UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

(Mark One)

[_]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                                       OR

[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

                                       OR

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

For the transition period from [___________] to [___________]

Commission file number                                                   0-30376

                                MIRAE CORPORATION
             (Exact name of Registrant as specified in its charter)

                                Republic of Korea
                 (Jurisdiction of incorporation or organization)
                               #9-2, Cha Am-Dong,
                       Chun An, Chung Chong Nam-Do 330-200
                                Republic of Korea
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

        Title of Each Class            Name of Each Exchange on Which Registered
        -------------------            -----------------------------------------

American Depositary Shares, Common            The NASDAQ National Market*
Stock par value (Won) 100 per share

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

                                      None
                                (Title of Class)
                                ----------------

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                   of the Act.

                                      None
                                (Title of Class)
                                ----------------

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.

            Common Stock            124,637,500

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 elected
to follow.

            Item 17 [_]       Item 18 [X]

*Not for trading, but only in connection with the registration of American
Depositary Shares.

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

CERTAIN TERMS AND CONVENTIONS..................................................2

CURRENCIES AND EXCHANGE RATES..................................................5

PART I.........................................................................6
     ITEM 1.  Identity of Directors, Senior Management and Advisors............6
     ITEM 2.  Offer Statistics and Expected Timetable..........................6
     ITEM 3.  Key Information..................................................6
     ITEM 4.  Information on the Company......................................22
     ITEM 5.  Operating and Financial Review and Prospects....................50
     ITEM 6.  Directors, Senior Management and Employees......................73
     ITEM 7.  Major Shareholders and Related Party Transactions...............81
     ITEM 8.  Financial Information...........................................83
     ITEM 9.  The Offer and Listing...........................................83
     ITEM 10. Additional Information..........................................84
     ITEM 11. Qualitative and Quantitative Disclosures About Market Risk......98
     ITEM 12. Description of Securities Other Than Equity Securities..........99

PART II.......................................................................99
     ITEM 13. Defaults, Dividend Arrearages and Delinquencies.................99
     ITEM 14. Material Modifications to the Rights of Security Holders
              and Use of Proceeds.............................................99
     ITEM 15. Control and Procedures..........................................99
     ITEM 16. [Reserved]......................................................99

PART III......................................................................99
     ITEM 17. Financial Statements............................................99
     ITEM 18. Financial Statements...........................................100
     ITEM 19. Exhibits.......................................................100


                                       -i-
<PAGE>

                           Forward-Looking Statements

      This annual report includes "forward-looking statements". All statements,
other than statements of historical facts, included in this annual report that
address activities, events or developments which we expect or anticipate will or
may occur in the future are forward-looking statements. The words "believe",
"intend", "expect", "anticipate", "project", "estimate", "predict" and similar
expressions are also intended to identify forward-looking statements.

      These forward-looking statements address, among others, such issues as:

      o     future prices of and demand for our products,

      o     future earnings and cash flow,

      o     future plans and capital expenditures,

      o     expansion and other development trends of the semiconductor
            industry,

      o     expansion and other development trends of the SMD placement system
            industry,

      o     expansion and growth of our business and operations, and

      o     our prospective operational and financial information.

      These statements are based on assumptions and analyses made by us in light
of our experience and our perception of historical trends, current conditions
and expected future developments, as well as other factors we believe are
appropriate in particular circumstances. However, whether actual results and
developments will meet our expectations and predictions depends on a number of
risks and uncertainties which could cause actual results to differ materially
from our expectations, including the risks set forth in "Item 3--Key
Information--Risk Factors" and the following:

      o     fluctuations in prices of our products,

      o     potential acquisitions and other business opportunities,

      o     general economic, market and business conditions, and

      o     other risks and factors beyond our control.

      Consequently, all of the forward-looking statements made in this annual
report are qualified by these cautionary statements. We cannot assure you that
the actual results or developments anticipated by us will be realized or, even
if substantially realized, that they will have the expected effect on us or our
business or operations.

<PAGE>

                          CERTAIN TERMS AND CONVENTIONS

      Definitions

      Unless the context otherwise requires, references in this annual report
to:

      o     "Mirae", the "Company", "we", "our" and "us" are to Mirae
            Corporation.

      o     "Korea" is to the Republic of Korea.

      o     "Government" is to the Korean government.

      o     "(Won)", "won" or "W" is to the currency of Korea.

      o     "US$" or "dollar" is to U.S. dollars, the currency of the United
            States of America.

      o     "ADS" is to Mirae's American Depositary Shares.

      o     "ADR" is to Mirae's American Depositary Receipts.

      o     "Depositary" is to The Bank of New York, the depositary of the ADRs.

      Glossary of Technical Terms

      Unless otherwise indicated in the context, references to the following
technical terms shall have the meanings set forth below:

      o     "BGA" - Ball grid array, a type of semiconductor package containing
            ball-shaped terminal leads.

      o     "Bit" - The smallest units of information recognized by a digital
            computer, a bit is a digit (1 or 0) used to represent one of two
            states in the binary number system. The term "bit" is a contraction
            of "binary digit".

      o     "Chip" - (1) Semiconductor manufacturing: a piece of silicon on
            which a large amount of circuitry is implanted. Also known as a die.
            (2) PCB Assembly: a simple electronic device, not including IC.

      o     "CRT" - Cathode ray tube.

      o     "CSP" - Chip scale package, a type of semiconductor package.

      o     "DDR" - Dual data rate memory, a type of memory device.

      o     "Device" - Semiconductors, semiconductor packages, ICs and other
            electronic components including registers, capacitors and
            conductors.

      o     "Die" - A piece of semiconductor wafer containing the circuitry of a
            single chip.


                                      -2-
<PAGE>

      o     "DIMM" - Dual in-line memory module, a type of memory module which
            has memory devices placed on both sides of a PCB.

      o     "DRAMs" - Dynamic random access memory chips, the most popular type
            of semiconductor memory chip. "Dynamic" means that the device's
            memory cells need to be periodically recharged. Information, stored
            in the memory cells in the form of bits as a positive or negative
            charge, is accessed randomly.

      o     "EMS" - Electronics manufacturing service.

      o     "Flash memory" - A computer chip with a read only memory that
            retains its data when the power is turned off and that can be
            electronically erased and reprogrammed without being removed from
            the circuit board.

      o     "IC" - Integrated circuit, an electronic circuit in which many
            active or passive elements are fabricated and connected on a
            continuous substrate.

      o     "Index time" - Average time needed by a test handler to change
            testing trays.

      o     "Internet" - An open global network of interconnected commercial,
            educational and governmental computer networks that utilize a common
            communications protocol, TCP/IP.

      o     "LCD" - Liquid crystal display.

      o     "Lead frame" - The skeleton of the semiconductor chip to which the
            die is bonded; after packaging the only visible parts are the
            protruding metal pins.

      o     "Lead frame magazines" - Aluminum carriers used to transport lead
            frames in their fragile state, before the dies are bonded onto them.

      o     "Mechatronics" - An engineering field combining principles of
            mechanical engineering and electrical engineering.

      o     "Memory chip" - A semiconductor device that stores data in
            electronic form.

      o     "OEM" - Original equipment manufacturer.

      o     "PCB" - Printed circuit boards.

      o     "QFP" - Quad flat package, ceramic or plastic chip carrier with
            leads projecting down and away from all four sides of a square
            package.

      o     "RAMbus" - RAMbus technology is a superscalar silicon technology
            that narrows the data bus width without any decline in transmission
            speed by using the PC buffer as a cache memory, thereby resulting in
            a brighter bandwidth and transmission rate. The main advantage of
            RAMbus DRAM is a performance speed of 800 Mhz vs. 100-133 Mhz


                                      -3-
<PAGE>

            for current PC 100/133 Synchronous DRAMs. Accordingly, it is an
            effective solution to the problem of bridging the growing speed
            disparity between CPU and the main memory.

      o     "RIMM" - RAMbus in-line memory module, a type of memory module which
            is used for RAMbus DRAMs.

      o     "Semiconductor" - A material, like silicon, whose properties lie in
            between those of a conductor and an insulator. Through doping
            (introducing impurities), it can be made slightly conductive or
            slightly insulative. (Also see "chip".)

      o     "SIMM" - Single in line memory module, a type of memory module,
            which is used in edge connector type sockets.

      o     "SMD placement system" - Surface mount device placement system for
            PCB assembly equipment. SMD placement systems are robotic machines
            used for high-speed and accurate placement of various electronic
            devices onto PCBs. This term is used interchangeably with "SMT
            placement system," or surface mount technology placement system.

      o     "Test handlers" - Specialized robotic machinery that form part of
            the back end equipment of the IC packaging and testing line. After
            the micro-chips are packaged in their black protective container,
            test handlers convey the devices to testing equipment, feed the
            devices in and out of the testers and finally sort the devices
            according to grading information received from the tester.
            Generally, two test handlers work with one tester.

      o     "TFT" - Thin film transistor.

      o     "TFT-LCD" - Liquid crystal display creates images by changing
            molecular arrays of liquid crystals, in which light and darkness are
            generated and then an image is formed when electricity is supplied.
            Liquid crystals of LCD are inserted between two thin glasses, and
            are characterized as material, which lies in the middle of a gas and
            solid. TFT-LCD falls in the category of active matrix LCD, rather
            than passive, which means each picture cell can be independently
            controlled for on and off switching activities, as a transistor
            (switching element) is attached directly onto each picture cell.
            This allows fast response and high resolution.

      o     "Throughput" - Product output quantity per unit of time.

      o     "TSOP" - Thin small outline package, a type of semiconductor package
            which is widely used in a PCB.

      o     "UPH" - Units per hour, a measure of throughput.

      o     "Wafer" - Commonly, a slice of a semicrystal crystalline ingot whose
            active surface has been processed into arrays of ICs.


                                      -4-
<PAGE>

                          CURRENCIES AND EXCHANGE RATES

      We publish our financial statements in won. Unless otherwise indicated,
all translations from won to U.S. dollars have been made at a rate of (Won)
1,186.30 to US $1.00 the noon buying rate as certified for customs purposes by
the Federal Reserve Bank of New York (the "Noon Buying Rate") on December 31,
2002. We do not represent that won or U.S. dollar amounts could be converted
into U.S. dollars or won, as the case may be, at any particular rate, the rates
below or at all. On June 18, 2003, the Noon Buying Rate was (Won) 1,185.00 to US
$1.00.

      The following table sets forth, for the periods indicated, the noon buying
rate for won announced by the Federal Reserve Bank of New York, expressed in won
per US $1.00.

                                                   Noon Buying Rate
                                     -------------------------------------------
Period                                 End      Average(1)     High       Low
----------------------------------   --------   ----------   --------   --------
                                                  (won per US $1.00)

1998                                 1,206.00     1,367.00   1,812.00   1,203.00
1999                                 1,136.00     1,188.00   1,243.00   1,125.00
2000                                 1,267.00     1,140.00   1,267.00   1,106.00
2001                                 1,314.00     1,293.00   1,369.00   1,234.00
2002                                 1,186.30     1,242.00   1,332.00   1,160.60
December 2002                        1,186.30           --   1,221.00   1,186.30
January 2003                         1,165.00           --   1,197.30   1,164.60
February 2003                        1,193.70           --   1,206.00   1,173.00
March 2003                           1,252.00           --   1,260.00   1,184.60
April 2003                           1,215.50           --   1,262.00   1,204.00
May 2003                             1,210.00           --   1,217.00   1,192.00
June 2003 (through June 18)          1,185.00           --         --         --

----------

(1)   The average of the noon buying rates on the last business day of each
      month during the period.


                                      -5-
<PAGE>

                                     PART I

ITEM 1. Identity of Directors, Senior Management and Advisors

      Not applicable, but see "Item 6--Directors, Senior Management and
Employees--Directors and Senior Management."

ITEM 2. Offer Statistics and Expected Timetable

      Not applicable.

ITEM 3. Key Information

A. Selected Financial Data

      The summary of consolidated financial information set forth below should
be read in conjunction with, and is qualified in its entirety by reference to,
the Consolidated Financial Statements, as of and for the years ended December
31, 2000, 2001 and 2002, together with the notes thereto, which appear elsewhere
in this annual report. The Consolidated Financial Statements as of and for the
years ended December 31, 2000, 2001 and 2002 have been audited by Ahn Kwon &
Co., a member firm of Deloitte Touche Tohmatsu.

      The Consolidated Financial Statements are prepared in accordance with
Korean GAAP, which differs in certain material respects from U.S. GAAP. See
Notes 29 and 30 of Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
Consolidated Balance Sheet:                 1998      1999      2000      2001      2002      2002
                                             Won       Won       Won       Won       Won     US$(1)
                                           -------   -------   -------   -------   -------   -------

                                                   ((Won) in millions and US$ in thousands)
                                           ---------------------------------------------------------
<S>                                        <C>       <C>       <C>       <C>       <C>       <C>
Korean GAAP:
Cash and cash equivalents and short-term    35,133    20,137    35,338    57,724    39,784    33,536
   financial instruments
Total assets                               178,267   181,221   379,172   351,122   240,512   202,741
Current liabilities                         11,049    23,413    39,982    96,016    51,291    43,236
Long-term liabilities                       11,117     1,957    11,819     5,076    14,565    12,276
Total shareholders' equity                 156,101   155,851   327,371   250,030   174,656   147,229

U.S. GAAP(3):
Total assets                               180,089   172,743   356,154   338,607   236,177   199,087
Total liabilities                           32,171    26,779    68,053   129,088    87,926    74,118
Total shareholders' equity                 147,918   145,964   288,101   209,519   148,251   124,969
</TABLE>


                                      -6-
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Operations:     1998       1999       2000       2001       2002       2002
                                            Won        Won        Won        Won        Won       US$(1)
                                          -------    -------    -------    -------    -------    -------

                                          ((Won) in millions and US$ in thousands, except per share data)
                                          ---------------------------------------------------------------
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>
Korean GAAP:
Sales                                      17,014     45,681    146,099     68,977     64,430     54,312
Cost of sales                              16,907     36,111    111,377     63,590     56,863     47,933
                                          -------    -------    -------    -------    -------    -------
Gross profit                                  107      9,570     34,722      5,387      7,567      6,379
Selling, general and administrative
   expenses                                 7,328     19,988     27,233     45,321     37,651     31,738
                                          -------    -------    -------    -------    -------    -------
Operating income (loss)                    (7,221)   (10,418)     7,499    (39,934)   (30,084)   (25,359)
                                          -------    -------    -------    -------    -------    -------
Other income                               14,299     14,603     12,809     11,020     13,285     11,199
Other expenses                              2,833      9,601     20,173     54,945     56,091     47,284
                                          -------    -------    -------    -------    -------    -------
Income (loss) before income taxes and
   minority interest                        4,245     (5,416)       135    (83,859)   (72,890)   (61,444)
Income tax expense (benefit)                  417     (5,396)    (3,602)    14,234        277        233
                                          -------    -------    -------    -------    -------    -------
Income (loss) before minority interest      3,828        (20)     3,737    (98,093)   (73,167)   (61,677)
                                          -------    -------    -------    -------    -------    -------
Minority interest in net loss (gain) of
   consolidated Subsidiaries                   --       (216)       533     (1,055)       176        148
                                          -------    -------    -------    -------    -------    -------
Net income (loss)                           3,828       (236)     4,270    (99,148)   (72,991)   (61,529)
                                          =======    =======    =======    =======    =======    =======
Net income (loss) per share (2)                39         (2)        35       (825)      (593)      (0.5)
                                          =======    =======    =======    =======    =======    =======
Cash dividends per share                       17         20         15         --         --         --

U.S. GAAP(3):
Sales                                      19,619     51,358    143,643     69,827     69,715     58,767
Gross profit (loss)                         7,119     15,526     43,545     (8,193)    (7,071)    (5,961)
Operating loss                            (11,223)   (11,163)   (11,903)   (62,687)   (50,195)   (42,312)
                                          -------    -------    -------    -------    -------    -------
Net income (loss)                           2,888       (117)     9,290    (84,811)   (62,607)   (52,775)
                                          =======    =======    =======    =======    =======    =======
Net income (loss) per share                    29         (1)        77       (706)      (509)      (0.4)
                                          =======    =======    =======    =======    =======    =======
</TABLE>

----------

1)    The translation of Korean won amounts into U.S. dollar amounts is included
      solely for the convenience of readers outside of Korea and has been made
      at the rate of (Won) 1,186.30 to US $1.00, the Noon Buying Rate on the
      last business day of the year ended December 31, 2002.

2)    Net income (loss) per share is calculated by dividing net income (loss) by
      the weighted average number of shares outstanding for the relevant period.
      See Note 20 of Notes to Consolidated Financial Statements.

3)    See Notes 29 and 30 of Notes to Consolidated Financial Statements for
      reconciliation to U.S. GAAP.

B. Capitalization and Indebtedness

      Not applicable.

C. Reasons for the Offer and Use of Proceeds

      Not applicable.


                                      -7-
<PAGE>

D. Risk Factors

Risks Relating to Mirae Corporation

      We are largely dependent upon the electronics, semiconductor and
semiconductor-related industries

      The electronics, semiconductor and semiconductor-related industries are
highly cyclical, with wide fluctuations in product supply and demand, and are
characterized by rapid technological change, short product life cycles,
fluctuations in manufacturing capacity and pricing, intense competition and
gross margin pressures. These industries periodically experience significant
downturns, often in connection with or in anticipation of declines in general
economic conditions, which in some cases have been prolonged. Our operations
have in the past and may in the future experience substantial fluctuations from
period to period as a consequence of such industry patterns, general economic
conditions affecting the timing of orders from customers and other factors
affecting capital spending. For instance, since the third quarter of 1997, the
financial crisis in Asia and Korea and since the fourth quarter of 2000, excess
global supply of DRAM chips have adversely affected customer demand for our
products and, consequently, our sales and results of operations. No assurance
can be given that any future downturns in the electronics, semiconductor and
semiconductor-related industries will not be as or more severe than in the past,
or that our results of operations or financial condition will not be materially
and adversely affected by such downturns or other developments in these
industries.

      Customer concentration may adversely affect our profitability

      The semiconductor manufacturing industry in Korea is highly concentrated,
with a relatively small number of large semiconductor manufacturers accounting
for a substantial portion of the purchases of semiconductor test handling
equipment. We are heavily dependent on two major customers, Samsung Electronics
Co., Ltd. and Hynix Semiconductor Inc. (formerly Hyundai Electronics Industries
Co., Ltd.). In the SMD placement systems industry, Tyco Electronics and Banner
Ever International Group are our major customers worldwide. The
formerly-mentioned customers are members of major Korean conglomerates while the
latterly-mentioned customers are major international mechatronics companies,
which together have accounted for a significant proportion of our consolidated
sales in the last several years.

      Although our strategies include expansion of our domestic customer base
and increasing our overseas sales to reduce our reliance on these customers,
they will likely remain important customers. Any negative financial impact on
these customers, the loss of any of these customers or a reduction in orders or
sales by any of these customers would have a material adverse effect on our
business, financial condition and results of operations.

      Our products may become obsolete as a result of rapid technological change
in semiconductor-related industries

      The semiconductor industry and the semiconductor equipment industry are
subject to rapid technological change and new product introductions and
enhancements. Our ability to remain competitive will depend in part upon our
ability to develop new products and to introduce these


                                      -8-
<PAGE>

products at competitive prices and on a timely and cost-effective basis. Our
success in developing new and enhanced products depends upon a variety of
factors, including:

      o     timely and efficient completion of product design;

      o     timely and efficient implementation of manufacturing and assembly
            processes;

      o     enhancement of product performance; and

      o     effective sales and marketing.

      Since new product development commitments must be made well in advance of
sales, we must anticipate both future demand and the technology that will be
available to supply that demand. Furthermore, introductions of new and complex
products typically involve a period in which we identify design, engineering and
reliability issues. While we believe that we have the technological resources
and ability to identify these issues, manage technological advances in the
industry and, in many instances, improve upon that technology, future
improvements in semiconductor design and in manufacturing technology may reduce
or eliminate the need for our products.

      A number of our traditional handler models are not compatible with RAMbus
DRAM testers and, therefore, cannot be used by manufacturers or testers of
RAMbus DRAMs. If our newer products, including our new handlers that are
compatible with RAMbus DRAM testers, and our new business lines fail to generate
sufficient demand or otherwise fail to meet the design and testing
specifications of the market, any significant industry shift to RAMbus DRAM
testers would have a material adverse effect on our business, financial
condition and results of operations.

      We may not be able to increase our market share because certain of our
competitors are more established than we are in some of our key and target
markets

      We seek to increase sales of our products in Korea, other Asian markets,
the United States and Europe. Since certain of our competitors already operate
in these key markets and have greater resources, we may not be able to compete
effectively for market share. If this happens, we may not be able to increase or
sustain sales in these markets.

      Some of our major competitors have the following advantages:

      o     greater name recognition;

      o     more diversified product lines;

      o     larger customer bases; and

      o     significantly greater financial, technical and marketing resources.


                                      -9-
<PAGE>

      As a result, as compared with Mirae, they may be able to:

      o     better withstand downturns in our key markets;

      o     adapt more quickly to new or emerging technologies or changes in
            customer requirements; and

      o     market, sell and support their products more effectively.

      Our new products and new business lines may not be successful

      Our strategies entail expanding the range of our products, as well as
widening our customer base in the Asia-Pacific region, the United States and
Europe. Our ability to implement these strategies will depend upon our use of
our core competencies to develop new products and market them successfully both
in and outside of Korea. We have expanded our core product offerings to include
SMD placement systems and Internet-related products and services. Through our
subsidiary, SoftForum Co., Ltd., we have developed and have begun selling
security solutions for on-line banking, trading and electronic commerce.
Although SoftForum has PKI-oriented solutions and is technologically advanced in
the area of infrastructure design and system integration, its competitors may
introduce a new technology and may have greater resources to compete in its
market. SK Communications Corporation (formerly Lycos Korea) has developed a
Korean language search and portal site on the Internet. We decreased our
ownership interest in Lycos Korea, which operated at a loss in both 2000 and
2001, from 43.25% to 4.54% in August 2002, and plan to redeem our initial
investment when SK Communications completes its merger with Cyworld Inc., which
is expected to occur in August 2003. Even though we have accumulated several
years of experience, our Internet and software security solutions business lines
are relatively new businesses for us and we may not have the necessary market
know-how or the operating and managerial experience to compete in these business
markets. See "Item 4 --Information on the Company--Business Overview--Internet
Businesses and On-line Solutions". No assurance can be given that any of these
products or businesses or any future products or businesses developed by us will
be accepted by the market and be profitable or that we will be able to find
suitable markets with sufficient demand for our products. The failure of one or
more of these products or business lines could have a material adverse effect on
our business, results of operations and financial condition.

      We may have significant amounts of uncollected and uncollectable trade
accounts receivable

      In order to penetrate new markets and build market share quickly, we have
offered longer payment periods to customers. We had total outstanding trade
accounts receivable of (Won) 33,965 million as of December 31, 2002. As a
percentage of sales, our accounts receivable decreased primarily due to the
sales decrease in semiconductor test handler products in 2002. The credit terms
on sales of our SMD placement systems were longer than the credit terms on sales
of our semiconductor test handler products. Since we only commenced the sale and
marketing of SMD placement systems within the second half of 1999, we provided
our customers longer credit terms to penetrate and advance our position in the
relatively new market. As a result of such longer credit terms as well as the
current weakness in the markets in which


                                      -10-
<PAGE>

we operate, we may experience significant uncollected and uncollectable trade
accounts receivable.

      We may hold excess raw material and product inventories

      We had inventories of (Won) 22,261 million as of December 31, 2002. This
was a decrease of 58%, or (Won) 31,293 million, from (Won) 53,554 million as of
December 31, 2001 resulting from our adoption of a new inventory management
system in 2002. Generally, we make advance purchases of raw material inventories
for the production of SMD placement systems and advance manufacturing of SMD
placement systems in order to cut back on the time required for delivery to meet
our projected customer demand on a timely basis. We may misjudge the size of raw
material and product inventories needed, and thereby hold excess and unusable
inventories which may be expensed as inventory valuation losses. We reported
(Won) 20,409 million of loss from valuation of inventories in 2002. Such excess
inventories could have a material adverse effect on our business, financial
condition and results of operations.

      Market prices for our products may decline in the future

      We anticipate that market prices for our main products may decline in the
future due to intensified competition. We expect that significant competition
among local and international companies, including from new entrants, may
continue to drive equipment prices lower. In the last couple years, average
prices for certain models of our SMD placement systems have declined 5-10%,
which we attribute in part to the contraction in this industry as well as
increased competition among our competitors. We also expect that there may be
increases in promotional spending by companies in our industry, which would also
contribute to increasing movement of customers between competitors. Such
increased competition and the resulting decline of market prices for our
products would have a material adverse effect on our business, financial
condition and results of operations.

      We have only limited experience in providing Internet products and
services and if we are unsuccessful, our operating results may be significantly
harmed

      Our future success may be dependent on the success of our Internet-related
products and services. If we are unable to successfully establish and expand
these businesses, we may lose market share to competitors who are able to
implement more effectively an Internet-based service business model and the
value of our investments in these businesses may decline or be eliminated
completely.

      The success of our Internet-related businesses depends on a variety of
factors, including:

      o     the quality and reliability of our Internet products and services
            and our network infrastructure;

      o     our ability to develop new products and services superior to that of
            our competitors;

      o     our ability to establish electronic commerce and licensing
            relationships and other strategic alliances;


                                      -11-
<PAGE>

      o     our pricing policies and the pricing policies of our competitors;

      o     our ability to introduce new products and services before our
            competitors;

      o     our ability to successfully advertise our products and services; and

      o     general economic trends.

      No assurance can be given that any or all of the above factors will be
favorable for us.

      The recent slowdown in the information technology industry may cause
bankruptcies or significant losses in some or all of our Internet-related
investments

      We have made significant investments in Internet-related businesses. Mirae
holds a greater than 20% stake in four subsidiaries and affiliates engaged in
Internet-related businesses. See "Item 4--Information on the Company--Business
Overview--Internet Businesses and On-line Solutions". During the last two years,
we sustained losses from several of our Internet-related investments. Due to the
difficult market conditions currently prevailing in the information technology
industry, there is a possibility that some of the Internet-related companies in
which we have invested may continue to sustain a large amount of losses or
become bankrupt. In such a case, the value of Mirae's equity in these
subsidiaries would decline, which could have a material adverse effect on our
business, financial condition and results of operations.

      The Internet may not be adopted as a significant medium of commerce and
communication

      As is typical in the case of a new and swiftly evolving industry
characterized by rapidly changing technology, evolving industry standards and
frequent new product and service introductions, demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty. In addition, critical issues concerning the commercial use of the
Internet remain unresolved and may affect the growth of Internet use. Despite
growing interest in the many commercial uses of the Internet, many individuals
and businesses have been deterred from purchasing Internet access services for a
number of reasons, including the existence or perception of, among other things,
inconsistent quality of service; lack of availability of cost-effective,
high-speed options; inability to integrate personal and business applications on
the Internet; inadequate protection of the confidentiality of stored data and
information moving across the Internet; a perceived lack of security of personal
and commercial data, such as credit card numbers; and a lack of tools to
simplify Internet access and use. These factors may hinder the performance of
our Internet-related investments and, thus, could have a negative impact on our
business, financial condition and results of operations.

      The Internet industry's standards and technology are evolving

      Our future success may depend upon our ability to enhance our existing
Internet-related products and services and to develop new products and services
that meet changing customer requirements. The Internet market is characterized
by rapidly changing technology, evolving industry standards, emerging
competition and frequent new product and service introductions. We can give no
assurance that we can successfully identify new opportunities and develop and
bring new Internet products and services to market in a timely manner or that
our products or


                                      -12-
<PAGE>

services will be competitive and current. Also, we can give no assurance that we
will have the necessary resources to obtain advances in technology necessary to
remain competitive.

      We also face the risk that fundamental changes may occur in the delivery
of Internet-related products and services. Currently, the Internet is accessed
by computers, screen-based telephones, television and other consumer electronic
devices and is delivered by telephone lines and other means such as coaxial
cable and wireless transmission. We may have to develop new technology and/or
modify our existing technology to accommodate further developments in Internet
access and delivery. Our pursuit of these technological advances, whether
directly through internal development or by third party license, may require
substantial time and expense, and we can give no assurance that we will succeed
in adapting our Internet businesses to alternate access devices and conduits or
that new technologies will be available to us at all.

      The announcement or introduction of new products or services by us or our
competitors and any change in industry standards could cause customers to defer
or cancel purchases of existing products or services, which could have a
material adverse effect on our business, financial condition and results of
operations. The failure by us to anticipate the prevailing standards, or the
failure of common standards to emerge, could have a material adverse effect on
our business, financial condition and results of operations. In addition,
services or technologies developed by others could render our services or
technology uncompetitive.

      We may not be able to manage our growth into new products, new product
lines and new markets

      Our diversification and expansion strategy may place strains on our
administrative, operational and financial resources and affect our
competitiveness. Such expansion will increase responsibilities placed upon
management personnel and will require development or enhancement of operational,
managerial and financial systems and controls. If we are unable to effectively
manage the expansion of our mechatronics product lines and the integration of
our Internet businesses and security solutions into our operations, our
business, financial condition and results of operations will likely be adversely
affected. Our diversification and expansion strategy may also require that we
hire additional administrative, sales and marketing personnel, which would
increase overall expenses and make it more difficult to maintain our simplified
decision-making process.

      Our operating results may fluctuate due to the seasonality of our sales of
semiconductor test handlers and SMD placement systems

      Our business has been seasonal and our sales have typically been higher in
the second half of the year. In addition, our operating results may fluctuate
considerably from quarter to quarter. Changes in the nature or level of customer
orders or a particularly large customer order or customer cancellation in any
particular quarter could cause significant variations in our revenues. For
instance, for our handlers, our major customers typically provide to us the
specifications needed for their orders. Our success may be dependent upon our
ability to mobilize our various divisions to manufacture products to meet our
customers' customization and volume demands in a timely and cost-efficient
manner and, if we are unable to do so, our results will be adversely affected.


