<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, 2002

[ ] 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: __________

                             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:

         Title of Each Class                         Name of each exchange
                                                     on which registered
                                                     as of December 31, 2002

Class A common shares, par value Won 2,500 per share ................. The
Nasdaq National Market

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

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

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..............................................................................         12
   ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS............................................................         24
   ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..............................................................         31
   ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.......................................................         36
   ITEM 8 - FINANCIAL INFORMATION...................................................................................         39
   ITEM 9 - THE OFFER AND LISTING...................................................................................         42
   ITEM 10 - ADDITIONAL INFORMATION.................................................................................         44

PART I..............................................................................................................         56

   ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................         57
   ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.................................................         57

PART II.............................................................................................................         58

   ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES........................................................         58
   ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS...........................         58
   ITEM 15 - CONTROLS AND PREOCEDURES...............................................................................         58
   ITEM 16 - [RESERVED].............................................................................................         58

PART III............................................................................................................         59

   ITEM 17 - FINANCIAL STATEMENTS...................................................................................         59
   ITEM 18 - FINANCIAL STATEMENTS...................................................................................         59
   ITEM 19 - EXHIBITS...............................................................................................         59
</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,
1998, 1999, 2000, 2001 and 2002. 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, 2002, which was Won 1,186.3
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 20, 2003, the noon buying rate
was Won 1,190.6 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:

     -    our future revenue opportunities;

     -    development by us or our competitors of new products or services;

     -    the future growth of our subscriber base;

     -    our future expense levels, including sales and marketing and general
          and administrative expenses and amortization of goodwill and other
          intangibles;

     -    our future capital needs;

     -    future strategic partnerships or acquisitions; and

     -    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, 2001 and 2002 and for each of the years in the three-year period ended
December 31, 2002, 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, 1998, 1999, 2000, 2001 and 2002 are derived from our audited consolidated
financial statements. Our consolidated financial statements (before restatement
resulting from discontinued operations) as of December 31, 2000 and for the
fiscal year ended December 31, 2000 were audited by KPMG Samjong Corp.,
independent certified public accountants. The report of KPMG Samjong Corp. on
the consolidated financial statements as of December 31, 2000 and for the fiscal
year ended December 31, 2000, (1) contains an emphasis paragraph related to the
adverse economic conditions in the Republic of Korea in recent years and in the
Asia Pacific region in general, (2) refers to a change in our method of revenue
and expense recognition related to installation fees and costs, and (3) contains
an explanatory paragraph regarding the existence of substantial doubt about
Thrunet's ability to continue as a going concern. Our consolidated financial
statements as of December 31, 2001 and 2002 and for the fiscal years ended
December 31, 2001 and 2002 and the restatement of our consolidated financial
statements for the year ended December 31, 2000 were audited by Samil Accounting
Corporation, a member firm of PricewaterhouseCoopers, independent certified
public accountants. The report of Samil Accounting Corporation on the
consolidated financial statements as of and for the fiscal years ended December
31, 2001 and 2002, (1) contains an emphasis paragraph related to the adverse
economic conditions in the Republic of Korea and in the Asia Pacific region and
(2) 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 Thrunet'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 4 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. in October 2002 and restated the results of operations of such disposed
business for 1998, 1999, 2000, 2001 and 2002 as discontinued operations in
accordance with Statement of Financial Accounting Standards No. 144. See Notes 1
and 4 to our consolidated financial statements for more details.

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                          ---------------------------------------------------------------------------------------
                                             1998           1999           2000            2001           2002            2002
                                          ----------     ----------    ------------    -----------   -------------    -----------
                                              (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 781       W 19,963       W 142,346      W 360,888       W 418,202    $   352,527
  Portal services.......................          --             --           3,015          7,723          6,079           5,124
                                          ----------     ----------    ------------    -----------   -------------    -----------
                                                 781         19,963         145,361        368,611         424,281        357,651
Costs and expenses:
  Operating costs, excluding
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                          --------------------------------------------------------------------------------------
                                             1998            1999          2000            2001           2002            2002
                                          ---------       ----------   ------------    -----------   -------------    -----------
                                              (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>
    Depreciation and amortization:
    Broadband Internet..................           --         22,920        144,947        293,698         262,209        221,031
    Portal services.....................           --             --          4,888         11,719          24,515         20,665
  Selling, general and administrative...          781         17,131         48,226         42,870          40,343         34,008
  Depreciation and amortization........           659         10,147         60,765        107,026         104,646         88,212
  Impairment loss on intangible
   assets, property and equipment.......           --             --             --         23,717          27,261         22,979
                                          -----------    -----------   ------------    -----------   -------------    -----------
                                                1,440         50,198        258,827        479,030         458,974        386,895
                                          -----------    -----------   ------------    -----------   -------------    -----------
    Operating loss......................         (659)       (30,235)      (113,465)      (110,419)        (34,692)       (29,244)
Other income (deductions):
  Interest income.......................          834          2,224          3,988          3,297           5,167          4,355
  Interest expense......................         (832)        (6,559)       (23,662)       (72,833)        (81,259)       (68,498)
  Gain (loss) on foreign exchange
      transactions, net.................          787           (492)        (1,320)        (3,870)          5,755          4,851
  Gain (loss) on disposition of
    investments, net....................           --             --          6,945         (3,164)           (965)          (814)
  Impairment loss on investments........           --             --        (47,397)        (4,594)        (28,930)       (24,387)
  Gain (loss) on disposition of
    property and equipment, net.........           --             --          2,072            312         (35,660)       (30,059)
  Other, net............................           34            760           (785)         3,528         (17,469)       (14,725)
                                          -----------    -----------   ------------    -----------   -------------    -----------
                                                  823         (4,068)       (60,158)       (77,324)       (153,361)      (129,277)
                                          -----------    -----------   ------------    -----------   -------------    -----------
Loss from continuing operations
   before taxes, equity in loss
   of affiliates and minority
   interest.............................          164        (34,302)      (173,623)      (187,742)       (188,053)      (158,521)
Equity in loss of affiliates, net.......                                     (9,902)        (8,357)         (6,215)        (5,239)
Minority interest ......................           --             --            197          1,075           2,842          2,396
Income tax expense (benefit)............          (73)        (4,775)           582             --             131            111
                                          -----------    -----------   ------------    -----------   -------------    -----------
Net loss from continuing operations.....  W       237    W   (29,527)  W   (183,910)   W  (195,024)  W    (191,557)   $  (161,475)
                                          ===========    ===========   ============    ===========   =============    ===========
Discontinued operations:
   Loss from discontinued
    operations..........................       (7,966)        (6,453)       (56,174)       (74,052)        (51,960)       (43,800)
   Gain (loss) from disposals ..........           --             --             --          6,016         (63,775)       (53,759)
                                          -----------    -----------   ------------    -----------   -------------    -----------
Net income (loss) from discontinued
  operations ...........................       (7,966)        (6,453)       (56,174)       (68,036)       (115,735)       (97,559)
                                          ===========    ===========   ============    ===========   =============    ===========
Extraordinary item:
    Gain on extinguishment of debt......           --             --             --             --             870            734
    Loss on retirement of bond..........           --         (1,647)            --             --        (129,681)      (109,316)
                                          -----------    -----------   ------------    -----------   -------------    -----------
Net loss................................  W    (7,729)   W   (37,627)  W   (240,084)   W  (263,060)  W    (436,103)   $  (367,616)
                                          ===========    ===========   ============    ===========   =============    ===========
Weighted average number of shares
  outstanding(1)........................   17,600,000     18,496,561     23,985,953     32,150,106      57,563,294     57,563,294

Basic and diluted loss from
 continuing operations per
 common share...........................           13         (1,596)        (7,667)        (6,066)         (3,328)         (2.81)
Basic and diluted net income (loss)
  from discontinued operations per
  common share..........................         (451)          (349)        (2,342)        (2,116)         (2,010)         (1.69)
Extraordinary item......................           --             --             --             --          (2,238)         (1.89)
Basic and diluted net loss per
 common share...........................  W      (438)   W    (2,034)  W    (10,009)   W    (8,182)  W      (7,576)    $    (6.39)
                                          ===========    ===========   ============    ===========   =============    ===========
Cash dividends declared per
 share of common share .................           --             --             --              --              --             --
                                          -----------    -----------   ------------    -----------   -------------    -----------
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...............  W    38,087    W   190,125   W     39,443    W   156,526   W      55,226    $    46,553
Working capital.........................       (4,950)        42,086       (493,877)      (403,383)       (487,866)      (411,250)
Total assets............................      298,515        976,867      1,458,725      1,567,256         764,051        644,063
Net assets..............................      136,784        528,346        167,322        142,971         (80,608)       (67,949)
Bonds...................................           --        125,278        412,806        335,383         133,942        112,908
Long-term debt, excluding
  current portion.......................      102,967         93,122        238,865        377,732           1,863          1,570
Common stock............................      132,000        179,895        179,895        256,602         194,088        163,608
Total stockholders' equity..............      136,784        528,346        167,322        142,971         (80,608)       (67,949)

OTHER DATA:
Capital expenditures....................  W    72,312    W   165,965   W    679,763    W   259,114   W      48,456    $    40,847
Net cash provided (used) in
operating activities....................      (18,923)       (28,166)       (35,067)       (35,841)         28,517         24,037
Net cash provided (used) in
investing activities....................     (106,583)      (268,108)      (724,892)      (213,219)        396,276        334,045
</TABLE>

                                       3

<PAGE>

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                          ---------------------------------------------------------------------------------------
                                             1998           1999           2000            2001           2002            2002
                                          ----------     ----------    ------------    -----------   -------------    -----------
                                              (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.................     125,632        448,312         609,278        366,144        (526,094)      (443,473)
EBITDA(2)...............................      (1,245)       (11,383)       (159,063)       (86,498)       (265,134)      (223,496)
Homes passed(3).........................   2,300,000      3,900,000       6,500,000      8,300,000       8,500,000      8,500,000
Broadband Internet end users............      12,012        134,740         760,822      1,312,248       1,301,620      1,301,620
</TABLE>

----------

     (1)  The weighted average number of shares outstanding for each of 1998,
          1999, 2000, 2001 and 2002 has been adjusted for the three-for-one
          reverse stock split implemented by the Company in December 2002.

     (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>
1998.....................              W1,206.0         W1,404.7       W1,812.0       W1,196.0
1999.....................               1,136.0          1,187.7        1,241.8        1,124.5
2000.....................               1,267.0          1,140.0        1,267.0        1,105.5
2001.....................               1,313.5          1,293.4        1,369.0        1,234.0
2002.....................               1,186.3          1,242.0        1,332.0        1,160.6
2003 (through June 20)                  1,190.6          1,207.2        1,262.0        1,164.6
</TABLE>

<TABLE>
<CAPTION>
                                                       AT END
MONTH ENDED                                           OF PERIOD          HIGH            LOW
-----------                                          ---------       ---------        ---------
<S>                                                  <C>             <C>              <C>
December 2002............                            W 1,186.3       W 1,221.0        W 1,186.3
January 2003.............                              1,165.0         1,197.3          1,164.6
February 2003............                              1,193.7         1,206.0          1,173.0
March 2003...............                              1,252.0         1,260.0          1,184.6
April 2003...............                              1,215.5         1,262.0          1,204.0
May 2003.................                              1,210.0         1,217.0          1,192.0
</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.

     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. 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.

     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. As of March 31, 2003, on a non-consolidated basis, our aggregate
long-term and short-term indebtedness was Won 625,805.9 million, including
short-term indebtedness (including the current portion of long-term debt and the
current portion of bonds) of Won 239,191.5 million and accounts payable of Won
114,101.8 million. As of March 31, 2003, on a non-consolidated basis, we had
cash and cash equivalents of Won 72,812.2 million and accounts receivable (net
of allowance for doubtful accounts) of Won 64,977.1 million. As of the same
date, our total current liabilities exceeded our total current assets by Won
354,995.6 million.

     Pursuant to the Corporate Reorganization Act of Korea, we received
reorganization claims from our creditors. As of 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. The holders of such rejected
claims may file any objections to the bankruptcy court within one month from
June 25. Based on the result of the review by the court of such objections, a
portion of such rejected claims may be included in the accepted claims. The
final accepted claims will be later satisfied or dismissed or converted into
equity interests in part or in whole according to a corporate reorganization
plan if and when such plan is adopted. Until such time, we are prohibited from
making any voluntary payment or other act to satisfy any of such claims and we
are by operation of Korean law afforded automatic protection from third parties
taking any action to obtain possession of our property or commence litigation
against us.

     We cannot assure that the proposed reorganization will be successful 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 the
reorganization plan is consummated or 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 the case of our liquidation or the following events in the case of the
reorganization plan being consummated: (x) if our debts exceed our assets, a
capital reduction by way of a reverse stock split in a ratio exceeding 2:1 will
be effected, which will result in the shares held by each shareholder being
reduced by more than 50% in number without consideration, and (y) if the
controlling shareholders are found to have been responsible for the
mismanagement of Thrunet, their shares may be retired up to more than two-thirds
(2/3) thereof without consideration. Even if the court-appointed 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 our shareholders, creditors
and security holders. 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.

     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. We currently own 91.95% of the voting shares in Korea.com
Communications. As of March 31, 2003, Korea.com Communications owed us
approximately Won 7,593.0 million, including Won 5,528 million in loan payable,
Won 1,962.0 million in accounts payable and Won 102.0 million in interest
payable. We also provided guarantees in the amount of approximately Won 9,405.0
million for the repayment of

                                       5

<PAGE>

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.

     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 0.7 billion, Won 30.2 billion, Won 113.5
billion, Won 110.4 billion and Won 34.7 billion in 1998, 1999, 2000, 2001 and
2002, 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 2002, Internet access fees accounted for 23.7% 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

                                       6

<PAGE>

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 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 dark fiber lease with SK Telecom expires in 2004. 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.

A MAJORITY OF OUR ASSETS IS NOT INSURED AGAINST FIRE AND OTHER CASUALTY LOSSES.

     As of December 31, 2002, the book value of our property and equipment, net
of accumulated depreciation, was Won 500.7 billion. As of the same date, our
depreciable assets were insured against fire and other casualty losses only up
to Won 236.5 billion, representing approximately 47.2% 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.
The prices of our shares may be lower than those that might otherwise be
available through the Nasdaq National Market.

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 48.5% as of May 31, 2003.
Hanaro Telecom provides ADSL and cable-based broadband Internet access services
and had a market share of approximately 26.9% as of May 31, 2003. We had a
market share of approximately 11.6% as of May 31, 2003.

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

                                       8

<PAGE>

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 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:

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

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

     -    costly litigation.

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

RISKS RELATED TO KOREA

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

     Since early 1997, a number of developments have adversely affected the
Korean economy. Some of Korea's recent financial and economic difficulties have
included:

     -    exchange rate fluctuations;

     -    interest rate fluctuations;

     -    reduced credit from foreign banks;

     -    reduced liquidity in the economy;

     -    volatile stock prices; and

     -    higher unemployment.

     A 47.5% depreciation in the value of the Won relative to the Dollar during
the second half of 1997 led to sharply higher domestic interest rates. Domestic
interest rates in Korea, however, declined significantly in the fourth quarter
of 1998 and are currently below interest rates which prevailed in Korea before
late 1997. If interest rates rise in the future, the debt service costs of
Korean borrowers (including Thrunet) would increase, which may have an adverse
effect on our liquidity and our ability to fund our expected capital
expenditures.

     Based on statistics prepared by The Bank of Korea, Korea's real gross
domestic product contracted by 6.7% in 1998. In 1999, 2000, 2001 and 2002,
however, Korea's real gross domestic product grew by 10.9%, 9.3%, 3.0% and 6.3%
respectively.

     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 15.7% 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.

                                       9

<PAGE>

     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 May 2003. There can be no assurance, however, that the Korean
economy will not deteriorate in the future.

     Finally, relations between Korea and North Korea have been tense over most
of Korea's history. The level of tension between the two Koreas has fluctuated
and may increase or change abruptly as a result of current or future events. The
occurrence of such events could have a material adverse effect on our operations
and the price of our shares.

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 or leased line businesses 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. Since
November 2000, the value of the Won relative to the Dollar has depreciated. The
noon buying rates as of November 9, 2000 and May 31, 2003 were Won 1,132.0 and
Won 1,210.0 to US$1.00, respectively. Anticipated foreign exchange payments,
principally in Dollars, relate primarily to net settlements paid for certain
equipment purchased from foreign suppliers. In 2002, we paid approximately
US$28.5 million and JPY 0.5 million in foreign exchange payments. Foreign
currency denominated liabilities, principally in Dollars, relate primarily to
foreign currency denominated debt and vendor financing. At May 31, 2003, we had
aggregate outstanding foreign currency denominated indebtedness of approximately
US$19.3 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 Telecommunications Business Law of Korea restricts foreign ownership in
voting shares of a network service provider, including Thrunet. At present,
foreign investors (including 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) are not allowed to own in
the aggregate more than 49% of the voting shares of any network service
provider. In the event that such foreign ownership restrictions are violated,
the holders of shares in excess of the legal limitations cannot exercise voting
rights with respect to the shares exceeding such limit and the Ministry of
Information and Communication of Korea may require that corrective measures be
taken to comply with the legal restrictions.

                                       10

<PAGE>

     In addition, the Broadcasting Law of Korea similarly 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.

                                       11

<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 are 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.
The holders of such rejected claims may file any objections to the bankruptcy
court within one month from June 25. Based on the result of the review by the
court of such objections, a portion of such rejected claims may be included in
the accepted claims. The final accepted claims will be later satisfied or
dismissed or converted into equity interests in part or in whole according to a
corporate reorganization plan if and when such plan is adopted.

     The receiver is currently conducting a detailed review of our financial
condition and operations, and soliciting views of interested parties regarding
our reorganization. Based on the result of the receiver's review, the receiver
will propose a reorganization plan for us. In a proposed reorganization plan,
the receiver may suggest any reorganization method, which he finds most
appropriate to bring us to normal commercial operations and to best serve public
interests, including re-scheduling our debt repayment and service obligations,
forgiving all or a part of our debt and converting debt to equity.

     Once the reorganization plan is filed, the court will convene a second
meeting of interested parties for the deliberation of the draft plan of
reorganization and then a third meeting of interested parties for the adoption
of a resolution accepting the plan which resolution shall be adopted (i) within
2 months from the date of the third meeting (such 2-month period to be
extendible up to 1 month) and, in any event, (ii) within 1 year from the order
of commencement (such 1-year period to be extendible up to 6-months). It is
customary for the second and third meetings of interested parties to be held at
the same time. Once such a plan is accepted by a resolution of the interested
parties, the court will promptly decide whether or not to confirm such accepted
plan. Once the accepted plan is confirmed by the court, the receiver will be
responsible for the implementation of the confirmed plan.

                                       12

<PAGE>

     The confirmed reorganization plan will contain certain provisions with
respect to the treatment of our current shareholders, including, among other
things, provisions stating that (i) if our debts exceed our assets, a capital
reduction by way of a reverse stock split in a ratio exceeding 2:1 be effected,
which will result in the shares held by each shareholder being reduced by more
than 50% in number without consideration, and (ii) if the controlling
shareholders are found to have been responsible for the mismanagement of
Thrunet, their shares may be retired up to more than two-thirds (2/3) thereof
without consideration.


     On June 30, 2003, we published a notice in the Korea Economic Daily that we
would stage a public auction on August 25, 2003 to find a new major shareholder.
We will be receiving applications from interested bidders until July 15, 2003.
According to our selection criteria, the successful bidder will be suggested to
use more than half of the acquisition funds to purchase new shares to be issued
by us and must hold 50% of the newly acquired shares for at least one year. We
plan to first select two highest bidders based on our detailed selection
criteria. The first highest bidder must, within three business days of
notification, make payment of 5% of the total acquisition funds to guarantee its
performance and execute a memorandum of understanding. The first highest bidder
may then conduct its preliminary due diligence investigations for three weeks.
If and when an agreement to acquire our shares is finalized, such bidder must
provide 10% of the acquisition price at the time of the execution of such
agreement as performance guarantee. If the proposed transaction with the first
highest bidder is not consummated, we will commence negotiations with the second
highest bidder. We will continue to proceed with our corporate reorganization
proceedings in conjunction with the proposed auction.

REVERSE STOCK SPLIT

     On October 10, 2002, our board of directors passed a resolution authorizing
a reverse stock split of our common shares in the ratio of 3:1, and on November
25, 2002, our shareholders approved the proposed reverse stock split. On
December 27, 2002, the total number of our outstanding shares was reduced to
77.63 million shares from 232.9 million shares. On January 20, 2003, we issued
to our shareholders new share certificates in exchange for their old shares.

    Other significant developments of the Company include:

     -    In August 1996, we received our Network Service Provider License from
          the Ministry of Information and Communication.

     -    In July 1997, we launched our leased line services.

     -    In July 1998, we launched our broadband Internet access services.

     -    In September 1999, we were designated by the Ministry of Information
          and Communication as a network operator.

     -    In November 1999, we successfully completed a global offering of our
          common shares on the Nasdaq National Market.

     -    In March 2000, we acquired the domain name Korea.com.

     -    In September 2000, we launched our Korea.com portal services.

     -    In January 2001, we acquired a license for the International Private
          Leased Circuit Leasing Business from the Ministry of Information and
          Communication.

     -    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.

     -    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.

     -    In July 2001, we sold a 55.6% equity interest in Korea Cable
          Television Haeundae Kijang Systems Co., Ltd.

     -    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.

     -    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.

     -    In August 2002, we completed the sale of approximately 70% of our HFC
          network system to Powercomm for Won 45.0 billion.

     -    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.

     -    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.

     -    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.

     -    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.

     -    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.

     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.

     On November 30, 2002, a consortium led by Dacom Corporation, in which we
participated, entered into a stock purchase agreement with KEPCO to purchase a
45.5% stake in Powercomm. In connection with our participation in such
consortium, we entered into an agreement with Dacom to acquire 83,333 shares of
Powercomm (representing a 0.06% stake in Powercomm) for

                                       13

<PAGE>

Won 999,996,000 on December 12, 2002. Dacom agreed to provide us a loan of Won
999,996,000, repayable by monthly installments until December 12, 2003. As
security for our obligations, we provided to Dacom our 83,333 shares of
Powercomm as collateral.

     In December 2002, our largest shareholders, TriGem, Naray and their
affiliates, had agreed to sell all of their common shares of our common stock,
being 34,941,289 shares, 20,098,958 shares, and 824,184 shares, respectively, in
consideration for convertible bonds issued by Hanaro Telecom, Inc., representing
approximately 72.0% of the then total outstanding shares, on a fully diluted
basis. On January 3, 2003, Hanaro Telecom, Inc., completed the acquisition of
the first tranche of shares, representing approximately 31.8 % of the total
outstanding shares. The closing for the acquisition of the remaining 40.2% of
our shares was scheduled to take place on February 7, 2003. However, on January
15, 2003, Hanaro Telecom, Inc., exercised its right to terminate the sale and
purchase agreement on the basis that our disclosure schedules were not
satisfactory to them, and exercised its right to sell back the first tranche of
shares to TriGem, Naray and their affiliates. Accordingly, TriGem, Naray and
their affiliates, continue to be our largest shareholder.

     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 1,280,667 paying end users as of May 31, 2003.

     We were also a major provider of enterprise network services in Korea until
October 28, 2002, on which date we completed the sale of the assets related to
our enterprise network services to SK Global for Won 346.9 billion.

     Accordingly, 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 have grown from Won 145.4 billion in
2000 to 368.6 billion in 2001 to Won 424.3 billion in 2002. In 2002, we derived
98.6% of our revenues from broadband Internet services and 1.4% from portal
services. Our revenues for the first quarter of 2003, on a non-consolidated and
unaudited basis, were Won 100.1 billion, all of which were derived from
broadband Internet services.

