                                               |  |        |           |                |  |         
|                                                               |  |        |           |                |  | Weighted |        |                |  |        |           | Weighted-      |  |   |        |  |  | Weighted-
|                                                               |  |        |           |                |  | average  |        |                |  |        |           | average        |  |   |        |  |  | average  
|                                                               |  | Shares |           | exercise price |  | Shares   |        | exercise price |  | Shares |           | exercise price
|                                                               |  |        |           |                |  |          |        |                |  |        |           |               
|Outstanding at beginning
of year                               |  |        | 170,000   |                |  | W        | 15,710 |                |  |        | 1,941,566 |                |  | W | 17,571 |  |  |           | 1,810,642 |  |  | W | 17,558 | 
|Granted                                                        |  |        | 1,771,566 |                |  | W        | 17,750 |                |  |        |          |                |  | W |       |  |  |           |          |  |  | W |       | 
|Cancelled                                                      |  |        |          |                |  | W        |       |                |  |        | (130,924  | )              |  | W | 17,750 |  |  |           |          |  |  | W |       | 
|                                                               |  |        |           |                |  |          |        |                |  |        |           |                |  |   |        |  |  |           |           |  |  |   |        | 
|Outstanding at end of year                                     |  |        | 1,941,566 |                |  | W        | 17,571 |                |  |        | 1,810,642 |                |  | W | 17,558 |  |  |           | 1,810,642 |  |  | W | 17,558 | 
|                                                               |  |        |           |                |  |          |        |                |  |        |           |                |  |   |        |  |  |           |           |  |  |   |        | 
|Options exercisable at
year-end                                |  |        |          |                |  |          |        |                |  |        |          |                |  |   |        |  |  |           | 170,000   |  |  |   |        | 
|Weighted-average fair
value of
options granted during
the year |  |        |           |                |  | W        | 12,910 |                |  |        |           |                |  | W |       |  |  |           |           |  |  | W |       | 

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##### Table of Contents



The following table summarizes information about Hanaros stock options as of
December 31, 2002.

|                         |        |                          |           |                         |                            |                |     |     |  |   |        |       | 
|------------------------ | ------ | ------------------------ | --------- | ----------------------- | -------------------------- | -------------- | --- | --- |  | - | ------ | ----- | 
|                         |        |                          | Number of |                         | Weighted-average
remaining |                |     |     | 
|Ranges of exercise price |        | contractual
life (years) |           | contractual life(years) |                            | exercise price
|                         |        |                          |           |                         |                            |               
|                         | W5,630 |                          |           | 50,000                  |                            |                |     | 1.7 |  |   | W      | 5,630 | 
|W17,750 to W19,910       |        |                          | 1,760,642 |                         |                            |                | 2.7 |     |  | W | 17,897 |      
|                         |        |                          |           |                         |                            |                |     |     |  |   |        |      
|W5,630 to W19,910        |        |                          | 1,810,642 |                         |                            |                | 2.7 |     |  | W | 17,558 |      
|                         |        |                          |           |                         |                            |                |     |     |  |   |        |      



|(10) |  | Interest rate swap
|---- |  | ------------------

The Company has entered into interest rate swap contracts in order to hedge
the exposure to variability in cash flows from a forecasted transaction of
floating rate notes. Under Korean GAAP, the Company records the valuation
loss as capital adjustment.

Under U.S. GAAP, SFAS No. 133-Accounting for Derivatives instruments and
Hedging Activities, for a derivative designated as hedging the exposure to
variability in expected future cash flows that is attributable to a
particular risk, the effective portion is reported in other comprehensive
income and the ineffective portion is reported in earnings.



|(11) |  | Deferred Income Taxes
|---- |  | ---------------------

Under Korean GAAP, deferred tax assets and liabilities are presented in the
balance sheet as a single and non-current amount.

Under U.S.GAAP, deferred tax assets and liabilities are separated into their
current and non-current portions based on the classification of the related
asset or liability for financial reporting purposes.



|(12) |  | Loans to Employees
|---- |  | ------------------

Under Korean GAAP, loans to employees for purposes of purchasing the Companys
common stock are recorded as assets. Under U.S.GAAP, such transactions are
recorded as a reduction in shareholders equity.



|(13) |  | Advanced Payments
|---- |  | -----------------

Under Korean GAAP, advanced payments, which relate to purchases of property and
equipment, are included in current assets. Under U.S.GAAP, such advanced
payments are included in non-current assets.



|(14) |  | Advances Received
|---- |  | -----------------

Under Korean GAAP, the transfers of beneficiary certificates to the SPEs,
described in Note 16, are recognized as sales and the proceeds from the
transfers are recorded as advances received. Under U.S.GAAP, such transaction
is accounted for as borrowings in accordance with Emerging Issues Task Force
Issue No. 88-18, Sales of Future Revenues.



|(15) |  | Revenue Recognition
|---- |  | -------------------

Under Korean GAAP, activation fees and service installation service fees are
recorded as revenues when billed and the related direct incremental acquisition
cost are expensed as incurred.

Under U.S.GAAP, such amount should be deferred and recognized over the period
of customer relationship.



|(16) |  | Minority Interest in Consolidated Subsidiaries
|---- |  | ----------------------------------------------

Under Korean GAAP, minority interest in consolidated subsidiaries is presented
as a component of shareholders
equity in the consolidated balance sheets. Under U.S. GAAP, minority interest
in consolidated subsidiaries is not included in shareholders equity; rather,
it is presented between liability and shareholders equity in the consolidated
balance sheets.

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##### Table of Contents





|(17) |  | Comprehensive Income
|---- |  | --------------------

Under Korean GAAP, there is no requirement to present comprehensive income.
Under U.S.GAAP, effective for fiscal years beginning after December 15, 1997,
comprehensive income and its components must be presented in the financial
statements. Comprehensive income includes all changes in shareholders equity
during a period except those resulting from investment by, or distribution to,
owners, including certain items not included in the current years results of
operations.