                                      -13-
<PAGE>

      Normally, we deliver our handlers between 2 1/2 and 3 1/2 months after we
receive an order. During these lead times, customers may modify or cancel their
orders due to their own changing technology or for various other reasons,
including economic downturns. The volume and timing of orders placed by our
customers vary due to fluctuations in product demand, the development of new
semiconductor devices and other microeconomic and macroeconomic factors.
Likewise, customers may misinterpret the marketplace direction and incorrectly
indicate to us the future customization or volume demand for a particular
product. Although our entry into the SMD placement system industry has reduced
our dependence on our semiconductor test handler sales, changes in the volume of
customer orders could have a material effect on our profitability, in part
because of the fixed costs associated with our handler product line and because
the volume of customer orders affects the utilization rate of our equipment,
labor and other overhead costs.

      Infringement of our intellectual property rights could negatively impact
our results of operations

      Our success is dependent in part on our technology and our continuing
right to use our technology. We rely on a combination of contractual rights and
patent, copyright, trademark and trade secret laws to establish and protect
proprietary rights in our technology. If we are unable to establish or protect
these rights in the domestic and international markets in which we compete, our
competitors may be able to use our intellectual property to compete against us
in such markets. This could limit our growth and adversely affect our operating
results. The laws of certain countries in which our products are distributed do
not protect our products and intellectual property rights to the same extent as
the laws of the United States and Korea. Accordingly, effective patent,
copyright and trademark protection may be unavailable in certain foreign
countries.

      As of December 31, 2002, we held 236 domestic patents, with expiration
dates between May 2007 and November 2020, as well as 25 patents in the United
States, with expiration dates in December 2021, 19 patents in Japan, with
expiration dates between February 2016 and May 2020, and 18 patents in Taiwan,
with expiration dates in November 2016. We have 199 domestic patents pending and
251 overseas patents pending in the United States, Japan, Germany, Taiwan,
Italy, Singapore and Malaysia. In Korea, we also hold 85 registered utility
models, 37 registrations of designs and 21 registered trademarks. We expect that
our patent applications will result in the issuance of more than 85% of our
pending patents; however, we cannot be sure that any of these applications will
be granted or that any issued patents will provide commercially significant
protection to our technology.

      It is possible that no additional patents will be issued to us or any of
our affiliates. In addition, our issued patents and trademarks may not prevent
other companies from competing with us. Furthermore, although we maintain
confidentiality agreements with many of our employees to limit disclosure or use
of any information obtained as a result of an employee's position with us, these
employees may leave us or may be terminated by us at any time, and no assurance
can be given that an employee will not misappropriate our proprietary
information or that the Korean courts will enforce our rights under the
confidentiality agreements. We cannot guarantee that any of the foregoing
measures will discourage others from misappropriating our technology or
independently developing similar technology.


                                      -14-
<PAGE>

      In the event that a third party claims that we are infringing on the
party's patents or other intellectual property rights or we make a similar claim
against a third party, it may become necessary to resort to litigation, which
can be costly and time consuming, to determine the scope and validity of other
parties' property rights, or to enforce our own, in either case, in judicial or
administrative proceedings. Generally, Korea's intellectual property legal
framework is similar to that of the United States. However, a broader array of
items may be protected as intellectual property in the United States.
Additionally, a Korean court may apply a less strict enforcement standard and/or
award a smaller amount of damages than a U.S. court. The laws of other countries
may not protect our intellectual property as vigorously as in the United States
or Korea. An adverse outcome in any dispute could subject us to significant
liabilities, require us to cease manufacture, sales and shipments of products or
our use of processes requiring the relevant technologies or alter the design of
our products or make it necessary for us to obtain licenses from third parties.
We can not assure you that we will obtain any licenses required under third
party patents or proprietary rights or that they will be available on terms
acceptable to us. Litigation could also adversely affect our sales of the
challenged product and divert the efforts of our technical and management
personnel, whether or not such litigation is resolved in our favor. We do not
believe that we have infringed on the intellectual property rights of any third
party.

      Presently, we are a plaintiff in a patent infringement suit in which we
are claiming that the line of memory module test handlers of the defendant, Yuil
Semicon Company, infringe on our patents. We obtained an injunction prohibiting
the defendant from selling any of these products and are seeking in excess of 1
billion won in damages. We expect resolution of this litigation by the end of
2003.

      We are controlled by a major shareholder

      Moon Soul Chung, founder and former President, Chief Executive Officer and
Chairman of the Board of Directors of the Company, together with his family
members, beneficially owns approximately 16.55% of our outstanding common stock.
See "Item 6--Directors, Senior Management and Employees--Share Ownership".
Accordingly, he may be able to influence the composition and decisions of the
Board of Directors and shareholder votes relating to certain types of decisions
and transactions, including those involving an actual or potential change of
control of the Company. In Korea, the rights of minority shareholders and the
fiduciary obligations of Directors and majority shareholders may not be as
extensive as those in the United States or elsewhere, and the ability to assert
any such rights may be limited. In addition, Korean courts may not be willing to
enforce judgments rendered against the Company or any of its officers or
Directors by courts outside of Korea.

      We rely on key personnel

      Our success depends on our ability to attract and retain additional highly
qualified management, engineers and technical, marketing and sales personnel.
The process of hiring employees with the combination of skills and attributes
required to implement our strategy can be extremely competitive and
time-consuming. We may be unable to retain or integrate existing personnel or
identify and hire additional personnel. Although Mirae has "key man" life
insurance for all executive officers, the loss of the services of key personnel
(especially the unexpected death or disability of key personnel), or the
inability to attract additional qualified


                                      -15-
<PAGE>

personnel, could have a material adverse effect on our business, financial
condition and results of operations.

      We may be classified as a passive foreign investment company for United
States federal income tax purposes, which could result in negative tax
consequences to you

      Since we presently hold a significant amount of short-term investments and
other passive assets, including cash, and we anticipate that we will continue to
hold a significant amount of passive assets, there is a risk that we will be
classified as a passive foreign investment company (a "PFIC") for United States
federal income tax purposes. If we are classified as a PFIC for the current or
any future taxable year, a U.S. Holder (as defined in "Item 10--Additional
Information--Taxation--United States Federal Income Tax Considerations") of ADSs
or common stock generally would, upon certain distributions by us with respect
to the ADSs or common stock or upon a disposition of the ADSs or common stock by
the U.S. Holder, be treated as if the distribution or gain had been recognized
ratably over the U.S. Holder's holding period for the ADSs or common stock
during which we were a PFIC, and the U.S. Holder would be liable for (i) tax
thereon, computed at ordinary income rates for any taxable year prior to the
first taxable year in which we are classified as a PFIC, and at the highest
applicable rate in effect for the U.S. Holder for each taxable year beginning
with the first taxable year in which we are classified as a PFIC (other than the
current taxable year) and (ii) an interest charge on the tax attributable to
taxable years beginning with the first taxable year in which we are classified
as a PFIC (other than the current taxable year). Certain aspects of this adverse
tax treatment, however, may be avoided by a U.S. Holder who makes a
"mark-to-market" election. See "Item 10--Additional
Information--Taxation--United States Federal Income Tax Considerations" for a
more detailed discussion of the United States federal income tax consequences of
our classification as a PFIC and the tax consequences of the mark-to-market
election. Each prospective investor is urged to consult his or her tax advisor
regarding the application and the effect of the PFIC rules in connection with
the purchase, ownership and disposition of ADSs or common stock.

      Becoming an investment company would preclude us from making subsequent
offerings

      While we have made a number of investments in Internet-related companies,
we believe we are not an investment company, as defined in the U.S. Investment
Company Act of 1940, as amended, and we do not intend to become an investment
company. To the extent we acquire additional investment securities as the result
of which the value of our total investment securities exceeds 40% of the value
of our total assets (exclusive of U.S. government securities and cash items) on
an unconsolidated basis, we could become an investment company. If we became an
investment company, we would be precluded from raising additional capital in the
United States.

Risks Relating to the Korean and Asian Economic Environment

      We are negatively affected by adverse economic conditions in Korea and
elsewhere in the world

      We are dependent on sales of our products to Korean companies and, as a
result, adverse economic conditions in Korea and the financial difficulties of
other Korean companies have had


                                      -16-
<PAGE>

a material adverse effect on our business and are likely to continue to have
such an effect for some period of time.

      Since early 1997, a number of developments have adversely affected the
Korean economy and Korean companies, including Mirae. Korean banks, financial
institutions and companies, including the conglomerates commonly known as
chaebols that dominate the Korean economy, several of which are our customers,
have struggled financially. A number of companies and financial institutions
have filed for corporate reorganization and protection from creditors and some
have gone into liquidation proceedings or have failed. Korea's recent financial
and economic difficulties have included:

      o     the depreciation of the won against the dollar and other currencies;

      o     interest rate fluctuations;

      o     reduced credit from foreign banks;

      o     reduced liquidity in the economy;

      o     volatile stock prices;

      o     reductions in Korea's foreign currency reserves (which have largely
            been replenished);

      o     declines in credit ratings of Korea and Korean financial
            institutions and companies; and

      o     higher unemployment.

      The sharp economic downturn in Korea and elsewhere in Asia adversely
affected our business as the demand for our customers' products and our products
declined. Future economic downturns in Korea, elsewhere in Asia and in our other
markets could be detrimental to our business.

      According to the Korea Development Institute ("KDI"), Korea's gross
domestic product ("GDP") contracted by 6.7% in 1998 and improved by 10.9%, 9.3%,
3.1% and 6.3% in 1999, 2000, 2001 and 2002, respectively. Although we believe
that the Korean economy is recovering, as evidenced by data and forecasts of the
International Monetary Fund and KDI, no assurance can be given as to the extent
of the economy's improvement or of the continuance of this improvement. Future
deterioration of economic conditions in Korea may have a significant impact on
the demand for our products and on our financial condition and results of
operations.

      Beginning in mid-1997, the economic difficulties experienced by certain
Southeast Asian countries, such as Indonesia, Thailand and Malaysia, exacerbated
Korea's economic difficulties. More recently, the continuing weakness of the
Japanese economy and the volatility of the Japanese yen against the dollar have
increased economic instability in Asia in general and may hinder Korea's ability
to recover from its own economic difficulties. Future adverse developments in
Southeast Asia, Japan and elsewhere could worsen Korea's economic difficulties
by affecting, among other things, Korean financial institutions that have lent
to borrowers in such countries, Korean exporters that export to such countries,
and Korean


                                      -17-
<PAGE>

companies and financial institutions that rely on credit from Japanese lenders.
Any of these developments could adversely affect demand for our products.

      We may be negatively affected by the depreciation of the won and exchange
rate fluctuations

      Depreciation and the volatility of the value of the won against the dollar
and other major foreign currencies in 1997 had a material adverse effect on the
results of operations of Korean companies, including Mirae. Any depreciation and
volatility of the value of the won in the future may adversely affect our
results of operations and the price of our shares and the ADSs.

      In the second half of 1997, the value of the won relative to the dollar
and other major currencies depreciated at an accelerated rate. As a result of
this sharp depreciation, the Government was forced to suspend its efforts to
support the value of the won, and on December 16, 1997, the Government allowed
the won to float freely. Such depreciation of the won relative to the dollar
increased the cost of imported goods and services and the won revenue needed by
Korean companies to service foreign currency-denominated debt. In the second
half of 1998, however, the won began to appreciate relative to the dollar and
other major foreign currencies. On December 31, 2002, the Noon Buying Rate was
(Won) 1,186.30 to US$ 1.00. Any change in the value of the won relative to other
major currencies may adversely affect the financial condition and results of
operations of Korean companies, particularly those companies requiring or
receiving foreign currencies and those companies with large amounts of short-
and long-term borrowings in foreign currencies. Since we are dependent on Korean
companies for our sales, the adverse effect of the depreciation of the won and
of exchange rate fluctuations on certain of our Korean customers has had, and
may in the future have, a material adverse impact on our business.

      Fluctuations in the exchange rate between the won and the dollar will also
affect the dollar equivalent of the won price of our shares on the Korea Stock
Exchange and, as a result, will likely affect the market price of the ADSs. The
fluctuations also will affect the dollar conversion by the Depositary of cash
dividends, if any, paid in won on shares of common stock represented by the
ADSs.

      We may be negatively affected by interest rate fluctuations

      The developments described above also led to sharply higher domestic
interest rates and reduced opportunities for refinancing or refunding maturing
debts, as financial institutions in Korea sought to limit their lending and
increase their reserves for non-performing assets and securities valuation
losses. Average annual interest rates on three-year won-denominated,
non-guaranteed corporate bonds rose from 12.6% as of September 30, 1997 to 29.0%
as of December 31, 1997. The rates have fallen from 1998 until the present.
Internationally, the spreads over United States Treasury Bonds on benchmark
dollar-denominated bonds issued by Korea and Korean financial institutions and
companies have also risen and fluctuated considerably, but these rates have
generally improved and stabilized since the second half of 1998. No assurance
can be given, however, that Korean interest rates or rates payable by Korean
companies and financial institutions on their foreign currency-denominated debt
will not rise in the future.


                                      -18-
<PAGE>

      Many of our large Korean customers, such as Samsung Electronics Co., Ltd.
and Hynix Semiconductor Inc., carry significant amounts of debt. As a result of
the high domestic interest rates in the last several years, these customers'
debt service costs have increased significantly and, as a result, their
financial condition deteriorated and capital expenditures, including purchases
of our products, declined markedly. If interest rates were to rise again,
funding requirements needed by our largest customers to make debt service
payments would rise significantly and, as a result, the financial condition and
results of operations of these companies would likely be adversely affected,
including their ability and willingness to make capital expenditures for
mechatronics equipment. This would likely have a material adverse effect on our
sales, financial condition and results of operations.

      We may be negatively impacted should the Government discontinue economic
reform measures adopted in the wake of the Asian economic crisis

      As a result of the severe financial and liquidity crises in Asia and in
Korea, the Government sought and obtained loans from the International Monetary
Fund, the World Bank and the Asia Development Bank in late 1997. In exchange,
the Government agreed to institute substantial economic initiatives to address
the structural weaknesses in the Korean economy, including, among others, the
following:

      o     implementing a policy requiring improved corporate governance;

      o     restructuring and recapitalizing the financial sector and making it
            more transparent, market-oriented, better supervised and free from
            political intervention;

      o     reforming the labor laws to enable corporations to lay-off workers
            for business reasons;

      o     removing restrictions on foreign investment in the country;

      o     eliminating all cross-guarantees between member firms of chaebols;

      o     requiring the divestment of certain non-core business lines by
            chaebols; and

      o     requiring significant reduction of debt levels.

      No assurance can be given that the Government will continue to implement
the various reform programs, that further programs will not be needed or that
the Government will sustain the reforms already implemented. If the Government
is unable to fully integrate and sustain the reform programs, the International
Monetary Fund and other international lenders may withdraw their financial
support. Such developments would likely have an adverse effect on the domestic
economy, as well as on the financial condition, including liquidity, of Korean
companies, including Mirae.

      Our business is subject to risks relating to North Korea

      Relations between Korea and the Democratic People's Republic of Korea
("North Korea") have been uneasy over most of Korea's recent history. These
tensions have been heightened recently by certain events, including (i) North
Korea's intrusion in June 1999 over the northern


                                      -19-
<PAGE>

boundary of Korea's territorial waters, which resulted in a series of military
clashes with Korea, including an exchange of gunfire and the sinking of a North
Korean vessel, (ii) North Korea's wavering stance with regard to its compliance
with the Nuclear Non-Proliferation Treaty, (iii) North Korea's firing in August
1998 of a mid-range ballistic missile which landed off the coast of Japan, and
(iv) reports of North Korea's development of nuclear weapons in 2002.

      Certain events, such as the then-Korean President Kim Dae-Jung's visit to
North Korea and the North-South Korea summit, each in June 2000, raise optimism
for improvement in the political relationship and economic cooperation between
the two countries.

      However, reports have indicated that North Korea may have the capacity to
use nuclear weapons against South Korea, Japan and the United States. Although
these countries have warned North Korea to refrain from any current or future
plans to develop nuclear weapons, no assurance can be given that the level of
tension with North Korea will decrease or not change abruptly. Any subsequent
adverse impact on the Korean economy could negatively affect Mirae's results of
operations and the price of its common stock and the ADSs.

Risks Relating to the ADSs

      The Korea Stock Exchange is a volatile trading market which could affect
the price of our common stock and the ADSs

      The principal trading market for our common stock is the Korea Stock
Exchange. The Korea Stock Exchange is a volatile market and considerably smaller
and less liquid than the securities markets in the United States. The Korea
Composite Stock Price Index ("KOSPI"), an index of all equities listed on the
Korea Stock Exchange, declined by 41.8% from 647.1 on September 30, 1997 to
376.3 on December 27, 1997, the last day of trading on the Korea Stock Exchange
in 1997. Since then, KOSPI increased by 49.5% to 562.46 on December 31, 1998 and
82.8% to 1028.07 on December 31, 1999. In 2000, the market decreased again by
50.9% to 504.6, recovered by 37.5% to 693.7 by the end of 2001 and then declined
by 9.5% to 627.55 by the end of 2002. Any decline in the KOSPI or large amounts
of sales of Korean securities by foreign investors and subsequent repatriation
of the proceeds of such sales could adversely affect the value of the won, the
foreign currency reserves held by financial institutions in Korea and the
ability of Korean companies to raise capital. Continued volatility of stock
prices in Korea may have a material adverse effect on our ability to raise
capital on the Korea Stock Exchange or elsewhere, and the price of our common
stock and ADSs could fluctuate substantially.

      In addition, a disproportionately large percentage of the market
capitalization and trading volume of the Korea Stock Exchange is represented by
a small number of listed companies and conglomerates. Fluctuations in the share
prices of these companies can have a significant effect on the market price of
other listed companies, including the price of our common stock and the ADSs.

      Liquidity of the ADSs may be limited

      Mirae became listed on The Nasdaq National Market on November 17, 1999
under the symbol "MRAE" and the ADSs were issued on February 17, 2000. An active
market for our


                                      -20-
<PAGE>

ADSs has not yet developed. There can be no assurance that an active market will
develop or, if such a market does develop, that it will continue.

      Volatility of The Nasdaq National Market may adversely affect the price of
the ADSs.

      Certain shares listed on The Nasdaq Stock Market have recently experienced
significant price and volume fluctuations, which have adversely affected the
market price of our and other shares listed on The Nasdaq Stock Market without
any regard to the underlying fundamentals of such stocks. Recent fluctuations
have been particularly acute for high technology sector stocks. These broad
market fluctuations, which may occur in the future, as well as issues more
specifically related to our business activities or prospects, our financial
performance, intellectual property, the semiconductor and semiconductor related
industries or the Internet industries, may continue to adversely affect the
market price of the ADSs.

      Preemptive rights may be unavailable to holders of ADSs in certain
circumstances

      The Commercial Code of Korea and our Articles of Incorporation require us,
with certain exceptions, to offer shareholders the right to subscribe for new
shares of our common stock in proportion to their existing ownership percentage
whenever new shares are issued. Under the deposit agreement (the "Deposit
Agreement") among the Company, the Depositary and all holders and beneficial
owners from time to time of the ADSs, if we offer or cause to be offered any
rights to subscribe for additional shares of our common stock or any rights of
any other nature, the Depositary, after consultation with us, may (to the extent
that the Depositary determines that it is lawful and feasible) make such rights
available to the holders of ADSs or dispose of such rights on behalf of such
holders and make the net proceeds available to them. If the Depositary is unable
to take such actions, it may allow the rights to lapse with no consideration to
be received by the holders of ADSs. The Depositary is not required to make
available any rights to subscribe for, or to purchase, any securities unless and
until a registration statement under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), is in effect with respect thereto or unless the offering
and sale of such securities is exempt from or not subject to the registration
requirements of the Securities Act. We are under no obligation to file a
registration statement under the Securities Act to enable holders of ADSs to
exercise preemptive rights for shares of our common stock underlying their ADSs,
and no assurance can be given that such registration statement would be filed.
Holders of ADSs that are not entitled to exercise preemptive rights for common
stock underlying their ADSs may suffer dilution of their interests in us.

      Your ability to deposit shares into the depositary facility may be limited

      Under current Korean laws and regulations, neither shares of our common
stock acquired in the open market nor shares withdrawn from the depositary
facility may be deposited or re-deposited, as the case may be, in the depositary
facility without our consent. However, we have consented to any deposit unless
such deposit is prohibited by Korean law or violates our Articles of
Incorporation. No assurance can be given that the deposit of such shares would
always be permitted.


                                      -21-
<PAGE>

      As a holder of ADSs, you will have fewer rights than a shareholder has and
you will have to act through the Depositary to exercise those rights

      The rights of shareholders under Korean law to take actions, including
voting their shares, receiving dividends and distributions, bringing derivative
actions, examining the Company's accounting books and records and exercising
appraisal rights, are available only to holders of record. Since the Depositary,
through Korea Securities Depository, is the holder of record of the shares
underlying the ADSs, only the Depositary can exercise those rights in connection
with the deposited shares. The Depositary will, if we ask it to, make efforts to
vote the shares underlying your ADSs as instructed by you and will pay to you
the dividends and distributions collected from us. However, in your capacity as
an ADS holder, you will not be able to bring a derivative action, examine the
accounting books and records of the Company or exercise appraisal rights.
Furthermore, we may not ask the Depositary to solicit your instructions on how
to vote. If you surrender your ADSs and take delivery of the underlying shares,
you can exercise all the rights of a shareholder, including voting your shares.
However, you may not be informed of events affecting shareholders sufficiently
in advance to withdraw your shares and exercise your rights as a shareholder.

ITEM 4. Information on the Company

A. History and Development

      Our legal and commercial name is Mirae Corporation. Our head office is
situated at 9-2, Cha Am-Dong, Chun An City, Chung Chong Nam-Do 330-200, Republic
of Korea and our telephone number is (8241) 621-5070. We have appointed Mirae
America, Inc., 48119 Warm Springs Blvd., Fremont, California 94539, as our agent
in the United States for sales and customer service.

      Mirae Corporation was founded as a sole proprietorship in 1983 and
incorporated as a limited liability company under the laws of Korea in December
1990. Shares of our common stock were listed on the Korea Stock Exchange on
November 2, 1996. We became listed on The Nasdaq National Market on November 17,
1999 and issued ADSs on February 7, 2000.

      Since 1983, we have manufactured and sold lead frame magazines and
products related to machine tools, and after 1989, we diversified our product
line into semiconductor test handlers primarily for sale to domestic
semiconductor manufacturers. Handlers are specialized robotic machines used to
move devices during the testing phase of the semiconductor manufacturing
process. Since 1991, we have further diversified our handler product lines to
include various models of memory test handlers, memory module test handlers,
non-memory test handlers and burn-in sorters. With improvement of our handler
product lines, our research and development capability has become the foundation
of our core competencies: precision mechanisms, intelligent control and machine
vision. For the years ended December 31, 2000, 2001 and 2002, sales of handlers
accounted for 29.9%, 26.7% and 22.4% of our total revenues, respectively.

      In 1998, we utilized our product know-how and our core competencies to
design and develop advanced surface mount placement systems (SMD placement
systems), machines that affix electronic devices onto printed circuit boards,
and TFT-LCD handlers and testers, machines that


                                      -22-
<PAGE>

handle and test a new generation of flat panel displays. In 1999, we began to
sell these new product lines in Korea and worldwide. We believe that our
semiconductor handler products and SMD placement systems are among the most
advanced products in the industry. For the years ended December 31, 2000, 2001
and 2002, SMD placement systems became our major product, accounting for 48.8%,
30.4% and 36.5% of our total revenues, respectively.

      Beginning in 1999, we focused on market advancement and enhancement of
customer infrastructure in our mechatronics, semiconductor-related and SMD
placement systems businesses and development of our Internet-related businesses.

      However, when the general economy as well as the semiconductor industry
and related markets experienced a significant downturn in 2001 and 2002, we
undertook a strategic corporate restructuring process in order to reduce related
risks and to enhance our mechatronics businesses. The three highlights of our
corporate restructuring procedure are as follows:

      First, in order to reduce the Company's expenses, we downsized the number
of employees by 37.8 percent, or 197 employees, in 2001. As of December 31, 2000
and 2001, the total number of our employees was 521 and 324, respectively. As of
May 31, 2003, the Company had a total of 298 employees.

      Second, the Company has concentrated on the part of the mechatronics
business that would enhance our test handler and SMD placement system
businesses. A part of our corporate restructuring is the positive exit from
Internet-related businesses that have been experiencing losses. In August 2002,
the Company's shareholdings of SK Communications Corporation (formerly Lycos
Korea) decreased from 43.25% to 4.54%. In addition, by exercise of our appraisal
right as a dissenting shareholder upon SK Communication's agreement to merge
with Cyworld Inc. on June 13, 2003, the Company plans to redeem its initial
investment of (Won) 2,582 million when the merger process is completed in August
2003.

      Third, in conjunction with our decision to exit from our unprofitable
Internet-related businesses, we have decided to divest buildings we have
utilized for our non-mechatronics operations. For example, we divested our
Kang-nam Mirae building for (Won) 60 billion on May 24, 2002.

      The following information describes how we have invested and developed
Internet-related businesses since 1999.

      SoftForum Co., Ltd. was incorporated in April 1999 under the laws of Korea
as a 70%-owned subsidiary of the Company, and is currently engaged in providing
security solutions for on-line banking, on-line trading and electronic commerce.
SoftForum's shares have been listed in the Korea Securities Dealers Automated
Quotation ("KOSDAQ") market since October 30, 2001. As of December 31, 2002,
SoftForum is 41.51%-owned by the Company, 6.94%-owned by Dongwon Venture Capital
Co., Ltd., 4.14%-owned by SoftForum employees and 47.41%-owned by others.
SoftForum's accounts were consolidated due to the Company's effective control of
it through the nomination of a majority of its board of directors by the
Company.

      MR Tech Town Co. was incorporated in April 1999 under the laws of Korea,
and the Company acquired a 100% equity interest in MR Tech on July 2, 1999. MR
Tech is engaged in


                                      -23-
<PAGE>

providing building administration services. On April 4, 2003, 20,000 common
shares of MR Tech valued at (Won) 46 million on such date were sold to SoftForum
as a part of corporate restructuring.

      Mirae Online, Co., Ltd. was incorporated in March 2000 under the laws of
Korea, and engages in the provision of a two-way satellite-based data
broadcasting service. As of December 31, 2002, Mirae Online was 81.38%-owned by
the Company.

      Korea Internet.com Co., Ltd. was incorporated in July 2000 under the laws
of Korea as a joint venture company between the Company and internet.com
Corporation, a United States corporation, in order to provide e-business related
information, real-time news and information for Internet professionals on the
Internet. As of December 31, 2002, Korea Internet.com was 87.38%-owned by the
Company.

      Alpha Logics Co., Ltd. was incorporated in December 2002 under the laws of
Korea, and develops and sells security solutions and related equipment. As of
December 31, 2002, Alpha Logics was 100%-owned by SoftForum, a subsidiary of the
Company.

      Mobile Game Co., Ltd. (formerly Java Games Co., Ltd.) was incorporated in
December 1999 under the laws of Korea as a 59.98%-owned affiliate of the
Company, and is currently engaged in providing game programs. In April 2002, the
status of Mobile Game changed to an affiliate accounted for using the equity
method from a consolidated subsidiary due to the Company's decrease in ownership
from 59.98% to 29.99%.

      Lycos Korea Inc. was formed in March 1999 under the laws of Korea as a
joint venture company between the Company and Lycos, Inc., a United States
corporation. Lycos Korea offers a Korean language search and portal site on the
Internet. Lycos Korea launched its Internet operations in July 1999. In 2002,
Lycos Korea changed its name to SK Communications Corporation. In August 2002,
the Company's ownership percentage decreased from 43.25% to 4.54% through a sale
to SK Telecom Co., Ltd. As a result, the Company's investment in SK
Communications is accounted for using the cost method of accounting whereas
until and through July 2002, it had been accounted for using the equity method
of accounting.

      Mirae America, Inc. was incorporated in February 2001 under the laws of
the United States as a joint venture company between the Company and Mr. Hyung
Yun Lee, our CEO, who at that time was and continues to be CEO of Mirae America.
Mirae America currently sells products manufactured by the Company and provides
after-sales services for the products.

      Display Equipment & Total Solution Co., Ltd. ("DE&T") was incorporated in
August 2001 under the laws of Korea, and produces flat panel display equipment.
On August 1, 2001, the Company transferred its LCD division with total assets of
(Won) 1,445 million and total liabilities of (Won) 620 million to DE&T, which
was an affiliated company in 2001, for (Won) 825 million.

      AIO Corporation was incorporated in the United States in 1990, and engages
in the design, manufacture and marketing of silicon wafer cleaning systems,
track systems and ancillary


                                      -24-
<PAGE>

equipment. As of December 31, 2002, the Company had a 21.63% ownership interest
in AIO Corporation.

      In 2002, we spent (Won) 3,238 million in capital expenditures. Our capital
expenditures in 2002 were for purchases of machinery, supplies and other items.
In 2001, our principal capital expenditures were for the establishment of the
Mirae Research Center in Hwasung City ((Won) 17,421 million) and for purchases
of machinery, supplies and other items ((Won) 6,172 million). In 2000, our
capital expenditures were for the acquisition of the land and building now
housing the Mirae Research Center in Hwasung City ((Won) 56,793 million) and for
purchases of machinery, supplies and other items ((Won) 13,615 million).

B. Business Overview

      We believe that our principal products, such as handlers and SMD placement
systems, are among the most advanced and efficient in the industry. We attribute
this to our ability to combine our core competencies in mechatronics with our
process know-how in semiconductor manufacturing and PCB assembly and inspection
processes, together with our software design expertise.

Core Competencies

      Our core competencies are concentrated in three mechatronics disciplines:
precision mechanism, intelligent control and machine vision.

      Precision Mechanism

      Precision mechanism consists primarily of four sub-fields: structural
analysis and design, kinetic analysis and design, thermofluid analysis and
design and tribology.

      Structural Analysis

      Structural analysis and design entails the development of mechanical parts
to achieve an optimized balance between high rigidity and low weight.