     For the fiscal years ended December 31, 2000, 2001 and 2002, we had the
following revenues:

<TABLE>
<CAPTION>
                                                   FOR THE YEAR ENDED DECEMBER 31,
                                                     (AMOUNTS IN MILLIONS OF WON)
REVENUES:                                 2000                  2001                   2002
<S>                                   <C>                   <C>                    <C>
  Broadband Internet services.......  W    142,346          W    360,888           W    418,202
  Portal services...................         3,015                 7,723                  6,079
                                      ------------          ------------           ------------
     TOTAL                            W    145,361          W    368,611           W    424,281
                                      ------------          ------------           ------------
</TABLE>

     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.

     Our enterprise network services consisted primarily of leasing to corporate
customers dedicated fiber optic lines for transmitting voice and data. Until
October 2002, we provided enterprise network services to more than 1,000
customers, with major Korean telecommunications companies such as SK Telecom
accounting for a substantial majority of our enterprise network revenues. We
also offered Internet protocol-based, or IP-based, Internet leased line
services, which provide Internet access via dedicated fiber optic lines, to
small and medium-sized enterprises and other corporate customers. We also
provided Metro-Ethernet services in high-density business districts in the
metropolitan areas of Pusan, Taejeon, Taegu, Incheon and Seoul under the brand
name, "MegaMAN". As a result of the sale of our enterprise network services to
SK Global, we no longer provide such services. However, we are continuing to
provide co-location services (which involve housing customers' servers) and Web
hosting services (which involve delivery of customers' Web site services via our
own servers), as part of our broadband

                                       14

<PAGE>

Internet business as from November 2002.

     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, 2003, our owned and
leased broadband Internet services network passed approximately 8.5 million
homes, representing approximately 60% 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 1.2 million
homes and the HFC networks we leased from Powercomm and system operator partners
passed 6.8 million homes and 0.5 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$32.03). Monthly service includes unlimited
access time, a free Korea.com e-mail account with 50 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$28.66) 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$23.60). Our two-way 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$2.53) to Won
9,000 (US$7.59) 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 36,000 (US$30.35).

     We also provide broadband Internet access mainly to SOHOs and other
commercial entities for a monthly fee of Won 58,000 (US$48.89) for two lines,
Won 99,000 (US$83.45) for three lines and Won 20,000 (US$16.86) 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$23.60) and a modem rental fee ranging from Won 3,000 (US$2.53) to Won
9,000 (US$7.59) 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.

                                       15

<PAGE>

SALES AND MARKETING

     We market our broadband Internet services to residential and commercial
subscribers throughout Korea. As of May 31, 2003, the total number of our
residential and commercial end users was 1,280,667.

     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:

     -    special promotions through various events, including concerts; and

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

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 700 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

                                       16

<PAGE>

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 87.0% as of May 31, 2003. 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 provider in Korea, with a market share of
approximately 48.5% as of May 31, 2003. 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, 2003, approximately 39.7% of Hanaro Telecom's end users
accessed their services through DSL connections. As of May 31, 2003, Hanaro
had a market share of approximately 26.9% and we had a market share of
approximately 11.6%. 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:

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

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

                           ENTERPRISE NETWORK SERVICES

PRODUCTS AND SERVICES

     Until October 2002, we provided enterprise network services to corporate
customers, including telecommunications carriers over our own or leased fiber
optic network facilities, under a license to operate leased line services on a
nationwide basis in Korea. On October 28, 2002, we completed the sale of the
assets related to our enterprise network services to SK Global.

                                       17

<PAGE>

     Through our data center in Seoul, we currently offer to our corporate
customers the following value-added services:

     Co-location. Our co-location services provide a shared location for
customers' servers, which are managed and hosted by us. We provide co-location
services to customers that require the resources of a server that is reserved
solely for their use, prefer to retain physical access to and ownership of their
server and have the expertise to maintain the Web site and the server. Our data
centers offer our customers a secure location, controlled environment,
monitoring and high-speed connections to the Internet via our fiber optic
network.

     Web Hosting. We provide Web site hosting services on a shared server that
is owned, managed and housed by us for multiple customers. Our Web hosting
services allow customers to establish a broadband-quality presence on the
Internet at a reasonable cost. Our Web hosting customers can run complex
Internet applications without the need for the significant investment of capital
and expert personnel that an internally located Web site would require.

     As a result of the sale of our enterprise network services to SK Global,
our co-location and web hosting services are part of our broadband Internet
business as from November 2002.

SALES AND MARKETING, CUSTOMER SERVICE AND TECHNICAL SUPPORT AND COMPETITION

     Until October 2003, we primarily offered our enterprise network services
through our direct sales force and advertised such services in trade and
technology journals.

     The customer service and technical support group for our enterprise network
services were staffed with experienced support technicians able to diagnose
customer problems and prescribe corrective measures. We maintained technical
teams dedicated to network management systems, network operation, Internet data
center operation, engineering management and external affairs, and our sales
teams provided customer service and technical support functions.

     We had competition from six principal leased line services providers,
namely KT, Thrunet, DACOM, Dreamline, Enterprise Networks, Inc. and Hanaro
Telecom. In addition, Powercomm provides leased line services to
telecommunications companies, which have historically accounted for the
substantial majority of our leased line services revenues. KT is the leading
provider of leased line services in Korea.

                                   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 service provider, we are not under
any filing or licensing requirement imposed by the Government to engage in the
delivery of our broadband Internet services and our IP-based Internet leased
line 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 have applied to surrender this license to the Ministry
of Information and Communication. We expect that our application will be
determined by the end of June, or July, 2003.

                                       18

<PAGE>

     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.

                 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 such as Thrunet 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 35
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. Leased line service providers whose total
leased line services revenue amount for the preceding year was more than Won 30
billion and that realized a net profit in the preceding year, are required to
make annual payments for the purpose of research and development in the amount
of 0.5% of the annual total leased line services revenue, to the extent that the
amount of such payment does not exceed the amount of the net profit for the
preceding year.

     The Telecommunications Business Law restricts the ownership and control of
network service providers by foreign shareholders. Foreigners (including foreign
entities), foreign government and foreign invested companies may, in the
aggregate, invest in up to 49% of the total issued and outstanding shares of a
network service provider. For purposes of the Telecommunications Business Law,
the term "foreign invested company" means (i) a company in which foreigners and
foreign governments hold 80% or more shares in the aggregate or (ii) a company
in which foreigners and foreign governments hold 15% or more shares in the
aggregate and a foreigner or a foreign government is the largest shareholder.

                                       19

<PAGE>

     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 such as Thrunet wishes to
cease its business or to be dissolved, such provider must obtain the approval of
the Ministry of Information and Communication.

RATE SETTING

     A network service provider must report to the Ministry of Information and
Communication the rates and contractual terms for each type of service provided
by the network service provider. In addition, the network service provider which
has the largest market share for certain types of service must obtain advance
approval from the Ministry of Information and Communication for the rates and
general terms for its service if its revenue from these services for the
previous year exceeds a specific revenue amount set by the Ministry of
Information and Communication. To date, the Ministry of Information and
Communication has specified cellular and local telephony as services subject to
such advance approval. Such network service providers must demonstrate that
their fees and charges are reasonable, fair and objective in terms of the method
of calculation to obtain approval from the Ministry of Information and
Communication. The Ministry of Information and Communication may order changes
in the rates charged or the terms established by such providers for any type of
telecommunications services if it deems such rates or terms to be unreasonable
and against the public interest.

LICENSING

     The Ministry of Information and Communication has promulgated regulations
specifying a detailed standard of review, the application method and the
application period for each new network service provider license. Upon receipt
of the application, the Ministry of Information and Communication will consider
various factors in its approval review, including the reasonableness of the
applicant's service provision plan, size of facilities, financial and technical
soundness and the applicant's research and development capabilities.

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 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, including Thrunet, pro rata based
on their respective annual revenue. In 2002, we were required to pay an
estimated amount of Won 817.5 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 2001. However, we have not
yet paid such amount. We are currently in negotiations with KT regarding the
method of settlement of such amount given our current reorganization
proceedings. The exact amount of our payment for 2002 will be determined in July
2003 based on the financial statements for the fiscal year 2002. Our
compensation amount may increase if our revenues increase in the future.

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. The Korea Communication Commission is
composed of nine 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.

                                       20

<PAGE>

C.   ORGANIZATIONAL STRUCTURE

     The following table lists information concerning our significant
subsidiaries and affiliates as of December 31, 2002:

<TABLE>
<CAPTION>
                                                                                PERCENTAGE OF OWNERSHIP
                                                           JURISDICTION OF     AND VOTING INTEREST HELD
               NAME                                         INCORPORATION             BY THRUNET
               ----                                         -------------             ----------
<S>                                                        <C>                 <C>
Ginam Broadcasting Comm.                                        Korea                   24.36%
Nowcom Co., Ltd.                                                Korea                   34.22%
Korea.com Communications Co., Ltd.                              Korea                   91.95%
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.

     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 Global and dark fiber leased from SK Telecom and SK Global. 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.

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<PAGE>

     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 Global. Our
metropolitan loop network is a ring-type network and supports speeds of 2.5
Gbps.

     As of May 31, 2003, we have also 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

[FLOWCHART OF HFC NETWORK]

     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
multicast 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.

                                       22

<PAGE>

     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
6.8 million homes passed, HFC networks we lease from certain of our system
operator partners, covering a total of 0.5 million homes passed and a HFC
network we have built out, covering a total of 1.2 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. We have an agreement with Naray Telecom and two agreements with Onse
Telecom, pursuant to which we lease an aggregate of three international lines
each supporting a bandwidth capacity of 155 Mbytes, expiring in June, August and
November 2003, respectively. We pay Won 268 million per month and Won 200
million per line per month to Naray Telecom and Onse Telecom, respectively. In
June 2002, we also acquired from Dacom Crossing an indefeasible right to use six
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. 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.

                                       23

<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 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. See Note 4 to our consolidated financial statements for more
details on the discontinued operations.

     Revenues. Our revenues increased by 15.1% from Won 368,611.0 million for
the year ended December 31, 2001 to Won 424,281.5 million for the year ended
December 31, 2002. This increase in revenues primarily reflected a 15.9%
increase in fees received from our broadband Internet services subscribers from
Won 360,887.5 million in 2001 to Won 418,202.5 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 27 to our consolidated financial statements for more details.

     Selling, General and Administrative Expense. Selling, general and
administrative expense decreased by 5.9% from Won 42,870.1 million in 2001 to
Won 40,343.2 million in 2002, primarily reflecting decreases in our fees and
charges and advertising expenses. 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 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. See Note 10
to our consolidated financial statements for more information regarding our
impairment loss on intangible assets.

     Operating Loss. Our operating loss decreased by 68.6% from Won 110,418.7
million in 2001 to Won 34,692.0 million in 2002, as a result of an increase in
our revenues and decreases in loss on cancellation of contract and impairment
loss on intangible assets.

     Other Income (Expense). Other expenses increased by 98.3% from Won 77,323.6
million to Won 153,360.6 million in 2002, primarily due to increases in (i) loss
on disposition of property and equipment, (ii) impairment loss on investments
and (iii) interest expenses, offset in part by a gain on foreign exchange
transactions. In 2002, we also 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 2,277.6 million in 2001. 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.,

                                       24

<PAGE>

Ginam Broadcasting, Saero Network Service, Hankyung.com Co., Ltd., and
EnTechville. See Note 8 to our consolidated financial statements for more
information on our investments. Our interest expenses increased by 11.6% from
Won 72,833.0 million in 2001 to Won 81,258.8 million in 2002. 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 22 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.

     Extraordinary Item. 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.

     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.

FISCAL 2001 COMPARED TO FISCAL 2000

     The following compares our operating results in the year ended December 31,
2001 to those of the year ended December 31, 2000. Our operating results from
continuing activities for the year ended December 31, 2000 have been restated to
exclude the operating results from six cable system operator subsidiaries, which
were sold in 2001. Our operating results from continuing activities for the
years ended December 31, 2002 and 2001 have been also restated to exclude the
operating results from our enterprise networks business which was sold in 2002.
See Note 4 to our consolidated financial statements for more details on the
discontinued operations.

     Revenues. Our revenues increased by 153.6% from Won 145,361.4 million for
the year ended December 31, 2000 to Won 368,611.0 million for the year ended
December 31, 2001. This increase in revenues primarily reflected a 153.5%
increase in fees received from our broadband Internet services subscribers from
Won 142,345.9 million in 2000 to Won 360,887.5 million in 2001. The increase in
our broadband Internet services revenues was primarily due to an increase in the
number of subscribers from 760,822 as of December 31, 2000 to 1,312,248 as of
December 31, 2001 and a decrease in the number of subscription fee free months
for new subscribers.

     Operating Costs. Our total operating costs, excluding depreciation and
amortization, increased by 103.8% from Won 149,835.1 million for 2000 to Won
305,416.9 million for 2001. The increase in our total operating costs, excluding
depreciation and amortization, was primarily due to increases in (i) loss on
cancellation of contract from none in 2000 to Won 28,330.2 million in 2001, (ii)
sales commissions paid to our independent dealers by 181.7% from Won 13,355.3
million in 2000 to Won 37,627.3 million in 2001, (iii) fees paid to TG Ubase for
its call center outsourcing services (which commenced in October 2000) by 165.1%
from Won 11,643.0 million for three months in 2000 to Won 30,867.2 million in
2001, (iv) lease payments to Powercomm for the use of its HFC network by 105.0%
from Won 18,013.6 million in 2000 to Won 36,920.7 million in 2001, (v)
installation fees paid to our cable modem installation contractors by 47.4% from
Won 27,632.9 million in 2000 to Won 40,728.3 million in 2001, (vi) international
bandwidth lease payments by 53.1% from Won 18,468.1 million to Won 28,266.5
million in 2001 and (vii) lease payments to KEPCO and Powercomm for the
utilization of their ancillary facilities by 723.5% from Won 1,105.5 million in
2000 to Won 9,103.9 million in 2001. These increases, except for the loss on
cancellation of contract, primarily reflected an increase in the number of
subscribers from 760,822 as of December 31, 2000 to 1,312,248 as of December 31,
2001. 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 27 to our consolidated financial
statements for more details.

     Selling, General and Administrative Expense. Selling, general and
administrative expense decreased by 11.1% from Won 48,226.1 million in 2000 to
Won 42,870.1 million in 2001, reflecting a significant decrease in our
advertising expenses, offset in part by an increase in our fees and charges.
Advertising expenses decreased by 50.0% from Won 25,828.6 million in 2000 to

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<PAGE>

Won 12,920.8 million in 2001, primarily due to substantial decreases in our
television and newspaper advertisements. Fees and charges increased by 116.1%
from Won 5,365.7 million in 2000 to Won 11,593.5 million in 2001, primarily due
to an increase in bank charges for collecting broadband service fees from our
subscribers.

     Depreciation and Amortization Expense. Depreciation and amortization
expense increased by 76.1% from Won 60,765.4 million in 2000 to Won 107,025.7
million in 2001, primarily as a result of our investment in additional fiber
optic cable and equipment used for our broadband internet services.

     Impairment Loss. In 2001, we recognized an impairment loss on intangible
assets of Won 23,716.9 million, including an impairment loss on the option
granted to Microsoft in August 1999 of Won 22,628.8 million. See Note 10 to our
consolidated financial statements for more information on our impairment loss on
intangible assets.

     Operating Loss. Our operating loss slightly decreased by 2.7% from Won
113,465.2 million in 2000 to Won 110,418.7 million in 2001.

     Other Income (Expense). Other expenses increased by 28.5% from Won 60,157.5
million to Won 77,323.6 million in 2001, primarily due to an increase in
interest expenses, offset in part by a decrease in impairment loss on
investments. Our interest expenses increased by 207.8% from Won 23,661.8 million
in 2000 to Won 72,833.0 million in 2001, primarily due to the issuance of bonds
with warrants in January 2001 and the asset-backed loan by Multiplus in June
2001. Our impairment loss on investments decreased by 90.3% from Won 47,396.7
million in 2000 to Won 4,593.5 million in 2001. An impairment loss on
investments of Won 4,593.5 million was recognized in 2001 due to
other-than-temporary declines in the value of investments, primarily for our
investments in TG Edunet Co., Ibiztoday.com Corp. and Philon Corporation.

     Income Tax. In 2000, we recognized income tax expense of 582.2 million due
to special tax related to the gain on our disposition of a plot of land in
Bundang for Won 17,000.0 million. 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 22 to our consolidated financial statements for
more details.

     Net Income (loss) from Discontinued Operations. In 2001, we disposed of our
cable television business, which we acquired in 1999 and 2000. As a result of
such disposition and after restating our financial statements for 2001 to
exclude the operating results from our enterprise network business which was
sold in 2002, we recognized net loss from discontinued operations of Won
68,035.8 million in 2001, reflecting loss from discontinued operations of Won
74,052.0 million (net of income tax benefit of Won 2,677.7 million), offset in
part by gain from disposals of Won 6,016.2 million (net of income tax of Won
2,677.7 million). In 2000, after restating our financial statements for 2000 to
exclude operating results from our cable television business and enterprise
network business, we recognized net loss from discontinued operations of Won
56,173.6 million.

     Net Loss. Our net loss increased by 9.6% from Won 240,083.9 million for
2000 to Won 263,059.5 million for 2001.

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 1998, 1999, 2000, 2001 and 2002 was
7.5%, 0.8%, 2.3%, 4.1% and 2.7%, 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".

B.   LIQUIDITY AND CAPITAL RESOURCES

     We have commenced corporate reorganization proceedings under the Corporate
Reorganization Act of Korea on March 27, 2003. In accordance with the timetable
issued by the court, filing of claims by our creditors and security holders was
completed by April 25, 2003. The receiver has been conducting a detailed review
of our financial condition and operations, reviewing claims against us and
soliciting views of interested parties such as our creditors and other security
holders regarding our

                                       26

<PAGE>

reorganization. Based on the result of the receiver's review, the receiver will
propose a reorganization plan for us. The court has ordered the receiver to
submit a reorganization plan by October 25, 2003. In the proposed reorganization
plan, the receiver may suggest any reorganization method, which he finds most
appropriate to bring us to normal commercial operations and to best serve public
interests, including re-scheduling our debt repayment and service obligations,
forgiving all or a part of our debt and converting debt to equity. Once the
reorganization plan is filed, the court will convene a series of meetings of
interested parties where they will examine and deliberate the reorganization
plan proposed by the receiver. Once such a plan is accepted by a resolution of
the interested parties, the court will promptly decide whether or not to confirm
such accepted plan. Once the accepted plan is confirmed by the court, the
receiver will be responsible for the implementation of the confirmed plan. 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 in 2002, compared to significant negative cash flows from operating
activities in 2000 and 2001. Net cash used in operating activities was Won
35,066.5 million and Won 35,841.3 million in 2000 and 2001, respectively. 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 2000 and
2001 primarily reflected net losses, adjusted for depreciation and amortization.

     Net cash provided by investing activities was Won 396,276.2 million in
2002, compared to net cash used in investing activities of Won 724,892.1 million
and Won 213,219.5 million in 2000 and 2001, respectively. 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. Net cash used in investing activities in 2000 was primarily the result
of investment in fiber optic network and acquisition of transmission equipment
and other facilities and equipment necessary for the delivery of our broadband
Internet access, enterprise network and portal services.

     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, 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 in 2002, compared to net cash
provided by financing activities of Won 609,277.5 million and Won 366,143.6
million in 2000 and 2001, 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 long-term debt totaled Won
221,993.9 million and Won 294,684.0 million in 2000 and 2001, respectively. In
2002, we did not raise any funds from long-term debts. We also raised Won
1,119,460.8 million, Won 118,247.4 million and Won 55,053.9 million from
short-term borrowings in 2000, 2001 and 2002, respectively. As of December 31,
2002, we had net short-term indebtedness (including short-term borrowings, the
current portion of long-term debts and the current portion of bonds) and
long-term indebtedness (including long-term debts and bonds) of Won 383,207.9
million and Won 135,804.5 million, respectively, and our current liabilities
exceeded our current assets by Won 487,865.7 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.

     We raised an aggregate of Won 49,333.1 million from the issuance of a
series of corporate bonds during 2002.

     See Notes 13 to 18 of 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, we sold the following assets to raise funds to satisfy our debt
repayment and debt service obligations.

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

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<PAGE>

     -    On August 16, 2002, we sold our corporate headquarter building to
          Carlyle Asia Real Estate L.L.C. for approximately Won 38.0 billion;
          and

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

     As of December 31, 2002, we provided four blank checks and six promissory
notes to KDB Capital, Woori Investment Bank, LG Card, Woori Bank and Jeil Mutual
Saving as collateral. As of the same date, we also provided guarantees in the
amount of approximately Won 2,710.7 million for the repayment of certain
short-term borrowings, long-term debt and lease payments of our affiliates. See
Note 20 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 679,763 million,
Won 259,114 million and Won 48,456.3 million in 2000, 2001 and 2002,
respectively. Capital expenditures primarily consisted of transmission
equipment, fiber optic cable for our enterprise network business, HFC networks
for our broadband Internet business, software, and other facilities and
equipment.

     Due to the commencement of our corporate reorganization proceedings, we are
unable to predict or determine our plans for operations, capital expenditures
and financing requirements until our corporate reorganization is adopted and
implemented. There is also substantial doubt as to our ability to continue as a
going concern. See "Item 3--Key Information--Risk Factors--We have commenced
reorganization proceedings under the Corporate Reorganization Act of Korea." and
"--We or our business may be acquired."

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. In 2002, we generated revenues primarily from the
monthly fees paid by our broadband Internet services subscribers and our leased
line customers. 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 enterprise network services revenues also included monthly fees paid by our
IP-based Internet leased line subscribers and revenues from value-added services
such as Web hosting and co-location. In 2002, we generated approximately 78% and
19% of our total revenues from our broadband Internet access services and
enterprise network services, respectively. On October 28, 2002, we terminated
our enterprise network services. As a result, we will generate revenues
primarily from our broadband Internet services going forward.

     Our operating costs consist primarily of (i) lease payments to Powercomm
for the use of its HFC network, (ii) installation fees paid to our cable modem
installation contractors, (iii) commission payments to our independent dealers,
(iv) customer service fees paid to TG Ubase, and (iv) international bandwidth
lease payments. 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 deterioration 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. As a result, we are unable
to predict our operations or financial condition until our corporate
reorganization is adopted and implemented.

     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

                                       28

<PAGE>

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

     On June 29, 2001, we entered into an Accounts Receivable Transfer
Agreement, under 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. This transaction is treated as a secured borrowing in
accordance with U.S.GAAP.

     On December 12, 2001, we entered into a Trust Deed with Kookmin Bank, to
establish a trust with assets comprising of our future trade receivables in the
aggregate amount of Won 245,912.1 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, which we assigned to ENS
Securitization Limited a Beneficiary Certificates Assignment Agreement dated
December 12, 2001. ENS Securitization issued securities backed by the
beneficiary certificates in the aggregate amount of Won 120,000.0 million. Out
of the proceeds from the asset-backed securities, ENS Securitization remitted
Won 101,000.0 million in cash to us in consideration for our assignment of the
beneficiary certificates. This transaction is treated as a secured borrowing in
accordance with U.S.GAAP repaid in 2002.

     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.

F.   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.

     REVENUE RECOGNITION

     We recognize revenue in accordance with SEC Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements ("SAB 101"), as amended and
other related guidance. SAB 101 requires that four basic criteria must be met
before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and
determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on management's judgments regarding the nature of
the fee charged for services rendered and products delivered and the
collectibility of those fees. Should changes in conditions cause management to
determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.

                                       29

<PAGE>

     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.

     MARKETABLE SECURITIES AND INVESTMENTS

     We invest in various financial instruments including debt and equity
securities. Depending on the accounting treatment specific to each type of
financial instrument, an estimate of fair value is required to determine the
instrument's effect on our consolidated financial statements. We determine the
appropriate classification of the instruments at the time of purchase and
re-evaluate such designation as of each balance sheet date. These instruments
are accounted for in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities. The debt securities that we have the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and reported at
amortized cost. The debt and equity securities that are bought and held
principally for the purpose of selling them in near term are classified as
trading and reported at fair value, with unrealized gains and losses included in
current operations. The debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale and reported at fair value, with unrealized gains and losses
excluded from current operations and reported in other comprehensive income
(loss) as a separate component of stockholders' equity.