Comprehensive loss for the years ended December 31, 2000, 2001 and 2002 is
summarized as follows:

|                                                           |                                             |   |            |        |      |   |               |       |  |   |          |        |  
|---------------------------------------------------------- | ------------------------------------------- | - | ---------- | ------ | ---- | - | ------------- | ----- |  | - | -------- | ------ | -
|                                                           |                                             |   | Korean Won
|                                                           |                                             |   |           
|                                                           |                                             |   | 2000       |        | 2001 |   | 2002         
|                                                           |                                             |   |            |        |      |   |              
|                                                           |                                             |   |            |        |      |   | (In millions) |       |  |   |         
|Net loss as adjusted in accordance with
U.S.GAAP           |                                             | W | (298,351   | )      |      | W | (244,447      | )     |  | W | (162,525 | )     
|Other comprehensive income (loss), net of
tax:             |                                             |   |            |        |      |   |               |       |  |   |          |       
|                                                           | Unrealized gains (losses) on
investments    |   |            | (1,820 | )    |   |               | 1,151 |  |   |          | (3,761 | )
|                                                           | Foreign-based operations translation
credit |   |            | 3      |      |   |               | 3     |  |   |          | (30    | )
|                                                           | Interest rate swap                          |   |            |       |      |   |               |      |  |   |          | (5,633 | )
|                                                           |                                             |   |            |        |      |   |               |       |  |   |          |       
|Comprehensive loss as adjusted in
accordance
With U.S.GAAP |                                             | W | (300,168   | )      |      | W | (243,293      | )     |  | W | (171,949 | )     
|                                                           |                                             |   |            |        |      |   |               |       |  |   |          |       



|(18) |  | Statements of Cash Flows
|---- |  | ------------------------

Statements of cash flows for the years ended December 31, 2001 and 2002 under
Korean GAAP do not include cash flows of Hanafos and Hanadream, which are
included in the consolidation under U.S. GAAP.

Under Korean GAAP, cash flows from restricted deposits, refundable deposits and
intangible assets are reported as investing activities. Under U.S.GAAP, these
items would be reported as operating activities. Summarized cash flows data by
operating, investing and financing activities in accordance with U.S.GAAP for
the years ended December 31, 2000, 2001 and 2002 are set out below:

|                                                 |                                                      |   |            |            |      |   |               |          |   |   |         |          |  
|------------------------------------------------ | ---------------------------------------------------- | - | ---------- | ---------- | ---- | - | ------------- | -------- | - | - | ------- | -------- | -
|                                                 |                                                      |   | Korean Won
|                                                 |                                                      |   |           
|                                                 |                                                      |   | 2000       |            | 2001 |   | 2002         
|                                                 |                                                      |   |            |            |      |   |              
|                                                 |                                                      |   |            |            |      |   | (In millions) |          |   |   |        
|Net cash provided by (used
in):                  |                                                      |   |            |            |      |   |               |          |   |   |         |         
|                                                 | Operating activities                                 |   | W          | (346,720   | )    |   | W             | (9,323   | ) |   | W       | (64,496  | )
|                                                 | Investing activities                                 |   |            | (1,094,357 | )    |   |               | (538,750 | ) |   |         | (260,360 | )
|                                                 | Financing activities                                 |   |            | 1,466,725  |      |   |               | 496,221  |   |   |         | 341,966  |  
|                                                 | Decrease due to changes in consolidated
subsidiaries |   |            |           |      |   |               | (32      | ) |   |         | (700     | )
|                                                 |                                                      |   |            |            |      |   |               |          |   |   |         |          |  
|Increase (decrease) in cash and cash
equivalents |                                                      |   | 25,648     |            |      |   | (51,884       | )        |   |   | 16,410  |         
|Cash and cash equivalents, beginning of
year     |                                                      |   | 333,409    |            |      |   | 359,057       |          |   |   | 307,173 |         
|                                                 |                                                      |   |            |            |      |   |               |          |   |   |         |          |  
|Cash and cash equivalents, end of
year           |                                                      | W | 359,057    |            |      | W | 307,173       |          |   | W | 323,583 |         
|                                                 |                                                      |   |            |            |      |   |               |          |   |   |         |          |  



|(19) |  | Recently Issued Accounting Pronouncements
|---- |  | -----------------------------------------

In June 2001, the FASB issued SFAS No. 143- Accounting for Asset Retirement
Obligations. The statement provides accounting and reporting standards for
recognizing the cost associated with obligations related to the retirement of
tangible long-lived assets. Under this statement, legal obligations associated
with the retirement of long-lived assets are to be recognized at their fair
value in the period in which they are incurred if a reasonable estimate of fair
value can be made. The fair value of the asset retirement costs is capitalized
as part of the carrying amount of the long-lived asset and expensed using a
systematic and rational method over the assets useful life. Any subsequent
changes to the fair value of the liability will be expensed. The Company will
adopt this statement effective January 1, 2003 and does not expect the adoption
of this statement to have a significant impact on its financial condition or
results of operations.

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SFAS 145, announced on April 20,
2002, rescinds SFAS No 4 - Reporting Gains
and Losses from Extinguishment of Debt, SFAS No 44 - Accounting for
Intangible Assets of Motor Carrier and SFAS No 64 - Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements. SFAS also amends SFAS No 13 -
Accounting for leases. This statement also makes various technical
corrections to existing pronouncements that are not substantive in nature.
SFAS 145 related to the rescission of SFAS 4 and 64 are effective for fiscal
year beginning after May 15, 2002. The provisions related to the amendment of
SFAS 13 are effective for transactions occurring after May 15, 2002. All other
provisions of SFAS 145 are effective for financial statements issued on or
after May 15, 2002. Early application of all provisions of SFAS 145 is
encouraged. The Company does not believe that the adoption of this statements
to have a significant impact on its financial conditions or result of
operations.

In June 2002, the FASB issued SFAS No. 146- Accounting for Costs Associated
with Exit or Disposal Activities, which is effective for financial statements
where exit or disposal activities are initiated after December 31, 2002. This
statement nullifies EITF Issue 94-3- Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity, which
allowed recognition of a liability for exit and disposal activities upon
managements intent to exit or dispose of an activity. This statement requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred. The Company will adopt this
statement for exit or disposal activities initiated after December 31, 2002 and
does not expect the adoption of this statement to have a significant impact on
its financial condition or results of operations.

