<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(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, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from __________ or __________

Commission file number:  000-30374

                             KOREA THRUNET CO., LTD.
             (Exact name of registrant as specified in its charter)

                             The Republic of Korea
                (Jurisdiction of incorporation or organization)

                             1337-20, Seocho-2dong
                                   Seocho-ku
                              Seoul, Korea 137-751
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
                                      None

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

                                                          Name of each exchange
     Title of Each Class                                   on which registered
     -------------------                                  ---------------------
Class A common shares, par value Won 2,500 per share ............ N/A

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
                                      None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

Class A common shares, par value Won 2,500 per share .............. 77,635,260

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
                 ---          ---


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                            <C>
PART I.......................................................................................   2

   ITEM 1  -- IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS..........................   2
   ITEM 2  -- OFFER STATISTICS AND EXPECTED TIMETABLE........................................   2
   ITEM 3  -- KEY INFORMATION................................................................   2
   ITEM 4  -- INFORMATION ON THE COMPANY.....................................................  11
   ITEM 5  -- OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................................  23

GENERAL......................................................................................  29

   ITEM 6  -- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................................  30
   ITEM 7  -- MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............................  34
   ITEM 8  -- FINANCIAL INFORMATION..........................................................  36
   ITEM 9  -- THE OFFER AND LISTING..........................................................  40
   ITEM 10 -- ADDITIONAL INFORMATION.........................................................  42
   ITEM 11 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................  55
   ITEM 12 -- DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.........................  55

PART II......................................................................................  56

   ITEM 13 -- DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES................................  56
   ITEM 14 -- MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS...  56
   ITEM 15 -- CONTROLS AND PROCEDURES........................................................  56
   ITEM 16 -- [RESERVED].....................................................................  56

PART III.....................................................................................  58

   ITEM 17 -- FINANCIAL STATEMENTS...........................................................  58
   ITEM 18 -- FINANCIAL STATEMENTS...........................................................  58
   ITEM 19 -- EXHIBITS.......................................................................  58
</TABLE>


<PAGE>


                              CURRENCY TRANSLATION

    In this annual report, references to "Won" or "W" are to the currency of
Korea and all references to "Dollars," "$" or "US$" are to the currency of the
United States of America. Our financial statements are prepared in Won and
presented in accordance with U.S. GAAP for the fiscal years ended December 31,
1999, 2000, 2001, 2002 and 2003. Solely for the convenience of the reader, this
annual report contains translations of certain Won amounts into Dollars at
specified rates. All translations from Won to Dollars were made (unless
otherwise indicated) at the noon buying rate in The City of New York for cable
transfers in Won per US$1.00 as certified for customs purposes by the Federal
Reserve Bank of New York in effect on December 31, 2003, which was Won 1,192.0
to US$1.00. No representation is made that the Won or US$ amounts referred to in
this annual report could have been or could be converted into US$ or Won, as the
case may be, at any particular rate or at all. See "Item 3 -- Key Information --
Exchange Rates Information" for information regarding the rates of exchange
between the Won and the Dollar. On June 30, 2003, the noon buying rate was Won
1,156.0 to US$1.00.

                           FORWARD-LOOKING INFORMATION

    We have made forward-looking statements in this annual report, all of which
are subject to risks and uncertainties. Forward-looking statements contain
information concerning our possible or assumed business success or future
results of operations. Forward-looking statements include, but are not limited
to, statements as to our expectations regarding:

  o        our future revenue opportunities;
  o        development by us or our competitors of new products or services;
  o        the future growth of our subscriber base;
  o        our future expense levels, including sales and marketing and general
           and administrative expenses and amortization of goodwill and other
           intangibles;
  o        our future capital needs;
  o        future strategic partnerships or acquisitions; and
  o        future financial performance.

    When we use words such as "believe," "expect," "anticipate" or similar
words, we are making forward-looking statements.

    We do not intend or assume any obligation to update these forward-looking
statements. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of many factors, including those
set forth in "Item 3 -- Key Information -- Risk Factors" and elsewhere in this
annual report.


                                   REFERENCES

    All references to "Korea" herein are references to The Republic of Korea.
All references to "Thrunet," "we," "us" or "our" herein are references to Korea
Thrunet Co., Ltd. All references to the "Government" are references to the
government of Korea. All references to the "shares" are references to the Class
A common shares of Thrunet, par value Won 2,500.


                                       1
<PAGE>



                                     PART I

         ITEM 1 -- IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

         Not applicable.


                ITEM 2 -- OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.


                            ITEM 3 -- KEY INFORMATION

A.  SELECTED FINANCIAL DATA

    The selected consolidated financial and other data set forth below should be
read in conjunction with our consolidated financial statements as of December
31, 2002 and 2003 and for each of the years in the three-year period ended
December 31, 2003, including the notes thereto, and "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, 1999, 2000, 2001, 2002 and 2003 are derived from our audited consolidated
financial statements. Our consolidated financial statements as of December 31,
2001, 2002 and 2003 and for the fiscal years ended December 31, 2001, 2002 and
2003 were audited by Samil PricewaterhouseCoopers, an independent registered
public accounting firm. The report of Samil PricewaterhouseCoopers on the
consolidated financial statements as of and for the fiscal years ended December
31, 2001, 2002 and 2003 refers to the Company's filing of a voluntary petition
for corporate reorganization in Korea and contains an explanatory paragraph
regarding the existence of substantial doubt about the Company's ability to
continue as a going concern as a result of the uncertainties inherent in the
bankruptcy process and the Company's recurring losses from operations.

    In July 2001, our board of directors approved a plan to dispose of our cable
television services business (which we had operated from January 2000). As a
result, we disposed of our interest in seven companies, including six cable
system operator subsidiaries, during 2001 and restated the results of operations
of such disposed subsidiaries for 2000 and 2001 as discontinued operations in
accordance with Accounting Principle Board Opinion No. 30. See Notes 1 and 5 to
our consolidated financial statements for more details.

    In August 2002, our shareholders approved a plan to dispose of our
enterprise network business (which we had operated from July 1997). As a result,
we sold the assets related to our enterprise network services to SK Global Co.,
Ltd. (which subsequently changed its name to SK Networks Co., Ltd.) in October
2002 and restated the results of operations of such disposed business for 1999,
2000, 2001 and 2002 as discontinued operations in accordance with Statement of
Financial Accounting Standards No. 144. See Notes 1 and 5 to our consolidated
financial statements for more details.


   <TABLE>
   <CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                     ------------------------------------------------------------------------------------------
                                           1999           2000           2001            2002           2003            2003
                                     -------------   ------------    ------------  -------------     ----------      ----------
                                            (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                           AND PER SHARE, HOMES PASSED AND END USER DATA)
   <S>                                  <C>           <C>           <C>             <C>              <C>             <C>
   CONSOLIDATED STATEMENTS OF
   OPERATIONS DATA:
   Revenues:
     Broadband Internet services.......   W 19,963      W 142,346       W 361,408      W 421,062       W393,600        $330,202
     Portal services...................         --          3,015           7,724          6,079          5,182           4,347
                                        ----------    -----------    ------------  -------------     ----------      ----------
                                            19,963        145,361         369,132        427,141        398,782         334,549
   Costs and expenses:
     Operating costs, excluding
       Depreciation and amortization:
       Broadband Internet..............     22,920        144,947         293,698        262,209        240,075         201,405
       Portal services.................        --           4,888          11,719         24,515         16,800          14,094
     Selling, general and
       administrative..................     17,131         48,226          43,040         65,004         48,150          40,395
     Depreciation and amortization.....     10,147         60,765         107,026        104,646        107,565          90,239
     Impairment loss on intangible
       assets, property and equipment..         --             --          23,717         27,261         56,324          47,252
</TABLE>


                                        2
<PAGE>

   <TABLE>
   <CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                     ------------------------------------------------------------------------------------------
                                           1999           2000           2001            2002           2003            2003
                                     -------------   ------------    ------------  -------------     ----------      ----------
                                            (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                           AND PER SHARE, HOMES PASSED AND END USER DATA)
   <S>                                  <C>           <C>           <C>             <C>              <C>             <C>
     Loss (gain) on disposition of
       property and equipment, net.....         --         (2,072)           (312)        35,660          3,005           2,521
                                        ----------    -----------    ------------  -------------     ----------      ----------
                                            50,198        256,754         478,888        519,295        471,919         395,906
                                        ----------    -----------    ------------  -------------     ----------      ----------
       Operating loss..................    (30,235)      (111,393)       (109,756)       (92,154)       (73,137)        (61,357)

   Other income (deductions):
     Interest income...................      2,224          3,988           4,466          6,847          7,264           6,094
     Interest expense..................     (6,559)       (23,662)        (72,833)       (81,259)       (56,230)        (47,173)
     Gain (loss) on foreign
       exchange transactions, net......       (492)        (1,320)         (3,870)         5,755          1,285           1,078
     Gain (loss) on disposition of
       investments, net................         --          6,945          (3,164)          (965)         1,089             914
     Impairment loss on investments....         --        (47,397)         (4,593)       (28,930)        (1,165)           (977)
     Loss on retirement of bond........     (1,647)            --              --       (129,681)            --              --
     Gain on extinguishment of debt....         --             --              --            870          5,738           4,814
     Other, net........................        760           (785)          2,008          2,654           (112)            (94)
                                        ----------    -----------    ------------  -------------     ----------      ----------
                                            (5,714)       (62,231)        (77,986)      (224,709)       (42,131)        (35,344)
   Loss from continuing operations
      before taxes, equity in loss
      of affiliates and minority
      interest.........................    (35,949)      (173,624)       (187,742)      (316,863)      (115,268)        (96,701)
   Equity in loss of affiliates, net...         --         (9,902)         (8,357)        (6,215)        (5,501)         (4,615)
   Minority interest ..................         --            197           1,075          2,842           (230)           (193)
   Income tax expense (benefit)........     (4,775)           582             --             131             --              --
                                        ----------    -----------    ------------  -------------     ----------      ----------
   Net loss from continuing operations.  W (31,174)    W (183,911)     W (195,024)    W (320,367)    W (120,999)     $ (101,509)
                                        ==========    ===========    ============  =============     ==========      ==========
   Discontinued operations:
      Loss from discontinued
       operations......................     (6,453)       (56,174)        (74,052)       (51,960)            --              --
      Gain (loss) from disposals ......        --             --            6,016        (63,775)            --              --
                                        ----------    -----------    ------------  -------------     ----------      ----------
   Net income (loss) from
      discontinued operations .........     (6,453)       (56,174)        (68,036)      (115,735)            --              --
                                        ==========    ===========    ============  =============     ==========      ==========
   Net loss ...........................  W (37,627)    W (240,085)     W (263,060)    W (436,102)    W (120,999)     $ (101,509)
                                        ==========    ===========    ============  =============     ==========      ==========

   Weighted average number of
   shares outstanding(1)...............    462,414        599,648         803,753      1,439,082      1,929,979       1,929,979

   Basic and diluted loss from
    continuing operations per
    common share.......................     (1,596)        (7,667)       (242,642)      (222,619)       (62,694)         (52.60)

   Basic and diluted net income
    (loss) from discontinued
    operations per common share........       (349)        (2,342)         84,648        (80,423)            --              --

   Basic and diluted net loss per
    common share.......................  W  (2,034)    W  (10,009)     W (327,290)    W (303,042)    W  (62,694)     $   (52.60)
                                        ==========    ===========    ============  =============     ==========      ==========

   Cash dividends declared per
    share of common share .............         --             --              --             --             --              --
                                        ----------    -----------    ------------  -------------     ----------      ----------
   CONSOLIDATED BALANCE SHEET DATA:
   Cash and cash equivalents...........  W 190,125     W   39,443      W  156,526     W   55,226     W   53,946         $45,256
   Working capital.....................     42,086       (493,877)       (403,383)      (487,893)      (562,578)       (471,961)
   Total assets........................    976,867      1,458,725       1,567,256        764,051        530,704         445,221
   Net assets..........................    528,346        167,322         142,971        (80,608)      (204,395)       (171,473)
   Bonds...............................    125,278        412,806         335,383        133,942         16,050          13,455
   Long-term debt, excluding
   current portion.....................     93,122        238,865         377,732          1,863          1,615           1,355
   Common stock........................    179,895        179,895         256,602        194,088          4,852           4,071
   Total stockholders' equity..........    528,346        167,322         142,971        (80,608)      (204,395)       (171,472)

   OTHER DATA:
   Capital expenditures................  W 165,965     W  679,763      W  259,114     W   48,456     W   15,835      $   13,284
   Net cash provided (used) in
     operating activities..............    (28,166)       (35,067)        (35,841)        28,517        103,291          86,653
   Net cash provided (used) in
     investing activities..............   (268,108)      (724,892)       (213,219)       396,276         13,316          11,172
   </TABLE>


                                       3
<PAGE>


   <TABLE>
   <CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                     ------------------------------------------------------------------------------------------
                                           1999           2000           2001            2002           2003            2003
                                     -------------   ------------    ------------  -------------     ----------      ----------
                                            (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                           AND PER SHARE, HOMES PASSED AND END USER DATA)
   <S>                                  <C>           <C>           <C>             <C>              <C>             <C>
   Net cash provided (used) by
      financing activities.............    448,312        609,278         366,144      (526,093)       (117,887)        (98,899)
   EBITDA(2)...........................    (11,383)      (159,063)        (87,677)     (256,913)         35,532          29,809
   Homes passed(3).....................  3,900,000      6,500,000       8,300,000     8,500,000       8,500,000       8,500,000
   Broadband Internet end users........    134,740        760,822       1,312,248     1,301,620       1,293,364       1,293,364
   </TABLE>

----------

     (1)  The weighted average number of shares outstanding for each of 1999,
          2000, 2001, 2002 and 2003 has been adjusted for the three-for-one
          reverse stock split and the forty-for-one reverse stock split
          implemented by Thrunet in December 2002 and February 2004,
          respectively.

     (2)  EBITDA represents income (loss) before interest income, interest
          expense, income taxes, depreciation and amortization. EBITDA is
          commonly used in the communications industry to analyze companies on
          the basis of operating performance, leverage and liquidity. EBITDA is
          not a measure of financial performance under U.S. GAAP and is not
          intended to represent cash flow for the period, nor has it been
          presented as an alternative to operating income (loss) or net income
          (loss) as an indicator of operating performance. The items of net
          income (loss) excluded from EBITDA are significant components in
          understanding and assessing our financial performance, and our
          computation of EBITDA may not be comparable to other similarly titled
          measures of other companies. See "Item 5--Operating and Financial
          Review and Prospects" and our consolidated statements of cash flows
          contained elsewhere in this annual report.

     (3)  Refers to the number of homes that may be immediately connected to a
          hybrid fiber coaxial, or HFC, network system.


EXCHANGE RATE INFORMATION

    The following table sets forth, for the periods and dates indicated, certain
information concerning the noon buying rate. No representation is made that the
Won or Dollar amounts referred to herein could have been or could be converted
into Dollars or Won, as the case may be, at any particular rate, or at all.

                    <TABLE>
                    <CAPTION>
                                                           AT END           AVERAGE
                    YEAR ENDED DECEMBER 31,               OF PERIOD         RATE(1)          HIGH           LOW
                    -------------------------             ---------         --------       --------       --------
                                                                             (WON PER US$1.00)
                    <S>                                     <C>              <C>            <C>            <C>
                    1999.....................              W1,136.0         W1,187.7       W1,241.8       W1,124.5
                    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.....................               1,192.0          1,193.0        1,262.0        1,146.0
                    2004 (through June 30)                  1,156.0          1,167.4        1,195.1        1,141.4
</TABLE>

<TABLE>
<CAPTION>
                                                                            AT END
                    MONTH ENDED                                            OF PERIOD          HIGH            LOW
                    -----------                                            ---------       ---------       ---------
                   <S>                                                     <C>             <C>             <C>
                    January 2004.............                              W 1,174.0       W 1,195.1       W 1,172.0
                    February 2004............                                1,179.0         1,180.0         1,152.2
                    March 2004...............                                1,146.7         1,181.0         1,146.7
                    April 2004...............                                1,173.6         1,173.6         1,141.4
                    May 2004.................                                1,165.0         1,191.0         1,165.0
                    June 2004................                                1,156.0         1,164.8         1,150.0
                    </TABLE>

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


B.  CAPITALIZATION AND INDEBTEDNESS

    Not Applicable.


C.  REASONS FOR THE OFFER AND USE OF PROCEEDS

    Not Applicable.




                                       4
<PAGE>


D.       RISK FACTORS

    Our business, financial condition or results of operations are subject to
various changing competitive, economic, political and social factors, including
those discussed below. In particular, Thrunet is a Korean company and is
governed by a legal and regulatory environment which in some respects may differ
from that which prevails in other countries.

RISKS RELATED TO OUR BUSINESS

WE HAVE COMMENCED REORGANIZATION PROCEEDINGS UNDER THE CORPORATE REORGANIZATION
ACT OF KOREA.

    Due to the rapid expansion of our business and continued operating losses
since our incorporation, we had significant debt and debt service obligations,
which we failed to meet. As a result, on March 27, 2003, the Bankruptcy Division
of the Seoul District Court granted our petition for the commencement of
reorganization proceedings under the Corporate Reorganization Act of Korea and
appointed a receiver to conduct and manage our business while we are in
reorganization proceedings. On October 25, 2003, we submitted a draft plan of
reorganization with the Seoul District Court, which was adopted by the
interested parties and approved by the Seoul District Court on January 9, 2004.
See "Item 4 -- Information on the Company -- History and Development of the
Company -- Commencement of Reorganization Proceedings" for more information on
the reorganization proceeding procedures.

    Pursuant to our reorganization plan, we also implemented a 100% capital
reduction of the common shares held by our largest shareholders (TriGem Computer
Inc. and its affiliates) without consideration and a reverse stock split of all
our remaining issued and outstanding common shares in the ratio of 40:1. As a
result, as of April 8, 2004, the total number of our outstanding shares was
reduced to 842,994 shares from 77,635,260 shares. Also, all of our outstanding
conversion rights on convertible bonds, warrants and stock options that had not
been exercised as of the commencement of our reorganization proceedings were
cancelled. See "Item 4 -- Information on the Company -- History and Development
of the Company -- Capital Reduction and Reverse Stock Split" and "Item 4 --
Information on the Company -- History and Development of the Company --
Cancellation of Conversion Rights on Convertible Bonds, Warrants and Stock
Options" for more information.

    Pursuant to the Corporate Reorganization Act of Korea, we received
reorganization claims from our creditors. As of January 9, 2004, the aggregate
amount of reorganization claims from our creditors which was accepted by us and
approved by the court as valid claims was Won 637.5 billion, after excluding
exempted claims of Won 7.5 billion. On June 1, 2004, according to our
reorganization plan, valid reorganization claims of Won 34.8 billion held by our
unsecured creditors were converted into our shares at Won 5,000 per share and as
a result, we issued 6,958,806 new shares. Our reorganization plan also includes
a repayment schedule for the remaining valid reorganization claims. However, we
cannot assure that we will be able to satisfy all valid claims according to such
repayment schedule. See "Item 4 -- Information on the Company -- History and
Development of the Company -- Repayment of Reorganization Claims" for more
information on our repayment plan for reorganization claims.

    We cannot assure that our reorganization plan will be successfully
implemented or that we will be able to emerge from the reorganization
proceedings as a going concern and not be forced to terminate or liquidate our
operations. If we are liquidated, it would almost certainly result in (i) our
creditors receiving less than 100% of the face value of their claims, and (ii)
in the claims of our equity holders being cancelled in whole. In addition,
during the reorganization proceedings, we would need court approval to take many
actions out of the ordinary course, which could adversely impact our ability to
manage the normal operations of the company and which would cause us to incur
additional costs associated with the reorganization proceedings.

KOREA.COM COMMUNICATIONS CO., LTD., OUR SUBSIDIARY, ALSO COMMENCED
REORGANIZATION PROCEEDINGS UNDER THE CORPORATE REORGANIZATION ACT OF KOREA.

    Since we established Korea.com Communications and transferred our Korea.com
portal business to it in June 2001, Korea.com Communications has provided
Korea.com portal services and other related services to its own and our
subscribers. On April 1, 2003, the Bankruptcy Division of the Seoul District
Court granted Korea.com Communications its petition for the commencement of
reorganization proceedings under the Corporate Reorganization Act of Korea. On
October 15, 2003, the Second District Court approved Korea.com Communications'
reorganization plan. Pursuant to its reorganization plan, we, as the largest
shareholder of Korea.com, were subject to a 90% capital reduction without
compensation on October 15, 2003. On December 2, 2003, Korea.com implemented a
reverse stock split of all its remaining issued and outstanding common shares in
the ratio of 10:1. We currently own 53.47% of the voting shares in Korea.com
Communications. As of December 31, 2003, Korea.com Communications owed us
approximately Won 3,938 million, including Won 2,487 million in loan payable and
Won 1,451 million in accounts payable. We also provided guarantees in the amount
of approximately Won 7,407 million for the repayment of certain short-term
borrowings and long-term debt of Korea.com Communications. Korea.com
Communications is subject to the same restrictions and procedures under the
Corporate Reorganization Act of Korea as we are.



                                       5
<PAGE>

    We cannot assure that Korea.com Communications' proposed reorganization will
be successful or that Korea.com Communications will be able to emerge from the
reorganization proceedings as a going concern and not be forced to terminate or
liquidate its operations. If the reorganization plan is consummated or if it is
liquidated, we would almost certainly receive less than 100% of the face value
of our claims, and the value of our equity holding in Korea.com Communications
will significantly decrease if it is not cancelled in whole. Even if its
receiver proposes a plan and it is accepted, we are unable to predict at this
time what treatment would be accorded under any such plan to us. Regardless of
whether Korea.com Communications will emerge from reorganization proceedings as
a going concern or be forced to liquidate its operations, Korea.com
Communications' commencement of reorganization proceedings will have an adverse
impact on our business, financial condition and results of operations.

WE OR OUR BUSINESS MAY BE ACQUIRED.

    We or our business may be acquired by our competitors or other companies
which plan to enter the broadband Internet access market. If only our business
is acquired, we will be liquidated and cease to exit. Upon such liquidation, all
of our assets, including the proceeds from the sale of our business, will be
first allocated to satisfy our debts and other liabilities and the remaining
assets, if any, will be distributed to our shareholders pursuant to the rules
and regulations of the Commercial Law and Bankruptcy Act of Korea. If we are
acquired and merged into an acquiring company, our shareholders may receive
shares in the acquiring company, cash or other form of consideration, if any,
for their equity holding in us.

    We cannot assure that we or our business will be acquired on terms favorable
to our creditors or shareholders, or at all. Even if we or our business are
acquired, we cannot predict how much our creditors and shareholders will receive
for their claims and equity interests in us, if at all.

WE HAVE EXPERIENCED CONTINUING OPERATING LOSSES AND WE MAY INCUR ADDITIONAL
LOSSES.

    We have incurred operating losses in each year since our incorporation. We
incurred operating losses of Won 30.2 billion, Won 111.4 billion, Won 109.8
billion, Won 92.2 billion and Won 73.1 billion in 1999, 2000, 2001, 2002 and
2003, respectively. These operating losses resulted primarily from the
significant infrastructure, marketing, technology and other costs incurred in
the development of our services. In order to reduce our operating losses and
eventually achieve operating income, we will need to continue to expand our end
user base and increase our revenues. We cannot assure you that we will achieve
the end user or revenue growth necessary to achieve or sustain operating income
in the foreseeable future.

OUR ABILITY TO ACHIEVE AND SUSTAIN PROFITABILITY MAY BE ADVERSELY AFFECTED BY A
DECLINE IN PRICES FOR OUR SERVICES OR INSUFFICIENT EXPANSION OF OUR END USER
BASE.

    The prices of communications services and products in general and Internet
access fees in particular have fallen historically, and we expect them to
continue to fall. In 2003, Internet access fees accounted for 98.7% of our
revenues. We anticipate that competitive pressures to reduce Internet access
fees will increase in the future. We have taken a number of steps to reduce our
network infrastructure costs, including entering into a long term international
bandwidth lease agreement and leasing dark fiber for our fiber optic backbone
instead of leasing bandwidth capacity. However, we believe that in order to
achieve and maintain profitability, we will need to continue to expand our end
user base and maintain adequate pricing levels. We cannot assure you that we
will be successful in further expanding our end user base or that prices for our
services will not fall more sharply or at a faster rate than we anticipate.
Failure to maintain adequate pricing levels or to achieve sufficient expansion
of our end user base could have a material adverse effect on our revenues and
the overall profitability of our business.

OUR SUCCESS DEPENDS TO A SIGNIFICANT EXTENT UPON THE CAPACITY, RELIABILITY AND
SECURITY OF NETWORK INFRASTRUCTURE OVER WHICH WE HAVE LIMITED CONTROL.

    Our success will depend to a significant extent upon the capacity,
reliability and security of the infrastructure used to carry data between our
end users and the Internet. The majority of our broadband Internet services end
users are linked to our fiber optic backbone by the HFC network we lease from
Powercomm Corporation and certain of our system operator partners. We also lease
bandwidth from Powercomm. We lease from Korea Electric Power Corporation,
referred to as "KEPCO", ancillary facilities such as electric poles, ducts and
nodes for use in building our own metropolitan and local loop networks and
installing the portions of our HFC network that we own. We have limited control
over the quality and maintenance of the portions of our network infrastructure
that we lease from Powercomm, KEPCO and certain of our system operator partners.
We are working closely with Powercomm, KEPCO and certain of our system operator
partners to maintain the quality of our leased network infrastructure. In
addition, we have increased our control over our network infrastructure by
leasing dark fiber for our fiber optic backbone from SK Telecom Co., Ltd..
Nevertheless, failure by Powercomm to properly maintain its fiber optic network,
by


                                       6
<PAGE>

Powercomm and certain of our system operator partners to properly maintain
the HFC network we lease from them or by KEPCO to properly maintain the
ancillary facilities could result in disruptions in the delivery of our services
or reduced data transmission quality. Any such service disruptions or reductions
in transmission quality could have a material adverse effect on our reputation
and competition with other broadband Internet services providers.

TERMINATION OR NON-RENEWAL OF OUR NETWORK INFRASTRUCTURE LEASES COULD RESULT IN
INCREASED COSTS OR SUBSCRIBER LOSS.

    We lease ancillary facilities, including electric poles, ducts and nodes,
from KEPCO. With respect to each pole, the ancillary facilities agreement has an
automatically renewable one-year term beginning on the date on which we commence
using such pole. We began leasing dark fiber for our fiber optic backbone from
SK Telecom in January 2000 to replace, or make redundant, bandwidth capacity
leased from Powercomm. Our current dark fiber lease with SK Telecom is effective
until the end of 2006. We cannot provide any assurance that our ancillary
facilities lease from KEPCO and our dark fiber lease from SK Telecom will be
renewed on terms acceptable to us, if at all. Non-renewal or early termination
of one or more of our network infrastructure leases could result in increased
operating costs and constrain our data transmission capacity over portions of
our fiber optic backbone.

SYSTEM INSTABILITY MAY ADVERSELY AFFECT SERVICE QUALITY.

    Maintaining high quality data transmission with minimal service disruptions
or interference is critical to our ability to attract and retain Internet
services end users. The principal determinants of data transmission quality over
our broadband Internet services network are maintenance of the integrity of our
fiber optic backbone, metropolitan and local loops and HFC network, the
subscriber density within a service area and the quality of the installation of
coaxial cable by our third party installation companies or system operator
partners.

    Construction and repairs conducted by Powercomm on its HFC network or by
KEPCO on its ancillary facilities may result in service disruptions to Internet
services end users. In addition, variations in the quality of the installation
of coaxial cable by Powercomm, our system operator partners or us have resulted
in certain end users experiencing transmission interference or service
disruptions. We have been working closely with Powercomm, KEPCO and our system
operator partners to maintain the quality of our system at levels generally
adequate for our services. Nevertheless, we cannot assure you that our end users
will not, from time to time, experience inconsistent quality of service. In
addition, adverse publicity regarding transmission interference or service
disruptions may deter potential new subscribers from choosing our services. Any
failure to maintain a consistently high quality of service could have a material
adverse impact on our business, financial condition and results of operations.

CERTAIN OF OUR ASSETS ARE NOT INSURED AGAINST FIRE AND OTHER CASUALTY LOSSES.

    As of December 31, 2003, the book value of our property and equipment, net
of accumulated depreciation, was Won 346 billion. As of the same date, our
depreciable assets were insured against fire and other casualty losses only up
to Won 246 billion, representing approximately 71% of the net book value of our
property and equipment. Any damage to our uninsured assets or any damage to our
assets in excess of the insurance coverage amount may have a material adverse
effect on our business.

IF WE EXPERIENCE SYSTEM FAILURE OR SHUTDOWN, WE MAY NOT BE ABLE TO DELIVER
SERVICES.

    Our success depends upon our ability to deliver reliable, high-speed access
to the Internet over our broadband Internet services network. Our broadband
Internet services network is vulnerable to damage or cessation of operations
from fire, earthquakes, severe storms, power loss, telecommunications failures,
network software flaws, transmission cable cuts and similar events. We have
designed our network to minimize the risk of such system failure, for instance,
with redundant circuits among points-of-presence to allow traffic rerouting. In
addition, we perform lab and field-testing before integrating new and emerging
technology into our broadband Internet services network, and we engage in
capacity planning. Nonetheless, we cannot assure you that we will not experience
failures or shutdowns relating to individual points-of-presence or even
catastrophic failure of our entire broadband Internet services network. In
general, any failure of our broadband Internet services network, our servers, or
any link in the delivery chain, whether from operational disruption, natural
disaster or otherwise, resulting in an interruption in our operations could have
a material adverse effect on our business, financial condition and results of
operations.

    We carry fire and gas accident insurance to protect us against losses due to
personal injury and property damage. However, we do not carry business
interruption insurance. In any event, significant or prolonged system failures
or shutdowns for any reason could damage our reputation and result in the loss
of subscribers.



                                       7
<PAGE>

OUR SHARES HAVE BEEN DELISTED FROM THE NASDAQ STOCK MARKET.

    As a result of the commencement of our corporate reorganization proceedings,
we received a Nasdaq delisting determination on April 3, 2003, indicating that
the Panel has determined to delist our securities from The Nasdaq Stock Market
effective with the open of business on Monday, April 7, 2003.

    Trading of our shares may be conducted in the over-the counter market in the
so-called "pink sheets" or, if available, the OTC Bulletin Board or another
quotation system or exchange on which we could qualify. However, any of these
alternatives to a listing on the Nasdaq National Market would impair the
liquidity of our shares, not only in the number of our shares which could be
bought and sold, but also through delays in the timing of transactions, greater
difficulty in disposing of our shares and obtaining accurate quotations and
reduction in security analysts' and the news media's coverage of our company.

RISKS RELATED TO OUR INDUSTRY

WE FACE A HIGH LEVEL OF COMPETITION IN THE INTERNET ACCESS MARKET.

    The market for Internet access and related services in Korea is very
competitive. We anticipate that competition will continue to intensify as the
use of the Internet grows. The tremendous growth and potential size of the
Internet access market has attracted many new start-ups as well as established
businesses from different industries. Our current and prospective competitors
include other Internet service providers, long distance and local exchange
telecommunications companies, cable television, direct broadcast satellite,
wireless communications providers and online service providers. Some of these
competitors have a significantly greater market presence, brand recognition and
financial, technical and personnel resources than us.

    Broadband Internet services. KT Corp. (previously known as Korea Telecom
Corp.) and Hanaro Telecom, Inc. are our primary competitors in the broadband
Internet services market in Korea. KT provides broadband Internet access
services via asymmetric digital subscriber line, or ADSL. KT, the largest
telephony services provider in Korea, has extensive telephone and fiber optic
backbone networks throughout Korea and has significantly greater resources than
we do. Currently, KT is the leading broadband Internet access services provider
in Korea, with a market share of approximately 50.6% as of May 31, 2004. Hanaro
Telecom provides ADSL and cable-based broadband Internet access services and had
a market share of approximately 23.9% as of May 31, 2004. We had a market share
of approximately 11.2% as of May 31, 2004.

TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS COULD RENDER OUR SERVICE
OFFERINGS OBSOLETE.

    The market for Internet access and related services is characterized by
rapidly changing technology, evolving industry standards, changes in customer
needs and frequent new product and service offerings. Our future success will
depend, in part, on our ability to effectively use and develop leading
technologies and technical expertise.

    We cannot assure you that we will be successful in responding to changing
technology or market trends. In addition, services or technologies developed by
others may render our services or technologies uncompetitive or obsolete.
Furthermore, changes to our services in response to market demand may require
the adoption of new technologies that could likewise render many of our assets
technologically uncompetitive or obsolete. Even if we do successfully respond to
technological advances and emerging industry standards, the integration of new
technology may require substantial time and expense, and we cannot assure you
that we will succeed in adapting our network infrastructure in a timely and
cost-effective manner.

WE MAY NOT BE ABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WHICH MAY AFFECT
OUR OPERATIONS AND FINANCIAL CONDITION.

    We have developed a number of our own proprietary rights, notably in
trademarks, service marks, copyrights, domain names and software applications.
From time to time, we may have to resort to litigation to enforce our
intellectual property rights, which could result in substantial costs and
diversion of our financial and management resources. We cannot assure you that
misappropriation or infringement of our intellectual property rights will not
occur or if they do that we will be able to effectively enforce our rights.

WE MAY BE LIABLE FOR INFORMATION DISSEMINATED OVER OUR BROADBAND INTERNET
SERVICES NETWORK.

    Korean law relating to liability of Internet service providers for
information carried on or disseminated through their networks is not completely
settled. Decisions, laws and regulations regarding content liability may
significantly affect the development and profitability of companies offering
online and Internet access services, including us. The imposition upon Internet
service providers of potential liability, such as liability for obscene
materials, defamatory speech, copyright infringement or accuracy of information
we provide, for materials carried on or disseminated through their systems could
require us to


                                       8
<PAGE>

implement measures to reduce our exposure to such liability. Such measures may
require that we spend substantial resources or discontinue some service 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.

ALTHOUGH WE HAVE IMPLEMENTED NETWORK SECURITY MEASURES, OUR NETWORK MAY BE
SUSCEPTIBLE TO VIRUSES, BREAK-INS OR DISRUPTIONS.

    We have implemented many industry-standard security measures, such as
limiting physical and network access to our servers and routers. Nonetheless,
the infrastructure of our broadband Internet services network is potentially
vulnerable to computer viruses, break-ins and similar disruptive problems caused
by our subscribers or other Internet users. Computer viruses, break-ins or other
problems could lead to the following problems:

     o    interruption, delays or cessation in service to our subscribers;

     o    the security of confidential information stored in the computer
          systems of our subscribers could be jeopardized; and

     o    costly litigation.

Such problems could damage our reputation or reduce our ability to attract and
retain subscribers.

WE ARE A PARTY TO LEGAL PROCEEDINGS ARISING FROM DISRUPTION IN THE INTERNET
SERVICE CAUSED BY COMPUTER VIRUSES.

      On January 25, 2003, the Slammer Worm originating from countries such as
the United States and Australia infected the MS SQL Server 2000 of the Microsoft
Corporation and disrupted the Internet service between Microsoft and a number of
Internet service providers, including us. As a result, numerous Internet users
experienced outages on their email servers and websites. We are a party to two
legal proceedings in relation to such outages. Such legal proceedings are
currently pending in Seoul Central District Court. We do not expect that an
unfavorable decision in the above legal proceedings will directly affect our
financial condition, as the amount of damages are fairly small and the absence
of class action lawsuits in Korean law will prevent an expansion of litigation.
However, we are not certain whether the outcome of the above legal proceedings
will be in our favor. If we lose, we may face additional legal actions based on
similar grounds by other customers or Internet users, which could adversely
affect our business, financial condition and results of operations. Furthermore,
other computer viruses which we cannot control could result in Internet service
disruptions in the future.

RISKS RELATED TO KOREA

THERE ARE UNIQUE ECONOMIC AND POLITICAL RISKS ASSOCIATED WITH INVESTING IN
COMPANIES FROM KOREA.

    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.

    Korea's terms of trade have deteriorated since the second half of 2002 due
to a rise in oil prices. Lower terms of trade indicate less net gain from
exports. Domestic demand is also slowing down rapidly. However, a majority of
the working population in Korea is employed in industries related to domestic
demand, not export. The financial market is also unstable and the volatility of
the domestic financial market is adversely affecting people's confidence in the
economy. The Korean Stock Price index (KOSPI) prices fell 4.2% compared with the
level at the beginning of this year. Furthermore, SK Global's accounting
scandals and problems of credit card companies this year due to a high level of
consumer debts have increased the pressure on the already volatile financial
market. In addition, the Korean labor market experienced several labor
disturbances in 2003, including the strike led by the Korean Cargo Workers
Federation of the Korean Confederation of Trade Unions in May and August 2003.

    In addition to the negative effect of the worldwide recession and
uncertainties surrounding the world 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.
Recently, discussions between governments of Korea and the United States about
withdrawing the American Forces stationed in Korea have become another factor of
uncertainty affecting the Korean economy.

    In the political arena, the first half of 2004 was fraught with political
controversy caused by President Roh Moo-Hyun's alleged breach of election laws,
which eventually culminated in an impeachment of the President by Korea's
National Assembly


                                       9
<PAGE>

on March 12, 2004. President Roh's presidential powers were suspended for 64
days until the Korean Constitutional Court revoked the impeachment in May 2004.

    According to Standard and Poor's Rating Services, a division of McGraw-Hill
Companies, Inc. and Moody's Investors Services, Inc., Korea's credit rating in
respect of long-term foreign currency-denominated borrowing was A- and A3,
respectively, in June 2004. There can be no assurance, however, that the Korean
economy will not deteriorate in the future. Negative consequences 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.