     We believe that the accounting estimates related to the fair market value
of our various securities is a "critical accounting policy" because: (1) it may
be highly susceptible to change from period to period based on factors beyond
our control and (2) any significant difference between our estimated fair value
of these securities on any particular date and either their estimated fair value
on a different date or the actual proceeds that we receive upon sale of these
securities could result in valuation losses or losses on disposal which may have
a material impact on our net income. Our assumptions about the fair market value
of securities we hold, and in particular whether any decline in the value of our
available-for-sale or held-to-maturity securities is temporary, require
significant judgment because actual valuations have fluctuated in the past and
are expected to continue to do so, based on variety of factors.

     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: 41 to 48 years for
buildings and structures; 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.

                                       30

<PAGE>

ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   DIRECTORS AND SENIOR MANAGEMENT

     For the fiscal year ended December 31, 2002, our board of directors and
senior executive officers (whose business addresses were at 1337-20
Seocho-2dong, Seocho-ku, Seoul, Korea) were as follows:

<TABLE>
<CAPTION>
         NAME                      AGE                                POSITION
---------------------             ----     --------------------------------------------------------------
<S>                               <C>      <C>
Hong Sun Lee.........               41     Chief Executive Officer and Representative Director
Sang Soon Jung.......               49     Director and Executive Vice President
Gi Choo Han..........               49     Director, Executive Vice President and Chief Financial Officer
Seok Joong Yoon                     42     Director and Executive Vice President
Se-Hwan Kim..........               43     Executive Director
Yong-Teh Lee.........               69     Director
Hong Soon Lee........               43     Director
David Lee............               30     Director
Alex Serge Vieux.....               44     Director
Kwee Chong John Moo..               62     Director
</TABLE>

     HONG SUN LEE served as representative director of Thrunet from February
2001 until March 2003. From 1994 until February 2002, Mr. Lee has served as
President and Chief Executive Officer of SOFTBANK Korea Co., Ltd. From 2000
until February 2002, Mr. Lee has served as Managing Partner of SOFTBANK Ventures
Korea Inc. Since 1997, Mr. Lee has served as President and Chief Executive
Officer of Sambo Xers Professional Basketball Club (formerly, Naray Blue Bird
Inc.). From 1998 until early 2000, Mr. Lee served as President and Chief
Executive Officer of Naray Mobile Telecom Inc. From 1996 until 1997, Mr. Lee
served as Vice President of Naray Mobile Telecom Inc. Mr. Lee received a
bachelor of arts from Florida Institute of Technology and masters in science
(computer science) from the University of South Florida.

     SANG SOON JUNG served as a director and Executive Vice President of Thrunet
from January 2002 until March 2003. From 1998 until 2000, he was a Senior Vice
President of Naray Mobile Telecom Inc. From 1996 until 1998, he served as a
Senior Director of Korea Thrunet Co., Ltd. Mr. Jung received a bachelor of arts
in electrical engineering from Seoul National University.

     GI CHOO HAN served as a director, Executive Vice President and Chief
Financial Officer of Thrunet from January 2002 until March 2003. From 1999 until
2000, Mr. Han served as a Senior Director of Naray Mobile Telecom, Inc. From
1996 until 1999, he served as a director of TriGem Computers Inc. Mr. Han
received a bachelor of arts in business administration from Sogang University.

     SEOK JOONG YOON has served as an Executive Vice President of Thrunet since
December 2002. From January 2002 until November 2002, Mr. Yoon served as a
director and Senior Advisor of Thrunet. Since 2000, Mr. Yoon has been and
currently is a consultant at the Korean e-business Commercialization Institute
of San Jose State University. Since 1998, he has been an Assistant Professor of
Management Information Systems at San Jose State University. From 1997 until
1999, he was a Senior Vice president at iQuest Inc. Mr. Yoon received a bachelor
of arts in business administration from Korea University in 1984, masters in
business from the University of Rochester in 1988 and a Ph.D. in business from
Georgia State University in 1994.

     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 Korea in February 1984.

     YONG-TEH LEE served as a director of Thrunet from July 1996 until March
2003. Mr. Lee served as Chief Executive Officer of Thrunet from July 1996 until
September 1997 and Chairman of Thrunet from October 1997 until February 2001.
From 1998 until 2000, Mr. Lee served as Chairman Emeritus of TriGem and from
1989 until 1998 Mr. Lee served as Chairman of the same company. Since 1999, Mr.
Lee has served as Deputy Chairman of the Federation of Korean Industries. Mr.
Lee received a bachelor of science in physics from Seoul National University and
a Ph.D. in physics from the University of Utah.

     HONG SOON LEE served as a director of Thrunet from March 2000 until March
2003. Mr. Lee has been also serving as Vice Chairman of TriGem since January
2000. From 1997 until 1999, Mr. Lee served as a Senior Vice President of TriGem.
From 1996 until 1997, Mr. Lee served as a Vice President of TriGem. From 1995
until 1996, Mr. Lee served as a director of TriGem.

                                       31

<PAGE>

Mr. Lee received a bachelor of science in physics from Korea University and
maters in computer science from Florida Institute of Technology.

     DAVID LEE served as a director of Thrunet from February 2001 until March
2003. Mr. Lee has since September 2000 served, as Assistant Vice President and
General Counsel of SOFTBANK Corp. of Japan. From 1998 until 2000, Mr. Lee was a
lawyer with Milbank, Tweed Hadley & McCloy. Mr. Lee received a bachelor of arts
in economics from Amherst College and a juris doctor degree from the New York
University School of Law.

     ALEX SERGE VIEUX served as a director of Thrunet from August 1999 until
March 2003. Mr. Vieux is the founder and the Chief Executive Officer of DASAR
Brothers. He also serves as a director for several international public and
private companies, including BVRP, Check Point Software, Cibox and Lernout &
Hauspie Speech Products. He has taught at the University of Paris Le Sorbonne
and was 1998 Visiting Professor at the University of Paris Dauphine. In 1997,
Mr. Vieux served as President of the Infotech Commission for the French
Republic, under the auspices of the Minister of Economics and Finance.

     KWEE CHONG JOHN MOO served as a director of Thrunet from March 2000 until
March 2003. Mr. Moo is the founder, and has served as Group Managing Director of
Computer Systems Advisors since its inception in 1970. Mr. Moo also holds
several positions for international public and private companies, including
Advisor of Singapore IT Federation (SITF), Honorary Chairman of School of
Computing at National University of Singapore, Governor of International Council
for Computer Communications (ICCC) and member of National Internet Advisory
Committee (NIAC).

     Hong Sun Lee and Hong Soon Lee are sons of Yong-Teh Lee.

     Following our filing of a petition for the commencement of reorganization
proceedings, all of the above-mentioned directors and officers, except for Seok
Joong Yoon and Se-Hwan Kim, voluntarily resigned on March 26, 2003. On March 27,
2003, the bankruptcy court appointed Mr. Seog Won Park as our receiver and he is
also acting as our President. In addition to Mr. Park, we expect that the
bankruptcy court will approve four additional persons to be our directors after
the court's approval of the reorganization plan to be submitted by the receiver.
Upon such approval, our board of directors will be as follows:

<TABLE>
<CAPTION>
         NAME                      AGE                    POSITION
---------------------              ---     -------------------------------------
<S>                                <C>     <C>
Seog Won Park........               60     President
Seok Joong Yoon......               42     Director and Executive Vice President
Se-Hwan Kim..........               43     Executive Director
Yu-Jung Kim..........               45     Director
Young-Won Kwon.......               43     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.

     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.

     YOUNG-WON KWON has served the Head of the Information Technology Team of
Thrunet since July 1998. From January 1993 until July 1998, he served as an
Accounts Receivable Manager of Naray Telecom. From January 1986 until July 1992,
he was employed with Daewoo Telecom. Mr. Kwon received a bachelor of accounting
from Kyungbuk National University in August 1985.

     The biographies of Seok Joong Yoon and Se-Hwan Kim are set forth above.

     In 1997 and 1999, we provided loans to Mr. Se-Hwan Kim, in the aggregate
amount of Won 11 million for the purchase of employee stock options. Such loans
were in existence as of July 30, 2002. Since that date, there has been no
material modification of any term, nor any extension or renewal, of such loans.

                                       32

<PAGE>

B.   COMPENSATION

     We paid an aggregate amount of compensation during fiscal 2002 to our
directors and officers as a group equal to Won 988 million. The amount of
retirement and severance benefits accrued for our executive officers and
directors in 2002 was Won 273 million. No stock options were granted to our
executive officers and independent directors in 2002. There were no pension,
retirement or other similar benefits set aside for our executive officers and
directors in 2002.

C.   BOARD PRACTICES

     As a result of the resignation of our former directors and officers on
March 26, 2003 and 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, currently has 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. We expect that with the approval and supervision of
the bankruptcy court, we will re-establish such bodies within this year.

     The following is a description of our board of directors, audit committee,
compensation committee and independent directors as of December 31, 2002.

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. As of December
31, 2002, the members of the Audit Committee were David Lee, Alex Serge Vieux
and Kwee Chong John Moo.

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. As of December 31, 2002, the members of
the Compensation Committee were David Lee, Alex Serge Vieux and Kwee Chong John
Moo.

INDEPENDENT DIRECTORS

     As of December 31, 2002, Alex Serge Vieux and Kwee Chong John Moo served on
the board of directors as independent directors.

                                       33

<PAGE>

D.   EMPLOYEES

     As of May 31, 2003, we had a total of 280 employees, including permanent
employees and contract employees. The following chart shows the number of
employees by main category of functional areas:

<TABLE>
<S>                                             <C>
SENIOR MANAGEMENT                                 8
SALES & MARKETING                               107
R&D AND ENGINEERING                             107
ADMINISTRATION AND FINANCE                       58
                                                ---
TOTAL                                           280
</TABLE>

     As of December 31, 2000, 2001 and 2002 we had 679, 507 and 316 employees,
respectively.

     None of our employees is represented by a labor union. We have not
experienced any work slowdowns or stoppages. We consider our relations with our
employees to be good.

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").

     -         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.

     -         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.

     -         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.

     -         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.

     -         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.

     -         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.

                                       34

<PAGE>

     On August 20, 1999, we granted stock options to our executive officers, our
independent directors and more than 230 employees to purchase 1,910,000, 60,000
and 1,520,000 of our shares, respectively. The stock options were granted with
an exercise price at US$18.00 per share. All of these stock options will vest on
August 21, 2002 and are exercisable until August 20, 2009.

     On March 24, 2000, we granted stock options to our executive officers, our
independent directors and more than 240 employees to purchase 428,000, 30,000
and 1,212,000 of our shares, respectively. The stock options were granted with
an exercise price at Won 48,400 per share. All of these stock options vested on
March 25, 2002 and are exercisable from March 25, 2003 until March 24, 2010.

     On March 27, 2001, we granted stock options to our executive officers, our
independent directors and more than 320 employees to purchase 1,055,000, 40,000
and 1,612,000 of our shares, respectively. The stock options were granted with
an exercise price at Won 7,200 per share. All of these stock options will vest
on March 28, 2003 and are exercisable from March 28, 2004 until March 27, 2011.

     At the general shareholders' meeting held on March 27, 2001, our
shareholders agreed to adjust the exercise price of 2,493,500 of the stock
options granted in August 1999 and March 2000 to Won 7,200 per share. As a
result of the reduction of exercise price of these stock options, they were
accounted for as variable options effective March 27, 2001. Accordingly, we will
recognize compensation cost based on the intrinsic value of these options for
each reporting period subsequent to the modification date of March 27, 2001,
until these awards are exercised, are forfeited or expire unexercised.

     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 outstanding stock options and their
exercise prices have been adjusted accordingly. As of December 31, 2002, we had
outstanding stock options, held by our current or former executive officers,
independent directors and employees, to purchase 1,264,834 shares at an exercise
price of Won 21,600 per share, 621,000 shares at Won 63,384 per share and 85,333
shares at Won 145,200 per share. See Note 24 to our consolidated financial
statements for more information about our stock options.

     As of May 31, 2003, in addition to Se-Hwan Kim, our current director, the
following former standing and non-standing directors and members of senior
management owned shares and/or options in Thrunet: Yong-Teh Lee, Hong Soon Lee,
Alex Serge Vieux, Kwee Chong John Moo, Moon Yong Jin, Yu Joong Kim, Young Won
Kwon, Byung Taik Rim, Kyu Bae Park, In Joong Kim, Jae Hyun Lee, Charles Rim, Ju
Man Park, Yong Hoe Kim, Jong Kil Kim, Won Ho Park, In Chung Ok, Yong Hae Lee,
Hyun Je Park, Boo Woong Yoo, Jong Moon Kim, Wyo Hyun Yoon, Woi Deok Jeon, Do Jin
Kim and Kang Woo Lee. None of these directors and members of senior management
beneficially own 1% or more of our shares or options on an individual basis.

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.

     We established our employee stock ownership association in June 1997. As of
December 31, 2002, 67 employees of our company were members of the employee
stock ownership association and the association held 176,560 shares of our
common shares.

                                       35

<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 March 31, 2003 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
March 31, 2003, we had approximately 16,000 holders of record, including 10,000
holders of record in the United States.

<TABLE>
<CAPTION>
                                                          SHARES BENEFICIALLY
                                                      OWNED AS OF MARCH 31, 2003
                                                      --------------------------
                NAME                                     NUMBER         PERCENT
-----------------------------------                   -----------      ---------
<S>                                                   <C>              <C>
TriGem Computer, Inc ..........................        42,228,869(1)       54.39%
SB-Thrunet Pte. Ltd.(2)........................        12,600,000          16.23%
Microsoft Corporation..........................         2,514,286           3.24%
Hynix Semiconductor Co., Ltd...................         1,998,204           2.57%
Directors and Executive Officers................          318,667(3)        0.41%
</TABLE>

----------

     (1)  Includes shares owned by Naray & Company, Naray D&C, TriGem Ventures,
          TriGem InfoNet, Solvit Media, TG Information Consulting, Inc., and AI
          Leaders, Inc., each an affiliate of TriGem Computer. As of March 31,
          2003, TriGem Computer and Naray & Company owned 24,727,241 shares
          representing 31.85% of our shares and 16,677,446 shares representing
          21.48% of our shares, respectively.

     (2)  In February 2002, SB Thrunet Fund, L.P. transferred all of its assets
          including its equity interest in Thrunet, to SB-Thrunet Pte. Ltd.

     (3)  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, 2000 and ending on May 31, 2003
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>
KEPCO                      January 11, 2000      5,227,200        7.26%      (5,227,200)               -             -
Dongsung Factoring           March 27, 2000      3,866,604        5.37%      (3,866,604)               -             -
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             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           September 6, 2002     40,472,338       17.38%       9,560,000       50,032,338         21.48%
SB-Thrunet Pte. Ltd.      September 6, 2002     47,360,000       30.61%       9,560,000       37,800,000         16.23%
</TABLE>

-------------------
Note: 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., has been reduced to
24,727,241, 16,677,446 and 12,600,000, respectively.

     We have not granted any preferential voting rights to our major
shareholders. However, pursuant to the Investor Rights Agreement dated December
14, 2000, SB Thrunet, TriGem, Naray, TriGem InfoNet, TG Ventures and Naray D&C
agreed to vote in accordance with the provisions of that agreement.

                                       36

<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 54.39% of our shares as of March 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., and
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.


RELATIONSHIP WITH SOFTBANK

     As of March 31, 2003, SOFTBANK, through SB Thrunet, beneficially owned
16.23% 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 holds 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.
Accordingly, as of December 31, 2002, we were liable to SB-Thrunet for bonds in
the principal of US$7,400,000 payable on January 26, 2006, with interest
accruing at the annual rate of 1.43%. On a fully diluted basis assuming the full
exercise of the warrants held by SB Ginko, SOFTBANK will beneficially own
approximately 37.28% of our shares. However, SB Ginko's exercise of its warrants
may be subject to the foreign ownership restrictions under Korean law. See "Item
3--Key Information--Risk Factors--Ownership of shares may be subject to certain
restrictions under Korean law" and "Item 10--Additional Information--Articles of
Incorporation-Limitation on Shareholdings."

     Our transactions with SOFTBANK have been on an arm's length basis.

RELATIONSHIP WITH KOREA.COM COMMUNICATIONS

     As of March 31, 2003, we owned 91.95% 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. We currently own 91.95% of the voting shares in Korea.com
Communications. As of March 31, 2003, Korea.com Communications owed us
approximately Won 7,593.0 million, including Won 5,528 million in loan payable,
Won 1,962.0 million in accounts payable and Won 102.0 million in interest
payable. We also provided guarantees in the amount of approximately Won 9,405.0
million for the repayment of certain short-term borrowings and long-term debt of
Korea.com Communications.

     See Note 30 to our consolidated financial statements for more information
about our related party transactions.

                                       37

<PAGE>

C.   INTERESTS OF EXPERTS AND COUNSEL

     Not applicable.

                                       38

<PAGE>

                         ITEM 8 - FINANCIAL INFORMATION

A.   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See "Item 18-- Financial Statements" and pages F-1 to F-74 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.

     We are in the process of applying to the bankruptcy court for approval to
enter 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 June 30, 2003, we filed a petition
pursuant to 11 U.S.C. 304 to commence a case ancillary to a foreign proceeding.
The petition was brought in the name of Seog Won Park, as receiver for Thrunet.
Motorola's response to the petition is due on July 28, 2003. The petition has
been assigned to Chief Judge Bruce Fox of the United States Bankruptcy Court for
the Eastern District of Pennsylvania. In the petition, we have asked the U.S.
Bankruptcy Court to stay the Motorola action since we are currently in
reorganization proceedings in Korea. We plan to file a supplement to our
petition reflecting the meeting of creditors, including Motorola, which took
place in Korea on June 25, 2003. Until the court grants the petition, there is
no stay in effect. Accordingly, we are required to file an answer to Motorola's
complaint by July 14, 2003.



     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".

                                       39

<PAGE>

             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.

                                 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

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 April 3, 2003, we received a Nasdaq delisting determination indicating
that the Nasdaq Listing Qualifications Panel has determined to delist our common
shares from The Nasdaq Stock Market effective with the open of business on April
7, 2003. See "--Consolidated Statements and Other Financial Information--Legal
Proceedings--Delisting of Our Shares from The

                                       40

<PAGE>

Nasdaq National Market".

ANNOUNCEMENT OF PUBLIC AUCTION TO FIND A NEW MAJOR SHAREHOLDER

     On June 30, 2003, we published a notice in the Korea Economic Daily that we
would stage a public auction on August 25, 2003 to find a new major shareholder.
See the last paragraph in "Item 4--Information on the Company--History and
Development of the Company--Commencement of Reorganization Proceedings" for more
information.

                        RECENT ACCOUNTING PRONOUNCEMENTS

     In May of 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" ("SFAS No. 145"). 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. We will apply the provisions of this statement for all debt
extinguishments going forward.

     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. We are currently assessing the
impact of SFAS No. 146 on our financial position and results of operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods of
transition for an entity that voluntarily changes to a fair value based method
of accounting for stock-based employee compensation, and amends disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
such compensation. We expect to continue to account for stock-based compensation
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and will provide the prominent disclosures required
in the footnotes to the financial statements.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, but now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 is generally effective for all
financial instruments entered into or modified after May 31, 2003, and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. We are currently assessing the impact of SFAS No. 150 on our
financial position and results of operations.

     In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
requires a guarantor to recognize a liability at the inception of certain
guarantees for the fair value of the obligation, including the ongoing
obligation to stand ready to perform over the term of the guarantee. Guarantees,
as defined in FIN 45, include contracts that contingently require the Company to
make payments to a guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements or indirect guarantees of
indebtedness of others. This new accounting is effective for certain guarantees
issued or modified after December 31, 2002. In addition, FIN 45 requires certain
additional disclosures that are presented in Note 12. Our management does not
expect that the adoption of FIN 45 will have a material impact on our financial
position or results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 provides a new framework for identifying variable interest entities
("VIEs") and determining when a company should include the assets, liabilities,
non-controlling interests and results of activities of VIEs in its consolidated
financial statements. FIN 46 requires 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. At
this time, we do not believe that the implementation of FIN 46 will have a
material impact on our consolidated balance sheet, earnings or capital
resources.

                                       41

<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. On
December 27, 2002, we effected a 3:1 reverse stock split of our common shares.
See "Item 4--Information on the Company--History and Development of the
Company--Reverse Stock Split".

<TABLE>
<CAPTION>
                                                           HIGH             LOW
                                                         --------         --------
<S>                                                      <C>              <C>
ANNUAL HIGHS AND LOWS
  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. See "Item
8--Financial Information--Consolidated Statements and Other Financial
Information--Legal Proceedings--Delisting of Our Shares from The Nasdaq National
Market ".

                                       42

<PAGE>

D.   SELLING SHAREHOLDERS

     Not applicable.

E.   DILUTION

     Not applicable.

F.   EXPENSES OF THE ISSUE

     Not applicable.

                                       43

<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 Corporate Reorganization Act of Korea, the latter shall supersede the
former, and we must comply with the provisions of the Corporation Reorganization
Act of Korea. 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:

     -    lease of telecommunication lines facilities;

     -    wired and/or wireless telecommunication business;

     -    value added network business such as collection, processing,
          provision, exchange and transmission of information and multimedia
          service;

     -    cable broadcasting transmission network and distribution network
          businesses and telecommunications business based on cable broadcasting
          transmission networks; and

     -    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, 77,635,260 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 322,364,740 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 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

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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:

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

     -    represented by depositary receipts;

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

     -    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);

     -    issued outside of Korea for listing on a foreign stock exchange or
          foreign securities market trading securities by means of an electronic
          or a quotation system;

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     -    issued according to our Stock Option Plan;

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

     -    issued as consideration for the acquisition of the stock or assets of
          another company up to but less than 20% of the total number of issued
          and outstanding shares; or

     -    issued through general public offering to unspecified general public
          other than existing shareholders in accordance with the Securities Act
          of Korea.

     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 (in the case of Thrunet, the Audit Committee). 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.

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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.

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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

     MASTER RENTAL AND FINANCING AGREEMENT BETWEEN THRUNET AND COMPAQ FINANCIAL
SERVICES COMPANY

     On September 29, 2000, we entered into a Master Rental and Financing
Agreement with Compaq Financial Services Company, under which Compaq agreed to
lease to us certain Compaq hardware and software and provide financing for
certain software program license fees, maintenance fees, fees for other services
and other one-time charges. We leased from Compaq their storage area network,
main server, delivery server, image server and other such equipment totaling Won
22,710,903,000 for a term of 36 months from September 29, 2000. Our rental
installment of Won 3,060,000,000 is payable in advance on a quarterly basis
commencing on July 1, 2001 through to July 1, 2003. Interest is payable on any
rent that is not paid within ten days of its due date at the rate of 13% per
annum calculated daily. We may elect to purchase and become the owner of the
equipment at the end of the 36 months by payment of Won 2,738,743,680 on the
last day of that term.

     AGREEMENT FOR IMPROVEMENT OF FINANCIAL STRUCTURE BETWEEN THRUNET AND KOREA
DEVELOPMENT BANK

     On September 14, 2001, we entered into an agreement with KDB under which we
agreed to comply with the following covenants, among other things, for the
improvement of our financial structure:

     -    to reduce the debt ratio of Thrunet and its affiliates from 1230% in
          2001 to 1100% in 2002, 390% in 2003 and 165% in 2004 in accordance
          with a Debt Ratio Reduction Plan attached to the agreement;

     -    to repay borrowings by proceeds from sale of assets, equity offerings
          and sale of affiliated companies and remove debt guarantees for our
          affiliated companies in accordance with a Self-help and Repayment of
          Borrowings Plan attached to the agreement;

     -    to undertake restructuring transactions in accordance with a Plan for
          Restructuring of Affiliates attached to the agreement;

     -    to appoint outside directors and external auditors in accordance with
          a Plan for Improvement of Corporate Control Structure attached to the
          agreement; and

     -    to conduct a comprehensive credit rating every year in accordance with
          a Table for Comprehensive Credit Rating attached to the agreement.