In November 2002, FASB Interpretation (FIN) No. 45- Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others was issued. The interpretation provides guidance on
the guarantors accounting and disclosure requirements for guarantees,
including indirect guarantees of indebtedness of others. The Company has
adopted the disclosure requirements of the interpretation as of December 31,
2002. The accounting guidelines are applicable to guarantees issued after
December 31, 2002 and require that the Company record a liability for the fair
value of such guarantees in the balance sheet. The Company does not expect the
adoption of this statement to have a significant impact on its financial
condition or results of operations.

In January 2003, the FASB issued FIN No. 46- Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51. FIN No. 46 requires
certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN No. 46 is effective
immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN No. 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company does not
expect the adoption of this interpretation to have a significant impact on its
financial statements.



|(20) |  | Fair Value of Financial Instruments
|---- |  | -----------------------------------

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.



|(i)   |  | Cash and cash equivalents, marketable securities, short-term borrowings:
The carrying amount approximates fair value because of the nature or short
maturity of those instruments.                                                                                                                                                                                                                       
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | Other investments:
The fair value of market-traded investments is estimated based on the
quoted market prices for those or similar investments. For other investments
for which there are no quoted market prices, a reasonable estimate of fair
value could not be made without incurring excessive costs. Additional
information pertinent to the fair value of unquoted investments is provided
below.
|     
|(iii) |  | Long-term debt and debentures:
The fair values of long-term debt and debentures are estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered for the debt of the same remaining maturities.                                                                                                                                                            

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The estimated fair values of the Companys financial instruments at December 31
are summarized as follows:

|                                                                     |                                    |  |               |                 |  |            |            |        |      |  |  |                 |  |            |           |        |  |  |  |  |  |   |           |        |  |  |  |  |  |   |           |        | 
|-------------------------------------------------------------------- | ---------------------------------- |  | ------------- | --------------- |  | ---------- | ---------- | ------ | ---- |  |  | --------------- |  | ---------- | --------- | ------ |  |  |  |  |  | - | --------- | ------ |  |  |  |  |  | - | --------- | ------ | 
|                                                                     |                                    |  |               |                 |  |            | Korean Won
|                                                                     |                                    |  |               |                 |  |            |           
|                                                                     |                                    |  | 2001          |                 |  |            |            |        | 2002
|                                                                     |                                    |  |               |                 |  |            |            |        |      |  |  |                 | 
|                                                                     |                                    |  |               | Carrying amount |  | Fair value |            |        |      |  |  | Carrying amount |  | Fair value
|                                                                     |                                    |  |               |                 |  |            |            |        |      |  |  |                 |  |            |           |        | 
|                                                                     |                                    |  | (In millions)
|Cash and cash equivalents and marketable
securities:                 |                                    |  |               |                 |  | W          | 349,436    |        |      |  |  |                 |  | W          | 349,436   |        |  |  |  |  |  | W | 323,929   |        |  |  |  |  |  | W | 323,929   |       
|Short-term financial instruments                                     |                                    |  |               |                 |  |            | 150,040    |        |      |  |  |                 |  |            | 150,040   |        |  |  |  |  |  |   | 150,499   |        |  |  |  |  |  |   | 150,499   |       
|Long-term financial instruments                                      |                                    |  |               |                 |  |            | 1,261      |        |      |  |  |                 |  |            | 1,261     |        |  |  |  |  |  |   | 23        |        |  |  |  |  |  |   | 23        |       
|Investment securities:                                               |                                    |  |               |                 |  |            |            |        |      |  |  |                 |  |            |           |        |  |  |  |  |  |   |           |        |  |  |  |  |  |   |           |       
|                                                                     | Practicable to estimate fair value |  |               |                 |  |            |            | 26,187 |      |  |  |                 |  |            |           | 26,187 |  |  |  |  |  |   |           | 26,195 |  |  |  |  |  |   |           | 26,195 | 
|                                                                     | Not practicable                    |  |               |                 |  |            |            | 37,419 |      |  |  |                 |  |            |           | N/A    |  |  |  |  |  |   |           | 31,473 |  |  |  |  |  |   |           | N/A    | 
|Short-term borrowings                                                |                                    |  |               |                 |  |            | 70,613     |        |      |  |  |                 |  |            | 70,613    |        |  |  |  |  |  |   | 63,000    |        |  |  |  |  |  |   | 63,000    |       
|Long-term debt, including current portion                            |                                    |  |               |                 |  |            | 265,660    |        |      |  |  |                 |  |            | 266,683   |        |  |  |  |  |  |   | 401,841   |        |  |  |  |  |  |   | 408,809   |       
|Debentures, including current portion                                |                                    |  |               |                 |  |            | 1,284,839  |        |      |  |  |                 |  |            | 1,286,960 |        |  |  |  |  |  |   | 1,442,174 |        |  |  |  |  |  |   | 1,464,691 |       
|Long-term obligations under capital
lease, including current portion |                                    |  |               |                 |  |            | 93,240     |        |      |  |  |                 |  |            | 91,597    |        |  |  |  |  |  |   | 74,232    |        |  |  |  |  |  |   | 73,718    |       
|Interest rate swap                                                   |                                    |  |               |                 |  |            |           |        |      |  |  |                 |  |            |          |        |  |  |  |  |  |   | 5,633     |        |  |  |  |  |  |   | 5,633     |       

(2) Segment information

Under U.S. GAAP, companies report segment information based on the way
management disaggregates the company for making operating decisions. Each of
the Companys consolidated subsidiaries is an operating segment in accordance
with SFAS No. 131- Disclosures about Segments of an Enterprise and Related
Information. The Companys reportable segments are strategic business units
that offer different products and services. The segments are managed
separately based on the difference in products and services, technology and
marketing strategies. The Company has three reportable operating segments:
voice services, lease line and broadband services. Voice services include all
services provided to fixed line customers, including local services. Lease
line services consist of the leasing of dedicated fiber optic lines over which
customers transmit voice and data. Broadband services include high-speed data
transmission services over Asymmetrical Digital Subscriber Line (ADSL) and
internet access services. The operations of all other operating segments are
included in the other segment, which include entities providing real estate
management services and customer services.

The accounting policies of the segments are the same as those described in Note
2, Summary of Significant Accounting Policies and Note 26- Reconciliation to
Accounting Principles Generally Accepted in the United States. The Company
evaluates performance based on operating income or loss before income tax.