NEW TELECOMMUNICATIONS LAWS AND REGULATIONS IN KOREA MAY LIMIT THE SERVICES WE
CAN OFFER.

    Our business subjects us to varying degrees of regulation. The Ministry of
Information and Communication exercises jurisdiction over all facilities of, and
services offered by, Korean companies to the extent that they involve the
provision of telecommunications services. We are unable to predict what laws or
regulations may be adopted in the future or the impact such new laws or
regulations may have on our business. We cannot assure you that new laws or
regulations relating to Internet services will not have a material adverse
effect on us.

WE MAY NOT BE ABLE TO CONVERT AND REMIT DIVIDENDS IN DOLLARS IF THE GOVERNMENT
IMPOSES CERTAIN EMERGENCY MEASURES.

    We do not intend to pay dividends on our shares in the foreseeable future.
However, if we declare cash dividends, such dividends will be declared in Won.
In order for us to pay such dividends outside Korea, such dividends will be
converted into Dollars and remitted to the shareholders, subject to certain
conditions. Fluctuations in the exchange rate between the Won and the Dollar
will affect, among other things, the amounts a holder of our shares will receive
as dividends. Under Korean law, if the Government believes that serious
difficulties exist or are expected in relation to the balance of payments, or
the movement of capital between Korea and other countries poses serious
obstacles in carrying out its currency, exchange rate or other macroeconomic
policies, it may implement measures to require any person who performs capital
transactions to deposit a part of the proceeds of such transaction with certain
Government agencies or financial institutions. We cannot give any assurance that
we can secure such prior approval from the relevant Korean authority for our
payment of dividends to the foreign investors in the future when the Government
deems that there are emergency circumstances in the Korean financial markets.
Failure to secure such approval could prevent us from distributing our dividends
and could have an adverse impact on our share price.

EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

    We are exposed to foreign exchange risk related to foreign currency
denominated liabilities and anticipated foreign exchange payments. Anticipated
foreign exchange payments, principally in Dollars, relate primarily to net
settlements paid for certain equipment purchased from foreign suppliers. In
2003, we paid approximately US$0.3 million in foreign exchange payments. Foreign
currency denominated liabilities, principally in Dollars, relate primarily to
foreign currency denominated debt and vendor financing. At April 1, 2004, we had
aggregate outstanding foreign currency denominated indebtedness of approximately
US$22.6 million on a non-consolidated basis. As dividends on our shares, if any,
will be declared in Won and converted into Dollars, any depreciation in the
value of the Won relative to the Dollar will reduce the value of the dividends
received by holders of our shares in the United States.

OWNERSHIP OF SHARES MAY BE SUBJECT TO CERTAIN RESTRICTIONS UNDER KOREAN LAW.

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

    The Broadcasting Law of Korea restricts foreign ownership of a network
operator, including Thrunet. At present, foreign investors (including Korean
companies in which foreigners hold 50% or more, or a foreigner is the largest
shareholder of such companies) are not allowed to own in the aggregate more than
49% of the shares of any network operator. In the event that such foreign
ownership restrictions are violated, the Ministry of Information and
Communication may order corrective measures to be taken to bring the network
operator into compliance.

    In light of the foregoing foreign ownership limitations, our ability to
raise capital from foreign investors or foreign-invested Korean companies may be
limited in the future.



                                       10
<PAGE>


                      ITEM 4 -- INFORMATION ON THE COMPANY

A.  HISTORY AND DEVELOPMENT OF THE COMPANY

    Korea Thrunet Co., Ltd. is a stock corporation organized under the laws of
the Republic of Korea. We were incorporated in Korea as Thrunet Co., Ltd. on
July 30, 1996 and renamed as Korea Thrunet Co., Ltd. on August 20, 1999. Our
principal office of business is located at 1337-20, Seocho-2dong, Seocho-ku,
Seoul, Korea 137-751, telephone (82-2) 3488-8114. Our agent for U.S. federal
securities law purposes is CT Corporation System, 111 Eighth Avenue, New York,
NY 10011.

COMMENCEMENT OF REORGANIZATION PROCEEDINGS

    On March 3, 2003, we filed with the Bankruptcy Division of the Seoul
District Court a petition for a temporary stay order and a petition for the
commencement of the reorganization proceedings. On March 4, 2003, the court
issued a temporary stay order, which prohibits us from making any voluntary
payment or providing collateral or any other act to satisfy any of our debt
obligations.

    On March 27, 2003, the Bankruptcy Division of the Seoul District Court
granted our petition for the commencement of reorganization proceedings under
the Corporate Reorganization Act of Korea. Accordingly, by operation of law, we
are afforded automatic protection from third parties taking any action to obtain
possession of our property or commencing litigation against us. The court also
appointed Mr. Seog Won Park as our receiver. Subject to certain approvals and
supervision of the bankruptcy court, the receiver has exclusive power and
capacity to conduct the business of our company and to manage and dispose of any
and all of our properties while we are in reorganization proceedings.

    The bankruptcy court also appointed Ahn Kwon & Co., a Korean accounting firm
affiliated with Deloitte Touche Tohmatsu, to examine the liquidation value and
the going-concern value of our business. Ahn Kwon & Co. submitted its report to
the bankruptcy court on June 21, 2003, and the going-concern value was evaluated
to exceed the liquidation value by Won 191,400 million.

    On June 25, 2003, the first meeting of interested parties took place. The
interested parties that participated in the meeting included our creditors and
security holders. In the normal case, interested parties would also include the
shareholders, however, the Corporate Reorganization Act of Korea provides that
if a company's total liabilities exceeded its total assets at the commencement
of the reorganization proceedings, the shareholders of such a company shall not
have any voting rights. In our case, as our total liabilities exceeded our total
assets at the commencement of our reorganization proceedings, only our creditors
and security holders were permitted to vote in our meetings of interested
parties.

    At such meeting, (i) based on Ahn Kwon & Co.'s report, the court determined
that the going-concern value exceeded the liquidation value of our business and
ordered the receiver to submit a reorganization plan by October 25, 2003; and
(ii) the receiver presented his review of our financial condition and the result
of his examination of the claims filed by our creditors and security holders by
April 25, 2003. The aggregate amount of reorganization claims from our creditors
was approximately Won 1,080 billion, of which we accepted as valid claims the
amount of Won 645 billion and rejected the remaining amount of Won 435 billion.

    After the first meeting of interested parties, certain of additional
reorganization claims filed by our creditors and security holders were accepted
as valid claims and certain of claims were rejected by the receiver or satisfied
and repaid upon court approval. As a result, as of January 9, 2004, the
aggregate amount of valid reorganization claims from our creditors and security
holders was Won 637.5 billion, after excluding exempted claims of Won 7.5
billion.

    On October 25, 2003, we submitted a draft plan of reorganization with the
Seoul District Court. On November 28, 2003, the court held the second and third
meetings of interested parties for the deliberation and acceptance of the draft
plan of reorganization. However, certain major creditors including Korea
Development Bank raised different opinions as to certain terms of the draft
reorganization plan. Accordingly, the court adjourned the meeting until January
9, 2004, at which meeting our draft reorganization plan was adopted by the
interested parties and approved by the Seoul District Court. The approved
reorganization plan contains provisions for the operation of our company during
the reorganization plan period ending in 2013 and a plan for our reorganization
claims, including a repayment schedule for the reorganization claims, a capital
reduction, a reverse stock split of our shares and a conversion of debt to
equity. See "-- Repayment of Reorganization Claims", "-- Capital Reduction and
Reverse Stock Split" and "-- Debt to Equity Conversion" below and "Item 8.
Financial Information -- Significant Changes."



                                       11
<PAGE>

REPAYMENT OF REORGANIZATION CLAIMS

    As of January 9, 2004, the date on which our reorganization plan was
approved by the court, the aggregate amount of our outstanding reorganization
claims was Won 637.5 billion (excluding exempted claims of Won 7.5 billion),
including Won 280.4 billion in secured claims and Won 357.1 billion in unsecured
claims. According to the repayment schedule in our reorganization plan, part of
unsecured claims was converted into our shares. See "-- Debt to Equity
Conversion" below. Remaining claims will be repaid in full by the end of our
reorganization plan period ending in 2013 over a repayment period ranging from
five to nine years, in certain cases after a grace period of three to five
years. See Note 2 to our consolidated financial statements for more details on
our reorganization plan.

CAPITAL REDUCTION AND REVERSE STOCK SPLIT

    Following the Seoul District Court's approval of the reorganization plan on
January 9, 2004, we implemented (a) a 100% capital reduction of the common
shares held by our largest shareholders (TriGem Computer Inc. and its
affiliates) without consideration and (b) a reverse stock split of all our
remaining issued and outstanding common shares in the ratio of 40:1. As of April
8, 2004, the total number of our outstanding shares was reduced to 842,994
shares from 77,635,260 shares (representing a 98.9% reduction in the number of
our total issued and outstanding shares).

CANCELLATION OF CONVERSION RIGHTS ON CONVERTIBLE BONDS, WARRANTS AND STOCK
OPTIONS

    As of March 27, 2003, we had outstanding conversion rights on convertible
bonds, warrants and stock options to purchase a total of 29,723,724 shares,
28,532,198 shares and 1,398,244 shares, respectively, of our shares. According
to our reorganization plan, all of outstanding conversion rights on convertible
bonds, warrants and stock options that had not been exercised as of the
commencement of our reorganization proceedings on March 27, 2003, were
cancelled.

DEBT TO EQUITY CONVERSION

    On June 1, 2004, valid reorganization claims of Won 34.8 billion held by our
unsecured creditors, including domestic financial institutes such as The Korea
Development Bank and Kookmin Bank, was converted into our shares at Won 5,000
per share according to our reorganization plan. As a result, we issued 6,958,806
new shares. Currently, our largest shareholder is the Korea Development Bank,
holding approximately 25% of our outstanding shares.

PUBLIC AUCTION TO FIND A NEW MAJOR SHAREHOLDER

    We or our business may be acquired by companies which plan to enter the
broadband Internet access market. If only our business is acquired, we will be
liquidated and cease to exit. Upon such liquidation, all of our assets,
including the proceeds from the sale of our business, will be first allocated to
satisfy our debts and other liabilities and the remaining assets, if any, will
be distributed to our shareholders pursuant to the rules and regulations of the
Commercial Law and Bankruptcy Act of Korea. If we are acquired and merged into
an acquiring company, our shareholders may receive shares in the acquiring
company, cash or other form of consideration, if any, for their equity holding
in us.

    On May 19, 2003, we formed a consortium, which comprised of the Korea
Development Bank, KPMG Financial Advisory Services Inc. and Daeryuk law firm to
assist us in identifying strategic buyers. On August 25, 2003, we staged a
public auction to find a new major shareholder. Hanaro Telecom, Inc. and Dacom
Corporation had participated in the bid. However, the bidding failed due to,
among other things, their low proposed acquisition fund amounts, uncertainty of
their acquisition fund raising plans and the deficient acquisition abilities of
the participants. We plan to continue our efforts to find a new major
shareholder.

    Other significant developments of the Company include:

    o   In August 1996, we received our Network Service Provider License from
        the Ministry of Information and Communication.
    o   In July 1997, we launched our leased line services.
    o   In July 1998, we launched our broadband Internet access services.
    o   In September 1999, we were designated by the Ministry of Information and
        Communication as a network operator.
    o   In November 1999, we successfully completed a global offering of our
        common shares on the Nasdaq National Market.
    o   In March 2000, we acquired the domain name Korea.com.
    o   In September 2000, we launched our Korea.com portal services.


                                       12
<PAGE>

    o   In January 2001, we acquired a license for the International Private
        Leased Circuit Leasing Business from the Ministry of Information and
        Communication.
    o   In January 2001, an investor consortium led by SB Thrunet Fund, L.P.
        (which subsequently transferred all of its assets including its equity
        interest in Thrunet to SB-Thrunet Pte. Ltd.), TriGem Computer Inc., and
        Naray & Company, Inc. acquired our common stock and bonds with warrants
        in the aggregate amount of US$250 million.
    o   In June 2001, we established Korea.com Communications Co., Ltd., our
        subsidiary, and transferred our Korea.com portal business-related assets
        and employees to such subsidiary.
    o   In July 2001, we sold a 55.6% equity interest in Korea Cable Television
        Haeundae Kijang Systems Co., Ltd.
    o   In October 2001, we sold our controlling equity interests in Korea Cable
        Television Gumjung System, Co., Ltd., Korea Cable Television Seopusan
        Broadcasting Co., Ltd., Korea Nakdong Cable TV Co., Ltd. and Dongnam
        Cablevision Corporation.
    o   In February 2002, SB-Thrunet, TriGem and Naray exercised their warrants
        to purchase 33,152,000, 7,104,000 and 11,840,000 shares, respectively,
        of our common stock at Won 2,500 per share.
    o   In August 2002, we completed the sale of approximately 70% of our HFC
        network system to Powercomm for Won 45.0 billion.
    o   In August 2002, we issued common shares in the aggregate amount of Won
        88.8 billion to TriGem and Naray, as a result of the conversion of
        their bonds into common stock in the amount of Won 59.2 billion and
        Won 29.6 billion, respectively.
    o   In October 2002, we completed the sale of the assets related to our
        enterprise network services business to SK Global for Won 346.9 billion.
    o   In December 2002, the total number of our outstanding shares was reduced
        to 77.63 million shares from 232.9 million shares as a result a reverse
        stock split of our common shares in the ratio of 3:1.
    o   In March 2003, we filed a petition for a temporary stay order and a
        petition for commencement of reorganization proceedings with the
        Bankruptcy Division of the Seoul District Court, which was granted
        pursuant to the Corporate Reorganization Act of Korea. See "--
        Commencement of Reorganization Proceedings" above.
    o   In April 2003, we received a Nasdaq delisting determination indicating
        that the Panel has determined to delist our securities from The Nasdaq
        Stock Market effective with the open of business on Monday, April 7,
        2003.
    o   In July 2003, we surrendered our license for the international private
        leased circuit leasing business to the Ministry of Information and
        Communication.
    o   In January 2004, our reorganization plan was approved by the Seoul
        District Court.
    o   In January 2004, the total number of our outstanding shares was reduced
        to 35,001,813 shares from 77,635,260 shares as a result of a 100%
        capital reduction of our common shares held by our largest shareholders.
    o   In February 2004, the total number of our outstanding shares was reduced
        to 875,045 shares from 35,001,813 shares as a result of a reverse stock
        split of our common shares in the ratio of 40:1.
    o   In April 2004, the total number of our outstanding shares was reduced to
        842,994 shares from 875,045 shares as a result of a 100% capital
        reduction of our common shares held by Naray, one of our largest
        shareholders.
    o   In June 2004, we issued 6,958,806 new shares to certain of our unsecured
        creditors as a result of a debt to equity conversion. See "-- Debt to
        Equity Conversion" above.

    See "Item 5 -- Operating and Financial Review and Prospects "-- Liquidity
and Capital Resources" for a description of our principal capital expenditures
and our divestitures since our inception.

    During the last and current fiscal year, there have been no public takeover
offers by third parties in respect of our shares, nor have we made any such
offers in respect of another company's shares.

B.  BUSINESS OVERVIEW

     We are a major provider of broadband Internet access services in Korea. We
had 1,295,811 paying end users as of May 31, 2004.

     We also provided enterprise network services in Korea from July 1997 until
October 28, 2002, on which date we completed the sale of the assets related to
our enterprise network services to SK Global. Our enterprise network services
consisted primarily of leasing to corporate customers dedicated fiber optic
lines for transmitting voice and data.

     For the fiscal years ended December 31, 2001, 2002 and 2003, we provided
the following services:

    o   2001: broadband Internet services, enterprise networks services and
        portal services
    o   2002: broadband Internet services, enterprise networks services (until
        October 28, 2002) and portal services




                                       13
<PAGE>


    o   2003: broadband Internet services and portal services

     For the fiscal years ended December 31, 2001, 2002 and 2003, we had the
following revenues(1):

             <TABLE>
             <CAPTION>
                                                                  FOR THE YEAR ENDED DECEMBER 31,
                                                     -------------------------------------------------------
                                                                    (AMOUNTS IN MILLIONS OF WON)
             REVENUES:                                  2001                  2002                   2003
                                                     ----------            ----------             ----------
              <S>                                    <C>                   <C>                    <C>
               Broadband Internet services.......     W 361,408             W 421,062              W 393,600
               Portal services...................         7,724                 6,079                  5,182
                                                     ----------            ----------             ----------
                  TOTAL                               W 369,132             W 427,141              W 398,782
                                                     ----------            ----------             ----------
             </TABLE>


    (1) Our operating results from continuing activities for 2000, 2001 and 2002
        have been restated to exclude the operating results from the sold
        enterprise networks business.

     Our revenues decreased from Won 427.1 billion in 2002 to Won 398.8 billion
in 2003. In 2003, we derived 98.7% of our revenues from broadband Internet
services and 1.3% from portal services. Our revenues for the first quarter of
2004, on a non-consolidated and unaudited basis, were Won 92.2 billion, all of
which were derived from broadband Internet services.

    SERVICES. We provide broadband Internet services via cable modem to
residential customers and small offices and home offices, or SOHOs, throughout
Korea. Our broadband services offer "always-on" Internet access at speeds up to
100 times faster than traditional dial-up Internet access. We also provide ADSL
services targeting apartment complexes in our HFC network areas. We provide
Cable Lite service, which offers Internet access at a slightly slower speed than
the speed of our usual broadband Internet services for a lower cost, targeting
middle-class customers. We also provide voice over Internet protocol, or VoIP,
services, which consist of local, long-distance and international telephony
services which we provide using an Internet protocol network, rather than a
public switched telephone network, or PSTN, at a lower cost than the ordinary
PSTN services as only local telephone charges are incurred for data delivery
over the Internet.

    NETWORK. On August 6, 2002, we completed the sale of approximately 70% of
our HFC network system to Powercomm for Won 45.0 billion. We have a lease back
arrangement with Powercomm with respect to such HFC network for use in the
operation of our broadband Internet business. As of May 31, 2004, our owned and
leased broadband Internet services network passed approximately 8.5 million
homes, representing approximately 58% of all Korean homes. The term "homes
passed" refers to the number of homes that can be immediately connected to a
cable system.

    Our network is designed to permit efficient, high-speed transmission of
data-intensive multimedia content. Our nationwide network is concentrated in
areas with the highest density of business and residential users of
communications services. Our fiber optic backbone mainly consists of dark fiber
leased from SK Telecom and SK Global and bandwidth leased from Powercomm and SK
Global. Our metropolitan and local loop networks, covering all major cities in
Korea, primarily consist of fiber optic cable we have leased from SK Global and
Powercomm. We link our broadband Internet services end users to our fiber optic
network through HFC cable connections principally leased from Powercomm and
system operator partners.

    As of May 31, 2003, the HFC network we have installed passed 1.1 million
homes and the HFC networks we leased from Powercomm and system operator partners
passed 5.0 million homes and 2.4 million homes, respectively. These HFC networks
collectively comprise the largest HFC network in Korea that permits the two-way
communication necessary to access the full range of broadband services.
Currently, the majority of our broadband end users are linked to our network
through Powercomm's HFC network.

    Currently, we provide the majority of our broadband Internet services in
cooperation with regional cable system operators. We provide services in 74 of
77 system operator areas.


                           BROADBAND INTERNET SERVICES

PRODUCTS AND SERVICES

    We offer broadband Internet access services to residential subscribers for a
monthly fee of Won 38,000 (US$31.88). Monthly service includes unlimited access
time, a free Korea.com e-mail account with 100 megabytes of storage and Web
browser software. Residential subscribers to our Thrunet Saver service agree to
receive e-mail messages advertising Thrunet and other companies and are charged
a monthly fee of Won 34,000 (US$28.52) for the same monthly services as our
other broadband Internet services subscribers. We also provide Cable Lite
service, which offers Internet access at a slightly slower speed than the speed
of our usual broadband Internet services for a lower monthly fee of Won 28,000
(US$23.49). Our two-way


                                       14
<PAGE>

HFC system provides always-on access and does not require the use of a phone
line to connect to the Internet. Therefore, subscribers who frequently access
the Internet may enjoy significant savings, as local phone calls in Korea cost
approximately Won 45 per three minutes. Almost all of our subscribers currently
rent a cable modem from us. New subscribers are charged a monthly cable modem
rental fee ranging from Won 3,000 (US$2.52) to Won 9,000 (US$7.55) depending on
the duration of their service contracts.

    Depending on the service area, our installation companies, TG Ubase, the
system operators, or Thrunet are responsible for installation of the cable
modem. Regardless of the company installing the modem, residential subscribers
pay an installation fee of Won 30,000 (US$25.17).

    We also provide broadband Internet access mainly to SOHOs and other
commercial entities for a monthly fee of Won 58,000 (US$48.66) for two lines,
Won 99,000 (US$83.05) for three lines and Won 20,000 (US$16.78) for each
additional line. For some of our larger accounts, we offer special discount
packages.

    We also offer ADSL services to residential customers. Our ADSL services
offering targets densely populated residential areas such as apartment
complexes. Our ADSL services subscribers pay a monthly subscription fee of Won
28,000 (US$23.49) and a modem rental fee ranging from Won 3,000 (US$2.52) to Won
9,000 (US$7.55) depending on the duration of their service contracts.

    We offer VoIP services under the brand name "e-c@ll" to residential and SOHO
customers. Our VoIP services consist of local, long-distance and international
telephony services which we provide using an Internet protocol network, rather
than a public switched telephone network, or PSTN, at a lower cost than the
ordinary PSTN services as only local telephone charges are incurred for data
delivery over the Internet.

SALES AND MARKETING

    We market our broadband Internet services to residential and commercial
subscribers throughout Korea. As of May 31, 2004, the total number of our
residential and commercial end users was 1,295,811.

    Within the residential sector, we are focusing our marketing efforts on
areas with relatively high concentrations of young middle and upper income
families. Within the commercial sector, we provide SOHOs and other commercial
entities with broadband Internet access via cable modem as a low cost
alternative to dedicated leased line access.

    Our sales and marketing efforts for broadband Internet services are
primarily conducted through three channels: our call center at TG Ubase,
independent dealers and cable system operator partners. Our broadband Internet
services sales and marketing division has two sales teams in Seoul and four
regional sales teams dedicated to high demand areas and five supporting teams in
charge of Internet marketing, sales planning and sales support. We conduct our
promotional efforts either at the corporate level or through a local manager and
sales staff maintained in each geographic area in which we operate. Sales to
SOHOs are conducted largely through our independent dealers.

    Cable system operators often participate in our promotional efforts. A
system operator may provide air time for our advertisements or include our
marketing materials in its customer bills. We also have a nationwide sales and
marketing network of more than 140 independent dealers.

    Our promotional efforts focus on national television and newspaper
advertisements. Our efforts to market our services and build our brand name also
include the following:

    o   special promotions through various events, including concerts; and

    o   joint marketing alliances with domestic financial institutions,
        retailers and e-commerce service providers.



                                       15
<PAGE>

OUR RELATIONSHIPS WITH SYSTEM OPERATORS

    We provide our broadband Internet services in 74 of 77 system operator areas
and in 62 areas we provide our broadband Internet services in cooperation with
regional cable system operators. In the areas where we provide our broadband
Internet services in cooperation with regional cable system operators, our
system operator partners provide marketing, installation or maintenance services
depending on our needs in each service area, and we pay each system operator
partner a percentage of the basic subscription fees we receive from subscribers
in the partner's service area based on the types of services the system operator
provides.

    We believe we offer system operators the most comprehensive solution to
deliver broadband Internet services to their cable television subscribers. We
are responsible for all aspects of our Internet access system. We also provide
system operators 24 hours per day, seven days per week network monitoring. We
continuously troubleshoot and monitor for problems over our HFC network that
could cause an interruption of cable service or our broadband Internet services.

CUSTOMER SERVICE AND TECHNICAL SUPPORT

    We have an agreement with TG Ubase to outsource our customer care and
after-sales service functions. Currently, we outsource more than 608 customer
service representatives from TG Ubase. These service representatives are
available 24 hours per day, seven days per week to answer questions regarding
broadband Internet services areas, fees, sign-up procedures, cable-modem
questions and problems, basic computer and software configuration questions and
other frequently asked questions. They also accept applications for our
broadband Internet services and repair requests by telephone. We also provide
customer support services through our sales and marketing department and handle
problems referred by the call center agents.

    When our broadband Internet services end user's technical problem cannot be
resolved over the phone, we send an engineer to investigate the problem. For
each service area, we either have an agreement with our system operator partner
in such service area or an outsourcing agreement with TG Ubase to provide
maintenance and repair services.

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,
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 per day, seven days per week. 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, including accounting and
personnel. For accounting purposes, we introduced an enterprise resource
planning, or ERP, system in the business support system. The ERP system
integrates and manages both our accounting and assets. 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 that the integration of our information systems is important
because it permits customer care, service management, service delivery,
accounting and sales personnel to access a single subscriber record.
Accordingly, a subscriber will be able to obtain 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 higher 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 delinquent customer accounts at an early stage.

COMPETITION

    We face competition in the Korean Internet services market from other
providers of broadband Internet access services. We compete with other broadband
Internet access providers on the basis of the ability to connect our subscribers
promptly and the coverage and cost efficiency of network infrastructure.

     KT, Hanaro Telecom and Thrunet are the three major service providers in the
Korean broadband Internet access market with a collective market share of
approximately 85.7% as of May 31, 2004. KT, the largest telephony services
provider in Korea, provides ADSL services through its own telephone network
utilizing an extensive one way fiber optic backbone network and last-mile
connections primarily consisting of copper lines. Currently, KT is the leading
broadband Internet access services


                                       16
<PAGE>

provider in Korea, with a market share of approximately 50.6% as of May 31,
2004. KT has been upgrading its last-mile connections and related facilities to
provide ADSL services through its nationwide telephone network. Hanaro Telecom
commenced providing cable-based Internet services in April 1999 and currently
provides those services through system operators using Powercomm's HFC network
and on its own HFC network. Hanaro Telecom offers services similar to our
current offerings. Together with Hanaro Telecom, we utilize almost all of
Powercomm's existing HFC network. Hanaro Telecom also provides ADSL services
utilizing its own fiber optic network. As of May 31, 2004, approximately 39.6%
of Hanaro Telecom's end users accessed their services through DSL connections.
As of May 31, 2004, Hanaro had a market share of approximately 23.9% and we had
a market share of approximately 11.2%. In addition to the three major service
providers, Dreamline provides cable-based Internet services and ADSL services,
and DACOM and Onsetel Co., Ltd. currently provide cable-based Internet services.

     The Korean Internet services market is rapidly evolving. In 2001, two out
of the three major service providers further solidified their leading positions
by acquiring smaller broadband Internet access service providers. In November
2001, we acquired SK Telecom's broadband Internet access business. In December
2001, Hanaro Telecom acquired an approximately 32% equity interest in Dreamline.
We expect more small to medium-sized telecommunications companies to merge and
the number of service providers in the market to continue to decrease.

    We believe that we have the following advantages over our competitors:

    o   wider coverage area than our cable-based broadband Internet access
        competitors; and

    o   cable-based Internet access, which is more ideal for interactive
        multi-user content.


                                   SEASONALITY

    We do not encounter seasonal changes in demand for our services. For a
description of factors that affect the demand for our services, see "Item 3 --
Key Information -- Risk Factors".

                                    LICENSES

    Pursuant to the Integrated Cable Broadcasting Law, we were designated by the
Ministry of Information and Communication as a network operator in September
1999. As a network operator, we are permitted to install, operate and lease
network facilities to system operators throughout Korea's 77 regions. 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
our transmission network in compliance with the technical standards set forth in
Article 25 of the Telecommunications Basic Law and obtain approval from the
Ministry of Information and Communication prior to providing network facilities
to system operators. As a licensed network provider until July 2003, we were not
under any filing or licensing requirement imposed by the Government to engage in
the delivery of our broadband Internet services.

    We held a perpetual license to operate leased line services on a nationwide
basis in Korea. On October 15, 2002, we transferred this license to SK Global as
part of the sale of our enterprise network services to SK Global, with the
permission of the Ministry of Information and Communication.

    In April 2001, we acquired a license for the international private leased
circuit leasing business from the Ministry of Information and Communication
which allows us to secure international bandwidth and provide international
private leased circuit facilities to customers for the transmission of voice,
data and images via satellite or submarine cable in order to connect to
communications facilities in other countries. In light of the competitive and
unprofitable business environment for international leased line services, we do
not intend to commence providing international leased line services in the near
future. Accordingly, we surrendered this license to the Ministry of Information
and Communication in July 2003. As a result, we ceased being a network service
provider and registered with the Seoul Regional Communication Office as a
value-added service provider to engage in the delivery of our broadband Internet
services.

    We had submitted a business plan as part of our application for the
international private leased circuit leasing business, committing that a certain
amount of research and development expenditures would be made annually through
December 31, 2001. Our research and development expenditures to date are
substantially less than the agreed amount. To date, the Ministry of Information
and Communication has not requested that we fulfill the research and development
commitments we made in our license application, and we do not believe that the
Ministry is likely to require us to make the remaining expenditures.



                                       17
<PAGE>

                 KOREAN TELECOMMUNICATIONS LAWS AND REGULATIONS

OVERVIEW

    Our broadband Internet services are subject to Korean laws and regulations
relating to the provision of telecommunications services. Korea's
telecommunications service industry is regulated by the Ministry of Information
and Communication pursuant to provisions of the Telecommunications Basic Law,
the Telecommunications Business Law and the Radiowave Act (collectively, the
"Telecommunications Laws"). These laws empower the Ministry of Information and
Communication to regulate and supervise entry into the telecommunications
service market, allocation of radio spectrum, the scope of permissible
businesses of telecommunications service providers, technologies used by
telecommunications service providers, rate-setting, deposit requirements,
research and development and interconnection arrangements between and among
telecommunications service providers.

    The Ministry of Information and Communication is responsible for the
formulation of a basic plan for the telecommunications industry, for preparing
periodic reports to be submitted to the National Assembly of Korea regarding
telecommunications development, for setting technical standards which all
service providers must meet and for promoting technological development and
technological standardization. The Ministry of Information and Communication is
also responsible for information and telecommunications policy, radio frequency
management, 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, value-added service providers and special
service providers.

    Network service providers provide specified types of basic
telecommunications services, including fixed-line and wireless telephony
services, as licensed by the Ministry of Information and Communication, using
their own telecommunications networks and transmission facilities. The
telecommunications services provided by a network service provider may include
local, domestic long distance and international telecommunications services,
cellular services, PCS services, paging services, trunked radio system services
and leased line services. In August 1996, we received a network service provider
license to provide leased line services for an indefinite term, subject to
compliance with the conditions set forth in the license. Currently, there are 33
network service providers in Korea.

    Value-added service providers provide value-added telecommunications
services, such as Internet services, using transmission facilities leased from a
network service provider following notification to the Ministry of Information
and Communication. Network service providers, including Thrunet, may provide
value-added telecommunications services without further approval from the
Government. Special service providers provide basic telecommunications services
on a resale basis by using transmission facilities leased from a network service
provider or reselling a network service provider's services.

    The Ministry of Information and Communication has the authority to recommend
that network service providers provide contributions to a government-managed
fund for the research and development of telecommunications technology and
related projects. Network service providers whose basic telecommunication
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 annual total basic telecommunication services revenue, to the extent that
the amount of such payment does not exceed the amount of the net profit for the
preceding year.

    A network service provider's license may be revoked by the Ministry of
Information and Communication for grounds including fraud in obtaining the
license, failure to perform in accordance with any conditions attached to the
license, violation of the rules restricting ownership and control, failure to
comply with general terms for its service either reported to or approved by the
Ministry of Information and Communication, and violation of the
Telecommunications Laws. If a network service provider wishes to cease its
business or to be dissolved, such provider must obtain the approval of the
Ministry of Information and Communication.

OBLIGATIONS TO SUPPLY UNIVERSAL SERVICES

    Starting in January 2000, all telecommunications service providers became
obligated to contribute toward the supply of "universal" telecommunications
services in Korea. Telecommunications service providers designated as "Universal
Service Providers" by the Ministry of Information and Communications are
required to provide certain universal telecommunications services such as local
calling service, local public telephone service, telecommunications services for
islands and wireless


                                       18
<PAGE>

communication services for ships and fee reductions for the disabled and low
income earners. The costs and losses of Universal Service Providers in
connection with the universal telecommunications services rendered will be
shared on an annual basis by network service providers as designated by the
Ministry of Information and Communication, pro rata based on their respective
annual revenue. In 2003, we were required to pay an estimated amount of Won
477.6 million for the costs and losses incurred in connection with the universal
services provided, which amount was calculated based on our financial statements
for the fiscal year 2002. Pursuant to our reorganization plan, such amount was
classified as a unsecured account payable and will be paid to KT according to
our repayment schedule until the end of 2005. Since we ceased being a network
service provider as of July 2003, we are no longer designated as "Universal
Service Provider".

KOREA COMMUNICATION COMMISSION

    In accordance with the Telecommunications Basic Law, the Korea Communication
Commission was established within the Ministry of Information and Communication
to promote fair competition in the telecommunications industry, protect the
rights of users of telecommunications services and settle disputes between
telecommunications service providers. In addition, the Korea Communication
Commission is authorized to investigate matters with respect to the provision of
telecommunications equipment among telecommunications service providers as well
as the supply of information and to resolve disputes arising from agreements
with respect thereto. Currently, the Korea Communication Commission is composed
of seven commissioners appointed by the president of Korea.

    In the event that a network service provider is engaged in unfair
competition, the Korea Communication Commission may order the network service
provider to take appropriate actions, including the separation of operating
units, the imposition of orders to modify the articles of incorporation, the
terms of any service contracts, or its internal accounting policies regarding
telecommunications services, and the imposition of orders to execute, perform or
modify the terms of agreements between telecommunications service providers.


C.   ORGANIZATIONAL STRUCTURE

     The following table lists information concerning our significant
subsidiaries and affiliates as of December 31, 2003:


     <TABLE>
     <CAPTION>
                                                                                                 PERCENTAGE OF OWNERSHIP
                                                                            JURISDICTION OF     AND VOTING INTEREST HELD
                    NAME                                                     INCORPORATION             BY THRUNET
     -----------------------------------                                    ---------------     ------------------------
<S>                                                                             <C>                     <C>
     Ginam Broadcasting Comm.                                                    Korea                   24.36%
     Korea.com Communications Co., Ltd.                                          Korea                   53.47%
      TriGem Edunet, Inc.                                                        Korea                   27.59%
      Multiplus Limited(1)                                                       Korea                     5%
      ENS Securitization Limited(1)                                              Korea                      -
      </TABLE>

    ------------
    (1) The operations of Multiplus and ENS Securitization were included in our
        consolidated financial statements in accordance with Statement of
        Financial Accounting Standards ("SFAS") No. 140, "Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities" due to the fact that each of the transactions with
        Multiplus and ENS Securitization, our special purpose entities, did not
        qualify as a true sale, thus the operations of the special purpose
        entities were consolidated under US GAAP. See "Item 5 -- Operating and
        Financial Review and Prospects -- Off-Balance Sheet Arrangements".


D.   PROPERTY, PLANTS AND EQUIPMENT

FACILITIES

     Our executive offices and administrative offices are located in Seocho-ku,
Seoul. We acquired this building, which has an aggregate of 11,742 square meters
of net usable space, in February 2000 and disposed of it in August 2002. We
currently lease three of the building's 20 floors, with an aggregate of 3,764
square meters of net usable space. See "Item 10 -- Additional Information --
Material Contracts -- Sale and Purchase Agreement between Korea Real Estate
Investment Co., Ltd. and CKR ABS Specialty L.L.C." and "-- Lease Agreement
between CKR ABS Specialty L.L.C. and Korea Thrunet Co., Ltd." for a summary of
the terms of such agreements.



                                       19
<PAGE>

     We also own an Internet data center building in Seocho-ku, Seoul, which has
an aggregate of 2,112 square meters of net usable space, and six buildings and
office space for our regional branch offices in Pusan, Taegu, Taejeon, Kwangju,
Wonju and Incheon. We own or lease facility space for headend equipment and
other related facilities in major cities throughout Korea, including Seoul and
Incheon. We believe that our existing facilities are adequate for our current
requirements. However, if expansion of our business requires us to obtain
additional office space, we believe that additional space can be obtained on
commercially reasonable terms to meet future requirements.

NETWORK

    Our network is designed to facilitate the efficient two-way transmission of
data-intensive multimedia content. Our broadband Internet services network
consists of a fiber optic backbone and metropolitan loops, supplemented by an
HFC network.

    On August 6, 2002, we completed the sale of approximately 70% of our HFC
network system to Powercomm for Won 45.0 billion. We have a lease back
arrangement with Powercomm with respect to such HFC network for use in the
operation of our broadband Internet business. See "Item 10 -- Additional
Information -- Material Contracts -- Asset Sale Agreement between Thrunet and
Powercomm" and "-- Agreement on Provision of Transferred Facilities Agreement
between Thrunet and Powercomm" for a summary of the terms of such agreements.

SHARED INFRASTRUCTURE

    BACKBONE. Our backbone network consists of bandwidth leased from Powercomm
and SK Networks and dark fiber leased from SK Telecom and SK Networks. Our
backbone network currently passes all major cities in Korea. Our backbone
network currently supports speeds of up to 35 Gbps and is upgradable to a
maximum capacity of 80 Gbps.

    Our primary backbone network is constructed based on DWDM technology and
optical Internet protocol. DWDM equipment, which multiplies the transmission
capacity of a specific fiber by dividing a single strand into multiple
lightpaths, or wavelengths, allows us to provide our Internet access services
over the same strand of fiber optic cable. Our optical Internet protocol allows
advanced network routers to be operated directly on our fiber optic network
without using asynchronous transfer mode, or ATM, equipment or SONET
multiplexers. Our DWDM technology and optical Internet technology allow us to
build a simple, easily upgradable, stable, high-quality broadband Internet
services network at a lower cost than ATM or SONET-based networks.