     AGREEMENT ON SUPPLY AND USE OF FIBER OPTIC GIGABIT SWITCH CIRCUIT BETWEEN
THRUNET AND POWERCOMM

     On February 27, 2001, we entered into an agreement on supply and use of
fiber optic gigabit switch circuit which specifically sets out the charges for
the use of such circuit between Powercomm's distribution center to Thrunet's
regional data center provided by Powercomm. The charges vary depending on the
distance of the relevant area and the number of subscribers in the distribution
center.

     AGREEMENT ON THE ESTABLISHMENT OF, CONTRIBUTION TO AND GENERAL MATTERS
RELATING TO KOREA.COM BETWEEN THRUNET AND KOREA.COM COMMUNICATIONS

     On June 12, 2001, we entered into an agreement with Korea.com
Communications, pursuant to which we transferred to Korea.com Communications our
Korea.com portal business-related assets in the amount of approximately Won 23
billion and

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invested approximately Won 12,000.0 million in cash. This agreement also sets
forth the terms and conditions of various office lease, equipment lease, housing
service and other contracts to be assumed by Korea.com Communications.

     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.

     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.

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     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.

     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.

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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.

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.

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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."

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

                                       52

<PAGE>

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:

     -    dealers in securities or currencies;

     -    financial institutions;

     -    tax-exempt entities;

     -    banks;

     -    life insurance companies;

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

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

     -    persons liable for the alternative minimum tax;

                                       53

<PAGE>

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

     -    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:

     -    a citizen or resident of the United States;

     -    a corporation or partnership, 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 (unless, in the case of a partnership,
          Treasury regulations provide otherwise);

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

     -    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.

     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 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. 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 passive foreign investment company 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

                                       54

<PAGE>

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 passive foreign investment company, or PFIC, with
respect to you if for any taxable year in which you hold our shares:

-    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

-    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 2002 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:

-    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

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

Under these rules:

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

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

-    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

-    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.

                                       55

<PAGE>

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:

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

-    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

     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) 3488-8058.

I.  SUBSIDIARY INFORMATION

Not applicable.

                                       56

<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, 2002,
we had an aggregate of Won 8,883 million in Dollar-denominated bonds, Won 4,409
million in Dollar-denominated long-term debt (including the current portion
thereof) and Won 12,301 million in Dollar-denominated accounts payable. We have
no other significant foreign currency denominated liabilities. As of December
31, 2002, 3.2% of our bonds, 1.9% of our long-term debt (including the current
portion thereof) and 5.8% 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, 2002, we had cash and cash equivalents of Won 55,226
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 15,979 million and short-term
investments of Won 39,247 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, 2002 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:

          -    The Won/Dollar exchange rate was assumed to be Won 1,186.30 to
               US$1.00, which was the noon buying rate in the city of New York
               as of December 31, 2002.

     If the Won depreciates against the Dollar by 10% and all other variables
are held constant from their levels at December 31, 2002, we estimate that our
loss before provision for income taxes will increase by approximately Won 25,577
million in 2003.

        ITEM 12 -- DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

                                       57

<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 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. The holders of such rejected claims may
file any objections to the bankruptcy court within one month from June 25. Based
on the result of the review by the court of such objections, a portion of such
rejected claims may be included in the accepted claims. The final accepted
claims will be later satisfied or dismissed or converted into equity interests
in part or in whole according to a corporate reorganization plan if and when
such plan is adopted. Until such time, we are prohibited from making any
voluntary payment or other act to satisfy any of such claims and we are by
operation of Korean law afforded automatic protection from third parties taking
any action to obtain possession of our property or commence litigation against
us.

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

     None.

                        ITEM 15 - CONTROLS AND PROCEDURES

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

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

                              ITEM 16 - [RESERVED]

                                       58

<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-74 following Glossary.

                               ITEM 19 - EXHIBITS

     Documents filed as exhibits to this annual report:

<TABLE>
<CAPTION>
Exhibit
Number                                                       Description
------                                                       -----------
<S>              <C>
1.1          -  Articles of Incorporation of Thrunet as amended on March 22, 2002 (including English translation).(3)

4.1          -  Service Agreement dated October 1, 2000, between Thrunet and TriGem Service Co., Ltd (including English
                translation).(2)

4.2          -  Agreement on Supply and Use of GBS Circuit dated February 27, 2001, between Thrunet and Powercomm
                (including English translation).*(2)

4.3          -  Agreement for Improvement of Financial Structure dated September 14, 2001, between Thrunet and KDB
                (including English translation).(3)

4.4          -  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)

4.5          -  Accounts Receivable Transfer Agreement dated June 29, 2001, between Thrunet and Multiplus Ltd.
                (including English translation).(3)

4.6          -  Trust Deed dated December 12, 2001, between Thrunet and Kookmin Bank (including English translation).(3)

4.7          -  Beneficiary Certificates Assignment Agreement dated December 12, 2001, between Thrunet and ENS
                Securitization Limited (including English translation).(3)

4.8          -  Agreement on Provision and Use of Facilities dated July 21, 2001, between Thrunet and SK Telecom
                (including English translation).(3)

4.9          -  Subscribers and Assets Transfer Agreement dated August 31, 2001, between Thrunet and SK Telecom
                (including English translation).(3)

4.10         -  Agreement on Provision and Use of Telecommunication Facilities dated June 18, 2001, between Thrunet
                and Dacom Corporation (including English translation).(3)

4.11         -  Agreement on Provision of Transferred Facilities following Asset Transfer Agreement dated July 31,
                2002, between Thrunet and Powercomm (English translation).

8.1          -  A list of Thrunet's significant subsidiaries as of December 31, 2001.

12(a).1      -  Certification of Chief Executive Officer or Equivalent pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

12(a).2      -  Certification of Chief Financial Officer or Equivalent pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

12(a).3      -  Network Service Provider License (including English translation).(1)

12(a).4      -  Network Operator Designation (including English translation).(1)

12(a).5      -  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)

12(a).6      -  Certificate of Registration of Transmission Network Business Operator dated May 14, 2002 (including
                English translation).(3)

12(a).7      -  Network Service Provider License dated August 7, 1996 as amended on May 24, 2002 (including English
                translation).3
</TABLE>

----------------

                                       59

<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.

                                       60

<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 14, 2003

                                          KOREA THRUNET CO., LTD.

                                          By:     /s/ Seok Joong Yoon
                                              ---------------------------
                                              Name: Seok Joong Yoon
                                              Title: Executive Vice President

                                       61

<PAGE>

             CERTIFICATION OF CHIEF EXECUTIVE OFFICER OR EQUIVALENT

I, SEOG WON PARK, certify that:

     1.   I have reviewed this annual report on Form 20-F of Korea Thrunet Co.,
          Ltd. (the "Company").

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report.

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the Company as of, and for, the periods presented in
          this annual report.

     4.   The Company's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          have:

               (a)  designed such disclosure controls and procedures to ensure
                    that material information relating to the Company, including
                    its consolidated subsidiaries, is made known to us by others
                    within those entities, particularly during the period in
                    which this annual report is being prepared;

               (b)  evaluated the effectiveness of the Company's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               (c)  presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date.

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

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

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

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

                                                               /s/ Seog Won Park
                                                               -----------------

                                                                   SEOG WON PARK
                                                                        Receiver
             (currently performs similar functions of a chief executive officer)
                                                                   July 14, 2003

                                       62

<PAGE>

             CERTIFICATION OF CHIEF FINANCIAL OFFICER OR EQUIVALENT

I, SEOG WON PARK, certify that:

     1.   I have reviewed this annual report on Form 20-F of Korea Thrunet Co.,
          Ltd. (the "Company").

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report.

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the Company as of, and for, the periods presented in
          this annual report.

     4.   The Company's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
          have:

               (d)  designed such disclosure controls and procedures to ensure
                    that material information relating to the Company, including
                    its consolidated subsidiaries, is made known to us by others
                    within those entities, particularly during the period in
                    which this annual report is being prepared;

               (e)  evaluated the effectiveness of the Company's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               (f)  presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date.

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

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

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

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

                                                               /s/ Seog Won Park
                                                               -----------------

                                                                   SEOG WON PARK
                                                                        Receiver
             (currently performs similar functions of a chief financial officer)
                                                                   July 14, 2003

                                       63

<PAGE>

                                    GLOSSARY

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

<TABLE>
<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.

dedicated line................................    Telecommunication  lines  dedicated  or  reserved  for  use  by  particular
                                                  subscribers along predetermined routes.

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.
</TABLE>

                                       64

<PAGE>

<TABLE>
<S>                                               <C>
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.

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.

host..........................................    A computer with direct access to the Internet.

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

Internet telephony............................    A  category  of  hardware  and  software  that  enables  people  to use the
                                                  Internet as the transmission medium for telephone calls.

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

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.
</TABLE>

                                       65

<PAGE>

<TABLE>
<S>                                               <C>
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.

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>

                                       66
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                                        PAGE
<S>                                                                                                                     <C>
Independent Auditors' Report of PricewaterhouseCoopers.............................................................     F-2
Independent Auditors' Report of KPMG Samjong Corp. ................................................................     F-3
Consolidated Balance Sheets as of December 31, 2001 and 2002.......................................................     F-4
Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002.........................     F-7
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 2001 and 2002...............     F-10
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002.........................     F-14
Notes to Consolidated Financial Statements.........................................................................     F-17
</TABLE>

                                      F-1

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders 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, 2001 and
2002, and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 2002 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
auditing standards generally accepted in the United States of America, which
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 financial statements of the Company for the year ended December 31, 2000,
prior to the restatement of the discontinued operation described in Note 4, were
audited by other independent accountants whose report, dated April 21, 2001,
expressed an unqualified opinion on those statements, included going concern
assumption and economic uncertainty in Korea, as well as a change in accounting
for its method of revenue and expense recognition related to installation fees
and costs.

We also audited the adjustments for discontinued operations described in Note 4
that were applied to restate the 2000 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied to the prior period
financial statements.

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 more fully discussed in the
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. The uncertainties inherent in the bankruptcy
process and the Company's recurring losses from operations raise substantial
doubt about the Company's ability to continue as a going concern. The Company is
currently operating its business under the jurisdiction of the Bankruptcy Court,
and continuation of the Company as a going concern is contingent upon, among
other things, the confirmation of the current corporate reorganization
proceedings, the Company's ability to comply with all debt covenants under the
existing financing agreement and the Company's ability to generate sufficient
cash from operations and obtain financing sources to meet its future
obligations. On June 25, the Court has approved the Company's corporate
reorganization proceedings. The Company has until October 25, 2005 to submit its
plan of reorganization. However, whether such reorganization plan will be
approved is still uncertain. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

/s/ Samil Accounting Corporation
Seoul, Korea
The Korean Member Firm of PricewaterhouseCoopers
June 21, 2003

                                      F-2

<PAGE>


                          Independent Auditor's Report

The Board of Directors and Stockholders
Korea Thrunet Co., Ltd.:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows (before restatement resulting from
discontinued operations) of Korea Thrunet Co., Ltd. and subsidiaries (the
"Company") for the year ended December 31, 2000, all expressed in Korean Won.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

The operations of the Company have been significantly affected and may continue
to be affected for the foreseeable future by the adverse economic conditions in
the Republic of Korea in recent years and those in the Asia Pacific Region in
general.

In our opinion, the consolidated financial statements (before restatement
resulting from discontinued operations) referred to above presents fairly, in
all material respects, the results of operations and cash flows of Thrunet Co.,
Ltd. and subsidiaries for the year ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements (before restatement resulting
from discontinued operations) have been prepared assuming that the Company will
continue as a going concern. As discussed in the consolidated financial
statements, the Company has suffered recurring losses and negative cash flows
from operations since inception and has current liabilities which significantly
exceed its current assets that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in the consolidated financial statements. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

In 2000, the Company changed its method of revenue and expense recognition
related to installation fees and costs.




/s/ KPMG Samjong Corp.
Seoul, Korea
April 21, 2001
                                      F-3

<PAGE>

                             KOREA THRUNET CO., LTD.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                       Thousands of U.S.
                                                                 Thousands of Korean Won               Dollars (Note 3)
                                                    ----------------------------------------------   ----------------------
                                                              2001                   2002                     2002
                                                    ----------------------   ---------------------   ----------------------
                                                                                                           (unaudited)
<S>                                                 <C>                      <C>                     <C>
ASSETS

Current assets :

   Cash and cash equivalents                        W          156,526,172   W          55,225,735   $               46,553
   Restricted cash                                               6,839,628               2,237,501                    1,886
   Marketable securities                                            58,980                  26,880                       23
   Accounts receivable, net of allowance for
      doubtful accounts                                         72,249,400              64,919,942                   54,725
   Prepaid expenses                                              4,405,162               6,438,154                    5,427
   Other receivables, net of allowance for
      doubtful accounts                                          9,561,666              52,715,135                   44,437
   Other current assets                                          8,579,597               1,710,596                    1,442
                                                    ----------------------   ---------------------   ----------------------
                Total current assets                           258,220,605             183,273,943                  154,493

Investments                                                     52,692,921              15,849,027                   13,360
Property and equipment, net                                  1,149,194,429             500,743,788                  422,105
Intangible assets, net                                          39,989,522              22,668,914                   19,109
Restricted cash, non-current                                    27,896,332              10,097,126                    8,511
Other assets                                                    39,261,998              31,418,602                   26,485
                                                    ----------------------   ---------------------   ----------------------
                    Total assets                    W        1,567,255,807   W         764,051,400   $              644,063
                                                    ======================   =====================   ======================
</TABLE>

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

Continued ;

                                      F-4

<PAGE>

                             KOREA THRUNET CO., LTD.
                     CONSOLIDATED BALANCE SHEETS, Continued
                           December 31, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                        Thousands of U.S.
                                                                Thousands of Korean Won                 Dollars (Note 3)
                                                    ----------------------------------------------   ----------------------
                                                             2001                    2002                    2002
                                                    ----------------------   ---------------------   ----------------------
                                                                                                        (unaudited)
<S>                                                 <C>                      <C>                     <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities :

   Short-term borrowings                            W           27,505,138   W          12,773,941   $               10,767
   Current portion of long-term debt                           154,642,169             226,141,012                  190,628
   Current portion of bonds payable                            174,437,029             144,292,926                  121,633
   Current portion of capital lease obligations                 13,857,950               9,434,795                    7,953
   Accounts payable                                            257,761,661             210,601,043                  177,528
   Accrued expenses                                             31,491,407              30,499,895                   25,710
   Other current liabilities                                     1,907,826              37,396,073                   31,523
                                                    ----------------------   ---------------------   ----------------------

           Total current liabilities                           661,603,180             671,139,685                  565,742

Bonds Payable                                                  335,382,856             133,941,975                  112,908
Long-term debt, excluding current portion                      377,732,255               1,862,540                    1,570
Capital lease obligations, excluding current
   portion                                                       9,906,779              13,451,635                   11,339
Retirement and severance benefits                                2,326,709               2,332,473                    1,966
Other long-term liabilities                                     35,661,468              21,931,389                   18,487
                                                    ----------------------   ---------------------   ----------------------

               Total liabilities                    W        1,422,613,247   W         844,659,697   $              712,012
                                                    ======================   =====================   ======================
</TABLE>

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

Continued ;

                                      F-5

<PAGE>

                             KOREA THRUNET CO., LTD.
                     CONSOLIDATED BALANCE SHEETS, Continued
                           December 31, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                        Thousands of U.S.
                                                                Thousands of Korean Won                 Dollars (Note 3)
                                                    ----------------------------------------------   ----------------------
                                                             2001                    2002                    2002
                                                    ----------------------   ---------------------   ----------------------
                                                                                                        (unaudited)
<S>                                                 <C>                      <C>                     <C>
Commitment and contingencies (Note 20)              W                    -   W                   -   $                    -
Minority interest                                                1,671,406                       -                        -
Stockholders' equity :
  Common stock of W2,500 par value,
     authorized 400,000,000 shares ; issued
     and outstanding 34,213,589 shares in
     2001 and 77,635,260 shares in 2002                        256,601,918             194,088,150                  163,608
   Additional paid-in capital                                  436,491,470             716,534,738                  604,008
   Loans to employees to acquire common stock                     (561,682)               (106,741)                     (90)
   Accumulated deficit                                        (552,830,465)           (989,980,985)                (834,511)
   Accumulated other comprehensive income                        3,269,913                       -                        -
   Less treasury stock, at cost, 436,102 shares
     in 2002                                                             -              (1,143,459)                    (964)
                                                    ----------------------   ---------------------   ----------------------
           Total stockholders' equity                          142,971,154             (80,608,297)                 (67,949)
                                                    ----------------------   ---------------------   ----------------------
   Total liabilities and stockholders' equity       W        1,567,255,807   W         764,051,400   $              644,063
                                                    ======================   =====================   ======================
</TABLE>

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

                                      F-6

<PAGE>

                             KOREA THRUNET CO., LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                                  Thousands of
                                                                                                                  U.S. Dollars
                                                                   Thousands of Korean Won                          (Note 3)
                                                --------------------------------------------------------------   --------------
                                                         2000                 2001                2002                 2002
                                                -------------------   -------------------   ------------------   --------------
                                                                                                                   (unaudited)
<S>                                             <C>                   <C>                   <C>                  <C>
Revenues :
   Broadband Internet Access Services           W       142,345,933   W       360,887,492   W      418,202,522   $      352,527
   Portal Services                                        3,015,457             7,723,490            6,078,971            5,124
                                                -------------------   -------------------   ------------------   --------------
                                                        145,361,390           368,610,982          424,281,493          357,651
                                                ===================   ===================   ==================   ==============
Costs and expenses :
Operating costs, excluding depreciation and
   amortization
   Broadband Internet Access Services                   144,947,203           293,697,630          262,208,617          221,031
   Portal Services                                        4,887,886            11,719,296           24,514,857           20,665
                                                -------------------   -------------------   ------------------   --------------
                                                        149,835,089           305,416,926          286,723,474          241,696
Selling, general and administrative expenses             48,226,109            42,870,099           40,343,158           34,008
Depreciation and amortization                            60,765,359           107,025,728          104,645,612           88,212
Impairment loss on intangible assets, property
  and equipment                                                   -            23,716,909           27,261,220           22,979
                                                ===================   ===================   ==================   ==============
                                                        258,826,557           479,029,662          458,973,464          386,895
                                                ===================   ===================   ==================   ==============
Operating loss                                         (113,465,167)         (110,418,680)         (34,691,971)         (29,244)
                                                ===================   ===================   ==================   ==============
</TABLE>

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

Continued ;

                                      F-7

<PAGE>

                             KOREA THRUNET CO., LTD.
                CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                                  Thousands of
                                                                                                                  U.S. Dollars
                                                                    Thousands of Korean Won                         (Note 3)
                                                --------------------------------------------------------------   --------------
                                                         2000                 2001                2002                 2002
                                                -------------------   -------------------   ------------------   --------------
                                                                                                                   (unaudited)
<S>                                             <C>                   <C>                   <C>                  <C>
Other income (expense) :

   Interest income                              W         3,988,445   W         3,296,798   W        5,166,902   $        4,355
   Interest expense                                     (23,661,771)          (72,832,969)         (81,258,758)         (68,498)
   Gain(loss) on foreign exchange transactions,
     net                                                 (1,319,568)           (3,869,804)           5,755,312            4,851
   Gain(loss) on disposition of investments, net          6,945,426            (3,164,154)            (965,096)            (814)
   Impairment loss on investments                       (47,396,657)           (4,593,526)         (28,930,136)         (24,387)
   Gain(loss) on disposition of property and
     equipment, net                                       2,071,979               311,814          (35,660,302)         (30,059)
   Others, net                                             (785,387)            3,528,281          (17,468,502)         (14,725)
                                                -------------------   -------------------   ------------------   --------------
                                                        (60,157,533)          (77,323,560)       ( 153,360,580)        (129,277)
                                                -------------------   -------------------   ------------------   --------------
Loss from continuing operations before taxes,
   equity in loss of affiliates and minority
     interest                                          (173,622,700)         (187,742,240)        (188,052,551)        (158,521)
   Equity in net loss of affiliates                      (9,902,289)           (8,356,689)          (6,214,911)          (5,239)
   Minority interest                                        196,881             1,075,146            2,841,944            2,396
   Income tax expense                                       582,191                     -              131,363              111
                                                -------------------   -------------------   ------------------   --------------
Net loss from continuing operations                    (183,910,299)         (195,023,783)        (191,556,881)        (161,475)
</TABLE>

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

Continued ;

                                      F-8

<PAGE>

                             KOREA THRUNET CO., LTD.
                CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                                  Thousands of
                                                                                                                  U.S. Dollars
                                                                    Thousands of Korean Won                         (Note 3)
                                                --------------------------------------------------------------   --------------
                                                         2000                 2001                2002                 2002
                                                -------------------   -------------------   ------------------   --------------
                                                                                                                   (unaudited)
<S>                                             <C>                   <C>                   <C>                  <C>
Discontinued operations  :

   Loss from discontinued operations
      (net of income tax benefit of
      W2,677,743 in 2001)                       W       (56,173,574)  W       (74,051,980)  W      (51,960,149)  $      (43,800)
   Gain(loss) from disposals
      (net of income tax of
        W2,677,743 in 2001)                                       -             6,016,227          (63,774,645)         (53,759)
                                                -------------------   -------------------   ------------------   --------------
Net loss from discontinued operations                   (56,173,574)          (68,035,753)        (115,734,794)         (97,559)
Extraordinary item :
   Gain on extinguishments of debt
      (net of income tax expense of
         W367,686)                                                -                     -              870,316              734
   Loss on retirement of bond
     (net of income tax benefit of
       W367,686)                                                  -                     -         (129,681,093)        (109,316)
                                                -------------------   -------------------   ------------------   --------------
Net loss                                        W      (240,083,873)  W      (263,059,536)  W     (436,102,452)  $     (367,616)
                                                ===================   ===================   ==================   ==============
Per Share Data :
  Basic and diluted loss from continuing
     operations per common share                W            (7,667)  W            (6,066)  W           (3,328)  $        (2.81)
   Basic and diluted net loss from
     discontinued operations per common share                (2,342)               (2,116)              (2,010)           (1.69)
   Extraordinary item                                             -                     -               (2,238)           (1.89)
   Basic and diluted net loss per common share  W           (10,009)  W            (8,182)  W           (7,576)  $        (6.39)
</TABLE>

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

                                      F-9

<PAGE>

                             KOREA THRUNET CO., LTD.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                           Thousands of Korean Won
                                           ----------------------------------------------------------------------------------------
                                                                                        Loans to                       Accumulated
                                                                                      employees to                        other
                                                               Additional paid-in   acquire common    Accumulated    comprehensive
                                              Common Stock      capital ("APIC")        stock            deficit     income (loss)
                                           -----------------   ------------------   --------------   -------------   --------------
<S>                                        <C>                 <C>                  <C>              <C>             <C>
Balance at December 31, 1999               W     179,894,645   W      281,396,307   W     (962,426)  W (49,687,056)  W  117,705,032
   Comprehensive income (loss):
     Net loss for 2000                                     -                    -                -    (240,083,873)               -
     Unrealized losses on investment
       securities, net of tax                              -                    -                -               -     (150,778,946)
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                    -                    -                -               -       24,537,375

        Total comprehensive loss

   Gain from issuance of stock by                          -            2,090,550                -               -                -
      subsidiaries
   Stock compensation expense                              -            2,943,565                -               -                -
   Collection of loans to employees to
      acquire common stock                                 -                    -          267,026               -                -
                                           -----------------   ------------------   --------------   -------------   --------------
Balance at December 31, 2000               W    179,894,645    W      286,430,422   W     (695,400)  W(289,770,929)  W   (8,536,539)
                                           =================   ==================   ==============   =============   ==============
</TABLE>