      Kinetic Analysis

      Kinetic analysis and design entails the analysis of the dynamic
characteristics of mechanical moving parts and their development to maximize the
speeds at which such parts operate and minimize the vibrations which result from
operating such parts at increasingly higher speeds.

      Thermofluid Analysis

      Thermofluid analysis and design entails the analysis of the effect of
temperature on certain materials, the study of the transmission of varying
temperatures through these materials and the methods used to control temperature
and its related effects.


                                      -25-
<PAGE>

      Tribology

      Tribology entails the study of the friction, wear and lubrication of
interacting surfaces in relative motion.

      Intelligent Control

      Intelligent control consists primarily of five sub-fields: intelligent
process planning, optimal motion planning, precision control, high speed control
architecture and power electronics technology.

      Intelligent Process Planning

      Intelligent process planning consists of the development of software to
manage certain manufacturing processes in order to derive optimal work flow and
process planning.

      Optimal Motion Planning

      Optimal motion planning consists of the development of software to
determine optimal task sequencing to minimize certain mechanical movements.

      Precision Control

      Precision control consists of the development of software to control the
position, velocity, temperature, vibration and force of mechatronic machinery.

      High Speed Control Architecture

      High speed control architecture consists of the development of
microprocessors and application specific integrated circuits (ASICs) based
hardware to control and maintain the accuracy of fast-moving components.

      Power Electronics Technology

      Power electronics technology is used to develop dedicated servo amplifiers
designed to drive linear or rotary motors for use in mechatronic products.
Dedicated servo amplifiers may achieve higher productivity at lower costs than
general purpose servo amplifiers.

      Machine Vision

      Machine vision consists primarily of three sub-fields: vision processing,
parallel processing architecture and the use of high precision vision
algorithms.

      Vision Processing

      Vision processing consists of the development of ASICs and supporting
hardware for image processing at high speed.


                                      -26-
<PAGE>

      Parallel Processing

      Parallel processing architecture consists of the development of technology
that enhances the speed and efficiency of multi-tasking.

      High Precision Vision Algorithms

      High precision vision algorithms are used to develop formulae to calculate
optimal positioning of items by taking into consideration such factors as
rotational angle and the center of gravity of particular components, and to
inspect the leads and balls of the electronic devices.

      Process Know-How

      In addition to our mechatronics core competencies, in order to manufacture
and improve upon our principal products, we require the know-how and
understanding of highly specialized engineering processes utilized by our
customers. We possess process know-how accumulated through experience and
research in areas of semiconductor handling during the testing phase and PCB
assembly and inspection. We believe that our core competencies, along with our
know-how and understanding of these processes, will enable us to implement our
handler products, SMD placement systems and TFT-LCD handlers and testers
according to market standards.

      Software Design Expertise

      In addition to our core competencies, we design software to control a
variety of functions in our mechatronics products and have developed expertise
in the following three key areas:

      o     real-time control software: a software program needed to implement
            control functions and to respond to signals in a synchronous manner;

      o     motion planning software: real-time operating system-based software
            that plans the movement of each robotic mechanism to complete a
            given task; and

      o     job planning software: a type of PC-based artificial intelligence
            software for planning the most efficient way for the end user to
            operate the production equipment.

      While our mechatronics engineers develop algorithms and formulae, our
software engineers design software to implement these algorithms and formulae.
This permits real-time feedback from various sensors within our mechatronics
machines to be processed and used. The ability to develop algorithms, formulae
and related software is necessary to design our high-quality mechatronics
machines. The close working relationship of our control and software engineers
enables us to develop and implement our software more efficiently and
effectively.

Mechatronics Products

      Semiconductor Test Handlers

      Since 1989, we have designed and manufactured about 80 test handler models
including minor modifications. As of December 31, 2002, we delivered four
categories of test handlers:


                                      -27-
<PAGE>

memory (component) test handlers, memory module test handlers, logic pick &
place test handlers and burn-in loader/sorters. In developing and manufacturing
these machines, we are utilizing faster and more precise pick & place technology
applied from our development of SMD placement systems, which is one of our core
competencies.

      The following table sets forth information about our major test handler
models manufactured by Mirae from 1997 to 2002:

<TABLE>
<CAPTION>
            Product                      Specifications                  Market focus              Year Introduced
-------------------------------   ----------------------------   ---------------------------   -----------------------
<S>                               <C>                            <C>                               <C>

Memory test handler

MR5400.......................     32/64 device parallel          Pick and place type (TSOP,             1997
                                  testing; 3,600 UPH;            QFP); DRAM
                                  Tri-temperature control;
                                  Vertical docking

MR5500.......................     32/64 device parallel          Pick-and-place type (TSOP,             1998
                                  testing; 7,200 UPH;            QFP, BGA, CSP, Memory
                                  Tri-temperature control;       cards); very short test
                                  Vertical docking               time; for fine pitch
                                                                 devices:  DRAM, Flash
                                                                 memories (SD, MMC)

MR5700.......................     128/64 device parallel         Pick-and-place type (TSOP,             2002
                                  testing (Dual test sites);     TQFP, BGA, CSP); very short
                                  9,000 UPH; Tri-temperature     test time; for fine pitch
                                  control, Heat compensation     devices
                                  option, Vertical docking

Memory module test handler

MR7200.......................     8/4 device parallel testing;   Pick-and-place type (SIMM,             1998
                                  4,200 UPH; Ambient; Vertical   DIMM); Low cost solution;
                                  docking                        Pick-and-place type (SIMM,
                                                                 DIMM, RIMM)

MR7300.......................     8 device parallel testing;     Pick-and-place type (SIMM,             1998
                                  1,000 UPH; Dual-temperature    DIMM, RIMM)
                                  control; Vertical docking

MR7500.......................     16/8 device parallel           Pick-and-place type (SIMM,             2000
                                  testing; 2,000 UPH;            144 SODIMM, 168 DIMM, 184
                                  Tri-temperature control;       RIMM, 184 DDR-DIMM, 200
                                  Vertical docking               SODIMM, 232 DIMM); High-end
                                                                 applications

Logic Pick & Place test handler

MR2700.......................     4/2/1 device parallel          Pick-and-place type (QFP,              2002
                                  testing (8 para:  option);     TQFP, TSOP, BGA, PGA, CSP)
                                  7,500 UPH; Dual -temperature
                                  control; Horizontal docking

Burn-in loader/sorter

MR9200.......................     Maximum throughput:  15,000    TSOP, fBGA                             2000
                                  UPH
</TABLE>


                                      -28-
<PAGE>

      Memory Test Handler

      We began manufacturing memory test handlers in 1992, and we believe we are
now one of the leading manufacturers of memory test handlers. We started with a
design based upon the vertical gravity technology that was a common standard of
the market 10 years ago. As we built up our know-how in design and
manufacturing, we switched our development focus from the existing gravity
feeding technology to the more flexible pick & place technology with chamber
technology. Our R&D group has focused on the faster, more reliable and more
precise pick & place technology and precision heat control since 1997 when we
hired a major R&D group from LG Electronics Co., Ltd. As a result of this
strategic transformation, we have successfully introduced our fastest memory
test handler, MR5500, which is mostly suited for the handling of flash memories
due to its higher speed performance. MR5500 has been continuously upgraded
during the last five years in order to meet customer demands, including smaller
device handling. Based upon this achievement, the same group of engineers
launched a new three-year project for developing the 128 para memory test
handler with a fully closed loop heat compensation capability. This model was
introduced to customers as MR5700 in 2002. Due to the limited availability of
128 para testers in the market, the application of MR5700 has been limited to
DRAMs thus far. When 128 para testers for flash memories are introduced to the
market by tester manufacturers, the application of MR5700 will significantly
expand. We believe that our new memory test handler, MR5700, provides the most
advanced technical features by using our own linear motor. In addition, each of
our memory test handlers includes a Microsoft Windows NT-based graphical user
interface, which provides for easy set-up, status monitoring and productivity
analysis.

      Memory Module Test Handler

      We were one of the first companies to develop and manufacture memory
module test handlers, which we introduced in 1995. Since that time, we have
maintained our position as a leading supplier. Memory modules are used to expand
memory functions in computers and other IC-related products by combining
multiple memory ICs and placing the combined devices onto standardized PCBs. The
assembled nature of the memory module, as well as specific memory module tests,
require specialized memory module test handler design features.

      Each of our memory module test handlers applies a Microsoft Windows
NT-based graphical user interface. In addition, each of our memory module test
handlers utilizes pick-and-place technology and, in the case of the MR7500,
offers tri-temperature control ranges. Depending on the design specifications,
our memory module test handlers can conduct between two and 16 modules
simultaneously and, in addition, can test under various temperature conditions
and offer vertical docking of loader trays.

      Logic Pick & Place Test Handler

      Although we have developed and manufactured various non-memory test
handlers, including logic pick & place test handlers, since 1989, we did not
fully focus on this category due to the local market, which contains the world's
leading DRAM manufacturers. As we aggressively sought customers overseas, we
quickly realized that we needed to bring the best logic pick & place test
handler to the market. Because this is the bigger market with a larger number of


                                      -29-
<PAGE>

customers than the market for memory test handlers, developing the next
generation logic pick & place test handler has been a focus of our R&D activity.
By successfully transplanting the core competencies from our development of
memory test handlers and module test handlers, MR2700 was finally introduced
during the Semicon West 2002, receiving sound attention. We will aggressively
market this product worldwide and seek to diversify our customer base further to
include non-memory semiconductor manufacturers.

      Burn-in Loader/Sorter

      We began manufacturing burn-in sorters in 1997. Our burn-in sorter, the
MR9200, is used in the extensive reliability screening and stress testing
procedure of ICs known as "burn-in." The burn-in process screens for early
failures by operating the IC at elevated voltages and temperatures of up to 125
degrees Celsius (257 degrees Fahrenheit) for periods typically ranging from 12
to 48 hours. The MR9200 is a burn-in-board loading and unloading handler. Before
loading the devices into the burn-in-board, the MR9200 performs certain basic
functional tests. Combining a linear motor system with pick-and-place
technology, we believe the MR9200 is one of the fastest sorters available, with
a maximum throughput of 15,000 UPH. In responding to various customer
requirements for the handling of different devices, including the BGA, on the
burn-in-board, our R&D group has put their efforts to developing derivative
models, such as MR9210 and MR9220.

      Sales and Marketing

      The following table shows sales volume and sales value of the handlers
manufactured and sold by Mirae for each of the periods indicated:

                                             Year ended December 31,
                                ------------------------------------------------
                                     2000             2001             2002
                                --------------   --------------   --------------
                                Units            Units            Units
            Model               sold    Sales    sold    Sales    sold    Sales
-----------------------------   -----   ------   -----   ------   -----   ------
                                            (Sales in (Won) millions)
Memory test handlers               73   26,255      35    8,683      17    3,790
Memory module test handlers        21   13,232       4      745       4    1,303
Logic pick & place test            40    2,725      17    1,681       7      605
   handlers
Burn-in sorters                     4    1,377      --       --       8    3,334
Handler components                 --      165      --    7,309      --    5,401
                                -----   ------   -----   ------   -----   ------
Total                             138   43,754      56   18,418      36   14,433
                                =====   ======   =====   ======   =====   ======

      In 2000, 2001 and 2002, the sales of our memory test handlers accounted
for 60%, 47% and 26% of total equipment revenues, respectively.

      Until 1998, we had focused our sales and marketing efforts for handlers on
the domestic market, with the vast majority of our sales being made to Samsung
Electronics Co., Ltd. and Hynix Semiconductor Inc. However, as a result of the
slowdown in the semiconductor and related industries in 1997, unit sales of
handlers fell by 66%, from 203 units for the year ended December 31, 1997 to 69
units for the year ended December 31, 1998.


                                      -30-
<PAGE>

      In 1999, sales of handlers increased from 69 to 100 units, or by a 38.3%
increase in volume compared to sales in 1998. In order to mitigate the decline
in domestic sales volumes and to reduce our dependence on major Korean
semiconductor manufacturers, we redoubled our marketing efforts within Korea and
broadened our sales strategy to outside of Korea. In the United States, Europe
and Southeast Asia, we increased our export sales of handlers from $1 million in
1996 to more than $20 million in 2000. Due to the severe global downturn of the
semiconductor industry, our export sales significantly dropped in 2001 and 2002.
However, we expect that future export sales of test handlers will increase, and
thereby broaden our client infrastructure, and that these export sales will be
assisted by our marketing of our logic pick & place test handlers, in
particular, MR2700, which we intend to aggressively reinforce.

      We market and distribute our handlers in the domestic market through a
direct sales force comprised of three employees based at the Mirae Research
Center in Hwasung City. Since we customize handlers to our customers' design
specifications, we do not ordinarily maintain a significant inventory.

      Outside of Korea, we market and distribute our handlers through our
worldwide sales team, which is based at the Mirae Research Center in Hwasung
City and consists of four sales personnel. Furthermore, to enhance our marketing
in the United States and Europe, we established Mirae America, Inc. in 2000. We
also participate in trade shows, providing us with a forum for product
demonstrations and customer contact. In addition, we market our handlers through
non-exclusive distribution arrangements with various international sales and
support agents, including agents in Taiwan, Singapore, Germany, Italy, England,
Malaysia, Brazil, Philippines and the United States. These sales and support
agents sold our handlers to more than 20 customers worldwide in 2001 and 2002.

      Customers

      Our principal handler customers are Korean semiconductor manufacturers,
which collectively were responsible for more than 39.5%, 81.3% and 56.3% of our
handler sales in 2000, 2001 and 2002, respectively. Hynix Semiconductor Inc. was
our largest customer in 1996 and 1997 and our second largest domestic customer
in 1998 and 1999, accounting for 63.3%, 76.7%, 7.1% and 3.1% of handler sales,
respectively. Samsung Electronics Co., Ltd. was our second largest customer in
1996 and 1997 and our largest in 1998 and 1999, accounting for 32.8%, 19.3%,
50.4% and 44.4% of handler sales, respectively. In 2000, 2001 and 2002, Hynix
Semiconductor accounted for 9.0%, 7.2% and 6.5% of our handler sales, while
Samsung Electronics accounted for 24.1%, 60.9% and 33.3% of our handler sales,
respectively.

      As our export sales have increased, our customers have diversified and
non-Korean customers now represent a major portion of our handler sales. In
2000, our export sales accounted for 60.0% of our total handler sales, comprised
of regional export sales for North America, Europe and Asia of 19.7%, 34.4% and
45.9%, respectively. In 2000, our major foreign customers, Infineon Technologies
AG and King Yuan Electronics Co., Ltd. of Taiwan, accounted for 21.5% and 20.4%
of handler sales, respectively. In 2001, these customers accounted for 3.48% and
8.18% of handler sales, respectively; these marked decreases were largely due to
the downturn in the semiconductor industry in 2001. In 2001, our export sales
accounted for 18.7% of our total handler sales, comprised of regional export
sales for


                                      -31-
<PAGE>

North America, Europe and Asia of 24.5%, 28.7% and 46.8%, respectively. In 2002,
our export sales expanded to 56.3% of our total handler sales, comprised of
regional export sales for North America, Europe and Asia of 15.3%, 66.8% and
17.9%, respectively. Our major foreign customers in this year were Infineon
Technologies AG and EEMS Italia SpA, which accounted for 33.5% and 12.9% of
total handler sales, respectively.

      Our customer support team consists of sixteen product engineers who repair
and service handler products sold to our customers. Of the sixteen support
engineers, seven are located in Chun An City and are available to provide
support services to our international customers if necessary, eight are located
at various locales in Korea and one is based in Taiwan. Our customer service
team assists our customers and agents in resolving installation and general
function issues. Typically, we are able to deploy service representatives to a
customer's site in Korea within 24 hours. We provide high quality service and
support which contributes to our ability to attract and retain key customers in
Korea. Outside of Korea, customer support service is typically provided by our
worldwide agents. However, we will send engineers from Korea to a customer's
facilities when we deem it necessary. We cover the cost of servicing our
handlers for the first year of ownership pursuant to the terms of our standard
product warranty.

      Competition

      The mechatronics markets are characterized by intense competition, rapid
technological and product changes, changing market requirements and significant
expenditures for product and market development. In the handler market in
particular, the principal competitive factors are throughput, accuracy,
reliability and price.

      We believe that we are well positioned to compete in the test handler
market due to our primary competitive advantages, including (i) our
technological expertise stemming from our core competencies, (ii) our
established brand-name recognition in Korean and foreign markets, and (iii) our
research and product development, which we believe is among the most advanced in
the industry. We believe our ability to price our products competitively is due
principally to our core competencies, applied across our mechatronics products,
and our relatively horizontal organizational structure. There can be no
assurance, however, that we will be able to continue to compete in our markets,
that we will be able to expand our markets or that these markets will continue
to grow.

      In the test handler market, we believe our primary competitors are
Advantest Corporation and Hitachi, Ltd. of Japan. In the domestic market, A-Ju
Prosys Co., Ltd. and YounWoo Engineering Co., Ltd. are beginning to enter the
market as well.

      Seasonality

      Our sales of test handlers tend to be concentrated in the fourth quarter,
because most overseas customers tend to place orders for them during the third
quarter due to the end of their fiscal year on the last day of September.


                                      -32-
<PAGE>

SMD Placement Systems

      SMD placement systems

      In March 1999, Mirae began manufacturing surface mount technology (SMT)
component placement systems. SMT component placement systems are robotic
machines used for the high precision, high-speed placing of a broad range of
electronic components, such as resistors, capacitors and integrated circuits
(ICs), onto printed circuits boards (PCBs) used in computers, telecommunications
equipment, consumer electronic products, industrial equipment, medical
instruments, automotive systems, military systems and aerospace systems.

      Based upon the definitions developed by the Japanese Robotics Association
(JARA) PROTEC Market Data Reporting Convention, SMT component placement
equipment can be divided into categories in relation to the types of components
the equipment is capable of placing onto PCBs and the size of the PCB that can
be processed. Chip shooters are used for the placement of small components, such
as resistors and capacitors, onto PCBs. Chip shooters are further classified
into three categories based on the type of placement head used, turret type and
non-turret type, and for non-turret type, the speed at which they can place
components, high-speed (< 24,000 components per hour) and mid-speed (< 24,000
components per hour). The second category of SMT component placement equipment
is multi-functional placement systems. These systems can place a full range of
components, including ICs, onto PCBs. Multi-functional component placement
systems are further classified based on the list price range of the system (high
end - list price = $ 150,000 and low end - list price < $ 150,000).

      The following table shows the classification of Mirae's current SMT
component placement systems:

               Current Mirae SMT Component Placement System Models

<TABLE>
<CAPTION>
                                           Performance Specification
Products           Sub-Class               (ICP-9850 Standard)             Year Introduced
----------------   ---------------------   -----------------------------   ---------------
<S>                <C>                     <C>                             <C>
Chip Shooters

MPS-1010 .......   Non-Turret High-Speed   Chips: 30,000 chips/hour                   1999
                   (Regular Board)
MPS-1010 Alpha .   Non-Turret High-Speed   Chips: 27,500 chips/hour                   2002
                   (Large Board)
MPS-1025 .......   Non-Turret Mid-Speed    Chips: 4,000 chips/hour                    2001
                   (Regular Board)

Multi-Functional

MPS-1020P ......   High End                Chips: 16,500 chips/hour ICs:              1999
                   (Regular Board)         1,500 ICs/hour
MPS-1020QP .....   High End                Chips: 12,000 chips/hour ICs:              2001
                   (Regular Board)         4,500 ICs/hour
MPS-1020QP Alpha   High End                Chips: 12,000 chips/hour ICs:              2002
                   (Large Board)           4,500 ICs/hour
MPS-1025P ......   Low End                 Chips: 11,000 chips/hour ICs:              2001
                   (Regular Board)         1,500 ICs/hour
</TABLE>

      The table below shows the percentage of SMT component placement systems
sold worldwide in 2002 that each major type of system represents and the number
of machine models


                                      -33-
<PAGE>

that Mirae offers in each category. Mirae presently produces seven machine
models in categories that account for 82.2% of all machine types sold.

                    Coverage of Mirae Models with Respect to
              Percent of Total Worldwide Sales by Machine Category

                                           Percentage of Total   Number of Mirae
Major Category      Machine Type              Sales of 2002          Models
------------------  ---------------------  -------------------   ---------------
Chip Shooters       Turret Type                           17.8%                0
                    Non-Turret High Speed                 15.2%                2
                    Non-Turret Mid Speed                   8.3%                1
Multi-Functional    High End                              14.6%                3
                    Low End                               44.1%                1
                                             -----------------   ---------------
Total                                                    100.0%                7
                                             =================   ===============

Source: PROTEC Market Data Convention

      All of Mirae's SMT placement systems use linear motors to drive the X Y
gantries containing the heads that are used to pick-and-place the electronic
components. The use of linear motors allows higher speed and reliability, as
well as lower maintenance than the belt or screw driven systems used by most of
Mirae's competitors. Additionally, all of our SMT placement systems use linear
scales to position the gantries. The use of linear motors and linear scales
allows our placement systems to achieve speeds (or tact times) of up to 0.096
seconds per chip and accuracy of 0.065mm for chip type devices and 0.025 mm for
fine-pitch IC type devices. The use of X Y gantries versus table turret-type
drive allows our placement systems to achieve a smaller system size (footprint)
while maintaining similar performance, which is an important factor for many
customers. Our MPS-1010 and MPS-1010 Alpha systems each contains two X Y
gantries while the remaining systems contain a single X Y gantry.

      The type of component placement head located on the X Y gantry determines
the type of component capable of being placed by the system. Our chip shooters
use multiple spindle modular heads containing four, six or eight chip type
spindles, while our multi-functional placement systems have one or more
precision heads that are used to place fine pitch ICs.

      Each of our SMT placement systems also includes a Mirae-designed vision
system that permits inspection of components at high speeds. All of our
placement systems also use a common Microsoft Windows 2000 based graphical user
interface that allows customers to mix multiple types of placement systems in
the same facility without having to retrain operators.

      We also design and manufacturer a full line of accessories to support
component feeding on our placement systems. These accessories include
"intelligent" tape feeders that can reduce the mis-picking (loss) of parts and
enhance placement reliability and automated tray feeders for IC components.

      Many of the technologies used in our component placement systems have been
adapted from the technologies that we developed from our core competencies and
in the manufacturing of our semiconductor test handler products. We believe
these technologies will enable us to produce and sell SMT placement systems that
are among the most advanced in the industry.


                                      -34-
<PAGE>

      Market Description

      The market for SMT placement equipment is influenced by many factors and
is presently undergoing many changes.

      SMT placement systems are used by two types of electronics manufacturers,
original equipment manufacturers (OEMs) who use the equipment to assemble PCBs
for use in their own systems, and electronics manufacturing services (EMSs) who
use the equipment to assemble PCBs for customers on a contract basis. During the
past few years, there has been a major shift from in-house assembly of PCBs to
the use of contract manufacturers to perform PCB assembly. When Mirae entered
the market in 1999, EMS-produced PCBs accounted for about 10% of the total
electronics market. Since then, the growth rate of the revenues of EMSs has been
roughly 30% per year, accumulating to approximately a 17% share of the total
electronics market in 2002 and is forecasted to grow to a 30% share by 2005. The
major factors driving this growth are that EMSs offer lower production costs
through a number of advantages, including lower labor costs, superior
competency, utilization improvement, economies of scale and business risk
mitigation. The placement equipment purchasing criteria used by OEMs and EMSs
often differs, with OEMs selecting the lowest cost component technology and
equipment capable of assembling their PCB board, whereas EMSs are interested in
equipment that has the widest flexibility and minimizes costs. These factors
have been responsible for the increase in popularity of non-turret type chip
shooters, such as our products, with their reduced floor space and set up time
requirements, over turret-type, as well as the rapid growth in multi-functional
placement systems, both in the high-end (large EMSs) and low-end (small EMSs and
OEMs). Both OEMs and EMSs place a great deal of importance on equipment
reliability and local customer service support.

      Unlike semiconductor test handlers, which are primarily purchased by major
semiconductor manufacturers who make up a market of a relatively small number of
potential customers, SMT placement systems are bought by both large and small
electronic manufacturers in a market of thousands of potential customers. Large
and small electronic manufacturers differ widely in the manner in which they buy
component placement systems. Large manufacturers have enormous buying power. A
recent study on the EMS market segment concluded that although there are
thousands of EMSs worldwide, the top 50 EMSs account for approximately 50% of
EMS revenues. Although they produce products from regional facilities located
throughout the world, these large electronics manufacturers use centralized
purchasing functions usually located at the headquarters to qualify vendors and
negotiate supply contracts. These large manufacturers desire to work directly
with a dedicated sales team from the placement system manufacturer and require
on-site service support for each manufacturing facility. Mirae is presently in
the qualification process with one of the top three EMSs. Small manufacturers
tend to buy placement systems once they have secured new business that requires
additional capacity or capabilities not present in their existing systems. In
order to handle these thousands of small manufacturers around the world, Mirae
relies on a network of distributors and sales representatives. Mirae is
presently expanding its distribution network to increase sales and service
coverage.

      There has been a major shift in where new SMT component placement systems
are geographically located, as shown in the table below. When Mirae entered the
market in 1999, the Americas and Europe accounted for 45.8% of new machine
placements in the world. In


                                      -35-
<PAGE>

2002, these two regions accounted for only 20.2% of new machine placements
worldwide. Asia not including Japan accounted for 32.5% and 64.7% of new machine
placements in 1999 and 2002, respectively. In 2002, new machine placements only
in China exceeded machine placements in the Americas, Europe and Japan combined.
This change is dramatic evidence of the relocation of PCB assembly, especially
for low margin consumer products, PCs and cellular phones, into Asia due to
lower labor costs. However, it is important to consider that a significant
number of these procurements are made by large OEMs and EMSs whose purchasing
contracts are made in the Americas and Europe.

     Comparison of New SMT Placement System Sales by Region (1999 vs. 2002)

                                             Percentage of Total Worldwide Sales
                                             -----------------------------------
Region                                         1999         2002       % Change
------------------------------------------   ------       ------       ---------
Americas                                       23.3%         9.7%       -58.4%
Europe                                         22.5%        10.5%       -53.5%
Japan                                          21.7%        15.1%       -30.4%
Rest of Asia (1)                               32.5%                    +99.1%
Rest of Asia (excluding China)                              22.2%
China                                                       42.5%
                                             ------       ------
Total                                        100.00%      100.00%
                                             ======       ======

(1)   Chinese data was reported as part of Rest of Asia in 1999

Source: PROTEC Market Data Convention

      The demand for new SMT component placement systems has been affected by
the general downturn in the electronics industry. The table below shows a
comparison of the total demand for SMT placement systems by region in 1999 and
2002. As shown, overall demand was down by 23.3%, with demand in all areas
except the Rest of Asia down by 50% or more.

           Comparison of SMT Placement Sales by Region (1999 vs. 2002)

                                                      (Unit: in million dollars)

                                                              Total Sales
                                                        ------------------------
Region                                                   1999    2002   % Change
-----------------------------------------------------   -----   -----   --------
Americas                                                1,944     578    -70.3%
Europe                                                  1,875     692    -63.1%
Japan                                                   1,812     881    -51.4%
Rest of Asia (1)                                        2,715            +56.5%
Rest of Asia (excluding China)                                  1,703
China                                                           2,545
                                                        -----   -----   --------
Total                                                   8,346   6,399    -23.3%
                                                        =====   =====   ========

(1)   Chinese data was reported as part of Rest of Asia in 1999

Source: PROTEC Market Data Convention


                                      -36-
<PAGE>

      Competition

      In the high end of the market, Mirae's major competitors are Fuji Machine
Manufacturing, Matsushita Electric Industrial Co., Ltd. and Siemens AG. In the
low end, Mirae faces competition from Yamaha Motor Co. Ltd., Juki Corporation
and Samsung Techwin Co., Ltd. Most of our competitors have been established in
this market for over 15 years.

      However, we believe that our core competencies in mechatronics give us
advantages over other manufacturers, primarily as a result of our experience and
expertise in producing advanced control hardware, machine vision and linear
motor design technologies, and advanced real-time control software-based robots
utilized in our semiconductor test handlers. We believe our SMD placement
systems are some of the most advanced in the market in terms of performance and
accuracy, as well as price-competitive. In addition, our system hardware and
software design allow customers to have short changeover times from one PCB
board to another, provide a high degree of flexibility in terms of line
configuration and types of systems available and are easy to operate.

      We intend to continue to price our SMD placement systems competitively and
furthermore, enjoy import tax advantages in the domestic Korean market.

      Sales and Marketing

      We market and distribute our SMD placement systems in Korea through a
direct sales force comprised of Mirae employees. At the time of delivery and
acceptance, customers are typically required to pay 20% of the contract price.
The balance (plus interest) is typically due in installments over the course of
the twelve months following delivery and acceptance.

      In China, we have Mirae sales offices located in Shen Zhen and Shanghai.
We also use Banner Ever International Group as our sales representative in this
region. Schmidt Electronics (S.E.A.) Pte., Long Shine Equipment & Supplies Ptd.
Ltd. and Agate & Agate cover sales in Southeast Asia. Ryoko Sangyo Corporation
distributes our products in Japan. Our Asian sales agents act as non-stocking
distributors. Our agency agreements provide that an agent may only sell SMT
placement systems manufactured by Mirae.

      Previously, Mirae sold its SMT placement systems in the Americas and
Europe on an exclusive OEM basis through Quad Systems Corporation through a
three-year distribution agreement entered into on June 1, 1999. Quad was
authorized to sell Mirae systems under its own name and logo. On December 18,
2000, Quad filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. During the bankruptcy settlement period, Mirae was barred
from selling its machines in the Americas and Europe. After settlement of the
bankruptcy in July 2001, Mirae began selling its machines in the Americas
through Mirae America, Inc., which acts as a non-stocking distributor. The
slowness in the Americas market coupled with the fact that Mirae did not have an
established brand name resulted in limited sales success in the Americas in
2002. However, Mirae was able to establish a relationship with one of the top
three EMS companies headquartered in the U.S. and is presently in the supplier
qualification process at one of its facilities. We believe that we will be
successful in this process and that once Mirae is qualified, the EMS will
authorize purchases of Mirae's systems for use in


                                      -37-
<PAGE>

all of its facilities worldwide. In September 2001, Mirae entered into a
distribution agreement with Tyco Electronics Group that grants Tyco distribution
rights of Mirae's SMT placement systems in Europe and Africa. Tyco Electronics
is a major division of Tyco Corporation, a Fortune 500 corporation. Under the
terms of the agreement, Tyco sells the equipment under the Mirae brand name.
During 2002, Tyco sold Mirae systems in most European and African countries.