There are no revenues from transactions with a single external customer that
amount to 10 percent or more of the consolidated revenues of the Company.

F-38



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##### Table of Contents



(22) Effect on Net Loss and Shareholders Equity

The approximate effects of the significant adjustments to net loss and
shareholders equity, that are required if U.S.GAAP were applied instead of
Korean GAAP, are summarized as follows:

|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |          |   | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------- |  |  |  | - | --------- | -------------------------------------- | ----- | -------------------------------------- |  |  |  | ---- | --------- | -------- | - |  |  | ---- |  | ---- | --------- | -------- | - | ---------------- | --------- | -------- | - | 
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   | Translation into
|                                                                                       |                                                                                 |                                          |  |  |  |   |           | Korean Won                             |       | U.S. Dollars(Note 2)                  
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           | 2000                                   |       |                                        |  |  |  | 2001 |           |          |   |  |  | 2002 |  | 2002
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |     
|                                                                                       |                                                                                 |                                          |  |  |  |   |           | (In millions, except per share amount) |       | (In
thousands, exceptper share amount)
|Net loss under Korean GAAP                                                             |                                                                                 |                                          |  |  |  | W | (305,170  | )                                      |       |                                        |  |  |  | W    | (245,902  | )        |   |  |  |      |  | W    | (125,025  | )        |   | $                | (105,391  | )       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Adjustments:                                                                           |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|                                                                                       | Amortization of licensing cost paid by
shareholders                             |                                          |  |  |  |   |           | (2,250                                 | )     |                                        |  |  |  |      |           | (2,250   | ) |  |  |      |  |      |           |         |   |                  |           |         |  
|                                                                                       | Marketable securities:                                                          |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |          |  
|                                                                                       |                                                                                 | Reversal of revaluation gains and losses |  |  |  |   |           |                                        | 6,820 |                                        |  |  |  |      |           |          |  |  |  |      |  |      |           |          |  |                  |           |          |  | 
|                                                                                       | Development costs                                                               |                                          |  |  |  |   |           | (7,066                                 | )     |                                        |  |  |  |      |           | 4,962    |   |  |  |      |  |      |           | 252      |   |                  |           | 212      |  
|                                                                                       | Stock compensation expense                                                      |                                          |  |  |  |   |           | 1,802                                  |       |                                        |  |  |  |      |           | 1,088    |   |  |  |      |  |      |           | (2,890   | ) |                  |           | (2,436   | )
|                                                                                       | Revenue recognition                                                             |                                          |  |  |  |   |           | (1,321                                 | )     |                                        |  |  |  |      |           | 346      |   |  |  |      |  |      |           | 346      |   |                  |           | 292      |  
|                                                                                       | Bonds with stock warrants                                                       |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | (4,039   | ) |  |  |      |  |      |           | (37,328  | ) |                  |           | (31,466  | )
|                                                                                       | Changes in consolidated subsidiaries                                            |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | 877      |   |  |  |      |  |      |           | 6        |   |                  |           | 5        |  
|                                                                                       | Consolidation of SPE                                                            |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | 471      |   |  |  |      |  |      |           | 1,689    |   |                  |           | 1,424    |  
|                                                                                       | Amortization of goodwill                                                        |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           |         |   |  |  |      |  |      |           | 425      |   |                  |           | 358      |  
|                                                                                       | Deferred tax effect of current years
U.S.GAAP adjustments                      |                                          |  |  |  |   |           | 621                                    |       |                                        |  |  |  |      |           | (432     | ) |  |  |      |  |      |           | 11,084   |   |                  |           | 9,343    |  
|                                                                                       | Valuation allowance against deferred tax
assets created by U.S.GAAP adjustments |                                          |  |  |  |   |           | 8,213                                  |       |                                        |  |  |  |      |           | 432      |   |  |  |      |  |      |           | (11,084  | ) |                  |           | (9,343   | )
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|                                                                                       |                                                                                 |                                          |  |  |  |   | 6,819     |                                        |       |                                        |  |  |  |      | 1,455     |          |   |  |  |      |  |      | (37,500   | )        |   |                  | (31,611   | )       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Net loss under U.S.GAAP                                                                |                                                                                 |                                          |  |  |  | W | (298,351  | )                                      |       |                                        |  |  |  | W    | (244,447  | )        |   |  |  |      |  | W    | (162,525  | )        |   | $                | (137,002  | )       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Basic and diluted loss per share under
U.S.GAAP (in single Korean won and U.S
dollars) |                                                                                 |                                          |  |  |  | W | (1,157    | )                                      |       |                                        |  |  |  | W    | (926      | )        |   |  |  |      |  | W    | (582      | )        |   | $                | (0.49     | )       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Shareholders equity under Korean GAAP                                                 |                                                                                 |                                          |  |  |  | W | 1,667,078 |                                        |       |                                        |  |  |  | W    | 1,568,392 |          |   |  |  |      |  | W    | 1,515,498 |          |   | $                | 1,277,500 |         
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Adjustments:                                                                           |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|                                                                                       | Licensing cost paid by shareholders                                             |                                          |  |  |  |   | W         | 37,500                                 |       |                                        |  |  |  |      | W         | 35,250   |   |  |  |      |  |      | W         | 35,250   |   |                  | $         | 29,714   |  
|                                                                                       | Development costs                                                               |                                          |  |  |  |   |           | (7,066                                 | )     |                                        |  |  |  |      |           | (1,251   | ) |  |  |      |  |      |           | (999     | ) |                  |           | (842     | )
|                                                                                       | Loans to employees                                                              |                                          |  |  |  |   |           | (13,022                                | )     |                                        |  |  |  |      |           | (13,807  | ) |  |  |      |  |      |           | (12,900  | ) |                  |           | (10,874  | )
|                                                                                       | Bonds with stock warrants                                                       |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | 34,988   |   |  |  |      |  |      |           | 7,066    |   |                  |           | 5,956    |  
|                                                                                       | Changes in consolidated subsidiaries                                            |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | 713      |   |  |  |      |  |      |           | (786     | ) |                  |           | (663     | )
|                                                                                       | Consolidation of SPE                                                            |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | 471      |   |  |  |      |  |      |           | 2,159    |   |                  |           | 1,820    |  
|                                                                                       | Revenue recognition                                                             |                                          |  |  |  |   |           | (1,321                                 | )     |                                        |  |  |  |      |           | (975     | ) |  |  |      |  |      |           | (628     | ) |                  |           | (529     | )
|                                                                                       | Goodwill                                                                        |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           |         |   |  |  |      |  |      |           | 425      |   |                  |           | 358      |  
|                                                                                       | Deferred tax effect of U.S.GAAP adjustments                                     |                                          |  |  |  |   |           | (8,213                                 | )     |                                        |  |  |  |      |           | (10,823  | ) |  |  |      |  |      |           | (12,047  | ) |                  |           | (10,155  | )
|                                                                                       | Valuation allowance against deferred tax
assets created by U.S.GAAP adjustments |                                          |  |  |  |   |           | 8,213                                  |       |                                        |  |  |  |      |           | 10,823   |   |  |  |      |  |      |           | 12,047   |   |                  |           | 10,155   |  
|                                                                                       | Changes in minority interest applying
U.S.GAAP                                  |                                          |  |  |  |   |           |                                       |       |                                        |  |  |  |      |           | (147,088 | ) |  |  |      |  |      |           | (145,477 | ) |                  |           | (122,631 | )
|                                                                                       | Minority interest under U.S.GAAP                                                |                                          |  |  |  |   |           | (1,457                                 | )     |                                        |  |  |  |      |           | (10      | ) |  |  |      |  |      |           | (19      | ) |                  |           | (16      | )
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|                                                                                       |                                                                                 |                                          |  |  |  |   | 14,634    |                                        |       |                                        |  |  |  |      | (91,709   | )        |   |  |  |      |  |      | (115,909  | )        |   |                  | (97,707   | )       
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         
|Shareholders equity under U.S.GAAP                                                    |                                                                                 |                                          |  |  |  | W | 1,681,712 |                                        |       |                                        |  |  |  | W    | 1,476,683 |          |   |  |  |      |  | W    | 1,399,589 |          |   | $                | 1,179,793 |         
|                                                                                       |                                                                                 |                                          |  |  |  |   |           |                                        |       |                                        |  |  |  |      |           |          |   |  |  |      |  |      |           |          |   |                  |           |         