<TABLE>
<CAPTION>
                                               Thousands of Korean Won
                                            -----------------------------
                                              Treasury
                                                stock           Total
                                            -------------   -------------
<S>                                         <C>             <C>
Balance at December 31, 1999                W           -   W 528,346,502
   Comprehensive income (loss):
     Net loss for 2000                                       (240,083,873)
     Unrealized losses on investment
       securities, net of tax                                (150,778,946)
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                        24,537,375
                                                            -------------
        Total comprehensive loss                             (366,325,444)
                                                            -------------
   Gain from issuance of stock by                               2,090,550
      subsidiaries
   Stock compensation expense                                   2,943,565
   Collection of loans to employees to
      acquire common stock                                        267,026
                                            -------------   -------------
Balance at December 31, 2000                W           -   W 167,322,199
                                            =============   =============
</TABLE>

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

Continued ;

                                      F-10

<PAGE>

                             KOREA THRUNET CO., LTD.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                           Thousands of Korean Won
                                           ----------------------------------------------------------------------------------------
                                                                                       Loans to                       Accumulated
                                                                                     employees to                        other
                                                                                    acquire common    Accumulated    comprehensive
                                              Common Stock          APIC                stock            deficit     income (loss)
                                           -----------------   ------------------   --------------   -------------   --------------
<S>                                        <C>                 <C>                  <C>              <C>             <C>
Balance at December 31, 2000               W     179,894,645   W      286,430,422   W     (695,400)  W(289,770,929)  W   (8,536,539)

   Comprehensive income (loss):
     Net loss for 2001                                     -                    -                -    (263,059,536)               -
     Unrealized gains on investment
       securities, net of tax                              -                    -                -               -        1,816,452
     Less: reclassification adjustment
       for losses on investment
       securities included in net loss,
       net of tax                                          -                    -                -               -        9,990,000

         Total comprehensive loss

   Issuance of 30,682,909 shares of
     common stock, net of issuance
     costs                                        76,707,273              727,457                -               -                -
   Issuance of warrants                                    -          148,682,560                -               -                -
   Gain from issuance of stock by
      subsidiaries                                         -              216,745                -               -                -
   Increase in equity due to increase in
      capital of the investee                              -               42,425                -               -                -
   Decrease of APIC on disposition of
      subsidiaries' stock                                  -           (2,090,550)               -               -                -
   Stock compensation expense                              -            2,482,411                -               -                -
   Collection of loans to employees to
      acquire common stock                                 -                    -          133,718               -                -
                                           -----------------   ------------------   --------------   -------------   --------------
Balance at December 31, 2001               W     256,601,918   W      436,491,470   W     (561,682)  W(552,830,465)  W    3,269,913
                                           =================   ==================   ==============   =============   ==============
</TABLE>

<TABLE>
<CAPTION>
                                                Thousands of Korean Won
                                            -------------------------------
                                               Treasury
                                                Stock            Total
                                            --------------   --------------
<S>                                         <C>              <C>
Balance at December 31, 2000                W            -   W  167,322,199

   Comprehensive income (loss):
     Net loss for 2001                                   -     (263,059,536)
     Unrealized gains on investment
       securities, net of tax                            -        1,816,452
     Less: reclassification adjustment
       for losses on investment
       securities included in net loss,
       net of tax                                        -        9,990,000
                                                             --------------
       Total comprehensive loss                                (251,253,084)
                                                             --------------
   Issuance of 30,682,909 shares of
     common stock, net of issuance
     costs                                               -       77,434,730
   Issuance of warrants                                  -      148,682,560
   Gain from issuance of stock by
      subsidiaries                                       -          216,745
   Increase in equity due to increase in
      capital of the investee                            -           42,425
   Decrease of APIC on disposition of
      subsidiaries' stock                                -       (2,090,550)
   Stock compensation expense                            -        2,482,411
   Collection of loans to employees to
      acquire common stock                               -          133,718
                                            --------------   --------------
Balance at December 31, 2001                W            -   W  142,971,154
                                            ==============   ==============
</TABLE>

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

Continued ;

                                      F-11

<PAGE>

                             KOREA THRUNET CO., LTD.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                           Thousands of Korean Won
                                           ----------------------------------------------------------------------------------------
                                                                                       Loans to                       Accumulated
                                                                                     employees to                        other
                                                                                    acquire common    Accumulated    comprehensive
                                              Common Stock         APIC                  stock            deficit     income (loss)
                                           -----------------   ------------------   --------------   -------------   --------------
<S>                                        <C>                 <C>                  <C>              <C>             <C>
Balance at December 31, 2001               W     256,601,918   W      436,491,470   W     (561,682)  W(552,830,465)  W    3,269,913

   Comprehensive income (loss):
     Net loss for 2002                                     -                    -                -    (436,102,452)               -
     Unrealized gains on investment
       securities, net of tax                              -                    -                -               -                -
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                    -                    -                -               -       (3,269,913)

         Total comprehensive loss

   Issuance of 52,096,000 shares of common
     stock by exercise of warrants, net of
     issuance costs                              130,240,000             (653,452)               -               -                -
   Issuance of 78,169,014 shares of common
     stock by debt to equity swap, net of
     issuance costs                              195,422,535         (107,561,975)               -               -                -
   Decrease in equity due to disposition
      of subsidiaries' stock                               -              (42,426)               -               -                -
   Acquisition of treasury stock                           -                    -                -               -                -
   Minority interest excess loss                           -                    -                -      (1,048,068)               -
   Decrease of 155,270,521 shares of common
      stock by reverse stock split              (388,176,303)         388,176,303                -               -                -
   Stock compensation expense                              -              124,818                -               -                -
   Collection of loans to employees to
     acquire common stock                                  -                    -          454,941               -                -
                                           -----------------   ------------------   --------------   -------------   --------------
Balance at December 31, 2002               W     194,088,150   W      716,534,738   W     (106,741)  W(989,980,985)  W            -
                                           =================   ==================   ==============   =============   ==============
</TABLE>

<TABLE>
<CAPTION>
                                                Thousands of Korean Won
                                            -------------------------------
                                               Treasury
                                                 Stock            Total
                                            --------------   --------------
<S>                                         <C>              <C>
Balance at December 31, 2001                W            -   W  142,971,154

   Comprehensive income (loss):
     Net loss for 2002                                   -     (436,102,452)
     Unrealized gains on investment
       securities, net of tax                            -                -
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                  -       (3,269,913)
                                                             --------------
         Total comprehensive loss                              (439,372,365)
                                                             --------------
   Issuance of 52,096,000 shares of common
     stock by exercise of warrants, net of
     issuance costs                                      -      129,586,548
   Issuance of 78,169,014 shares of common
     stock by debt to equity swap, net of
     issuance costs                                      -       87,860,560
   Decrease in equity due to disposition
      of subsidiaries' stock                             -          (42,426)
   Acquisition of treasury stock                (1,143,459)      (1,143,459)
   Minority interest excess loss                         -       (1,048,068)
   Decrease of 155,270,521 shares of common
      stock by reverse stock split                       -                -
   Stock compensation expense                            -          124,818
   Collection of loans to employees to
     acquire common stock                                -          454,941
                                            --------------   --------------
Balance at December 31, 2002                W   (1,143,459)  W  (80,608,297)
                                            ==============   ==============
</TABLE>

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

Continued ;

                                      F-12

<PAGE>

                             KOREA THRUNET CO., LTD.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                           Thousands of Korean Won
                                           ----------------------------------------------------------------------------------------
                                                                                       Loans to                       Accumulated
                                                                                     employees to                        other
                                                                                    acquire common    Accumulated    comprehensive
                                              Common Stock         APIC                  stock            deficit     income (loss)
                                           -----------------   ------------------   --------------   -------------   --------------
<S>                                        <C>                 <C>                  <C>              <C>             <C>
Balance at December 31, 2001               $         216,304   $          367,944   $         (473)  $    (466,012)  $        2,756

   Comprehensive income (loss):
     Net loss for 2002                                     -                    -                -        (367,616)               -
     Unrealized gains on investment
       securities, net of tax                              -                    -                -               -                -
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                    -                    -                -               -           (2,756)

         Total comprehensive loss

   Issuance of 52,096,000 shares of common
     stock by exercise of warrants, net of
     issuance costs                                  109,787                 (551)               -               -                -
   Issuance of 78,169,014 shares of common
     stock by debt to equity swap, net of
     issuance costs                                  164,733              (90,670)               -               -                -
   Decrease in equity due to disposition
      of subsidiaries' stock                               -                  (36)               -               -                -
   Acquisition of treasury stock                           -                    -                -               -                -
   Minority interest excess loss                           -                    -                -            (883)               -
   Decrease of 155,270,521 shares of common
      stock by reverse stock split                  (327,216)             327,216                -               -                -
   Stock compensation expense                              -                  105                -               -                -
   Collection of loans to employees to
     acquire common stock                                  -                    -              383               -                -
                                           -----------------   ------------------   --------------   -------------   --------------
Balance at December 31, 2002               $         163,608   $          604,008   $          (90)  $    (834,511)  $            -
                                           =================   ==================   ==============   =============   ==============
</TABLE>

<TABLE>
<CAPTION>
                                                Thousands of Korean Won
                                            -------------------------------
                                            Treasury stock        Total
                                            --------------   --------------
<S>                                         <C>              <C>
Balance at December 31, 2001                $            -   $      120,519

   Comprehensive income (loss):
     Net loss for 2002                                   -         (367,616)
     Unrealized gains on investment
       securities, net of tax                            -                -
     Less: reclassification adjustment for
       losses on investment securities
       included in net loss, net of tax                  -           (2,756)
                                                             --------------
         Total comprehensive loss                                  (364,860)
                                                             --------------
   Issuance of 52,096,000 shares of common
     stock by exercise of warrants, net of
     issuance costs                                      -          109,236
   Issuance of 78,169,014 shares of common
     stock by debt to equity swap, net of
     issuance costs                                      -           74,063
   Decrease in equity due to disposition
      of subsidiaries' stock                             -              (36)
   Acquisition of treasury stock                      (964)            (964)
   Minority interest excess loss                         -             (883)
   Decrease of 155,270,521 shares of common
      stock by reverse stock split                       -                -
   Stock compensation expense                            -              105
   Collection of loans to employees to
     acquire common stock                                -              383
                                            --------------   --------------
Balance at December 31, 2002                $         (964)  $      (67,949)
                                            ==============   ==============
</TABLE>

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

Continued ;

                                      F-13

<PAGE>

                             KOREA THRUNET CO., LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                            Thousands of
                                                                                                            U.S. Dollars
                                                                     Thousands of Korean Won                  (Note 3)
                                                      -------------------------------------------------------------------
                                                            2000              2001             2002             2002
                                                      ---------------   ---------------   ---------------   -------------
                                                                                                             (unaudited)
<S>                                                   <C>               <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES :

Net loss                                              W  (240,083,873)  W  (263,059,536)  W  (436,102,452)  $    (367,616)

Adjustments to reconcile net loss to net cash
used in operating activities

   Depreciation and amortization                          104,785,632       160,961,192       164,164,844         138,384
   Accretion of discounts on bonds issued                   3,401,682        25,452,383        40,154,340          33,848
   Amortization of premium                                          -                 -        13,268,930          11,185
   Bad debt provision                                       3,291,676         5,039,072        40,904,309          34,481
   Provision for retirement and severance benefits          1,927,915         5,422,668         2,723,961           2,296
   Retirement and severance benefits paid                    (749,507)       (4,332,428)       (3,908,355)         (3,295)
   Stock compensation expense                               2,943,565         2,482,411           124,818             105
   Contribution from the National Pension Fund                 70,681            38,739            44,834              38
   Loss (gain) on disposition of property and
     equipment, net                                        (3,446,595)        2,277,641        35,660,302          30,059
   Gain from disposal of cable TV operation, net           (1,518,463)       (8,693,970)                -               -
   Loss from disposal of enterprise network service                 -                 -        63,774,645          53,759
   Loss (gain) on disposition of investments, net          (8,788,413)       (2,197,397)          965,096             814
   Gain on disposition of marketable securities, net           (2,827)          (51,428)           (3,378)             (3)
   Loss (gain) on valuation of marketable securities           38,656             2,720                 -               -
   Loss (gain) on foreign exchange transactions, net        2,470,765         3,671,568        (3,343,145)         (2,818)
   Loss on valuation of forward contract                            -             7,389            34,611              29
   Loss on disposition of other assets                        286,902                 -                 -               -
   Equity in loss of cable TV operations, net                       -         7,848,889                 -               -
   Equity in loss of affiliates, net                        9,902,289         8,356,689         6,214,911           5,239
   Loss on cancellation of contract                                 -        28,330,184                 -               -
   Loss on redemption of bonds                                      -                 -       130,048,780         109,626
   Gain on extinguishment of debt                                   -                 -        (1,238,002)         (1,044)
   Impairment loss on investments                          47,396,657         4,593,526        28,930,136          24,387
   Impairment loss on intangible assets                             -        23,716,909        24,861,991          20,957
   Impairment loss on property and equipment                        -                 -        17,466,895          14,724
   Minority interest                                         (196,881)       (1,075,146)       (2,841,944)         (2,396)
</TABLE>

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

Continued ;

                                      F-14

<PAGE>

                             KOREA THRUNET CO., LTD.
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                            Thousands of
                                                                                                            U.S. Dollars
                                                                     Thousands of Korean Won                  (Note 3)
                                                      -------------------------------------------------------------------
                                                            2000              2001             2002             2002
                                                      ---------------   ---------------   ---------------   -------------
                                                                                                             (unaudited)
<S>                                                   <C>               <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES, CONTINUED :
Adjustments to reconcile net loss to net cash
provided by operating activities, continued
   Decrease (increase) in accounts receivable         W   (38,846,095)  W   (31,038,665)  W     4,277,507   $       3,606
   Increase in prepaid expenses                            (2,548,734)       (1,567,315)       (2,032,992)         (1,714)
   Decrease in prepaid value-added taxes                    2,700,460         1,694,661           863,497             728
   Increase in other receivables                             (997,876)         (723,511)      (75,828,045)        (63,920)
   Decrease (increase) in other current assets              3,270,391        (3,775,922)        3,918,022           3,303
   Increase (decrease) in accounts payable                 52,334,220        (1,680,360)      (60,476,571)        (50,979)
   Increase (decrease) in accrued expenses                 18,403,946         2,999,625       (16,884,976)        (14,232)
   Increase in value-added taxes payable                            -                 -        35,512,182          29,935
   Increase (decrease) in other current liabilities         8,452,093          (541,932)       17,262,429          14,551
   Proceeds from sale of trading securities                 1,039,674                 -                 -               -
   Acquisition of trading securities                         (604,487)                -                 -               -
                                                      ---------------   ---------------   ---------------   -------------
Net cash provided (used) in operating activities          (35,066,547)      (35,841,344)       28,517,180          24,037
                                                      ===============   ===============   ===============   =============
CASH FLOWS FROM INVESTING ACTIVITIES :
   Disposition of property and equipment                   18,152,322        11,984,996        83,901,626          70,725
   Proceed from discontinued operation                              -                 -       346,860,000         292,389
   Acquisition of property and equipment                 (679,763,269)     (259,114,432)      (48,456,267)        (40,847)
   Disposition of investments                              81,313,828        33,032,784         5,978,515           5,040
   Acquisition of investments                             (81,640,604)       (4,244,492)       (4,298,426)         (3,623)
   Disposition of cable system operators                    8,411,077        41,900,171                 -               -
   Acquisition of cable system operators                  (24,503,453)                -                 -               -
   Increase in intangible assets                           (6,935,078)      (25,844,618)       (5,048,236)         (4,255)
   Decrease in intangible assets                                    -         5,668,650                 -               -
   Decrease (increase) in other assets, net               (39,926,881)      (16,602,534)       17,338,983          14,616
                                                      ---------------   ---------------   ---------------   -------------
Net cash provided (used) in investing activities         (724,892,058)     (213,219,475)      396,276,195         334,045
                                                      ---------------   ---------------   ---------------   -------------
</TABLE>

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

Continued ;

                                      F-15

<PAGE>

                             KOREA THRUNET CO., LTD.
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
              for the years ended December 31, 2000, 2001 and 2002

<TABLE>
<CAPTION>
                                                                                                            Thousands of
                                                                                                            U.S. Dollars
                                                                     Thousands of Korean Won                  (Note 3)
                                                      -------------------------------------------------------------------
                                                            2000              2001             2002             2002
                                                      ---------------   ---------------   ---------------   -------------
                                                                                                             (unaudited)
<S>                                                   <C>               <C>               <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES :
   Proceeds from short-term borrowings                W 1,119,460,752   W   118,247,389   W    55,053,928   $      46,408
   Repayments of short-term borrowings                   (949,586,333)     (309,786,239)     (180,590,911)       (152,230)
   Proceeds from long-term debt                           221,993,941       294,684,020                 -               -
   Repayments of long-term debt                           (71,223,427)      (33,704,935)     (230,933,679)       (194,666)
   Repayments of capital lease obligations                 (1,658,803)       (6,147,754)      (10,296,340)         (8,679)
   Issuance of bonds                                      284,125,989       225,344,501        49,333,095          41,586
   Repayments of bonds                                              -                 -      (198,348,000)       (167,199)
   Increase (decrease) in other long-term liabilities       2,898,392        (3,025,674)       (7,483,091)         (6,308)
   Issuance of stock by subsidiaries                        3,000,000         2,963,799                 -               -
   Issuance of common stock                                         -        77,434,730                 -               -
   Issuance cost on common stock                                    -                 -        (1,595,260)         (1,345)
   Acquisition of treasury stock                                    -                 -        (1,126,812)           (950)
   Collection of loans to employees to acquire
     common stock                                             267,026           133,718          (106,742)            (90)
                                                      ---------------   ---------------   ---------------   -------------
Net cash provided (used) by financing activities          609,277,537       366,143,555      (526,093,812)       (443,473)
                                                      ===============   ===============   ===============   =============
NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                      (150,681,068)      117,082,736      (101,300,437)        (85,391)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR            190,124,504        39,443,436       156,526,172         131,944
                                                      ---------------   ---------------   ---------------   -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR              W    39,443,436   W   156,526,172   W    55,225,735   $      46,553
                                                      ===============   ===============   ===============   =============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest                                              W    61,737,361   W   111,688,519   W    49,367,148   $      41,614
                                                      ===============   ===============   ===============   =============
   Income taxes                                       W     1,503,155   W       972,434   W       952,372   $         803
                                                      ===============   ===============   ===============   =============
</TABLE>

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

                                      F-16

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

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 as of December 31, 2001 and 2002,
     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 12,000.0
     million Won 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 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 W183,910,299, W195,023,783 and
     W191,556,881 for the years ended December 31, 2000, 2001 and 2002,
     respectively. The Company's current liabilities exceed its current assets
     by W487,865,742 and its total liabilities exceed total assets by
     W80,608,297 as of December 31, 2002. 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.

Continued ;

                                      F-17

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

1.   Description of the Company, Continued :

     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 and appointed the
     receiver to evaluate the Company's corporate reorganization plans on March
     27, 2003. 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. The Company is currently operating its business under the
     jurisdiction of the Bankruptcy Court, and continuation of the Company as a
     going concern is contingent upon, among other things, the confirmation of
     the current corporate reorganization proceedings, the Company's ability to
     comply with all debt covenants under the existing financing agreement, and
     the Company's ability to generate sufficient cash from operations and
     obtain financing sources to meet its future obligations. The Court has
     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
     is significantly higher than its liquidation value. On June 25, the Court
     has approved the Company's corporate reorganization proceedings and ordered
     the receiver to submit a reorganization plan. The Company has until October
     25, 2005 to submit its plan of reorganization. Once the reorganization plan
     is filed, the Court will convene a series of meetings of interested parties
     where they will examine and deliberate the reorganization plan proposed by
     the receiver. Once such a plan is accepted by a resolution of the interest
     parties, the Court will promptly decide whether or not to confirm such
     accepted plan. Once the accepted plan is confirmed by the Court, the
     receiver will be responsible for implementation of the confirmed plan.
     However, whether the interested parties and the Court will approve such
     reorganization plan is still uncertain.

     The Company is currently pursuing several initiatives intended to increase
     liquidity and alleviate the going concern issue. As part of the Company's
     corporate reorganization plan, the Company intends to restructure its
     existing debt payments with its creditors. Furthermore, after the
     disposition of enterprise network services business, the Company intends to
     focus on the Broadband Internet Access business and improve its results of
     operations by reducing its discretionary expenses, such as promotion and
     advertising expenses, labor cost and rental cost, to minimize its cash
     outflow. On May 19, 2003, the Company has formed a consortium, which
     comprised of Korea Development Bank, KPMG Financial Advisory Services Inc.
     and Daeryuk law firm, to assist the Company in identifying the strategic
     buyers. Currently, the Company is in discussion with several interested
     parties.

Continued ;

                                      F-18

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

1.   Description of the Company, Continued :

     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, 2002.

<TABLE>
<CAPTION>
                                               Percentage
                                               ownership
                             Acquisition  -------------------
         Subsidiary             date        2001       2002     Primary business
---------------------------  -----------  ----------  -------   ----------------
<S>                          <C>          <C>         <C>       <C>
Korea.com Communications      June 2001    91.95%     91.95%           Portal Service
Multiplus Limited             July 2001     5.00%      5.00%    Special Purpose Entity ("SPE")
ENS Securitization Limited    Dec. 2001        -          -                SPE
</TABLE>

     In September 2001, the Company's 100.00% ownership interest in Korea.com
     Communications was reduced to 91.95% as a result of issuance of new common
     shares to third parties by this subsidiary in 2001.

     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" due to the fact that neither of them qualifies as a true sale,
     thus the operations of the SPE were consolidated under US GAAP.

     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-19

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   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 percent 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 is
     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.

     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.

     Risk and Uncertainties -

     The Asian financial crisis that began in 1997 has adversely affected the
     Korean economy, as well as those of other countries in the Asia Pacific
     region. Further, the effect may be exacerbated as a result of current
     political tensions with the Democratic People's Republic of Korea ("North
     Korea"). In response to this situation, the Korean government and the
     private sector began implementing structural reforms, particularly in the
     areas of restructuring private enterprise and reforming the banking
     industry.

     Although economic conditions in Korea may have improved in recent years,
     the Company may continue to be affected for the foreseeable future by
     certain adverse economic conditions in Korea and in the Asia Pacific
     region. If these conditions have an adverse effect on the Company,
     adjustments to the consolidated financial statement could be required, and
     such adjustments could be material.

Continued ;

                                      F-20

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     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.

     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.

     Marketable Securities and Investments -

     The Company classifies its marketable investments included in "Marketable
     Securities" and "Investments" into three categories and accounts for such
     securities as follows :

     Debt securities that the enterprise has the positive intent and ability to
     hold to maturity are classified as held-to-maturity securities and reported
     at amortized cost.

     Debt and equity securities that are bought and held principally for the
     purpose of selling them in near term are classified as trading securities
     and reported at fair value, with unrealized gains and losses included in
     current operations.

     Debt and equity securities not classified as either held-to-maturity
     securities or trading securities are classified as available-for-sale
     securities and reported at fair value, with unrealized gains and losses
     excluded from current operations and reported in other comprehensive income
     (loss) as a separate component of stockholders' equity.

     The Company classified its marketable investments included in "Marketable
     Securities" as trading securities and its marketable investments included
     in "Investments" as available-for-sale and held-to-maturity securities at
     December 31, 2001 and 2002. Gross proceeds from the sale of such securities
     are separately classified on the statements of cash flows. Equity
     securities that do not have readily determinable fair values are carried at
     cost.