      On March 31, 2003, Mirae entered into a new distribution agreement with
Tyco Electronics. Under the terms of the new agreement, Tyco Electronics has
exclusive rights to sell and service Mirae's SMT placement systems in the
Americas and in Europe, excluding Belgium, Luxembourg, the Netherlands, Greece,
Italy, Israel and Turkey. In the Americas, Mirae is able to continue to sell and
service equipment to selected in-house accounts, including Flextronics
International. In addition, Tyco Electronics has agreed to place a minimum of
$1.5 million in SMT equipment purchases by October 1, 2003, including an initial
purchase of up to $500,000 at the contract signing. The equipment is to be sold
under a joint Mirae/Tyco Electronics brand. In addition to the sales commitment
this year, Mirae expects the partnership to have a much greater effect in
increased sales and market share if and when the market recovers, due to Tyco
Electronics' extensive customer base. This agreement provides Mirae with the
benefit of Tyco Electronics' existing sales and service infrastructure without
the need for us to make further investments in these areas. Mirae has already
signed a distribution agreement with Laryo of Italy and is in the process of
selecting distributors in the other European countries in which Mirae has
retained the right to market and sell its systems.

      The table below summarizes Mirae's SMT component placement system sales
for 2002.

       Mirae's 2002 SMT Placement System Sales by PROTEC Machine Category

                                                   (Unit: in million Korean won)

<TABLE>
<CAPTION>
Major Category                   Machine Type             Model             2002 Sales
--------------------------   ---------------------   ----------------   --------   --------
                                                                        Systems    Revenues
                                                                        --------   --------
<S>                          <C>                     <C>                <C>        <C>
Chip Shooters                Non-Turret High Speed   MPS-1010                 51      6,270
                                                     MPS-1010 Alpha            1        159
                             Non-Turret Mid Speed    MPS-1020                  2        214
                                                     MPS-1025                 37      2,913
                                                     MPS-1030                  5        311
Multi-Function                     High End          MPS-1010P                 1         54
                                                     MPS-1020P                15      1,688
                                                     MPS-1020QP                8      1,200
                                                     MPS-1020QP Alpha          2        348
                                    Low End          MPS-1025P                28      2,412
                                                     MPS-1030P                 9        586
Accessories, Spare Parts
   & Service                                                                          7,331
                                                                        --------   --------
Total                                                                        159     23,486
                                                                        ========   ========
</TABLE>

      Customers

      Our principal SMT placement system customers are Tyco Electronics, KMT and
Mirae America, Inc., which were responsible for more than 18.6%, 8.9% and 7.4%
of our SMT


                                      -38-
<PAGE>

placement system sales in 2002, respectively. In 2001, our major customers of
SMT placement systems were Tyco Electronics, All Gather Rain and WeTech Co.,
Ltd., which accounted for 13.2%, 9.9% and 9.1%, respectively, of these sales. In
2000, Fan Asia Information Technology, Donghwa Co., Ltd. and LG Electronics were
our major customers, accounting for 11.9%, 11.5% and 11.2% of our SMT placement
system sales, respectively. As our export sales have increased, our customers
have diversified and non-Korean customers now represent a major portion of our
SMT placement system sales. In 2002, our export sales accounted for 53.2% of our
total SMT placement system sales, comprised of regional export sales for Europe,
Asia and North America of 35.6%, 50.1% and 14.3%, respectively.

TFT-LCD Handlers and Testers

      Mirae began developing its TFT-LCD handler and tester products in 1994
with the production of the MR6520, and began to actively market additional
TFT-LCD handler and tester models in 1997. In 1999, 2000 and 2001, we
manufactured three different TFT-LCD handler models, the MC2410, the MC2510 and
the MC2510A, and one TFT-LCD tester model, the MR6560.

      Of the three testing phases in the TFT-LCD manufacturing process, the
array phase, the cell phase and the module phase, our TFT-LCD handlers are used
in the cell phase and our TFT-LCD testers are used in the module phase. During
the cell phase, liquid crystal is inserted into cut glass and various tests are
performed on the semi-finished panel. These tests are facilitated by a TFT-LCD
handler which automatically conveys a cell to a test site by interfacing with a
tester and, following the appropriate tests, transfers the tested cell to a
cassette. The cell encased in a cassette is carefully moved to the manufacturing
line and processed into a display module. During the module phase, the major
components of the TFT-LCD panel, which drives and controls the display, are
attached and tested. Our TFT-LCD module tester inspects LCD displays for optical
defects after the color cell construction phase. The tester uses a
high-resolution camera and is driven by specialized software developed in-house
to quantitatively measure critical optical qualities, such as contrast,
luminance and color balance, and to precisely locate various pixel defects.

      While cathode ray tubes ("CRTs") are still commonly used in display
monitors, TFT-LCDs are incorporated in many notebook computers and are also
penetrating the desktop PC monitor market. We expect that as TFT-LCDs
increasingly replace CRTs, demand for TFT-LCDs and, consequently, for TFT-LCD
handling and testing equipment should increase. However, this shift in demand
may be largely dependent on price declines of TFT-LCD screens, as such screens
are significantly more expensive than a comparable CRT screen.

      As of December 31, 2001, the market for our TFT-LCD handlers and testers
was comprised exclusively of domestic manufacturers of TFT-LCD screens. As we
had existing relationships with Korean semiconductor manufacturers who also
manufactured TFT-LCDs, we focused our marketing efforts on these customers to
strengthen our relationships and on other major individual producers of TFT-LCDs
in Korea, with frequent direct one-on-one sales contacts.

      In 1999, we delivered four units of our MC2510 model and one unit of our
MC2410 model at an aggregate contract value of (Won) 3,334 million. In 2000, we
delivered 28 units of both


                                      -39-
<PAGE>

models for an aggregate of (Won) 11,166 million. In 2001, we delivered an
aggregate of 13 units of our MC2410, MC2510 and MC2510A models for (Won) 5,608
million.

      In both the TFT-LCD handler and tester markets, our major competitors were
Micro Japan Corporation of Japan and Pyung Chang High Tech of Korea. We believe
that the advanced technology of our TFT-LCD handler and tester products,
including high throughput, competitive pricing and local-based support, helped
us become competitive in the domestic TFT-LCD handler and tester markets.

      On August 1, 2001, the Company transferred its LCD division with total
assets of (Won) 1,445 million and total liabilities of (Won) 620 million to
Display Equipment & Total Solutions Co., Ltd., an affiliated company in 2001,
for (Won) 825 million in accordance with a resolution made at a board of
directors meeting on July 12, 2001.

Lead Frame Magazines

      Since 1983, Mirae has manufactured lead frame magazines, which essentially
are the skeleton of the semiconductor chip to which dies are bonded.

      Our original product line was manufactured using cutting technology.
However, beginning in 1984, we switched from cutting to machine tool technology,
as machine tool technology, especially press-cutting, increases the uniformity
and precision of the finished lead frame magazines. We manufactured our lead
frames exclusively for the Korean domestic market. In 1997, 1998, 1999 and 2000
we sold (Won) 4.1 billion, (Won) 2.2 billion, (Won) 3.5 billion and (Won) 4.7
billion of lead frame magazines, representing approximately 6.7%, 12.8%, 7.6%
and 3.2% of our sales in these periods, respectively. Our principal customers
were Samsung Electronics Co., Ltd., Anam Semiconductors & Technology Co., Ltd.,
ChipPAC, Inc. and Hynix Semiconductor Inc.

      In September 1999, we spun-off the manufacturing of this business segment
to a group of our employees in line with our strategy to outsource low
value-added, labor intensive production processes. However, we continued to
market lead frames under our name in 2000 and sold (Won) 4.7 billion of lead
frame magazines. We had expected that Nail System Co., Ltd., the spun-off
company manufacturing lead frame magazines, would be able to market these
products directly starting in 2001. However, in 2001, we accounted for (Won) 218
million of lead frame magazines as other sales, and no sales in 2002.

Raw Materials

      We generally had not accumulated raw materials inventory as we typically
commence production of our various mechatronics products only upon receipt of
confirmed orders from our customers. However, in 1999, we began to accumulate
raw material inventory required for the production of SMD placement systems in
order to meet our projected customer demand on a timely basis. Our principal raw
materials include:

      o     for handlers: motors, linear motor guides, PCBs and power supply;
            and

      o     for SMD placement systems: linear motors, PCBs, sensors and personal
            computers.


                                      -40-
<PAGE>

      With respect to our handlers and SMD placement systems, we typically use
between 22,000 and 24,000 component parts. The majority of these component parts
is fabricated by our suppliers (or their manufacturers) based on our design
specifications and instructions. The remaining component parts are commodity
goods that are available from a wide variety of suppliers. In 2000, 2001 and
2002, no supplier accounted for more than 10% of our raw materials costs.

      The raw materials costs for our handlers, SMD placement systems and
TFT-LCD handlers and testers were 76.5%, 41.0% and 56.6% of manufacturing costs
in 2000, 2001 and 2002, respectively. In 1999 and 2000, approximately 60% and
65%, respectively, of the raw materials costs for these products were imported.
However, our efforts to replace imported raw materials with domestic raw
materials paid off, with imported raw materials accounting for only 11% and 3%
of the raw materials costs for our products in 2001 and 2002, respectively. In
the future, we expect to continue purchasing many of our raw materials
domestically to lower our overall costs.

      As we have been paid in foreign currencies (primarily U.S. dollars and
Japanese yen) for many of our export products, we have been able to maintain
foreign currency balances with which to purchase imported raw materials.
Accordingly, we have not been adversely affected by exchange rate fluctuations
on the cost of such raw materials.

Manufacturing and Assembly

      We outsource many of our basic assembly line functions to reduce total
fixed costs, particularly labor. Internally, separate engineering teams are
responsible for handlers, SMD placement systems, and TFT-LCD handlers and
testers, share technology and apply many of the same core competencies across
these product lines.

      We have developed detailed procedures for production management. Our
three-person development verification test team oversees production management
and technology, and is responsible for gathering customer feedback. Typically,
our manufacturing process includes four major stages: raw material inspection,
processing, assembly and final testing. After each stage, quality testing takes
place. Defective products or components are analyzed to assess the defect and
prevent recurrences in the future.

      In connection with production management, we prepare a detailed manual
outlining the assembly and parts inspection process. By developing a detailed
standardized document, we can assure consistency in manufactured products and
easily train new employees. We then establish criteria for parts inspection and
final testing. We frequently update the criteria to reflect customer input, as
well as feedback collected throughout the manufacturing process, and we believe
that having detailed pre-set criteria makes inspection and testing more
efficient. Finally, we emphasize a rigorous final testing procedure. We believe
our commitment to quality management, for which we have received ISO 9001
certification for our handlers, results in higher levels of customer
satisfaction.

      Background

      The semiconductor manufacturing process involves two principal phases,
wafer processing (the "front-end") and assembly/test processing (the
"back-end"). Since the production costs


                                      -41-
<PAGE>

associated with front-end processing are high, manufacturers seek to minimize
losses during back-end operations from defective processing, and to maximize
throughput and shorten the time-to-market for semiconductors and other devices.

      The back-end manufacturing process involves separating individual dies or
chips from the wafer, bonding each chip on a plated metal lead frame or other
carrier and connecting the chip onto external leads. The chips are then
encapsulated in an epoxy plastic, the leads are deflashed and tin-plated, the
devices are separated, and the leads are trimmed and formed. Throughout the
back-end process, devices are tested to ensure functionality, and sorted in
accordance with the test results.

      Different types of devices, such as linear ICs and logic ICs, memory and
individual transistors (discretes), and different types of packages require
different assembly and packaging and, therefore, different testing solutions.
Semiconductor manufacturers rely on a multiple-step testing and reliability
screening procedures to detect defects or weaknesses that may result at any
stage during the manufacturing process. The initial testing phase is typically
performed before the processed semiconductor wafer is cut into individual die.
After the die is packaged, a test for packaging defects is performed. Certain
devices then undergo an extensive reliability screening and stress testing
procedure known as "burn-in". The final testing phase involves the use of
automated test equipment - or "testers" - that evaluate numerous devices
simultaneously and perform a variety of tests at various temperatures.

      Test handlers facilitate the testing process. Test handlers are
specialized robotic machines that (i) carry devices on loader trays to testing
equipment, (ii) feed devices into and remove devices from the testers once the
testing process is complete, and (iii) sort tested devices into bins based on
pre-programmed grading criteria. The grade received determines the type of
application for which a device may be used, with a higher grade allowing for
more sophisticated applications.

      Test handlers use either "vertical gravity" or "pick-and-place" technology
to interface devices with a tester. Vertical gravity handlers essentially drop
devices onto the contact point of a tester. Pick-and-place test handlers, which
became the industry standard following the development of the 64MB DRAM, use
vacuum technology and are designed for linear processing of a device to a
contact point on a test handler.

      Typically, test handlers are customized to meet the product specifications
of a customer to ensure proper operation with its tester. A customer's
specifications relate principally to the tester software program and the tester
interface software program to be used, the shape of the interface board linking
the tester to the test handler, the function, shape and design of the individual
device package, and the shape of the device loader tray. The number of units
processed per hour is dependent on the operational specifications of a
particular test handler, the speed of the tester to which it is connected, and
the type and number of devices being tested. A test handler's index time, which
exceeds a tester's device test time prevents a tester from sitting idle, thereby
ensuring productivity of the testing process.


                                      -42-
<PAGE>

Internet Businesses and On-line Solutions

      Beginning in 1999, Mirae turned its attention to the formation of, and
investment in, companies and joint ventures that focus on the development of
Internet services in Korea. This Internet strategy resulted in the formation in
March 1999 of Lycos Korea, a leading Internet portal, and the incorporation in
March 1999 of our subsidiary SoftForum, now a leading Korean provider of
security solutions for cyber banking, trading and electronic commerce.

      Since that time, we had attempted to further position ourselves to become
a leading provider of Internet-related services in Korea by establishing other
joint ventures and strategic alliances with, and by making strategic investments
in, Internet companies. Most of these investments were primarily focused on
building synergistic partnerships with our flagship companies, SoftForum and
Lycos Korea.

      However, with adverse market conditions in 2001 as a result of the overall
local and global decline in technology, advertising and capital spending, Mirae
significantly reduced its investments in Internet-related businesses and has
been focusing on building greater value to certain of its existing Internet
properties. Currently, Mirae is undergoing a corporate restructuring process in
order to improve on its negative profits as well as reduce its expenses. In
addition, we are implementing positive exit plans for our Internet-related and
non-mechatronics-related businesses that have not been profitable.

      SoftForum Co., Ltd.

      SoftForum was incorporated in April 1999 under the laws of Korea as a
70%-owned subsidiary of the Company and is currently engaged in providing
security solutions for on-line banking, trading and electronic commerce. It
originated in 1995 as a research annex institute for security software within
Mirae. SoftForum's shares have been listed in the Korea Securities Dealers
Automated Quotation ("KOSDAQ") market since October 30, 2001, and the price of
the initial public offering of common stock, issuing approximately 2,019,280
shares, was (Won) 7,300 per share. Total amount of shares after the offering
increased to 8,020,000 shares from 6,000,720 shares. As of December 31, 2002,
SoftForum was 41.51%-owned by the Company, 6.94%-owned by Dongwon Venture
Capital Co., Ltd., 4.14%-owned by SoftForum employees and 47.41%-owned by
others.

      SoftForum's security solutions provide secure trading and on-line banking
between financial institutions and end users, offering authentication
technology, secure technology for Internet websites and Internet transaction
systems. SoftForum also has developed key wireless/mobile security solutions and
is aiming to penetrate the growing EAM (extranet access management) in Korea.

      SoftForum offers products in five major areas: cryptographic technology,
certification authority ("CA"), public key infrastructure ("PKI"), user
authentication solutions and secure web mail. Our cryptographic technology
enables users to send and receive encrypted data. Our leading product offering
in this area is XecureWeb. CA is an electronic commerce solution, which
generates electronic signatures and manages the electronic signatures on the
database for easy confirmation by a service provider. SoftForum's PKI security
package is a comprehensive


                                      -43-
<PAGE>

security solution incorporating SoftForum's major security applications,
including cryptographic technology and CA solutions. User authentication
solutions, such as SoftForum's "OnceID" product, allow users to identify
themselves to a remote system via a password with a one-use lifespan.
SoftForum's web mail enables web users to exchange encrypted e-mails.

      SoftForum developed customized security solutions for electronic commerce
to be offered by leading Korean cyber-shopping services and has also developed
secure web mail for portals and corporations in Korea. In addition, SoftForum
has sold its solutions to several major Korean banks, and has sold its
crytographic technology, CA and PKI solutions to a wide variety of Korean
financial and quasi-governmental institutions.

      We believe that Internet and electronic commerce will continue to grow in
popularity in Korea, which may lead to increasing demand for SoftForum's
security solutions. While SoftForum licenses what we believe to be leading
security solution technology in Korea and has approximately over 60 percent
market share, there are several competitors in the Korean security solution
market, including some companies that have strong footholds in other security
solutions areas that plan to expand into PKI. We intend to continue to manage
SoftForum by aggressively marketing its products and services and by investing
as much as 10% of SoftForum's total sales into research and development. Capital
expenditures of SoftForum in 2000, 2001 and 2002 were (Won) 919 million, (Won)
318 million and (Won) 215 million. SoftForum's plans for international advance
are also now underway, particularly in Asia.

      SoftForum's security solutions products and services generated revenues of
(Won) 9,501 million, (Won) 15,517 million and (Won) 15,881 million in 2000, 2001
and 2002, respectively. Its net income was (Won) 2,020 million, (Won) 1,973
million and (Won) 965 million in 2000, 2001 and 2002, respectively.

      SK Communications Corporation (formerly Lycos Korea)

      In 2002, Lycos Korea changed its name to SK Communications Corporation. In
addition, in August 2002, the Company's ownership percentage decreased from
43.25% to 4.54% through a sale of our interest to SK Telecom Co., Ltd. As a
result, the investment in SK Communications was accounted for using the equity
method through July 2002 and thereafter, the cost method of accounting.

      SK Communications was originally formed in March 1999 as a joint venture
in which Mirae and Lycos, Inc. of the United States had an equal shareholding.
Lycos, Inc. was acquired by Terra Networks and now goes by the name of Terra
Lycos. The Company's initial investment was (Won) 50 million. In 1999, the
carrying value was subsequently reduced to zero to reflect the Company's share
of SK Communications' loss for the year ended December 31, 1999, which exceeded
the carrying amount of the common stock investment.

      In February 2000, SK Communications issued and sold 3,122 additional
shares of its common stock at a premium to outside entities, including Mirae
Asset Venture Capital, Sumitomo Corp., SingTel and Hikari, for (Won) 18,000,000
per share (par value (Won) 5,000 per share). As a result of such issuance, the
Company's equity ownership in SK Communications decreased from 50% to 43% and
its investment increased by (Won) 24,628


                                      -44-
<PAGE>

million. The resulting gain on sale of stock by SK Communications was accounted
for as an equity transaction and included in capital surplus. Also, the Company
recognized its share of SK Communications' 1999 loss not recognized during 1999
amounting to (Won) 2,435 million, as an adjustment to retained earnings from
prior periods. In addition, the carrying value of our investment was
subsequently reduced by a charge to other expense to reflect the Company's share
of SK Communications' loss for the years ended December 31, 2000 and 2001 and
the seven-month period ended July 31, 2002, amounting to (Won) 9,608 million,
(Won) 12,068 million and (Won) 848 million, respectively, in the relevant
period.

      In October 2000, SK Communications executed a 10:1 stock split with the
par value on common stock decreasing from (Won) 5,000 to 500 and the total
amount of issued shares increasing from 693,660 to 6,936,600.

      In January 2001, SK Communications also increased its paid in capital to
(Won) 3,468 million from (Won) 116 million.

      SK Communications offers a Korean language portal site on the Internet
that provides web search and directory services, guides to online content,
aggregated third party content, and community and personalization features. SK
Communications launched its Internet operation, www.lycos.co.kr, in July 1999,
which was changed to www.nate.com in 2002, and introduced free personal home
page services in August 1999. Utilizing solutions developed by Tripod, Inc., a
subsidiary of Lycos, Inc., SK Communications offers Internet users 12 megabytes
of web space on which to create personal homepages and join interest-based
on-line communities.

      In addition to home page services, SK Communications offers a search
engine designed to effectively search information on the World Wide Web in
Korean. SK Communications also offers various content on its website. Services
currently offered by SK Communications include: securities information, chatting
service, games, real estate, job placement center, auction and maps, among other
services. Due to the technology downturn and significant reduction in
advertising spending, SK Communications has focused on ramping up and creating
new revenue sources through e-commerce, solution sales and paid contents. The
company has entered into a number of partnerships with companies that include:
SK Telecom (mobile messaging system), Istar Network (entertainment), Interpark
(shopping mall) and Insung Information Systems (solutions sales for EAM).

      SK Communications generated revenues of approximately (Won) 13,315 million
and (Won) 28,736 million in 2000 and 2001, respectively, and net loss of (Won)
22,216 million and 27,904 million in 2000 and 2001, respectively. In 2002, we
stopped accounting for our investment in SK Communications with the equity
method due to our reduced ownership.

Other Investments

      Since the formation of SK Communications and SoftForum, we have invested
in a variety of Internet-related companies, and have formed a number of
strategic alliances. The most significant of these are discussed below:


                                      -45-
<PAGE>

      Cyber Bank Co., Ltd.

      In March 2000, Mirae acquired a 1.47% interest, which has been diluted to
1.36% after Cyber Bank issued an additional 55,022 shares to Softbank Co. of
Japan and Samsung Electronics Co., Ltd. Cyber Bank develops personal data
assistants (PDAs) that combine a traditional PDA with mobile phone and wireless
Internet capabilities. Currently, Samsung Electronics is manufacturing the PDAs
on an OEM basis and Softbank is handling their distribution in Japan. The PDAs
will allow users to access and view in color information on the World Wide Web
in the same format as on a PC, only miniaturized on a 640 x 480 mm TFT-LCD
screen. Cyber Bank won the Best Finalist award at COMDEX 2001.

      On-net Corporation

      In December 2000, we acquire a 14.7% interest in On-net, a Korean Internet
company, which provides community-based online services, such as clubs and
message boards. On-net now provides SK Communications (formerly Lycos Korea)
with clubs, message boards and Star4U services, each of which, we believe, has
strengthened the user loyalty base of SK Communications.

      Mobile Game Co., Ltd. (formerly Java Games Co., Ltd.)

      Mobile Game was incorporated in December 1999 and we acquired a 59.98%
interest in the company. Mobile Game is one of the first Java-based mobile and
web-enabled game programming companies worldwide. In April 2002, Mobile Game's
classification changed to our equity method affiliate from a consolidated
subsidiary due to the Company's decrease in ownership stake from 59.98% to
29.99%. Mobile Game launched SK Communications' game site in March 2000 and
marketed its application service provider (ASP) to Chosun Newspaper and Hanmir
in 2000. The company has positioned itself as one of the leading mobile content
providers for all the major wireless carriers in Korea, including SK Telecom, LG
Telecom and KT Freetel. In 2001 and 2002, the company generated revenues of
(Won) 477 million and (Won) 805 million and net income of (Won) 75 million and
(Won) 149 million, respectively.

      Mirae Online, Co., Ltd.

      In March 2000, we purchased a 79.9% interest in Mirae Online, which has
been diluted to 64.78% after the issuance of additional shares. As of December
31, 2002, Mirae Online is 81.38% owned by the Company through capital increases.
Mirae Online is a two-way satellite based data broadcasting service provider.
Mirae Online launched its Internet broadband service in June 2000 and data
broadcasting service in November 2000. The company has entered into several
contracts with cable TV program providers for the delivery of their programming
through Mirae Online's satellite services. For the years ended December 31, 2001
and 2002, Mirae Online generated revenues of (Won) 604 million and (Won) 4,145
million and net losses of (Won) 6,773 million and (Won) 3,729 million,
respectively.

      Korea Internet.com Co., Ltd.

      On January 3, 2000, we signed a joint venture agreement with US-based
internet.com Corporation, a global leader in the provision of real-time news and
information resources for the


                                      -46-
<PAGE>

Internet industry, to form Korea Internet.com and launched its Korean version of
this Internet news service and network website in July 2000. On April 1, 2001,
both parties agreed to terminate the joint venture agreement and establish a new
seven year license agreement. Mirae acquired a 36.7% interest in the company
from internet.com Corporation for (Won) 304 million, which was later purchased
by the company's CEO, Yeh Byung-il. As of December 31, 2002, we had a 87.38%
interest in this company. For 2001 and 2002, Korea Internet.com reported
revenues of (Won) 253 million and (Won) 232 million and net losses of (Won)
1,140 million and (Won) 381 million, respectively.

      Intro System Co., Ltd.

      In December 1999, we purchased an 18.2% interest for (Won) 500 million in
Intro System, which has been diluted to 15.16% after the issuance of additional
shares. The company was an operator of cyber cafe franchises in Korea and
assisted Lycos Korea in the promotion of its sites and services. In October
2001, Intro System filed for dissolution, which resulted in no liabilities or
debts to or assets claimed by Mirae.

      Infinity Telecom Co., Ltd.

      In January 2000, we purchased an 18.0% interest in Infinity Telecom, which
has been diluted to 16.70% after the issuance of additional shares. Infinity
Telecom is a Korean Internet start-up company concentrating on the development
of voice recognition software for text-speech and speech-text based services
used in unified messaging services (UMS). Infinity Telecom began as a research
lab focusing on automatic speech recognition and expanded into computer
telephony integration. Infinity Telecom is recognized in Korea for introducing
personal UMS and is currently developing enterprise communication software for
corporate use that incorporates the personal UMS service.

      Nara Vision

      In January 2000, we purchased a 17.4% interest in Nara Vision, an Internet
portal service provider and an Internet-related software developer. We have
incorporated Nara Vision's free online e-mail service, Kebi, with the e-mail
service provided by Lycos Korea. Kebi is one of Korea's largest e-mail service
providers.

      Korea Internet Holdings Corporation

      In February 2000, we purchased a 20.0% interest in Korea Internet Holdings
Corporation, a venture investment company, which also provides management
consulting and business model development services. Korea Internet Holdings
filed for insolvency on April 27, 2001 and upon its liquidation, Mirae obtained
stakes in Internet related companies, as follows:

      [1.22%] Linxtek Co., Ltd.: A broadband network equipment provider

      [1.00%] Sunwoo Information System: Barcode application solution provider

      [0.75%] Telinker: Internet phone messaging service and solutions


                                      -47-
<PAGE>

      [0.93]  Digital Photo Corporation: Digital photo processing service

      [0.73]  YessWorld Corp.: Internet auction company

      [5.69%] Seoul Venture Base: Venture consulting and incubating

      [1.33%] Eon Group: Research and consulting

      [0.26%] Camis Co., Ltd.: E-business solutions provider

      [0.79%] Dabonet Co., Ltd.: PC program and electronic equipment provider

      Tele Free Corporation

      In March 2000, we purchased a 2.6% interest in Tele Free Corporation, a
voice-over IP solution provider. We incorporated their service into Lycos Korea
in May 2001 to offer free phone services over the Internet.

      Net thru Corporation

      In March 2000, we purchased a 19.7% interest in Net thru Corporation, a
data mining solution provider. Net thru Corporation was founded by researchers
at the Pohang Institute of Technology and develops innovative data mining
solutions.

      Stream Box Korea Corporation

      In April 2000, we purchased a 5.1% interest in Stream Box Korea
Corporation, a video streaming service provider specializing in media contents
search. The company supplies Lycos Korea with video search and streaming
solutions.

      Neobill Co., Ltd.

      In May 2000, we purchased a 15.7% interest in Neobill, which has been
diluted to 4.4% after the disposal of common shares. Neobill builds an Internet
payment and billing system. We intend to integrate this service into e-security
solutions of SoftForum.

Intellectual Property

      We generally rely upon patent, copyright, trademark and trade secret laws
to protect and maintain our proprietary rights for our technology and products.
We have filed for and/or obtained numerous Korean and foreign patents relating
to various aspects of our handlers, SMD placement systems and linear motors
after assessing the patent rights of our competitors in and outside of Korea. We
expect to file additional patent applications as we deem appropriate to protect
our technology and products. As of December 31, 2002, we held 236 domestic
patents with expiration dates between May 2007 and November 2020, as well as 25
patents in the United States, with expiration dates in December 2021, 19 patents
in Japan, with expiration dates between February 2016 and May 2020, and 18
patents in Taiwan, with expiration dates in


                                      -48-
<PAGE>

November 2016. We have 199 domestic patents pending and 251 overseas patents
pending in the United States, Japan, Germany, Taiwan, Italy, Singapore and
Malaysia. In Korea, we also hold 85 registered utility models, 37 registrations
of designs and 21 registered trademarks. We expect that our patent applications
will result in the issuance of more than 85% of our pending patents; however, we
cannot be sure that any of these applications will be granted or that any issued
patents will provide commercially significant protection to our technology.

      To help protect our intellectual property rights in particular, and our
engineering and software expertise more generally, many of our agreements with
our employees, consultants and strategic partners contain confidentiality
provisions that prohibit disclosure of our proprietary information.