    METROPOLITAN LOOPS. We have deployed our metropolitan loops in Kangwon
Province and six major cities, including Seoul, Incheon, Taejon, Kwangju, Taegu
and Pusan, using fiber optic cables we lease from Powercomm and SK Networks. Our
metropolitan loop network is a ring-type network and supports speeds of 2.5
Gbps.

    As of May 31, 2004, we have installed 25 units of DWDM equipment to
establish four ring-type metropolitan DWDM networks in major metropolitan areas,
including Seoul, Kyounggi and Incheon. Such ring-type metropolitan DWDM networks
are designed to enhance network stability by directing data traffic to
alternative routes in the event of unexpected network disconnection. By
utilizing the DWDM technology, we can upgrade our metropolitan networks to a
maximum capacity of 80 Gbps.

    NETWORK OPERATIONS CENTER. The network operations center located in Seoul
use advanced network management tools and systems to monitor our network
infrastructure on a 24 hour per day, seven days per week basis.

BROADBAND INTERNET SERVICES

    The following diagram shows the structure of our broadband Internet services
network.

                           BROADBAND INTERNET NETWORK





                                       20
<PAGE>


                                     [CHART]

    DATA CENTERS. Our data center is located at our building in Seoul. To date,
we have deployed regional data centers in Seoul, Pusan, Taejeon, Taegu, Incheon,
Kwangju, Chonju and Wonju. The data centers act as service hubs for defined
geographic areas, proactively managing network performance, replicating content
and applications, and providing an economical infrastructure to cache and
broadcast data throughout a region.

    CABLE HEADENDS. We install switching hubs, cable routers and other equipment
on each cable headend and connect each headend to one of our regional data
centers using fiber optic cable. Our redundant architecture allows the equipment
on the cable headends to function even if some of the connections to the
regional data centers are disrupted. Our major suppliers of cable headend
equipment include Cisco and Motorola.

    SUBSCRIBER CONNECTIONS. The last leg of the network connection is from the
headend to the consumer over our HFC network. Our HFC lines carry the signal
from the headend out to cable "nodes" in each neighborhood via fiber optic
cable, which in turn connect through coaxial cable to the home. In a two-way
cable modem system, no use of telephone line facilities in the home is required
to access the Internet.

    Our HFC network currently passes approximately 8.5 million homes. Our HFC
network consists of a HFC network we lease from Powercomm, covering a total of
5.0 million homes passed, HFC networks we lease from certain of our system
operator partners, covering a total of 2.4 million homes passed and a HFC
network we have built out, covering a total of 1.1 million homes passed.
Currently, the majority of our broadband Internet services subscribers are
connected to our fiber optic backbone and metropolitan loops through Powercomm's
HFC network.

    CABLE MODEMS. A cable modem connects to cable television coaxial wiring and
attaches to the end user's personal computer via standard Ethernet connections,
which support data transfer rates of up to 10 Mbps. While peak data transmission
speed of a cable modem depends on the specific model and can approach 10-38 Mbps
downstream to the subscriber and 0.7-10 Mbps upstream, the performance that
subscribers actually experience is often constrained by the capacity of their
personal computers and the performance of the Web servers. We currently use
cable modems manufactured primarily by Motorola and Samsung Electronics Co.,
Ltd., which we either sell or rent to the subscribers.

    The North American cable industry has adopted a set of interface
specifications, known as "DOCSIS", for hardware and software to support
cable-based data delivery using cable modems. All of our systems use
DOCSIS-compliant equipment. We expect that DOCSIS specifications will make lower
cost cable modems more readily available in the retail market in the future. We
also expect computer manufacturers to begin integrating DOCSIS cable modems into
their products. We expect that these developments will save us the cost of
purchasing and installing cable modems for subscribers and increase demand for
our services.

    INTERNET GATEWAYS. Our backbone network has direct links to Internet
gateways in the United States via connections provided by various parties as
follows. In June 2002, we acquired from Dacom Crossing an indefeasible right to
use six


                                       21
<PAGE>

international leased lines, each supporting a bandwidth capacity of 155Mbytes,
until December 2016, for a total price of US$12,000,000, which we have paid. We
also have agreements with Dacom Crossing and Onse Telecom, pursuant to which we
lease an aggregate of three international lines each supporting a bandwidth
capacity of 155 Mbytes, expiring in September and Novemeber 2004, respectively.
We pay Won 45.6 million and Won 12.3 million per month to Dacom Crossing and and
Onse Telecom, respectively. In addition, we have dedicated access lines to each
of the domestic Internet exchanges, including DACOM IX, KINX, KIDC and KT-IX.

    Our data center in Seoul also connects with content providers and the
Internet through co-location and Web hosting services. By directly connecting
our network to major online service providers, we can provide our end users with
faster access to content offered by such providers.



                                       22
<PAGE>


             ITEM 5 -- OPERATING AND FINANCIAL REVIEW AND PROSPECTS


    The following discussion and analysis is based on and should be read in
conjunction with the consolidated financial statements, including the notes
thereto, and other financial information appearing elsewhere herein. The
consolidated financial statements have been prepared in Korean Won and prepared
in accordance with U.S. GAAP.

A.  OPERATING RESULTS

FISCAL 2003 COMPARED TO FISCAL 2002

    The following compares our operating results in the year ended December 31,
2003 to those of the year ended December 31, 2002. Certain of our operating
results from the year ended December 31, 2002, including loss on disposition of
property and equipment, loss on retirement of bond and gain on extinguishment of
debt, have been reclassified to conform to the presentation of our operating
results from the year ended December 31, 2003.

    Revenues. Our revenues decreased by 6.6% from Won 427,140.8 million for the
year ended December 31, 2002 to Won 398,782.4 million for the year ended
December 31, 2003. This decrease in revenues reflected a 6.5% decrease in fees
received from our broadband Internet services subscribers from Won 421,061.9
million in 2002 to Won 393,600.4 million in 2003 and a 14.8% decrease in
revenues from our portal services from Won 6,079.0 million in 2002 to Won
5,182.0 million in 2003. The decrease in our broadband Internet access services
revenues was primarily due to a decrease in the number of our subscribers from
1,301,620 as of December 31, 2002 to 1,279,398 as of March 31, 2003 to 1,293,364
as of December 31, 2003. The decrease in our portal services revenues was
primarily due to a decrease in the revenues of Korea.com, our consolidated
subsidiary, as a result of the commencement of its corporate reorganization
proceedings.

    Operating Costs. Our total operating costs, excluding depreciation and
amortization, decreased by 10.4% from Won 286,723.5 million for 2002 to Won
256,875.4 million for 2003. The decrease in our total operating costs, excluding
depreciation and amortization, was primarily due to decreases in commission
payments to our independent dealers, lease payments to Powercomm and other
network operators for the use of their HFC networks, salaries paid to our
employees and repair expenses. Commission payments decreased by 11.1% from Won
115,289.9 million in 2002 to Won 102,467.1 million in 2003, primarily due to a
decrease in the amount of incentive payments to independent dealers. Lease
payments to Powercomm and other network operators decreased by 9.9% from Won
100,463.0 million in 2002 to Won 90,563.2 million in 2003, primarily due to a
decrease in the number of our subscribers. Labor expenses decreased by 24.3%
from Won 14,609.4 million in 2002 to Won 11,056.7 million in 2003, primarily due
to a decrease in the number of our employees and a reduction in bonus payments
to our employees. Repair expenses decreased by 22.9% from Won 14,757.4 million
in 2002 to Won 11,370.6 million in 2003.

    Selling, General and Administrative Expense. Selling, general and
administrative expense slightly decreased by 25.9% from Won 65,003.9 million in
2002 to Won 48,150.6 million in 2003, primarily reflecting decreases in bad debt
expenses, salaries paid to our employees, fees and charges and research and
development costs, offset in part by an increase in our advertising expenses.
Bad debt expenses decreased by 76.2% from Won 24,660.7 million in 2002 to Won
5,858.4 million in 2003. Labor expenses decreased by 49.2% from Won 5,629.9
million in 2002 to Won 2,862.5 million in 2003, primarily due to a decrease in
the number of our employees and a reduction in bonus payments to our employees.
Fees and charges decreased by 36.4% from Won 7,009.8 million in 2002 to Won
4,455.3 million in 2003, primarily due to a decrease in fees paid to our legal
and financial advisors and other consultants reflecting a reduced level of our
activities in 2003. Research and development expenses decreased from Won 2,073.2
million in 2002 to nil in 2003. Advertising expenses increased by 14.2% from Won
10,886.8 million in 2002 to Won 12,431.3 million in 2003, primarily due to a
increase in our advertising activities.

    Depreciation and Amortization Expense. Depreciation and amortization expense
slightly increased by 2.8% from Won 104,645.6 million in 2002 to Won 107,565.0
million in 2003.

    Impairment Loss. Our impairment loss increased by 106.6% from Won 27,261.2
million in 2002 to Won 56,323.8 million in 2003, due to our disposition of
obsolete equipment and facilities such as old cable modems and other
telecommunication facilities that are not reusable.

    Loss on Disposition of Property and Equipment. Our loss on disposition of
property and equipment decreased by 91.6% from Won 35,660.3 million in 2002 to
Won 3,005.3 million in 2003. In 2002, we recognized loss on disposition of
property and equipment of Won 35,660.3 million primarily as a result of the sale
of our HFC network system to Powercomm in August 2002.



                                       23
<PAGE>

    Operating Loss. Our operating loss decreased by 20.6% from Won 92,153.7
million in 2002 to Won 73,136.6 million in 2003, primarily as a result of a
decrease in loss on disposition of property and equipment, offset in part by an
increase in impairment loss.

    Other Income (Expense). Other expenses decreased by 81.3% from Won 224,709.7
million in 2002 to Won 42,130.9 million in 2003, primarily due to decreases in
loss on retirement of bonds, impairment loss on investments and interest
expense. Our loss on retirement of bonds decreased by 100.0% from Won 129,681.1
million in 2002 to nil in 2003. In 2002, we incurred loss on retirement of bonds
of Won 129,681.1 million, due to our retirement of bonds held by SB Thrunet,
TriGem and Naray & Company in February 2002 and retirement of bonds held by
TriGem and Naray & Company in August 2002. Our impairment loss on investments
decreased by 96.0% from Won 28,930.1 million in 2002 to Won 1,165.1 million in
2003. In 2002, prior to the commencement of our corporate reorganization
proceedings, we recognized other-than-temporary declines in the value of
investments, primarily for our investments in corporate debt securities. Our
interest expense decreased by 30.8% from Won 81,258.7 million in 2002 to Won
56,230.5 million in 2003, primarily due to a decrease in the amount of our
interest bearing liabilities.

    Income Tax. In 2003, we did not incur any income tax expense. In 2002, we
recognized income tax expense of Won 131.4 million in 2002, reflecting income
tax paid by ENS Securitization Limited on its income. See Note 15 to our
consolidated financial statements for more details.

    Net Loss. Our net loss decreased by 72.3% from Won 436,102.5 million in 2002
to Won 120,998.8 million in 2003, primarily due to decreases in loss on
retirement of bonds and loss from discontinued operations.


FISCAL 2002 COMPARED TO FISCAL 2001

    The following compares our operating results in the year ended December 31,
2002 to those of the year ended December 31, 2001. Our operating results from
continuing activities for the year ended December 31, 2001 have been restated to
exclude the operating results from our enterprise networks business, which was
sold in 2002. Certain of our operating results from the years ended December 31,
2001 and December 31, 2002, including loss on disposition of property and
equipment, loss on retirement of bond and gain on extinguishment of debt, have
been reclassified to conform to the presentation of our operating results from
the year ended December 31, 2003.

    Revenues. Our revenues increased by 15.7% from Won 369,132.4 million for the
year ended December 31, 2001 to Won 427,140.8 million for the year ended
December 31, 2002. This increase in revenues primarily reflected a 16.5%
increase in fees received from our broadband Internet services subscribers from
Won 361,408.9 million in 2001 to Won 421,061.9 million in 2002. The increase in
our broadband Internet services revenues was primarily due to an increase in the
average number of subscribers from approximately 1.0 million in 2001 to 1.3
million in 2002.

    Operating Costs. Our total operating costs, excluding depreciation and
amortization, decreased by 6.1% from Won 305,416.9 million for 2001 to Won
286,723.5 million for 2002. The decrease in our total operating costs, excluding
depreciation and amortization, was primarily due to decreases in loss on
cancellation of contract from Won 28,330.2 million in 2001 to none in 2002. In
2001, we incurred loss on cancellation of contract of Won 28,330.2 million, as a
result of our cancellation of an international leased line agreement with Onse
Telecom. See Note 19 to our consolidated financial statements for more details.

    Selling, General and Administrative Expense. Selling, general and
administrative expense increased by 51.0% from Won 43,040.0 million in 2001 to
Won 65,003.9 million in 2002, primarily due to an increase in our bad debt
expenses, offset in part by decreases in our fees and charges and advertising
expenses. Bad debt expenses increased by 395.2% from Won 4,980.2 million in 2001
to Won 24,660.7 million in 2002. Fees and charges decreased by 39.5% from Won
11,593.5 million in 2001 to Won 7,009.8 million in 2002, primarily due to a
decrease in fees paid to our legal and financial advisors and other consultants
reflecting a reduced level of our investment activities in 2002. Advertising
expenses decreased by 15.7% from Won 12,920.8 million in 2001 to Won 10,886.8
million in 2002, primarily due to decreases in our television and newspaper
advertisements.

    Depreciation and Amortization Expense. Depreciation and amortization expense
slightly decreased by 2.2% from Won 107,025.7 million in 2001 to Won 104,645.6
million in 2002.

    Impairment Loss. Our impairment loss increased by 14.9% from Won 23,716.9
million in 2001 to Won 27,261.2 million in 2002, due to an increase in
impairment loss on property and equipment, partly offset by impairment loss on
intangible assets. Our impairment loss on property and equipment increased from
none in 2001 to Won 17,466.9 million in 2002, including an


                                       24
<PAGE>

impairment loss on obsolete property and equipment of Korea.com Communications
in the amount of Won 12,330.3 million and an impairment loss on our obsolete
cable modems in the amount of Won 5,136.6 million. Our impairment loss on
intangible assets decreased from Won 23,716.9 million in 2001 to Won 9,794.3
million in 2002. We recognized impairment loss on intangible assets such as our
software licenses and domain name in 2002 and the option granted to Microsoft in
2001.

    Loss on Disposition of Property and Equipment. In 2002, we recognized loss
on disposition of property and equipment of Won 35,660.3 million primarily as a
result of the sale of our HFC network system to Powercomm in August 2002,
compared to our gain on disposition of property and equipment of Won 311.8
million in 2001.

    Operating Loss. Our operating loss decreased by 16.0% from Won 109,756.3
million in 2001 to Won 92,153.7 million in 2002, primarily as a result of an
increase in our revenues, offset in part by the loss on disposition of property
and equipment in 2002.

    Other Income (Expense). Other expenses increased by 188.1% from Won 77,985.9
million to Won 224,708.7 million in 2002, primarily due to increases in loss on
retirement of bonds and impairment loss on investments, offset in part by a gain
on foreign exchange transactions. In 2002, we incurred loss on retirement of
bonds of Won 129,681.1 million, due to our retirement of bonds held by SB
Thrunet, TriGem and Naray & Company in February 2002 and retirement of bonds
held by TriGem and Naray & Company in August 2002. Our impairment loss on
investments increased by 529.8% from Won 4,593.5 million in 2001 to Won 28,930.1
million in 2002 due to other-than-temporary declines in the value of
investments, primarily for our investments in corporate debt securities, Nowcom
Co., Ltd., Ginam Broadcasting, Saero Network Service, Hankyung.com Co., Ltd.,
and EnTechville. In 2002, we recognized gain on foreign exchange transactions of
Won 5,755.3 million due to an appreciation in the value of the Won relative to
the Dollar from Won 1,326.1 to US$ 1.00 as of December 31, 2001 to Won 1,200.4
to US$ 1.00 as of December 31, 2002, compared to our loss on foreign exchange
transactions of Won 3,869.8 million in 2001.

    Income Tax. In 2002, we recognized income tax expense of Won 131.4 million
in 2002, reflecting income tax paid by ENS Securitization Limited on its income.
In 2001, we recognized income tax benefit of Won 2,677.7 million from the loss
from discontinued operations, offset in whole by income tax of the same amount
from the gain from disposals of our cable television business. See Note 15 to
our consolidated financial statements for more details.

    Net Income (loss) from Discontinued Operations. On October 28, 2002, we
disposed of our enterprise network business. As a result, we recognized net loss
from discontinued operations of Won 115,734.8 million in 2002, reflecting loss
from discontinued operations of Won 51,960.1 million and loss from disposals of
Won 63,774.7 million. After restating our financial statements for 2001 to
exclude the operating results from six cable system operator subsidiaries sold
in 2001 and our enterprise networks business sold in 2002, we had net loss from
discontinued operations of Won 68,035.8 million in 2001, reflecting loss from
discontinued operations of Won 74,052.0 million, offset in part by gain from
disposals of Won 6,016.2 million.

    Net Loss. Our net loss increased by 65.8% from Won 263,059.5 million for
2001 to Won 436,102.5 million for 2002.


IMPACT OF INFLATION

    We do not consider that inflation in Korea has had a material impact on our
results of operations. Inflation in Korea in 1999, 2000, 2001, 2002 and 2003 was
0.8%, 2.3%, 4.1%, 2.7% and 3.6%, respectively. See "Item 3 -- Key
Information--Risk Factors--There are unique economic and political risks
associated with investing in companies from Korea".

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 -- Key Information--Risk Factors--Risks Related to Korea" and
"Item 10 -- Additional Information -- Taxation".




                                       25
<PAGE>

B.  LIQUIDITY AND CAPITAL RESOURCES

    We have commenced corporate reorganization proceedings under the Corporate
Reorganization Act of Korea on March 27, 2003. See "Item 4 -- Information on the
Company -- History and Development of the Company -- Commencement of
Reorganization Proceedings" for more details on our corporate reorganization
proceedings.

    We had positive cash flows from operating activities of Won 28,517.2 million
and Won 103,290.6 million in 2002 and 2003, respectively, compared to negative
cash flows from operating activities of Won 35,841.3 million in 2001. Net cash
provided by operating activities in 2003 primarily reflected net losses,
adjusted by depreciation and amortization. Net cash provided by operating
activities in 2002 primarily reflected net losses, adjusted by loss from
discontinued operation, loss on redemption of bonds and depreciation and
amortization. Net cash used in operating activities in 2001 primarily reflected
net losses, adjusted for depreciation and amortization.

    Net cash provided by investing activities was Won 396,276.2 million and Won
13,316.6 million in 2002 and 2003, respectively, compared to net cash used in
investing activities of Won 213,219.5 million in 2001. Net cash provided by
investing activities in 2003 was primarily due to the sale of our HFC network
and headquarter building, offset in part by our acquisition of telecommunication
equipment such as cable moderns and CMTS. Net cash provided by investing
activities in 2002 was primarily the result of the disposition of property and
equipment in connection with the sale of our enterprise networks business. Net
cash used in investing activities in 2001 was primarily the result of investment
in transmission equipment and other facilities and equipment necessary for the
delivery of our broadband Internet access and enterprise network.

    As a result of the rapid expansion of our business and continued operating
losses since our incorporation, we have significant debt and debt service
obligations. In 2002 and 2003, we made significant efforts to reduce our
liabilities and used the proceeds from the sale of our assets to pay off a
portion of our long-term and short-term borrowings. As a result, we had net cash
used in financing activities of Won 526,093.8 million and Won 117,887.2 million
in 2002 and 2003, respectively, compared to net cash provided by financing
activities of Won 366,143.6 million in 2001. In 2003, we used Won 76,485.8
million, Won 41,086.9 million and Won 7,066.3 million in repayments of long-term
debts, short-term borrowings and bonds, respectively. In 2002, we used Won
198,348.0 million, Won 180,590.9 million and Won 230,933.7 million in repayments
of bonds, short-term borrowings and long-term debts, respectively. Since our
inception, we have met our working capital and other capital requirements
principally from private and public sales of our shares and bonds and bank
borrowings. We raised Won 64,744.3 million and Won 12,690.4 million from share
sales in January 2001 and December 2001, respectively. Proceeds from the
issuance of a series of bonds totaled Won 225,344.5 million, Won 49,333.1
million and Won 6,280.8 million in 2001, 2002 and 2003, respectively. Proceeds
from long-term debt totaled Won 294,684.0 million in 2001. In 2002 and 2003, we
did not raise any funds from long-term debts. We also raised Won 118,247.4
million, Won 55,053.9 million and Won 2,800.0 million from short-term borrowings
in 2001, 2002 and 2003, respectively. As of December 31, 2003, we had net
short-term indebtedness (including short-term borrowings, the current portion of
long-term debts and the current portion of capital lease obligations) and
long-term indebtedness (including long-term debts and bonds) of Won 447,860.1
million and Won 21,118.8 million, respectively, and our current liabilities
exceeded our current assets by Won 562,578.1 million.

    On February 28, 2002, we issued 52,096,000 shares of our common stock to SB
Thrunet, Naray & Company and TriGem as a result of the exercise of their
warrants. The subscription money for the exercised warrants was paid by delivery
of the bonds issued to them in 2001, amounting to US$ 62,600,000, Won 29,600.0
million and Won 17,760.0 million, respectively.

    On August 30, 2002, we issued 78,169,014 shares of our common stock to
TriGem and Naray Company, as a result of the conversion of the bonds issued to
them in 2001 in the amount of Won 59,200.0 million and Won 29,600.0 million,
respectively, into our common stock.

    On June 1, 2004, we issued 6,958,806 shares of our common stock to our
unsecured creditors, including the Korea Development Bank and Kookmin Bank, as a
result of their conversion of unsecured claims in the amount of Won 34.8 billion
into our common shares at Won 5,000 per share according to our reorganization
plan.

    See Notes 11 and 12 to our consolidated financial statements for a
description of the types of financial instruments used, the maturity profile of
debt, currency and interest rate structure.

    In 2002 and 2003, we sold the following assets to raise funds to satisfy our
debt repayment and debt service obligations.

    o   On August 6, 2002, we sold our HFC network system to Powercomm for Won
        45.0 billion;

    o   On August 16, 2002, we sold our corporate headquarter building to
        Carlyle Asia Real Estate L.L.C. for approximately



                                       26
<PAGE>

        Won 38.0 billion;

    o   On October 28, 2002, we sold the assets related to our enterprise
        network services business to SK Global for Won 346.9 billion;

    o   On December 30, 2003, we sold our HFC network in Youngdong, Kangwon for
        Won 3.4 billion;

    o   On December 30, 2003, we sold our HFC network in east Daegue for Won 1.7
        billion;

    o   On December 30, 2003, we sold additional enterprise network services
        business related assets to SK Networks for Won 10.0 billion; and

    o   On October 2, 2003, we sold 3,808,600 Nowcom shares for Won 2.2 billion.

    As of December 31, 2003, we provided six promissory notes to KDB Capital,
Woori Investment Bank, LG Card, Woori Bank and LG Capital as collateral. We
entered into a overdraft agreement amounting to Won 2 billion with Hanmi Bank.
In relation to the overdraft agreement, we had provided bank deposits amounting
to Won 2 billion as collateral to Hanmi Bank as of December 31, 2003. As of the
same date, we also provided financial guarantees in the amount of approximately
US$6.2 million for the repayment of certain financial obligations of our
affiliates. See Note 14 to our consolidated financial statements for more
details on our commitments and contingencies. 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.

    Capital expenditures in property and equipment were Won 259,114.4 million,
Won 48,456.3 million and Won 15,834.9 million in 2001, 2002 and 2003,
respectively. Capital expenditures primarily consisted of transmission
equipment, HFC networks for our broadband Internet business, software, cable
modems and other facilities and equipment.

    Our current capital expenditure plan calls for the expenditure of
approximately Won 38 billion, Won 39 billion and Won 60 billion in 2004, 2005
and 2006, respectively. None of those amounts represents contractually committed
capital expenditures. We had invested approximately Won 12 billion of the
planned 2004 capital expenditures as of June 30, 2004. The principal components
of our capital investment plan are:

    o   purchase of equipment, such as cable modems, CMTS and servers;

    o   network infrastructure maintenance and repair; and

    o   general administrative infrastructure.

    We plan to meet our debt service, debt repayment and other repayment
obligations and satisfy our currently anticipated capital expenditure and
working capital requirements in 2004 and 2005 through revenues from our
broadband Internet services.

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

    Research and development costs are not significant and are expensed as
incurred.

D.  TREND INFORMATION

    Thrunet was incorporated on July 30, 1996 and we began offering our
enterprise network services and broadband Internet services in July 1997 and
July 1998, respectively. As we terminated our enterprise network services on
October 28, 2002, in 2003 we generated revenues primarily from the monthly fees
paid by our broadband Internet services subscribers and expect that this will
continue. Our broadband Internet services revenues also included revenues from
the rental of cable modems to our broadband Internet services subscribers and
installation fees received from our broadband Internet services subscribers.

    Our operating costs consist primarily of (i) lease payments to Powercomm and
other network operators for the use of their HFC networks, (ii) international
bandwidth lease payments, (iii) commission payments to our independent dealers,
(iv)


                                       27
<PAGE>

installation fees paid to our cable modem installation contractors and (v)
customer service fees paid to TG Ubase. As we have reached our target business
and network coverage, we do not expect substantial increases in our future
operating expenses.

    Our selling, general and administrative expenses consist primarily of
advertising expenses, fees and charges mostly paid to our consultants, legal and
financial advisors and salaries of administrative employees.

    As a result of the rapid expansion of our business and continued operating
losses since our incorporation, we had significant debt and debt service
obligations. Furthermore, during the course of 2001, there was a significant
decline in the market value of telecommunication companies around the world as
well as a decline in the prices of communications services and products in
general, which affected our ability to achieve and sustain profitability.
Despite our efforts to improve our financial condition, we commenced our
corporate reorganization proceedings in March 2003.

    Even if we successfully complete our corporate reorganization and continue
our business as a going concern, our ability to generate future revenues will be
dependent on a number of factors, certain of which are beyond our control. The
prices of communications services and products in general and Internet access
fees in particular have fallen historically, and we expect them to continue to
fall. In order to achieve and maintain profitability, we will need to continue
expanding our end user base and maintain adequate pricing levels. See "Item
3--Key Information--Risk Factors--We have experienced continuing operating
losses." and "-Our ability to achieve and sustain profitability may be adversely
affected by a decline in prices for our services or insufficient expansion of
our end user base."

E.  OFF-BALANCE SHEET ARRANGEMENTS

    There are no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.

F.  TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

    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 10 to 13 to
our financial statements.

<TABLE>
<CAPTION>
                                                                   PAYMENTS DUE BY PERIOD
                                               ---------------------------------------------------------------
                                                           LESS THAN                                 MORE THAN
  CONTRACTUAL OBLIGATIONS                       TOTAL        1 YEAR      1-3 YEARS     3-5 YEARS      5 YEARS
                                               -------     ---------     ---------     ---------     ---------
                                                                    (IN MILLIONS OF WON)
<S>                                            <C>          <C>            <C>             <C>          <C>
Long-Term Debt, net of present value           447,255      429,590        17,665            --            --
Capital Lease Obligations                       20,723       17,270         3,448             5            --
Operating Lease                                     --           --            --            --            --
Long-term Advances Received (trade
      receivable securitization)                    --           --            --            --            --
Short-term Borrowings                            1,000        1,000            --            --            --
Retirement and Severance Benefits                2,479           --            --            --         2,479
Total Contractual Cash Obligations             471,457      447,860        21,113             5         2,479
</TABLE>


    If our reorganization plan had been effective as of December 31, 3002,
future payments under non-cancelable lease arrangements and short-term and
long-term debt arrangements would have been as follows:

<TABLE>
<CAPTION>
                                                                   PAYMENTS DUE BY PERIOD
                                                --------------------------------------------------------------
                                                           LESS THAN                                 MORE THAN
  CONTRACTUAL OBLIGATIONS                       TOTAL        1 YEAR      1-3 YEARS     3-5 YEARS      5 YEARS
                                               -------     ---------     ---------     ---------     ---------
                                                                    (IN MILLIONS OF WON)
<S>                                            <C>           <C>           <C>          <C>          <C>
Long-Term Debt, net of present value           429,747       14,516        40,285       115,274      259,672
Capital Lease Obligations                           --           --            --            --           --
Operating Lease                                     --           --            --            --           --
Long-term Advances Received (trade
      receivable securitization)                    --           --            --            --           --
</TABLE>


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                   PAYMENTS DUE BY PERIOD
                                                --------------------------------------------------------------
                                                           LESS THAN                                 MORE THAN
  CONTRACTUAL OBLIGATIONS                       TOTAL        1 YEAR      1-3 YEARS     3-5 YEARS      5 YEARS
                                               -------     ---------     ---------     ---------     ---------
                                                                    (IN MILLIONS OF WON)
<S>                                            <C>           <C>           <C>          <C>          <C>
Short-term Borrowings                               --           --            --            --           --
Retirement and Severance Benefits                2,479           --            --            --        2,479
Total Contractual Cash Obligations             432,226       14,516        40,285       115,274      262,151
</TABLE>


G. OTHER INFORMATION

CRITICAL ACCOUNTING POLICIES

    GENERAL

    The discussion and analysis of our operating and financial review and
prospects are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, management evaluates its estimates,
including those related to revenue recognition, bad debts, marketable
securities, long-lived assets and useful lives of property and equipment. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ materially from these estimates under different assumptions or
conditions.

    We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

    ALLOWANCE FOR DOUBTFUL ACCOUNTS

    We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. We provide an
allowance for specific customer accounts where collection is doubtful and also
provide a general allowance for other accounts based on historical collection
and write-off experience. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

    LONG-LIVED ASSETS

    We periodically review our long-lived assets for possible impairment
whenever facts and circumstances indicate that the carrying amount may not be
fully recoverable. Assumptions and estimates used in the evaluation of
impairment may affect the carrying value of long-lived assets, which could
result in impairment charges in future periods. Significant assumptions and
estimates include the projected cash flows based upon estimated revenue and
expense growth rates and the discount rate applied to the expected cash flows.
In addition, our amortization policies reflect judgments on the estimated useful
lives of assets.

    ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT

    We recognize depreciation expenses on our property and equipment using the
straight line method based on the estimated useful lives thereof. We apply the
following useful lives for our property and equipment: 40 years for buildings
and structures; 6 to 15 years for communication circuit equipment; 3 to 6 years
for transmission and communication equipment; and 5 to 8 years vehicles,
furniture and tools. We estimate such useful lives by analyzing, (1) by
analyzing the estimated period from which we will benefit from the use of such
assets, and (2) the estimated useful lives used by companies in our industry.
Use of other estimate methods may result in significantly different results.

    INCOME TAXES

    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.




                                       29
<PAGE>



              ITEM 6 -- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.  DIRECTORS AND SENIOR MANAGEMENT

    Following our filing of a petition for the commencement of reorganization
proceedings, on March 27, 2003, the bankruptcy court appointed Mr. Seog Won Park
as our receiver and he has since been performing functions similar to those of a
Chief Executive Officer. The current members of our board of directors and
senior executive officers (whose business addresses were at 1337-20
Seocho-2dong, Seocho-ku, Seoul, Korea) are as follows:

<TABLE>
<CAPTION>
         NAME                      AGE                       POSITION
         ----                      ---                       --------
<S>                                <C>    <C>
Seog Won Park........               61     Receiver / Chief Executive Officer
Chang Lib Ko.........               59     Statutory auditor / Executive Director
Se-Hwan Kim..........               45     Executive Director
Yu-Jung Kim..........               46     Senior Director
Kyu Bae Park.........               45     Senior Director
In Jung Kim..........               45     Director
</TABLE>

    SEOG WON PARK has served as the receiver of Thrunet since March 27, 2003.
From October 2001 until March 2003, Mr. Park served as a receiver of HungChang
Co., Ltd. From June 2001 until February 2002, Mr. Park served as a non-resident
Director of KorAm Bank. From March 2000 until June 2001, he served as a Vice
President of KorAm Bank. From February 1997 until March 2000, he served as a
Managing Director of KorAm Bank. From July 1996 until February 1997, he served
as a Branch Manager of KorAm Bank. Mr. Park received a bachelor of laws from
Korea University in February 1969.

    CHANG LIB KO joined Thrunet in April 2004 as a statutory auditor and
executive director. From December 2002 until March 2004, Mr. Ko served as a
receiver of Korea Tarpaulin Co., Ltd. From 2002 until 2002, he served as a
statutory auditor of Sanga Co., Ltd., Labora Co., Ltd. and Korea Tarpaulin. Mr.
Ko received a bachelor of arts in business administration from Kookmin
University in February 1972.

    SE-HWAN KIM joined Thrunet in January 1998 and served as a Marketing Team
Manager until December 2000. In January 2001, Mr. Kim was promoted to director.
Since January 2002, Mr. Kim has served as an Executive Director of Thrunet. From
1993 until 1997, Mr. Kim was a Marketing Team Manager at Naray Mobile Telecom,
Inc. Mr. Kim received a bachelor of arts in business administration from
Keimyung University in February 1984.

    YU-JUNG KIM has served as the Head of the Network Team of Thrunet since July
1999. From March 1996 until July 1999, he served as a Technology Manager of
Naray Telecom. From December 1985 until March 1993, he served as a Chief
Researcher at Daewoo Telecom. Mr. Kim received a bachelor of statistics from
Chungnam National University in February 1986.

    KYU BAE PARK joined Thrunet as the Head of the Finance Team of Thrunet in
August 1996 and has served as a director in charge of Thrunet's finance and
accounting from December 2001 until December 2003. In January 2004, he was
promoted to senior director of Thrunet. Mr. Park received a bachelor of arts in
international trade from Dongguk University in February 1986.

    IN JUNG KIM joined Thrunet as the Head of the General Affairs Team of
Thrunet in August 1996 and has served as the Head of the Operation Support and
Human Resources Team of Thrunet from January 1999 until January 2001. Since
February 2001, he has served as the Head of the Operation Support Team of
Thrunet. From February 1978 until June 1996, he was employed with KEPCO. Mr. Kim
received a bachelor of arts in public administration from Korea National Open
University in February 1985 and masters in public administration from Yonsei
University in 1994.


B.  COMPENSATION

    We paid an aggregate amount of compensation during fiscal 2003 to our
directors and officers as a group equal to Won 425 million. The amount of
retirement and severance benefits accrued for our executive officers and
directors in 2003 was Won 111 million. We are not required to disclose
compensation to our directors and officers on an individual basis under Korean
law and do not publicly disclose such information. No stock options were granted
to our executive officers and independent directors in 2003. There were no
pension, retirement or other similar benefits set aside for our executive
officers and directors in 2003.



                                       30
<PAGE>

C.  BOARD PRACTICES

    As a result of the commencement of our reorganization proceedings on March
27, 2003, our board meetings, audit committee, compensation committee and
independent directors have been temporarily suspended. Subject to certain
approvals and supervision of the bankruptcy court, Mr. Seog Won Park, our
receiver, and Mr. Chang Lib Ko, our statutory auditor, currently have the power
to perform the functions and responsibilities of such bodies and the exclusive
power and capacity to conduct our business and to manage and dispose of any and
all of our properties while we are in reorganization proceedings.

    The following is a description of our board of directors, audit committee,
compensation committee and independent directors prior to the commencement of
the reorganization proceedings.

BOARD OF DIRECTORS

      The board of directors had the ultimate responsibility for the
administration of the affairs of Thrunet. Our Articles of Incorporation, as
currently in effect, provide for a board of directors, which is comprised of
standing directors and non-standing directors including independent directors.
Our non-standing directors, as opposed to our standing directors, do not
participate in our day-to-day operations. Under our Articles of Incorporation,
all directors serve a three-year term, which may be extended to the close of the
ordinary general meeting shareholders convened with respect to the last fiscal
year, which ends on or before the date three years from the date of acceptance
of office by such director. Our Articles of Incorporation provide for a board of
directors of not less than five directors and not more than 15 directors. The
Commercial Code requires that the directors be elected at a general meeting of
shareholders by a majority of vote of the shareholders present or represented,
subject to such majority of at least one-quarter of all issued and outstanding
shares having voting rights. The board of directors elects one Representative
Director from the standing directors. None of our directors is party to a
service contract with us that provides for benefits upon termination of
employment.

AUDIT COMMITTEE

    The board of directors maintained an Audit Committee to ensure the impartial
supervision of our accounting and business operations. The Audit Committee must
consist of three or more directors and independent directors must comprise at
least two-thirds of the members of the Audit Committee. Under our Articles of
Incorporation, the Audit Committee 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 for such meeting.

COMPENSATION COMMITTEE

    In February 2001, the board of directors set up a Compensation Committee to
establish compensation levels for directors. The Compensation Committee must
mainly consist of independent directors.

D.  EMPLOYEES

    As of March 31, 2004, we had a total of 257 employees, including permanent
employees and contract employees. The following chart shows the number of
employees by main category of functional areas:

           <TABLE>
           <CAPTION>
          <S>                                             <C>
           SENIOR MANAGEMENT                                 2
           SALES & MARKETING                                99
           R&D AND ENGINEERING                             100
            ADMINISTRATION AND FINANCE                      56
                                                           ---
           TOTAL                                           257
           </TABLE>

    As of December 31, 2001, 2002 and 2003 we had 507, 316 and 283 employees,
respectively.

    A labor union was established in March 2004. Currently, 183 of our employees
are represented by the labor union. In accordance with Korean labor laws, our
labor union has been in negotiations with our management to improve work
conditions and benefits for our employees. We have not experienced any work
slowdowns or stoppages.