F-39



---



##### Table of Contents



(23) Reconciliation of the Balance Sheet Accounts

The reconciliation of the significant balance sheet accounts under Korean GAAP
except for the shareholders equity items shown above, to the approximate
amounts determined under U.S.GAAP as of December 31 is as follows:

|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |           |          |  
|----------------------------------- | ------------------ | ---------------------- | ------------------------------------ |  |  | - | --------- | - | ------------- | -------- | -------------------- |  |  | - | --------- | - | --------- | -------- | --------- | - | --------- | -------- | -
|                                    |                    |                        |                                      |  |  |   |           |   |               |          | Translation into    
|                                    |                    |                        |                                      |  |  |   |           |   | Korean
Won    |          | U.S.Dollars (Note 2)
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                     
|                                    |                    |                        |                                      |  |  |   |           |   | 2001          |          |                      |  |  |   | 2002      |   | 2002     
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |          
|                                    |                    |                        |                                      |  |  |   |           |   | (In millions) |          | (In thousands)      
|Current assets                      |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As reported            |                                      |  |  |   |           | W | 734,077       |          |                      |  |  |   |           | W | 748,419   |          |           | $ | 630,885   |         
|                                    |                    | U.S. GAAP adjustments: |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |           |         
|                                    |                    |                        | Short-term loans                     |  |  |   |           |   |               | (9,776   | )                    |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        | Advanced payments                    |  |  |   |           |   |               | (2,510   | )                    |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        | Prepaid expenses                     |  |  |   |           |   |               | 11,235   |                      |  |  |   |           |   |           | 10,811   |           |   |           | 9,113    |  
|                                    |                    |                        | Changes in consolidated subsidiaries |  |  |   |           |   |               | (86,714  | )                    |  |  |   |           |   |           | (67,674  | )         |   |           | (57,046  | )
|                                    |                    |                        | Consolidation of SPEs                |  |  |   |           |   |               | 58,003   |                      |  |  |   |           |   |           | 34,996   |           |   |           | 29,500   |  
|                                    |                    |                        | Deferred income tax assets           |  |  |   |           |   |               | 676      |                      |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As adjusted            |                                      |  |  |   |           |   | 704,991       |          |                      |  |  |   |           |   | 726,552   |          |           |   | 612,452   |         
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    | Non-current assets |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |          
|                                    |                    | As reported            |                                      |  |  |   |           |   | 3,370,188     |          |                      |  |  |   |           |   | 3,356,366 |          |           |   | 2,829,273 |         
|                                    |                    | U.S. GAAP adjustments: |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |           |         
|                                    |                    |                        | Long-term loans                      |  |  |   |           |   |               | (4,031   | )                    |  |  |   |           |   |           | (12,900  | )         |   |           | (10,874  | )
|                                    |                    |                        | Long-term prepaid expenses           |  |  |   |           |   |               | 16,249   |                      |  |  |   |           |   |           | 7,686    |           |   |           | 6,479    |  
|                                    |                    |                        | Advanced payments                    |  |  |   |           |   |               | 2,510    |                      |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        | Intangibles                          |  |  |   |           |   |               | 33,999   |                      |  |  |   |           |   |           | 34,676   |           |   |           | 29,230   |  
|                                    |                    |                        | Changes in consolidated subsidiaries |  |  |   |           |   |               | (441,779 | )                    |  |  |   |           |   |           | (437,374 | )         |   |           | (368,688 | )
|                                    |                    |                        | Consolidation of SPEs                |  |  |   |           |   |               | (9,000   | )                    |  |  |   |           |   |           | (10,180  | )         |   |           | (8,581   | )
|                                    |                    |                        | Deferred income tax assets           |  |  |   |           |   |               | 20,332   |                      |  |  |   |           |   |           | 13,516   |           |   |           | 11,393   |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As adjusted            |                                      |  |  |   |           |   | 2,988,468     |          |                      |  |  |   |           |   | 2,951,790 |          |           |   | 2,488,232 |         
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|Total assets based on U.S.GAAP      |                    |                        |                                      |  |  | W | 3,693,459 |   |               |          |                      |  |  | W | 3,678,342 |   |           | $        | 3,100,684 |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|Current liabilities                 |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As reported            |                                      |  |  |   |           | W | 1,038,013     |          |                      |  |  |   |           | W | 1,605,367 |          |           | $ | 1,353,256 |         
|                                    |                    | U.S.GAAP adjustments:  |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |           |         
|                                    |                    |                        | Unearned income                      |  |  |   |           |   |               | 11,581   |                      |  |  |   |           |   |           | 11,157   |           |   |           | 9,405    |  
|                                    |                    |                        | Bonds with stock warrants            |  |  |   |           |   |               |         |                      |  |  |   |           |   |           | (7,066   | )         |   |           | (5,956   | )
|                                    |                    |                        | Changes in consolidated subsidiaries |  |  |   |           |   |               | (133,678 | )                    |  |  |   |           |   |           | (276,295 | )         |   |           | (232,905 | )
|                                    |                    |                        | Consolidation of SPEs                |  |  |   |           |   |               | 33,992   |                      |  |  |   |           |   |           | (1,086   | )         |   |           | (916     | )
|                                    |                    |                        | Deferred income tax liabilities      |  |  |   |           |   |               | 676      |                      |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As adjusted            |                                      |  |  |   |           |   | 950,584       |          |                      |  |  |   |           |   | 1,332,077 |          |           |   | 1,122,884 |         
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|Long-term liabilities               |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As reported            |                                      |  |  |   |           |   | 1,497,860     |          |                      |  |  |   |           |   | 983,920   |          |           |   | 829,402   |         
|                                    |                    | U.S.GAAP adjustments:  |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |   |           |         
|                                    |                    |                        | Unearned income                      |  |  |   |           |   |               | 16,878   |                      |  |  |   |           |   |           | 7,968    |           |   |           | 6,717    |  
|                                    |                    |                        | Bonds with stock warrants            |  |  |   |           |   |               | (34,988  | )                    |  |  |   |           |   |           |         |           |   |           |         |  
|                                    |                    |                        | Changes in consolidated subsidiaries |  |  |   |           |   |               | (248,430 | )                    |  |  |   |           |   |           | (83,004  | )         |   |           | (69,969  | )
|                                    |                    |                        | Consolidation of SPEs                |  |  |   |           |   |               | 14,530   |                      |  |  |   |           |   |           | 23,743   |           |   |           | 20,014   |  
|                                    |                    |                        | Deferred income tax liabilities      |  |  |   |           |   |               | 20,332   |                      |  |  |   |           |   |           | 13,516   |           |   |           | 11,394   |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|                                    |                    | As adjusted            |                                      |  |  |   |           |   | 1,266,182     |          |                      |  |  |   |           |   | 946,143   |          |           |   | 797,558   |         
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|Total liabilities based on U.S.GAAP |                    |                        |                                      |  |  | W | 2,216,766 |   |               |          |                      |  |  | W | 2,278,220 |   |           | $        | 1,920,442 |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  
|Minority interest based on U.S.GAAP |                    |                        |                                      |  |  | W | 10        |   |               |          |                      |  |  | W | 533       |   |           | $        | 449       |  
|                                    |                    |                        |                                      |  |  |   |           |   |               |          |                      |  |  |   |           |   |           |          |           |  