      Generally, litigation, which can be costly and time consuming, may be
necessary to determine the scope and validity of others' proprietary rights, or
to enforce any patent issued to us, in either case, in judicial or
administrative proceedings. Korea's intellectual property legal framework is
similar to that of the United States. However, a broader array of items may be
protected as intellectual property in the United States, and a Korean court may
apply a less strict enforcement regime and award a smaller amount of damages as
compared to a United States court. In addition, an adverse outcome in any
litigation could subject us to significant liabilities to third parties, require
us to obtain licenses from third parties, or require us to cease product sales
and possibly alter the design of the products. Not all licenses required under
third-party patents or proprietary rights may be available on acceptable terms.
In addition, the laws of certain countries may not protect our intellectual
property. We know of no pending, threatened or actual infringement of any of our
intellectual property rights, other than the following litigation. Presently, we
are a plaintiff in a patent infringement suit in which we are claiming that the
line of memory module test handlers of the defendant, Yuil Semicon Company,
infringe on our patents. We obtained an injunction prohibiting the defendant
from selling any of these products and are seeking in excess of 1 billion won in
damages. We expect resolution of this litigation by the end of 2003. In
addition, we do not believe that we have infringed on the intellectual property
rights of any third party.

C. Organizational Structure

      For a list of our significant subsidiaries, see "Item 10--Additional
Information--Subsidiary Information".

D. Property, Plant and Equipment

      We set forth below a description of each of our facilities:

Headquarters

      Our headquarters for corporate administration is located in Chun An City,
Korea. These premises, which we own, consist of approximately 5,565 square
meters of office space. The headquarters building aggregates approximately 3,387
square meters.


                                      -49-
<PAGE>

Production Factory

      Our production division for semiconductor test handlers and SMD placement
systems is located at our 14,678 square meter factory in Chun An City. This
factory, which we own, includes a 6,112 square meter annex, which was
constructed to increase the production capacity of SMD placement systems in
2000.

Office Building for Internet Venture Companies

      We acquired 17,838 square meters of space in a building in Seoul, Korea
for use by our Internet venture companies. As of May 24, 2002, we sold our space
in the building for (Won) 60,000 million to Pagoda Academy Company. The
divestiture was part of a corporate restructuring process we undertook in order
to enhance our mechatronics business.

Mirae Research and Development Center

      In November 2001, we established the Mirae Research Center in a new 15,500
square meter building located in Hwasung City, Korea. Our R&D personnel and
sales force are located in this center. Capital expenditures of approximately
(Won) 15 billion were invested in connection with this research center.

Bundang Office Building

      Previously, we conducted research and development for mechatronics related
technology and products at our 7,748 square meter facility in Bundang City,
Korea. This office space has been rented to tenants since we moved these
activities to the Mirae Research Center in Hwasung in November 2001.

Seoul Branch

      We have reinstated a branch of the Company in Seoul, Korea with 386 square
meters of leased office space in a building owned by SoftForum located in
Dokok-dong, Kangnam-gu. Our lease runs from April 13, 2003 through April 13,
2005. A guarantee deposit of (Won) 386 million was paid by us to SoftForum.

      Our existing facilities have been adequate for our needs through the end
of 2002. We believe that any additional space we may need in the future will be
available on commercially reasonable terms.

ITEM 5. Operating and Financial Review and Prospects

      The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
The Consolidated Financial Statements have been prepared in accordance with
Korean GAAP, which differs in certain significant respects from U.S. GAAP. Notes
29 and 30 of Notes to Consolidated Financial Statements provide a description of
the significant differences between Korean GAAP and U.S. GAAP as they relate to
Mirae and provide a reconciliation to U.S. GAAP for operating income (loss), net
income (loss) and shareholders' equity.


                                      -50-
<PAGE>

Overview

      We design and manufacture mechatronics machines, including the
high-precision robotic parts and software that controls these robotic parts,
primarily for sale to the semiconductor manufacturing and PCB assembly
industries. Our product lines consist of semiconductor test handlers, their
components and SMD placement systems. We spun out our TFT-LCD handler line on
August 1, 2001.

      Our revenue structure has significantly changed since 2000. Historically,
the majority of our revenues had been derived from the sales of semiconductor
test handlers and their components. In 1998 and 1999, approximately 86% and 45%
of our sales, respectively, were derived from the sales of semiconductor test
handlers. However, in 2000, 2001 and 2002, only 30%, 27% and 22% of revenue,
respectively, were derived from the sales of semiconductor test handlers while
49%, 30% and 37% of revenue, respectively, were derived from the sales of SMD
placement systems, which we began to sell and market in the second half of 1999.

      Historically, our sales had been concentrated among a small number of
Korean customers that are semiconductor manufacturers as well as major
conglomerates in Korea. In 1999, we began to market our products internationally
in pursuit of customer diversification and profit maximization, and our global
sales have gradually increased since 1998. However, in 2001, our export sales
decreased significantly, in large part due to the worldwide decline in the
semiconductor industry and the bankruptcy of Quad Systems Corporation, formerly
one of our major customers, which filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code on September 29, 2000. In 2001, the
portion of total sales derived from export sales decreased to 18%, from 35% and
41% in 1999 and 2000, respectively. In 2002, however, export sales were almost
double the 2001 figure, or 32%, of our total sales revenue, due to sales
increases in Europe and Asia.

      Our sales and results of operations have depended in most significant part
on levels of capital expenditures by semiconductor manufacturers, electronic
manufacturers and PCB assemblers, which in turn depend on the current and
anticipated market demand for semiconductors and products utilizing
semiconductors and PCB assemblies.

      Demand for semiconductor devices and expenditures for related capital
equipment is cyclical, and is dependent on levels of worldwide demand for
computing and peripheral equipment, telecommunications devices and automotive
and industrial components, as well as the production capacity of global
semiconductor manufacturers. Historically, changes in production capacity in the
semiconductor industry and in the demand for electronic systems have resulted in
pronounced periodic declines in the level of semiconductor sales and significant
fluctuations in prices and margins for semiconductor devices.

      The cyclical variations in the supply and demand of DRAM chips and the
fluctuations in the electronic manufacturing industry have affected and will
continue to affect our sales and results of operations. Our principal means of
responding to this situation have been and will be as follows:


                                      -51-
<PAGE>

      o     we adopted a concerted marketing and export strategy focused beyond
            our traditional Korean customer base;

      o     we expanded our mechatronics product lines to include SMD placement
            systems;

      o     we implemented an early retirement program and downsized the number
            of our employees to 296 as of December 31, 2002 from 521 as of
            December 31, 2000;

      o     we will concentrate our research and development on several
            projects, which will be on-going projects; and

      o     we will cut back on our investments in multimedia and
            Internet-related business areas and focus on maximizing the value of
            and minimizing the risks from current investments.

      Future operating profits will depend on many factors, including the
reversal of the downturn in the semiconductor and electronic manufacturing
industry, our ability to successfully expand our product markets outside of
Korea, receipt, timing and shipment of orders, the introduction and industry
acceptance of our new semiconductor test handlers, SMD placement systems and
Internet and software-based products, as well as the success of our competitors.
Results of operations for the periods discussed herein should not be considered
indicative of the results to be expected in any future period, and fluctuations
in operating results may also result in fluctuations in the market price of our
common stock and the ADSs.

A. Operating Results

      Our revenues of (Won) 64,430 million in 2002 reflected a decrease of 6.6%
from our revenues of (Won) 68,977 million in 2001, mainly due to the spin-off on
August 1, 2001 of our TFT-LCD handler line, which generated (Won) 5,608 million
in 2001. A downturn in the semiconductor industry in 2001 and 2002 resulted in
sales decreases of our semiconductor test handlers, which further negatively
affected our revenues. However, revenues derived from our SMD placement systems
increased by 11.9% in 2002 compared to 2001.

      Our sales had historically been derived principally from sales of
semiconductor test handlers until 1999. We began in the second half of 1999 to
recognize revenue from the sale of SMD placement systems, which accounted for
48.8%, 30.4% and 36.5% of our total revenues in 2000, 2001 and 2002,
respectively.

      The following table sets forth certain information regarding our financial
performance for each of the years ended December 31, 2000, 2001 and 2002.

<TABLE>
<CAPTION>
                                          2000                       2001                       2002
                                 ----------------------     ----------------------     ----------------------
                                                 (% of                      (% of                      (% of
                                 (in millions    total      (in millions    total      (in millions    total
                                   of won)       sales)       of won)       sales)       of won)       sales)
                                 ------------    ------     ------------    ------     ------------    ------
<S>                              <C>             <C>        <C>             <C>        <C>             <C>
Sales ........................   (won)146,099     100.0%     (won)68,977     100.0%     (won)64,430     100.0%
Semiconductor test handlers ..         43,754      29.9%          18,418      26.7%          14,434      22.4%
SMD placement systems ........         71,250      48.8%          20,992      30.4%          23,486      36.5%
TFT-LCD handlers and testers .         11,166       7.6%           5,608       8.1%              --        --
Lead frame magazines .........          4,733       3.3%              --        --               --        --
</TABLE>


                                      -52-
<PAGE>

<TABLE>
<CAPTION>
                                          2000                       2001                       2002
                                 ----------------------     ----------------------     ----------------------
                                                 (% of                      (% of                      (% of
                                 (in millions    total      (in millions    total      (in millions    total
                                   of won)       sales)       of won)       sales)       of won)       sales)
                                 ------------    ------     ------------    ------     ------------    ------
<S>                              <C>             <C>        <C>             <C>        <C>             <C>
Security solutions ...........          9,501       6.5%          15,517      22.5%          15,881      24.6%
Other ........................          5,695       3.9%           8,442      12.3%          10,629      16.5%
Cost of sales ................        111,377      76.2%          63,590      92.2%          56,863      88.2%
Gross profit .................         34,722      23.8%           5,387       7.8%           7,567      11.8%
Selling, general and
   administrative expenses ...         27,223      18.6%          45,321      65.7%          37,651      58.4%
Operating income (loss) ......          7,499       5.1%         (39,934)    (57.9)%        (30,084)    (46.6)%
Other income .................         12,809       8.8%          11,020      16.0%          13,285      20.6%
Other expense ................         20,173      13.8%          54,945      79.7%          56,091      87.1%
Income (loss) before income
   taxes and minority interest            135       0.1%         (83,859)   (121.6)%        (72,890)   (113.1)%
Income tax expense (benefit) .         (3,602)     (2.5)%         14,234      20.6%             277       0.4%
Net income (loss) before
   minority interest .........          3,737       2.6%         (98,093)   (142.2)%        (73,167)   (113.6)%
Minority interest in net loss
   (gain) of consolidated
   subsidiaries ..............            533       0.4%          (1,055)     (1.5)%            176       0.3%
Net income (loss) ............          4,270       2.9%         (99,148)   (143.7)%        (72,991)   (113.3)%
                                 ============    ======     ============    ======     ============    ======
</TABLE>

      Our gross margins have experienced, and may continue to experience, severe
fluctuation and downward pressure as a result of a number of interrelated
factors associated with the markets in which we operate as follows:

      o     We have diversified into SMD placement systems and successfully
            launched new models in the domestic market since the second half of
            1999. As a result of the successful market introduction of new SMD
            placement systems, our earnings structure has been less vulnerable
            to the cyclical nature of the semiconductor industry than it had
            been prior to 1999. However, because we have applied
            price-discounting policies to such sales in order to develop and
            penetrate into the SMD placement systems market, which policies we
            have been compelled to continue due to intense competition and a
            decline in this market, our gross profit margins on these products
            were not as high as the gross profit margins on our semiconductor
            test handlers.

      o     We have invested (Won) 39.1 billion into multimedia and
            Internet-related companies since 1999. We have strategically
            invested most of these amounts, including indirect investments, into
            content and service related companies, which subsequently entered
            into exclusive or first-right contracts to provide content and
            services to SK Communications Corporation and SoftForum. Not all of
            these investments have been profitable.

      o     On December 18, 2000, Quad Systems Corporation, an OEM contractor of
            our SMD placement systems in North America and Europe, filed under
            Chapter 11 of the U.S. Bankruptcy Code. As a result, our sales to
            North America and Europe had ceased for approximately 12 months,
            from September 2000 to August 2001, until we had reestablished our
            distribution channel of SMD placement systems in North America and
            Europe.


                                      -53-
<PAGE>

      o     Virtually all of our handler products are subject to life cycles,
            which generally range from 18 to 24 months. During this cycle, the
            price of each product typically declines as newer models with
            improved performance go on demand. If new products are not
            introduced on a regular basis to replace older models, our overall
            gross margins will experience downward pressure as the gross margins
            on the older model decline.

      o     Our semiconductor test handlers and SMD placement systems come with
            a one-year product warranty. As we expense warranty costs as
            incurred rather than provide for estimated costs at the time of
            sale, recognition of warranty costs usually lags behind the sale of
            our products by approximately one year. Our domestic semiconductor
            test handler customers have historically focused on front-end
            manufacturing processes and do not have the facilities or expertise
            necessary to maintain and repair their back-end equipment. When they
            experience difficulties with one of our handler products, we have
            provided complimentary after-sale services even if the problem is
            not expressly covered by the terms of the product warranty. The
            costs incurred in providing these services are booked as product
            warranty expenses. We do not intend to provide similar non-warranty
            related services for which we receive no compensation in respect of
            our SMD placement systems.

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

      Sales

      Sales revenue for the year ended December 31, 2002 decreased by (Won)
4,547 million, or 6.6%, to (Won) 64,430 million, compared to (Won) 68,977
million for the year ended December 31, 2001. This decrease was mainly due to
the spin-off as of August 1, 2001 of our TFT-LCD handler line, which generated
(Won) 5,608 million of sales revenue in 2001.

      Sales revenue derived from SMD placement systems increased by (Won) 2,494
million, or 11.9%, from (Won) 20,992 million in 2001 to (Won) 23,486 million in
2002. The increase in sales was largely due to our greater penetration into
overseas markets, particularly in Asia.

      Sales revenue derived from sales of semiconductor handlers and components
decreased by (Won) 3,984 million, or 21.6%, from (Won) 18,418 million in 2001 to
(Won) 14,434 million in 2002. We attribute this contraction in sales largely to
the continued downturn in the semiconductor and related industries.

      Through the operations of our subsidiary, SoftForum, we recognized
revenues of (Won) 15,881 million from sales of software-based securities
solutions for on-line banking, trading and electronic commerce for the year
ended December 31, 2002, compared to (Won) 15,517 million for the year ended
December 31, 2001.

      The proportion of export sales revenue compared to total sales revenue
increased to 32.2% for the year ended December 31, 2002, from 17.9% for the year
ended December 31, 2001.


                                      -54-
<PAGE>

      Cost of Sales

      The principal components of cost of sales are raw material costs, labor
costs, depreciation expense, research and development costs and outsourced
manufacturing fees. Cost of sales for the year ended December 31, 2002 was (Won)
56,863 million, compared to (Won) 63,590 million for the year ended December 31,
2001. The ratio of cost of sales to total sales revenue in 2002 was 88.2% while
it was 92.2% in 2001.

      Gross Profit

      Gross profit increased to (Won) 7,567 million for the year ended December
31, 2002 from (Won) 5,387 million for the year ended December 31, 2001. Gross
profit ratio to sales also increased to 11.8% in 2002 from 7.8% in 2001. The
increase in gross profit resulted in part from our efforts to reduce
manufacturing costs by replacing imported raw materials with domestic raw
materials.

      Since export sales prices are higher than domestic sales prices, our gross
profit ratio to sales increased as the proportion of exports sales increased by
14.3% from 2001 to 2002.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses decreased by (Won) 7,670
million, or 16.9%, from (Won) 45,321 million in 2001 to (Won) 37,651 million in
2002.

      Selling, general and administrative expenses decreased primarily as a
result of a decrease in product warranty costs. (Won) 1,004 million of product
warranty costs were incurred in the year ended December 31, 2002, which
represented an 81.0%, or (Won) 4,290 million, decrease compared to our product
warranty costs of (Won) 5,294 million for the year ended December 31, 2001.

      Advertising costs decreased by 59.9%, or (Won) 1,408 million, from (Won)
2,349 million in 2001 to (Won) 941 million in 2002.

      In addition, salaries decreased by 10.1%, or (Won) 1,140 million, from
(Won) 11,343 million in 2001 to (Won) 10,203 million in 2002, as a result of the
downsizing of the number of employees. Our employees decreased in number to 296
as of December 31, 2002 from 324 as of December 31, 2001.

      The decrease in selling, general and administrative expenses was offset in
part by a (Won) 1,519 million increase in bad debts, from (Won) 10,267 million
in 2001 to (Won) 11,786 million in 2002.

      Operating Loss

      Operating loss for the year ended December 31, 2002 was (Won) 30,084
million, which represents an improvement of 24.7%, or (Won) 9,850 million, from
our operating loss of (Won) 39,934 million for the year ended December 31, 2001.
The decrease in operating loss


                                      -55-
<PAGE>

resulted primarily from the improvement of cost of sales and the decrease in
selling, general and administrative expenses in 2002, as compared to 2001.

      Other Income

      Other income consisted primarily of interest income, gain on disposal and
valuation of marketable securities, foreign exchange and translation gains and
miscellaneous income. Other income increased by (Won) 2,265 million, or 20.6%,
from (Won) 11,020 million in 2001 to (Won) 13,285 million in 2002.

      Other income increased primarily due to a (Won) 3,739 million reversal of
provision for guarantees issued, which was accounted for as other expenses in
2001. The guarantee expired in 2002.

      The increase in other income was offset in part by a (Won) 1,837 million
decrease in foreign exchange and translation gains. Interest income also
decreased by (Won) 752 million due to both reductions in interest-bearing
financial assets and the interest rate, compared to 2001.

      Other Expenses

      Other expenses for the year ended December 31, 2002 consisted primarily of
valuation loss on inventories, provision for doubtful accounts, impairment loss
on deferred development costs and impairment loss on investment securities.
Other expenses increased by 2.1%, or (Won) 1,146 million, from (Won) 54,945
million in 2001 to (Won) 56,091 million in 2002.

      Inventories, especially finished products, were written down to net
realizable value where applicable and (Won) 20,409 million of inventory
valuation loss was accounted for as other expenses in 2002. The comparable
amount in 2001 was (Won) 16,837 million. Investment securities were also written
down to their net asset value and (Won) 3,631 million of impairment loss on
investment securities was accounted for as other expenses in 2002.

      In 2002, several development projects were discontinued and related
deferred development costs of (Won) 11,337 million were written off as other
expenses.

      Other expenses in 2002 also included (Won) 3,663 million of interest
expense, (Won) 7,087 million of provision for doubtful accounts and (Won) 2,102
million of foreign currency exchange and translation losses.

      Income Taxes

      A full valuation allowance has been provided for the tax effect of
temporary differences, net loss of consolidated subsidiaries, net operating loss
carry-forwards and tax credit carry-forwards as of December 31, 2002 since we
believe that the realization of the deferred tax assets is uncertain. Income tax
expense for the year ended December 31, 2002 was (Won) 277 million.


                                      -56-
<PAGE>

      Net Loss

      Net loss for the year ended December 31, 2002 was (Won) 72,991 million,
which was an improvement of 26.4%, or (Won) 26,157 million, compared to the net
loss of (Won) 99,148 million in 2001.

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

      Sales

      Sales revenue for the year ended December 31, 2001 decreased by (Won)
77,122 million, or 52.8%, to (Won) 68,977 million, compared to (Won) 146,099
million for the year ended December 31, 2000.

      Sales revenue derived from SMD placement systems decreased by (Won) 50,259
million, or 70.5%, from (Won) 71,251 million in 2000 to (Won) 20,992 million in
2001. The decrease in sales of SMD placement systems was primarily the result of
an economic recession that prevailed worldwide in 2001. The bankruptcy of Quad
Systems Corporation, which had exclusive rights to sell our products to North
America and Europe, partly contributed to the sales decrease in 2001. As a
result of the bankruptcy of Quad Systems, our sales of SMD placement systems to
North America and Europe had actually stopped for approximately 12 months, from
September 2000 to August 2001, until we had reestablished our distribution
channel of SMD placement systems in North America and Europe. Unit sales of SMD
placement systems decreased from 368 in 2000 to 121 in 2001.

      Sales revenue derived from sales of semiconductor handlers and components
also decreased by (Won) 25,336 million, or 57.9%, from (Won) 43,754 million in
2000, to (Won) 18,418 million in 2001, with unit sales decreasing from 138 to 56
over such periods. Revenues derived from sales of TFT-LCD handlers and testers
decreased by (Won) 5,558 million, or 49.8%, from (Won) 11,166 million in 2000,
to (Won) 5,608 million in 2001. We spun off the TFT-LCD handlers and testers
line as of August 2001.

      In addition, through the operations of our subsidiary, SoftForum, we
recognized revenues of (Won) 15,517 million from sales of software-based
securities solutions for on-line banking, trading and electronic commerce for
the year ended December 31, 2001, compared to (Won) 9,501 million for the year
ended December 31, 2000.

      The proportion of export sales revenue compared to total sales revenue
decreased to 17.9% for the year ended December 31, 2001, from 40.4% for the year
ended December 31, 2000.

      Cost of Sales

      The principal components of cost of sales are raw material costs, labor
costs, depreciation expense, research and development costs and outsourced
manufacturing fees. Cost of sales for the year ended December 31, 2001 was (Won)
63,590 million, which was 42.9% less than the cost of sales of (Won) 111,377
million for the year ended December 31, 2000.


                                      -57-
<PAGE>

      Gross Profit

      Gross profit decreased to (Won) 5,387 million for the year ended December
31, 2001 from (Won) 34,722 million for the year ended December 31, 2000. The
gross profit to sales ratio decreased to 7.8% in 2001 from 23.8% in 2000. Unit
fixed costs increase as sales volume decreases. Accordingly, our gross profit to
sales ratio decreased as sales volume decreased.

      In addition, since export prices are higher than domestic prices, our
gross profit to sales ratio decreased as the proportion of exports, compared to
2000, decreased for the year ended December 31, 2001.

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses increased by (Won) 18,098
million, or 66.5%, to (Won) 45,321 million in 2001, from (Won) 27,223 million in
2000.

      Selling, general and administrative expenses increased primarily as a
result of (Won) 10,267 million of bad debts. We discounted (Won) 6,923 million
of trade receivables in the process of collecting the receivables in advance of
the collection dates. In addition, we provided (Won) 3,344 million of bad debt
allowance for doubtful trade receivables and expensed this provision as bad
debts.

      Selling, general and administrative expenses also increased due to (Won)
5,294 million of product warranty costs, which had been classified as a cost of
sales item through 2000. Effective January 1, 2001, product warranties
expenditures incurred relating to selling and administrative activities are
classified as an item of selling, general and administrative expenses for a more
appropriate financial statement presentation as the Company established a
customer satisfaction division.

      In addition, salaries increased by (Won) 3,696 million, from (Won) 7,647
million in 2000 to (Won) 11,343 million in 2001, as a result of compensation
payments to the employees who applied for the early retirement program. We
executed an early retirement program with 5 months compensation payments on
November 2001 for downsizing and successfully cut down employees to 324 as of
December 31, 2001 from 521 as of December 31, 2000.

      The increase in selling, general and administrative expenses was offset in
part by a (Won) 2,367 decrease in sales commissions, from (Won) 5,894 million in
2000 to (Won) 3,527 million in 2001, due to a decrease of sales volume in 2001.

      Operating Income (Loss)

      Operating loss for the year ended December 31, 2001 was (Won) 39,934
million, which represented a decrease of (Won) 47,433 million from our operating
income of (Won) 7,499 million for the year ended December 31, 2000. The decrease
in operating income resulted primarily from the decrease in sales volume and
increase in selling, general and administrative expenses in 2001, as compared to
2000.


                                      -58-
<PAGE>

         Other Income

      Other income consisted primarily of interest income, gains on disposals
and valuation of marketable securities, foreign exchange and translation gains,
and miscellaneous income. Other income decreased by (Won) 1,789 million, or
14.0%, to (Won) 11,020 million in 2001 from (Won) 12,809 million in 2000.

      Other income decreased primarily due to a (Won) 3,264 million decrease in
interest income, from (Won) 6,548 million in 2000 to (Won) 3,284 million in
2001. The main reason for such decrease in interest income was the decrease in
the net balance of interest bearing financial instruments and an interest rate
decrease in 2001. Our net balance, net of short-term borrowings, of cash and
cash equivalents, short-term financial instruments and interest-bearing
marketable securities as of December 31, 1999, 2000 and 2001 were (Won) 33,229
million, (Won) 40,698 million and (Won) 26,055 million, respectively. The range
of interest rates in 2000 was about 7 to 8% while the range of interest rates in
2001 was about 6 to 7%. Foreign exchange and translation gains also decreased by
(Won) 79 million, from (Won) 2,551 million in 2000 to (Won) 2,472 million in
2001.

      The decrease in other income was offset in part by a (Won) 571 million
increase in gain on disposal and valuation of marketable securities.

      Other Expenses

      Other expenses for the year ended December 31, 2001 consisted primarily of
valuation loss on inventories, impairment loss on investment securities, equity
in losses of affiliates and impairment loss on deferred development costs. Other
expenses increased by (Won) 34,772 million, or 172.4%, from (Won) 20,173 million
in 2000 to (Won) 54,945 million in 2001.

      Inventories, especially finished products, were revalued down to net
realizable value where applicable and (Won) 16,837 million of inventory
valuation loss was accounted for as other expenses in 2001. The comparable
amount in 2000 was (Won) 844 million. Investment securities were also revalued
down to their net asset value and (Won) 8,718 million of impairment loss on
investment securities was accounted for as other expenses in 2001.

      Equity in losses of affiliates increased by (Won) 6,013 million to (Won)
15,677 million in 2001 from 9,664 million in 2000. In 2001, several development
projects were discontinued and related development costs of (Won) 4,429 million
were written off as other expenses.

      Other expenses in 2001 also included (Won) 3,093 million of interest
expense, (Won) 3,739 million of provision for guarantees issued and (Won) 221
million of foreign currency exchange and translation losses.

      Income Taxes

      A full valuation allowance has been provided for the tax effect of
temporary differences, net loss of consolidated subsidiaries, net operating loss
carry-forwards and tax credit carry-forwards as of December 31, 2001 since we
believe that the realization of the deferred tax assets is uncertain. As a
result, although income taxes payable for the year ended December 31, 2001


                                      -59-
<PAGE>

was (Won) 264 million, income tax expense for the year ended December 31, 2001
was (Won) 14,234 million.

      Net Loss

      Net loss for the year ended December 31, 2001 was (Won) 99,148 million,
which was (Won) 103,418 million less than 2000 when net income was (Won) 4,270
million.

U.S. GAAP Reconciliation

      Our Consolidated Financial Statements are prepared in accordance with
Korean GAAP, which differs in certain significant respects from U.S. GAAP. The
principal differences between Korean GAAP and U.S. GAAP as they relate to Mirae
include:

      o     under U.S. GAAP, the realization of deferred tax assets depends on
            an objectively verifiable estimate of future income which is
            commonly based on pretax accounting income (losses) of the current
            and immediate two preceding years. Under Korean GAAP, no such
            practice has evolved;

      o     under Korean GAAP, research and development costs that meet specific
            conditions, such as new product development, technological
            feasibility, marketability and usefulness, are deferred and
            amortized over a period not to exceed 20 years, while such costs are
            expensed under U.S. GAAP (we have elected to defer and amortize such
            costs over five years for Korean GAAP purposes);

      o     under Korean GAAP, sales are recognized at the time products are
            delivered to customers while under U.S. GAAP, product sales are
            recognized upon final customer acceptance and passage of legal
            title;

      o     under U.S. GAAP, after a long-lived asset write-down, representing
            the new carrying amount, subsequent recoveries in value may not be
            recognized, whereas under Korean GAAP, such recoveries are
            recognized as gains to the extent of impairment losses previously
            recognized;

      o     Korean GAAP permits the inclusion of product warranty expenditures
            as incurred in manufacturing costs, which are allocated between cost
            of sales and inventories. Under U.S. GAAP, warranty costs are
            accrued at the time of sale based on historical experience and
            expected future costs and recorded as costs of sales. In accordance
            with Korean GAAP, effective January 1, 2001, Mirae classifies
            product warranty expenditures incurred that are related to selling
            and administrative activities as an item of selling, general and
            administrative expenses for a more appropriate financial statement
            presentation, as we have established a customer satisfaction
            division;

      o     under Korean GAAP, proposed cash dividends are recorded as a current
            liability while under U.S. GAAP, a liability is not recorded until
            the dividends have been approved;


                                      -60-
<PAGE>

      o     under Korean GAAP, loss from valuation of inventories is classified
            as other expenses while under U.S. GAAP, it is classified as cost of
            sales;

      o     under Korean GAAP, a parent company is required to account for sales
            of stock by a subsidiary as an equity transaction to be included in
            capital surplus, while under U.S. GAAP, a parent company may elect
            income statement or equity transaction treatment, depending on
            certain criteria being met and so long as such election is applied
            consistently and on a prospective basis for all subsidiary stock
            transactions;

      o     under Korean GAAP, a purchase by a subsidiary of a non-controlling
            equity interest in the subsidiary is recorded as a capital
            adjustment in the consolidated financial statements in proportion to
            the parent's equity interest. Under U.S. GAAP, this purchase is
            accounted for using the purchase method in the consolidated
            financial statements;

      o     under Korean GAAP, depreciation for six months is recorded for any
            asset placed in service during the second half of the year in
            accordance with Korean tax law until 2001. Effective from 2002,
            depreciation expense commences in the month the related asset is
            placed in service. Under U.S. GAAP, depreciation expense starts to
            accrue from the month the related asset is deployed into service;

      o     Korean GAAP permits all entities to exclude the volatility factor in
            estimating the value of their stock options, which results in
            minimizing the measurement. Under U.S. GAAP, public entities are not
            permitted to exclude the volatility factor in estimating the value
            of their stock options. In addition, under U.S. GAAP, if the fair
            value of the modified option exceeds the value of the related old
            option, the entity recognizes additional compensation cost for the
            difference. Under Korean GAAP, no such practice has evolved;

      o     under Korean GAAP, gain on disposal of investments in common stock
            of a subsidiary incurred from a transaction between the Company and
            its subsidiary's employees, which should be included in capital
            surplus, is measured based on the actual selling price and the
            carrying value of such investment. Under U.S. GAAP, however, if the
            actual selling price differs from the fair value of the investment,
            the difference between the fair value and the actual selling price
            should be recorded as an employee benefits expense;

      o     effective January 1, 2000, Korean GAAP was changed to require that
            minority interest in equity of consolidated subsidiaries be included
            in shareholders' equity. Under U.S. GAAP, minority interest is
            presented as an item separate from shareholders' equity; and

      o     under Korean GAAP, loans provided by the Company to employees to
            finance purchases of the Company's shares are accounted for as
            receivables, and related payment guarantees provided by the Company
            to a lender are accounted for as a contingency. Under U.S. GAAP,
            such loans are deducted from stockholders' equity and the related
            payment guarantees are recorded as a liability with a corresponding
            deduction from stockholders' equity.