                                       31
<PAGE>

E.  SHARE OWNERSHIP

STOCK OPTION PLAN

    Under our Articles of Incorporation, we may grant options for the purchase
of our shares to certain qualified officers and employees. Set forth below are
the details of our stock option plan as currently contained in our Articles of
Incorporation (the "Stock Option Plan").

    o   In order to qualify for participation in the Stock Option Plan, officers
        and employees must have the ability to contribute to, the establishment,
        development or technological innovation of Thrunet. Notwithstanding the
        foregoing, shareholders meeting the following criteria shall not be
        eligible to receive options under the Stock Option Plan; (i) a
        shareholder who holds 10% or more of the total outstanding shares of
        Thrunet excluding the non-voting shares, (ii) a person who has actual
        control over major management decisions of Thrunet such as the
        appointment or dismissal of directors and auditors, and in each case his
        or her spouse and lineal ascendants or descendants.

    o   The specific terms and conditions of stock options granted under the
        Stock Option Plan shall be approved at a duly convened shareholders'
        meeting. Under our Articles of Incorporation, stock options shall be
        offered through (i) issuance of new shares, or (ii) payment in cash or
        treasury stock held by Thrunet of the difference between the market
        price of our shares and the option exercise price.

    o   The maximum aggregate number of our shares available for issuance under
        the Stock Option Plan shall not exceed 10% of the total number of our
        shares outstanding. The stock options may not be granted to all of our
        directors, auditors and employees. Any single officer or employee may
        not be granted stock options for the shares exceeding 10% of the shares
        issued and outstanding.

    o   Stock options granted under the Stock Option Plan will have a minimum
        exercise price determined as follows: (i) if new shares are to be issued
        for the option, the minimum exercise price will be the higher of the
        market price or par value of our shares on the grant date, and (ii) if
        Thrunet's existing shares are to be transferred for the option, the
        minimum exercise price will be the market price of our shares on the
        grant date.

    o   Stock options granted under the Stock Option Plan may be exercised after
        the third anniversary date of the shareholders' meeting at which the
        grant of stock options under the Stock Option Plan is approved but prior
        to the tenth anniversary date thereof, unless otherwise revoked by the
        board of directors. The board of directors may revoke stock options
        granted under the Stock Option Plan if (i) the beneficiary voluntarily
        retires or resigns prior to the second anniversary date of the
        shareholders' meeting at which the grant of the stock options is
        approved, (ii) the beneficiary causes significant loss to us by his or
        her negligence or willful misconduct, or (iii) an event of termination
        specified in the Stock Option Plan occurs.

    o   Shares purchased upon the exercise of stock options granted under the
        Stock Option Plan will not, at the time of their issuance, be registered
        with the Securities and Exchange Commission but may be salable in the
        public market in the United States in accordance with Rule 144 under the
        Securities Act and applicable Korean laws and regulations.

    On August 20, 1999, March 24, 2000 and March 27, 2001, we granted stock
options to purchase our shares to our executive officers, independent directors
and employees. As of December 31, 2003, we had outstanding options to purchase
1,398,244 of our shares. As of January 15, 2004, however, all of the stock
options were cancelled pursuant to our reorganization plan. See Note 17 to our
consolidated financial statements for more information about our stock options.

STOCK OWNERSHIP ASSOCIATION

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



                                       32
<PAGE>

    We established our employee stock ownership association in June 1997. As of
December 31, 2003, 67 employees of our company were members of the employee
stock ownership association and the association held 2,865 shares of our common
shares.






                                       33
<PAGE>



           ITEM 7 -- MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  MAJOR SHAREHOLDERS

    The following table sets forth information with respect to the beneficial
ownership of our shares, on a fully diluted basis, as of June 1, 2004 by (1)
each person known to us to own beneficially more than five percent (5%) of our
shares, and (2) all of our directors and executive officers as a group. As of
February 20, 2004, 875,045 shares of our common stock were held by 16,498
holders of record in Korea, and 96,791 shares of our common stock were held by
holders in the United States.


                   <TABLE>
                   <CAPTION>
                                                                             SHARES BENEFICIALLY
                                                                           OWNED AS OF JUNE 1, 2004
                                                                         ----------------------------
                                   NAME                                     NUMBER           PERCENT
                   -----------------------------------                   ------------       ---------
                  <S>                                                      <C>                <C>
                   Korea Development Bank.........................         1,912,950          24.52%
                   Kookmin Bank...................................         1,352,532          17.34%
                   Powercomm......................................           834,552          10.70%
                   SHIN SMAIL AGEIN SPE. .........................           735,000           9.42%
                   BOND PARK ECHA SPE.............................           450,000           5.77%
                   BOND PARK SPE..................................           450,000           5.77%
                   Directors and Executive Officers(1)..............              65           0.00%
                   </TABLE>

    ----------
    (1) None of the directors/executive officers beneficially owns 1% or more of
        our shares on an individual basis.

    The following table describes transactions known to us through publicly
available information involving holders of over 5% of our outstanding common
stock during the period beginning on January 1, 2001 and ending on April 30,
2004 that resulted in a change of greater than 1% in the percentage ownership by
that shareholder of our outstanding shares.

<TABLE>
<CAPTION>
                                                                             NUMBER OF
                                               SHARES OWNED                    SHARES       SHARES OWNED
                               DATE OF           PRIOR TO                    PURCHASED        AFTER THE
NAME OF SHAREHOLDER          TRANSACTION       TRANSACTION     PERCENTAGE      (SOLD)       TRANSACTION     PERCENTAGE
---------------------     -----------------    ------------    ----------    -----------    ------------    ----------
<S>                       <C>                  <C>               <C>         <C>             <C>               <C>
TriGem Computer           January 26, 2001      6,443,250         8.95%       11,840,000     18,283,250        18.66%
SB-Thrunet Pte. Ltd.      January 26, 2001         -                -         14,208,000     14,208,000        14.50%
TriGem Computer           January 26, 2001     18,283,250        18.66%      (1,685,000)     16,598,250        16.94%
TriGem Computer           March 31, 2001       16,598,250        16.94%      (6,268,111)     10,330,139        10.54%
TriGem Computer           December 14, 2001    10,330,139        10.54%        4,634,909     14,965,048        14.58%
TriGem Computer           February 28, 2002    14,965,048        14.58%        7,104,000     22,069,048        14.26%
SB-Thrunet Pte. Ltd.      February 28, 2002    14,208,000        14.50%       33,152,000     47,360,000        30.61%
Naray & Company           February 28, 2002     2,576,000         2.51%       11,840,000     14,416,000         9.32%
TriGem Computer(1)        August 28, 2002      22,069,048        14.26%       52,112,676     74,181,724        31.85%
Naray & Company           August 28, 2002      14,416,000         9.32%       26,056,338     40,472,338        17.38%
Naray & Company(1)        September 6, 2002    40,472,338        17.38%        9,560,000     50,032,338        21.48%
SB-Thrunet Pte. Ltd.(1)   September 6, 2002    47,360,000        30.61%        9,560,000     37,800,000        16.23%
SB-Thrunet Pte. Ltd.(2)   April 25, 2003       12,600,000        16.23%      (1,282,051)     11,317,949        14.58%
Naray & Company           April 25, 2003       16,677,446        21.48%        1,282,051     17,959,497        23.13%
TriGem Computer(3)        January 9, 2004      24,727,240        31.85%      (24,727,240)             0            0%
Naray & Company(2)(3)     January 9, 2004      17,959,497        23.13%      (16,677,446)     1,282,051         3.66%
Naray & Company(3)        April 8, 2004            32,051         3.66%         (32,051)              0            0%
</TABLE>
-------------------------
(1) As a result of the reverse stock split of our common shares in the ratio of
    3:1 on December 27, 2002, the number of shares held by each of TriGem
    Computer, Naray & Company and SB-Thrunet Pte. Ltd., was reduced to
    24,727,240, 16,677,446 and 12,600,000, respectively.
(2) As a result of the reverse stock split of our common shares in the ratio of
    40:1 on February 20, 2004, the number of shares held by SB-Thrunet Pte. Ltd.
    and Naray & Company, was reduced from 11,317,949 to 282,948 and from
    1,282,051 to 32,051, respectively.
(3) The 100% capital reduction of the common shares held by our largest
    shareholder, TriGem Computer, and its affiliates.



                                       34
<PAGE>

B.  RELATED PARTY TRANSACTIONS

RELATIONSHIP WITH TRIGEM AND ITS AFFILIATES

    TriGem was one of our founding shareholders and together with its affiliates
beneficially owned 56.56% of our shares as of December 31, 2003. On January 26,
2001, we issued to TriGem and Naray bonds maturing on January 26, 2006, with
interest accruing at the annual rate of 4.35% payable semi-annually, together
with detachable warrants to purchase our common stock for Won 2,500 per share.
In August 2002, TriGem and Naray converted their bonds in the amounts of Won
59,200,000,000 and Won 29,600,000,000, respectively, into our common stock. None
of TriGem and its affiliates currently owns any bonds or warrants to purchase
our common stock.

    We have an agreement with TG Ubase, a subsidiary of TriGem, under which we
outsource all of our customer care and after-service functions to TG Ubase.
Payments to TriGem's affiliates, including TG Ubase in 2000, 2001 and 2002
totaled Won 54,505.7 million, Won 66,483.7 million and Won 37,808.4 million,
respectively. We believe that our agreements with TriGem's affiliates and TG
Ubase were on terms no less favorable than could have been obtained from
independent third parties.

    In June 2002, we entered into an agreement with Naray Telecom, pursuant to
which we lease one international leased line for a monthly fee of Won 268
million, for a term of one year.

    In September 2002, we provided a loan of Won 11.5 billion to Naray & Company
until June 27, 2004. As collateral for such loan, Naray & Company has provided
to us a blank promissory note for the maximum amount of Won 11.5 billion, and
has pledged to us its 16,000,000 of our common shares, 448,000 shares in Digital
Biotech Co., Ltd., 156,800 shares in Heyanita Korea, Inc., 30,000 shares in
Electronic Times Internet Co., Ltd., and certificates of contribution of Won 10
billion in SOFTBANK VENTURES FUND No.1 and Won 5.8 billion in SOFTVEN No.2
Investment Enterprise Partnership. However, Naray & Company is currently in
bankruptcy proceedings and it is not certain whether we can collect the loan in
full, or at all.

RELATIONSHIP WITH SOFTBANK

    As of December 31, 2003, SOFTBANK, through SB Thrunet, beneficially owned
14.58% of our outstanding shares. On January 26, 2001, we issued to SB Thrunet
bonds maturing on January 26, 2006, with interest accruing at the annual rate of
1.43% payable semi-annually, together with detachable warrants to purchase our
common stock for Won 2,500, exercisable at any time until January 26, 2006.
SOFTBANK's wholly-owned entity, SB Ginko, which is a general partner of SB
Thrunet, also held warrants to purchase a total of 35,520,000 shares of our
common stock at a per share exercise price of Won 2,500, exercisable at any time
until January 26, 2006. On February 28, 2002, SB-Thrunet exercised all of its
warrants to purchase 33,152,000 shares of our common stock. The subscription
money in Korea Won was used to repay the US$70 million bonds issued to SB
Thrunet. As a result of the difference in the exchange rate used to determine
the aggregate denominated amount of the warrants and the exchange rate used for
the payment of the subscription money, bonds amounting to US$7,400,000 remained.
As a result of the implementation of our reorganization plan, the bonds held by
SB Thrunet were classified as secured borrowings which will be repaid in six
equal annual installments after a grace period of three years, with interests
accruing at the annual rate of 7% after the commencement of our reorganization
proceedings, and as of January 9, 2004, all of the warrants held by SB Ginko
were cancelled.

RELATIONSHIP WITH KOREA.COM COMMUNICATIONS

    As of December 31, 2003, we owned 53.47% of the outstanding shares of
Korea.com Communications. On April 1, 2003, the Bankruptcy Division of the Seoul
District Court granted Korea.com Communications its petition for the
commencement of reorganization proceedings under the Corporate Reorganization
Act of Korea. Since we established Korea.com Communications and transferred our
Korea.com portal business to it in June 2001, Korea.com Communications has
provided Korea.com portal services and other related services to its own and our
subscribers. As of December 31, 2003, Korea.com Communications owed us
approximately Won 3,938 million, including Won 2,487 million in loan payable and
Won 1,451 million in accounts payable.

C.  INTERESTS OF EXPERTS AND COUNSEL

    Not applicable.



                                       35
<PAGE>



                         ITEM 8 -- FINANCIAL INFORMATION


A.  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See "Item 18 -- Financial Statements" and pages F-1 to F-54 following
Glossary.


                                LEGAL PROCEEDINGS

     CLASS ACTION LAWSUIT

    On October 26, 2001, a class action lawsuit was filed with the US District
Court, Southern District of New York on behalf of the purchasers of the
securities of Thrunet between November 16, 1999 and December 6, 2000. We are
named as a defendant, along with three controlling officers at the time of our
initial public offering in 1999, namely, Yong-Teh Lee, Jong-Kil Kim and
Boo-Woong Yoo, and eight investment banks that were underwriters for
approximately 300 other companies, which completed their initial public
offerings in the United States during the above period. The investment banks
named as co-defendants in this action include: The Bear Stearns Companies Inc.,
CIBC World Markets, Credit Suisse First Boston Corp., Fleetboston Robertson
Stephens, Inc., The Goldman Sachs Group, Inc., J.P. Morgan Chase & Co., Lehman
Brothers Holdings Inc., and Merrill Lynch, Pierce, Fenner & Smith, Inc.

     The complaint alleges violations of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934
and Rule 10-5 promulgated thereunder. The complaint essentially alleges that the
prospectus and registration statement we filed in connection with our initial
public offering were materially false and misleading because they failed to
disclose, among other things, that: (i) the underwriters on the offering had
solicited and received excessive and undisclosed commissions from certain
investors in exchange for which those underwriters allocated to those investors
material portions of the restricted number of shares; and (ii) the underwriters
had entered into agreements with customers whereby the underwriters agreed to
allocate shares to those customers in the initial public offering in exchange
for which the customers agreed to purchase additional shares in the aftermarket
at predetermined prices.

     On November 26, 2001, we received from Wolf Haldenstein Adler Freeman &
Herz LLP, one of the six member firms on the plaintiff's executive committee, a
notice of lawsuit and a request for waiver of service for summons dated November
9, 2001. We did not sign this waiver. On May 9, 2002, we received a copy of the
complaint from CT Corporation, our designated service agent. Our time to file a
motion or an answer to the complaint has been stayed by the Court. Numerous case
management conferences and mediation sessions have taken place since the
commencement of the class action.

     We and our directors are covered by the directors and officers liability
and company reimbursement policy up to a liability amount of Won 30,000 million
with a retention amount of Won 325 million including defense costs.

     On June 30, 2003, we entered into a memorandum of understanding with the
plaintiff, which contains among other things, an agreement to settle the
plaintiff's claim upon the condition that if the judgment sum is less than US$1
billion, the difference between the judgment sum and US$1 billion will be
covered by all the defendants to the claim.

     MOTOROLA LAWSUIT

     On December 3, 2002, General Instrument Corporation d/b/a the Broadband
Communications Sector of Motorola, Inc. filed suit in the United States District
Court for the Eastern District of Pennsylvania against us for breach of a
contract for cable modems. We responded to the complaint with a motion to
dismiss for lack of personal jurisdiction filed on April 1, 2003, which was
denied by the court on June 24, 2003. On April 24, 2003, General Instrument
Corporation filed a claim against us in the Seoul District Court for the
identical modems that were subject of the lawsuit in the United States. On June
30, 2003, we filed a petition pursuant to 11 U.S.C. 304 to


                                       36
<PAGE>

commence a case ancillary to a foreign proceeding, which was supplemented on
September 22, 2003. The petition was assigned to Chief Judge Bruce Fox of the
United States Bankruptcy Court for the Eastern District of Pennsylvania. In the
petition, we asked the U.S. Bankruptcy Court to stay the Motorola action since
we are currently in reorganization proceedings in Korea. On January 9, 2004, the
Seoul District Court approved our reorganization plan which provides for the
payment over time of US$8,221,912 to General Instrument Corporation in
satisfaction of its claim in the Seoul District Court. As a result, on February
6, 2004, General Instrument Corporation and we executed a settlement agreement
and release to resolve all the disputes addressed in General Instrument
Corporation's lawsuit against us in the United States and our petition to the
U.S. Bankruptcy Court. Accordingly, on February 9, 2004, we withdrew our
petition pursuant to 11 U.S.C. 304 to commence a case ancillary to a foreign
proceeding and on February 19, 2004, by consent of General Instrument
Corporation and us, a consent judgment was entered in favor of General
Instrument Corporation and against us in the amount of US$8,679,072.83.

     COMMENCEMENT OF REORGANIZATION PROCEEDINGS

     On March 27, 2003, the Bankruptcy Division of the Seoul District Court
granted our petition for the commencement of reorganization proceedings under
the Corporate Reorganization Act of Korea. See "Item 4 -- Information on the
Company -- History and Development of the Company -- Commencement of
Reorganization Proceedings".

     DELISTING OF OUR SHARES FROM THE NASDAQ NATIONAL MARKET

     On August 7, 2002, we received a Nasdaq staff determination indicating that
we failed to satisfy the $1.00 minimum bid price requirement for continued
listing set forth in Marketplace Rule 4450(a)(5), for the prior 30-day trading
period. Pursuant to Marketplace Rule 4450(e)(2), we were provided 90 calendar
days, or until November 5, 2002, to regain compliance with such requirement.
However, we did not regain compliance within the proscribed time period and, on
November 6, 2002, we received another Nasdaq staff determination letter
indicating that our securities would be delisted. On November 13, 2002, we
requested a hearing pursuant to Marketplace Rule 4820(a) and on November 21,
2002, we made a written submission to the Nasdaq Listing Qualifications Panel
requesting an exception through February 20, 2003, by which time we believed we
would effect a 1-for-3 reverse stock split, and thereafter regain compliance
with the continued listing standard of Nasdaq, including the minimum bid price
requirement. On November 25, 2002, our shareholders approved the proposed
reverse stock split of our common shares in the ratio of 3:1. The reverse stock
split took effect on January 20, 2003, on which date we issued new share
certificates.

       In February 2003, we were notified of the panel's determination to
continue the listing of our securities on the Nasdaq National Market, subject to
us being able to demonstrate compliance with all requirements for continued
listing on the Nasdaq.

       However, on March 5, 2003, we received another Nasdaq staff determination
indicating that as a result of our filing of a petition for a temporary stay
order and a petition for commencement of reorganization proceedings with the
Bankruptcy Division of the Seoul District Court on March 3, 2003, we no longer
meet the requirement of continued listing set forth in Marketplace Rule 4450(f),
and that the panel will consider such filing in rendering its decision regarding
the delisting of our securities from the Nasdaq.

       On March 11, 2003, we made a written submission to the panel, to the
effect that the purpose of the reorganization proceedings is not to liquidate
our operations, but to allow ourselves to overcome our financial difficulties
and resume normal commercial operations and continue serving our customers. See
"Item 4 -- Information on the Company -- History and Development of the Company
-- Commencement of Reorganization Proceedings" for more information on the
reorganization proceeding procedures.

       On April 3, 2003, we received a Nasdaq delisting determination indicating
that the panel has determined to delist our securities from The Nasdaq Stock
Market effective with the open of business on Monday, April 7, 2003.

    LEGAL PROCEEDINGS ARISING FROM DISRUPTION IN THE INTERNET SERVICE CAUSED BY
COMPUTER VIRUSES

      On January 25, 2003, the Slammer Worm originating from countries such as
the United States and Australia infected the MS SQL Server 2000 of the Microsoft
Corporation and disrupted the Internet service between Microsoft and a number of
Internet service providers, including us. As a result, numerous Internet users
experienced outages on their email servers and websites. We are a party to two
legal proceedings in relation to such outages. Such legal proceedings are
currently pending in Seoul Central District Court. We do not expect that an
unfavorable decision in the above legal proceedings will directly affect our
financial condition, as the amount of damages are fairly small and the absence
of class action lawsuits in Korean law will prevent an expansion of litigation.
However, we are not certain whether the outcome of the above legal proceedings
will be in our favor. If we lose, we may face additional legal actions based on
similar grounds by other customers or Internet users, which could adversely
affect our business, financial condition and results of operations.

         There are several other legal proceedings to which we are a party.
However, such pending legal proceedings involve minor claims, none of which is
likely to have a material adverse effect on our business or financial condition.




                                       37
<PAGE>

                                 DIVIDEND POLICY

    We intend to retain any earnings for use in our business. We do not intend
to pay dividends on our shares for the foreseeable future. Dividends, if any, on
the outstanding shares are recommended by the board of directors and must be
approved at our annual general meeting of shareholders. This meeting is
generally held in March each year, and the dividend in respect of the preceding
year is generally paid shortly thereafter. The declaration of dividends is
subject to the discretion of the shareholders, and consequently, no assurance
can be given to the amount of dividends per share or that any such dividends
will be declared. Future cash dividends, if any, will also depend upon our
future operations and earnings, capital requirements and surplus, general
financial condition, contractual restrictions and other factors as may deem
relevant. Loan agreements and contractual arrangements entered into by us may
also restrict distributions of dividends.


B.  SIGNIFICANT CHANGES

                               RECENT DEVELOPMENTS

CAPITAL REDUCTION AND REVERSE STOCK SPLIT

    Following the Seoul District Court's approval of the reorganization plan on
January 9, 2004, we implemented (a) a 100% capital reduction of the common
shares held by our largest shareholders (TriGem Computer Inc. and its
affiliates) without consideration and (b) a reverse stock split of all our
remaining issued and outstanding common shares in the ratio of 40:1. As of April
8, 2004, the total number of our outstanding shares was reduced to 842,994
shares from 77,635,260 shares (representing a 98.9% reduction in the number of
our total issued and outstanding shares).

DEBT TO EQUITY CONVERSION

    On June 1, 2004, valid reorganization claims of Won 34.8 billion held by our
unsecured creditors, including domestic financial institutes such as the Korea
Development Bank and Kookmin Bank, was converted into our shares at Won 5,000
per share according to our reorganization plan. As a result, we issued 6,958,806
new shares. Currently, our largest shareholder is the Korea Development Bank,
holding approximately 25% of our outstanding shares.


                        RECENT ACCOUNTING PRONOUNCEMENTS

    In May of 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
The statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. As a result,
gains and losses from extinguishment of debt will be classified as extraordinary
items only if they are determined to be unusual and infrequently occurring
items. SFAS No. 145 also requires that gains and losses from debt
extinguishments, which were classified as extraordinary items in prior periods,
be reclassified to continuing operations if they do not meet the criteria for
extraordinary items. The provisions of SFAS No. 145 will be effective for our
fiscal year beginning January 30, 2003. The Company will apply the provisions of
this statement for all debt extinguishments going forward, and has reclassified
past restructuring gains to other income.

    In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 requires that a liability for
costs associated with exit or disposal activities be recognized when the
liability is incurred. Existing generally accepted accounting principles provide
for the recognition of such costs at the date of management's commitment to an
exit plan. In addition, SFAS No. 146 requires that the liability be measured at
fair value and be adjusted for changes in estimated cash flows. The provisions
of SFAS No. 146 are effective for exit or disposal activities initiated after
December 31, 2002.

    On January 1, 2003, the Company adopted SFAS No. 146 Accounting for Costs
Associated with Exit or Disposal Activities. This statement nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). This statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred rather than the date of an entity's commitment to
an exit plan. The adoption of SFAS No. 146 did not have a significant impact on
its consolidated financial position or results of operations.

                                       38
<PAGE>


   In November 2002, the FASB issued Interpretation No. 45 ("FIN 45")
Guarantor's Accounting and is closure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of others. FIN 45 elaborates on the
disclosures to be made by a guarantor about its obligations under certain
guarantees issued. It also clarifies that a guarantor is required to recognize,
at the inception of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial recognition and
measurement provisions of FIN 45 apply on a prospective basis to guarantees
issued or modified after December 31, 2002. The disclosures are effective for
the Company's annual financial statements for the year ended December 31, 2002.
The adoption of this Interpretation did not have a significant impact on the
Company's consolidation financial position or results of operations.

   On January 17, 2003, the FIN 46 Consolidation of Variable Interest Entities,
which addresses consolidation by business enterprises where equity investors do
not bear the residual economic risks and rewards. These entities have been
commonly referred to as "Special purpose entities ("SPEs")." The underlying
principle behind the new Interpretation is that if a business enterprise has the
majority financial interest in an entity, which is defined in the guidance as a
variable interest entity, the assets, liabilities and results of the activities
of the variable interest entity should be included in the consolidated financial
statements with those of the business enterprise. The Interpretation also
explains how to identify variable interest entities and how an enterprise should
assess its interest in an entity when deciding whether or not it will
consolidate that entity.

   In December 2003, the FASB released a revision of FIN No. 46 ("FIN No. 46R")
in which the calculation of expected losses and expected residual returns have
been altered to reduce the impact of decision maker and guarantor fees. In
addition, FIN No. 46R changed the definition of a variable interest. The Company
as a foreign private issuer is required to apply either FIN 46 or FIN 46R to
variable interest entities ("VIEs") created after January 31, 2003. The Company
is also required to apply FIN 46R to the VIEs which existed prior to February 1,
2003 in 2004. Certain special purpose companies (SPC) established by the
Company, have been consolidated from the date of their establishment. There is
an entity created before February 1, 2003, other than the aforementioned
consolidated SPCs, for which is reasonably possible that the Company will be
deemed a primary beneficiary upon the application of FIN 46R to the entity in
2004. It is a joint venture established to operate wireless telecommunication
services in a country outside of Korea. With respect to the Company's
involvement in the entity, the Company's maximum exposure to loss was
approximately (pound)U26.6 billion as of December 31, 2003. The Company has not
completed the evaluation of the effect of the application of FIN No. 46R in
2004.



                                       39
<PAGE>


                         ITEM 9 -- THE OFFER AND LISTING


A.  OFFER AND LISTING DETAILS

    From November 17, 1999 until April 4, 2003, our common shares were quoted on
the Nasdaq National Market under the symbol "KOREA". Prior to that time, there
was no public market for our common shares. On April 7, 2003, our shares were
delisted from the Nasdaq National Market and began trading on the other --
over-the-counter market, or otherwise known as the "Grey Market" in the U.S.
under the symbol "KOREQ" effective as of April 7, 2003. Since then, the reported
last sale price has remained at US$0.001. The following table sets forth, for
each of the periods indicated, the high and low sales prices per share of our
common shares as reported on the Nasdaq National Market.

             <TABLE>
             <CAPTION>
                                                                        HIGH             LOW
                                                                        ----             ---
             ANNUAL HIGHS AND LOWS
            <S>                                                       <C>             <C>
               1999 (since November 17) ........................       $  84.00        $  31.75
               2000 ............................................          72.63            2.09
               2001 ............................................           6.00            0.62
               2002 ............................................           1.85            0.13

             QUARTERLY HIGHS AND LOWS
             2001
                First Quarter ..................................         $ 2.50          $ 2.25
                Second Quarter .................................           3.94            1.94
                Third Quarter ..................................           2.60            1.01
                Fourth Quarter .................................           2.15            0.62
             2002
                First Quarter ..................................           1.85            0.80
                Second Quarter .................................           1.27            0.69
                Third Quarter ..................................           0.99            0.38
                Fourth Quarter .................................           0.91            0.13
             2003
                First Quarter ..................................           1.37            0.23
                Second Quarter (through April 4)................           0.34            0.15

             MONTHLY HIGHS AND LOWS
             2002
                October.........................................           0.55            0.21
                November........................................           0.91            0.13
                December........................................           0.68            0.40
             2003
                January ........................................           1.34            0.45
                February........................................           1.37            0.75
                March ..........................................           0.72            0.23
             </TABLE>


    On April 4, 2003, the reported last sale price of our common shares on the
Nasdaq National Market was $0.15 per share. As of April 4, 2003, there were
approximately 10,000 shareholders of record.

B.  PLAN OF DISTRIBUTION

    Not applicable.

C.  MARKETS

    Our common shares were quoted on the Nasdaq National Market until April 4,
2003. See "Item 8 -- Financial Information -- Consolidated Statements and Other
Financial Information -- Legal Proceedings -- Delisting of Our Shares from The
Nasdaq National Market".

D.  SELLING SHAREHOLDERS



                                       40
<PAGE>


    Not applicable.


E.  DILUTION

    Not applicable.


F.  EXPENSES OF THE ISSUE

    Not applicable.




                                       41
<PAGE>




                        ITEM 10 -- ADDITIONAL INFORMATION

A.  SHARE CAPITAL

    Not applicable.


B.  ARTICLES OF INCORPORATION

    The following is a summary of certain provisions in our Articles of
Incorporation. However, during our reorganization proceedings, to the extent
that any provision of our Articles of Incorporation conflicts with any provision
of the Corporation Reorganization Act of Korea, the latter shall supersede the
former, and we must comply with the provisions of the Corporation Reorganization
Act of Korea. Among other things, general meetings of shareholders will not be
held and voting rights of shareholders will be restricted. If an amendment to
our Articles of Incorporation is necessary, our receiver should obtain court
approval. See "Item 4 -- Information on the Company -- History and Development
of the Company -- Commencement of Reorganization Proceedings".

OBJECTIVES

    Our objective is to engage in those businesses as stated in Article 2 of our
Articles of Incorporation, which include the following:

    o   lease of telecommunication lines facilities;
    o   wired and/or wireless telecommunication business;
    o   value added network business such as collection, processing, provision,
        exchange and transmission of information and multimedia service;
    o   cable broadcasting transmission network and distribution network
        businesses and telecommunications business based on cable broadcasting
        transmission networks; and
    o   installation, operation and maintenance of facilities for the purpose of
        the businesses mentioned in each item above.

GENERAL

    As of the date hereof, our authorized share capital is 400,000,000 shares,
which consists of our Class A common shares and non-voting Class B preferred
shares. Under our Articles of Incorporation, we are authorized to issue up to
40,000,000 Class B preferred shares.

    As of the date hereof, 7,801,800 shares were issued and outstanding. No
Class B preferred shares are currently outstanding. All of our issued and
outstanding shares have a par value of Won 2,500 per share, are fully paid and
non-assessable, and are in registered form. Our authorized but unissued share
capital consists of 399,157,006 shares. We may issue additional shares without
further shareholder approval as provided in our Articles of Incorporation.

    Share certificates are issued in denominations of 1, 5, 10, 50, 100, 500,
1,000 and 10,000 shares. U.S. investors will hold their shares in book-entry
form through The Depository Trust Company.

    Pursuant to our Articles of Incorporation and the Telecommunications
Business Law, both our Class A common shares and our non-voting Class B
preferred shares are required to be issued in registered form.

DIVIDENDS

    Dividends are distributed to shareholders in proportion to the number of
shares of capital stock owned by each shareholder following approval by the
shareholders at a general meeting of shareholders. Under the Commercial Code and
our Articles of Incorporation, we will pay, to the extent declared, full annual
dividends on newly issued shares.

    The dividends on each Class B preferred share will be an amount not less
than 1% of the par value as determined by the board of directors at the time of
its issuance. If the dividends on our Class A common shares exceed those on the
Class B preferred shares, the Class B preferred shares shall also participate in
the distribution of such excess dividend amount in the same proportion as our
Class A common shares. If we in any fiscal year do not pay any dividend as
provided in our Articles of Incorporation, the holders of Class B preferred
shares will be entitled to receive such accumulated unpaid dividend in priority
to the holders of our Class A common shares from the dividends payable in
respect of the next fiscal year. The board of directors


                                       42
<PAGE>

shall also determine, at the time of the issuance, the effective period of the
Class B preferred shares. On the expiration of the effective period, the Class B
preferred shares will be converted into Class A common shares. If we in any
fiscal year do not pay any dividend as provided in our Articles of
Incorporation, the effective period of such Class B preferred shares will be
extended until full payment of dividends is made. However, no Class B preferred
shares have been issued to date.

    If a resolution not to pay dividends on Class B preferred shares is adopted,
voting rights will be granted to Class B preferred shares from the following
general meeting of shareholders until the end of the general meeting of
shareholders at which a resolution to pay dividends on Class B preferred shares
is adopted.

    When we issue new shares for the holders of Class B preferred shares, the
new shares issued will be: (i) Class A common share in the case of a rights
offering; and (ii) the same Class B preferred shares in the case of a bonus
issue.

    We may declare our dividend annually at the annual general meeting of
shareholders which is held within three months after the end of the fiscal year.
Within one month after the annual general meeting, the annual dividend is paid
to the shareholders registered in the shareholder's registry and registered
pledgees as of the end of the preceding fiscal year. Annual dividends may be
distributed either in cash or in shares provided that shares must be distributed
at par value and dividends in shares may not exceed one-half of the annual
dividend. If a dividend is paid in shares, either our Class A common shares or
Class B preferred shares may be distributed to the holders of our Class A common
shares or Class B preferred shares by a resolution of the general meeting of
shareholders.

    Under the Commercial Code and our Articles of Incorporation, we do not have
an obligation to pay any annual dividend unclaimed for five years from the
payment date.

    The Commercial Code provides that a company shall not pay an annual dividend
unless it has set aside in its legal reserve an amount equal to at least
one-tenth of the cash portion of such annual dividend or has a legal reserve of
not less than one-half of its stated capital. The Commercial Code also provides
that a company may pay an annual dividend out of the excess of its net assets
over the sum of (a) its stated capital, (b) the aggregate amount of its capital
surplus reserve and legal reserve which have been accumulated up to the end of
the relevant dividend period and (c) the legal reserve to be set aside in
respect of such annual dividend. Such reserves are not available for payment of
cash dividends but may be transferred to capital stock or used to reduce an
accumulated deficit through a shareholders action.

DISTRIBUTION OF FREE SHARES

    In addition to dividends in the form of shares to be paid out of retained or
current earnings, the Commercial Code permits a company to distribute to its
shareholders an amount transferred from the capital surplus or legal reserve to
stated capital in the form of free shares. Such distribution must be made pro
rata.

PREEMPTIVE RIGHTS AND ISSUANCE OF ADDITIONAL SHARES

    The authorized but unissued shares may be issued at such times and, unless
otherwise provided in the Commercial Code, upon such terms as the board of
directors of a company may determine. The new shares must be offered on uniform
terms to all shareholders who have preemptive rights and who are listed on the
shareholders' register as of the record date. Our shareholders are primarily
entitled to subscribe for any newly issued shares in proportion to their
existing shareholdings.

    However, new shares may be issued to persons other than the existing
shareholders by a resolution of the board of directors, provided that the new
shares are:

    o  issued by public offering by filing a registration statement with the
       Financial Supervisory Commission of Korea in accordance with the
       Securities Act of Korea;

    o  issued to our employee stock ownership association up to 20% of the newly
       issued shares (to the extent the total number of shares so subscribed and
       held by the members of the employee stock ownership association does not
       exceed 20% of the total number of shares);

    o  issued according to our Stock Option Plan;

    o  represented by depositary receipts;

    o  issued to foreign corporations or foreigners under the Foreign Investment
       Promotion Law or other relevant laws and regulations in accordance with
       the relevant laws and


                                       43
<PAGE>

       regulations including, but not limited to, the Telecommunication
       Business Law; or

    o  issued to a domestic corporation having a strategic relationship with us
       in connection with our management or technology.

    Under the Commercial Code, a company may vary, without shareholder approval,
the terms of such preemptive rights for different classes of shares. Public
notice of the preemptive rights to new shares and the transferability thereof
must be given not less than two weeks (excluding the period during which the
shareholders' register is closed) prior to the record date. We will notify the
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 on or before such deadline, such shareholder's
preemptive rights will lapse. The board of directors may determine how to
distribute fractional shares and shares in respect of which preemptive rights
have not been exercised.

GENERAL MEETING OF SHAREHOLDERS

    Under the Commercial Code, the ordinary general meeting of shareholders is
held within three months after the end of each fiscal year and, subject to board
resolution or court approval, an extraordinary general meeting of shareholders
may be held as necessary or at the request of holders of an aggregate of 3% or
more of the outstanding shares of a company or at the request of the company's
statutory auditor. Under the Commercial Code, written notices setting forth the
date, place and agenda of the meeting must be given to shareholders at least two
weeks prior to the date of the general meeting of shareholders. 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 such meeting.
Such notices to U.S. shareholders will be forwarded to The Bank of New York in
accordance with an agreement to be entered by and between Thrunet and The Bank
of New York as the U.S. transfer agent. The agenda of the general meeting of
shareholders is determined at the meeting of the board of directors. In
addition, shareholders holding an aggregate of 3% or more of the outstanding
shares may propose an agenda for the general meeting of shareholders. Such
proposal should be made in writing at least six weeks prior to the meeting. The
board of directors may decline such proposal if it is in violation of the
relevant laws and regulations or our Articles of Incorporation.

    The general meeting of shareholders is held at our headquarters in Seoul,
or, if necessary, may be held anywhere in the vicinity of our headquarters.

VOTING RIGHTS

    Holders of our shares are entitled to one vote for each share, except that
voting rights with respect to shares held by us and shares held by a corporate
shareholder, more than one-tenth of whose outstanding capital stock is directly
or indirectly owned by us, may not be exercised. Cumulative voting is precluded
in our Articles of Incorporation.

    The Commercial Code also provides that in order to amend our Articles of
Incorporation (which is required for any change to our authorized share capital)
and for certain other instances, including removal of any of our directors and
statutory auditor, dissolution, merger or consolidation, transfer of the whole
or a significant part of our business, acquisition of all of the business of any
other company or issuance of new shares at a price lower than their par value,
an approval from holders of at least two-thirds of those shares present or
represented at such meeting is required, provided that, such super-majority also
represents at least one-third of the total issued and outstanding shares.

    A shareholder may exercise his voting rights by proxy given to any person.
The proxy must present a document evidencing the power of attorney prior to the
start of the general meeting of shareholders.