F-40



---



##### Table of Contents



(24) Tax Effects of Temporary Differences

The tax effects of temporary differences that resulted in significant portions
of the deferred tax assets and liabilities at December 31, computed under
U.S.GAAP, and the description of the financial statement items that created
these differences are as follows:

|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|------------------------------------- | ------------------------------------ |  |  |  |  | ---- | ------------- | ---- | - |  |  | ---- | ----------- | - | ------- | ------- | - |  | ------- |  |  | - | ---- | --- | ----------- |  |  |  |  | - | ------- | ------- | -
|                                      |                                      |  |  |  |  |      | Korean Won   
|                                      |                                      |  |  |  |  |      |              
|                                      |                                      |  |  |  |  | 2001 |               |      |   |  |  | 2002
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |            
|                                      |                                      |  |  |  |  |      | Current       |      |   |  |  |      | Non-current |   |         |         |   |  | Current |  |  |   |      |     | Non-current
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |            
|                                      |                                      |  |  |  |  |      | (In millions)
|Deferred tax assets:                  |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |        
|                                      | Development costs                    |  |  |  |  |      | W             | 372  |   |  |  |      |             |   | W       |        |   |  |         |  |  |   | W    | 297 |             |  |  |  |  |   | W       |        |  
|                                      | Revenue recognition                  |  |  |  |  |      |               | 103  |   |  |  |      |             |   |         | 186     |   |  |         |  |  |   |      | 103 |             |  |  |  |  |   |         | 84      |  
|                                      | Changes in consolidated subsidiaries |  |  |  |  |      |               |     |   |  |  |      |             |   |         |        |   |  |         |  |  |   |      | 180 |             |  |  |  |  |   |         |        |  
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|Total deferred income tax assets      |                                      |  |  |  |  |      | 475           |      |   |  |  |      |             |   | 186     |         |   |  |         |  |  |   | 580  |     |             |  |  |  |  |   | 84      |        
|Valuation allowance                   |                                      |  |  |  |  |      | 201           |      |   |  |  |      |             |   | 20,146  |         |   |  |         |  |  |   | (580 | )   |             |  |  |  |  |   | 13,432  |        
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|Net deferred income tax assets        |                                      |  |  |  |  |      | 676           |      |   |  |  |      |             |   | 20,332  |         |   |  |         |  |  |   |     |     |             |  |  |  |  |   | 13,516  |        
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|Deferred tax liabilities:             |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |        
|                                      | License fee                          |  |  |  |  |      |               | (668 | ) |  |  |      |             |   |         | (9,801  | ) |  |         |  |  |   |      |    |             |  |  |  |  |   |         | (10,469 | )
|                                      | Changes in consolidated subsidiaries |  |  |  |  |      |               | (8   | ) |  |  |      |             |   |         |        |   |  |         |  |  |   |      |    |             |  |  |  |  |   |         | (187    | )
|                                      | Consolidation of SPEs                |  |  |  |  |      |               |     |   |  |  |      |             |   |         | (139    | ) |  |         |  |  |   |      |    |             |  |  |  |  |   |         | (635    | )
|                                      | Bonds with stock warrants            |  |  |  |  |      |               |     |   |  |  |      |             |   |         | (10,392 | ) |  |         |  |  |   |      |    |             |  |  |  |  |   |         | (2,099  | )
|                                      | Goodwill                             |  |  |  |  |      |               |     |   |  |  |      |             |   |         |        |   |  |         |  |  |   |      |    |             |  |  |  |  |   |         | (126    | )
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|Total deferred income tax liabilities |                                      |  |  |  |  |      | (676          | )    |   |  |  |      |             |   | (20,332 | )       |   |  |         |  |  |   |     |     |             |  |  |  |  |   | (13,516 | )      
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  
|Net deferred income tax assets        |                                      |  |  |  |  | W    |              |      |   |  |  |      |             | W |        |         |   |  |         |  |  | W |     |     |             |  |  |  |  | W |        |        
|                                      |                                      |  |  |  |  |      |               |      |   |  |  |      |             |   |         |         |   |  |         |  |  |   |      |     |             |  |  |  |  |   |         |         |  