                                      -61-
<PAGE>

      For a discussion of these and other significant differences between Korean
GAAP and U.S. GAAP, see Notes 29 and 30 of Notes to Consolidated Financial
Statements. For a discussion of the Company's blank check arrangements, see Note
23 of Notes to Consolidated Financial Statements.

      Sales, cost of sales, gross profit (loss), operating expenses, operating
loss, net income (loss) and shareholders' equity under U.S. GAAP as of and for
the years ended December 31, 2000, 2001 and 2002 are as follows (in millions of
Korean won):

                                       2000            2001            2002
                                   ------------    ------------    ------------
Sales ..........................   (Won)143,643     (Won)69,827     (Won)69,715
Cost of sales ..................        100,098          78,020          76,786
Gross profit (loss) ............         43,545          (8,193)         (7,071)
Operating expenses .............         55,448          54,494          43,124
Operating loss .................        (11,903)        (62,687)        (50,195)
Net income (loss) ..............          9,290         (84,811)        (62,607)
Shareholders' equity ...........        288,101         209,519         148,251

Year ended December 31, 2002 compared with year ended December 31, 2001

      Sales

      Sales revenue under U.S. GAAP for the year ended December 31, 2002 was
(Won) 69,715 million. The comparable amount for the year ended December 31, 2001
was (Won) 69,827 million.

      Sales revenue derived from SMD placement systems increased by (Won) 2,494
million, from (Won) 20,992 million in 2001 to (Won) 23,486 million in 2002. The
increase in sales was largely due to our greater penetration into overseas
markets, particularly in Asia.

      Sales revenue derived from sales of semiconductor handlers and components
decreased by (Won) 2,964 million, from (Won) 19,823 million in 2001 to (Won)
16,859 million in 2002. We attribute this contraction in sales largely to the
continued downturn in the semiconductor and related industries.

      We spun off our TFT-LCD handler line as of August 1, 2001. Although we did
not subsequently produce or deliver any TFT-LCD handlers and testers in 2002, we
recognized (Won) 2,860 million of sales revenue in 2002 for TFT-LCD handlers and
testers that were delivered in 2001 and final acceptance of which were taken by
customers in 2002, in accordance with U.S. GAAP.

      In addition, through the operations of our subsidiary, SoftForum, we
recognized revenue of (Won) 15,881 million from sales of software-based
securities solutions for on-line banking, trading and electronic commerce for
the year ended December 31, 2002, compared to (Won) 15,517 million for the year
ended December 31, 2001.

      The proportion of export sales revenue to total sales revenue increased to
29.8% for the year ended December 31, 2002, from 17.6% for the year ended
December 31, 2001.


                                      -62-
<PAGE>

      Cost of Sales

      The principal components of cost of sales under U.S. GAAP for the year
ended December 31, 2002 are raw material costs, labor costs, depreciation
expense, outsourced manufacturing fees and inventory valuation loss. Cost of
sales for the year ended December 31, 2002 was (Won) 76,786 million, which
included (Won) 20,409 million of inventory valuation loss. The comparable amount
for the year ended December 31, 2001 was (Won) 78,020 million, which included
(Won) 16,837 million of inventory valuation loss.

      Gross Profit (Loss)

      Negative margins under U.S. GAAP for the year ended December 31, 2002 were
(Won) 7,071 million. The negative margins were primarily due to lower sales
volume during this period. The ratio of negative margin to total sales revenue
in 2002 was 10.1%, compared to 11.7% in 2001.

      Operating Expenses

      The principal components of our operating expenses under U.S. GAAP are
selling, general and administrative expenses, sales commissions and research and
development costs. Operating expenses decreased by (Won) 11,370 million, or
20.9%, from (Won) 54,494 million in 2001 to (Won) 43,124 million in 2002.

      Operating expenses decreased primarily as a result of a decrease in
research and development costs, which decreased by (Won) 6,930 million, from
(Won) 16,369 million in 2001 to (Won) 9,439 million in 2002.

      In addition, advertising costs decreased by (Won) 1,408 million, from
(Won) 2,349 million in 2001 to (Won) 941 million in 2002.

      The decrease in operating expenses was due in part to a (Won) 724 million
decrease in depreciation, from (Won) 3,866 million in 2001 to (Won) 3,142
million in 2002, due to the disposal of a building located in Seoul, Korea in
June 2002. Additionally, bad debts increased by (Won) 1,519 million, from (Won)
10,267 million in 2001 to (Won) 11,786 million in 2002.

      Operating Loss

      As a result of the foregoing factors, operating losses decreased to (Won)
50,195 million in 2002 from (Won) 62,687 million in 2001.

      Net Loss

      For the year ended December 31, 2002, we had a net loss of (Won) 62,607
million under U.S. GAAP, compared to a net loss of (Won) 84,811 million for the
year ended December 31, 2001.


                                      -63-
<PAGE>

Year ended December 31, 2001 compared with year ended December 31, 2000

      Sales

      Sales revenue for the year ended December 31, 2001 decreased by (Won)
73,816 million, or 51.4%, to (Won) 69,827 million, compared to (Won) 143,643
million for the year ended December 31, 2000.

      Sales revenue derived from SMD placement systems sharply decreased by
(Won) 50,258 million, or 70.5%, from (Won) 71,250 million in 2000 to (Won)
20,992 million in 2001. The decrease in sales of SMD placement systems was
primarily the result of an economic recession that prevailed worldwide in 2001.
The bankruptcy of Quad Systems Corporation, which had exclusive rights to sell
our products in North America and Europe, partly contributed to the sales
decrease in 2001. As a result of this bankruptcy, our sales of SMD placement
systems to North America and Europe stopped for approximately a 12 month period,
from September 2000 to August 2001, until we had reestablished our distribution
channel for SMD placement systems in North America and Europe. Unit sales of SMD
placement systems decreased from 368 in 2000 to 121 in 2001.

      Sales revenue derived from sales of semiconductor handlers and components
also decreased by (Won) 23,781 million, or 54.5%, to (Won) 19,823 million in
2001 from (Won) 43,604 million in 2000. Sales revenue derived from sales of
TFT-LCD handlers and testers decreased by (Won) 3,808 million, or 43.0%, to
(Won) 5,053 million for the year ended December 31, 2001 as a result of our
TFT-LCD handlers and testers line being spun out in August 2001.

      In addition, through the operations of our subsidiary, SoftForum, we
recognized revenue of (Won) 15,517 million from sales of software-based
securities solutions for on-line banking, trading and electronic commerce for
the year ended December 31, 2001, compared to (Won) 9,501 million for the year
ended December 31, 2000.

      The proportion of export sales revenue to total sales revenue decreased to
17.6% for the year ended December 31, 2001, from 41.1% for the year ended
December 31, 2000.

      Cost of Sales

      The principal components of cost of sales under U.S. GAAP for the year
ended December 31, 2001 are raw material costs, labor costs, depreciation
expenses and outsourced manufacturing fees. Cost of sales for the year ended
December 31, 2001 was (Won) 78,020 million, which were 22.1% less than the cost
of sales of (Won) 100,098 million for the year ended December 31, 2000, mainly
due to the sales downtown in 2001. (Won) 16,837 million of inventory valuation
loss was included in the cost of sales for the year ended December 31, 2001.

      Gross Profit (Loss)

      Negative margins for the year ended December 31, 2001 were (Won) 8,193
million, which was (Won) 51,738 million less than the gross profit of (Won)
43,545 million for the year ended December 31, 2000. The negative margins were
primarily due to lower sales volume during this


                                      -64-
<PAGE>

period. Unit fixed costs increase as sales volume decreases. Accordingly, our
gross profit ratio to sales decreased as sales volume decreased.

      Moreover, since export prices are higher than domestic prices, our gross
profit ratio to sales decreased as the proportion of exports to total sales
decreased in 2001 from 2000 due to the significant downturn in the semiconductor
and related industries. In addition, one of our major customers, Quad Systems
Corporation, filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code, which had a material effect on our export sales.

      Operating Expenses

      The principal components of our operating expenses under U.S. GAAP are
selling, general and administrative expenses, sales commissions and research and
development costs. Operating expenses decreased by (Won) 954 million, or 1.7%,
to (Won) 54,494 million in 2001 from (Won) 55,448 million in 2000.

      Operating expenses for the year ended December 31, 2001 included (Won)
10,267 million of bad debts. We discounted (Won) 6,923 million of trade
receivables in the process of collecting receivables in advance of the
collection dates and accounted for an additional (Won) 3,344 million of bad debt
expense as an allowance for doubtful trade receivables.

      In addition, salaries increased by (Won) 3,696 million, from (Won) 7,647
million in 2000 to (Won) 11,343 million in 2001, as a result of compensation
payments to employees who applied for early retirement. We initiated an early
retirement program with five months' compensation payments in November 2001 for
purposes of downsizing and successfully reduced the number of our employees to
324 as of December 31, 2001, from 521 as of December 31, 2000.

      However, the increase in operating expenses was offset in part by a (Won)
2,367 million decrease in sales commissions, from (Won) 5,894 million in 2000 to
(Won) 3,527 million in 2001, due to a decrease in sales volume for 2001.
Additionally, research and development costs for the year ended December 31,
2001 decreased by (Won) 4,839 million, from (Won) 21,208 million in 2000 to
(Won) 16,369 million in 2001.

      Operating Loss

      As a result of the foregoing factors, operating losses increased to (Won)
62,687 million in 2001 from (Won) 11,903 million in 2000.

      Net Income

      For the year ended December 31, 2001, we had a net loss of (Won) 84,811
million under U.S. GAAP, compared to net income of (Won) 9,290 million for the
year ended December 31, 2000.

Trend analysis of U.S. GAAP warranty costs

      Warranty costs based on U.S. GAAP were (Won) 607 million, (Won) 674
million and (Won) 1,856 million at December 31, 2002, 2001 and 2000,
respectively. The relatively large


                                      -65-
<PAGE>

warranty cost under U.S. GAAP for the year ended December 31, 2000, as compared
to other periods, resulted from an increase in sales volume in 2000.

Taxation

      We have benefited from, and may continue to benefit from, certain tax
benefits as set forth below:

      o     The Korean tax code provides for various special tax credits for
            expenses related to the development of technology and human
            resources and capital investments. In 2000, we benefited by (Won)
            2,861 million from such credits. However, we could not benefit from
            such tax credits in 2001 and 2002 because we did not realize taxable
            income for these years. Such tax credits can be carried forward for
            a period of four to seven years from the date of accrual. As of
            December 31, 2002, we had (Won) 7,747 million in tax credit
            carry-forwards expiring between 2004 and the end of 2009.

      o     SoftForum, one of our subsidiaries, received a special tax credit
            applicable to small- and medium-sized venture companies of (Won) 362
            million, (Won) 415 million and (Won) 266 million, for the years
            ended December 31, 2000, 2001 and 2002, respectively. The special
            tax credit equals 50% of income taxes payable. SoftForum can benefit
            from this tax credit up to 2004.

      o     Korean customs duty laws provide for the imposition of a general
            duty of 8% on certain equipment imported for use in the sector of
            the economy in which we operate. As a result, in the domestic market
            our semiconductor test handlers, SMD placement systems and TFT-LCD
            handlers and testers benefit from a competitive price advantage
            compared to similar products imported into Korea. Korean customs
            duty laws also provide for the imposition of a special duty of 18%
            on medium-speed general gantry type SMD placement systems with test
            times slower than 0.1 second per chip. This special duty had been
            applied until December 31, 2001, and further, has been imposed
            continuously thereafter. It is not known when it will expire.

B. Liquidity and Capital Resources

      We have traditionally met our working capital and capital requirements
principally from cash provided by operations, while addressing the remainder of
our requirements primarily through the issuance of common stock and short- and
long-term borrowings. We believe that our working capital is sufficient for our
present requirements.

      Net cash used in operating activities in 2002 was (Won) 24,340 million as
compared to net cash used in operating activities of (Won) 11,957 million in
2001 and (Won) 62,537 million in 2000. The use of cash in 2000 was primarily due
to the increase in accounts receivable and inventories, which resulted from the
market penetration of our new products, including SMD placement systems and
TFT-LCD handlers and testers during the periods. Since 2001, we have focused our
efforts on collecting receivables and reducing inventories. Despite our success
in decreasing the level of trade receivables and inventories, we realized
negative cash flow from operating activities, mainly due to our low sales volume
in 2001 and 2002.


                                      -66-
<PAGE>

      Cash and cash equivalents, short-term financial instruments and marketable
securities as of December 31, 2002, 2001 and 2000 were (Won) 70,202 million (29%
of total assets), (Won) 81,485 million (23% of total assets) and (Won) 44,198
million (12% of total assets), respectively. Short-term financial instruments
are comprised of time deposits and financial instruments readily convertible
into cash within one year. Marketable securities are primarily comprised of
Korean debt unit trusts. The increase for the year ended December 31, 2001 was
primarily due to SoftForum's initial public offering on the KOSDAQ, which
resulted in cash-inflows of (Won) 14,741 million. The decrease for the year
ended December 31, 2002 was mainly due to lower sales volume. In order to
compensate for this decrease in our cash flow, we made a divestiture of our
Kang-nam Mirae building for (Won) 60 billion as part of our corporate
restructuring.

      Cash provided by (used in) financing activities for the year ended
December 31, 2002 was (Won) (13,375) million. Cash used in financing activities
in 2002 was mainly due to a payment of short-term borrowings of (Won) 21,885
million. While short-term borrowings decreased, long-term borrowings increased
by (Won) 10,000 million for the year ended December 31, 2002. Cash provided by
financing activities for the years ended December 31, 2001 and 2000 were (Won)
71,210 million and (Won) 147,436 million, respectively. Cash provided by
financing activities in 2001 was mainly due to an increase in short-term
borrowings of (Won) 55,330 million, as well as net cash inflows from the
purchase and disposal of treasury stock of (Won) 17,448 million. For the year
ended December 31, 2000, (Won) 128,118 million was provided as a result of an
issuance of 7,475,000 ADSs representing 14,950,000 shares of common stock at US
$8.04 per share, or US $16.08 per ADS.

      Our capital expenditures for the years ended December 31, 2002, 2001 and
2000 were (Won) 3,238 million, (Won) 23,593 million and (Won) 70,408 million,
respectively. For the year ended December 31, 2002, we received (Won) 58,655
million for the disposal of an office building in Seoul, Korea and spent (Won)
3,238 million for capital expenditures. For the year ended December 31, 2001, we
spent (Won) 23,729 million in connection with the construction of a research and
development center in Hwasung City and other equipment, most of which relates to
this center. For the year ended December 31, 2000, we spent (Won) 70,545 million
in connection with the purchase of an office building in Seoul and other
equipment, most of which relates to such building in Seoul (i.e., repair and
interior construction). We do not have any material commitments for capital
expenditures other than our regular research and development activities.

      As of December 31, 2002, we had short-term credit lines with Korea
Exchange Bank, Shinhan Bank and Kookmin Bank, the aggregate limits of which were
(Won) 29,094 million, (Won) 9,000 million and (Won) 4,000 million, respectively.
The interest rates for our credit lines with Korea Exchange Bank are 3.0%-4.0%,
5.5%-5.7% and 8.4% respectively, and for our credit lines with Kookmin Bank and
Shinhan Bank, the interest rate is 7.4% and 5.7%, respectively. As of such date,
the amount of these credit lines being used were (Won) 20,542 million, (Won)
9,000 million and (Won) 4,000 million, respectively. These lines of credit will
expire within one year. However, we believe that such credit lines will be
renewed. A certain portion of our land and buildings is pledged as collateral
for the credit line with Korea Exchange Bank.


                                      -67-
<PAGE>

      As of December 31, 2002, we had long-term credit lines with Korea
Development Bank bearing interest at a rate of 4.98% and 6.70%, respectively.
The aggregate limit of these credit lines was (Won) 9,543 million and these are
due to expire in 2008. As of such date, we were utilizing the full amount of
this credit line. A certain portion of our land and buildings is pledged as
collateral for this credit line.

      The tables below sets forth our contractual obligations and commercial
commitments as of December 31, 2002.

Contractual Obligations as of December 31, 2002

                                                          (Unit: in million won)
<TABLE>
<CAPTION>
                                                     Payments Due by Period
                                     ------------------------------------------------------
                                              Less Than 1                           After 5
Contractual Obligations              Total       year       1-3 years   4-5 years    years
----------------------------------   ------   -----------   ---------   ---------   -------
<S>                                  <C>      <C>           <C>         <C>         <C>
Long-Term Debt                        9,543            --       4,175       4,772       596
Capital Lease Obligations             1,079           458         621          --        --
Other Long-Term Obligations              --            --          --          --        --
                                     ------   -----------   ---------   ---------   -------
Total Contractual Cash Obligations   10,622           458       4,796       4,772       596
</TABLE>

Other Commercial Commitments as of December 31, 2002

                                                          (Unit: in million won)
<TABLE>
<CAPTION>
                                           Amount of Commitment Expiration Per Period
                                     ------------------------------------------------------
                                              Less than 1                           Over 5
Other Commercial Commitments         Total       year       1-3 years   4-5 years    years
----------------------------------   ------   -----------   ---------   ---------   -------
<S>                                  <C>      <C>           <C>         <C>         <C>
Lines of Credit(1)                   42,094        42,094          --          --        --
Standby Letters of Credit             9,107         9,107          --          --        --
Guarantees                            2,353         2,353          --          --        --
Other Commercial Commitments             --            --          --          --        --
                                     ------   -----------   ---------   ---------   -------
Total Commercial Commitments         53,554        53,554          --          --        --
</TABLE>

(1)   Excluding a long-term credit line with Korea Development Bank of (Won)
      9,543 million included under Long-Term Debt.

      Traditionally, the functional currency for our operations has been the
Korean won. We believe that with overseas sales, our liquidity may be affected
by exchange rate fluctuations, especially rates for US dollars. However, for the
periods referred to above, there had been no material operating trends or
effects on liquidity as a result of fluctuations in currency exchange rates. We
do not use any hedge instruments to diversify these risks.

      We had total outstanding trade accounts receivable of (Won) 33,965
million, (Won) 36,409 million and (Won) 65,098 million, net of allowance, as of
December 31, 2002, 2001 and 2000, respectively. We have been focusing our
efforts on collecting outstanding trade accounts receivables and, compared to as
of December 31, 2000, successfully decreased the amount as of December 31, 2001
and 2002.


                                      -68-
<PAGE>

      As of December 31, 2002, a lawsuit relating to payment of construction
costs for a building, which we purchased in 2000, had been outstanding between
the former building owner and his creditors. In connection with this, we made a
payment of (Won) 6 billion to a court on behalf of the former building owner in
order to protect our assets and recorded the payment as an advance payment. In
2002, we sold this building to a third party. As of December 31, 2002, we
recorded an allowance for the aggregate of the advance payments and an
additional provision for guarantees of (Won) 650 million.

      In the future, we may need to raise additional funds to develop new and
enhanced products and to respond to competitive pressures. Such funds, if
necessary, would be raised through additional equity or debt financing, credit
facilities or disposal of properties, although no assurance can be given that we
will be able to obtain such financing, facilities or disposals on satisfactory
terms. We also plan for additional sales of stock in our subsidiaries in the
near future as part of our business strategy.

      As our working capital and capital requirements are principally satisfied
by cash provided by operations, circumstances affecting our operations will in
turn affect our liquidity. Our operations may be detrimentally affected by
several factors, including the highly cyclical nature of the electronics,
semiconductor and semiconductor related industries, intense competition,
economic downturn, especially in Korea, periodic industry downturn, loss of
customers and the lack of success of future products or business lines. Any of
these factors or a combination thereof could depress our sales revenue and
overall profitability and thereby constrain our operating cash flow. For an in
depth discussion of risks related to our operations see "Item 3--Key
Information--Risk Factors". For an in depth discussion of factors that have
historically affected our operating results, see "Item 5--Operating and
Financial Review and Prospects--Operating Results".

      We have provided and may in the future provide performance guarantees on
our affiliates' or third parties' behalf, in accordance with common business
practices in Korea. Accordingly, collection by a secured party on a guarantee
could affect our liquidity.

      We have provided collateral to Seoul Guarantee Insurance Company
guaranteeing the performance of certain of Mirae's significant customers for
their timely delivery of goods and satisfaction of their warranty obligations.
In the event Seoul Guarantee collects on our guarantees, our maximum liability
is (Won) 1,000 million. We have also provided a promissory note to a significant
customer guaranteeing our performance on a contract. In the event we fail to
satisfy our contractual obligations, the customer could utilize the guarantee to
cover its resulting losses. Our management does not presently anticipate any
losses as a result of any of the above guarantees.

      We have provided a blank promissory note to Samsung Card Co., Ltd. as
collateral for repayment of a lease payable, in accordance with common business
practices in Korea. In the event we fail to repay our lease payable, Samsung
Card could utilize the blank note. Our management does not presently anticipate
any such loss.

      The Company provided Mirae Online, Co., Ltd., one of its consolidated
subsidiaries, with a guarantee in the amount of (Won) 11 billion and U.S.
$700,000 for Mirae Online's short-term


                                      -69-
<PAGE>

borrowings. In connection with the subsidiary's obligations subsequent to 2001,
estimated losses Mirae would incur for payments to be made on behalf of Mirae
Online were recorded in the amount of (Won) 3,739 million at December 31, 2001,
as a provision of guarantees issued. However, in 2002, the guarantee expired,
and accordingly, the Company reversed the provision for guarantee of (Won) 3,739
million.

      The Company has provided its employee association with guarantees totaling
(Won) 1,056 million for their purchases of common stock of SoftForum, a
subsidiary of the Company.

C. Research and Development, Patents and Licenses, Etc.

      The semiconductor equipment industry is subject to rapid technological
change. We believe that continued and timely development and introduction of new
and enhanced products is essential for us to maintain our competitive position.

      Mirae's research and product development activities focus on developing
new generations of mechatronics equipment and software, and on advancing our
core competencies and current system features relating primarily to accuracy,
reliability and flexibility. Research and development for mechatronics products
is principally undertaken at the Mirae Research Center in Hwasung City, which
was built in 2002. Our application engineers who are responsible for the
customization of our mechatronics products based on specific customer
requirements and the investigation of new manufacturing processes and materials
were relocated to the Hwasung center as part of the centralization of our R&D
activities in this facility. SoftForum independently undertakes research and
development activities at their respective facilities in Seoul. As we develop
most of our essential technology in-house, we do not license outside technology
and, consequently, are not obligated to pay royalty fees.

      Our research engineers share ideas and information with different product
groups. We believe this has contributed to our development of new products and
advancement of existing products. For instance, most of the essential robotics
technologies in our SMD placement systems, particularly linear motor
engineering, intelligent control, software and feeder mechanics, are derived
from our expertise in designing our test handlers.

      Mirae has strategic relationships with Seoul National University and Korea
Advanced Institute of Science and Technology, conducting joint product
development projects and testing activities. In return for the developmental
assistance provided by both of these organizations, Mirae pays the associated
research fees. Patents granted and other intellectual property developed as a
result of these relationships are held solely by Mirae. These collaborative
efforts have resulted in the development of a number of software solutions and
products, including linear motor design software and its control technology
(which we developed with Seoul National University) and PCB assembly support
software for SMD placement systems (which we developed with Korea Advanced
Institute of Science and Technology). Six months are typically required to
produce a prototype from product design to sample engineering. We believe our
product development times may contribute to our ability to maintain our
competitive position in the global marketplace. If product cycles become shorter
due, for instance, to the rapid pace of technological advancements, we believe
that our research and development capabilities may help us maintain our
competitive position in the marketplace. In 2002, we


                                      -70-
<PAGE>

completed the development of new models of SMD placement systems and test
handlers, which are now ready for mass production. Each of the newly developed
SMD placement systems is a high-end chip placement system or a high-end
multifunctional placement system. Each of the new test handler models is a
memory test handler with 128 parallelism or a logic test handler with a high
speed indexing mechanism. We expect these new products to contribute to our
revenue and profits beginning in 2003.

      Historically, we have placed high strategic importance on fostering our
research and development expertise. As a result, our aggregate research and
development expenditures for the years ended December 31, 2002, 2001 and 2000
amounted to (Won) 9.3 billion, (Won) 16.0 billion and (Won) 20.7 billion,
respectively. Over the next several years, we plan to direct up to 15% of our
sales revenue to research and development expenditures, though this percentage
may vary depending upon our financial results in any given year.

      For information on our patents and other intellectual property, please
refer to "Item 4--Information on the Company--Business Overview--Intellectual
Property".

D. Trend Information

      See "Item 4--Information on the Company--Business Overview" and "Item
5--Operating and Financial Review and Prospects--Operating Results".

E. Critical Accounting Policies, Estimates and Judgments

      Our consolidated financial statements are prepared in accordance with
accounting principles that are generally accepted in Korea ("Korean GAAP"). The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue
and expenses as well as the disclosure of contingent assets and liabilities.
Management continually evaluates our estimates and judgments including those
related to allowances for doubtful accounts, inventories, useful lives of
property and equipment, investments, employee stock option compensation plans
and income taxes. Management bases their estimates and judgments on historical
experience and other factors that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe that of our significant accounting
policies, the following may involve a higher degree of judgment or complexity:

      Allowances for Doubtful Accounts

      An allowance for doubtful accounts is provided based on a review of the
status of individual receivable accounts at end of the year. We maintain
allowances for doubtful accounts for estimated losses that result from the
inability of our customers to make required payments. We base our allowances on
the likelihood of recoverability of accounts receivable based on past experience
and taking into account current collection trends that are expected to continue.
If economic or specific industry trends worsen beyond our estimates, we increase
our allowances for doubtful accounts by recording additional expense.


                                      -71-
<PAGE>

      Inventories

      Inventories are stated at the lower of cost, determined using the weighted
average method, or net realizable value. Inventories consist of raw materials,
finished goods, merchandise, work in-process and inventories in transit.

      Estimated Useful Lives of Property and Equipment

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

      The cost of maintenance and repairs is charged to operations as incurred;
expenditures which extend the useful life of the asset or result in increased
future economic benefits, such as increase in capacity and improvement in the
quality of output or standard of performance, are capitalized. When assets are
retired or otherwise disposed of, their carrying values and the related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in the current operations.

      Investments

      Investment securities of non-consolidated affiliated companies, in which
we have a 20% or more ownership interest, are stated using the equity method of
accounting, whereby our initial investment is recorded at cost. The carrying
value is subsequently increased or decreased to reflect our share of income or
loss of the investee and dividends received therefrom. Our share in net losses
of its affiliates is reflected only to the extent of its investment-carrying
amount.

      Other investments in equity securities of listed companies are stated at
fair value and the net unrealized gain or loss on investments in equity
securities of listed companies is recorded as a capital adjustment. Other
investments in equity securities of non-listed companies are stated at
acquisition cost. If the fair value (or the net asset value for non-listed
companies) of the investments declines significantly below the acquisition cost
and is not expected to recover, such investments are carried at fair value (or
net asset value) and the resulting unrealized loss on investments is charged to
current operations.

      Employee Stock Option Compensation Plan

      We adopted the fair value based method of accounting for the employee
stock option compensation plan, which was established, effective as of March 25,
2000, in order to reward the


                                      -72-
<PAGE>

performance of individual officers and other employees who have contributed, or
have the ability to contribute, significantly to us. Under the fair value based
method, compensation cost is measured at the grant date, based on the value of
the award, and is recognized over the service period. For stock options, fair
value is determined using an option-pricing model that takes into account the
stock price at the grant date, the exercise price, the expected life of the
option, the volatility of the underlying stock, the expected dividends and a
risk-free interest rate over the expected life of the option. However, as
permitted under Korean GAAP, we exclude the volatility factor in estimating the
value of its stock options, which results in measurement at minimum value. The
total compensation cost at the grant date is not subsequently adjusted for
changes in the price of the underlying stock or its volatility, the expected
life of the option, dividends on the stock, or the risk-free interest rate.

      Income Taxes

      Deferred tax assets and liabilities are recognized for the future tax
consequences of operating loss carry-forwards, tax credits and temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets are
recognized to the extent that they are expected to be realizable.

ITEM 6. Directors, Senior Management and Employees

A. Directors and Senior Management

      As of December 31, 2002, our Board of Directors consisted of four
Directors, two of whom are independent (or "outside") non-executive Directors.
Two new Directors were subsequently inaugurated, one Director in May 2003 and
one outside Director in March 2003. The functions and duties conferred on the
Board of Directors include:

      o     convening shareholders' meetings and providing reports at the
            shareholders' meetings;

      o     implementing the resolutions of the shareholders' meetings;

      o     determining our business plans and investment plans;

      o     formulating our annual budget and final accounts;

      o     formulating our proposals for dividend and bonus distributions and
            for the increase or reduction of capital; and

      o     exercising other powers, functions and duties as conferred by our
            Articles of Incorporation and By-laws.

      Our Board of Directors has the ultimate responsibility for the management
of our affairs. Under our Articles of Incorporation, our Board must consist of
at least three but not more than ten Directors, and at least one but not more
than two Statutory Auditors. The term of office for Directors is three years but
may be extended to the close of the ordinary general meeting of shareholders
convened in the last fiscal year ending during such term. Our Articles of
Incorporation preclude cumulative voting.


                                      -73-
<PAGE>

      In February 1998, in order to enhance the transparency of the management
of companies listed on the Korea Stock Exchange and to provide increased
investor protection, the Korea Stock Exchange enacted a regulation requiring all
listed companies to appoint the greater of (a) one outside Director and (b)
one-fourth (1/4) or more of the total number of Directors, as outside Directors.
If a listed company fails to comply with this requirement its common stock may
be de-listed from the Korea Stock Exchange. Pursuant to amendments promulgated
on January 21, 2000 to the Korean Securities and Exchange Act of 1962, as
amended, certain companies listed on the Korea Stock Exchange, to be designated
by a Presidential Decree, will be required to appoint one-half ( 1/2) or more,
but in any event, no fewer than three, of the total number of Directors as
outside Directors. Because the Presidential Decree has not yet been issued, we
do not know whether we will be required to appoint additional outside Directors.
There are no family relationships among the Directors or senior managers of
Mirae.