    It is expected that The Depository Trust Company will issue an omnibus proxy
to The Bank of New York, which will cast the votes through The Bank of New
York's duly authorized agent qualified under the Korean law to provide such
services, in accordance with the instructions from the beneficial owners whose
instructions it obtained.



                                       44
<PAGE>

LIMITATION ON SHAREHOLDINGS

    The Telecommunications Business Law permits maximum aggregate foreign
shareholdings in Thrunet of 49%. Foreign shareholding includes shareholding by
Korean companies in which foreigners hold 80% or more of voting shares or a
foreigner is the largest shareholder and foreigners in the aggregate hold 15% or
more of voting shares. A foreigner who has acquired our shares in excess of such
ceiling described above may not exercise its voting rights with respect to our
shares exceeding such limit, and the Ministry of Information and Communication
may take corrective action pursuant to the Telecommunications Business Law.

    Holdings of our shares are subject to additional restrictions as set forth
in "Korean Foreign Exchange Controls and Securities Regulations."

REGISTRATION OF SHAREHOLDERS AND RECORD DATES

    The Korea Securities Depository is our transfer agent. The Korea Securities
Depository maintains our register of shareholders and registers transfers of our
shares on the register of shareholders upon presentation of the share
certificates.

    The Bank of New York will be the U.S. transfer agent. The Bank of New York
will maintain the register of U.S. shareholders and register transfers of
registered shares traded in the U.S. in accordance with the Fast Automated
Securities Transfer, or FAST, arrangement with The Depository Trust Company,
which provides clearance and settlement in connection with transfers in the U.S.
The registered owner of the shares offered in the U.S. will be Cede & Co., a
nominee of The Depository Trust Company.

    For the purpose of determining the holders of our shares entitled to annual
dividends, the register of shareholders is closed for a period commencing on
January 1 and ending on January 31 of each fiscal year. The record date for
annual dividends is December 31. Further, the Commercial Code and our Articles
of Incorporation permit us upon at least two weeks' public notice to set a
record date and/or close the register of shareholders for not more than three
months for the purpose of determining the shareholders entitled to certain
rights pertaining to our shares. The trading of our shares and the delivery of
certificates in respect thereof may continue while the register of shareholders
is closed.

ANNUAL AND PERIODIC REPORTS

    At least one week prior to the annual general meeting of shareholders, our
annual report and audited non-consolidated financial statements must be made
available for inspection at our principal office and at all branch offices.
Copies of annual reports, the audited non-consolidated financial statements
prepared in accordance with Korean generally accepted accounting principles and
any resolutions adopted at the general meeting of shareholders will be available
to our shareholders. In addition, we will dispatch the copies of our financial
statements prepared in accordance with Korean generally accepted accounting
principles and business report to our shareholders at least two weeks prior to
the date of the annual general meeting of shareholders, and we will make
available the copies of our semi-annual reports submitted to the SEC to our
shareholders within two weeks from the submission of such report to the SEC.

TRANSFER OF SHARES

    Under the Commercial Code, the transfer of shares is effected by delivery of
share certificates but, in order to assert shareholder's rights against Thrunet,
the transferee must have his name and address registered on the register of
shareholders. For this purpose, shareholders are required to file their name,
address and seal or specimen signature with us. Under the regulations of the
Financial Supervisory Commission of Korea, non-resident shareholders may appoint
a standing proxy and may not allow any person other than such standing proxy to
exercise rights regarding the acquired shares or perform any task related
thereto on his behalf, subject to certain exceptions. Under current Korean
regulations, securities companies and banks in Korea (including licensed
branches of non-Korean securities companies and banks), investment management
companies in Korea, futures trading companies in Korea, internationally
recognized foreign custodians and the Korea Securities Depository are authorized
to act as agents and provide related services. Certain foreign exchange controls
and securities regulations apply to the transfer of our shares by non-residents
or non-Korean persons.

ACQUISITION BY THE COMPANY OF SHARES

    We generally may not acquire our own shares except in certain limited
circumstances, including, without limitation, a reduction in capital. Under the
Commercial Code, except in case of a reduction in capital, any of our own shares
acquired by us must be sold or otherwise transferred to a third party within a
reasonable time.



                                       45
<PAGE>

LIQUIDATION RIGHTS

    In the event of a liquidation of Thrunet, the assets remaining after payment
of all debts, liquidation expenses and taxes will be distributed among
shareholders in proportion to the number of our shares held.

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.

  EFFECT OF KOREAN LAWS

    For a description of the effect of relevant Korean laws applicable to
Thrunet, see "Item 4 -- Information on the Company -- Business Overview --
Korean Telecommunication Laws and Regulations", "Item 10 -- Additional
Information -- Exchange Controls" and "Item 10 -- Additional Information --
Taxation -- Korean Taxation".


C.   MATERIAL CONTRACTS

    ACCOUNTS RECEIVABLE TRANSFER AGREEMENT AND TEMPORARY LOAN AGREEMENT BETWEEN
THRUNET AND MULTIPLUS LTD.

    On June 29, 2001, we entered into an Accounts Receivable Transfer Agreement,
pursuant to which we agreed to assign to Multiplus Ltd., a special purpose
vehicle established in Korea by a group of financial institutions led by Kookmin
Bank, future credit card receivables in the aggregate amount of Won 210,000.0
million for a transfer price of Won 173,805.6 million. The assigned receivables
will originate from broadband Internet service fees paid by our subscribers by
using credit cards issued by Kookmin Credit Card Co., Ltd. (up to Won 66,394.0
million), Samsung Card Co., Ltd. (up to Won 49,654.1 million) and LG Capital
Services Corp. (up to Won 93,952.0 million) for the four-year period commencing
on June 29, 2001. Multiplus obtained a loan from Kookmin Bank and other
financial institutions to pay for a part of the transfer price. In connection
with this transaction, we entered into an agreement with Multiplus on June 29,
2001, pursuant to which we agreed to provide Multiplus a temporary loan of up to
Won 10,000.0 million for a period of three years and six months from the date of
the agreement if Multiplus has shortage of funds to repay such loan.

    TRUST DEED BETWEEN THRUNET AND KOOKMIN BANK

    On December 12, 2001, we entered into a Trust Deed with Koomin Bank, to
establish a trust with assets comprising of our future trade receivables in the
aggregate amount of Won 245,912.0 million, originating from enterprise network
service fees paid by our subscribers for the period commencing on December 21,
2001 until December 20, 2005. Kookmin Bank issued to us beneficiary certificates
with a face value of Won 120,000.0 million, evidencing the right to receive such
amount out of the trust assets in 36 monthly installments in accordance with a
schedule attached to the Trust Deed. The term of the trust is four years from
January 1, 2002.

    BENEFICIARY CERTIFICATES ASSIGNMENT AGREEMENT BETWEEN THRUNET AND ENS
SECURITIZATION LIMITED

    On December 12, 2001, we entered into an agreement with ENS Securitization
Limited to assign to it the beneficiary certificates issued to us by Kookmin
Bank as described above, in consideration for a cash payment of Won 101,000.0
million by ENS Securitization to us, subject to certain conditions including
that ENS Securitization completes an issuance of bonds to procure the assignment
price.

    AGREEMENT ON PROVISION AND USE OF FACILITIES BETWEEN THRUNET AND SK TELECOM

    On July 21, 2001, we entered into an agreement with SK Telecom, pursuant to
which agreed to cooperate with SK Telecom in connection with its construction of
a regional center station network and a base station transmission network by
leasing to SK Telecom certain telecommunication facilities and dark fiber for a
minimum period of four years. If we provide telecommunication facilities in the
area where SK Telecom in the future constructs a regional center station
network, the minimum period for the use of such facilities shall be three years.
A condition precedent to our obligation to provide such facilities is for SK
Telecom to lease from us at least 70% of the facilities required to construct
the networks. The fees for the use of such facilities shall be calculated in
accordance with a schedule separately provided to us.



                                       46
<PAGE>

    SUBSCRIBERS AND ASSETS TRANSFER AGREEMENT BETWEEN THRUNET AND SK TELECOM

    On August 31, 2001, we entered into an agreement with SK Telecom, pursuant
to which SK Telecom agreed to transfer its broadband Internet business-related
assets (including various equipment, subscribers and contracts) to us for a
total purchase price (which was subsequently determined by the parties) of Won
7,148,532,676 (exclusive of value added tax), payable in cash in twelve equal
monthly installments commencing from October 30, 2001.

    AGREEMENT ON PROVISION AND USE OF TELECOMMUNICATION FACILITIES BETWEEN
THRUNET AND DACOM

    On June 18, 2001, we entered into an agreement with Dacom, pursuant to which
we or Dacom may request the other party to provide certain telecommunication
facilities within the scope of, and in accordance with, the Telecommunication
Business Act and the standards and procedures set by the Ministry of Information
and Communication in respect of the terms of use and method of calculation of
the usage fee.

    EQUIPMENT LEASE AGREEMENT BETWEEN THRUNET AND LG CARD CO., LTD.

    On April 3, 2002, 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 40,000 million. The term
of the lease is 48 months. Interest is calculated by using the three-year
corporate bond rate published by the Korea Securities Dealers Association plus
2.69%. As of March 6, 2003, LG Card has leased to us machinery and equipment
worth approximately Won 7,936 million. In March 2003, we received from LG Card a
notice of termination of the agreement.

    ASSET SALE AGREEMENT BETWEEN THRUNET AND SK GLOBAL

    On July 5, 2002, we entered into an agreement with SK Global pursuant to
which we agreed to sell to SK Global the following assets related to our
enterprise network services business for a total purchase of Won 346.9 billion:
fiber optic cable, fiber optic backbone, metropolitan and local loops and
related facilities; various agreements under which Thrunet leases such
facilities for its operation of the enterprise networks services business (such
as agreements with KEPCO and Cisco); patents, trade marks, copyrights;
information relating to the license to operate leased line services; manuals,
computer software or any other documents or information relating to the
operation of the assets. Closing occurred on October 28, 2002.

    In connection with this transaction, TriGem and Naray (our major
shareholders) and we entered into a non-competition agreement with SK Global in
October 2002, pursuant to which our major shareholders and we agreed not to
conduct any domestic leased line or similar business nor acquire more than 5%
interest in an entity operating such a business for a period of five years from
October 2002.

    ASSET SALE AGREEMENT BETWEEN THRUNET AND POWERCOMM

    On July 31, 2002, we entered into an asset sale agreement with Powercomm
pursuant to which we agreed to sell to Powercomm our HFC network system and
related facilities, including an aggregate of 154 electric poles, 64,101 meters
of ducts and 5,443,554 meters of coaxial cables, in certain services areas of
Seoul, Pusan, Incheon, Ulsan, Taejeon and Kyonggi-do, for a total purchase price
of Won 45.0 billion (or Won 49.5 billion including value added tax). Closing
occurred on August 6, 2002.

    AGREEMENT ON PROVISION OF TRANSFERRED FACILITIES FOLLOWING ASSET TRANSFER
AGREEMENT BETWEEN THRUNET AND POWERCOMM

    On July 31, 2002, we entered into an agreement with Powercomm pursuant to
which Powercomm agreed to lease back to us the assets we sold to Powercomm under
the Asset Sale Agreement (described above), for use in the operation our
broadband Internet business. The usage fees vary depending on the number of
subscribers in the service area and our broadband Internet services revenue. The
initial term of this agreement is three years, and is automatically renewable
for another three years unless a party gives notice of intention to terminate
the agreement at least three months prior to expiration of the term.

    SALE AND PURCHASE AGREEMENT BETWEEN KOREA REAL ESTATE INVESTMENT CO., LTD.
AND CKR ABS SPECIALTY L.L.C.

    In August 2002, Korea Real Estate Investment Co., Ltd. (the "Trustee"), as
trustee for Thrunet with title to our land and building (including certain
fixtures) located at 1337-20 Seocho-dong, Seocho-gu, Seoul (the "Properties"),
entered into a sale and purchase agreement with CKR ABS Specialty L.L.C. (the
"Purchaser"), pursuant to which the Trustee agreed to sell the Properties to the
Purchaser for a total purchase price of Won 38,000 million (exclusive of value
added tax). Closing under this agreement occurred on August 16, 2002.



                                       47
<PAGE>

    AMENDED AND RESTATED LEASE AGREEMENT BETWEEN CKR ABS SPECIALTY L.L.C. AND
KOREA THRUNET CO., LTD.

    On June 21, 2003, we entered into an amended and restated lease agreement
with CKR ABS Specialty L.L.C. (the "Lessor"), further to our original agreement
on August 16, 2002. Under the amended and restated lease agreement, the Lessor
agreed to lease to us three floors of the building located at 1337-20
Seocho-dong, Seocho-gu, Seoul, for us to use as executive offices. The term of
the lease is two years from June 1, 2003 until May 31, 2005. We paid a key money
deposit in the amount of Won 1,111,574,300, which is refundable to us upon
expiration of the lease agreement or termination in accordance with the terms of
the agreement. The agreement provides for a monthly rent of Won 62,621,350 and
monthly maintenance fee of Won 27,325,680.


 D. EXCHANGE CONTROLS

GENERAL

    The Foreign Exchange Transaction Law of Korea and the Presidential Decree
and regulations established thereunder (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
Ministry of Finance and Economy. The Financial Supervisory Commission also has
adopted, pursuant to the delegated authority under the Securities and Exchange
Law of Korea, regulations that restrict investment by foreigners in Korean
securities and regulate issuance of securities outside Korea by Korean
companies.

    Under the Foreign Exchange Transaction Laws, if the Government believes that
serious difficulties exist or are expected in relation to the balance of
payments, or the movement of capital between Korea and other countries poses
serious obstacles in carrying out its currency, exchange rate or other
macroeconomic policies, it may implement measures to require any person who
performs capital transactions to deposit a part of the proceeds of such
transaction with certain Government agencies or financial institutions.

GOVERNMENT REPORTING REQUIREMENTS

    In order for us to issue our shares outside of Korea, we are required to
file a prior report of such issuance with the Ministry of Finance and Economy.
No further approval from the Government is necessary for the issuance of our
shares.

    Furthermore, prior to making an investment of 10% or more of the outstanding
shares of a Korean company, foreign investors are generally required under the
Foreign Investment Promotion Law to submit a report to the Korea
Trust-Investment Promotion Agency or a Korean foreign exchange bank pursuant to
a delegation by the Ministry of Commerce, Industry and Energy. Subsequent sale
by such investor of the shares will also require a prior report to such bank.

CERTIFICATES OF THE SHARES MUST BE KEPT IN CUSTODY WITH AN ELIGIBLE CUSTODIAN

    Under Korean law, certificates evidencing shares of Korean companies must be
kept in custody with an eligible custodian, which certificates are in turn
required to be deposited with the Korea Securities Depository. However, the
securities listed on a foreign stock exchange are exempted from this
requirement. Accordingly, certificates representing the shares of Thrunet to be
offered will be deposited in the U.S. facilities of The Bank of New York,
pursuant to the FAST arrangement with The Depository Trust Company.

    A foreign investor may appoint one or more standing proxies from among the
Korea Securities Depository, foreign exchange banks (including domestic branches
of foreign banks), securities companies (including domestic branches of foreign
securities companies), investment management companies, futures trading
companies and internationally recognized foreign custodians which have obtained
a license to act as a standing proxy to exercise shareholders' rights or perform
any matters related thereto if the foreign investor does not perform these
activities himself. The Bank of New York, through its duly authorized agent
qualified under the Korean law to provide such services, will be authorized to
vote in accordance with the instructions from the U.S. investors pursuant to the
omnibus proxy given by The Depository Trust Company. However, a foreign investor
may be exempted from complying with these standing proxy rules with the approval
of the Governor of the Financial Supervisory Service in case deemed inevitable
by reason of conflict between laws of Korea and the home country of such foreign
investor.



                                       48
<PAGE>

DIVIDEND TO BE DECLARED IN WON

    We do not intend to pay dividends on our shares for the foreseeable future.
However, if we declare cash dividends, such dividends will be declared in Won.
In order for us to pay such dividends outside Korea, such dividends will be
converted into Dollars and remitted to the shareholders, subject to certain
conditions. We will convert dividend amounts in foreign currency and remit them
to shareholders abroad. No governmental approval is required for foreign
investors to receive dividends. However, in order for us to convert the Won
amount in foreign currency and to remit such amount abroad, relevant documents
must be submitted to the foreign exchange bank to verify (i) that the amount
being paid conforms to the amount required to be paid and (ii) whether all
necessary legal procedures have been completed.


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.

Taxation of Dividends

    For the purposes of Korean taxation of distributions of profits either in
cash or shares made on our shares, a non-resident holder will be treated as the
owner of our shares. Dividends paid (whether in cash or in shares) to a
non-resident holder are generally subject to withholding tax at a rate of 27.5%
(including local surtax) or such lower rate as is applicable under a treaty
between Korea and such non-resident holder's country of tax residence. Such tax
is required to be deducted from such dividends and only the net amount is paid
to the non-resident holder of our shares.

    Under the U.S.-Korea tax treaty, the maximum rate of withholding on
dividends paid to United States residents eligible for treaty benefits and
beneficial owners of such dividend generally is 15% (10% if the recipient of the
dividends is a U.S. corporation and owned at least 10% of the outstanding shares
of voting stock of the relevant Korean company during any part of its taxable
year which precedes the date of payment of the dividend and during the whole of
its prior taxable year (if any) and certain other conditions are satisfied)
which does not include withholding of local tax. In addition, a local surtax
will be included in the withholding, therefore the maximum rate of withholding
is generally 16.5%.

    Distribution of free shares representing a transfer of certain capital
surplus or certain asset revaluation reserves into paid-in capital may be
treated as dividends subject to Korean tax. However, stock split, if any, will
not be treated as dividends.

Taxation of Capital Gains

    A non-resident holder will be subject to Korean taxation on capital gains
realized on a sale of our shares unless the non-resident holder is eligible for
the benefits of an applicable tax treaty exempting such capital tax. In
addition, the capital gains realized from the transfer of shares listed on
certain foreign stock exchanges (including the Nasdaq National Market), insofar
as the transfer is completed through such stock exchange, are exempted from
Korean income taxation by virtue of the Tax Exemption and Limitation Law.

    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 our shares, with certain exceptions.

    In the absence of any applicable treaty or the exemption under the Tax
Exemption and Limitation Law, a non-resident holder will generally be subject to
Korean taxation on capital gains realized on a sale of our shares at the rate of
the lesser of (subject to production of satisfactory evidence of the acquisition
costs and the transaction costs) 27.5% of the net capital gains or 11% of the
gross realization proceeds. See "-- Withholding of Taxes."



                                       49
<PAGE>

Application of the U.S.-Korea Tax Treaty

    Under the U.S.-Korea tax treaty, a resident of the United States means (i) a
United States corporation and, (ii) any other person (except a corporation or
any entity treated under United States law as a corporation) resident in the
United States for purposes of its tax, but in the case of a person acting as
partner or fiduciary only to the extent that the income derived by such person
is subject to United States tax as the income of a resident.

    Further, the reduced Korean withholding tax rate on dividends and capital
gains under the U.S.-Korea Tax Treaty would not be available if (a) the U.S.
resident holders are certain investment or holding companies or (b) the
dividends or capital gains derived by residents of the United States from our
shares are effectively connected with the United States residents' permanent
establishment in Korea or, in the case of capital gains derived by an
individual, (i) such United States resident maintains a fixed base in Korea for
a period aggregating 183 days or more during the taxable year and our shares are
effectively connected with such fixed base or (ii) such United States resident
is present in Korea for 183 days or more during the taxable year.

Securities Transaction Tax

    Under the Securities Transaction Tax Law of Korea, securities transaction
tax to be imposed at the rate of 0.5% (this rate may be reduced to 0.3%,
including other surtax, if traded through the Korea Stock Exchange or KOSDAQ)
will not be imposed on the shares listed on a foreign stock exchange (including
the Nasdaq National Market).

Inheritance Tax and Gift Tax

    Under Korean inheritance and gift tax laws, shares issued by Korean
corporations are deemed located in Korea irrespective of where they are
physically located or by whom they are owned. Therefore, Korean inheritance tax
and gift tax are imposed with respect to our shares. The taxes are imposed
currently at the rate of 10% to 50%, if the value of the relevant property is
above a certain limit and vary according to the identity of the parties
involved. At present, Korea has not entered into any tax treaty with respect to
inheritance or gift tax.

Withholding of Taxes

    Under Korean tax law, holders of our shares in the United States will
generally be subject to Korean withholding taxes on the capital gains and
dividend payments by us in respect of those shares, unless exempted by a
relevant tax treaty or the Tax Exemption and Limitation Law. In order to obtain
the benefit of a tax exemption available under applicable tax treaties on or
after July 1, 2002, holders of our shares must submit to us, the purchaser or
the securities company an application for exemption prior to the time of first
payment of the sale proceeds, together with a certificate of the tax residence
issued by a competent authority of the residence country. However, this
requirement will not apply to exemptions under Korean tax law. Under the Special
Tax Treatment Control Law of Korea (the "STTCL"), capital gains arising from the
transfer of the shares listed on a foreign stock exchange such as the Nasdaq
National Market will be exempt from Korean taxation if such transfer is made
through such stock exchange. Accordingly, if our shares are traded on the Nasdaq
National Market, the seller will not be required to submit an application for
exemption. Failure to withhold Korean taxes may result in the imposition of the
withholding tax itself and 10% penalty tax, and, if prosecuted, a criminal
penalty of an imprisonment up to one year and/or a fine up to the tax amount, on
the relevant withholding agent. We, as payer of dividends, will act as
withholding agent for the collection of Korean tax on such dividend payment. The
capital gains realized from the transfer of shares listed and traded on the
Nasdaq National Market are exempt from Korean income taxation by virtue of the
Tax Exemption and Limitation Law.

    Korean tax law provides that, in case of transfer of Korean shares, the
Korean securities broker broking such transfer, or if there is no such
securities broker, the purchaser is required to withhold the relevant Korean
capital gains taxes.

UNITED STATES FEDERAL INCOME TAXATION

    The following is a general discussion of the material United States federal
income tax consequences of purchasing, owning, and disposing of our shares if
you are a U.S. Holder (as defined below) and hold our shares as capital assets
for United States federal income tax purposes. This discussion does not address
all of the tax consequences relating to the purchase, ownership, and disposition
of our shares, and does not take into account U.S. Holders subject to special
rules including:

o   dealers in securities or currencies;

o   financial institutions;



                                       50
<PAGE>

o   tax-exempt entities;

o   banks;

o   life insurance companies;

o   traders in securities that elect to mark-to-market their securities;

o   persons that hold our shares as a part of a straddle or a hedging or
    conversion transaction;

o   persons liable for the alternative minimum tax;

o   persons that actually or constructively own 10% or more of our voting stock;
    or

o   persons whose "functional currency" is not the U.S. dollar.

    This discussion is based on the Internal Revenue Code of 1986, as amended,
its legislative history, final, temporary, and proposed Treasury regulations,
published rulings and court decisions, all as currently in effect. These laws
are subject to change, possibly on a retroactive basis.

    You are a "U.S. Holder" if you are:

o   a citizen or resident of the United States;

o   a corporation, including any entity treated as a corporation for United
    States federal income tax purposes, created or organized under the laws of
    the United States, any State thereof or the District of Columbia;

o   an estate the income of which is subject to United States federal income
    taxation regardless of its source;

o   a trust:

    --  if a United States court can exercise primary supervision over the
        trust's administration and one or more United States persons are
        authorized to control all substantial decisions of the trust; or

    --  that has elected to be treated as a United States person under
        applicable Treasury regulations.

    This discussion addresses only United States federal income taxation.

    If a partnership holds our shares, the tax treatment of a partner generally
will depend on the status of the partner and the activities of the partnership.
If you are a partner of a partnership that holds our shares, we urge you to
consult your tax advisors regarding the consequences of the purchase, ownership
and disposition of our shares.

    WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF OWNING AND DISPOSING OF
OUR SHARES.

Distributions on Our Shares

    Subject to the passive foreign investment company ("PFIC") rules discussed
below, you must include in your gross income as dividend income the gross amount
of any distribution (including amounts withheld to pay Korean withholding taxes)
we make on our shares out of our current or accumulated earnings and profits (as
determined under United States federal income tax principles) when the
distribution is actually or constructively received by you. Subject to certain
limitations, dividends paid to non-corporate U.S. Holders, including
individuals, may be eligible for a reduced rate of taxation if we are deemed to
be a "qualified foreign corporation" for United States federal income tax
purposes. A qualified foreign corporation includes:

o   a foreign corporation that is eligible for the benefits of a comprehensive
    income tax treaty with the United States that includes an exchange of
    information program; and
o   a foreign corporation if its stock with respect to which a dividend is paid
    is readily tradable on an established securities market within the United
    States,



                                       51
<PAGE>

but does not include an otherwise qualified foreign corporation that is a PFIC.
We believe that we will be a qualified foreign corporation for so long as we are
not a PFIC and we are considered eligible for the benefits of the income tax
treaty between Korea and the United States. Our status as a qualified foreign
corporation, however, may change.

    Distributions that exceed our current and accumulated earnings and profits
will be treated as a return of capital to you to the extent of your tax basis in
our shares and thereafter as capital gain. Dividends will not be eligible for
the dividends-received deduction generally allowed to United States corporations
in respect of dividends received from United States corporations.

    If we make a distribution paid in Won, you will be considered to receive the
U.S. dollar value of the distribution determined at the spot Won/U.S. dollar
rate on the date the distribution is received by you, regardless of whether you
convert the distribution into U.S. dollars. Generally, any fluctuations during
the period from the date the dividend distribution is includible in your income
to the date you convert the distribution into U.S. dollars will be treated as
United States source ordinary income or loss for foreign tax credit purposes.

    Subject to certain limitations, the U.S. dollar value of the Korean tax
withheld from distributions will be deductible or creditable against your United
States federal income tax liability. For foreign tax credit limitation purposes,
the dividend will be foreign source income, but generally will be treated
separately, together with other items of "passive income" or, in the case of
some United States financial service providers, "financial services income." The
rules governing the foreign tax credit are complex. We urge you to consult your
tax advisors regarding the availability of the foreign tax credit under your
particular circumstances.

Sale, Exchange or Other Disposition of Our Shares

    Subject to the PFIC rules discussed below, if you sell, exchange or
otherwise dispose of our shares, you will recognize capital gain or loss equal
to the difference between the U.S. dollar value of the amount that you realize
and your tax basis, determined in U.S. dollars, in our shares. The gain or loss
generally will be United States source gain or loss for foreign tax credit
purposes. Capital gain of a non-corporate U.S. Holder may be subject to United
States federal income tax at a preferential rate where the property is held more
than one year. Your ability to deduct capital losses is subject to limitations.

    If you are paid in a currency other than U.S. dollars, any gain or loss
resulting from currency exchange fluctuations during the period from the date of
the payment resulting from the sale, exchange or other disposition, to the date
you convert the payment into U.S. dollars generally will be treated as United
States source ordinary income or loss for foreign tax credit purposes.

Passive Foreign Investment Company Rules

    In general, we will be a PFIC with respect to you if for any taxable year in
which you hold our shares, after applying relevant look-through rules to the
income and assets of certain subsidiaries:

o   75% or more of our gross income consists of passive income, such as
    dividends, interest, rents, royalties and gains from assets which produce
    passive income; or

o   50% or more of the average quarterly value of our assets consists of assets
    that produce, or are held for the production of, passive income.

    We believe that we were not a PFIC in 2003 and will not be a PFIC in
subsequent taxable years. However, there can be no assurance in this regard.

    If we are a PFIC in any taxable year that you hold our shares, you will be
subject to special rules with respect to:

o   any excess distribution that we make to you (generally, any distributions
    made to you during a single taxable year that are greater than 125% of the
    average annual distributions received by you in respect of our shares during
    the three preceding years or if shorter, your holding period for our
    shares); and

o   any gain you realize on the sale, exchange, or other disposition of your
    shares.

Under these rules:

o   the excess distribution or gain will be allocated ratably over your holding
    period for our shares;



                                       52
<PAGE>

o   the amount allocated to the taxable year in which you received the excess
    distribution or realized the gain will be taxed as ordinary income;

o   the amount allocated to each prior year, other than a year prior to the
    first year in which we became a PFIC, will be taxed at the highest United
    States federal income tax rate on ordinary income in effect for that taxable
    year; and

o   the interest charge generally applicable to underpayments of tax will be
    imposed in respect of the resulting tax liability to each such year.

    You will not be able to avoid the special PFIC rules described above by
making a mark-to-market election as long as our shares are not regularly traded
on an exchange that meets certain trading, listing, financial disclosure and
other requirements of a qualified exchange under applicable Treasury
regulations.

    You may nevertheless avoid the special PFIC rules described above if you
elect to have us treated as a qualifying electing fund, or a QEF, and we provide
certain information required to make a QEF election effective. We intend to
provide U.S. Holders with the information required to make a QEF election
effective.

    If you make a QEF election, you will be currently taxable on your pro rata
share of our ordinary earnings and net capital gain, at ordinary income and
capital gain rates, respectively, for each taxable year that we are a PFIC,
regardless of whether or not you receive distributions. Your tax basis in our
shares will be increased to reflect taxed but undistributed income.
Distributions of income that had been taxed previously will result in a
corresponding reduction of tax basis in our shares and will not be taxed again
as a distribution to you.

    If you own our shares during any year that we are a PFIC, you must file
Internal Revenue Service Form 8621.

Information Reporting and Backup Withholding

    In general, information reporting requirements will apply to dividend
payments made to you in respect of our shares and the proceeds received on the
disposition of our shares paid within the United States, and in certain cases,
outside of the United States, unless you are an exempt recipient such as a
corporation. In addition, you may, under certain circumstances, be subject to
"backup withholding" at the rate of 28% with respect to dividends paid on our
shares or the proceeds of any sale, exchange or other disposition of our shares,
unless you:

o   are a corporation or fall within certain other exempt categories, and, when
    required, demonstrate this fact; or

o   provide a correct taxpayer identification number, certify that you are not
    subject to backup withholding and otherwise comply with applicable
    requirements of the backup withholding rules.

    You generally may obtain a credit against your United States federal income
tax liability for the amount withheld under the backup withholding rules
provided that you furnish the required information to the Internal Revenue
Service. If you do not provide a correct taxpayer identification number, you may
be subject to penalties imposed by the Internal Revenue Service.

F.  DIVIDENDS AND PAYING AGENTS

    Not applicable.

G.  STATEMENT BY EXPERTS

    Not applicable.

H.  DOCUMENTS ON DISPLAY



                                       53
<PAGE>

    Thrunet is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the SEC. You may 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 we file
with the SEC, 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 1337-20, Seocho-2dong, Seocho-ku, Seoul, Korea 137-751,
Attention: Investor Relations Team, telephone number: (822) 3488-8959.

I.  SUBSIDIARY INFORMATION

Not applicable.



                                       54
<PAGE>


      ITEM 11 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

    Our primary market risk exposures are to fluctuations in exchange rates,
interest rates and equity prices. We are exposed to foreign exchange risk
related to foreign currency denominated long-term debt. As of December 31, 2003,
we had an aggregate of Won 8,863.7 million in Dollar-denominated bonds, Won
4,399.8 million in Dollar-denominated long-term debt (including the current
portion thereof) and Won 14,141.8 million in Dollar-denominated accounts
payable. We have no other significant foreign currency denominated liabilities.
As of December 31, 2003, 3.1% of our bonds, 2.7% of our long-term debt
(including the current portion thereof) and 7.5% of our accounts payable were
denominated in Dollars. Substantially all of our revenues are denominated in
Won. However, due to our limited foreign currency denominated liabilities,
changes in the foreign exchange rate between the Won and the Dollar may not
significantly affect us.

    As of December 31, 2003, we had cash and cash equivalents of Won 53,945.7
million. A substantial part of this amount consists of highly liquid investments
with a remaining maturity at the date of purchase of less than 90 days. We have
cash on hand and demand deposits of Won 1,053.5 million and short-term
investments of Won 52,592.2 million. Short-term investments are primarily money
market deposits and money market funds. All of these amounts are exposed to
interest rate risk and will decrease in value if market interest rates should
increase. A hypothetical increase in market interest rates by 10% from December
31, 2003 would cause the fair value of these instruments to decline by an
insignificant amount. Due to the short duration of these investments, a change
in interest rates would not have a material effect on our financial condition
results of operations. Declines in interest rates over time will, however,
reduce interest income related to the cash on hand and deposit accounts.

    Other than the above, we are not exposed to interest rate risk because none
of our short-term and long-term borrowings has floating interests rates.

    The following analysis sets forth the sensitivity of our loss before
provision for income taxes to changes in exchange rates. We made the following
modeling assumptions in our sensitivity analysis:

    o   The Won/Dollar exchange rate was assumed to be Won 1,192.0 to US$1.00,
        which was the noon buying rate in the city of New York as of December
        31, 2003.

    If the Won depreciates against the Dollar by 10% and all other variables are
held constant from their levels at December 31, 2003, we estimate that our loss
before provision for income taxes will increase by approximately Won 440 million
in 2004.


        ITEM 12 -- DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

    Not applicable.



                                       55
<PAGE>


                                     PART II

           ITEM 13 -- DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

    On March 27, 2003, the Bankruptcy Division of the Seoul District Court
granted our petition for the commencement of reorganization proceedings and we
received reorganization claims from our creditors pursuant to the Corporate
Reorganization Act of Korea. As of January 9, 2004, the aggregate amount of
reorganization claims from our creditors which was accepted by us and approved
by the court was approximately Won 637.5 billion (after excluding exempted
claims of Won 7.5 billion), including Won 280.4 billion in secured claims and
Won 357.1 billion in unsecured claims. According to the repayment schedule in
our reorganization plan, part of unsecured claims was converted into our shares.
Remaining claims will be repaid in full by the end of our reorganization plan
period ending in 2013 over a repayment period ranging from five to nine years,
in certain cases after a grace period of three to five years. See Note 2 to our
consolidated financial statements for more details on our reorganization claims
and repayment schedule.


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

    None.

                       ITEM 15 -- CONTROLS AND PROCEDURES

    (a) Disclosure Controls and Procedures. Our Receiver/Chief Executive
Officer, who also performs similar functions of a chief financial officer, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in the United States Exchange Act Rule 13a-15(e)) as of the end of the
period covered by this Form 20-F, has concluded that, as of such date, our
disclosure controls and procedures were effective to ensure that material
information required to be included in our periodic SEC reports relating to us,
is made known to him.

    (b) Internal Control over Financial Reporting. There have been no
significant changes in internal control over financial reporting that occurred
during the fiscal year ended December 31, 2003, that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.



                              ITEM 16 -- [RESERVED]

                  ITEM 16.A -- AUDIT COMMITTEE FINANCIAL EXPERT

    As a result of the commencement of our reorganization proceedings on March
27, 2003, our audit committee has been temporarily suspended. Instead, a
statutory auditor was appointed on April 6, 2004.

                           ITEM 16.B -- CODE OF ETHICS

    We have not adopted a written code of ethics for our directors, officers and
employees. We plan to adopt a code of ethics for our directors, officers and
employees before the end of 2004.

               ITEM 16.C -- PRINCIPAL ACCOUNTANT FEES AND SERVICES

    Samil PricewaterhouseCoopers has served as our independent registered public
accounting firm for each of the fiscal years in the three-year period ended
December 31, 2003. The following table presents the aggregate fees for
professional services and other services rendered by Samil
PricewaterhouseCoopers to us in 2002 and 2003:


         <TABLE>
         <CAPTION>
                                                     2002                         2003
                                                     ----                         ----
        <S>                                   <C>                           <C>
         (a) Audit Fees(1)                      Won 568 million              Won 290 million
         (b) Tax Fees(2)                        Won 20.5 million                   --
         </TABLE>



                                       56
<PAGE>


            (1) Audit Fees consist of fees billed for the annual audit services
            engagement and other audit services, which are those services that
            only the external auditor reasonably can provide, and include the
            group audit; statutory audits; comfort letters and consents; attest
            services; and assistance with and review of documents filed with the
            SEC.

            (2) Tax Fees include fees billed for tax consultations, such as
            assistance and representation in connection with tax audits and
            appeals.

    All audit and allowable non-audit services, including tax services, must be
pre-approved by the bankruptcy court while we are in reorganization proceedings.
The bankruptcy court approved 0% of the fees described above (other than audit
fees).

    During 2003, 0% of Audit-related Fees, 0% of Tax Fees and 0% of all Other
Fees provided to us by Samil PricewaterhouseCoopers were approved by the
bankruptcy court pursuant to the de minimis exception to the pre-approval
requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.


     ITEM 16.D -- EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

    Not applicable.

    ITEM 16.E -- PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
                                   PURCHASERS

    In August 2002, we acquired 1,289,259 shares of common stock for Won 1,126.8
million upon our dissenting shareholders' exercise of the right to sell their
shares to us in connection with the sale of our enterprise networks service
business. After the three-for-one reverse stock split in December 2002, the
number of our treasury stock decreased to 429,753 shares. We also acquired an
additional 6,349 shares of common stock for Won 16.6 million as fractional
shares resulted from the reverse stock split. As of December 31, 2003, we held
436,102 shares of treasury stock.



                                       57
<PAGE>



                                    PART III

                         ITEM 17 -- FINANCIAL STATEMENTS

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


                         ITEM 18 -- FINANCIAL STATEMENTS

    See page F-1 to F-54 following Glossary.