At December 31, 2001 and 2002, the Company has available loss carryforwards of
W648,033 million and W710,379 million, respectively, which may be applied
against future taxable income through 2006 and 2007, respectively.

The income tax expense under U.S.GAAP for 2001 and 2002 are as follows:

|                             |  |            |  |               |  |   |     |   |  |  |  |  |  |   |     | 
|---------------------------- |  | ---------- |  | ------------- |  | - | --- | - |  |  |  |  |  | - | --- | 
|                             |  | Korean Won
|                             |  |           
|                             |  | 2001       |  | 2002         
|                             |  |            |  |              
|                             |  |            |  | (In millions)
|Income tax currently payable |  |            |  |               |  | W | 108 |   |  |  |  |  |  | W | 323 | 
|Deferred income taxes        |  |            |  |               |  |   | (72 | ) |  |  |  |  |  |   | 127 | 
|                             |  |            |  |               |  |   |     |   |  |  |  |  |  |   |     | 
|Income tax expense           |  |            |  |               |  | W | 36  |   |  |  |  |  |  | W | 450 | 
|                             |  |            |  |               |  |   |     |   |  |  |  |  |  |   |     | 

The deferred income tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized, if
appropriate. Realization of the future tax benefits related to the deferred
income tax assets is dependent on several factors, including the Companys
ability to generate taxable income within the period during which the temporary
differences reverse, the outlook for the Korean economic environment and the
overall industry outlook. Management has considered these factors in reaching
its conclusion as to the valuation allowance for financial reporting purposes.
Such valuation allowance is reviewed periodically.

F-41



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##### Table of Contents



The difference between the actual income tax expense and the tax benefit
computed by applying the statutory Korean corporate income tax rates to income
before income tax for 2001 and 2002 is attributable to the following:

|                                                                                                    |  |               |  |  |  |      |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ------------- |  |  |  | ---- | ------- | ---- |  | - | ------- | -
|                                                                                                    |  | Korean Won   
|                                                                                                    |  |              
|                                                                                                    |  |               |  |  |  | 2001 |         | 2002
|                                                                                                    |  |               |  |  |  |      |         |     
|                                                                                                    |  | (In millions)
|Income tax benefit at statutory
Korean corporate income tax rate of
30.8% in 2001 and 29.7% in 2002 |  |               |  |  |  | W    | (75,278 | )    |  | W | (48,113 | )
|Non-deductible meals and entertainment                                                              |  |               |  |  |  |      | 1,376   |      |  |   | 106     |  
|Change in valuation allowance                                                                       |  |               |  |  |  |      | 75,759  |      |  |   | 56,410  |  
|Other                                                                                               |  |               |  |  |  |      | (1,821  | )    |  |   | (7,953  | )
|                                                                                                    |  |               |  |  |  |      |         |      |  |   |         |  
|Actual income tax expense                                                                           |  |               |  |  |  | W    | 36      |      |  | W | 450     |  
|                                                                                                    |  |               |  |  |  |      |         |      |  |   |         |  

F-42



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EXHIBITS INDEX

|        |      |             |                                                                                                                                                                                                    
|------- | ---- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 1.1  |             | Articles of Incorporation of Hanaro Telecom as amended on March 29, 2002 (including
English translation).3                                                                                         
|        |      |             |                                                                                                                                                                                                    
|        | 4.1  |             | CATV Access Network Lease Agreement dated May 10, 1999, between Hanaro Telecom and
KEPCO (including English translation).1                                                                         
|        |      |             |                                                                                                                                                                                                    
|        | 4.2  |             | Contract Assignment Agreement dated January 17, 2000, between Hanaro Telecom and KEPCO
(including English translation).1                                                                           
|        |      |             |                                                                                                                                                                                                    
|        | 4.3  |             | Contract Assignment Agreement dated February 17, 2000, between Hanaro Telecom and
Powercomm (including English translation).1                                                                      
|        |      |             |                                                                                                                                                                                                    
|        | 4.4  |             | Agreement on Provision and Usage of HFC Network dated May 22, 2000, between Hanaro
Telecom and Powercomm (including English translation).2                                                         
|        |      |             |                                                                                                                                                                                                    
|        | 4.5  |             | Agreement on Provision and Usage of Transmission Network Facilities dated July 10,
2000, between Hanaro Telecom and Powercomm (including English translation).2                                    
|        |      |             |                                                                                                                                                                                                    
|        | 4.6  |             | Agreement on Provision and Usage of Fiber Optic Cable Network for High-Speed Internet
Access Service dated March 23, 2001, between Hanaro Telecom and Powercomm (including
English translation).2  
|        |      |             |                                                                                                                                                                                                    
|        | 4.7  |             | Loan Agreement dated February 29, 2000, between Hanaro Telecom and Hewlett-Packard
(including English translation).1                                                                               
|        |      |             |                                                                                                                                                                                                    
|        | 4.8  |             | Master Lease Agreement dated February 29, 2000, between Hanaro Telecom and
Hewlett-Packard (including English translation).2                                                                       
|        |      |             |                                                                                                                                                                                                    
|        | 4.9  |             | Equipment Lease Agreement dated May 29, 2000, between Hanaro Telecom and Samsung Card
Co., Ltd (including English translation).2                                                                   
|        |      |             |                                                                                                                                                                                                    
|        | 4.10 |             | Equipment Lease Amendment Agreement dated July 3, 2000, between Hanaro Telecom and
Samsung Card Co., Ltd (including English summary).3                                                             
|        |      |             |                                                                                                                                                                                                    
|        | 4.11 |             | Equipment Lease Agreement dated June 26, 2001, between Hanaro Telecom and LG Card Co.,
Ltd (formerly known as LG Capital) (including English translation).3                                        
|        |      |             |                                                                                                                                                                                                    
|        | 4.12 |             | Service Agreement dated January 4, 1999, between Hanaro Telecom and Hanaro Customer
Service (including English translation).2                                                                      
|        |      |             |                                                                                                                                                                                                    
|        | 4.13 |             | KDBC-Hanaro Internet Venture Fund No.1 Partnership Agreement dated January 27, 2000,
between Hanaro Telecom, KDB Capital Co., Ltd and Hyundai Finance Corporation
(including English translation).2