     The Company has a policy to regularly review its investments for declines
     in fair value below the amortized cost basis. Declines in fair value of
     individual securities below their cost that are other than temporary result
     in write-downs of the individual securities to their fair value, and the
     amount of the write down is included in the results of operations. The new
     cost basis is not changed due to subsequent recoveries in fair value.
     Subsequent increases in fair value of available-for-sale securities are
     included in the related separate component of stockholders' equity.

Continued ;

                                      F-21

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     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 less 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 and structures                                                           41~48 years
Communication circuit equipment                                                       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. The capitalized
     interest is recorded as part of the related asset and is amortized over the
     asset's estimated useful life.

     Capital Lease Transactions -

     Assets leased under capital leases are recorded at cost as property and
     equipment and depreciated using the straight-line method over their
     estimated useful lives or the lease term, whichever is shorter. In
     addition, aggregate lease payments are recorded as obligations under
     capital leases, net of accrued interest as determined by total lease
     payments in excess of the cost of the leased machinery and equipment.
     Accrued interest is amortized over the lease period using the effective
     interest rate method.

 Continued ;

                                      F-22

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

 2.  Summary of Significant Accounting Policies, Continued :

     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.

     Intangible Assets -

     (i) Licenses

     Software licenses, which represent rights to use certain software, are
     stated at cost less accumulated amortization. Amortization is computed by
     the straight-line method over the term of the license.

     The leased line license was obtained using the funds collected from the
     initial stockholders prior to inception of the Company. This license fee
     was reflected as an asset and a component of stockholders' equity at the
     time of establishment of the Company. The asset is amortized by the
     straight-line method over 20 years.

     (ii) Domain Name and Web-site Development Costs

     In March 2000, the Company acquired the domain name "Korea.com" and
     recorded its acquisition cost of W4,669,100 as an intangible asset
     which is amortized on a straight-line basis over the estimated period of
     benefit of 10 years. Direct costs related to website application and
     infrastructure development are capitalized and amortized using the
     straight-line method over 3 years.

Continued ;

                                      F-23

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     Intangible Assets, Continued -

     (iii) Leased line right

     The Company recognized an intangible asset in connection with the right to
     use Asia Global Crossing (the "AGC") international leased line. Such
     acquisition costs are capitalized and amortized using the straight-line
     method over 15 years.

     The recoverability of intangibles assets is evaluated if facts and
     circumstances indicate a possible impairment. Such facts and circumstances
     include significant or sustained declines in revenues or earnings and
     material adverse changes in the economic climate. If this review indicates
     that intangible assets will not be recoverable, based on estimated
     undiscounted cash flow projections, impairment will be measured by
     comparing the carrying values of intangible assets to their fair values, as
     determined based on discounted cash flows or appraisals.

     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.

Continued ;

                                      F-24

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     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, 2001 and 2002, 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.

     Revenue Recognition -

     Monthly customer subscription fees for broadband Internet and enterprise
     network services 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, 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 taken into
     income over the estimated average period that subscribers are expected to
     remain connected to the system.

     Foreign Currency Transactions -

     Monetary assets and liabilities denominated in a foreign currency are
     converted into Korean Won at (pound)U1,326.1 to US$1.00 and (pound)U1,200.4
     to US$1.00, the equivalent rates of exchange as of December 31, 2001 and
     2002, 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.

Continued ;

                                      F-25

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     Accounting for Sales of Stock by a Subsidiary -

     In accordance with guidance provided in Staff Accounting Bulletin ("SAB")
     No. 51, "Accounting for Sales of Stock by a Subsidiary," the Company
     accounts for gains arising from issuance of stock by subsidiaries as
     capital transactions in the consolidated financial statements.

     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 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 23,985,953, 32,150,106 and 57,563,294 shares for
     the years ended December 31, 2000, 2001 and 2002, 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, 2000, 2001 and 2002 as their effect was anti-dilutive.

     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 2000 and 2001 financial statements have been
     reclassified to conform to the current year's presentation. These
     reclassifications have no effect on previously reported net loss or
     accumulated deficit.

Continued ;

                                      F-26

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     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" ("SFAS No. 145"). 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.

     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. The Company is currently assessing the impacts of SFAS No. 146 on its
     financial position and its results of its operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation - Transition and Disclosure". This statement amends SFAS No.
     123, "Accounting for Stock-Based Compensation", to provide alternative
     methods of transition for an entity that voluntarily changes to a fair
     value based method of accounting for stock-based employee compensation, and
     amends disclosure provisions of SFAS No. 123 to require prominent
     disclosure about the effects on reported net income of an entity's
     accounting policy decisions with respect to such compensation. The Company
     expects to continue to account for stock-based compensation in accordance
     with Accounting Principles Board Opinion No. 25, "Accounting for Stock
     Issued to Employees", and will provide the prominent disclosures required
     in the footnotes to the financial statements.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
     Instruments with Characteristics of both Liabilities and Equity. SFAS No.
     150 changes the accounting for certain financial instruments that, under
     previous guidance, could be classified as equity or "mezzanine" equity, but
     now requiring those instruments to be classified as liabilities (or assets
     in some circumstances) in the statement of financial position. Further,
     SFAS No. 150 requires disclosure regarding the terms of those instruments
     and settlement alternatives. The guidance in SFAS No. 150 is generally
     effective for all financial instruments entered into or modified after May
     31, 2003, and is otherwise effective at the beginning of the first interim
     period beginning after June 15, 2003. The Company is currently assessing
     the impacts of SFAS No. 150 on its financial position and its results of
     its operations.

Continued ;

                                      F-27

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

2.   Summary of Significant Accounting Policies, Continued :

     Recent Accounting Pronouncements, Continued -

     In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"),
     Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
     requires a guarantor to recognize a liability at the inception of certain
     guarantees for the fair value of the obligation, including the ongoing
     obligation to stand ready to perform over the term of the guarantee.
     Guarantees, as defined in FIN 45, include contracts that contingently
     require the Company to make payments to a guaranteed party based on changes
     in an underlying that is related to an asset, liability or equity security
     of the guaranteed party, performance guarantees, indemnification agreements
     or indirect guarantees of indebtedness of others. This new accounting is
     effective for certain guarantees issued or modified after December 31,
     2002. In addition, FIN 45 requires certain additional disclosures that are
     presented in Note 20. Management does not expect that the adoption of FIN
     45 will have a material impact on the Company's financial position or its
     results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
     Consolidation of Variable Interest Entities, an interpretation of ARB No.
     51. FIN 46 provides a new framework for identifying variable interest
     entities ("VIEs") and determining when a company should include the assets,
     liabilities, noncontrolling interests and results of activities of VIEs in
     its consolidated financial statements. FIN 46 requires 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. The Company has performed an
     analysis to identify such entities and does not believe that the Company
     has any entities that fall within the scope of this standard.

3.   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 W1,186.3 to US$1.00, the
     US Federal Reserve Bank of New York noon buying exchange rate in effect on
     December 31, 2002. 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-28

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

4.   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 W6,016,227, net of income
     tax of W2,677,743, from the disposition of its subsidiaries. The book value
     of the subsidiaries at the date of sale totaled W41,583,306. The
     dispositions of the six system operations were considered as a disposal of
     a business segment and was 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 W7,848,889.

     On August 2002, the Company announced its decision to dispose of the
     enterprise network service business by the end of 2002. On October, 2002,
     the Company sold and recognized an aggregate loss of W63,774,645 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
     W410,634,645. 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 W51,960,149 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 2000, 2001 and 2002 have been restated to show
     the operating results of the enterprise network service business
     separately.

     The net losses from cable television business and enterprise network
     service business for the year ended 200, 2001, and 2002 are as follows:

<TABLE>
<CAPTION>
                                                 2000            2001            2002
                                            -------------    ------------    ------------
<S>                                         <C>              <C>             <C>
Cable television                            W  18,283,043    W  7,848,889    W          -
Enterprise network services                    37,890,531      68,880,834      51,960,149
                                            -------------    ------------    ------------
Total loss from discontinued operation      W  56,173,574    W 76,729,723    W 51,960,149
                                            =============    ============    ============
</TABLE>

                                      F-29

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

5.   Accounts Receivable :

     Accounts receivable at December 31, 2001 and 2002 are summarized as
     follows:

<TABLE>
<CAPTION>
                                                 2001            2002
                                            -------------    ------------
<S>                                         <C>              <C>
Accounts receivable-trade                   W  80,610,166    W 80,984,531
Allowance for doubtful accounts                (8,360,766)    (16,064,589)
                                            -------------    ------------
Balance at end of year                      W  72,249,400    W 64,919,942
                                            =============    ============
</TABLE>

     Changes in allowance for doubtful accounts for the years ended December 31,
     2000, 2001 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                2000             2001            2002
                                            -------------    ------------    -------------
<S>                                         <C>              <C>             <C>
Balance at beginning of year                W     451,268    W  3,742,944    W   8,360,766
Provision for the year                          3,291,676       4,617,822        7,703,823
                                            -------------    ------------    -------------
Balance at end of year                      W   3,742,944    W  8,360,766    W  16,064,589
                                            =============    ============    =============
</TABLE>

6.   Other Receivables :

     Other receivable at December 31, 2001 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                 2001             2002
                                            -------------    -------------
<S>                                         <C>              <C>
Accounts receivable-trade                   W  10,010,910    W  74,768,021
Discounted Present Value                         (371,503)        (274,659)
Allowance for doubtful accounts                   (77,741)     (21,778,227)
                                            -------------    -------------
Balance at end of year                      W   9,561,666    W  52,715,135
                                            =============    =============
</TABLE>

     Changes in allowance for doubtful accounts for the years ended December 31,
     2000, 2001 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                2000             2001            2002
                                            -------------    ------------    ------------
<S>                                         <C>              <C>             <C>
Balance at beginning of year                W           -    W         -     W     77,741
Provision for the year                                  -          77,741      21,700,486
                                            -------------    ------------    ------------
Balance at end of year                      W           -    W     77,741    W 21,778,227
                                            =============    ============    ============
</TABLE>

Continued ;

                                      F-30

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

6.   Other Receivables Continued :

     As of December 31, 2002, the Company has receivable amounting W65,798,058
     from SK Global as a remainder for the disposal of the assets. The Company
     recorded W21,212,058 as an allowance for doubtful account representing
     balance of this receivable not paid during 2003.

7.   Other Current Assets :

     Other current assets at December 31, 2001 and 2002 are summarized as
     follows:

<TABLE>
<CAPTION>
                                                 2001            2002
                                            -------------    ------------
<S>                                         <C>              <C>
Accrued interest income                     W   2,220,726    W    443,296
Advance payments                                1,946,940               -
Short-term loans to employees                   2,576,000         314,928
Prepaid value-added taxes                         863,497               -
Prepaid income taxes                              972,434         952,372
                                            -------------    ------------
                                            W   8,579,597    W  1,710,596
                                            =============    ============
</TABLE>

                                      F-31

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

8.   Investments :

     A summary of investments at December 31, 2001 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                    Percentage
                                                   ownership(%)
                                             ------------------------
                                                2001          2002             2001              2002
                                             ----------    ----------     -------------     --------------
<S>                                          <C>           <C>            <C>               <C>
Held-to-maturity
    Corporate debt securities                      -             -        W   4,437,933     W            -
                                                                          -------------     --------------

Available-for-sale (at fair value)
    Gi-Nam Broadcasting COMM. convertible
       bond                                        -             -           21,269,913                  -
                                                                          -------------     --------------

Cost Method
    Media Valley Inc.                           5.43          3.28              404,249            202,125
    Hankyung.com Co., Ltd                       5.00          5.00              515,000            180,312
    Korea Cable TV Kyungnam Broadcasting
       Network Co., Ltd.                        8.43             -            3,662,113                  -
    Inbain Co., Ltd. (Access Information
       Telecom Co., Ltd.)                       2.92          2.92              450,000            450,000
    HeyAnita.com Inc.                           0.25          0.12                1,000                  -
    Getmore Securities Co., Ltd.               10.53          9.30            2,000,000          2,000,000
    Ibiztoday.com Corp.                        10.00         10.00              103,753                  -
    Philon Corporation                         11.96         11.96               22,147                  -
    Seoul Media service Co., Ltd.              16.67             -               32,400                  -
    Actizen.Com Co., Ltd.                      18.68         18.68                1,000                  -
    EnTechville                                19.19         19.19              285,000                  -
    HeyAnita Korea, Inc.                       15.58         15.58                1,000              1,000
    Sportslove.com Co., Ltd.                    8.12          8.12               14,920                  -
    MIC 99-7 KDIFC Venture Investment
       Partnership                             15.00         15.00            1,154,240          1,154,240
    KINX                                        6.67          6.67               50,000             50,000
    Saero Network Service                          -         12.31                    -          1,056,891
    Powercomm Corporation                          -          0.06                    -            999,996
                                                                          -------------     --------------
                                                                          W   8,696,822     W    6,094,564
                                                                          -------------     --------------
</TABLE>

Continued ;

                                      F-32

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

8.   Investments, Continued :

<TABLE>
<CAPTION>
                                                    Percentage
                                                    ownership(%)
                                             ------------------------
                                                2001          2002             2001              2002
                                             ----------    ----------     -------------     --------------
<S>                                          <C>           <C>            <C>               <C>
Equity Method
    Thrunet Shopping, Inc.
       (Metaland Inc.)                          19.24            -        W   1,123,662     W            -
    Korea Shilla TV System Co., Ltd.            39.50            -            2,110,163                  -
    Nowcom Co., Ltd.                            34.22        34.22           13,595,905            787,884
    Persontel Co., Ltd.                         50.00        50.00              324,560                  -
    YT Venture Investment Partnership           22.22        22.22              859,953            707,871
    21C Telecommunication Co., Ltd.             21.05        21.05                5,114                  -
    rentHouse co.kr Co.,Ltd.                    20.00        20.00              268,896                  -
    Gi-Nam Broadcasting COMM.                       -        24.36                    -          8,258,708
                                                                          -------------     --------------
                                                                             18,288,253          9,754,463
                                                                          -------------     --------------

                                                                          W  52,692,921     W   15,849,027
                                                                          =============     ==============
</TABLE>

     At December 31, 2002, the Company's investments in affiliated companies
     under the equity method are summarized below :

<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                               Accumulated      Impairment loss
                                           Acquisition cost   equity in loss    on investments      Carrying value
                                           ----------------   --------------    ----------------    --------------
<S>                                        <C>                <C>               <C>                 <C>
Nowcom Co., Ltd.                           W     38,701,002   W  (18,334,384)   W    (19,578,734)   W     787,884
YT Venture Investment Partnership                   800,000          (92,129)                  -          707,871
Persontel Co., Ltd.                               1,666,650       (1,077,650)           (589,000)               -
21C Telecommunication Co., Ltd.                     100,000          (59,887)            (40,113)               -
rentHouse co.kr Co.,Ltd.                            420,000         (420,000)                  -                -
Gi-Nam Broadcasting COMM.                        19,417,493         (149,450)        (11,009,335)       8,258,708
                                           ----------------   --------------    ----------------    --------------
                                           W     61,105,145   W  (20,133,500)   W    (31,217,182)   W   9,754,463
                                           ================   ==============    ================    ==============
</TABLE>

     In 2002, the Company disposed Thrunet Shopping, Inc., Korea Shilla TV
     System Co., Ltd., Korea Cable TV Kyungnam Broadcasting Network Co., Ltd.,
     Seoul Media service Co., Ltd. and part of Media Valley Inc. for cash of
     W5,978,515 and a loss of W965,096 was realized on the disposition.

Continued ;

                                      F-33

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

8.   Investments, Continued :

     The Company held Gi-Nam Broadcasting COMM. convertible bond under
     available-for-sale investments from February 2000 to May 2002 and converted
     the bond into equity and owned 24.36% of Gi-Nam Broadcasting COMM at
     December 31, 2002.

     During 2000 and 2001, the Company purchased an equity interest in Nowcom
     Co., Ltd. ("Nowcom"), for cash payments of W35,701,002 and W3,000,000
     respectively, and has become Nowcom's largest shareholder with 34.22% of
     its outstanding common shares as of December 31, 2002. Nowcom is the fourth
     largest Korean narrowband Internet portal and on-line access service
     provider. As part of the carrying balances of these investments, the
     Company recorded goodwill of approximately W32,469,279 and W1,365,960
     respectively, representing the difference between the acquisition amounts
     and the underlying equity in net assets on the dates of acquisition. These
     amounts are amortized over 5 years. The Company recorded an impairment loss
     on goodwill of Nowcom Co., Ltd. that was W11,965,589 and W7,613,145 for the
     years ended December 31, 2000 and 2002. No impairment loss was recognized
     in 2001. Thus the balance of the goodwill is W14,829,313 as of December 31,
     2000, W12,175,989 as of December 31, 2001 and none as of December 31, 2002.

     Information with respect to available-for-sale securities and
     held-to-maturity securities included in investments at December 31, 2001
     are as follows :

<TABLE>
<CAPTION>
                                                                2001
                                 ---------------------------------------------------------------------
                                                      Gross               Gross
                                                    unrealized         unrealized
                                     Cost          holding gains      holding losses      Fair value
                                 ------------      -------------      --------------     -------------
<S>                              <C>               <C>                <C>                <C>
Available-for-sale
Gi-Nam Broadcasting COMM.
  convertible bond               W 18,000,000      W  3,269,913         W        -       W  21,269,913
                                 ============      ============         ==========       =============

Held-to-maturity
Corporate debt securities        W  4,437,933      W          -         W        -       W   4,437,933
                                 ============      ============         ==========       =============
</TABLE>

     The Company did not hold any available-for-sale and held-to-maturity
     securities at December 31, 2002.

Continued ;

                                      F-34

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

8.   Investments, Continued :

     For the years ended December 31, 2000 and 2001, total proceeds from sales
     of available-for-sale investments was W76,860,129 and W32,997,708,
     respectively. Realized gains included in results of operations related to
     available-for-sale investments that were sold were W6,014,714 and
     W2,297,697 for the years ended December 31, 2000 and 2001, respectively. No
     sales have occurred in 2002.

     The Company recorded impairment losses of W47,396,657, W4,593,526 and
     W28,930,136 in 2000, 2001 and 2002 respectively, related to investments
     which have experienced other than temporary declines in value and such
     investments have been written down to their estimated fair values as the
     new cost bases.

     A summary of impairment loss on investments at December 31, 2002 is as
     follows:

<TABLE>
<CAPTION>
                                              Amounts
                                          ----------------
<S>                                       <C>
Held-to-maturity
    Corporate debt securities             W     (7,850,933)

Cost Method
    Hankyung.com Co., Ltd                         (334,688)
    HeyAnita.com Inc.                                 (999)
    Ibiztoday.com Corp.                           (103,752)
    Philon Corporation                             (22,147)
    Seoul Media service Co., Ltd.                  (32,400)
    Actizen.Com Co., Ltd.                             (999)
    EnTechville                                   (285,000)
    Sportslove.com Co., Ltd.                       (14,920)
    Saero Network Service                       (1,661,818)

Equity Method
    Nowcom Co., Ltd.                            (7,613,145)
    Gi-Nam Broadcasting COMM.                  (11,009,335)
                                          ----------------

                                          W    (28,930,136)
                                          ================
</TABLE>

                                      F-35

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

9.   Property and Equipment :

     Property and equipment at December 31, 2001 and 2002 consisted of the
     following :

<TABLE>
<CAPTION>
                                                      2001                       2002
                                                 -----------------           ----------------
<S>                                              <C>                         <C>
   Land                                          W      22,379,623           W     12,252,031
   Buildings and structures                             40,236,456                 17,878,124
   Communication circuit equipment                     611,952,088                166,878,113
   Transmission and communications
      equipment                                        684,042,103                532,609,488
   Furniture, tools and vehicles                        12,232,553                 10,734,424
   Construction-in-progress                             23,114,418                  3,532,125
                                                 -----------------           ----------------
                                                     1,393,957,241                743,884,305
Less : accumulated depreciation                       (244,762,812)              (243,140,517)
                                                 -----------------           ----------------
Property and equipment, net                      W   1,149,194,429           W    500,743,788
                                                 =================           ================
</TABLE>

     Depreciable assets are insured against fire and other casualty losses up to
     W226,462 million at December 31, 2002. W285,166 million of the Company's
     property and equipment is pledged as collateral for certain short-term
     borrowings and long-term debt at December 31, 2002 (see Note 12).

     During 2001, the Company disposed of its broadcasting equipment in
     connection with the divestiture of its cable television business in 2001
     (see Note 4).

     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, a sales contract with Powercomm regarding the HFC lease-line was
     completed resulting in a loss of 41,487 million Won. On August 9, a sales
     contract with Carlyle Korea Special Purpose Company regarding the land and
     buildings was completed resulting in a gain of 6,203 million Won. The
     Company also recognized a loss of 376 million Won on sale of miscellaneous
     assets. On October 28, a sales contract with SK Global regarding its
     enterprise network business was completed resulting a loss of 63,775
     million Won (see Note 4).

     For the year ended December 31, 2001, the Company recognized no impairment
     loss. For the year ended December 31, 2002, the Company recognized an
     impairment loss of W17,467 million as the carrying amount of the property
     and equipment was not recoverable.

                                      F-36

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

10.  Intangible Assets :

     Intangible assets at December 31, 2001 consisted of the following :

<TABLE>
<CAPTION>
                                                               Accumulated
                                       Acquisition Cost        Amortization         Impairment           Book Value
                                      ------------------      --------------      --------------       --------------
<S>                                   <C>                     <C>                 <C>                  <C>
Leased line license                     W  21,200,000         W   5,830,000       W            -       W   15,370,000
Microsoft option                           42,774,566            20,145,743           22,628,823                    -
Domain name                                 4,669,100               610,864                    -            4,058,236
Software license                           24,432,641             8,140,328                    -           16,292,313
Web-site development costs                  1,187,003                98,917            1,088,086                    -
Leased line right                           2,600,000                28,889                    -            2,571,111
Other intangible assets                     1,764,067                66,205                    -            1,697,862
                                        -------------         -------------       --------------       --------------
                                        W  98,627,377         W  34,920,946       W   23,716,909       W   39,989,522
                                        =============         =============       ==============       ==============
</TABLE>

     Intangible assets at December 31, 2002 consisted of the following :

<TABLE>
<CAPTION>
                                                               Accumulated
                                       Acquisition Cost        Amortization          Impairment            Book Value
                                      ------------------      -------------       --------------       --------------
<S>                                   <C>                     <C>                 <C>                  <C>
Leased line license                     W  21,200,000         W   6,713,333       W   14,486,667       W            -
Domain name                                 4,669,100             1,042,756            3,626,344                    -
Software license                           28,031,027            16,227,030            5,575,465            6,228,532
Leased line right                          15,442,800               531,098                    -           14,911,702
Other intangible assets                     3,210,155               507,959            1,173,516            1,528,680
                                        -------------         -------------       --------------       --------------
                                        W  72,553,082         W  25,022,176       W   24,861,992       W   22,668,914
                                        =============         =============       ==============       ==============
</TABLE>

     Amortization expense on the Company's intangible assets was W23,442,542,
     W17,236,331 and W10,345,890 for the years ended December 31, 2000, 2001 and
     2002, respectively.

     Continued ;

                                      F-37

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

10.  Intangible Assets, Continued :

     The estimated aggregate amortization expense for each of the next five
     fiscal years are as follows :

<TABLE>
<CAPTION>
                                                                              Other intangible
                             Software license        Leased line right              assets                Total
                            ------------------      -------------------       -----------------       --------------
<S>                         <C>                     <C>                       <C>                     <C>
        2003                 W      4,189,486        W      1,029,520           W     391,281         W    5,610,287
        2004                        1,782,574               1,029,520                 391,281              3,203,375
        2005                          256,472               1,029,520                 391,281              1,677,273
        2006                                -               1,029,520                 325,078              1,354,598
2007 and thereafter                         -              10,793,622                  29,759             10,823,381
                            ------------------      -------------------         -------------         --------------
                             W      6,228,532        W     14,911,702           W   1,528,680         W   22,668,914
                            ==================      ===================         =============         ==============
</TABLE>

     Leased line license -

     The leased line license was obtained using the funds collected from the
     initial stockholders prior to inception of the Company. This license fee
     was reflected as an asset and a component of stockholders' equity at the
     time of establishment of the Company.