                               ITEM 19 -- EXHIBITS


    Documents filed as exhibits to this annual report:

    <TABLE>
    <CAPTION>
    Exhibit
    Number                                                       Description
    ------                                                       -----------
   <S>          <C> <C>
     1.1         X   Articles of Incorporation of Thrunet as amended on January 9, 2004 (English translation).
     4.1         X   Agreement on Supply and Use of GBS Circuit dated February 27, 2001, between Thrunet and Powercomm
                     (including English translation).*(2)
     4.2         X   Agreement for Improvement of Financial Structure dated September 14, 2001, between Thrunet and KDB
                     (including English translation).(3)
     4.3         X   Agreement on the Establishment of, Contribution to and General Matters relating to Korea.com dated June
                     12, 2001, between Thrunet and Korea.com Communications (including English translation).(3)
     4.4         X   Accounts Receivable Transfer Agreement dated June 29, 2001, between Thrunet and Multiplus Ltd.
                     (including English translation).(3)
     4.5         X   Trust Deed dated December 12, 2001, between Thrunet and Kookmin Bank (including English translation).(3)
     4.6         X   Beneficiary Certificates Assignment Agreement dated December 12, 2001, between Thrunet and ENS
                     Securitization Limited (including English translation).(3)
     4.7         X   Agreement on Provision and Use of Facilities dated July 21, 2001, between Thrunet and SK Telecom
                     (including English translation).(3)
     4.8         X   Subscribers and Assets Transfer Agreement dated August 31, 2001, between Thrunet and SK Telecom
                     (including English translation).(3)
     4.9         X   Agreement on Provision and Use of Telecommunication Facilities dated June 18, 2001, between Thrunet and
                     Dacom Corporation (including English translation).(3)
     4.10        X   Agreement on Provision of Transferred Facilities following Asset Transfer Agreement dated July 31,
                     2002, between Thrunet and Powercomm (English translation).(4)
     4.11        X   Agreement Supplemental to the Agreement on Provision and Use of Fiber Optic Communication Cable Facilities
                     dated January 1, 2004, between Thrunet and SK Telecom (English translation).
     8.1         X   A list of Thrunet's significant subsidiaries.
    12.1         X   Section 302 Certification of Chief Executive Officer or Equivalent pursuant to Rule 13a-14(a).
    12.2         X   Section 302 Certification of Chief Financial Officer or Equivalent pursuant to Rule 13a-14(a).
    13.1         X   Section 906 Certification required by Rule 13a-14(b) and 18 U.S.C. Section 1350.
    14.1         X   Network Service Provider License (including English translation).(1)
    14.2         X   Network Operator Designation (including English translation).(1)
    14.3         X   Network Service Provider License dated August 7, 1996 as amended on April 7, 2001 to include the
                     License for the International Private Leased Circuit (IPLC) Leasing Business from the Ministry of
                     Information and Communication (MIC) (including English translation).(2)
    14.4         X   Certificate of Registration of Transmission Network Business Operator dated May 14, 2002 (including
                     English translation).(3)
    14.5         X   Network Service Provider License dated August 7, 1996 as amended on May 24, 2002 (including English
                     translation).(3)
    </TABLE>


                                       58
<PAGE>

------------------
*   Confidential treatment has been requested. Confidential materials have been
    redacted and have been separately filed with the Securities and Exchange
    Commission.
(1) Previously filed with the annual report on Form 20-F for the fiscal year
    ended December 31, 1999.
(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.
(4) Previously filed with the annual report on Form 20-F for the fiscal year
    ended December 31, 2002.




                                       59
<PAGE>




                                   SIGNATURES

    The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused and authorized the undersigned to sign
this annual report on its behalf.



Date: July 15, 2004





                                      KOREA THRUNET CO., LTD.



                                     By: /s/ Seog Won Park
                                         -------------------------------------
                                         Name:  Seog Won Park
                                         Title: Receiver/Chief Executive Officer




                                       60
<PAGE>



                                    GLOSSARY

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

<TABLE>
<CAPTION>
<S>                                              <C>
asymmetric digital
subscriber line (ADSL)........................    A technology that allows more data to be sent over existing copper
                                                  telephone lines.


asynchronous transfer mode
   (ATM)......................................    A high bandwidth, low-delay, high speed transmission technology.  ATM is a
                                                  communications 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 communications
                                                  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 provide much greater bandwidth
                                                  than telephone lines, a cable modem can be used to achieve faster access
                                                  to the world wide web.


coaxial cable.................................    A type of wire that consists of a center wire surrounded by insulation and
                                                  then a grounded shield of braided wire.


co-location...................................    A service whereby a service provider places customers' servers and/or
                                                  network equipment on the service providers' premises.


dark fiber....................................    Optical fiber infrastructure (cabling and repeaters) that is currently in
                                                  place but is not being used. Optical fiber conveys information in the form
                                                  of light pulses so the "dark" means no light pulses are being sent. Dark
                                                  fiber can refer to infrastructure that is in place but not yet ready to
                                                  use.

dense wavelength division
   multiplexing (DWDM)........................    DWDM equipment multiplies the transmission capacity of a specific fiber by
                                                  dividing a single strand into multiple lightpaths, or wavelengths.


DOCSIS........................................    A set of interface specifications, adopted by the North American cable
                                                  industry, for hardware and software to support cable-based delivery using
                                                  cable modems.
</TABLE>




                                       61
<PAGE>

<TABLE>
<CAPTION>
<S>                                              <C>
electronic mail or
e-mail........................................    An application that allows a user to send or receive multimedia messages
                                                  to or from any other user with an Internet address, commonly termed an
                                                  e-mail address.


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 kpbs, 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.


Internet......................................    The open global network of interconnected commercial, educational and
                                                  governmental computer networks which utilize TCP/IP, a common
                                                  communications protocol.


kbps..........................................    Kilobits per second. A measure of digital information transmission rates.
                                                  One kbps equals 1,000 bps.


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.


mbps..........................................    Megabits per second. A measure of digital information transmission rates.
                                                  One mbps equals 1,000 Kbps or one million bps.


modem (modulator-
   demodulator)...............................    A device or program that enables a computer to transmit data over
                                                  telephone lines. Computer information is stored digitally, whereas
                                                  information transmitted over telephone lines is transmitted in the form of
                                                  analog waves. A modem converts between these two forms.


network.......................................    A collection of distributed computers which share data and information
                                                  through inter-connected lines of communication.


node..........................................    In networks, a processing location. A node can be a computer or some other
                                                  device, such as a printer.


protocol......................................    A formal description of message formats and the rules two or more machines
                                                  must follow in order to communicate.
</TABLE>




                                       62
<PAGE>

<TABLE>
<CAPTION>
<S>                                              <C>
router........................................    A device that receives and transmits data packets between segments in a
                                                  network or different networks.


server........................................    Software that allows a computer to offer a service to another computer.
                                                  Other computers contact the server program by means of matching client
                                                  software. The term also refers to the computer on which server software
                                                  runs.


switch........................................    A device that selects the paths or circuits to be used for transmission of
                                                  information and establishes a connection; switching is the process of
                                                  interconnecting circuits to form a transmission path between users and
                                                  capturing information for billing purposes.


SONET.........................................    Synchronous optical network. SONET defines interface standards at the
                                                  physical layer of the OSI seven-layer model. The standard defines a
                                                  hierarchy of interface rates that allow data systems of different rates to
                                                  be multiplexed. SONET establishes Optical Carrier (OC) levels from 51.8
                                                  Mbps to 2.48 Gbps.


VoIP..........................................    Voice over Internet Protocol.


Web or World Wide Web
   (WWW)......................................    A network of computer servers that uses a special communications protocol
                                                  to link different servers throughout the Internet and permits
                                                  communication of graphics, video and sound.


Web server....................................    A computer system that runs Web software, used to create custom Web sites,
                                                  Web pages and home pages.

</TABLE>




                                       63
<PAGE>
KOREA THRUNET CO., LTD.
INDEX
DECEMBER 31, 2002 AND 2003

<TABLE>
<CAPTION>
                                                                                                                 Page(s)
<S>                                                                                                             <C>
Report of Independent Registered Public Accounting Firm   ...........................................             F - 2
Consolidated Balance Sheets as of December 31, 2002 and 2003 ........................................             F - 3
Consolidated Statements of Operations                                                                             F - 4
     for the years ended December 31, 2001, 2002 and 2003 ...........................................
Consolidated Statements of Stockholders' Equity                                                                   F - 6
     for the years ended December 31, 2001, 2002 and 2003 ...........................................
Consolidated Statements of Cash Flows                                                                            F - 10
     for the years ended December 31, 2001, 2002 and 2003 ...........................................
Notes to Consolidated Financial Statements ..........................................................            F - 12
</TABLE>



                                      F-1
<PAGE>



SAMIL PRICEWATERHOUSECOOPERS                       [PRICEWATERHOUSECOOPERS LOGO]
                                                           Kukje Center Building
                                                    191 Hankangro 2ga, Yongsanku
                                                            Seoul 140-702, KOREA
                                                 (Yongsan P.O. Box 266, 140-600)

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Trustee and Stockholders of Korea Thrunet Co., Ltd. :


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Korea
Thrunet Co., Ltd. and its subsidiaries (the "Company") at December 31, 2002 and
2003, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. 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 of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates continuity
of the Company's operations and realization of its assets and payment of its
liabilities in the ordinary course of business. As discussed in Note 1 to the
consolidated financial statements, on March 3, 2003, the Company filed a
voluntary petition for corporate reorganization, under the Korean Corporate
Reorganization Act, which was approved by the Court on June 25, 2003. On January
9, 2004, the Company's reorganization plan was accepted by its creditors and
equity committees, and confirmed by the Court. As a result, the receiver is now
responsible for the implementation of the reorganization plan. While these
factors raise substantial doubt about the Company's ability to continue as a
going concern, the financial statements do not include any adjustments that
might result from the outcome of this uncertainty.





/s/ Samil PricewaterhouseCoopers
Samil PricewaterhouseCoopers
Seoul, Korea
March 19, 2004



                                      F-2
<PAGE>


KOREA THRUNET CO., LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

(in millions of Korean Won and in thousands of US Dollars)

<TABLE>
<CAPTION>
                                                                                                           (Note 3)
                                                                                                         -----------
                                                                                 2002         2003          2003
                                                                             -----------   -----------   -----------
                                                                                                         (Unaudited)
<S>                                                                          <C>           <C>           <C>
ASSETS
Current assets :
 Cash and cash equivalents                                                    W   55,226   W    53,946   $   45,256
 Accounts receivable, net of allowance for
  doubtful accounts                                                               64,920        63,808       53,530
 Other receivables, net of allowance for
  doubtful accounts                                                               52,715         4,570        3,834
 Other current assets                                                             10,386         5,726        4,804
                                                                              ----------   -----------   ----------
   Total current assets                                                          183,247       128,050      107,424
                                                                              ----------   -----------   ----------
 Property and equipment, net                                                     500,744       346,260      290,487
 Other non-current assets                                                         80,060        56,394       47,310
                                                                              ----------   -----------   ----------
   Total assets                                                                  764,051       530,704      445,221
                                                                              ----------   -----------   ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
 Short-term borrowings                                                            12,774         1,000          839
 Current portion of long-term debts                                              370,434       429,590      360,395
 Current portion of capital lease obligations                                         --        17,270       14,488
 Accounts payable                                                                210,601       179,841      150,873
 Accrued expenses                                                                 30,500        57,206       47,991
 Other current liabilities                                                        46,831         5,721        4,799
                                                                              ----------   -----------   ----------
   Total current liabilities                                                     671,140       690,628      579,385

 Long-term accounts payable                                                        3,695         7,445        6,246
 Long-term debts, excluding current portion                                      135,805        17,665       14,820
 Other non-current liabilities                                                    34,019        19,361       16,242
                                                                              ----------   -----------   ----------
   Total liabilities                                                             844,659       735,099      616,693
                                                                              ----------   -----------   ----------

 Commitment and contingencies

 Stockholders' equity
 Common stock of W2,500 par value, authorized
  10,000,000 shares; issued and outstanding
  1,940,881 shares in 2002 and in 2003                                           194,088         4,852         4,071
 Additional paid-in capital                                                      716,535       907,531       761,352
 Loans to employees to acquire common stock                                         (107)          (66)          (56)
 Accumulated deficit                                                            (989,981)   (1,115,569)     (935,880)
 Less: treasury stock, at cost, 10,902
  shares in 2002 and in 2003                                                      (1,143)       (1,143)         (959)
                                                                               ----------  ------------   ----------
   Total stockholders' equity                                                    (80,608)     (204,395)     (171,472)
                                                                               ----------  ------------   ----------
    Total liabilities and stockholders' equity                                 W  764,051  W    530,704   $  445,221
                                                                               ==========  ============   ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.




                                      F-3
<PAGE>


KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

(in millions of Korean Won and in thousands of US Dollars, except per share
amounts)

<TABLE>
<CAPTION>
                                                                                                             (Note 3)
                                                                                                           -----------
                                                       2001              2002              2003                2003
                                                       ----              ----              ----             -----------
                                                                                                            (Unaudited)
<S>                                                 <C>                <C>               <C>               <C>
Revenues
 Broadband Internet Access Services                  W  361,408         W   421,062       W  393,600       $   330,202
 Portal Services                                          7,724               6,079            5,182             4,347
                                                     ----------         -----------       ----------       -----------
                                                        369,132             427,141          398,782           334,549
                                                     ----------         -----------       ----------       -----------
 Cost of revenues, excluding depreciation
  and amortization
 Broadband Internet Access Services                     293,698             262,209          240,075           201,405
 Portal Services                                         11,719              24,515           16,800            14,094
                                                     ----------         -----------       ----------       -----------
                                                        305,417             286,724          256,875           215,499
 Selling, general and administrative
  expenses                                               43,040              65,004           48,150            40,395
 Depreciation and amortization                          107,026             104,646          107,565            90,239
 Impairment loss on intangible
  assets, property and equipment                         23,717              27,261           56,324            47,252
 Loss (gain) on disposition of property
  and equipment, net                                       (312)             35,660            3,005             2,521
                                                     ----------         -----------       ----------       -----------
Operating loss                                         (109,756)            (92,154)         (73,137)          (61,357)
                                                     ----------         -----------       ----------       -----------

Other income (expense)
 Interest income                                          4,466               6,847            7,264             6,094
 Interest expense                                       (72,833)            (81,259)         (56,230)          (47,173)
 Gain on foreign exchange
  transactions                                            4,714               6,317            1,500             1,258
 Loss on foreign exchange
  transactions                                           (8,584)               (562)            (215)             (180)
 Gain (loss) on disposition of
  investments, net                                       (3,164)               (965)           1,089               914
 Impairment loss on investments                          (4,593)            (28,930)          (1,165)             (977)
 Loss on retirement of bond                                   -            (129,681)               -                 -
 Gain on extinguishment of debt                               -                 870            5,738             4,814
 Others, net                                              2,008               2,654             (112)              (94)
                                                     ----------         -----------       ----------       -----------
                                                     W  (77,986)        W  (224,709)      W  (42,131)      $   (35,344)
                                                     ----------         -----------       ----------       -----------
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.




                                      F-4
<PAGE>


KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

(in millions of Korean Won and in thousands of US Dollars, except per share
amounts)

<TABLE>
<CAPTION>
                                                                                                              (Note 3)
                                                                                                             ----------
                                                            2001              2002              2003            2003
                                                            ----              ----              ----            ----
<S>                                                    <C>                 <C>               <C>            <C>
Loss from continuing operations before taxes,
equity in loss of affiliates and minority interest      W  (187,742)        W  (316,863)      W (115,268)    $  (96,701)
  Income tax expense                                              -                 131                -              -
  Equity in loss of affiliates, net                          (8,357)             (6,215)          (5,501)        (4,615)
  Minority interest                                           1,075               2,842             (230)          (193)
                                                        -----------         -----------       ----------     ----------
Net loss from continuing operations                        (195,024)           (320,367)        (120,999)      (101,509)
                                                        -----------         -----------       ----------     ----------
Discontinued operations
  Loss from discontinued operations                         (74,052)            (51,960)               -              -
  Gain (loss) from disposals                                  6,016             (63,775)               -              -
                                                        -----------         -----------       ----------     ----------
Loss from discontinued operations                           (68,036)           (115,735)               -              -
                                                        -----------         -----------       ----------     ----------
Net loss                                                W  (263,060)        W  (436,102)      W (120,999)    $ (101,509)
                                                        -----------         -----------       ----------     ----------
Per Share Data
  Basic and diluted loss from continuing
  operations per common share                           W  (242,642)        W  (222,619)      W  (62,694)    $   (52.60)
  Basic and diluted net loss from
  discontinued operations per common share                  (84,648)            (80,423)               -              -
                                                        -----------         -----------       ----------     ----------
  Basic and diluted net loss per common
  share                                                 W  (327,290)        W  (303,042)      W  (62,694)    $   (52.60)
                                                        -----------         -----------       ----------     ----------
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                      F-5
<PAGE>


KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        LOANS TO                  ACCUMULATED
                                                                       EMPLOYEES TO                  OTHER
(in millions of Korean Won,                             ADDITIONAL       ACQUIRE     ACCUMULATED COMPREHENSIVE TREASURY
 except share data)                       COMMON STOCK PAID-IN CAPITAL COMMON STOCK    DEFICIT   INCOME (LOSS)   STOCK     TOTAL
--------------------------                ------------ --------------- ------------  ----------- ------------- --------    -----
<S>                                       <C>            <C>            <C>        <C>            <C>           <C>    <C>
Balance at December 31, 2000               W  179,894     W  286,430     W  (695)   W  (289,771)   W  (8,537)   W   -   W  167,321
   Comprehensive income (loss):
     Net loss for 2001                              -              -           -       (263,060)           -        -     (263,060)
     Unrealized gains on investment
       securities, net of tax                       -              -           -              -        1,816        -        1,816
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax             -              -           -              -        9,990        -        9,990
                                                                                                                        ----------
       Total comprehensive loss                                                                                           (251,254)
                                                                                                                        ----------
   Issuance of 767,072 shares of common
     stock, net of issuance costs              76,707            727           -              -            -        -       77,434
   Issuance of warrants                             -        148,683           -              -            -        -      148,683
   Gain from issuance of stock by
      subsidiaries                                  -            217           -              -            -        -          217
   Increase in equity due to increase in
      capital of the investee                       -             42           -              -            -        -           42
  Decrease of APIC on disposition of
      subsidiaries' stock                           -         (2,090)          -              -            -        -       (2,090)
   Stock compensation expense                       -          2,482           -              -            -        -        2,482
   Collection of loans to employees to
      acquire common stock                          -              -         134              -            -        -          134
                                           ----------     ----------     -------    -----------     --------    -----   ----------
Balance at December 31, 2001               W  256,601     W  436,491     W  (561)   W  (552,831)    W  3,269    W   -   W  142,969
                                           ==========     ==========     =======    ===========     ========    =====   ==========
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                   statements.



                                      F-6
<PAGE>

KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                        LOANS TO                  ACCUMULATED
                                                                       EMPLOYEES TO                  OTHER
(in millions of Korean Won,                             ADDITIONAL       ACQUIRE     ACCUMULATED COMPREHENSIVE TREASURY
 except share data)                       COMMON STOCK PAID-IN CAPITAL COMMON STOCK    DEFICIT   INCOME (LOSS)   STOCK     TOTAL
 ------------------                       ------------ --------------- ------------  ----------- ------------- --------    -----
<S>                                       <C>            <C>            <C>        <C>            <C>           <C>    <C>
Balance at December 31, 2001               W  256,601     W  436,491     W  (561)   W  (552,831)    W  3,269  W     -   W  142,969

   Comprehensive income (loss):
     Net loss for 2002                              -              -           -       (436,102)           -        -     (436,102)
     Unrealized gains on investment
       securities, net of tax                       -              -           -              -            -        -            -
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax             -              -           -              -       (3,269)       -       (3,269)
                                                                                                                        ----------
       Total comprehensive loss                                                                                           (439,371)
                                                                                                                        ----------
   Issuance of 1,302,400 shares of common
     stock by exercise of warrants, net of
     issuance costs                           130,240           (653)          -              -            -        -      129,587
   Issuance of 1,954,255 shares of common
      stock by debt to equity conversion,
      net of issuance costs                   195,423       (107,562)          -              -            -        -       87,861
   Decrease in equity due to disposition of
      subsidiaries' stock                           -            (42)          -              -            -        -          (42)
   Acquisition of treasury stock                    -              -           -              -            -   (1,143)      (1,143)
   Minority interest excess loss                    -              -           -         (1,048)           -        -       (1,048)
   Decrease due to reverse stock split       (388,176)       388,176           -              -            -        -            -
   Stock compensation expense                       -            125           -              -            -        -          125
   Collection of loans to employees to
      acquire common stock                          -              -         454              -            -        -          454
                                           ----------     ----------     -------    -----------     --------  -------   ----------
Balance at December 31, 2002               W  194,088     W  716,535     W  (107)   W  (989,981)    W      -  W(1,143)  W  (80,608)
                                           ==========     ==========     =======    ===========     ========  =======   ==========
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                      F-7
<PAGE>

KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        LOANS TO                 ACCUMULATED
                                                                       EMPLOYEES TO                 OTHER
(in millions of Korean Won,                             ADDITIONAL       ACQUIRE     ACCUMULATED COMPREHENSIVE TREASURY
 except share data)                       COMMON STOCK PAID-IN CAPITAL COMMON STOCK    DEFICIT   INCOME (LOSS)   STOCK     TOTAL
 ------------------                       ------------ --------------- ------------  ----------- ------------- --------    -----
<S>                                       <C>            <C>            <C>        <C>            <C>           <C>    <C>
Balance at December 31, 2002               W  194,088     W  716,535     W  (107)   W  (989,981)   W       -  W(1,143)  W  (80,608)

   Comprehensive income (loss)                      -              -           -              -            -        -            -
      Net loss for 2003                             -              -           -       (120,999)           -        -     (120,999)
      Effect of change from consolidated
         subsidiaries                               -              -           -         (2,498)           -        -       (2,498)
                                                                                                                        ----------
      Total comprehensive loss                                                                                            (123,497)
                                                                                                                        ----------
   Capital Surplus (differences due to
      changes in interests)                         -          1,729           -              -            -        -        1,729
   Minority interest excess loss                    -              -           -         (2,091)           -        -       (2,091)
   Decrease due to reverse stock split       (189,236)       189,236           -              -            -                     -
   Stock compensation expense                       -             31           -              -            -        -           31
      Collection of loans to employees to
         acquire common stock                       -              -          41              -            -        -           41
                                           ----------     ----------     -------    -----------     --------  -------   ----------
      Balance at December 31, 2003         W    4,852     W  907,531     W   (66)   W(1,115,569)    W      -  W(1,143)  W(204,395)
                                           ==========     ==========     =======    ===========     ========  =======   ==========
</TABLE>




   The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                      F-8
<PAGE>

KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        LOANS TO                  ACCUMULATED
                                                                       EMPLOYEES TO                  OTHER
                                                        ADDITIONAL       ACQUIRE     ACCUMULATED COMPREHENSIVE TREASURY
 (in thousands of U.S. Dollars            COMMON STOCK PAID-IN CAPITAL COMMON STOCK    DEFICIT   INCOME (LOSS)   STOCK     TOTAL
 -----------------------------            ------------ --------------- ------------    -------   -------------   -----     -----
<S>                                       <C>            <C>            <C>        <C>            <C>           <C>    <C>
Balance at December 31, 2002               $  162,826     $  601,120     $   (90)   $  (830,521)    $      -  $  (959)  $  (67,624)
   Comprehensive income (loss)
      Net loss for 2003                             -              -           -       (101,509)           -        -     (101,509)
      Effect of change from consolidated
         subsidiaries                               -              -           -         (2,096)           -        -       (2,096)
                                                                                                                        ----------
      Total comprehensive loss                                                                                            (103,605)
                                                                                                                        ----------
   Capital Surplus (differences due to
      changes in interests)                         -          1,451           -              -            -        -        1,451
   Minority interest excess loss                    -              -           -         (1,754)           -        -       (1,754)
   Decrease due to reverse stock split       (158,755)       158,755           -              -            -        -            -
   Stock compensation expense                       -             26           -              -            -        -           26
      Collection of loans to employees to
         acquire common stock                       -              -          34              -            -        -           34
                                           ----------     ----------     -------    -----------     --------  -------   ----------
      Balance at December 31, 2003         $    4,071     $  761,352     $   (56)   $  (935,880)    $      -  $  (959)  $ (171,472)
                                           ==========     ==========     =======    ===========     ========  =======   ==========
</TABLE>


   The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       F-9
<PAGE>


KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

(in millions of Korean Won and in thousands of US Dollars)

<TABLE>
<CAPTION>
                                                                                                             (Note 3)
                                                                                                            ----------
                                                         2001             2002              2003              2003
                                                        ------           ------            ------          -----------
                                                                                                           (Unaudited)
<S>                                                   <C>              <C>               <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS                                               W (263,060)      W (436,102)       W (120,999)       $ (101,509)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
 CASH PROVIDED BY (USED IN) OPERATING
 ACTIVITIES
 Depreciation and amortization                            160,961          164,165           107,565            90,239
 Accretion of discounts on bonds issued                    25,452           40,154            18,352            15,396
 Amortization of discounts                                      -           13,269             1,231             1,033
 Bad debt provision                                         5,039           40,904            17,725            14,870
 Provision for retirement and severance benefits            5,423            2,724             1,176               987
 Retirement and severance benefits paid                    (4,332)          (3,908)           (1,050)             (881)
 Stock compensation expense                                 2,482              125                31                26
 Contribution from the National Pension Fund                   39               45                 2                 2
 Loss on disposition of property
  and equipment, net                                        2,278           35,660             3,005             2,521
 Gain from disposal of cable TV operation, net             (8,694)               -                 -                 -
 Loss from disposal of ENS, net                                 -           63,775                 -                 -
 Loss (gain) on disposition of investments, net            (2,197)             965            (1,089)             (914)
 Gain on disposition of available-for-sale
  securities, net                                             (51)              (3)                -                 -
 Loss on valuation of available-for-sale
  securities                                                    3                -                 -                 -
 Loss (gain) on foreign exchange transactions, net          3,671           (3,343)           (1,461)           (1,226)
 Loss on valuation of forward contract                          7               35                 -                 -
 Equity in loss of cable TV operations, net                 7,849                -                 -                 -
 Equity in loss of affiliates, net                          8,357            6,215             5,501             4,615
 Loss on cancellation of contract                          28,330                -                 -                 -
 Loss on redemption of bonds                                    -          130,049                 -                 -
 Gain on extinguishment of debt                                 -           (1,238)           (5,738)           (4,814)
 Impairment loss on investments                             4,593           28,930             1,165               977
 Impairment loss on intangible assets,
  property and equipment                                   23,717           42,329            56,324            47,252
 Minority interest                                         (1,075)          (2,842)              230               193
 Miscellaneous gain, net                                        -                -              (434)             (364)
CHANGES IN OPERATING ASSETS AND LIABILITIES
 Decrease (increase) in accounts receivable               (31,039)           4,277           (12,021)          (10,085)
 Decrease (increase) in other receivables                    (724)         (75,828)           46,549            39,051
 Decrease (increase) in other current assets               (3,648)           2,748             8,357             7,011
 Decrease in accounts payable                              (1,680)         (60,477)          (22,998)          (19,294)
 Increase(decrease) in accrued expenses                     3,000          (16,885)           33,796            28,352
 Increase (decrease) in other current liabilities            (542)          52,774           (31,928)          (26,785)
                                                       ----------       ----------        ----------        ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES                                             W  (35,841)      W   28,517        W  103,291        $   86,653
                                                       ----------       ----------        ----------        ----------
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                      F-10
<PAGE>

KOREA THRUNET CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
--------------------------------------------------------------------------------

(in millions of Korean Won and in thousands of US Dollars)


<TABLE>
<CAPTION>
                                                                                                        (Note 3)
                                                                                                      -----------
                                                            2001          2002          2003             2003
                                                           ------        ------        ------           ------
                                                                                                      (Unaudited)
<S>                                                      <C>          <C>           <C>              <C>
CASH FLOWS FROM INVESTING ACTIVITIES
 Disposition of property and equipment                    W  11,985    W  83,902     W  10,101        $   8,474
 Proceeds from sale of discontinued operation                     -      346,860             -                -
 Acquisition of property and equipment                     (259,114)     (48,456)      (15,835)         (13,284)
 Disposition of investments                                  33,033        5,978         3,023            2,536
 Acquisition of investments                                  (4,244)      (4,298)         (441)            (370)
 Disposition of cable system operators                       41,900            -             -                -
 Decrease (increase) in intangible assets
  and other assets, net                                     (36,779)      12,290        16,468           13,816
                                                          ---------    ---------     ---------        ---------

 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES       (213,219)     396,276        13,316           11,172
                                                          =========    =========     =========        =========

CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from short-term borrowings and long-term debts    638,275      104,387         9,081            7,618
 Repayments of short-term borrowings and long-term debts   (343,491)    (609,872)     (124,639)        (104,563)
 Repayments of capital lease obligations                     (6,148)     (10,296)       (2,235)          (1,875)
 Decrease in other long-term liabilities                     (3,026)      (7,483)          (94)             (79)
 Issuance of stock by subsidiaries                            2,964            -             -                -
 Issuance of common stock                                    77,435            -             -                -
 Issuance cost on common stock                                    -       (1,595)            -                -
 Acquisition of treasury stock                                    -       (1,127)            -                -
 Collection of loans to employees to acquire common stock       134         (107)            -                -
                                                          ---------    ---------     ---------        ---------
  NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES       366,143     (526,093)     (117,887)         (98,899)
                                                          =========    =========     =========        =========
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        117,083     (101,300)       (1,280)          (1,074)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             39,443      156,526        55,226           46,330
                                                          ---------    ---------     ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                W 156,526    W  55,226     W  53,946        $  45,256
                                                          =========    =========     =========        =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR
 Interest                                                 W 111,689    W  49,367     W   4,755         $  3,989
 Income taxes                                             W     972    W     952     W       -         $      -
</TABLE>




  The accompanying notes are an integral part of these consolidated financial
                                  statements.



                                      F-11
<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

1.  DESCRIPTION OF THE COMPANY

    Incorporated in July 1996, Korea Thrunet Co., Ltd. (the "Company") is a
    provider of broadband Internet and portal services in Korea.

    Starting in July 1998, the Company was the first to offer broadband internet
    access services in Korea with its number of broadband internet subscribers
    of 1,312,248 and 1,301,620 and 1,293,364 as of December 31, 2001, 2002 and
    2003, respectively. The Company provides broadband Internet services via
    cable modem to residential area customers, small offices and home offices
    throughout Korea. The Company acquired the domain name "Korea.com" in March
    2000 and launched its Korea.com portal services in September 2000. Korea.com
    is a broadband oriented mega-portal featuring multi-access capability
    providing a variety of services such as interactive multimedia-concentrated
    content services, free e-mail and other multimedia communications services
    and e-commerce hosting. On June 12, 2001, we established Korea.com
    Communications, our subsidiary, to which we transferred all of our Korea.com
    portal business-related assets and approximately 100 employees. We also
    invested approximately W12,000 million in cash. In January 2000, the
    Company began to provide cable television services through its cable system
    operator subsidiaries. However, in September 2001, the Company discontinued
    its cable television business by selling its six subsidiaries. Enterprise
    network services, which began in July 1997, consist primarily of leasing
    dedicated fiber optic lines to corporate customers for transmitting voice
    and data. The Company provides enterprise network services to corporate
    customers including certain major Korean telecommunications companies and
    offered Internet protocol-based leased line services, via dedicated fiber
    optic lines, to small and medium-sized enterprises and other corporate
    customers. As part of its enterprise network business, the Company provides
    co-location services by offering secure location for servers, controlled
    environment, monitoring and high-speed connection to the internet via fiber
    optic network. On October 28, 2002, the Company discontinued its enterprise
    network services business, except co-location service, by selling its
    related assets, including local fiber optic network and related equipment.

    Since its inception, the Company has experienced recurring losses and
    negative cash flows from operations. The Company has recorded net losses
    from continuing operations of W195,024 million W320,367
    million and W120,999 million for the years ended December 31, 2001,
    2002 and 2003, respectively. The Company's liabilities exceed its assets by
    W204,395 million as of December 31, 2003. Market conditions and their
    effect on the Company's liquidity may further restrict availability of cash
    which may result in the Company not making payments on its short and
    long-term obligations. These matters raise substantial doubt about the
    Company's ability to continue as a going concern.



                                      F-12
<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

2.  REORGANIZATION PROCEEDINGS

    On March 3, 2003, the Company filed a voluntary petition for a stay order
    and for corporate reorganization proceedings with the Bankruptcy Division of
    the Seoul District Court (the "Court"). The Court ordered the commencement
    of the corporate reorganization proceedings on March 27, 2003 (the
    "Commencement") and appointed the receiver to evaluate the Company's
    corporate reorganization plans on the same day.

    In 2003, the Court appointed Ahn Kwon & Co., a Korean accounting firm
    affiliated with Deloitte Touche Tohmatsu, to perform an independent
    assessment of the Company's going concern value and liquidation value. Based
    on the report submitted by Ahn Kwon & Co. to the Court on June 21, 2003, the
    Company's going concern value was higher than its liquidation value. On June
    25, 2003, the Court approved the Company's corporate reorganization
    proceedings and ordered the Company to submit a reorganization plan. The
    first and second assembly for creditors and equity committee were held on
    June 25, 2003 and November 28, 2003, respectively. On January 9, 2004, the
    Company's reorganization plan was accepted by its creditors and equity
    committee and confirmed by the Court.

    On March 6, 2003, Korea.com Communications (the "Korea.com"), our
    subsidiary, also filed a voluntary petition for a stay order and for
    corporate reorganization proceedings with the Court. The Court ordered the
    commencement of the corporate reorganization proceedings and appointed the
    receiver to evaluate the Korea.com's corporate reorganization plans on April
    1, 2003. On October 15, 2003, the Court approved Korea.com's corporate
    reorganization plans. The Company is currently operating its business under
    the jurisdiction of the Bankruptcy Court.

    SUBSEQUENT EVENT - REORGANIZATION PLANS OF KOREA THRUNET CO., LTD.

    The Company filed business reorganization petition due to the aforementioned
    financial difficulties on March 3, 2003, which was confirmed by the Seoul
    District Court on March 27, 2003.

    During the restructuring proceedings, the Company continues to restructure
    operations to improve its ability to operate as a going concern.
    Furthermore, after the disposition of enterprise network services business
    in 2002, the Company focused on the Broadband Internet Access business. The
    Company improved its results of operations and minimized cash outflows by
    reducing discretionary expenses, such as promotion and advertising expenses,
    labor cost and rental costs. The reorganization plan was officially approved
    on January 9, 2004. Details of the Company's reorganization plan are
    summarized as follows:



                                      F-13
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    A.  TERMS OF REORGANIZATION PLAN:

    1)  SECURED BORROWINGS FROM FINANCIAL INSTITUTIONS AND OTHERS

        The principal of secured borrowings is to be repaid in equal
        installments for six years after a three-year grace period. Interest
        incurred prior to the Commencement amounting to W52 million is
        fully exempted, whereas an interest rate of 7% is applied to the secured
        borrowings after the Commencement. Interest incurred during preparative
        period, from March 27, 2003 to January 9, 2004, is to be repaid in
        accordance with the approved schedule of principal redemption (the
        "Schedule") by Court, while interest incurred after the preparative
        period is to be repaid as incurred.

    2)  UNSECURED BORROWINGS FROM FINANCIAL INSTITUTIONS AND OTHERS

        15% of the total principal amount of unsecured borrowings will be
        redeemed through a debt-equity conversion, with the remaining principal
        payable in equal installments over five years after a five year grace
        period. Interest incurred prior to the Commencement amounting to
        W5,169 million is fully exempted, whereas an interest rate of 2%
        is applied to the unsecured borrowings after the Commencement. Due to
        decrease in interest rate, W33,123 million of accrued expense
        will be exempted. Interest incurred during preparative period to be
        repaid in accordance with the schedule of principal redemption, while
        interest incurred after the preparative period is to be repaid as
        incurred.

        Aggregate maturities of the Company's long-term debts after the
        restructuring will be:

      <TABLE>
      <CAPTION>
               YEAR ENDING               SECURED          UNSECURED
               DECEMBER 31,             BORROWINGS       BORROWINGS       TOTAL
              -------------            ------------     ------------     -------

          <S>                         <C>             <C>               <C>
                   2004                W     14,516    W         -       W   14,516
                   2005                           -              -                -
                   2006                           -              -                -
                   2007                      40,285              -           40,285
           2008 and thereafter              201,425        173,521          374,946
                                       ------------    -----------       ----------
                                       W    256,226    W   173,521       W  429,747
                                       ============    ===========       ==========
      </TABLE>

    3)  SECURED ACCOUNTS PAYABLE

        The principal of secured accounts payable is to be repaid in equal
        installments for five years, and interests incurred before and after the
        Commencement are fully relieved.



                                      F-14
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    4)  UNSECURED ACCOUNTS PAYABLE

        Unsecured accounts payable with a principal amount of less than
        W20,000 million are to be repaid up to the amount of W200
        million, W300 million, W1,000 million and W2,000
        million during the first, second, third and fourth year under the
        reorganization plan, respectively. For the period of the fifth through
        the eighth year under the reorganization plan, the principal amount up
        to W3,000 million is to be repaid annually, and the remaining
        principal amount is to be fully repaid in the ninth year.

        For unsecured accounts payable in excess of W20,000 million, 15%
        of total principal amount in unsecured accounts payable will be redeemed
        through a debt-equity conversion. The remaining principal amount is
        redeemed up to W1,500 million and W2,000 million for the
        third and fourth year under the reorganization plan after a two year of
        grace period. The principal amount up to W3,000 million is
        annually payable in the period of the fifth through the eighth year
        under the reorganization plan. The remaining principal amount is fully
        redeemed in the ninth year of the reorganization plan. Interest incurred
        before and after the Commencement is fully relieved.