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##### Table of Contents



|        |         |             |                                                                                                                                                                                                                                 
|------- | ------- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 4.14    |             | Agreement for Outsourcing of Business Operation dated January 2002, between Hanaro
Telecom and Dreamline Corporation (including English translation).3                                                                          
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.15    |             | Business Outsourcing Agreement dated April 1, 2002, between Hanaro Telecom and
Dreamline Corporation (including English summary).3                                                                                              
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.16    |             | Agreement for the transfer of HanaNet Business dated March 22, 2002, between Hanaro
Telecom and DreamX.net Co. (including English translation).3                                                                                
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.17    |             | Internet Service Agreement dated March 22, 2002, between Hanaro Telecom and DreamX.net
Co. (including English summary).3                                                                                                        
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.18    |             | Underwriting Agreement dated April 24, 2002, between Hanaro Telecom, Bridge
Securities, Korea Development Bank, Daewoo Securities, CJ Investment
Trust &
Securities and Mirae Asset Securities (including English translation).3
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.19    |             | Interest Rate Swap Agreement dated April 16, 2002, between Hanaro Telecom and the
Industrial Bank of Korea.3                                                                                                                    
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.20    |             | Kun-Pledge Creation Agreement dated April 16, 2002, between Hanaro Telecom and the
Industrial Bank of Korea (including English translation).3                                                                                   
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.21    |             | Trust Deed dated October 23, 2001, between Hanaro Telecom and Shinhan Bank (including
English translation).3                                                                                                                    
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.22    |             | Special Terms of the Trust Deed dated October 23, 2001, between Hanaro Telecom and
Shinhan Bank (including English translation).3                                                                                               
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.23    |             | Amendment to the Special Terms of the Trust Deed dated December 3, 2001, between
Hanaro Telecom and Shinhan Bank (including English translation).3                                                                              
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.24    |             | Amendment to the Special Terms of the Trust Deed dated April 9, 2002, between Hanaro
Telecom and Shinhan Bank (including English translation).3                                                                                 
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.25    |             | Asset Transfer Agreement dated October 23, 2001, between Hanaro Telecom and Hanafos
Securitization Speciality Co., Ltd. (including English translation).3                                                                       
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.26    |             | Trust Deed dated April 18, 2002, between Hanaro Telecom and Kookmin Bank (including
English translation).3                                                                                                                      
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.27    |             | Asset Transfer Agreement dated April 18, 2002, between Hanaro Telecom and HanaDream
Co., Ltd. (including English translation).3                                                                                                 
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.28    |             | Agreement for Outsourcing of Office Building Management dated 2003 between Hanaro
Telecom and Hanaro Realty Development & Management (English translation).                                                                     
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.29    |             | Agreement for Outsourcing of Telecommunication Center Management dated 2003 between
Hanaro Telecom and Hanaro Realty Development & Management (English translation).                                                            
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.30    |             | Real Estate Collateral Trust Agreement dated March 20, 2003 between Hanaro Telecom and
Korea Real Estate Investment Trust Co., Ltd (English translation).                                                                       
|        |         |             |                                                                                                                                                                                                                                 
|        | 4.31    |             | Loan Transaction Agreement dated November 14, 2002 between Hanaro Telecom and Korea
Exchange Bank (English translation).                                                                                                        
|        |         |             |                                                                                                                                                                                                                                 
|        | 8.1     |             | List of Hanaro Telecoms significant subsidiaries.                                                                                                                                                                              
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).1 |             | Certification of Chief Executive Officer or Equivalent pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).2 |             | Certification Chief Financial Officer or Equivalent pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                   
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).3 |             | Network Service Provider License dated February 12, 2000 (including English
translation).2                                                                                                                                      
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).4 |             | Network Service Provider License dated August 17, 2000 (including English
translation).2                                                                                                                                        
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).5 |             | Specific Service Provider License dated June 19, 1998 (including English translation).2                                                                                                                                         
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).6 |             | Network Operator License Letter dated June 28, 1999 (including English translation).2                                                                                                                                           
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).7 |             | Public Notice regarding grant of International Telecommunications Certificate from
U.S. Federal Communications Commission dated July 6, 2000.2                                                                                  
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).8 |             | Letter from Hanaro Telecom to the U.S. Securities and Exchange Commission.3                                                                                                                                                     
|        |         |             |                                                                                                                                                                                                                                 
|        | 12(a).9 |             | License for Facilities Based Telecommunications Business (Network Service) dated
January 28, 2003 (English translation).                                                                                                        



---

|1 |  | Previously filed with the registration statement relating to our
initial public offering (No.333-11614) dated March 28, 2000.
|- |  | -----------------------------------------------------------------------------------------------------------------------------
| 
|2 |  | Previously filed with the annual report on Form 20-F for the fiscal
year ended December 31, 2000.                            
| 
|3 |  | Previously filed with the annual report on Form 20-F for the fiscal
year ended December 31, 2001.