      Directors

      The following table provides certain information about the members of our
Board of Directors as of December 31, 2002 and June 30, 2003.

                           Year
     Name         Age   Appointed                  Position Held
---------------   ---   ---------   --------------------------------------------
Hyung Yun Lee      54      2001     Chief Executive Officer, President and
                                    Director of Mirae Corporation (appointed on
                                    May 2, 2003) and Chief Executive Officer of
                                    Mirae America, Inc.

Dae Hoon Chang     55      2001     Chief Executive Officer (resigned on May 2,
                                    2003) and Chairman of the Board of Directors

Soon Do Kwon       45      1999     Vice President, Chief Financial Officer and
                                    Director

Kwang Hyung Lee    48      1999     Outside Director

Hyun Kyo Jung      47      1999     Outside Director

Yeon Ho Lee        44      2003     Outside Director (appointed March 21, 2003)

Moon Soul Chung    65      1990     Former President and Chief Executive
                                    Officer, Honorary Chairman of the Board of
                                    Directors

Kwangil Koh        47      1998     Former Executive Vice President of SMD
                                    Placement Systems Division, Head of Mirae
                                    Research Center and Director (resigned on
                                    March 22, 2002)

Kook Jung Kwon     60      2000     Former Director (resigned on March 26, 2002)

Ho Gun Lee         61      2000     Former Outside Director (resigned on March
                                    26, 2002)

Soon Seok Jung     47      2002     Former Director and Member of audit
                                    committee (resigned on September 24, 2002)

      The principal occupation, employment and education histories of the
members of our Board are as follows:

      Hyung Yun Lee joined Mirae in 2001 as President of Mirae America, Inc. On
May 2, 2003 he was appointed President, Chief Executive Officer and as a
Director of Mirae Corporation. Prior to that, Mr. Lee worked for LG Electronics
Co., Ltd. (formerly Kum-Sung Electronics Co., Ltd.) as a general manager and as
President of Teradyne Korea and Schlumberger Korea. Mr. Lee received a B.S. in
Electronics from Seoul National University and a M.S. in Electricity from KAIST
(Korea Advanced Institute of Science & Technology).


                                      -74-
<PAGE>

      Dae Hoon Chang joined Mirae in 1999 as a Senior Executive Vice President
of Sales & Marketing and was appointed as a Director in October 1999 and Chief
Executive Officer in January 2001. He resigned as Chief Executive Officer in May
2003 and is currently the Chairman of the Board of Directors (elected January 4,
2001). Prior to joining Mirae, Mr. Chang was a branch manager of the customer
support division in Teradyne Korea from 1988 to 1996. Mr. Chang also worked at
Korea Semiconductor Co. from 1975 to 1978 in various positions, including as a
test engineer, and at LG Semicon Co., as a general manager. Mr. Chang received a
B.S. in Electrical Engineering from Korea University.

      Soon Do Kwon joined the Company as Chief Financial Officer in 1999 and was
elected as a Director in March 2000. In May 2003, he was appointed as Vice
President of the Company. Prior to joining Mirae, he was employed at Ssangyong
Oil and Refinery Co. from 1982 to 1999, during which time he held various
positions, including serving as an internal auditor. Mr. Kwon received a B.B.A.
from Korea University. Mr. Kwon is the Representative Director and Chief
Executive Officer of Mobile Game Co., Ltd., as well as the Chief Executive
Officer of SoftForum Co., Ltd. and Mirae Online Co., Ltd., each of which are
subsidiaries of Mirae.

      Kwang Hyung Lee was elected as an outside Director in 1999. He is a
professor at Korea Advanced Institute of Science and Technology. Mr. Lee
received a B.S. in Industrial Engineering from Seoul National University and a
Ph.D from Institut National Sciences Appliques de Lyon in Computer Science.

      Hyun Kyo Jung was elected as an outside Director in October 1999. He is a
professor at Seoul National University. Mr. Jung received a B.E., M.E. and Ph.D
from Seoul National University in Electrical Engineering.

      Yeon Ho Lee was elected as an outside Director in March 2003. He is a
certified public accountant and is currently employed by Kwang-Jang Accounting
Corporation. He received a Master in Business Administration from Yon sei
University.

      Moon Soul Chung is the founder of Mirae and served as President since its
inception in 1983 and as Chief Executive Officer, Chairman of the Board of
Directors and Representative Director since its incorporation in 1990. Mr. Chung
resigned from these positions in January 2001 and is currently named Honorary
Chairman of the Board of Directors. He received a B.A. in Religious Philosophy
from Wonkwang University.

      Kwangil Koh joined Mirae in 1997 as Executive Vice President and Head of
Mirae Research Center, and was elected as a Director in 1998. Prior to joining
Mirae, Mr. Koh worked at LG Industrial Electronics Co. from 1989 to 1997 in
various positions, including research and development manager. Mr. Koh also
worked at Goldstar Co. Research Institution from 1983 to 1985 as a researcher,
and at Korea Electronic and Communication Research Institute from 1982 to 1983
as a researcher. Mr. Koh received a B.S. and M.S. in Electrical Engineering from
Seoul National University and a Ph.D. from the University of Pittsburgh. Mr. Koh
resigned from all positions on March 22, 2002.


                                      -75-
<PAGE>

      Kook Jung Kwon was elected as a Director in March 2000. Mr. Kwon has
served as Mirae's auditor since March 1997. Mr. Kwon is a certified public
accountant and received his B.B.A. from Chun Buk University. Mr. Kwon resigned
on March 26, 2002.

      Ho Gun Lee was elected as an outside Director in March 2000 and was a
member of Mirae's audit committee. He is the Chief Executive Officer of BC Card
Corporation. Mr. Lee received his L.L.B. from Seoul National University and M.S.
from Kyunghee University in Tax Management. Mr. Lee resigned on March 26, 2002.

      Soon Seok Jung joined Mirae as a Director and audit committee member on
March 22, 2002. He was employed as the Branch General Manager of Kyobo
Securities Co., Ltd. from September 1999 to March 2002. He received a B.B.A.
from Seoul National University in Business Administration. Mr. Jung resigned on
September 24, 2002.

      Senior Managers

      The following table sets forth the age and position held by the senior
managers of Mirae as of the date of this annual report.

                           Year
     Name         Age   Appointed                  Position Held
---------------   ---   ---------   --------------------------------------------
Han Chul Shin      50      1997     Vice President of Quality Assurance Division
Yoon Hee Bae       51      1997     Managing Director of Sales Division
Hee Rak Beom       44      1997     Director of R&D Division
Heung Sun Hwang    44      2001     Director of Management Support Division
Hyun Tae Kyeong    40      2001     Director of Production Division
Ji Hyun Hwang      40      2001     Director of R&D Center

      The principal occupation, employment and education histories of the senior
managers are as follows:

      Han Chul Shin joined Mirae in 1997 as an Executive Officer in the R&D
Center and was appointed Vice President of the Quality Assurance Division in May
2003. Before joining Mirae, Mr. Shin worked at Teradyne Korea from 1985 to 1997
as a Director. From 1979 to 1985 Mr. Shin served as Section Chief at Samsung
Electronics Co., Ltd. Mr. Shin received a B.S. in Electrical Engineering from
Hanyang University.

      Yoon Hee Bae joined Mirae in 1997 as Director of New Business Development,
served as Director of Overseas Business Support from 1999 to 2001 and Executive
Director of the Customer Support Division from 2001 to 2003, and currently
serves as a Managing Director of the Sales Division. Before joining Mirae, Mr.
Bae worked as a Director of the Customer Support Division at Applied Materials,
Inc., Manager of Field Service Group LTX Korea Co. and Manager of Device Test
Engineering Group at Hynix Semiconductor Inc.

      Hee Rak Beom joined Mirae in 1997 as Director of the R&D Division. Prior
to joining Mirae, Mr. Beom worked at LG Electronics Co. R&D Center and at LG
Industrial Systems Co. as a general manager in the R&D Center. Mr. Beom received
a Ph.D in Mechanics from KAIST (Korea Advanced Institute of Science &
Technology).


                                      -76-
<PAGE>

      Heung Sun Hwang joined Mirae in 2000 as a Director of the Production
Division and currently holds the position of Director of the Management Support
Division. Prior to joining Mirae, Mr. Hwang worked for Samsung Electronics and
Samsung Techwin as a Unit Leader. Mr. Hwang graduated from Hongsung College.

      Hyun Tae Kyeong joined Mirae in 1997 and currently serves as Director of
the Production Division. Mr. Kyeong worked for LG Industrial Systems Ltd. as a
manager of research and development. Mr. Kyeong received a M.S. in Applied
Mechanics from Yonsei University.

      Ji Hyun Hwang joined Mirae in 1998 and currently serves as a Director of
the R&D Center. Mr. Hwang worked for LG Industrial Systems Ltd. as a senior
research engineer and received a M.S. in Precision Machinery Engineering from
Hang Yang University.

B. Compensation

Directors' and Senior Managers' Compensation

      We pay our Directors salaries and bonuses as determined by shareholder
resolutions. For the year ended December 31, 2002, the aggregate compensation
(salaries, bonuses and allowances) paid and accrued to all Directors and senior
managers was approximately (Won) 528 million. In addition, the aggregate amount
set aside for all Directors and senior managers for pension, retirement and
similar benefits in kind was approximately (Won) 493 million. The foregoing
amounts do not include amounts expended by us for automobiles made available to
our Directors and senior managers, expenses reimbursed to Directors and senior
managers (including business travel expenses and professional and business
association dues and expenses) and other benefits commonly reimbursed or paid by
companies in Korea.

Stock Options Granted to Employees, Directors and Senior Managers

      As of March 31, 2003, stock options to our employees representing
4,645,000 common shares of the Company remain outstanding. In March 2000, with
the approval of our shareholders, 2,052,000 stock options were granted at an
exercise price of (Won) 8,018 per share. However, all of the stock options
granted in 2000 were cancelled prior to the end of 2001. In March 2001, with the
approval of our shareholders, 2,480,000 stock options were granted at an
exercise price of (Won) 1,780 per share, which shall become exercisable on March
24, 2004 and expire on March 23, 2009. However, 725,000 stock options were
cancelled upon employees' resignation and 1,755,000 stock options remain
unissued. In June 2002, with the approval of our shareholders, 840,000 stock
options were granted at an exercise price of (Won) 1,610 per share, which shall
be exercisable on June 25, 2004 and expire on June 24, 2009. However, 60,000
stock options were cancelled upon employees' resignation and 780,000 stock
options remain unissued. In March 2003, with the approval of our shareholders,
2,110,000 stock options were granted at an exercise price of (Won) 1,217 per
share, which shall be exercisable on March 22, 2005 and expire on March 21,
2010.

      The Company utilizes its stock option plans to reward the performance of
its officers and other employees who have contributed and/or have the ability to
contribute significantly to the Company. When the length of employment is less
than two years after the grant of stock options, the Company may cancel the
stock options awarded. Upon exercise of stock options, in


                                      -77-
<PAGE>

accordance with the sole discretion of the Board of Directors, the Company may
(i) grant newly issued common stock, (ii) grant treasury stock or (iii) grant
the net difference in exercise price and market price with either cash or
treasury stock.

      As described in Note 2(t) of the Notes to Consolidated Financial
Statements, the Company adopted the fair value based method of accounting for
the stock option compensation plan, in which fair value is determined using the
Black-Scholes option-pricing model, without considering a volatility factor in
estimating the value of its stock options, as permitted under Korean GAAP. Under
these accounting policies, total compensation costs were measured at (Won) 768
million and (Won) 617 million for options granted in 2001 and 2002,
respectively, and are recognized over the service period (2 years). Compensation
cost amounting to (Won) 198 million and (Won) 159 million in 2001 and 2002,
respectively, was recognized.

                           List of Stock Option Awards
                        to Directors and Senior Managers

        Name                        Position                      Stock Option *
----------------   --------------------------------------------   --------------
Hyung Yun Lee      CEO & President                                        50,000
Soon Do Kwon       Vice President & CFO                                  100,000
Dae Hoon Chang     Chairman of Board of Directors                        200,000
Han Chul Shin      Vice President of Quality Assurance Division          300,000
Yoon Hee Bae       Managing Director of Sales Division                   230,000
Heung Sun Hwang    Director of Business Support Division                 230,000
Hee Rak Beom       Director of R&D Division                              150,000
Hyun Tae Kyeong    Director of Productions Division                      150,000
Ji Hyun Hwang      Director                                              150,000
Kwang Hyung Lee    Outside Director                                       15,000
Hyun Kyo Jung      Outside Director                                       15,000
Jeong Yul Jeon     General Manager                                       100,000
Robert Laurent     General Manager                                       100,000
Min Suke Suh       General Manager                                        80,000
Jae Myeong Song    General Manager                                        70,000
Gun Hong Yang      General Manager                                        70,000
Suk Joo Ko         General Manager                                        70,000
Sang Doo Byun      General Manager                                        70,000
Je Il Lee          General Manager                                        70,000
Mi Ri Chung        General Manager                                        70,000
Sung Woo Hong      General Manager                                        50,000
Jong Chul Park     General Manager                                        50,000
Young Taek Kim     General Manager                                        50,000
Do Hyun Kim        General Manager                                        20,000

----------

* all stock options are for our common shares.


                                      -78-
<PAGE>

C. Board Practice

Audit and Other Committees

      Pursuant to the rules of The Nasdaq National Market, our Board of
Directors established an Audit Committee in November 1999 to review Mirae's
financial reporting, administrative systems and internal control systems and
structure. The Audit Committee also reviews Mirae's policies relating to the
avoidance of conflicts of interest. Our Audit Committee members are Mr.
Kwang-Hyung Lee, Mr. Hyun-Kyo Jung and Mr. Yeon-Ho Lee. Pursuant to an amendment
to the Korean Commercial Code, effective as of December 31, 1999, certain
companies may establish an Audit Committee in lieu of a statutory auditor. In
addition, pursuant to the January 2000 amendments to the Korean Securities and
Exchange Act, certain companies listed on the Korea Stock Exchange, which will
be designated by Presidential Decree, will be required to establish an Audit
Committee. In each case, the Audit Committee must consist of three or more
members, two-thirds or more being outside Directors.

      The following table sets forth the details of our Audit Committee members.

                                                                          Year
     Name                             Career                           Appointed
---------------   --------------------------------------------------   ---------
Kwang Hyung Lee   Ph.D in Computer Science from Institut National         1999
                  Sciences Appliques de Lyon
                  Professor of Korea Advanced Institute of Science
                  and Technology (KAIST)

Hyun Kyo Jung     Ph.D in Electrical Engineering from Seoul National      1999
                  University
                  Professor of Seoul National University

Yeon Ho Lee       M.B.A. from Yon sei University, Certified Public        2003
                  Accountant
                  Kwang-Jang Accounting Firm

Expiration of Current Directorship Terms

      The following table sets forth the dates of expiration of the directorship
terms of our current Directors.

                             Name                                     Date
--------------------------------------------------------------   ---------------
Hyung Yun Lee ................................................   March 20, 2006
Soon Do Kwon .................................................   March 20, 2006
Dae Hoon Chang ...............................................   October 5, 2005
Kwang Hyung Lee ..............................................   March 25, 2005
Hyun Kyo Jung ................................................   October 5, 2005
Yeon Ho Lee ..................................................   March 20, 2006


                                      -79-
<PAGE>

D. Employees

      Competition for technical personnel in our industry is intense. We believe
that we have been successful in recruiting qualified employees, and that our
future success depends in part on our continued ability to hire, assimilate and
retain qualified personnel.

      We maintain a retirement plan, as required by Korean labor law, pursuant
to which an employee terminating his or her employment after one year or more of
service is entitled to receive a lump-sum payment based on length of service and
average monthly compensation over the employee's final three months. We have an
employee stock ownership association through which members may, with certain
exceptions, purchase up to an aggregate of 20% of any shares of Mirae offered
publicly in Korea.

      Our employees do not belong to any labor unions. We have not been subject
to any strikes or other labor disturbances that have interfered with our
operations, and we believe that our relations with our employees are good.

      The following table sets forth the number of our employees by department
as of May 31, 2003. Our employees decreased in number by 10.8% from December 31,
2001 when we had 324 employees. This downsizing was a part of our corporate
restructuring.

                                                            Number of Employees
                                                            --------------------
Management & Administration .............................                     62
Research & Development ..................................                     75
Manufacturing ...........................................                     89
Sales & Marketing .......................................                     63
Total ...................................................                    289

E. Share Ownership

      The following table sets forth the ownership of our common shares by our
Directors and senior managers:

                                                                   Percentage
                                     Number of shares issued       Shareholder
Shareholder                              and outstanding          ownership(2)
----------------------------------   -----------------------      -------------
Dae Hoon Chang ...................                    29,850               0.02%
Soon Do Kwon .....................                    22,000               0.02%
Heung Sun Hwang ..................                    15,000               0.01%
Moon Soul Chung ..................                20,632,862(1)           16.55%

----------

(1)   Mr. Chung resigned as of January 3, 2001. This number includes 18,604,414
      (14.93%) held by Moon Soul Chung, 1,453,392 (1.17%) held by Boon Soon Yang
      (wife), 229,847 (0.18%) held by Eun Kyoung Chung (daughter), 114,803
      (0.09%) held by Eun Hee Chung (daughter), 115,203 (0.09%) held by Jin Man
      Chung (son) and 115,203 (0.09%) held by Ki Won Chung (son).

(2)   Includes the 1,760,000 shares of stock held in treasury by the Company.


                                      -80-
<PAGE>

      For information regarding ownership of stock options to acquire our common
shares which are held by our Directors, senior managers and employees, please
refer to "Item 6--Directors, Senior Management and
Employees--Compensation--Stock Options Granted to Employees, Directors and
Senior Managers".

ITEM 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

      To the best of our knowledge, our only major shareholder (i.e.,
shareholder beneficially owning five percent (5%) or more of our common shares)
is Mr. Moon Soul Chung, our former Chairman of the Board, President and Chief
Executive Officer until January 3, 2001. Mr. Chung's voting rights as a holder
of Mirae common shares do not differ from the rights of our other shareholders.
For a description of Mr. Chung's shareholdings, please see "Item 6--Directors,
Senior Management and Employees--Share Ownership".

B. Related Party Transactions

      Mirae believes that all of the transactions described below have terms
that are no more favorable to either party than had such transactions been
negotiated between independent parties. Each transaction was entered into by the
management of the Company in pursuit of the synergistic benefits for both
parties.

      o     In May 1999, Mirae agreed to provide SK Communications (formerly
            Lycos Korea) with a loan of up to (Won) 6,250 million pursuant to
            the joint venture agreement between Mirae and Lycos, Inc. that
            established Lycos Korea. The Company received interest of (Won) 688
            million in 2001 and repayment of the principal in full of (Won)
            6,250 million together with interest of (Won) 359 million on August
            22, 2002. A payment guarantee by us of (Won) 12,477 million on
            behalf of Lycos Korea to Lycos, Inc. and Lycos Business Trust I
            (U.S.A.) was dissolved when SK Telecom Co., Ltd. purchased Lycos
            Inc.'s interest in Lycos Korea. In addition, the Company received
            total rental fees of (Won) 130 million and (Won) 266 million in 2001
            and 2002, respectively, from SK Communications until its head office
            moved to another location in 2002.

      o     Mirae sold (Won) 1,783 million of SMD placement systems to Mirae
            America, Inc., the Company's affiliate in the United States, and
            paid to Mirae America sales commissions of (Won) 26 million in 2002.
            As of December 2002, the Company had a balance of (Won) 1,977
            million in accounts receivable, (Won) 1,102 million of advance
            payments and (Won) 2 million of accrued expenses in connection with
            its dealings with Mirae America.

      o     In 2002, Mirae received total rental fees of (Won) 253 million from
            Mobile Game Co., Ltd., the Company's affiliate, for its use of our
            Kang-nam Building in Seoul, Korea, which we then sold in June 2002.
            As of December 31, 2002, the Company had (Won) 7 million of other
            accounts receivable and (Won) 2 million of advance payments.


                                      -81-
<PAGE>

      o     Mirae imported and sold telecommunication devices, including PDAs,
            to Cyber Bank Co., Ltd. The total amounts of sales were (Won) 5,571
            million and (Won) 3,974 million in 2001 and 2002, respectively. In
            addition, the Company received interest income of (Won) 235 million
            due on a late payment of (Won) 2,382 million in accounts receivable
            in 2001. As of December 31, 2002, the Company had a balance of (Won)
            6,753 million of accounts receivable for Cyber Bank.

      o     The Company provided short-term loans of (Won) 800 million and (Won)
            1,200 million in 2001 and 2002, respectively, to a subsidiary, Mirae
            Online, Co., Ltd. in order to enhance its competitiveness in
            providing program broadcasting and a home shopping channel service.
            The full amount of the principal of (Won) 2,000 million and interest
            (9%) of (Won) 109 million were paid to us on April 19, 2002. In
            addition, the Company received total rental fees of (Won) 93 million
            in 2002 from Mirae Online for its lease of office space in our
            building in Bundang City, Korea.

      o     The Company also provided Mirae Online with a guarantee in the
            amount of (Won) 11 billion and U.S. $700,000 for Mirae Online's
            short-term borrowings. In connection with the subsidiary's
            obligations subsequent to 2001, estimated losses Mirae would incur
            for payments to be made on behalf of Mirae Online were recorded in
            the amount of (Won) 3,739 million at December 31, 2001, as a
            provision of guarantees issued. However, in 2002, the guarantee
            expired, and accordingly, the Company reversed the provision for
            guarantee of (Won) 3,739 million.

      o     On December 16, 2002, SoftForum made an acquisition of 359,997
            common shares of Alpha Logics Co., Ltd. at (Won) 5,000 per share, or
            (Won) 1,800 million, from Cyber Bank. This acquisition was part of
            management strategy to enhance SoftForum's security market,
            including forgery-free technology.

      o     As of December 31, 2002, the Company's major shareholder, Mr. Moon
            Soul Chung, had a 29.8%-ownership of Testech Co., Ltd. In November
            2001, the Company sold its fingerprint system division to Testech
            and in connection therewith, received (Won) 1,250 million in 2002.
            The Company sold (Won) 88 million of property and equipment to
            Testech and received (Won) 10 million of other income for acting as
            a patent rights agency for Testech in 2002. In the same year, the
            Company purchased (Won) 1,784 million of raw materials from Testech
            and paid (Won) 15 million for services provided by Testech. As of
            December 31, 2002, the Company had (Won) 1,004 million of accounts
            payable to Testech.

      o     We have reinstated a branch of the Company in Seoul, Korea with 386
            square meters of leased office space in a building owned by
            SoftForum located in Dokok-dong, Kang Nam-gu. Our lease runs from
            April 13, 2003 through April 13, 2005. A guarantee deposit of (Won)
            386 million was paid by us to SoftForum.


                                      -82-
<PAGE>

ITEM 8. Financial Information

A. Consolidated Statements And Other Financial Information

      See page F-1 to F-63 following Item 19.

Legal Proceedings

      Our exclusive distributor for SMT placement systems until 2000 in North
America, South America, Europe, Africa and Israel, Quad Systems Corporation,
filed a voluntary petition for reorganization on December 18, 2000 under Chapter
11 of the U.S. Bankruptcy Code. As a major creditor of Quad Systems, we were an
interested party actively participating in such proceedings. During the
settlement period, we were barred from selling our machines in the Americas and
Europe. The bankruptcy settlement took place in July 2001.

      As of December 31, 2002, a lawsuit relating to payment of construction
costs for a building in Seoul, Korea we sold in 2002 had been outstanding
between the former building owner and his creditors. In connection with this, we
made a payment of (Won) 6 billion to a court on behalf of the former building
owner in order to protect our assets and recorded the payment as an advance
payment. As of December 31, 2002, we recorded an allowance for the aggregate of
the advance payments and an additional provision for guarantees of (Won) 650
million.

      Presently, we are a plaintiff in a patent infringement suit in which we
are claiming that the line of memory module test handlers of the defendant, Yuil
Semicon Company, infringe on our patents. We obtained an injunction prohibiting
the defendant from selling any of these products and are seeking in excess of 1
billion won in damages. We expect resolution of this litigation by the end of
2003.

Dividend Distribution Policy

      Our Board of Directors will determine the payment of dividends, if any,
with respect to our shares on a per share basis. Any final dividend for a
financial year shall be subject to shareholders' approval. A decision to declare
or to pay any dividends in the future, and the amount of any dividends, will
depend on our results of operations, cash flows, financial condition, the
payment by our subsidiaries of cash dividends to us, future prospects and other
factors which our Directors may determine are important.

B. Significant Changes

      None.

ITEM 9. The Offer and Listing

      Not Applicable, except for Item 9A.4 and Item 9C.

      Shares of our common stock are traded in Korea on the Korea Stock
Exchange. Our American Depositary Shares (ADSs) are listed on The Nasdaq
National Market under the symbol "MRAE".


                                      -83-
<PAGE>

      Each ADS represents two shares of our common stock. ADRs evidencing ADSs
are issued by The Bank of New York as Depositary.

      The table below shows the high and low closing prices (in won and dollars,
as applicable) of trading activity on the Korea Stock Exchange for our common
stock since 1997 and on The Nasdaq National Market for our ADSs since November
17, 1999. With respect to our common stock, the share prices and average daily
trading volume have been adjusted to reflect a 50 for one stock split effected
on March 2, 1998. Liquidity of our ADSs may be limited as an active market for
these securities has not yet developed.

                                     (KSE figures in won, NASDAQ figures in US$)

                                                      KSE             NASDAQ
                                                 --------------   --------------
Year                                              High     Low     High     Low
----------------------------------------------   ------   -----   ------   -----
2002                                              3,480   1,250     5.75    2.00
2001                                              2,840     740    3.625    1.37
2000                                             11,300   1,260    23.00   1.063
1999                                             11,300   3,050    16.75   15.00
1998                                              6,940   1,840

                                                       KSE            NASDAQ
                                                 --------------   --------------
Year                                   Quarter    High     Low     High     Low
------------------------------------   -------   ------   -----   ------   -----
2002                                         1    3,480   2,105     5.75    3.30
                                             2    2,390   1,110     3.56    2.00
                                             3    2,410   1,250     3.90    2.00
                                             4    1,850   1,255     3.58    2.00
2001                                         1    2,580   1,260    3.625   1.875
                                             2    1,970   1,595     2.98   2.125
                                             3    1,665     740     2.45    1.37
                                             4    2,840     880     3.09     1.4

                                                      KSE             NASDAQ
                                                 --------------   --------------
Month                                             High     Low     High     Low
----------------------------------------------   ------   -----   ------   -----
May 2003                                          1,590   1,270     2.57    2.04
April 2003                                        1,510   1,095     1.95    1.75
March 2003                                        1,290   1,055     1.88    1.69
February 2003                                     1,410   1,130     1.96    1.81
January 2003                                      1,500   1,180     2.75    1.96
December 2002                                     1,715   1,255     3.58    2.05

ITEM 10. Additional Information

A. Share Capital

      Not applicable.


                                      -84-
<PAGE>

B. Articles of Incorporation and By Laws

      Article 2 of our Articles of Incorporation states our business objectives
as include the following: the manufacture and sale of semiconductor equipment,
automation equipment, electronic precision instruments, manufacture and sale of
software and other products, the leasing of real estate, the data base business
(internet related business), the electronic communication sales business
(electronic commerce related business), the cable broadcasting business, and
business incidental or related to the foregoing.

      No Director with a special interest with respect to a resolution of the
Board of Directors may exercise his voting right. The remuneration for Directors
and auditors is determined by resolution of the general meetings of
shareholders. Severance allowances for Directors and auditors are paid in
accordance with the Officer's Severance Pay Regulation of the Company, adopted
by resolution of a general meeting of shareholders.

      Summary information relating to the Company's capital stock and annual
meetings are hereby incorporated by reference to the information in our
registration statement on Form F-1 (Registration No. 333-11390), to which our
Articles of Incorporation and By Laws were filed as exhibits.

C. Material Contracts

      On May 24, 2002, we agreed to sell 17,838 square meters of space in a
building located in Seoul, Korea to Pagoda Academy Company, an unrelated party,
for (Won) 60,000 million. We used this space for our Internet venture companies
and subsequently divested the property as part of a corporate restructuring
process we undertook in order to enhance our mechatronics business. We received
full consideration for the sale in May and June 2002.

      As of December 31, 2002, a lawsuit relating to payment of construction
costs for this building had been outstanding between the former building owner
and his creditors. In connection with this, we made a payment of (Won) 6 billion
to a court on behalf of the former building owner in order to protect our assets
and recorded the payment as an advance payment. As of December 31, 2002, we
recorded an allowance for the aggregate of the advance payments and an
additional provision for guarantees of (Won) 650 million.

D. Exchange Controls

General

      Prior to April 1, 1999, investments in Korean securities by non-residents
and issuance of securities outside of Korea by Korean companies were regulated
by the Foreign Exchange Management Act and the Presidential Decrees and
regulations thereunder (collectively, the "Foreign Exchange Management Laws").
On April 1, 1999, the Foreign Exchange Management Laws were abolished and the
Foreign Exchange Transaction Act and the Presidential Decree and regulations
thereunder (collectively, the "Foreign Exchange Transaction Laws") were enacted.
Under the Foreign Exchange Transaction Laws, many restrictions on foreign
exchange transactions have been deregulated and many currency and capital
transactions have been liberalized. Although non-residents may invest in Korean
securities only to the extent specially


                                      -85-
<PAGE>

allowed by such laws or otherwise permitted by the Minister of Finance and
Economy, many approval requirements have become more lenient. However, the
Government has instituted certain measures to curb capital flight and
international money laundering which may result from liberalization of capital
transfer. The Financial Supervisory Commission ("FSC") also has adopted,
pursuant to its authority under the Korean Securities and Exchange Act,
regulations that restrict investment by foreigners (as defined therein) in
Korean securities and regulate issuance of securities outside Korea by Korean
companies.