    5)  UNSECURED DEBTS PAYABLE TO RELATED PARTIES

        The principal amount of unsecured debts with affiliated companies are
        payable up to the amount of W200 million and W300 million
        during the first and second year under the reorganization plan,
        respectively. From the third through the sixth year, the principal
        amount up to W500 million will be redeemed annually, and the
        remaining principal amount is fully payable in the seventh year.
        Interests incurred before and after the commencement of reorganization
        plan are fully relieved.

        After the reorganization plan is effective, aggregate maturities of the
        Company's long-term accounts payable will be

                <TABLE>
               <CAPTION>
               YEAR ENDING                   SECURED             UNSECURED
               DECEMBER 31,              ACCOUNTS PAYABLE     ACCOUNTS PAYABLE    TOTAL
              -------------              ----------------     ----------------   -------

          <S>                           <C>                 <C>              <C>
                   2004                  W     5,092          W   41,500      W    46,592
                   2005                        4,420              25,724           30,144
                   2006                        4,420              24,588           29,008
                   2007                        4,420              15,079           19,499
            2008 and thereafter                4,420              40,439           44,859
                                         -----------          ----------      -----------
                                         W    22,772          W  147,330      W   170,102
                                         ===========          ==========      ===========
</TABLE>


    6)  OTHER

        The principal of secured and unsecured security deposits received is to
        be repaid with the consideration from subsequent lease contract with a
        third party after the termination of lease contract. Interest incurred
        before and after the Commencement are fully relieved.



                                      F-15
<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    B.  CHANGES IN SHAREHOLDER'S RIGHTS

    1)  REDUCTION OF CAPITAL BY REVERSE STOCK SPLIT

        The Company authorized a forty-for-one reverse stock split. As a result,
        the Company decreased 75,694,379 common stock issued and outstanding to
        1,940,881 and decreased from W194,088 million common stock at par value
        to W4,852 million. The reverse stock split has been reflected in the
        2003 financial statements. Any fractional shares resulting from the
        reverse stock split will be disposed and the proceeds will be
        proportionally distributed to corresponding shareholders.

    2)  RETIREMENT OF SHARES OWNED BY THE LARGEST SHAREHOLDER, ITS AFFILIATES,
        AND RELATED PARTIES

        Pursuant to the reorganization plan, an aggregate number of 1,097,887
        shares out of 1,940,881 total common shares as of January 9, 2004, that
        are owned by the largest shareholder, its affiliates and related parties
        will be retired without any consideration.

    3)  CANCELLATION OF STOCK OPTIONS AND WARRANTS

        Warrants that were attached with the bonds before the Commencement
        amounting to W58,537 million, and stock options granted to directors and
        employees before the Commencement amounting to W5,582 million, will be
        effectively cancelled subsequent to January 9, 2004.

    C.  PRO FORMA BALANCE SHEETS

        If the restructuring plan had been effective as of December 31, 2003,
        the condensed balance sheets would be as follows;


       (in millions of Korean Won)

      <TABLE>
      <CAPTION>
      <S>                                                                               <C>
       Current assets                                                                   W   128,049
       Non-current assets                                                                   402,655
                                                                                        -----------
       Total assets                                                                         530,704
                                                                                        -----------
       Current liabilities                                                                  107,404
       Non-current liabilities                                                              554,557
       Stockholders' equity                                                                (131,257)
                                                                                        -----------
       Total liabilities and stockholders' equity                                       W   530,704
                                                                                        -----------
       </TABLE>

        In addition, the Company will recognize a gain of W62,207 million
        in 2004 due to debt to equity swap and debt extinguishment.



                                      F-16
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    REORGANIZATION PLANS OF KOREA.COM

    Korea.com filed a voluntary petition for a stay order and for corporate
    reorganization proceedings with the Court on March 6, 2003, which was
    confirmed by the Seoul District Court on April 4, 2003. The Korea.com
    reorganization plan was approved on October 15, 2003. The effects of the
    reorganization plan are reflected in financial statements.

    A.  REDEMPTION OF DEBTS

    1)  UNSECURED ACCOUNTS PAYABLE

        The total principal amount of unsecured accounts payable is W6,927
        million. For the first year W266 million is payable and W1,665 million
        is payable annually from 2005 to 2008.

    2)  UNSECURED ACCOUNTS PAYABLE TO RELATED PARTIES

        The total principal amount of accounts payable to related parties is
        W769 million. The principal amount of accounts payable to related
        parties, is to be repaid equally in equal installments for five years
        after a five-year grace period.

    B.  CHANGES IN SHAREHOLDERS' RIGHT

    1)  RETIREMENT OF SHARES OWNED BY THE LARGEST SHAREHOLDER, KOREA THRUNET

        Pursuant to the reorganization plan of Korea.com, 31,500,000 shares
        which were held by Korea Thrunet Co., Ltd. out of the total number of
        share of 35,000,000 are retired without any consideration.

    2)  REDUCTION OF CAPITAL BY REVERSE STOCK SPLIT

        Subsequent to the retirement of stocks, Korea.com authorized a
        ten-for-one reverse stock split. As a result, the Company decreased the
        number of shares from 6,562,500 common stock issued and outstanding to
        656,250 at par value of W1,000 and common stock amounts decreased
        from W6,563 million to W656 million.

        At December 2, 2003, as a result of retirement of stock and reverse
        stock split, the Company's ownership interest in Korea.com
        Communications was reduced from 91.95% to 53.47%.



                                      F-17
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    CONSOLIDATED SUBSIDIARIES

    The consolidated financial statements include the accounts of Korea Thrunet
    Co., Ltd. and its subsidiaries. The following table reflects the Company's
    ownership percentages and acquisition dates of its consolidated subsidiaries
    as December 31, 2003.

     <TABLE>
     <CAPTION>
                SUBSIDIARY                ACQUISITION        PERCENTAGE OWNERSHIP            PRIMARY BUSINESS
                ----------                   DATE            --------------------            ----------------
                                          -----------       2002           2003
    <S>                                   <C>               <C>            <C>           <C>
     Korea.com Communications              June 2001        91.95%         53.47%             Portal Service
     Multiplus Limited                     June 2001         5.00%          5.00%         Special Purpose Entity
                                                                                                 ("SPE")
     ENS Securitization Limited            Dec. 2001            -             -                    SPE
     </TABLE>

    The operations of Multiplus Limited and ENS Securitization Limited are
    included in the consolidation of the Company in accordance with Statement of
    Financial Accounting Standards ("SFAS") No. 140, Accounting for Transfers
    and Servicing of Financial Assets and Extinguishments of Liabilities. As
    neither of the subsidiaries qualify as a true sale, thus the operations of
    the SPE were consolidated based on SFAS No. 140. ENS had no activity during
    2003.

    On June 29, 2001, the Company established Multiplus Ltd. ("Multiplus"), a
    special purpose entity ("SPE"), in order to transfer rights to future
    receivables to be held by the Company. These receivables reflect four years
    of broadband internet access service that will be paid by the Company's
    customers with credit cards issued by three designated credit card. Kookmin
    Bank led the syndication of this transaction. The transaction was
    consummated on June 29, 2001. Multiplus has outstanding capital stock of W10
    million as of December 31, 2003. The Company recorded W22,559 million as
    current portion of long-term debts that are collateral for the Company's
    obligation.

    All significant inter-company balances and transactions have been eliminated
    in consolidation. Investments in affiliated companies where the Company has
    the ability to exercise significant influence are accounted for by the
    equity method of accounting. Investments in other investee companies are
    accounted for using the cost method of accounting.



                                      F-18
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION
    The accounting and financial reporting policies of the Company conform with
    accounting principles generally accepted in the United States of America
    ("U. S. GAAP").

    PRINCIPLES OF CONSOLIDATION
    The consolidated financial statements include the accounts of Korea Thrunet
    Co., Ltd., and its majority owned subsidiaries. Equity investments of 20 to
    50% ownership interests or where the Company has the ability to exercise
    significant influence over the investee are accounted for using the equity
    method of accounting and are reported in "Investments." The Company's
    proportional share of earnings and losses of these companies are included in
    "Equity in net loss of affiliates." Investments of less than 20% ownership
    interests are carried at cost. All significant inter-company transactions
    and balances have been eliminated in consolidation.

    The FASB Interpretation No. 46 ("FIN 46"), Consolidation of Variable
    Interest Entities, an interpretation of ARB No. 51. was issued by the FASB
    in January 2003. FIN 46 requires variable interest entities ("VIEs") to be
    consolidated by a company if that company is subject to a majority of the
    risk of loss from the VIEs' activities or entitled to receive a majority of
    the entity's residual returns, or both. FIN 46 is effective immediately for
    VIEs created after January 31, 2003 and is effective January 1, 2004 for
    VIEs created prior to February 1, 2003.

    Any gain or loss resulting from changes in equity of consolidated investees
    that change the Company's relative ownership interest in such investees is
    recorded in "Additional paid-in capital."

    USE OF ESTIMATES
    The preparation of financial statements in accordance with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements and the reported amounts of revenues and expenses during the
    period. Actual results could differ from those estimates.

    In common with certain other Asian countries, the economic environment in
    the Republic of Korea continues to be volatile. In addition, the Korean
    government and the private sector continue to implement structural reforms
    to historical business practices including corporate governance. The
    Company's operating plans call for obtaining certain amounts of short-term
    financing during the year. If such financing is not available, the Company
    may be required to make significant changes to its operating plans. The
    accompanying financial statements reflect management's assessment of the
    impact to date of the economic environment on the financial position and
    results of operations of the Company. Actual results may differ materially
    from management's current assessment.



                                      F-19
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    CASH AND CASH EQUIVALENTS
    Cash and cash equivalents are comprised of cash on hand, demand deposits,
    money market deposits accounts, and money market funds. All such amounts
    have an original maturity of 90 days or less. Other current assets and other
    non-current assets include W2,238 million and W10,097 million,
    respectively, of restricted cash at December 31, 2002, and W4,674
    million and W8,448 million of restricted cash at December 31, 2003.

    ALLOWANCE FOR DOUBTFUL ACCOUNTS
    The allowance for doubtful accounts is based on management's estimate of the
    uncollectible portion of the Company's accounts receivable balance based on
    analyses of historical bad debt experience, customer credit worthiness,
    current economic trends and changes in customer payment terms.

    VALUE - ADDED TAXES
    Under the Korean value-added tax ("VAT") system, the Company pays a 10% VAT
    on the purchase of most goods and services, and receives VAT from its
    customers equal to 10% of revenue. The VAT the Company collects from the
    customers must be remitted to the Korean government, offset by the VAT the
    Company has paid to its suppliers. To the extent the Company has paid its
    suppliers and vendors more VAT than it has received from its customers, the
    net amount is recorded as prepaid value-added taxes. If more VAT is received
    from customers than is paid to vendors and suppliers, the net amount is
    recorded as a current liability.

    PROPERTY AND EQUIPMENT
    Property and equipment are stated at acquisition cost, net of accumulated
    depreciation. Improvements that significantly extend the life of an asset or
    add to its productive capacity are capitalized. Expenditures for repairs and
    maintenance are charged to expense as incurred. Depreciation is provided on
    the straight-line method based on estimated useful lives as follows:

    <TABLE>
    <CAPTION>
                                                                                  ESTIMATED USEFUL LIVES
                                                                                  ----------------------
    <S>                                                                               <C>
    Buildings                                                                             40 years
    Communication circuit equipment                                                     6~15 years
    Transmission and communications equipment                                            3~6 years
    Furniture, tools and vehicles                                                        5~8 years
    </TABLE>

    Certain costs incurred during the construction and installation period of
    the Company's property and equipment are capitalized.



                                      F-20
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    LONG-LIVED ASSETS
    Long-lived assets, including certain identifiable intangibles with
    finite-lives, are reviewed for impairment whenever events or changes in
    circumstances indicate that the carrying amount of the asset may not be
    recoverable. An estimate of undiscounted future cash flows produced by the
    asset, or the group of assets, is compared to the carrying value to
    determine whether impairment exists. If an asset is determined to be
    impaired, the loss is measured based on differences between the carrying
    value and quoted market prices in active markets, if available. If quoted
    market prices are not available, the estimate of fair value is based on
    various valuation techniques, including a discounted value of estimated
    future cash flows and fundamental analysis. The Company reports an asset to
    be disposed of at the lower of its carrying value or fair value less cost to
    sell.

    STOCK-BASED COMPENSATION
    The Company applies the intrinsic value-based method of accounting
    prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees,
    and related interpretations, in accounting for its fixed plan stock options.
    As such, compensation expense would be recorded on the date of grant only if
    the current market price of the underlying stock exceeded the exercise
    price. SFAS No. 123, Accounting for Stock-Based Compensation, established
    accounting and disclosure requirements using a fair value-based method of
    accounting for stock-based employee compensation plans. As allowed by SFAS
    No. 123, the Company elected to apply the intrinsic value-based method of
    accounting described above, and has adopted the disclosure requirements of
    SFAS No. 123.

    DISCOUNTS ON DEBENTURES
    Discounts on debentures are amortized to interest expense using the
    effective interest rate method over the repayment period of the debentures.

    RETIREMENT AND SEVERANCE BENEFITS
    Employees and directors with one year or more 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 Company's estimated liability under the plan, equal to the
    amount which would be payable assuming all employees were to resign as of
    December 31, 2002 and 2003, has been accrued in the accompanying
    consolidated financial statements. Under the National Pension Scheme of
    Korea, through March 31, 1999, the Company was required to transfer a
    certain percentage of retirement benefits of employees to the National
    Pension Fund. The amount transferred will reduce the retirement and
    severance benefit amount payable to the employees when they leave the
    Company and is reflected as a direct deduction from the retirement and
    severance benefits liability



                                      F-21
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    REVENUE RECOGNITION
    Monthly customer subscription fees for broadband Internet service are
    recognized as revenue in the period services are provided. Included in
    subscription revenues are fees related to the rental of cable modems to
    customers in connection with subscription contracts. Through 1999, the
    Company recognized installation fees, and related installation costs, as
    revenues and operating costs upon origination of service to customers.
    Beginning January 1, 2000, in accordance with SAB 104, installation fees and
    the related installation costs up to an amount not exceeding installation
    fees, are deferred and recognized as revenue and operating costs over the
    estimated customer retention period of 4 years.

    Subscriber service fees are recognized as revenue in the period in which the
    services are provided to the customers. Installation revenue is recognized
    when the service is performed, to the extent of direct selling costs, with
    any revenue in excess of those costs deferred and recognized as income over
    the estimated average customer relationship period of 4 years.

    FOREIGN CURRENCY TRANSACTIONS
    Monetary assets and liabilities denominated in a foreign currency are
    converted into Korean Won at W1,200.4 to US$1.00 and W1,197.8
    to US$1.00 the equivalent rates of exchange as of December 31, 2002 and
    2003, respectively. Revenue, expenses, gains and losses from foreign
    currency transactions are converted at the exchange rate in effect on the
    date on which the transaction occurred. All foreign exchange transaction
    gains and losses are included in the results of operations.

    INCOME TAXES
    Income taxes are accounted for under the asset and liability method.
    Deferred tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their respective tax
    bases and operating loss carry forwards. Deferred tax assets and liabilities
    are measured using enacted tax rates expected to apply to taxable income in
    the years in which those temporary differences are expected to be recovered
    or settled. Deferred tax assets are reduced by a valuation allowance when,
    in the opinion of management, it is more likely than not that some portion
    or all of the deferred tax assets will not be realized. Deferred tax assets
    and liabilities are adjusted for the effects of changes in tax laws and
    rates on the date of enactment.

    LOSS PER SHARE
    Basic and diluted earnings (loss) per common share is calculated by dividing
    net loss by the weighted average number of shares of common stock
    outstanding during the fiscal year, which is, 803,753, 1,439,082 and
    1,929,979 shares for the years ended December 31, 2001, 2002, and 2003,
    respectively. The warrants issued and stock options granted in 2000 and 2001
    were not included in the calculation of loss per share for the years ended
    December 31, 2001, 2002 and 2003 as their effect was anti-dilutive.



                                      F-22
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    COMPREHENSIVE INCOME (LOSS)
    The Company applies the provisions of SFAS No. 130, Reporting Comprehensive
    Income with respect to the reporting and display of comprehensive income and
    its components (revenues, expenses, gains and losses) for each period
    presented. This information is presented in the accompanying consolidated
    statements of stockholders' equity and comprehensive income (loss).

    RECLASSIFICATIONS
    Certain amounts in the 2001 and 2002 financial statements have been
    reclassified to conform to the current year's presentation.

    RECENT ACCOUNTING PRONOUNCEMENTS
    In May of 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
    No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
    Corrections. The statement rescinds SFAS No. 4, Reporting Gains and Losses
    from Extinguishment of Debt, and an amendment of that statement, SFAS No.
    64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. As a
    result, gains and losses from extinguishment of debt will be classified as
    extraordinary items only if they are determined to be unusual and
    infrequently occurring items. SFAS No. 145 also requires that gains and
    losses from debt extinguishments, which were classified as extraordinary
    items in prior periods, be reclassified to continuing operations if they do
    not meet the criteria for extraordinary items. The provisions of SFAS No.
    145 will be effective for our fiscal year beginning January 30, 2003. The
    Company will apply the provisions of this statement for all debt
    extinguishments going forward, and has reclassified past restructuring gains
    to other income.

    In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
    with Exit or Disposal Activities. SFAS No. 146 requires that a liability for
    costs associated with exit or disposal activities be recognized when the
    liability is incurred. Existing generally accepted accounting principles
    provide for the recognition of such costs at the date of management's
    commitment to an exit plan. In addition, SFAS No. 146 requires that the
    liability be measured at fair value and be adjusted for changes in estimated
    cash flows. The provisions of SFAS No. 146 are effective for exit or
    disposal activities initiated after December 31, 2002.

    On January 1, 2003, the Company adopted SFAS No. 146 Accounting for Costs
    Associated with Exit or Disposal Activities. This statement nullifies
    Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
    Certain Employee Termination Benefits and Other Costs to Exit an Activity
    (including Certain Costs Incurred in a Restructuring). This statement
    requires that a liability for a cost associated with an exit or disposal
    activity be recognized when the liability is incurred rather than the date
    of an entity's commitment to an exit plan. The adoption of SFAS No. 146 did
    not have a significant impact on its consolidated financial position or
    results of operations.

    In November 2002, the FASB issued Interpretation No. 45 ("FIN 45")
    Guarantor's Accounting and is closure Requirements for Guarantees, Including
    Indirect Guarantees of Indebtedness of others. FIN 45 elaborates on the
    disclosures to be made by a guarantor about its obligations under certain
    guarantees issued. It also clarifies that a guarantor is required to
    recognize, at the inception of certain guarantees, a liability for the fair
    value of the obligation undertaken in issuing the guarantee. The initial
    recognition and measurement provisions of FIN 45 apply on a prospective
    basis to guarantees issued or modified after December 31, 2002. The
    disclosures are effective for the Company's annual


                                      F-23
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    financial statements for the year ended December 31, 2002. The adoption of
    this Interpretation did not have a significant impact on the Company's
    consolidation financial position or results of operations.

    On January 17, 2003, the FIN 46 Consolidation of Variable Interest Entities,
    which addresses consolidation by business enterprises where equity investors
    do not bear the residual economic risks and rewards. These entities have
    been commonly referred to as "Special purpose entities ("SPEs")." The
    underlying principle behind the new Interpretation is that if a business
    enterprise has the majority financial interest in an entity, which is
    defined in the guidance as a variable interest entity, the assets,
    liabilities and results of the activities of the variable interest entity
    should be included in the consolidated financial statements with those of
    the business enterprise. The Interpretation also explains how to identify
    variable interest entities and how an enterprise should assess its interest
    in an entity when deciding whether or not it will consolidate that entity.

    In December 2003, the FASB released a revision of FIN No. 46 ("FIN No. 46R")
    in which the calculation of expected losses and expected residual returns
    have been altered to reduce the impact of decision maker and guarantor fees.
    In addition, FIN No. 46R changed the definition of a variable interest. The
    Company as a foreign private issuer is required to apply either FIN 46 or
    FIN 46R to variable interest entities ("VIEs") created after January 31,
    2003. The Company is also required to apply FIN 46R to the VIEs which
    existed prior to February 1, 2003 in 2004. Certain special purpose companies
    (SPC) established by the Company, have been consolidated from the date of
    their establishment. There is an entity created before February 1, 2003,
    other than the aforementioned consolidated SPCs, for which is reasonably
    possible that the Company will be deemed a primary beneficiary upon the
    application of FIN 46R to the entity in 2004. It is a joint venture
    established to operate wireless telecommunication services in a country
    outside of Korea. With respect to the Company's involvement in the entity,
    the Company's maximum exposure to loss was approximately W26.6
    billion as of December 31, 2003. The Company has not completed the
    evaluation of the effect of the application of FIN No. 46R in 2004.

4. BASIS OF TRANSLATING FINANCIAL STATEMENTS (UNAUDITED)

    The consolidated financial statements are expressed in Korean Won and,
    solely for the convenience of the reader, certain Korean Won amounts are
    expressed in United States dollars at the rate of W1,192.0 to
    US$1.00, the US Federal Reserve Bank of New York noon buying exchange rate
    in effect on December 31, 2003. The US dollar amounts are unaudited and
    should not be construed as representation that the Korean Won amounts shown
    could be converted into U.S. dollars at this or any other rate.




                                      F-24
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

5.  DISCONTINUED OPERATION

    On July 2001, the Company announced its decision to dispose of the entire
    cable television business, which includes six subsidiaries, by the end of
    2001. The Company recognized an aggregate gain of W6,016 million, net
    of income tax of W2,678 million from the disposition of its
    subsidiaries. The book value of the subsidiaries at the date of sale totaled
    W41,583 million. The dispositions of the six system operations were
    considered as a disposal of a business segment and were accounted for under
    the provisions of APB No. 30, "Reporting the Results of Operations Reporting
    the Effects of Disposal of a Segment of a Business, and Extraordinary,
    Unusual and Infrequently Occurring Events and Transactions." For the period
    from the measurement date to the disposal date, operating loss from the
    cable television business amounted to W7,849 million.

    On October, 2002, the Company sold and recognized an aggregate loss of
    W63,775 million from the disposition of its related property and
    equipment to SK Global. The book value of the property and equipment at the
    date of sale totaled W410,635 million. The dispositions of the
    related assets were considered as a disposal of a business segment and was
    accounted for under the provisions of SFAS No.144, "Accounting for the
    Impairment or Disposal of a Long-lived Assets" which superceded APB Opinion
    No. 30. Operating loss from the discontinued operations amounted to
    W51,960 million in 2002.

    The operating results of the cable television business and enterprise
    network service business are shown separately as discontinued operations in
    the accompanying consolidated statement of operations. The consolidated
    statements of operations for 2001 and 2002 have been restated to show the
    operating results of the enterprise network service business separately. Tax
    benefits for the loss from discontinued operations were W2,678
    million in 2001 and nil in 2002.

    The net losses from cable television business and enterprise network service
    business for the year ended 2001 and 2002 were as follows:

    <TABLE>
    <CAPTION>
                                                                     2001             2002
                                                                -------------    --------------
    (in millions of Korean Won)
      <S>                                                      <C>             <C>
       Cable television                                         W       7,849    W            -
       Enterprise network services                                     68,881            51,960
                                                                -------------    --------------
       Total loss from discontinued operation                   W      76,730    W       51,960
                                                                =============    ==============
       </TABLE>





                                      F-25
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

6.  ACCOUNTS RECEIVABLE

    Accounts receivables at December 31, 2002 and 2003 are summarized as
    follows:

   <TABLE>
   <CAPTION>
                                                                  2002               2003
                                                             --------------    -------------
   (in millions of Korean Won)
  <S>                                                       <C>               <C>
   Accounts receivable-trade                                 W       80,985    W      92,061
   Allowance for doubtful accounts                                  (16,065)         (28,253)
                                                             --------------    -------------
   Balance at end of year                                    W       64,920    W      63,808
                                                             ==============    =============
   </TABLE>

    Changes in allowance for doubtful accounts for the years ended December 31,
    2001, 2002 and 2003 are summarized as follows:

   <TABLE>
   <CAPTION>
                                                 2001           2002            2003
                                             -----------    -----------    -------------
   (in millions of Korean Won)
  <S>                                       <C>            <C>            <C>
   Balance at beginning of year              W     3,743    W     8,361    W      16,065
   Write-offs                                          -              -             (961)
   Provision for the year                          4,618          7,704           13,149
                                             -----------    -----------    -------------
   Balance at end of year                    W     8,361    W    16,065    W      28,253
                                             ===========    ===========    =============
   </TABLE>


7.  OTHER RECEIVABLES

    Other receivable at December 31, 2002 and 2003 are summarized as follows:

   <TABLE>
   <CAPTION>
                                                                   2002               2003
                                                               -------------       ------------
   (in millions of Korean Won)
  <S>                                                         <C>                 <C>
   Accounts receivable-other                                   W      74,768       W     23,449
   Discounted present value                                             (275)               (58)
   Allowance for doubtful accounts                                   (21,778)           (18,821)
                                                               -------------       ------------
   Balance at end of year                                      W      52,715       W      4,570
                                                               =============       ============
   </TABLE>





                                      F-26
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    Changes in allowance for doubtful accounts for the years ended December 31,
    2001, 2002 and 2003 are summarized as follows:

   <TABLE>
   <CAPTION>
                                                2001           2002             2003
                                             -----------    -----------    -------------
   (in millions of Korean Won)

  <S>                                       <C>            <C>            <C>
   Balance at beginning of year              W         -    W        78    W      21,778
   Write-offs                                          -              -           (5,641)
   Provision for the year                             78         21,700            2,684
                                             -----------    -----------    -------------
   Balance at end of year                    W        78    W    21,778    W      18,821
                                             ===========    ===========    =============
   </TABLE>

8.  PROPERTY AND EQUIPMENT

    Property and equipment at December 31, 2002 and 2003 consisted of the
    following:

   <TABLE>
   <CAPTION>
                                                                     2002                             2003
                                                                ----------------                  ---------------
      (in millions of Korean Won)
     <S>                                                       <C>                              <C>
      Land                                                      W         12,252                  W        12,252
      Buildings                                                           17,878                           17,878
      Communication circuit equipment                                    166,878                          144,258
      Transmission and communications equipment                          532,609                          434,105
      Furniture, tools and vehicles                                       10,735                            9,207
      Construction-in-progress                                             3,532                           11,359
                                                                ----------------                  ---------------
                                                                         743,884                          629,059
   Less accumulated depreciation                                        (243,140)                        (282,799)
                                                                ----------------                  ---------------
   Property and equipment, net                                  W        500,744                  W       346,260
                                                                ================                  ===============
   </TABLE>

    Depreciable assets are insured against fire and other casualty losses up to
    W246,863 million at December 31, 2003. As of W268,488 million of the
    Company's property and equipment is pledged as collateral for certain
    short-term borrowings and long-term debt.

    During 2002, the Company disposed of its Hybrid Fiber Coaxial (the "HFC")
    leased-line, land and building, enterprise network equipment and others. On
    August 6, 2002, a sales contract with Powercomm for the HFC lease-line was
    completed resulting in a loss of W41,487 million. On August 9, 2002,
    a sales contract with Carlyle Korea Special Purpose Company for the land and
    buildings was completed resulting in a gain of W6,203 million. The
    Company also recognized a loss of W376 million on sale of
    miscellaneous assets. On October 28, 2002, a sales contract with SK


                                      F-27
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    Networks regarding its enterprise network business was completed resulting
    in a loss of W63,775 million.

    During 2003, the Company recognized a loss of W51 million on sale of
    tools with a carrying value of W53 million. On December 31, 2003 a
    sales contract with SK Networks for Communication circuit equipment and
    transmission and communications equipment used for enterprise network
    business in carrying value of W13,037 million was disposed resulting
    in a loss of W2,954 million.

    For the year ended December 31, 2002, the Company recognized an impairment
    loss of W17,467 million as the carrying amount of equipment was not
    recoverable.

    For the year ended December 31, 2003, the Company recognized an impairment
    loss of W55,272 million on tangible assets. As part of the
    reorganization proceeding, the Court required the Company to evaluate all
    fixed assets. During this process the Company identified W28,094
    million related to the abandonment of obsolete assets.

9.  PLEDGED ASSETS

    The Company pledged W299,571 million in assets and W280,500
    million in 2002 and 2003, respectively, as collateral for W350,488
    million and W280,500 million of liabilities in 2002 and 2003,
    respectively. The pledged assets are primarily comprised of fixed assets.
    All rights to exercise collaterals, referred to above, were cancelled when
    the Company entered into the reorganization proceedings on March 27, 2003.


10. LEASE :

    The Company is obligated under various capital leases for equipment as of
    December 31, 2002 and 2003. Equipment and related accumulated depreciation
    recorded under capital leases as of December 31, 2002 and 2003 are
    summarized as follows:

     <TABLE>
     <CAPTION>
                                                                   2002           2003
        (in millions of Korean Won)
       <S>                                                   <C>            <C>
        Transmission and communications equipment             W    36,012    W    34,068
        Accumulated depreciation                                  (19,895)       (26,249)
                                                              -----------    -----------
                                                              W    16,117    W     7,819
                                                              ===========    ===========
        </TABLE>




                                      F-28
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------











                                      F-29
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    Future minimum capital lease payments as of December 31, 2003 are as follow:


         (in millions of Korean Won)

          <TABLE>
          <CAPTION>
                                    FISCAL YEAR                                 AMOUNTS
                                    -----------                            ----------------
                                   <S>                                     <C>
                                        2004                                W        19,193
                                        2005                                          2,333
                                        2006                                          1,384
                                        2007                                              5
                                                                            ---------------
          Total minimum lease payments                                               22,915
          Less : interest                                                            (2,192)
                                                                            ---------------
          Present value of minimum lease payments                                    20,723
          Less : current portion of capital lease obligations                       (17,270)
                                                                            ---------------
          Capital lease obligations, excluding current portion              W         3,453
                                                                            ===============
</TABLE>


11. SHORT-TERM BORROWINGS

    Short-term borrowings at December 31, 2002 and 2003 consists of the
    following :

             <TABLE>
             <CAPTION>
             (in millions of Korean Won)               2002            2003
                                                 ---------------  --------------
            <S>                                  <C>              <C>
             General Loans
               Korea Exchange Bank                W        3,000   W           -
               Jeil Mutual Saving Bank                     8,774               -
               Dacom Corporation                           1,000           1,000
                                                  --------------   -------------
                                                  W       12,774   W       1,000
                                                  ==============   =============
             </TABLE>

    The weighted average interest rates of short-term borrowings were 10.14% and
    nil at December 31, 2002 and 2003.



                                      F-30
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

12. LONG-TERM DEBTS

    As a result of the Company entering reorganization proceedings, certain
    covenants were violated. In accordance with debt agreements these
    liabilities are due on call and are therefore classified as current
    liabilities.

    Long-term debts outstanding as of December 31, 2002 and 2003 are summarized
    as follows:

    <TABLE>
    <CAPTION>
    (in millions of Korean Won)                                                     2002               2003
                                                                                ------------      --------------
    <S>                                                                        <C>                <C>
     WON DENOMINATED LOANS:
     Secured bonds                                                              W    146,652       W     153,905
     Unsecured bonds                                                                 124,453             123,500
     Unsecured loans, representing obligations principally to banks                   86,774              20,823
                                                136,282
                                                434,510
                                                153,905
     Secured loans, representing obligations principally to banks                    136,820             136,282
                                                                                ------------       -------------
                                                                                     494,699             434,510
                                                                                ------------       -------------
        Less : Current portion                                                      (366,025)           (425,190)
        Less : Discount on bonds issued                                               (1,752)               (519)
                                                                                ------------       -------------
                                                                                     126,922               8,801
                                                                                ------------       -------------

     US DOLLAR DENOMINATED LOANS:
     Secured bonds                                                                     8,883               8,864
     Secured loans, representing obligations principally to banks                      4,409               4,400
                                                                                ------------       -------------
                                                                                      13,292              13,264
                                                                                ------------       -------------
        Less : Current portion                                                        (4,409)             (4,400)
        Less : Discount on bonds issued                                                    -                   -
                                                                                ------------       -------------
                                                                                       8,883               8,864
                                                                                ------------       -------------
                                                                             W       135,805       W      17,665
     </TABLE>




                                      F-31
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    On July 27, 2000, the Company issued 5th convertible bonds with total
    principal amount of W100,000 million for cash of W99,696
    million which were to be redeemed on July 27, 2003. The bonds had a coupon
    interest rate of 2.0% per annum, payable on a quarterly basis starting at
    the end of the first quarter after the issuance date. However, for all or a
    portion of the bonds that were not converted into the Company's common
    shares, additional compound interest at a rate of 6.0% per annum, calculated
    on a quarterly basis from the issuance date to the redemption date, would be
    payable on the redemption date. The bonds were convertible into the
    Company's shares of common stock from July 27, 2001 to July 26, 2003, and
    the conversion price would be the lowest of (a) the average of the following
    amounts: (i) the weighted average of the daily market share prices for the
    one-month period from one day prior to the date of determination per the
    Company's minutes; (ii) the weighted average of the daily market share
    prices for the one-week period from the date of determination per the
    Company's minutes; and (iii) the latest closing price that can be obtained
    before the year end; (b) the average of the following amounts: (i) the
    weighted average of the daily market share prices for the one-month period
    prior to the first date of conversion date July 27, 2001; (ii) the weighted
    average of the daily market share prices for the one-week period prior to
    July 27, 2001; and (iii) the latest closing price that can be obtained
    before the year end; or (c) the latest closing price that can be obtained
    before the year end which is W2,150 at December 29, 2001.

    In 2002, the Company modified the contract with Korea Development Bank, the
    holder of the 5th convertible bond by fixing the conversion price at
    W1,136 in accordance with modified contract at August 28, 2002.
    Aforementioned conversion price was agreed with Korea Development Bank in
    accordance with assignment of convertible bonds attached contract dated
    August 28, 2002. The 5th convertible bonds agreement contains debt
    covenants. At December 31, 2002, the Company was in breach of the debt
    covenant. Under the terms of the agreement, the lender may call the loan if
    the Company was in violation of any restrictive covenants. As of December
    31, 2002, the lender did not waived capital requirement, and accordingly
    W100,000 million of convertible bonds had been reclassified to
    current portion of convertible bonds.

    At March 21, 2002, the Company issued 20th convertible bond with total
    principal amount of W952 million for cash of W833 million,
    which were to be redeemed on March 21, 2005. The bonds had a coupon interest
    rate of 4.0% per annum, payable on an annual basis starting at the end of
    the first year after the issuance date. However, for all or a portion of the
    bonds that were not converted into the Company's common shares, additional
    compound interest at a rate of 12.0% per annum, calculated on an annual
    basis from the issuance date to the redemption date, would be payable on the
    redemption date. The bonds were convertible into the Company's shares of
    common stock from June 22, 2002 to February 21, 2005, at the conversion
    price of W100 thousand. None of this had been exercised for the
    period ended December 31, 2002.




                                      F-32
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
--------------------------------------------------------------------------------

    On January 26, 2001, the Company issued bonds with warrants with par value
    of US $70 million to Softbank, W59,200 million to Naray and
    W76,960 million to TriGem. The exercisable warrants entitle Softbank,
    Naray and TriGem to acquire 828,800, 592,000 and 792,600 shares of the
    Company's common stock, respectively. All shares were exercisable at an
    exercise price of W100 thousand per share from January 27, 2001
    through January 26, 2006. For financial reporting purpose, the portion of
    the proceeds allocable to the warrants, in the amount of W148,682
    million had been recorded as additional paid-in-capital.

    On February 28, 2002, Softbank, Naray and TriGem exercised their warrants to
    acquire 828,800, 296,000 and 177,600 shares of the Company's common stock,
    respectively. Pursuant to the original agreement, Softbank, Naray and TriGem
    elected to tender their bonds to the Company with par value equal to the
    exercise price of the warrant. At the time of the issuance, the par value of
    the US $70,000 thousand bond issued to Softbank was equivalent to
    W82,880 million. The value of Korean Won had subsequently depreciated
    against U.S. dollar. At the time of the exercise, US $62,600,000 was
    equivalent to W82,880 million in accordance with the exchange rate
    published by the Korea Financial Telecommunications and Clearing Institute
    on the day immediately preceding the date of exercise. To compensate
    Softbank for the difference between the par value of the bond surrendered
    and the exercise price of its warrants, the Company issued a par value of US
    $7,400 thousand debenture at the exact same term as the bond surrendered to
    Softbank. All of the Company's 654,183 of cable modems as well as 35,000,000
    shares of Korea.com Communications were pledged as collateral. The Company
    recognized loss of W81,029 million, net of income tax benefit of
    W61 million on the early retirement of the bonds.

    On August 2002, the Company entered into an agreement to exercise a debt to
    equity conversion on the bonds with warrant held by Tri-Gem and Naray. The
    conversion took place on August 2002, with the Company issuing 1,302,816 and
    651,408 shares of common stock at W45 thousand per share in exchange
    for par value W59,200 million and W29,600 million of the bonds
    with warrants. The Company recognized loss of W48,014 million on the
    early retirement of the bonds. Warrants to purchase 296,000 shares of common
    stock at revised exercise price of W300 thousand per share remain
    outstanding.

    Accretion of bond discount was W3,922 million and W1,549
    million for the years ended December 31, 2001 and 2002, respectively. These
    amounts were recorded as interest expense.

    On September 14, 2001, in connection with plant and equipment loans,
    debentures and convertible bonds, the Company entered into a comprehensive
    agreement on financial structure improvement with Korea Development Bank. In
    addition to the contract, Korea Development Bank added supplementary article
    on May 31, 2002 concerning grace of payment and related requirements. In an
    event of default, the Korea Development Bank may not provide additional
    loans and may demand immediate payment of existing loans. As of December 31,
    2002, the Company was in breach of certain debt covenants and the lender had
    not waived capital requirement of plant and equipment


                                      F-33




<PAGE>
KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------
loans. Accordingly W132,650 million of long-term debt had been
reclassified to current portion of long-term debt.