     For the year ended December 31, 2002, the Company recognized an impairment
     loss of W14,486,667, as the carrying amount of the leased line license was
     not recoverable due to disposal of the enterprise network business. Such
     impairment loss is recognized in the loss from discontinued operations.

     Software license -

     Software licenses, which represent rights to use certain software, is
     acquired at a purchase price of W 16,837,463 and W 3,598,386 in 2001 and
     2002, respectively.

     For the year ended December 31, 2001, the Company recognized no impairment
     loss. For the year ended December 31, 2002, the Company recognized an
     impairment loss of W5,575,465, as the carrying amount of the software
     licenses was not recoverable. Such amount loss is recognized as an
     impairment loss of broadband Internet Access Services and Portal Services.

     Domain name -

     The Company acquired the domain name "Korea.com" in March 2000 and launched
     it Korea.com portal services in September 2000.

     For the ended December 31, 2002, the Company recognized an impairment loss
     of W3,626,344, as the carrying amount of the domain name intangible asset
     was not recoverable. Such amount loss is recognized as an impairment loss
     of Portal Services.

     Continued ;

                                      F-38

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

10.  Intangible Assets, Continued :

     Intangible asset-MS option -

     In August 1999, the Company granted Microsoft an option to acquire at a
     purchase price of 9,350 Won per share up to 4,525,714 of the Company's
     common shares in conjunction with the execution of an agreement with
     Microsoft regarding a significant expansion of the scope of cooperation
     between the two companies.

     For the year ended December 31, 2001, the Company recognized an impairment
     loss of W22,628,823, as the carrying amount of the MS option was not
     recoverable. Such impairment loss is recognized under the operating cost of
     broadband Internet Access Services.

     Leased line right -

     In 2001 and 2002, the Company obtained the right to use AGC international
     leased line at a purchase price of W2,600,000 and W12,842,800,
     respectively. Such acquisition costs are capitalized and amortized using
     the straight-line method over 15 years.

     Other intangible asset -

     In March 2001, the Company acquired the right for lease-line business of
     international line and accounted under other intangible asset.

     For the year ended December 31, 2002, the Company recognized an impairment
     loss of total W581,000, as the carrying amount of the intangible asset was
     not recoverable, due to abandonment of the enterprise network services
     business. Such impairment loss is recognized in the loss from discontinued
     operations.

     Throughout 2001 and 2002, the Company acquired an additional broadband
     internet business and related subscribers from SK Telecom, and others. In
     relation to the transaction, the Company recognized an intangible asset of
     W1,183,067 in 2001 and W773,339 in 2002, which represents the benefit the
     Company expects to generate from the acquired subscribers for the extended
     period of time.

     In 2002, the Company paid W672,749 to acquire the copyright for comics and
     movies and accounted under other intangible asset.

     For the year ended December 31, 2002, the Company recognized an impairment
     loss of W 592,516, as the carrying amount of other intangible asset was not
     recoverable. Such amount loss is recognized as an impairment loss of Portal
     Services.

                                      F-39

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

11.  Other Assets :

     Other assets at December 31, 2001 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                       2001                 2002
                                  --------------      --------------
<S>                               <C>                 <C>
Deferred installation costs       W   17,231,883      W   16,019,409
Guarantee deposits                    10,449,460          11,184,346
Long-term loans                        2,831,736             737,248
Long-term advance payments             2,718,710                   -
Memberships                            1,574,473           1,574,473
Other                                  4,455,736           1,903,126
                                  --------------      --------------
                                  W   39,261,998      W   31,418,602
                                  ==============      ==============
</TABLE>

     On April 12, 2001, the Company entered into a forward exchange contract
     with Korea Exchange Bank. The contract was closed on April 12, 2002,
     resulting a loss of W28,162.

                                      F-40

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

12.  Pledged Assets :

     Certain assets of the Company are pledged as collateral for capital lease
     obligations, short-term borrowings, bonds payable and long-term debt at
     December 31, 2001 and 2002 as follows:

<TABLE>
<CAPTION>
                                                                  2001                   2002
                                                            ---------------         --------------
<S>                                                         <C>                     <C>
Pledged Assets
  Long-term bank deposits                                   W    33,886,460         W    9,566,460
  Investments                                                    27,012,293              2,169,502
  Guarantee deposits                                                      -              2,670,000
  Land and buildings                                             58,788,609             28,719,716
  Communication circuit equipment                               303,623,928                      -
  Transmission and communications
    equipment                                                   299,168,480            256,446,108
                                                            ---------------         --------------
                                                            W   722,479,770         W  299,571,786
                                                            ===============         ==============

Obligations from which collateral is pledged to secure
  Short-term borrowings                                     W     1,800,000         W      999,996
  Current portion of long term debt                                       -            137,059,000
  Long-term debt                                                522,180,423              4,170,000
  Other account payables                                                  -             38,720,000
  Current portion of bonds payable                                        -            100,000,000
  Bonds payable                                                 262,050,000             46,652,000
  Capital lease obligations                                      18,665,817             22,887,000
  Security deposits received                                      1,536,268                      -
                                                            ---------------         --------------
                                                            W   806,232,508         W  350,487,996
                                                            ===============         ==============
</TABLE>

                                      F-41

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

13.  Lease :

     The Company is obligated under various capital leases for equipment as of
     December 31, 2001 and 2002. Equipment and related accumulated depreciation
     recorded under capital leases as of December 31, 2001 and 2002 are
     summarized as follows :

<TABLE>
<CAPTION>
                                                        2001                2002
                                                  ---------------      ---------------
<S>                                               <C>                  <C>
Transmission and communications
   equipment                                      W    28,925,728      W    36,012,021
Buildings and structures                                1,614,626                    -
                                                  ---------------      ---------------
                                                       30,540,354           36,012,021
Accumulated depreciation                              (11,409,374)         (19,895,487)
                                                  ---------------      ---------------
                                                  W    19,130,980      W    16,116,534
                                                  ===============      ===============
</TABLE>

     The Company has provided two blank checks and certain leased assets to LG
     Card Co., Ltd. as collateral for various leases.

     Future minimum capital lease payments as of December 31, 2002 are as
     follow :

<TABLE>
<CAPTION>
                          Fiscal year                               Amounts
----------------------------------------------------          ------------------
<S>                                                           <C>
                        2003                                  W      11,089,167
                        2004                                         10,739,275
                        2005                                          2,311,721
                        2006                                          1,362,485
                                                              ------------------
Total minimum lease payments                                         25,502,648
Less : interest                                                      (2,616,218)
                                                              ------------------
Present value of minimum lease payments                              22,886,430
Less : current portion of capital lease obligations                  (9,434,795)
                                                              ------------------
Capital lease obligations, excluding current portion          W      13,451,635
                                                              ==================
</TABLE>

                                      F-42

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

14.  Short-term borrowings :

     Short-term borrowings at December 31, 2001 and 2002 consisted of the
     following :

<TABLE>
<CAPTION>
                                                    Annual interest rate
                                                          (%) at
                                                     December 31, 2002               2001                2002
                                                    --------------------        -------------        -------------
<S>                                                 <C>                         <C>                  <C>
General Loans in Korean Won
  Shinhan Bank                                                    -             W   5,000,000        W           -
  Korea Exchange Bank                                          7.93                 3,000,000            3,000,000
  Tongyang Life Insurance Company                                 -                 1,800,000                    -
  Jeil Mutual Saving Bank                                9.50~10.30                 8,000,000            8,773,945
  DACOM CORPORATION                                               -                         -              999,996
                                                                                -------------        -------------
                                                                                   17,800,000           12,773,941
                                                                                -------------        -------------
Collateral Loan Obligation in Korean Won
  Chohung Bank                                                    -                 5,600,000                    -
  Korea Exchange Bank                                             -                 4,000,000                    -
                                                                                -------------        -------------
                                                                                    9,600,000                    -
                                                                                -------------        -------------
U.S. Dollar Loan
  Chohung Bank                                                    -                   105,138                    -
                                                                                -------------        -------------
                                                                                W  27,505,138        W  12,773,941
                                                                                =============        =============
</TABLE>

     In relation to the short-term borrowings, two blank checks are pledged to
     Jeil Mutual Savings Bank.

     The weighted average interest rates of short-term borrowings were 10.14%
     and 8.44% at December 31, 2001 and 2002, respectively.

15.  Other Current Liabilities :

     Other current liabilities at December 31, 2001 and 2002 are summarized as
     follows:

<TABLE>
<CAPTION>
                                             2001                    2002
                                         -------------       --------------
<S>                                      <C>                 <C>
Withholdings                             W     954,557       W     436,946
Advance from customers                         945,880            1,394,672
Value added tax payable                              -           35,512,182
Income tax payable                                   -               52,273
Forward contracts                                7,389                    -
                                         -------------       --------------
                                         W   1,907,826       W   37,396,073
                                         =============       ==============
</TABLE>

                                      F-43

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

16.  Bonds Payable :

     Bonds outstanding as of December 31, 2001 and 2002 are summarized as
     follows :

<TABLE>
<CAPTION>
                                                             Annual
                                                           interest
                                            Maturity      rate (%) at
                          Issue date          date       Dec. 31, 2002          2001                  2002
                          ----------       ---------     -------------      --------------       ----------------
<S>   <C>                 <C>              <C>           <C>                <C>                  <C>
Convertible bonds

      5th bond            Jul. 2000        Jul. 2003         8.11           W  100,000,000       W    100,000,000
      20th bond           Mar. 2002        Mar. 2005        17.31                        -                952,500
                                                                            --------------       ----------------
                                                                               100,000,000            100,952,500
   Less : Current portion of Convertible bond                                            -           (100,000,000)
   Less : Discount on bonds issued                                                (167,962)               (93,136)
                                                                            --------------       ----------------
                                                                                99,832,038                859,364
                                                                            --------------       ----------------
Bonds with warrants

      16th bond           Jan. 2001        Jan. 2006            -               92,827,000                      -
      17th bond           Jan. 2001        Jan. 2006            -               59,200,000                      -
      18th bond           Jan. 2001        Jan. 2006            -               59,200,000                      -
      19th bond           Jan. 2001        Jan. 2006            -               17,760,000                      -
                                                                            --------------       ----------------
                                                                               228,987,000                      -
   Less : Discount on bonds issued                                            (135,991,545)                     -
                                                                            --------------       ----------------
                                                                                92,995,455                      -
                                                                            --------------       ----------------
</TABLE>

Continued ;

                                      F-44

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

16.  Bonds Payable, Continued :

<TABLE>
<CAPTION>
                                                             Annual
                                                           interest
                                            Maturity      rate (%) at
                          Issue date          date       Dec. 31, 2002          2001                  2002
                          ----------       ---------     -------------      --------------       --------------
<S>   <C>                 <C>              <C>           <C>                <C>                  <C>
Debentures

      1st bond            Jan. 1999        Jan. 2002            -           W   45,000,000       W            -
      2nd bond            Mar. 1999        Mar. 2002            -               45,000,000                    -
      3rd bond            May 1999         May 2004          9.00               45,000,000           45,000,000
      6th bond            Aug. 2000        Jun. 2002            -               20,000,000                    -
      7th bond            Aug. 2000        Aug. 2003        11.74               30,000,000           30,000,000
      8th bond            Sep. 2000        Jun. 2002            -                8,000,000                    -
      9th bond            Sep. 2000        Sep. 2002            -               12,000,000                    -
      10th bond           Oct. 2000        Apr. 2002            -               10,000,000                    -
      11th bond           Nov. 2000        Nov. 2005        12.23               70,000,000           46,652,000
      12th bond           Dec. 2000        Dec. 2002            -               10,000,000                    -
      13th bond           Dec. 2000        Dec. 2002            -               10,000,000                    -
      14th bond           Dec. 2000        Dec. 2002            -                5,000,000                    -
      15th bond           Dec. 2000        Dec. 2002            -               10,000,000                    -
      16th bond           Feb. 2002        Jan. 2006         1.43                        -            8,882,960
      21th bond           Apr. 2002        Oct. 2003        12.90                        -            8,000,000
      22th bond           Jun. 2002        Dec. 2003        12.71                        -            6,400,000
      23th bond           Sep. 2002         May 2004        11.97                        -            9,600,000
      24th bond           Dec. 2002        Dec. 2004        10.66                        -           24,500,000
                                                                            --------------       --------------
                                                                               320,000,000          179,034,960
         Less : Current portion of debentures                                 (175,000,000)        (44,400,000)
         Less : Discount on bonds issued                                        (2,444,637)         (1,552,349)
                                                                            --------------       --------------
                                                                               142,555,363          133,082,611
                                                                            --------------       --------------
                                                                            W  335,382,856       W  133,941,975
                                                                            ==============       ==============
</TABLE>

Continued ;

                                      F-45

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

16.  Bonds Payable, Continued :

     On June 21, 1999, the Company issued bonds with warrants. As of December
     31, 2002, 1,951,220 warrants for an exercise price of 30,750 Won have yet
     to be exercised.

     On July 27, 2000, the Company issued 5th convertible bonds with total
     principal amount of W100,000,000 for cash of W99,696,935, which are to be
     redeemed on July 27, 2003. The bonds have 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 are 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, will be payable on the
     redemption date. The bonds are convertible into the Company's shares of
     common stock from July 27, 2001 to July 26, 2003, and the conversion price
     will 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 2,150 Won at December 29, 2001.

     In 2002, the Company modified the contract with Korea Development Bank, the
     holder of the 5th convertible bond by fixing conversion price at 1,136 Won
     in accordance with modified contract at August 28, 2002. In November 2002,
     the Company authorized, a three-for-one reverse stock split, so conversion
     price was changed at 3,408 Won. 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 is in violation of any restrictive
     covenants. As of December 31, 2002, the lender has not waived capital
     requirement, and accordingly W100,000,000 of convertible bonds have been
     reclassified to current portion of convertible bonds.

Continued ;

                                      F-46

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

16.  Bonds Payable, Continued :

     Also, on March 21, 2002, the Company issued 20th convertible bonds with
     total principal amount of W952,500 for cash of W833,095, which are to be
     redeemed on March 21, 2005. The bonds have a coupon interest rate of 4.0%
     per annum, payable on an annually basis starting at the end of the first
     year after the issuance date. However, for all or a portion of the bonds
     that are 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, will be payable on the
     redemption date. The bonds are convertible into the Company's shares of
     common stock from June 22, 2002 to February 21, 2005, at the conversion
     price of 2,500 Won. None of this has been exercised for the period ended
     December 31, 2002.

     On January 26, 2001, the Company issued bonds with warrants with par value
     of US $70,000,000 to Softbank, W59,200,000 to Naray and W76,960,000 to
     TriGem. The exercisable warrants entitle Softbank, Naray and TriGem to
     acquire 33,152,000, 23,680,000 and 30,784,000 shares of the Company's
     common stock, respectively. All shares are exercisable at an exercise price
     of 2,500 Won per share beginning 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 W148,682,560 has been recorded
     as additional paid-in-capital.

     On February 28, 2002, Softbank, Naray and TriGem exercised their warrants
     to acquire 33,152,000, 11,840,000 and 7,104,000 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 $70,000,000 bond issued to Softbank was
     equivalent to W82,880,000. The value of Korean Won has subsequently
     depreciated against U.S. dollar. At the time of the exercise, US
     $62,600,000 was equivalent to W82,880,000 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 $7,400,000 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 are pledged as
     collateral. The Company recognized the extraordinary loss of W81,029,334,
     net of income tax benefit of W61,779 on the early retirement of the bonds.

     In addition, on August 2002, the Company entered into agreement to exercise
     a debt to equity swap on the bonds with warrant held by Tri-Gem and Naray.
     The swap took place on August 2002, with the Company issuing 52,112,676 and
     26,056,338 shares of common stock at 1,136 Won per share in exchange for
     par value W59,200,000 and W29,600,000 of the bonds with warrants. The
     Company recognized the extraordinary loss of W48,014,327, net of income tax
     benefit of W36,608 on the early retirement of the bonds. Warrants to
     purchase 11,840,000 shares of common stock at revised exercise price of
     7,500 Won per share remain outstanding.

Continued ;

                                      F-47

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

16.  Bonds Payable, Continued :

     Accretion of bond discount was W3,305,985, W3,922,421 and W1,549,872 for
     the years ended December 31, 2000, 2001 and 2002, respectively, and was
     recorded as interest expense.

     In relation to debenture, stated above, certain investment securities,
     tangible assets, guaranty money and current restricted cash are provided as
     collateral (Note 12).

     Aggregate maturities of the Company's bonds as of December 31, 2002 are as
     follows:

<TABLE>
<CAPTION>
Year ending
December 31,   Convertible bonds      Debentures          Total
------------   -----------------    -------------     -------------
<S>            <C>                  <C>               <C>
    2003       W     100,000,000    W  44,400,000     W 144,400,000
    2004                       -       79,100,000        79,100,000
    2005                 952,500       46,652,000        47,604,500
    2006                       -        8,882,960         8,882,960
               -----------------    -------------     -------------
               W     100,952,500    W 179,034,960     W 279,987,460
               =================    =============     =============
</TABLE>

                                      F-48

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

17.  Long-term Debt :

     Long-term debt as of December 31, 2001 and 2002 are summarized as follows :

<TABLE>
<CAPTION>
                                                  Annual interest
                                                    rate (%) at
                                                 December 31, 2002         2001                 2002
                                                 -----------------   -----------------    -----------------
<S>                                              <C>                 <C>                  <C>
General Loans in Korean Won
  Korea Development Bank                                     12.03   W     229,575,000    W     132,650,000
  Shinhan Bank                                                6.50             406,000              174,000
  Korea Development
     Bank Capital Co., Ltd.                                   6.50           5,624,520            3,579,240
  Hanvit Bank                                                 6.50             788,000              590,940
                                                                     -----------------    -----------------
                                                                           236,393,520          136,994,180
                                                                     -----------------    -----------------
Collateralized Loan Obligation in Korean Won
  Kookmin Bank                                               10.41           9,000,000            9,000,000

Asset Backed Loan in Korean Won
  Kookmin Bank and others                                    10.55         135,200,000           77,600,000

Asset Backed Security in Korean Won
  Kookmin Bank                                                   -         120,000,000                    -

Vendor Financing in U.S. Dollars
  CISCO Systems, Inc.                                Libor+2.50             31,780,904            4,409,372
                                                                     -----------------    -----------------
                                                                           532,374,424          228,003,552
         Less : Current maturities                                        (154,642,169)        (226,141,012)
                                                                     -----------------    -----------------
                                                                     W     377,732,255    W       1,862,540
                                                                     =================    =================
</TABLE>

Continued ;

                                      F-49

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

17.  Long-term Debt, Continued :

     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 has not waived capital requirement of plant and
     equipment loans, and accordingly W132,650,000 of long-term debt has 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 is for
     purchase of networking and telecommunications equipment from CISCO.
     Repayment terms stipulate that principal and interest is 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 is 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 is recognized as expense during the available period for 2000 and
     2001. Additionally, the Company is 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 has 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 is 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 is required to transfer the assets
     that is 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 can call the outstanding debt or can 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 has 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
     contains 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 may call the loan if the Company is in violation of any restrictive
     covenants. At the end of 2002, the lender has not waived capital
     requirement of asset-backed loans, and accordingly, entire long-term debt
     in amount of W20,000,000 has been reclassified to current portion of
     long-term debt.

Continued ;

                                      F-50

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

17.  Long-term Debt, Continued :

     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
     has 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 the extraordinary loss of W637,432,
     net of income tax benefit of W269,299.

     Aggregate maturities of the Company's long-term debt as of December 31,
     2002 are as follows:

<TABLE>
<CAPTION>
Year ending                                  U.S. dollar
December 31,       Won currency loans     denominated loans          Total
-----------        ------------------     -----------------     --------------
<S>                <C>                    <C>                   <C>
   2003            W      221,731,640     W       4,409,372     W  226,141,012
   2004                     1,796,880                     -          1,796,880
   2005                        65,660                     -             65,660
                   ------------------     -----------------     --------------
                   W      223,594,180     W       4,409,372     W  228,003,552
                   ==================     =================     ==============
</TABLE>

18.  Other long-term liabilities :

     Other long-term liabilities at December 31, 2001 and 2002 are summarized as
     follows:

<TABLE>
<CAPTION>
                                             2001                  2002
                                        ----------------     ---------------
<S>                                     <C>                  <C>
Deferred installation fees              W     17,231,883     W    16,019,410
Accrued interest payable                       8,968,436              56,568
Guarantee deposits received                    7,409,403           2,160,406
Other payables                                 2,051,746           3,695,005
                                        ----------------     ---------------
                                        W     35,661,468     W    21,931,389
                                        ================     ===============
</TABLE>

                                      F-51

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

19.  Retirement and Severance Benefits :

     Changes in the liability for retirement and severance benefits for the
     years ended December 31, 2000, 2001 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                 2000              2001              2002
                                             -------------   ---------------    --------------
<S>                                          <C>             <C>                <C>
Balance, beginning of period                 W   2,663,585   W     4,029,401    W    3,964,022
Severance plan expense                           1,927,915         5,422,668         2,723,961
Transfers from acquired subsidiaries               209,663                 -                 -
Transfers to disposed subsidiaries                 (22,255)       (1,155,619)                -
Plan payments                                     (749,507)       (4,332,428)       (3,908,355)
                                             -------------   ---------------    --------------
                                                 4,029,401         3,964,022         2,779,628

Cumulative transfer to National
  Pension Fund, net                               (230,849)          (78,392)          (33,557)
Payments made to severance insurance
  deposit fund                                           -        (1,558,921)         (413,598)
                                             -------------   ---------------    --------------
Balance, end of period                       W   3,798,552   W     2,326,709    W    2,332,473
                                             =============   ===============    ==============
</TABLE>

     Payments made to the severance insurance deposit fund is used to reduce the
     Company's accrued severance benefit liabilities. As of December 31, 2002,
     the amount placed to the severance insurance deposit fund was 14.88% of the
     Company's total severance benefit liability. The beneficiaries of the
     severance insurance deposit are the Company's employees.

                                      F-52

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

20.  Commitments and Contingencies :

     The Company has provided total of 4 blank checks and total of 6 promissory
     notes as of December 31, 2002 to KDB Capital, Woori Investment Bank, LG
     Card, Woori Bank and Jeil Mutaul Saving as collateral.

     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 is
     automatically renewed unless cancelled by either the Company or Microsoft
     within six months of the initial term of the agreement which expires in
     November 2003. During 2001 and 2002, the Company paid W4,039,188 and
     W3,586,314, 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.

Continued ;

                                      F-53

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

20.  Commitments and Contingencies, Continued :

     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 2000, 2001 and 2002, the
     Company paid W18,013,609, W40,266,765 and W53,215,960, 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 2000, 2001 and 2002, the Company paid W43,915,310, W62,678,785 and
     W29,640,633, 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.

Continued ;

                                      F-54

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

20.  Commitments and Contingencies, Continued :

     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.

     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, 2001 and 2002, the
     Company paid W2,632,855, W3,421,665 and W2,455,583, respectively, under
     such leases.

     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
     2000, 2001 and 2002, the Company paid a total of W18,227,138 W29,478,025
     and W28,626,531, respectively, under such leases.