On August 14, 2000, the Company entered into a vendor financing agreement with
CISCO of 35 million U.S. dollars, which was available until December 31, 2000,
and an additional 40 million U.S. dollars, reduced from an initial available
amount of 80 million U.S. dollars, available starting January 1, 2001 until
December 31, 2001. This financing arrangement was for purchase of networking and
telecommunications equipment from CISCO. Repayment terms stipulate that
principal and interest were payable in 16 consecutive quarterly installments
from the last day of availability period for vendor financing. For the first 8
consecutive quarterly installments, 3.75% of total drawn amount was required to
be paid and 8.75% for the last 8 consecutive quarterly installments. The Company
paid a one-time underwriting fee of 0.75% of the total available credit totaling
US$862,500 which was recognized as expense during the available period for 2000
and 2001. Additionally, the Company was required to pay commitment fees of 1%
per year on the average daily unused balance of the total available credit. As a
result of such vendor-financing contract, the Company had purchased machinery
and equipment in amount of approximately US$11,116 and US$14,479 in 2000 and
2001, respectively. Available period to benefit from such contract was over by
the end of 2001 however comprehensive agreements related to the repayment of
outstanding balance remain. In any event of default on the agreements, the
Company was required to transfer the assets that were purchased from CISCO and
all right, title and interest in the assets to CISCO. The vendor financing
agreement contains certain debt covenants. At December 31, 2001, the Company was
in breach of the debt covenant. In addition, subsequent to December 31, 2002,
the Company failed to pay US$3,673,253 to CISCO at its due date, February 28,
2003. Under the agreement, CISCO had the ability to call the outstanding debt or
require the Company to return the Company to return the equipment purchased from
them.

On June 12, 2001, the Company obtained an asset-backed loan in the amount of
W150 billion from five major financial institutions including Kookmin Bank (the
"Banks") and had pledged certain receivables expected to be generated from
future broadband Internet services revenue from 2001 to 2005 amounting to
approximately W210 billion as collateral. The loan agreement contained covenants
requiring the Company to maintain a debt to equity ratio less than 5:1 at each
fiscal year end. At December 31, 2002, the Company was in breach of the debt
covenants. Under the terms of the agreement, the lender can call the loan if the
Company was in violation of any restrictive covenants. At the end of 2002, the
lender did not waived capital requirement of asset-backed loans, and
accordingly, entire long-term debt had been reclassified to current portion of
long-term debt.

During 2001, the Company obtained an asset-backed security in the amount of W120
billion with interest rates of 8.5% per annum from Kookmin Bank, and had pledged
certain receivables expected to be generated from future enterprise network
services revenue from 2001 to 2005 amounting to approximately W246 billion as
collateral. On October 28, 2002, the Company repaid the total debt and
recognized a loss of W637,432 million, net of income tax benefit of W269,299
million.

                                      F-34
<PAGE>
KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

Upon approval of the reorganization petition by the court on March 27, 2003, any
enforcement of collection of debts and legal proceedings were suspended.




                                      F-35

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     The aggregate annual maturities of long-term debt outstanding as of
     December 31, 2003 were as follows :

     <TABLE>
     <CAPTION>
                                                              WON             US DOLLAR
                                                          DENOMINATED        DENOMINATED
     (in millions of Korean Won)                             LOANS             LOANS               TOTAL
                                                          -----------        -----------           -----
     <S>                                                   <C>               <C>                <C>
     For the years ending December 31,
        2005                                                W  8,867          W     -            W   8,867
        2006                                                       -            8,864                8,864
                                                            --------          -------            ---------
                                                            W  8,867          W 8,864            W  17,731
                                                            ========          =======            =========
     </TABLE>

13.  RETIREMENT AND SEVERANCE BENEFITS


     Other non-current liabilities include the liability for retirement and
     severance benefits at December 31, 2002 and 2003 are as follows:

     <TABLE>
     <CAPTION>

     (in millions of Korean Won)                                    2002               2003
                                                                    ----               ----
     <S>                                                         <C>                 <C>
     Balance, beginning of period                                 W  3,964            W  2,779
     Severance plan expense                                          2,723               1,176
     Plan payments                                                  (3,908)             (1,049)
                                                                  --------            --------
                                                                     2,779               2,906
                                                                  --------            --------

     Cumulative transfer to National Pension
       Fund, net                                                       (33)                (31)
     Payments made to severance insurance deposit
       fund                                                           (413)               (396)
                                                                  --------            --------
     Balance, end of period                                       W  2,333            W  2,479
                                                                  ========            ========

     </TABLE>

     Payments made to the severance insurance deposit fund are used to reduce
     the Company's accrued severance benefit liabilities. As of December 31,
     2003, the amount placed to the severance insurance deposit fund was 13.61%
     of the Company's total severance benefit liability. The beneficiaries of
     the severance insurance deposit are the Company's employees.

                                      F-36
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

14.  COMMITMENTS AND CONTINGENCIES

     The Company has provided total 6 promissory notes to creditors as
     collaterals as of December 31, 2003.

     As of December 31, 2003, the Company entered into overdraft agreement up to
     W2,000 million with Hanmi Bank. In relation to the overdraft agreement, the
     Company has provided bank deposits amounting to W2,000 million as
     collateral to Hanmi Bank.

     In 1997, the Company entered into a three-year Internet System License
     Agreement with Microsoft to provide Microsoft Internet System License and
     technical support to the Company. In accordance with the agreement, until
     2000, the Company has paid Microsoft a percentage of the gross monthly
     subscriber fees resulting from the Company's broadband Internet services.
     In late 2000, the Company renewed the agreement and modified the terms
     whereby, effective 2001, the Company shall pay Microsoft a certain fixed
     amount per the Company's number of subscribers. This agreement was renewed
     for an additional 2 years in September 2003. During 2001, 2002 and 2003 the
     Company paid W4,039 million W3,586 million and W2,519 million respectively,
     under this agreement.

     In June 1997, the Company entered into a long-term agreement with Korea
     Electric Power Corporation ("KEPCO") under which the Company utilizes
     KEPCO's network infrastructure, including KEPCO's fiber optic network and
     other ancillary facilities (such as telecommunications ducts, electric
     poles, and installation space in buildings). In early 2000, the long-term
     agreement with KEPCO related to fiber optic network and ancillary
     facilities excluding electric poles was transferred to Powercomm to provide
     leasing of network lines owned by KEPCO. The Company pays a usage-based fee
     equal to a fixed percentage of the Company's monthly enterprise network
     services revenues for the use of the fiber optic network and certain other
     usage-based fees for the use of the ancillary facilities. The agreements
     with KEPCO and Powercomm are automatically renewed unless cancelled by
     either the Company, KEPCO or Powercomm. In January 2001, the Company
     entered into an agreement with Powercomm, under which the Company agreed to
     pay a monthly minimum usage fee for the Company's use of Powercomm's line
     facilities and dark fiber and to pay a part of the lease fees requested by
     Powercomm in settlement of the disagreement. This agreement also
     supplements the Agreement Concerning Provision of Facilities dated June
     1997, an earlier agreement with Powercomm concerning Powercomm's provision
     of line facilities and dark fiber. Under this supplemental agreement, the
     Company agreed to lease Powercomm's line facilities and dark fiber for a
     minimum period of three years from the date on which we commence using
     those line facilities or dark fiber. The Company must pay a monthly usage
     fee which is determined based on the length and the bandwidth of line
     facilities and the number of dark fibers used by the Company during the
     relevant month. The fee and term provisions became effective retroactively
     from July 2000.


                                      F-37
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     In March 1999, the Company entered into an agreement with KEPCO to lease
     the HFC Network for 3 years for lease payments equal to a fixed percentage
     of certain broadband Internet services revenue. The agreement was
     transferred to Powercomm in early 2000. Under certain conditions, this
     agreement can be terminated by either party prior to its expiration. In
     January 2001, the Company entered into an agreement with Powercomm on the
     provision of HFC network which supplements an earlier agreement concerning
     cable television network use dated March 1999. Under this supplemental
     agreement, Powercomm agreed to provide HFC network in those areas where the
     Company does not have an exclusive marketing agreement with a system
     operator. The Company have agreed that Powercomm will provide its cable
     television transmission network to a number of Internet service providers
     using the other frequency range of the cable television transmission
     network in an area where the Company provides value added services using
     specific frequency range of Powercomm's cable television transmission
     network, and Powercomm must allow the Company to participate in such
     project. With regard to the fees for the use of the cable television
     transmission network, the Company guaranteed to Powercomm the minimum
     monthly usage fees per subscriber from January 1, 2001. In February 2001,
     the Company entered into an agreement for the supply and use of network
     facilities of Powercomm in its multi-ISP areas.

     The network facilities include cable television electrical transmission
     network, HFC network, cable modem termination system, dynamic host
     configuration protocol servers and fiber optic gigabit switch. The period
     of this agreement is three years from February 27, 2001 and shall be
     extended for another three years unless a party demands to terminate or
     amend this agreement in writing. Under this agreement, the Company should
     pay a fixed amount of basic fees depending on the area, and monthly fees
     per subscribers. During 2001, 2002 and 2003, the Company paid
     W40,266 million W53,215 million and W58,408 million,
     respectively, under these agreements.

     In January 2001, the Company entered into another agreement with Powercomm,
     which supplements the Agreement Concerning Provision of Facilities dated
     June 1997 and the Agreement on Provision of Line Facilities and Dark Fiber
     dated January 2001. Under this agreement, Powercomm and the Company agreed
     that the period applicable for the minimum usage fees guaranteed to
     Powercomm under the agreement on the provision of line facilities and dark
     fiber shall be from July 1, 2000 to June 30, 2002. The minimum usage fees
     applicable thereafter shall be determined by the parties by June 30, 2002.
     During 2001, 2002 and 2003, the Company paid W62,678 million,
     W29,640 million and W2,241 million, respectively, under these
     agreements.

     On August 6, 2002, the Company sold HFC lease-line to Powercomm. According
     to the sales contract, if the Company leases back the lines, it must
     exclusively lease lines from Powercomm only, for next ten years.

     On October 28, 2002, the Company disposed of its enterprise network
     service business to SK Global. According to the contract, the Company is
     liable for any lawsuit or claims for damages relate to period prior to the
     final contract date. Also, in relation to the usage of transmission and
     communications equipment of KEPCO without permission, the Company is
     jointly responsible with SK Global for repair and maintenance expenses upon
     request from KEPCO until December 31, 2003. If the Company leases back the
     lines, it must exclusively lease lines from SK Global and its affiliates.


                                      F-38

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     In October 1999 and in January 2000, the Company entered into agreements
     with GNG Networks and SK Telecom Co., Ltd., respectively, to lease dark
     fiber for lease payments based on usage. During 2000 and 2001, the Company
     paid W3,421million and W2,455 million, respectively, under
     such leases. In 2003 the agreement with GNG Networks were terminated, as a
     result, the Company paid W2,454 million to SK Telecom Co., Ltd in
     2003.

     In 1998, the Company entered into an agreement with Dacom Corporation and
     in 2000, the Company entered into agreements with Onse Telecom and MCI Com
     to lease international private leased circuit for fixed monthly payments.
     In 2001, the Company entered into an agreement with Naray Telecom to lease
     international private leased circuit for fixed monthly payments. During
     2001, 2002 and 2003, the Company paid a total of W29,478 million, W28,626
     million and W12,708 million, respectively, under such leases.

     As of December 31, 2003 the Company is a defendant in seventeen related
     lawsuits including one class action and the lawsuits seeking approximately
     W115,373 million and US$8,679 thousand in total damages. These lawsuits are
     currently pending before the court and the outcome cannot presently be
     determined.

     The Company has provided financial guarantees to its related party to
     enhance their credit standings. They represent irrevocable assurance that
     the Company will make payment in the event that its related parties fail to
     fulfill their obligations to third parties.

     The Company's guarantees under FIN 45 at December 31, 2003 which maximum
     potential amount of future payments amount to US$ 6,184 thousand and these
     payments expire within one year.

15.  INCOME TAXES

     The components of income tax expense attributable to loss before provision
     for income taxes and extraordinary item for the years ended December 31,
     2001, 2002 and 2003 are summarized as follows:

     <TABLE>
     <CAPTION>

     (in millions of Korean Won)                        2001            2002              2003
                                                        ----            ----              ----
     <S>                                              <C>              <C>               <C>
     Current:                                         W      -         W    131          W     -
     Deferred:                                               -                -                -
                                                      --------         --------          -------
     Total                                                   -              131                -
     Income tax (benefit) allocated to
        discontinued operation                          (2,677)               -                -
     Income tax (benefit) allocated to
        disposition of discontinued operation            2,677                -                -
                                                      --------         --------          -------
     Continuing operation                             W      -         W    131          W     -
                                                      ========         ========          =======
     </TABLE>

                                      F-39

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     The Company is subject to a number of taxes based upon earnings which
     results in the following normal tax rates :

     <TABLE>
     <CAPTION>
     TAXABLE EARNINGS                                 RATES
     ----------------                                 -----
     <S>                                              <C>
     Up to W 100 million                              16.5%
     Over  W 100 million                              29.7%
     </TABLE>

     The Company incurs income tax liabilities based on taxable income
     determined in accordance with Korean generally accepted accounting
     principles and tax laws. The tax provision included in these financial
     statements reflects current tax expense and deferred taxes under the
     provisions of US GAAP SFAS No. 109, Accounting for Income Taxes.

     The statutory tax rate, applicable to the Company for 2001 was
     approximately 30.8% and for 2002 and 2003 it was applied approximately
     29.7%. The reconciliation from income taxes calculated using the statutory
     tax rate to the effective tax rate for each of the periods is as follows :

     <TABLE>
     <CAPTION>

     (in millions of Korean Won)                                 2001                   2002                  2003
                                                                 ----                   ----                  ----
     <S>                                                  <C>                   <C>                      <C>
     Taxes at Korean statutory tax rate                    W  (78,128)           W  (129,522)             W  (35,937)
     Permanent differences                                     15,584                  7,730                   5,810
     Tax benefits not recognized in current period             57,751                121,923                  27,895
     Effect of change in tax rate                               4,793                      -                   2,232
     Special tax levied to gains on sale
        of certain property                                         -                      -                       -
                                                           ----------            -----------              ----------
      Total income tax provision                           W        -            W       131              W        -
                                                           ==========            ===========              ==========
 </TABLE>


                                      F-40
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     The tax effects of temporary differences that resulted in significant
     portions of the deferred tax assets and liabilities at December 31, 2002
     and 2003 and a description of the financial statement items that created
     these differences are as follows :

     <TABLE>
     <CAPTION>
     (in millions of Korean Won)                                2002                  2003
                                                                ----                  ----
     <S>                                                   <C>                    <C>
     Deferred tax assets:
         Accounts receivable                                W    18,513            W   12,682
         Investment securities                                   31,807                20,100
         Other investment                                             -                 7,726
         Property and equipment                                   2,115                 2,192
         Intangible assets                                        1,011                   913
         Accrued expenses                                         4,857                     -
         Net operation loss carry forward                       171,247               194,288
         Tax credit                                              29,070                17,254
         Others                                                   2,964                   559
                                                            -----------            ----------
                  Total deferred tax assets                 W   261,584            W  255,714
                                                            -----------            ----------
     </TABLE>

     <TABLE>
     <CAPTION>
                                                                2002                  2003
                                                                ----                  ----
     <S>                                                   <C>                    <C>
     Deferred tax liabilities:
         Others                                             W      (112)           W     (122)
                                                            -----------            ----------
                Total deferred tax liabilities                     (112)                 (122)
                                                            -----------            ----------
     Deferred tax assets (liabilities)
        before valuation allowance                              261,472               255,592
     Valuation allowance                                       (261,472)             (255,592)
                                                            -----------            ----------
     Net deferred tax assets (liabilities)                  W         -            W        -
                                                            ===========            ==========
     </TABLE>

     At December 31, 2003, the Company had W702,821 million of net
     operating loss carry forwards ("NOLs") available to offset future taxable
     income. These losses expire in the periods ranging from 2004 to 2008. Also,
     the Company has a tax credit in the amount of W17,254 million, a
     credit against the Company's income tax liability which was generated in
     1999 and 2000, based on investments in certain equipment and development
     costs incurred. Since the Company did not have a tax liability in 2000,
     2001 or 2002, this credit generated in 1999 and 2000 can be carried forward
     from 4 to 7 years from the occurrence.

     Deferred income tax assets are recognized only to the extent that
     realization of the related tax benefit is more likely than not. Management
     believes it is uncertain whether the Company is able to generate sufficient
     profits to offset their tax losses prior to the expiration of prior year
     NOLs. Accordingly, a valuation allowance totaling W261,472 million
     and W255,592 million in 2002 and 2003, respectively, was established
     for deferred income tax assets that may not be realized.

                                      F-41
<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

16. STOCKHOLDERS' EQUITY

     In January and December of 2001, the Company issued an additional 651,200
     and 109,122 shares of common stock for total cash consideration of
     W64,744 million and W12,690 million, respectively.

     In February 2002, the Company issued an additional 1,302,400 common shares
     upon exercise of warrants by Softbank, Tri-Gem and Naray.

     In August of 2002, the Company issued an additional 1,954,225 common shares
     at W45,440 per share by means of converting bonds with warrants into
     common shares.

     In November of 2002, the Company authorized a three-for-one reverse stock
     split, as a result, the Company decreased from 5,826,644 common stock
     issued and outstanding to 1,940,881 and decreased from W582,264
     million common stock at par value to W194,088 million.

     In August 2002, the Company acquired 32,231 shares of common stock for
     W1,126 million. After the three-for-one reverse stock split, the
     Company decrease its treasury stock to 10,743 shares. Subsequently, the
     Company acquired an additional 159 shares of common stock for W16
     million. At December 31, 2002, the Company held 10,902 shares of treasury
     stock.

     At December 31, 2002 and 2003, the Company has 400,000,000 authorized
     shares, consisting of voting common shares and voting preferred shares of
     W2,500 at par value. Under its articles of incorporation, the
     Company may issue up to 40,000,000 non-voting preferred shares. There were
     no non-voting preferred shares outstanding as of December 31, 2002 and
     2003.

     In January 19, 2004, the Company authorized a forty-for-one reverse stock
     split. In the consolidated financial statements, number of shares, per
     share amounts, and stock option data have been adjusted by the effect of
     reverse stock split.

                                      F-42

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

17. STOCK-BASED COMPENSATION

     STOCK OPTION PLAN
     Prior to the reorganization, the Company had a stock option plan (the
     "Plan") pursuant to which the Company may grant options to qualified
     officers and employees. In accordance with the Plan prior to March 2000,
     stock options were granted with a minimum exercise price equal to the
     three-month average market closing price of the Company's shares prior to
     the shareholders' meeting at which the grant of options was approved. The
     Plan was modified in March 2000 pursuant to which stock options were
     granted with a minimum exercise price equal to the arithmetic mean of (i)
     the weighted average of the daily market share price for the two-month
     period prior to the date on which the stock options were granted, (ii) the
     weighted average of the daily market share price for the one-month period
     prior to such date and (iii) the weighted average of the daily market share
     price for the one-week period prior to such date. When new shares are
     issued upon the exercise of stock options, the option exercise price shall
     not be less than the par value of the Company's shares. Under the terms of
     the Plan prior to March 2000, the options vest at the end of the third year
     from the date of grant and are exercisable for a period of 7 years from the
     date they become vested. Options granted under the modified terms of the
     Plan effective March 2000, vest at the end of the second year from the date
     of grant and are exercisable beginning after the end of the third year from
     the date of grant for a period of 7 years from the date they become
     exercisable. The maximum aggregate number of shares available for issuance
     under the Plan shall not exceed 10% of the total number of the Company's
     shares outstanding.

     On March 24, 2000, the Company granted options for up to 13,916 common
     shares to certain of its executive officers, directors and employees. The
     exercise price of the options granted were W5,808 thousand per
     share. The options vested on March 25, 2002 and are exercisable from March
     25, 2003 until March 24, 2010.

     On March 27, 2001, the Company granted options for up to 22,558 common
     shares to certain of its executive officers, directors and employees. The
     exercise price of the options granted were W864 thousand per share.
     The options vested on March 28, 2003 and will become exercisable from March
     28, 2004 until March 27, 2011.

    In connection with the restructurings, on January 9, 2004, all of
    outstanding stock options given to the Company's employees and directors
    were cancelled as per the reorganization plan.


                                      F-43
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

    A summary of changes in number of options outstanding during 2002 and 2003
    is as follows. The following number of options and exercise price of stock
    option have been adjusted by the effect of reverse stock split (exercise
    prices are in thousands of Won):

    <TABLE>
    <CAPTION>
                                                              2002                              2003
                                                   ---------------------------      ----------------------------
                                                    Number         Weighted          Number        Weighted
                                                      of            average            of           average
    (in millions of Korean Won)                     options     exercise price       options     exercise price
                                                    -------     --------------       -------     --------------
    <S>                                            <C>            <C>               <C>           <C>
    Options outstanding, beginning of year           59,829        W  1,474           49,279       W  1,604
    Options granted                                       -                                -
    Options forfeited                               (10,550)           (864)         (14,323)          (930)
                                                    -------        --------          -------       --------
    Options outstanding, end of year                 49,279        W  1,604           34,956       W  1,880
                                                    =======        ========          =======       ========
    </TABLE>

    PRO FORMA AND FAIR VALUE DISCLOSURES
    Had compensation expense for the Company's stock options been recognized
    based on the fair value of the options on the grant date under the
    methodology prescribed by SFAS 123, using an option pricing model intended
    to estimate the fair value of the awards at the grant date, the Company's
    net loss and loss per share amounts for the years ended December 31, 2002
    and 2003, would have been impacted as shown in the following table (in
    millions, except per share amounts).

    <TABLE>
    <CAPTION>


    (in millions of Korean Won)                            2002               2003
                                                           ----               ----
    <S>                                                <C>                <C>
    Net loss:
        As reported                                     W (436,102)        W (120,999)
        Pro forma                                         (437,464)          (121,191)
    Loss per share-basic and diluted:
        As reported (in Korean Won)                       (303,042)           (62,694)
        Pro forma (in Korean Won)                         (303,988)           (62,793)
    </TABLE>

    Solely for purposes of providing the disclosures required by SFAS No. 123,
    the fair value of each option granted is estimated on the date of grant
    using the Black Scholes option-pricing model using the following
    assumptions:

    <TABLE>
    <CAPTION>
                                                      2000                  2001
                                                      ----                  ----
    <S>                                            <C>                   <C>
    Expected life of option                         3 years               3 years
    Risk free interest rate                           9.03%                 5.72%
    Expected volatility                              65.91%                75.72%
    Expected dividend yield                           0.00%                 0.00%
    </TABLE>

                                      F-44

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

    The fair values of options granted during 2000 and 2001 are as follows (in
    thousands, except number of options and per option amounts):

    <TABLE>
    <CAPTION>
                                                           2000                  2001
                                                           ----                  ----
    <S>                                                 <C>                 <C>
    Fair value of each option granted                    W   3,427          W    131,160
    Total number of options granted                          3,654                43,337
    Total fair value of all options granted              W  12,524          W  5,684,147
    </TABLE>

    As a result of the reorganization, all options were cancelled. The Company
    ceased accruing stock compensation expense at the filing date of bankruptcy.

18. LOSS PER SHARE

    Loss per share for years ended December 31, 2001, 2002 and 2003 were
    calculated as follows:

    BASIC(DILUTED) LOSS PER SHARE

     <TABLE>
     <CAPTION>

     (in millions of Korean Won)                            2001            2002           2003
                                                            ----            ----           ----
      <S>                                               <C>             <C>            <C>
      Basic (Diluted) Net Loss Per Share:
        Loss from continuing operation                   W (195,024)     W (320,367)    W (120,999)
        Net loss from discontinued operation                (68,036)       (115,735)             -
                                                         ----------      ----------     ----------
        Net loss attributable to common shares           W (263,060)     W (436,102)    W (120,999)
                                                         ==========      ==========     ==========
        Weighted average number of common shares
           outstanding                                      803,753       1,439,082      1,929,979

     (in Korean Won)
     Net Loss Per Share:
        Loss from continuing operation                   W (242,642)     W (222,619)    W  (62,694)
        Net loss from discontinued operation                (84,648)        (80,423)             -
                                                         ----------      ----------     ----------
                   Basic (diluted) net loss per share    W (327,290)     W (303,042)    W  (62,694)
                                                         ==========      ==========     ==========
     </TABLE>


19.  LOSS ON CANCELLATION OF CONTRACT

     The Company entered into an agreement with Onsetel. Co., Ltd. on March 29,
     2000 regarding the exclusive use of certain broadband capacity via an
     international transoceanic fiber optic cable. The contract was cancelled by
     the Company in May 2001 and W28,330 million was recorded as a loss on
     cancellation of contract under operating expenses.

20.  ADVERTISING COSTS

     Advertising costs, amounting to W12,921 million, W10,887 million and
     W12,431 million for the


                                      F-45

<PAGE>



KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------


     years ended December 31, 2001, 2002 and 2003, respectively, were expensed
     as incurred.


                                      F-46

<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

21.  RELATED PARTY TRANSACTIONS

     The following are major balances and transactions with related parties as
     of and for the years ended December 31, 2001, 2002 and 2003, respectively.

      <TABLE>
      <CAPTION>

      (in millions of Korean Won)                           2001                2002                2003
                                                            ----                ----                ----
      <S>                                                  <C>                <C>                 <C>
      Trigem Computer, Inc.:
      ---------------------
           Revenues                                        W    129            W    384            W    51
           Current payables                                   8,566                 228                  1
           Interest expenses                                  1,640               2,321                  -
           Accounts receivable                                   47                 469                  4
           Other long-term liabilities                          196                   -                  -
           Bonds                                             76,901                   -                  -

      TG Ubase Inc.:
      -------------
           Accounts receivable                                  896               1,343                 82
           Commission expense                                39,731              36,530             29,788
           Accounts payable                                  14,029              13,740                  -
           Revenues                                              49                  77                  1
           Interest income                                      542                   -                  -
           Other Assets                                       3,038               2,118                  -

      Thrunet Shopping Inc.:
      ---------------------
           Revenues                                             203                   -                  -
           Accounts payable                                     431                   -                  -

      Microsoft Corporation.:
      ----------------------
           Commission expense                                 5,820               2,763              2,519
           Accrued expenses                                     564               3,445                  -

      Nowcom Co., Ltd.:
      ----------------
           Revenues                                           1,097                 583                304
           Commission expense                                     -               1,278                  -
           Purchase                                               -                   -                738
           Accounts receivable                                    -                  60                 73
           Accounts payable                                   3,062                 460                333
      </TABLE>

                                      F-47

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>

      (in millions of Korean Won)                           2001                2002                2003
                                                            ----                ----                ----
      <S>                                                  <C>                <C>                 <C>
       Softbank.:
       ---------
            Revenues                                       W      -            W    712           W      -
            Interest expenses                                 1,235                 995                  -
            Accrued expenses                                    658                  54                  -
            Bonds                                            92,757               7,097                  -

       Naray & Company Inc.:
       --------------------
            Interest expenses                                 1,262               1,346              1,346
            Accrued expenses                                  1,252                   -                  -
            Bonds                                            59,155                   -                  -
            Loans to others                                       -              11,500             11,500
            Revenues                                              -                   -                  2

       Kinam Broadcasting Inc.:
       -----------------------
            Revenues                                              -                   -                252
            Accounts receivable                                   -                   -                144
</TABLE>

22.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The estimated fair value of financial instruments has been determined by
     the Company using available market information and appropriate
     methodologies; however, considerable judgment is required in interpreting
     market data to develop estimates for fair value. Accordingly, these
     estimates are not necessarily indicative of the amounts that the Company
     could realize in a current market exchange. Certain of these financial
     instruments are with major financial institutions and expose the Company to
     market and credit risks and may at times be concentrated with certain
     counter parties or group of counter-parties. The creditworthiness of
     counterparties is continually reviewed, and full performance is
     anticipated.

                                      F-48
<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------


    The estimated fair values of the Company's long-term debt and bonds at
    December 31, 2002 and 2003 are summarized as follows :

   <TABLE>
   <CAPTION>
                                                            2002                                    2003
                                             ---------------------------------       ----------------------------------
   (in millions of Korean Won)               Carrying amount        Fair value       Carrying amount         Fair value
                                             ---------------        ----------       ---------------         ----------
    <S>                                        <C>                  <C>                <C>                   <C>
    Long-term debt, including current
       portion                                  W  228,003           W 227,951          W  161,505            W 160,312
    Bonds                                          294,184             304,593             294,716              294,725
   </TABLE>


23. SEGMENT INFORMATION

    The Company's reportable segments offer different products and services. The
    segments are managed separately based on the differences in products and
    services, technology and marketing strategies. Management evaluates the
    performance of each reportable segment based on financial information
    prepared in accordance with Korean GAAP. Such financial information is
    presented in the table below with reconciling adjustments to the Company's
    financial statements prepared in accordance with U.S.GAAP.

    In 2001, the Company disposed of its entire cable television business.
    Consequently, the Company had three reporting segments for the year ended
    December 31, 2001 : enterprise network, broadband Internet, and portal
    services. The results of operations of the cable television business for
    2000 and 2001 have been reclassified to discontinued operations.

    In 2002, the Company disposed of its enterprise network services business.
    Consequently, the Company had two reporting segments for the year ended
    December 31, 2002: broadband Internet and portal services. The results of
    operations of the enterprise network services business for 2001, 2002 and
    2003 have been reclassified to discontinued operations.


                                      F-49

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

    The following table provides information for each reportable operating
    segment for the years ended December 31, 2001, 2002 and 2003.

    <TABLE>
    <CAPTION>

    (in millions of Korean Won)                           2001                  2002                  2003
                                                          ----                  ----                  ----
    <S>                                               <C>                   <C>                    <C>
    Revenues:
    Broadband Internet                                 W 360,887             W 425,570              W 388,321
    Portal                                                12,634                16,679                 13,677
                                                       ---------             ---------              ---------
                                                         373,521               442,249                401,998

    Inter-segment revenues                               (12,729)              (20,838)               (14,134)
    US GAAP adjustments                                    8,340                 5,729                 10,918
                                                       ---------             ---------              ---------
                                                         369,132               427,140                398,782
                                                       ---------             ---------              ---------

    Operating costs:
    Broadband Internet                                   306,930               280,698                253,773
    Portal                                                11,835                25,444                 13,568
                                                       ---------             ---------              ---------
                                                         318,765               306,142                267,341

    Inter-segment expenses                               (12,729)              (20,408)               (14,226)
    US GAAP adjustments                                     (619)                  990                  3,760
                                                       ---------             ---------              ---------
                                                         305,417               286,724                256,875
                                                       ---------             ---------              ---------

    Selling, general and administrative
    expenses :
    Broadband Internet                                    50,043                41,336                 47,089
    Portal                                                 3,313                 2,029                  1,061
                                                       ---------             ---------              ---------
                                                          53,356                43,365                 48,150

    Inter-segment expenses                                     -                     -                      -
    US GAAP adjustments                                  (10,316)               21,638                      -
                                                       ---------             ---------              ---------
                                                          43,040                65,003                 48,150
                                                       ---------             ---------              ---------
    </TABLE>


                                      F-50
<PAGE>


KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     <TABLE>
     <CAPTION>
     (in millions of Korean Won)                         2001                   2002                   2003
                                                         ----                   ----                   ----
     <S>                                              <C>                   <C>                    <C>
      Depreciation and amortization:
      Broadband Internet                               W  94,330             W 108,161              W 107,784
      Portal                                               8,228                     -                      -
                                                       ---------             ---------              ---------
                                                         102,558               108,161                107,784

      Inter-segment expenses                                   -                   108                      -
      US GAAP adjustments                                  4,468                (3,623)                  (219)
                                                       ---------             ---------              ---------
                                                         107,026               104,646                107,565
                                                       ---------             ---------              ---------

      Impairment loss on intangible assets,
      property and equipment:
      Broadband Internet                                   1,088                 5,502                 27,178
      Portal                                                   -                20,465                  1,052
                                                       ---------             ---------              ---------
                                                           1,088                25,967                 28,230

      Inter-segment expenses                                   -                 1,294                      -
      US GAAP adjustments                                 22,629                     -                 28,094
                                                       ---------             ---------              ---------
                                                          23,717                27,261                 56,324
                                                       ---------             ---------              ---------

      Operating loss:
      Broadband Internet                                 (91,504)              (10,127)               (47,504)
      Portal                                             (10,742)              (31,259)                (2,003)
                                                       ---------             ---------              ---------
                                                        (102,246)              (41,386)               (49,507)

      Inter-segment expenses                                   -                (1,832)                    92
      US GAAP adjustments                                 (7,822)              (13,276)               (20,717)
                                                       ---------             ---------              ---------
                                                       W(110,068)            W (56,494)             W (70,132)
                                                       ---------             ---------              ---------

      </TABLE>

                                      F-51

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

     <TABLE>
     <CAPTION>
     (in millions of Korean Won)                         2001                   2002                   2003
                                                         ----                   ----                   ----
     <S>                                              <C>                   <C>                    <C>
     Other income (expense):
     Interest income                                   W   4,466             W   6,847              W   7,264
     Interest expense                                    (72,833)              (81,259)               (56,230)
     Gain (loss) on foreign exchange                      (3,870)                5,755                  1,285
        transactions, net
     Gain (loss) on disposition of                        (3,164)                 (965)                 1,089
        investments, net
     Impairment loss on investments                       (4,594)              (28,930)                (1,165)
     Gain (loss) on disposition of                           312               (35,660)                (3,005)
       property and equipment, net
     Gain on extinguishment of debts                           -                   870                  5,738
     Loss on retirement of bond                                -              (129,681)                     -
     Others, net                                           2,009                 2,654                   (112)
                                                       ---------             ---------              ---------
                                                         (77,674)             (260,369)               (45,136)
                                                       ---------             ---------              ---------

     Loss from continuing operations
       before taxes, equity in loss of
       affiliates and minority interest                W(187,742)            W(316,863)             W(115,268)
                                                       =========             =========              =========
     </TABLE>

     The inter-segment adjustments are due to the elimination of transactions
     between segments in consolidation. Under Korean GAAP, financial statements
     are prepared on a non-consolidated basis.

     The adjustments included in "US GAAP adjustments" are due to the
     reconciliation between Korean GAAP and U.S. GAAP. The remaining accounting
     policies of the segments are consistent with those policies described in
     Note 2 to the consolidated financial statements. Significant adjustments
     included in "US GAAP adjustments" in the above table resulted from the
     following:

     Revenues - The adjustments to revenues represent the difference in
     recognition of revenues between Korean GAAP and U.S. GAAP. Under Korean
     GAAP, revenues related to installation for activation of ongoing service
     are recognized upon origination of service to customers while such revenues
     are deferred and recognized over the expected customer retention period
     under U.S. GAAP.

     Operating costs - The adjustments to operating costs represent the
     difference in recognition of certain installation costs and classification
     of certain leases between Korean GAAP and U.S. GAAP. Certain installation
     costs are deferred and recognized over the expected customer retention
     period under U.S. GAAP while these costs are recognized upon origination of
     service to customers under Korean GAAP. Also, certain leases are accounted
     for as operating leases under Korean GAAP while such leases are treated as
     capital leases under U.S. GAAP.

                                      F-52

<PAGE>

KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------




                                      F-53

<PAGE>



KOREA THRUNET CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
-------------------------------------------------------------------------------

       Selling, general and administrative expenses - The adjustments related to
       selling, general and administrative expenses resulted from employee stock
       options. Under Korean GAAP, the Company uses a fair value-based method of
       accounting for the stock options while the Company applies the intrinsic
       value-based method prescribed by APB No. 25 under U.S. GAAP.

       Depreciation and amortization - The adjustments related to depreciation
       and amortization resulted from the amortization period of certain
       software and the difference in recognition of assets such as MS option
       intangible asset and leased line license fee. The leased line license fee
       paid prior to inception of the Company was recorded as an intangible
       asset and amortized over 20 years under U.S. GAAP while under Korean
       GAAP, this item was not recognized for accounting purposes. Additionally,
       the Company has recorded amortization expense related to the income tax
       effect of the MS option intangible asset under U.S. GAAP while the income
       tax effect of this item was not recorded under Korean GAAP.

       The following table provides information for the Company's total assets
       by each reportable segment as of December 31, 2001, 2002 and 2003. The
       adjustments included in "US GAAP adjustments" are due to the
       reconciliation between Korean GAAP and U.S. GAAP. Significant adjustments
       included in "US GAAP adjustments" resulted from the leased line license
       which is recorded as an intangible asset under U.S. GAAP while it is not
       recognized for accounting purposes under Korean GAAP, the MS option
       intangible asset which is recorded net of its income tax effect for
       Korean GAAP purposes while it is recorded including its related income
       tax effect under U.S. GAAP, and impairment loss on investments for
       declines in value considered to be other-than-temporary, which was
       recognized under U.S. GAAP while it was not recognized for accounting
       purposes under Korean GAAP.

       <TABLE>
       <CAPTION>
       (in millions of Korean Won)                    2001                    2002                   2003
                                                      ----                    ----                   ----
       <S>                                        <C>                    <C>                    <C>
       Broadband Internet                         W    999,889            W   748,969            W   529,433
       Enterprise Network                              672,460                      -                      -
       Portal                                           41,635                 28,676                  3,457
                                                  ------------            -----------            -----------
                                                     1,713,984                777,645                532,890
       US GAAP adjustments                            (146,729)               (13,594)                (2,186)
                                                  ------------            -----------            -----------

       Total Assets                               W  1,567,255            W   764,051            W   530,704
                                                  ============            ===========            ===========
       </TABLE>

                                      F-54