     The following is a schedule by years of future minimum lease payments
     required under the agreements described above with Powercomm, KEPCO, SK
     Telecom Co., Ltd., Dacom Corporation, Onse Telecom and MCI which have
     initial or remaining non-cancelable terms in excess of one year as of
     December 31, 2002:

<TABLE>
<CAPTION>
Years ending December 31,                 Amounts
-------------------------             --------------
<S>                                   <C>
          2003                        W   70,357,090
          2004                            50,952,840
          2005                            41,346,547
          2006                             9,997,377
                                      --------------
                                      W  172,653,854
                                      ==============
</TABLE>

Continued ;

                                      F-55

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

20.  Commitments and Contingencies, Continued :

     The Company has a commitment to make payments to the Ministry of
     Information and Communication ("MIC") for research and development of an
     amount equal to 1.8% for 2000 and changed to 1% for 2001 of enterprise
     network services revenues. Such payments amounting to W883,563 and
     W651,581 for the years ended December 31, 2000 and 2001,
     respectively and none for 2002, are included in operating costs. In
     addition, the Company submitted a business plan as part of its license
     application, committing that certain amount of research and development
     expenditures would be made annually. To date, the Company has not made all
     of the research and development expenditures included in that business
     plan, and the MIC has not required the Company to make all of the
     expenditures up to the amount included in the business plan. As a result of
     the Company's noncompliance with the terms of the license application, the
     MIC may cancel the license or suspend all or part of its enterprise network
     business. However, management believes that it is unlikely for the MIC to
     take actions that would have a material adverse effect on the Company.
     Additionally, management believes that the MIC is unlikely to take any
     action without prior discussions with management, consideration of the
     Company's performance and adequate advance notice.

     As of December 31, 2002 the Company is a defendant in eight related
     lawsuits including one class action and the lawsuits seek approximately
     W1,060,490 and US$8,679,073 in total damages. Subsequent to December 31,
     2002, the Company is a defendant of in additional eight lawsuits claiming
     damages W2,027,423 in total damages. These lawsuits are currently pending
     before the court and the outcome cannot presently be determined.

     The Company has provided financial guarantees for its related parties 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 table below summarizes the Company's guarantees under FIN 45 at
     December 31, 2002.

<TABLE>
<CAPTION>
                                                                              Amount of        Maximum
                                                                  Total      Recourse or      Potential
                                Expire within   Expire After      Amount     Collateral       Amount of
(In thousands of Won)             One Year        One Year     Outstanding       Held      Future Payments
                                -------------   ------------   ------------  -----------   ---------------
<S>                             <C>             <C>            <C>           <C>           <C>
Financial guarantees            W   2,549,739   W    161,010   W  2,710,749  W         -   W     2,710,749
                                =============   ============   ============  ===========   ===============
</TABLE>

                                      F-56

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

21.  Gain from Issuance of Stock by Subsidiaries :

     In 2001, the Company's ownership interest in Korea.com Communications
     decreased from 100% to 91.95% and a result of the issuance of new shares by
     the subsidiary in which the Company did not purchase. In accordance with
     SEC Staff Accounting Bulletin ("SAB") No. 51, "Accounting for Sales of
     Stock of a Subsidiary", the Company recorded a gain in the amount of
     W216,745 as additional paid-in capital in the consolidated statement of
     stockholders' equity and comprehensive income (loss) for the year ended
     December 31, 2001.

22.  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,
     2000, 2001 and 2002 are summarized as follows :

<TABLE>
<CAPTION>
                                                  2000           2001             2002
                                             -------------   ------------    -------------
<S>                                          <C>             <C>             <C>
Current :                                    W     582,191   W          -    W     131,363
Deferred :                                               -              -                -
                                             -------------   ------------    -------------
Total                                              582,191              -          131,363
Income tax(benefit) allocated to
   discontinued operation                                -     (2,677,743)               -
Income tax(benefit) allocated to
   disposition of discontinued
   operation                                           -        2,677,743                -

                                             -------------   ------------    -------------
Continuing operation                         W     582,191   W          -    W     131,363
                                             =============   ============    =============
</TABLE>

     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 100,000          16.5%
Over  W 100,000          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 reflect current tax expense and deferred taxes under the
     provisions of US GAAP SFAS No. 109, "Accounting for Income Taxes".

Continued ;

                                      F-57

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

22.  Income Taxes, Continued :

     The statutory tax rate, applicable to the Company for 2000 and 2001 was
     approximately 30.8% and for 2002 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>
                                                     2000             2001             2002
                                                -------------    -------------    -------------
<S>                                             <C>              <C>              <C>
Taxes at Korean statutory tax rate              W (73,827,157)   W (78,128,683)   W(129,522,428)
Permanent differences                               2,059,565       15,584,881        7,730,524
Tax benefits not recognized in current period      71,767,592       57,751,096      121,923,267
Effect of change in tax rate                                -        4,792,706                -
Special tax levied to gains on sale
   of certain property                                582,191                -                -
                                                -------------    -------------    -------------
Total income tax provision                      W     582,191    W           -    W     131,363
                                                =============    =============    =============
</TABLE>

     The tax effects of temporary differences that resulted in significant
     portions of the deferred tax assets and liabilities at December 31, 2001
     and 2002 and a description of the financial statement items that created
     these differences are as follows :

<TABLE>
<CAPTION>
                                             2001           2002
                                         ------------   ------------
<S>                                     <C>            <C>
Deferred tax assets:
   Accounts receivable                  W   2,156,367  W  18,513,314
   Short-term and long-term loans             166,820         31,702
   Investment securities                   51,468,313     31,806,742
   Property and equipment                     535,962      2,115,313
   Software                                   612,452      1,010,853
   Deferred installation revenue            5,117,869      4,757,765
   Retirement and severance benefits          325,856        362,525
   Accrued expenses                         2,663,625      4,857,237
   Short-term and long-term borrowings              -        848,642
   MS option                                4,645,952              -
   Net operation loss carryforward        129,403,061    171,246,667
   Tax credit                              29,070,122     29,070,122
   Others                                     997,361      1,721,581
                                        -------------  -------------
             Total deferred tax assets  W 227,163,760  W 266,342,463
                                        -------------  -------------
</TABLE>

 Continued;

                                      F-58

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

22.  Income Taxes, Continued :

<TABLE>
<CAPTION>
                                                 2001             2002
                                            -------------    -------------
<S>                                         <C>              <C>
Deferred tax liabilities:
   Accrued income                           W    (187,639)   W    (106,022)
   Deferred installation costs                 (5,117,869)      (4,757,765)
   Leased line license                         (4,564,890)               -
   Short-term and long-term debts              (4,708,290)               -
   Advance receipts                           (25,752,746)               -
   Long-term advance receipts                 (47,283,161)               -
   Others                                               -           (6,244)
                                            -------------    -------------
           Total deferred tax liabilities     (87,614,595)      (4,870,031)
                                            -------------    -------------
Deferred tax assets(liabilities)
  before valuation allowance                  139,549,165      261,472,432
Valuation allowance                          (139,549,165)    (261,472,432)
                                            -------------    -------------
Net deferred tax assets(liabilities)        W           -    W           -
                                            =============    =============
</TABLE>

     At December 31, 2002, the Company had W576,588,105 of net operating loss
     carryforwards("NOLs") available to offset future taxable income. These
     losses expire in the periods ranging from 2003 to 2007. Also, the Company
     has a tax credit in the amount of W29,070,122, 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 139,549 million Won and
     261,472 million Won in 2001 and 2002, respectively, was established for
     deferred income tax assets that may not be realized.

                                      F-59

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

23.  Stockholders' Equity :

     In January and December of 2001, the Company issued an additional
     26,048,000 and 4,634,909 shares of common stock for total cash
     consideration of W64,744,349 and W12,690,381, respectively.

     In February of 2002, the Company issued an additional 52,096,000 common
     shares upon exercise of warrants by Softbank, Tri-Gem and Naray (Note 16).

     In August of 2002, the Company issued an additional 78,169,014 common
     shares at 1,136 Won per share by means of converting bonds with warrants
     into common shares (Note 16).

     In November of 2002, the Company authorized a three-for-one reverse stock
     split, as a result, the Company decreased from 232,905,781 common stock
     issued and outstanding to 77,635,260 and decreased from W582,264,453 common
     stock at par value to W194,088,150. 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.

     In August 2002, the Company acquired 1,289,259 shares of common stock for
     W1,126,812. After the three-for-one reverse stock split, the Company
     decrease its treasury stock to 429,753 shares. Subsequently, the Company
     acquired an additional 6,349 shares of common stock for W16,647. At
     December 31, 2002, the Company held 436,102 shares of treasury stock.

     At December 31, 2001 and 2002, the Company has 400,000,000 authorized
     shares, consisting of voting common shares and voting preferred shares of
     2,500 Won 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, 2001 and 2002.

                                      F-60

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

24.  Stock-Based Compensation :

     Stock Option Plan -

     The Company has a stock option plan (the "Plan") pursuant to which the
     Company may grant options to certain 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 556,667 common
     shares to certain of its executive officers, directors and employees. The
     exercise price of the options granted were 145,200 Won per share. The
     options will vest 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 902,333 common
     shares to certain of its executive officers, directors and employees. The
     exercise price of the options granted were 21,600 Won per share. The
     options will vest on March 28, 2003 and will become exercisable from March
     28, 2004 until March 27, 2011.

Continued ;

                                      F-61

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

24.  Stock-Based Compensation, Continued :

     Stock Option Plan, Continued -

     A summary of changes in number of options outstanding during 2001 and 2002
     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 Won) :

<TABLE>
<CAPTION>
                                                                              2001                           2002
                                                                 ----------------------------    ---------------------------
                                                                    Number        Weighted         Number        Weighted
                                                                      of           average           of          average
                                                                   options     exercise price     options     exercise price
                                                                 ----------    --------------    ---------   ---------------
<S>                                                               <C>          <C>               <C>         <C>
Options outstanding, beginning of year                            1,554,167    W       89,985    2,393,167   W        36,840
Options granted                                                     902,333            21,600            -                 -
Options forfeited                                                   (63,333)          (37,062)    (422,000)          (21,600)
                                                                 ----------    --------------    ---------   ---------------
Options outstanding, end of year                                  2,393,167    W       36,840    1,971,167   W        40,101
                                                                 ==========    ==============    =========   ===============
</TABLE>

     The following table shows exercise prices and remaining contractual lives
     of stock options outstanding as of December 31, 2002 (exercise prices are
     in Won).

<TABLE>
<CAPTION>
                      Number of options         Remaining
Exercise price           outstanding        contractual life
---------------       -----------------     ----------------
<S>                   <C>                   <C>
W       21,600                1,264,834        8.24 years
        63,384                  621,000        6.64 years
       145,200                   85,333        7.24 years
---------------       -----------------     ----------------
W       40,101                1,971,167        7.70 years
===============       =================     ================
</TABLE>

     Compensation expense of W2,943,565, W2,482,411 and W124,818 attributable to
     stock options is included in the Company's consolidated results of
     operations for the years ended December 31, 2000, 2001 and 2002,
     respectively.

     On March 27, 2001, 420,667 stock options out of 1,163,333 stock options
     granted on August 20, 1999 and 410,500 stock options out of 556,667 stock
     options granted on March 24, 2000 were modified. The exercise price was
     reduced to 21,600 Won per share and the vesting date was modified to two
     years after the re-measurement date and are exercisable beginning after the
     end of the third year from the re-measurement date for a period of 7 years
     from the date they become exercisable.

Continued ;

                                      F-62

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

24.  Stock-Based Compensation, Continued :

     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, 2001
     and 2002, would have been impacted as shown in the following table (in
     thousands, except per share amounts).

<TABLE>
<CAPTION>
                                         2000             2001             2002
                                    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>
Net loss:
    As reported                     W(240,083,873)   W(263,059,536)   W(436,102,452)
    Pro forma                        (259,174,465)    (257,131,620)    (437,464,846)
Loss per share-basic and diluted:
    As reported                           (10,009)          (8,182)          (7,576)
    Pro forma                             (10,806)          (7,998)          (7,600)
</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>

Continued ;

                                      F-63

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

24.  Stock-Based Compensation, Continued :

     Pro Forma and Fair Value Disclosures, Continued -

     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    85,686   W      3,279
Total number of options granted               146,166     1,733,500
Total fair value of all options granted  W 12,524,437  W  5,684,147
</TABLE>

25.  Loss Per Share :

     Loss per share for years ended December 31, 2000, 2001 and 2002 were
     calculated as follows :

     Basic(Diluted) Loss per Share -

<TABLE>
<CAPTION>
                                                 2000             2001             2002
                                            -------------    -------------    -------------
<S>                                         <C>              <C>              <C>
Basic(Diluted) Net Loss Per Share :
   Loss from continuing operation           W(183,910,299)   W(195,023,783)   W(191,556,881)
   Net loss from discontinued operation       (56,173,574)     (68,035,753)    (115,734,794)

   Extraordinary item                                   -                -     (128,810,777)
                                            -------------    -------------    -------------
   Net loss attributable to common shares   W(240,083,873)   W(263,059,536)   W(436,102,452)
                                            =============    =============    =============
   Weighted average number of common
      shares outstanding                       23,985,953       32,150,106       57,563,294
Net Loss Per Share :
   Loss from continuing operation           W      (7,667)   W      (6,066)   W      (3,328)
   Net loss from discontinued operation            (2,342)          (2,116)          (2,010)
   Extraordinary item                                   -                -           (2,238)
                                            -------------    -------------    -------------
Basic (diluted) net loss per share          W     (10,009)   W      (8,182)   W      (7,576)
                                            =============    =============    =============
</TABLE>

     Dilutive securities -

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

                                      F-64

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

26.  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 W28,330,184 was recorded as a loss on
     cancellation of contract under operating expenses.

27.  Research and Development Costs :

     The Company records all research and development costs to expense as
     incurred. The Company incurred research and development costs of
     W3,975,521, W1,711,116 and W2,073,223 for the years ended December 31,
     2000, 2001 and 2002, respectively.

28.  Advertising Costs :

     Advertising costs, amounting to W25,828,562, W12,920,775 and W10,886,767
     for the years ended December 31, 2000, 2001 and 2002, respectively, were
     expensed as incurred.

29.  Interest Capitalization :

     The Company capitalizes interest costs on borrowings with respect to
     property and equipment during the construction period. Interest
     capitalization for the years ended December 31, 2000, 2001 and 2002 were as
     follows:

<TABLE>
<CAPTION>
                               2000             2001             2002
                          -------------    -------------    -------------
<S>                       <C>              <C>              <C>
Total interest incurred   W  63,832,176    W 116,863,721    W 102,342,606
Charged to expense          (49,245,283)    (112,346,167)     (98,793,266)
                          -------------    -------------    -------------
Interest capitalized      W  14,586,893    W   4,517,554    W   3,549,340
                          =============    =============    =============
</TABLE>

                                      F-65

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

30.  Related Party Transactions :

     The following are major balances and transactions with related parties as
     of and for the years ended December 31, 2000, 2001 and 2002, respectively.

<TABLE>
<CAPTION>
                                                 2000          2001          2002
                                             -----------   -----------   -----------
<S>                                          <C>           <C>           <C>
Trigem Computer, Inc. :
     Revenues                                W    75,215   W   129,539   W   384,867
     Purchase of property and equipment       26,846,296             -             -
     Accounts payable                         15,804,996     6,938,579       228,719
     Short-term borrowings                    55,000,000             -             -
     Interest expenses                                 -     1,640,660     2,321,413
     Accounts receivable                               -        32,301       411,671
     Other receivables                                 -        15,556        58,344
     Other long-term liabilities                       -       196,174             -
     Accrued expenses                                  -     1,628,739             -
     Bonds                                             -    76,901,803             -

TG Ubase Inc. :
     Disposition of property and equipment     5,660,649             -             -
     Accounts receivable                               -        23,114        98,059
     Commission expense                        6,419,921    39,731,321    36,530,195
     Other receivables                         6,226,714       873,840     1,245,343
     Accounts payable                          5,416,491    14,029,492    13,740,615
     Revenues                                          -        49,157        77,114
     Interest income                                   -       542,985             -
     Other Assets                                      -     3,038,237     2,118,703
</TABLE>

Continued ;

                                      F-66

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

30.  Related Party Transactions, Continued :

<TABLE>
<CAPTION>
                                              2000          2001          2002
                                          -----------   -----------   -----------
<S>                                       <C>           <C>           <C>
Thrunet Shopping Inc. :
     Revenues                             W   184,634   W   203,635   W         -
     Purchase of property and equipment       692,649             -             -
     Accounts payable                         217,918       431,912             -
     Accounts receivable                       45,131             -             -
     Other receivables                         10,220             -             -

Microsoft Corporation. :
     Commission expense                     6,073,632     5,820,271     2,763,419
     Accrued expenses                       4,792,662       564,340     3,445,251

Nowcom Co., Ltd. :
     Revenues                                 255,427     1,097,820       583,139
     Commission expense                     1,613,187             -     1,278,161
     Accounts receivable                            -             -        60,186
     Accounts payable                       1,358,798     3,062,294       460,436

Softbank. :
     Revenue                                        -             -       712,841
     Interest expenses                              -     1,235,718       995,500
     Accrued expenses                               -       658,423        54,538
     Bonds                                          -    92,757,690     7,097,527

Naray & Company Inc. :
     Interest expenses                              -     1,262,046     1,346,619
     Accrued expenses                               -     1,252,876             -
     Bonds                                          -    59,155,233             -
     Loans to others                                -             -    11,500,000
</TABLE>

                                      F-67

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

31.  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.

     The estimated fair values of the Company's long-term debt and bonds at
     December 31, 2000, 2001 and 2002 are summarized as follows :

<TABLE>
<CAPTION>
                                                       2000                            2001                        2002
                                            ---------------------------   ---------------------------   ---------------------------
                                               Carrying                     Carrying                      Carrying
                                                amount      Fair value       amount       Fair value       amount       Fair value
                                            ------------   ------------   ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>            <C>            <C>
Long-term debt, including current portion   W270,738,096   W270,734,182   W532,374,423   W529,947,602   W228,003,552   W227,951,759
Bonds                                        412,805,823    409,466,538    512,827,493    529,708,239    294,184,933    304,593,741
</TABLE>

                                      F-68

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  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 1999, the Company had two reportable operating segments, enterprise
     network and broadband Internet.

     From December 1999 to April 2000, the Company acquired 7 cable television
     corporations. In addition, in September 2000, the Company launched a portal
     site called "Korea.com" which provides portal services such as content and
     advertising. Accordingly, the Company had four reportable operating
     segments for the year ended December 31, 2000 : enterprise network,
     broadband Internet, portal services and cable television.

     In 2001, the Company disposed of its entire cable television business.
     Consequently, the Company has 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 has 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 2000, 2001 and
     2002 have been reclassified to discontinued operations.

Continued ;

                                      F-69

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  Segment Information, Continued:

     The following table provides information for each reportable operating
     segment for the years ended December 31, 2000, 2001and 2002.

<TABLE>
<CAPTION>
                                           2000             2001             2002
                                      -------------    -------------    -------------
<S>                                   <C>              <C>              <C>
Revenues:
Broadband Internet                    W 153,767,527    W 360,887,492    W 425,570,101
Portal                                    3,015,457       12,633,710       16,678,961
                                      -------------    -------------    -------------

                                        156,782,984      373,521,202      442,249,062

Inter-segment revenues                   (5,862,817)     (12,728,603)     (20,837,761)
US GAAP adjustments                      (5,558,777)       7,818,383        2,870,192
                                      -------------    -------------    -------------

                                        145,361,390      368,610,982      424,281,493
                                      -------------    -------------    -------------

Operating costs:
Broadband Internet                      162,332,711      306,930,159      280,698,198
Portal                                    4,887,886       11,834,963       25,444,025
                                      -------------    -------------    -------------

                                        167,220,597      318,765,122      306,142,223

Inter-segment expenses                   (5,740,632)     (12,728,603)     (20,407,939)
US GAAP adjustments                     (11,644,876)        (619,593)         989,190
                                      -------------    -------------    -------------

                                        149,835,089      305,416,926      286,723,474
                                      -------------    -------------    -------------

Selling, general and administrative
expenses :
Broadband Internet                       51,473,839       50,042,876       41,335,580
Portal                                   15,556,913        3,313,316        2,029,455
                                      -------------    -------------    -------------

                                         67,030,752       53,356,192       43,365,035

Inter-segment expenses                     (122,185)               -                -
US GAAP adjustments                     (18,682,458)     (10,486,093)      (3,021,877)
                                      -------------    -------------    -------------

                                         48,226,109       42,870,099       40,343,158
                                      -------------    -------------    -------------
</TABLE>

Continued ;

                                      F-70

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  Segment Information, Continued :

<TABLE>
<CAPTION>
                                             2000             2001             2002
                                        -------------    -------------    -------------
<S>                                     <C>              <C>              <C>
Depreciation and amortization:
Broadband Internet                      W  53,745,468    W  94,329,956    W 108,160,523
Portal                                      2,531,211        8,227,510                -
                                        -------------    -------------    -------------

                                           56,276,679      102,557,466      108,160,523

Inter-segment expenses                              -                -          107,831
US GAAP adjustments                         4,488,680        4,468,262       (3,622,742)
                                        -------------    -------------    -------------

                                           60,765,359      107,025,728      104,645,612
                                        -------------    -------------    -------------

Impairment loss on intangible assets,
property and equipment:
Broadband Internet                                  -        1,088,086        5,501,878
Portal                                              -                -       20,464,920
                                        -------------    -------------    -------------

                                                             1,088,086       25,966,798

Inter-segment expenses                              -                -        1,294,422
US GAAP adjustments                                 -       22,628,823                -
                                        -------------    -------------    -------------

                                                    -       23,716,909       27,261,220
                                        -------------    -------------    -------------

Operating loss:
Broadband Internet                       (113,784,491)     (91,503,585)     (10,126,078)
Portal                                    (19,960,553)     (10,742,079)     (31,259,439)
                                        -------------    -------------    -------------

                                         (133,745,044)    (102,245,664)     (41,385,517)

Inter-segment expenses                              -                -       (1,832,075)
US GAAP adjustments                        20,279,877       (8,173,016)       8,525,621
                                        -------------    -------------    -------------

                                        W(113,465,167)   W(110,418,680)   W (34,691,971)
                                        -------------    -------------    -------------
</TABLE>

                                      F-71

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  Segment Information, Continued :

<TABLE>
<CAPTION>
                                                  2000             2001             2002
                                             -------------    -------------    -------------
<S>                                          <C>              <C>              <C>
Other income(expense) :
Interest income                              W   3,988,445    W   3,296,798    W   5,166,902
Interest expense                               (23,661,771)     (72,832,969)     (81,258,758)
Gain (loss) on foreign exchange
   ttransactions, net                           (1,319,568)      (3,869,804)       5,755,312
Gain (loss) on disposition of
   investments, net                              6,945,426       (3,164,154)        (965,096)
Impairment loss on investments                 (47,396,657)      (4,593,526)     (28,930,136)
Gain (loss) on disposition of property and
  equipment, net                                 2,071,979          311,814      (35,660,302)
Other, net                                        (785,387)       3,528,281      (17,468,502)
                                             -------------    -------------    -------------

                                               (60,157,533)     (77,323,560)    (153,360,580)
                                             -------------    -------------    -------------

Loss from continuing operations before
  taxes, equity in loss of affiliates and
  minority interest                          W(173,622,700)   W(187,742,240)   W(188,052,551)
                                             =============    =============    =============
</TABLE>

Continued ;

                                      F-72

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  Segment Information, Continued :

     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.

     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.

Continued ;

                                      F-73

<PAGE>

                             KOREA THRUNET CO., LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (In thousands of Korean Won)

32.  Segment Information, Continued :

     The following table provides information for the Company's total assets by
     each reportable segment as of December 31, 2000, 2001 and 2002. 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>
                            2000              2001               2002
                      ---------------   ---------------    ---------------
<S>                   <C>               <C>                <C>
Broadband Internet    W   810,479,234   W   999,889,320    W   748,969,422
Enterprise Network        564,809,639       672,460,635                  -
Cable Television           24,334,455                 -                  -
Portal                     47,445,899        41,635,325         28,676,887
                      ---------------   ---------------    ---------------

                        1,447,069,227     1,713,985,280        777,646,309
US GAAP adjustments        14,375,727      (146,729,473)       (13,594,909)
                      ---------------   ---------------    ---------------

Total Assets          W 1,461,444,954   W 1,567,255,807    W   764,051,400
                      ===============   ===============    ===============
</TABLE>

                                      F-74