      Under the Foreign Exchange Transaction Laws, if the Government deems that
certain emergency circumstances, including, but not limited to, sudden
fluctuations in interest rates or exchange rates, extreme difficulty in
stabilizing the balance of payment or a substantial disturbance in the Korean
financial and capital markets, are likely to occur, it may impose any necessary
restrictions, other than in respect of foreign investments prescribed under the
Foreign Investment Promotion Act, such as requiring foreign investors to obtain
prior approval from the Minister of Finance and Economy ("MOFE") for the
acquisition of Korean securities or for the repatriation of interest, dividends
or sales proceeds arising from Korean securities or from disposition of such
securities.

Government Review of Issuance of ADSs

      In order for the Company to offer for purchase common stock held in
treasury in the form of ADSs or issue common stock represented by the ADSs, the
Company is required to file a prior report of such offer or issuance with the
MOFE (in case the amount exceeds $30 million) or a designated foreign exchange
bank (in case the amount is $30 million or less). No further Korean government
approval is necessary for the initial offering and issuance of the ADSs.

      In order for a depositary to receive any existing common stock from
holders of such common stock (other than from the Company) for the purpose of
issuance of depositary receipts representing such common stock, the Depositary
would be required to obtain the Company's consent. The Company has agreed that
it will consent to any deposit if the deposit will not violate applicable law.
No assurance can be given that the Company will always grant such consent.
Therefore, a holder of ADSs who surrenders ADSs and withdraws common stock may
not be permitted subsequently to deposit such common stock and obtain ADSs.

Reporting Requirements for Holders of Substantial Interests

      Under the Korean Securities and Exchange Act, any person whose direct or
beneficial ownership of common stock (whether in the form of common stock or
ADSs), certificates representing the right to subscribe for common stock and
certain equity related debt securities such as convertible bonds, bonds with
warrants and certain exchangeable bonds (collectively, the "Equity Securities"),
together with any Equity Securities beneficially owned by certain related
persons or by any person acting in concert with such person, accounts for 5% or
more of the aggregate of the total issued shares of common stock and those other
Equity Securities issued by the Company, is required to report the status of
such holdings to the FSC and the Korea Stock Exchange within five business days
after reaching the 5% ownership interest. Moreover, any change in the ownership
interest subsequent to such report which equals or exceeds 1% of the aggregate
of the total issued shares of common stock and those other Equity Securities
issued by


                                      -86-
<PAGE>

the Company is required to be reported to the FSC and the Korea Stock Exchange
within five business days from the date of such change.

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

Restrictions Applicable to ADSs

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

      Persons who have acquired common stock as a result of the withdrawal of
common stock underlying the ADSs may exercise all shareholder rights without any
further governmental approval.

Restrictions Applicable to Common Stock

      As a result of amendments to the Foreign Exchange Transaction Laws and FSC
regulations (together, the "FSC Rules") adopted in connection with the stock
market opening from January 1992 and thereafter, foreigners are permitted to
invest, with certain exceptions and subject to certain procedural requirements,
in all shares of Korean companies unless prohibited by specific laws. Foreign
investors may trade shares listed on the Korea Stock Exchange or registered on
the Korea Securities Dealers Association Automated Quotation system (the
"KOSDAQ") only through the Korea Stock Exchange or through the KOSDAQ except in
certain limited circumstances, including odd lot trading of shares, acquisition
of shares ("Converted Shares") by exercise of warrant, conversion right under
convertible bonds or withdrawal right under depositary receipts issued outside
of Korea by a Korean company, acquisition of shares as a result of exercising
allocable conversion rights attached to certain eligible domestic convertible
bonds issued by listed companies, acquisition of shares as a result of
inheritance, donation, bequest or exercise of shareholders' rights (including
preemptive rights or rights to participate in free distributions and receive
dividends). Odd lot trading of shares outside the Korea Stock Exchange or the
KOSDAQ must involve a licensed securities company in Korea as the other party.
Foreigners are prohibited from engaging in margin transactions with respect to
shares which are subject to a foreign ownership limit.

      The FSC Rules require a foreign investor who wishes to invest in shares on
the Korea Stock Exchange or the KOSDAQ (including Converted Shares) to register
its identity with the Financial Supervisory Service prior to making any such
investment; provided, however, that such registration requirement does not apply
to foreign investors who acquire Converted Shares with the intention of selling
such Converted Shares within three months from the date of


                                      -87-
<PAGE>

acquisition thereof. Upon registration, the Financial Supervisory Service will
issue to the foreign investor an Investment Registration Card which must be
presented each time the foreign investor opens a brokerage account with a
securities company. Foreigners eligible to obtain an Investment Registration
Card include foreign nationals (who are individuals with residence abroad for
six months or more), foreign governments, foreign municipal authorities, foreign
public institutions, international financial institutions or similar
international organizations, corporations incorporated under foreign laws and
any person in any additional category designated by the decree of the MOFE. All
Korean branches of a foreign corporation as a group are treated as a separate
foreigner from the head office of the foreign corporation. However, a foreign
corporation or a depositary issuing depositary receipts may obtain one or more
Investment Registration Cards in its name in certain circumstances as described
in the relevant regulations.

      Upon a foreign investor's purchase of shares through the Korea Stock
Exchange or the KOSDAQ, no separate report by the investor is required because
the Investment Registration Card system is designed to control and oversee
foreign investment through a computer system. However, a foreign investor's
acquisition or sale of shares outside the Korea Stock Exchange or the KOSDAQ (as
discussed above) must be reported by the foreign investor or his standing proxy
to the Governor of the Financial Supervisory Service at the time of each such
acquisition or sale; provided, however, that a foreign investor must ensure that
any acquisition or sale by it of shares outside the Korea Stock Exchange or the
KOSDAQ, in the case of trades in connection with a tender offer, odd lot trading
of shares, or trades in which the counterpart is a securities company, is
reported to the Governor of the Financial Supervisory Service by the securities
company engaged to facilitate such transaction. A foreign investor must appoint
one or more standing proxies from among the Korea Securities Depository, foreign
exchange banks (including domestic branches of foreign banks), securities
companies (including domestic branches of foreign securities companies),
investment management companies and internationally recognized foreign
custodians to exercise shareholders' rights, place an order to sell or purchase
shares or perform any matters related to the foregoing activities if the foreign
investor does not perform these activities himself. 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 cases deemed inevitable
by reason of conflict between laws of Korea and the home country of such foreign
investor.

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

      Under the FSC Rules, with certain exceptions, all foreign investors may
acquire shares of a Korean company without being subject to any foreign
investment ceiling. As one such


                                      -88-
<PAGE>

exception, certain designated public corporations are subject to a 40% ceiling
on acquisitions of shares by foreigners in the aggregate. Of the Korean
companies listed on the Korea Stock Exchange, Korea Electric Power Corporation
has been so designated. The FSC may increase or decrease these percentages if it
deems necessary for the public interest, protection of investors or industrial
policy. There currently is no foreign investment ceiling that applies to our
shares. Furthermore, an investment by a foreign investor of not less than 10% of
the outstanding shares of a Korean company is defined as a direct foreign
investment under the Foreign Investment Promotion Law, which is, in general,
subject to report to the Ministry of Commerce, Industry and Energy or a foreign
exchange bank.

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

      Dividends on common stock are paid in won. No governmental approval is
required for foreign investors to receive dividends on, or the won proceeds of
the sale of, any such shares to be paid, received and retained in Korea.
Dividends paid on, and the won proceeds of the sale of, any such shares held by
a non-resident of Korea must be deposited either in a Won account with the
investor's securities company or his Won Account. Funds in the investor's Won
Account may be transferred to his Foreign Currency Account or withdrawn for
local living expenses (provided that any withdrawal of local living expenses
exceeding a certain limit will be reported to the tax authorities by the foreign
exchange bank at which the Won Account is maintained). Funds in the Won Account
may also be used for future investment in shares or for payment of the
subscription price of new shares obtained through the exercise of preemptive
rights.

      In 1995, certain designated securities companies were allowed to open
foreign currency accounts and Won accounts with foreign exchange banks
exclusively for accommodating foreign investors' stock investments in Korea.
Through such accounts, these designated securities companies may enter into
foreign exchange transactions on a limited basis, such as conversion of foreign
currency funds and won funds, either as a counterpart to or on behalf of foreign
investors, without such investors having to open their own accounts with foreign
exchange banks.

      The Korean Securities and Exchange Act was amended several times from
January 1997 through April 2002 to internationalize the systems for issuing and
distributing securities and the systems for mergers and acquisitions of
businesses, to enhance the autonomy of the securities industry through
deregulation and to strengthen the independence of auditors and the protection
of minority shareholders. The amendments made the tender offer requirements more
specific by requiring a tender offer where the purchaser and the persons who
have a special relationship with the purchaser will hold 5% or more of the total
issued and outstanding shares concerned as a result of the purchase of the
shares outside the Korea Stock Exchange or the KOSDAQ from a certain number of
persons, enhanced the rights of minority shareholders, repealed certain


                                      -89-
<PAGE>

limitations for the acquisition of its own shares by a listed company, permitted
stock splits by companies of shares listed on the Korea Stock Exchange or
registered with the KOSDAQ with a par value of not less than (Won) 100 and
permitted the payment of interim dividends by companies listed on the Korea
Stock Exchange or registered with the KOSDAQ if provided for in their articles
of incorporation. In addition, to strengthen the protection of shareholders, the
amendments also include the requirement that companies listed on the Korea Stock
Exchange and companies exceeding a certain size that are registered with the
KOSDAQ appoint a certain minimum number of outside directors to their boards,
and companies listed on the Korea Stock Exchange or registered with the KOSDAQ
that exceed a certain size are required to maintain an audit committee.

E. Taxation

Korean Taxation

      The following is a summary of the principal Korean tax consequences to
owners of ADSs 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 considerations 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 common stock,
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 purpose of Korean taxation of distributions made on common stock
represented by ADSs, a non-resident holder will be treated as the owner of the
common stock represented by such ADS. 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% (which includes a 10% local tax) 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 the common stock. In
order to obtain a reduced rate of withholding tax pursuant to an applicable tax
treaty, the non-resident holder must submit to the Company, prior to the
dividend payment date, such evidence of tax residence as may be required by the
Korean tax authorities. Evidence of tax residence may be submitted to the
Company through the Depositary. Excess taxes withheld are not automatically
recoverable even if the non-resident holder subsequently produces evidence that
it was entitled to have taxes withheld at a lower rate.

      Under the income tax treaty between the United States and Korea (the "U.S.
Korea Tax Treaty"), the maximum rate of withholding on dividends paid to U.S.
residents eligible for treaty benefits generally is 15% (10% if the recipient of
the dividends has owned at least 10% of the outstanding shares of the voting
stock of the Company and certain other conditions are satisfied) which does not
include withholding of local tax. If local withholding tax is included, the


                                      -90-
<PAGE>

maximum rate of withholding is generally 16.5%. A beneficial owner of ADSs or
common stock generally will be entitled to benefits under the U.S. Korea Tax
Treaty if it (i) is an individual U.S. resident, a U.S. corporation, or a
partnership, estate or trust to the extent its income is subject to taxation in
the United States as the income of a U.S. resident; (ii) is not also a resident
of Korea for purposes of the U.S. Korea Tax Treaty; (iii) is not subject to an
anti treaty shopping article that applies in limited circumstances; and (iv)
does not hold ADSs or common stock in connection with the conduct of business in
Korea through a permanent establishment or the performance of independent
personal services in Korea through a fixed base.

      Distributions of free shares representing a transfer of certain capital
reserves or asset revaluation reserves into paid in capital may be subject to
Korean tax.

Taxation of Capital Gains

      In the absence of any applicable treaty, a non-resident holder will
generally be subject to Korean taxation on capital gains realized on a sale of
ADSs or of common stock acquired as a result of a withdrawal of common stock
underlying ADSs. However, capital gains earned by a non-resident without a
permanent establishment in Korea from the sale of shares listed on the Korea
Stock Exchange or registered with the KOSDAQ of a Korean company (such as the
common stock or ADSs) may be exempt from Korean withholding tax if the
non-resident seller, together with certain of its related parties, did not own
or has not owned 25% or more of the total issued and outstanding shares of the
company at any time during the year of the transfer date and during the five
years before the year within which the transfer occurs. Under the Special Tax
Treatment Control Law, capital gains earned by a non-resident holder (whether or
not they have a permanent establishment in Korea) from the transfer outside
Korea of securities issued outside Korea by a Korean company which are
denominated in a foreign currency or satisfy certain criteria established by the
Ministry of Finance and Economy are exempt from Korean taxation. The Korean tax
authorities have issued a tax ruling confirming that depositary receipts (which
would include the ADSs) are deemed to be securities issued outside Korea by the
issuer of the underlying stock. Further, capital gains earned by a non-resident
from the transfer of stocks issued by a Korean company are also exempt from
Korean taxation if sold through an overseas securities market having functional
similarity to the Korean Stock Exchange or KOSDAQ under the Korean Securities
and Exchange Act.

      Under the U.S. Korea Tax Treaty, capital gains realized by holders who are
residents of the United States eligible for treaty benefits upon the disposition
of common stock or ADSs generally will not be subject to Korean taxation, so
long as the common stock or ADSs are not effectively connected with a permanent
establishment or, in the case of an individual holder, a fixed base maintained
by the holder in Korea and the holder is not present in Korea for 183 days or
more during the taxation year.

      Capital gains with respect to the sale of ADSs, or common stock which were
acquired by a non-resident holder as a result of a withdrawal, would be
calculated based on the acquisition cost to such holder of the ADSs representing
such common stock, although there are no specific Korean tax provisions or
rulings on this issue. In the absence of the application of a tax treaty which
exempts or reduces the rate of tax on capital gains, capital gains which are
subject to Korean tax will be subject to tax at the lesser of (i) 11% of the
gross realization proceeds or


                                      -91-
<PAGE>

(ii) (subject to the production of satisfactory evidence of the acquisition cost
of the ADSs) 27.5% of the gains made (the excess of the gross realization
proceeds over the non-resident holder's acquisition cost for the ADSs (including
any transaction charges, commissions, fees or taxes paid at the time of the
acquisition or disposition)).

      The purchaser or, in the case of the sale of common stock on the Korea
Stock Exchange or through a licensed securities company in Korea, the licensed
securities company, is required under Korean law to withhold the applicable
amount of Korean tax from the sales price in an amount equal to 11% of the gross
realization proceeds and to make payment thereof to the relevant Korean tax
authority, unless the seller establishes its entitlement to an exemption or
lower rate of taxation under an applicable tax treaty or produces satisfactory
evidence of its acquisition cost for the ADSs. In order to obtain the benefit of
an exemption or reduced rate of tax pursuant to a tax treaty, a non-resident
holder must submit to the purchaser or the securities company (or through the
Depositary), as applicable, prior to or at the time of payment, such evidence of
tax residence of the seller as the Korean tax authorities may require in support
of its claim for treaty protection. Excess taxes withheld are not automatically
recoverable even if the non-resident holder subsequently produces evidence that
it was entitled to have taxes withheld at the lower rate.

Inheritance Tax and Gift Tax

      Korean inheritance and gift taxes are imposed upon (a) all assets
(wherever located) of the deceased if at the time of his death he was domiciled
in Korea and (b) all property located in Korea which passes on at the time of
his death (irrespective of the domicile of the deceased).

      It is unclear whether ADSs will be deemed to be located in Korea for
Korean inheritance and gift tax purposes. However, the Korean tax authorities
have interpreted that shares and bonds issued by Korean corporations,
wheresoever held, are deemed for inheritance and gift tax purposes to be located
in Korea. According to such interpretation, American Depositary Shares,
including the ADSs, which are held outside of Korea and represent shares issued
by Korean corporations, shall be subject to Korean inheritance or gift tax at
the rate of 10% to 50%, provided that the value of such ADSs is greater than
amounts specified under Korean law.

Securities Transaction Tax

      No securities transaction tax is payable on transfers of ADSs. The
transfer of common stock generally will be subject to a securities transaction
tax at the rate of 0.15% when traded on the Korea Stock Exchange, and 0.3% when
traded on the KOSDAQ. In addition, an agriculture and fishery special tax shall
apply at the rate of 0.15% of the sale price of the common stock when traded on
the Korea Stock Exchange. The transfer of common stock off the Korea Stock
Exchange and the KOSDAQ will, however, be subject to a securities transaction
tax at the rate of 0.5% and such transfer will not be subject to an agriculture
and fishery special tax.

Tax Treaties

      Each non-resident holder should consult his tax advisor regarding whether
he is entitled to the benefit of a tax treaty with Korea. It is the
responsibility of the party claiming the benefits of a tax treaty in respect of
dividend payments or capital gains to submit to the Company through


                                      -92-
<PAGE>

the Depositary, the purchaser or the securities company, as applicable, a
certificate as to his residence. In the absence of sufficient proof, the
Company, the purchaser or the securities company, as applicable, must withhold
tax at the normal rates.

      At present, Korea has not entered into any tax treaties regarding
inheritance or gift tax.

United States Federal Income Tax Considerations

      The following is a summary of United States federal income tax
considerations that are anticipated to be material for U.S. Holders (as defined
below) who purchase common shares or ADSs of Mirae. This summary is based upon
existing United States federal income tax law as currently in effect, which is
subject to change, possibly with retroactive effect. This summary does not
discuss all aspects of United States federal income taxation that may be
important to particular investors in light of their individual investment
circumstances, such as investors subject to special tax rules, including:
financial institutions, insurance companies, broker dealers, tax-exempt
organizations, and, except as described below, Non-U.S. Holders, or to persons
that will hold common shares or ADSs as part of a straddle, hedge, conversion,
or constructive sale transaction for United States federal income tax purposes
or that have a functional currency other than the United States dollar, all of
whom may be subject to tax rules that differ significantly from those summarized
below. In addition, this summary does not discuss any foreign, state, or local
tax considerations. This summary assumes that investors will hold their common
shares or ADSs as "capital assets" (generally, property held for investment)
under the United States Internal Revenue Code. Each prospective investor is
urged to consult its tax advisor regarding the United States federal, state,
local, and foreign income and other tax considerations of the purchase,
ownership, and disposition of common shares or ADSs.

      For purposes of this summary, a U.S. Holder is a beneficial owner of
common shares or ADSs that is for United States federal income tax purposes:

      o     an individual who is a citizen or resident of the United States;

      o     a corporation (or other entity treated as a corporation for United
            States federal income tax purposes) created in or organized under
            the laws of, the United States or any State or political subdivision
            thereof;

      o     an estate the income of which is includible in gross income for
            United States federal income tax purposes regardless of its source;

      o     a trust the administration of which is subject to the primary
            supervision of a United States court and which has one or more
            United States persons who have the authority to control all
            substantial decisions of the trust; or

      o     a trust that was in existence on August 20, 1996, was treated as a
            United States person, for United States federal income tax purposes,
            on the previous day and elected to continue to be so treated.


                                      -93-
<PAGE>

      A beneficial owner of the common shares or ADSs that is not a U.S. Holder
is referred to herein as a "Non-U.S. Holder".

      The tax treatment of a partner in a partnership generally will depend on
the status of the partner and the activities of the partnership. Each
prospective investor that is a partnership or a partner in a partnership should
consult its tax advisor regarding the particular tax consequences to you.

U.S. Holders

      For United States federal income tax purposes, a U.S. Holder of an ADS
will be treated as the owner of the proportionate interest of the common shares
held by the depositary that is represented by an ADS and evidenced by such ADS.
Accordingly, no gain or loss will be recognized upon the exchange of an ADS for
the holder's proportionate interest in the common shares. A U.S. Holder's tax
basis in the withdrawn common shares will be the same as the tax basis in the
ADS surrendered therefor, and the holding period in the withdrawn common shares
will include the period during which the holder held the surrendered ADS.

Dividends

      Subject to the discussion below under the heading "PFIC Considerations",
any cash distributions paid by Mirae out of earnings and profits, as determined
under United States federal income tax principles, will be treated as foreign
source dividend income and will be includible in the gross income of a U.S.
Holder upon receipt. Cash distributions paid by Mirae in excess of its earnings
and profits will be treated as a tax-free return of capital to the extent of the
U.S. Holder's adjusted tax basis in its shares or ADSs, and after that as gain
from the sale or exchange of a capital asset. Dividends received on common
shares or ADSs will not be eligible for the dividends-received deduction allowed
to corporations. Dividends paid in won will be includible in income in a United
States dollar amount calculated by reference to the United States dollar - won
exchange rate prevailing at the time of receipt of such dividends by the
depositary, in the case of ADSs, or by the U.S. Holder, in the case of common
shares held directly by such U.S. Holder. If a U.S. Holder does not convert the
won it receives as a dividend into United States dollars on the date of receipt,
it will have a tax basis in the won equal to the United States dollar value of
the won on the date of receipt. Any gain or loss realized by a U.S. Holder on a
subsequent conversion or other disposition of the won will be treated as
ordinary income or loss.

      A U.S. Holder may be eligible, subject to a number of complex limitations,
to claim a foreign tax credit in respect of any foreign withholding taxes
imposed on dividends received on common shares or ADSs. U.S. Holders who do not
elect to claim a foreign tax credit for foreign income tax withheld may instead
claim a deduction, for United States federal income tax purposes, in respect of
such withholdings, but only for a year in which the U.S. Holder elects to do so
for all creditable foreign income taxes. Each prospective investor should
consult its tax advisor regarding the availability of the foreign tax credit
under its particular circumstances.

      A distribution of additional shares of Mirae's stock to U.S. Holders with
respect to their common shares or ADSs that is pro rata to all Mirae's
shareholders may not be subject to United States federal income tax. The tax
basis of such additional shares will be determined by


                                      -94-
<PAGE>

allocating the U.S. Holders' adjusted tax basis in the common shares or ADSs
between the common shares or ADSs and the additional shares, based on their
relative fair market values on the date of distribution.

Sale or Other Disposition of Common Shares or ADSs

      Subject to the discussion below under the heading "PFIC Considerations", a
U.S. Holder will recognize capital gain or loss upon the sale or other
disposition of common shares or ADSs in an amount equal to the difference
between the amount realized upon the disposition and the U.S. Holder's adjusted
tax basis in such common shares or ADSs, as each is determined in United States
dollars. Any such capital gain or loss will be long term if the common shares or
ADSs have been held for more than one year and will generally be United States
source gain or loss. The claim of a deduction in respect of a capital loss, for
United States federal income tax purposes, may be subject to limitations.

PFIC Considerations

      A foreign corporation will be treated as a "passive foreign investment
company" (a "PFIC"), for United States federal income tax purposes if 75% or
more of its gross income consists of certain types of "passive" income, or 50%
or more of the gross value of its assets is attributable to assets that produce
passive income or are held for the production of passive income. For this
purpose, "passive" income generally includes dividends, interest, royalties,
rents, annuities and the excess of gains over losses from the disposition of
assets that produce passive income. Mirae currently believes that it is not a
PFIC and does not anticipate becoming a PFIC. This is, however, a factual
determination made on an annual basis and is subject to change.

      If Mirae were to be classified as a PFIC in any taxable year, a U.S.
Holder would be subject to special rules generally intended to reduce or
eliminate any benefits from the deferral of United States federal income tax
that a U.S. Holder could derive from investing in a foreign company that does
not distribute all of its earnings on a current basis. In such event, a U.S.
Holder of the common shares or ADSs may be subject to tax at ordinary income tax
rates on (i) any gain recognized on the sale of the common shares or ADSs and
(ii) any "excess distribution" paid on the common shares or ADSs (generally, a
distribution in excess of 125% of the average annual distributions paid by Mirae
in the three preceding taxable years). In addition, a U.S. Holder may be subject
to an interest charge on such gain or excess distribution.

      Each prospective investor should consult its tax advisor regarding the
potential application of the PFIC provisions, as well as the availability and
advisability of certain elections that may be made by such investor with respect
to common shares or ADSs if we are classified as a PFIC.

Non-U.S. Holders

      An investment in common shares or ADSs by a Non-U.S. Holder will not give
rise to any United States federal income tax consequences unless:

      o     the dividends received or gain recognized on the sale of common
            shares or ADSs by such person is treated as effectively connected
            with the conduct of a trade or business by such person in the United
            States as determined under United States federal income tax law; or


                                      -95-
<PAGE>

      o     in the case of gains recognized on a sale of common shares or ADSs
            by an individual, such individual is present in the United States
            for 183 days or more during the relevant year and certain other
            conditions are met.

Information Reporting and Backup Withholding

      Information reporting requirements applies to dividends received by
individuals on common shares or ADSs and the proceeds received from the sale,
exchange or other disposition of common shares or ADSs paid within the United
States and in certain cases, outside of the United States. In addition, backup
withholding may also apply to such amounts if the beneficial owner fails to
report interest and dividends required to be shown on the holder's United States
federal income tax returns, or fails to comply with applicable certification
requirements. Backup withholding is applied at a rate not to exceed 31%. Backup
withholding is not an additional tax. Any amounts withheld from a payment under
the backup withholding tax rules can be refunded or credited against the
holder's United States federal income tax liability, if any, if the required
information is furnished to the Internal Revenue Service.

F. Dividends and Paying Agents

      Not applicable.

G. Statement by Experts

      Not applicable.

H. Documents on Display

      We filed with the Securities and Exchange Commission in Washington, D.C. a
Registration Statement on Form F-1 (Registration No. 333 11390) under the
Securities Act in connection with the ADSs offered in Mirae's global offering.
The Registration Statement contains exhibits and schedules. Any statement in
this annual report about any of our contracts or other documents is not
necessarily complete. If the contract or document is filed as an exhibit to the
Registration Statement, the contract or document is deemed to modify the
description contained in this annual report. You must review the exhibits
themselves for a complete description of the contract or documents.

      You may inspect and copy our registration statements, including their
exhibits and schedules, and the reports and other information we file with the
Securities and Exchange Commission in accordance with the Exchange Act at the
public reference facilities maintained by the Securities and Exchange Commission
at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington, D.C. 20549
and at the regional offices of the Securities and Exchange Commission located at
7 World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may
also inspect the registration statements, including their exhibits and
schedules, at the office of the New York Stock Exchange, Wall Street, New York,
New York 10005. Copies of such material may also be obtained from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. You may obtain information
regarding the Washington D.C. Public Reference Room by calling the Securities
and Exchange


                                      -96-
<PAGE>

Commission at 1 800 SEC 0330 or by contacting the Securities and Exchange
Commission over the internet at its website at http://www.sec.gov.

I. Subsidiary Information

      Other than Mirae America, Inc., a California corporation, and Mirae Hong
Kong Co., Ltd., a Hong Kong corporation, Mirae has a shareholding interest in 35
companies, all of which are Korean corporations. Set forth below is a list of
such invested companies and Mirae's percentage of shareholding interest in them.

Company Name                                                          Percentage
-------------------------------------------------------------------   ----------
MR Tech Town Co. ..................................................       100.00
Mirae Online, Co., Ltd. ...........................................        81.38
Korea Internet.com Co., Ltd. ......................................        87.38
Alpha Logics Co., Ltd. ............................................       100.00
SoftForum Co., Ltd. ...............................................        41.51
Mobile Game Co., Ltd. .............................................        29.99
Mirae America, Inc. ...............................................        50.00
AIO Corporation ...................................................        21.63
SK Communications Corporation .....................................         4.54
On-net Corporation ................................................        14.71
Intro System Co., Ltd. ............................................        15.16
JIT Corporation ...................................................         3.65
Nara Vision .......................................................        17.43
NetThru ...........................................................        19.73
Cyber Bank Co., Ltd. ..............................................         1.36
Infinity Telecom Co., Ltd. ........................................        16.70
Telefree Co., Ltd. ................................................         2.57
Streambox Korea ...................................................         5.11
NeoBill Co., Ltd. .................................................         4.37
Mobens Co., Ltd. ..................................................        16.42
Mirae (HongKong) Co., Ltd. ........................................        99.00
Linxtek Co., Ltd. .................................................         1.22
Seoul Venture Base ................................................         5.69
EON Group .........................................................         1.33
CAMIS Co., Ltd. ...................................................         0.26
YESS World Inc. ...................................................         0.73
Sunwoo Information system .........................................         1.00
Dabonet Co., Ltd. .................................................         0.79
Digital Photo Corporation .........................................         0.93
Telinker ..........................................................         0.75
E-GIOS Corporation ................................................         1.59
Hackers Lab Co., Ltd. .............................................         1.47
Interchem Korea ...................................................         8.00
Imobiz ............................................................         2.32
K Lab .............................................................        11.10


                                      -97-
<PAGE>

ITEM 11. Qualitative and Quantitative Disclosures About Market Risk

      We are exposed to market risks from changes in interest rates and foreign
exchange rates, which may adversely affect our results of operations and
financial condition. We seek to minimize the risks from fluctuations of interest
rates and foreign exchange rates through our regular operating and financing
activities. We do not use financial instruments for trading or other speculative
purposes and have not used derivative instruments to manage these risks.

Equity Risk

      We have invested (Won) 663 million in Hynix Semiconductor Inc., which is
listed on the Korea Composite Stock Price Index ("KOSPI"). As of December 31,
2002, this investment had decreased in market value from our initial investment
by approximately (Won) 151 million and (Won) 453 million in 2001 and 2002,
respectively.

      As of December 31, 2002 we held interest-bearing Korean debt unit trusts
comprised of Government, public and corporate bonds with a fair market value of
approximately (Won) 30,358 million. The unit trusts bear interest at variable
rates and generally have maturities of less than one year. The weighted average
yield rate of the government bonds was three to six percent, or a valuation gain
of (Won) 154 million, on an investment of (Won) 1,595 million in 2002. The
weighted average yield rate of the public and corporate bonds was -8.3%, or a
valuation loss of (Won) 2,591 million, on an investment of (Won) 31,200 million
in 2002. The unit trusts are not traded over any organized exchange in Korea,
but are traded over the counter primarily by securities firms, investment trust
companies and investment management companies. Fluctuations in the net asset
value of these investments will fluctuate with changes in the value of the
underlying securities.

      The following table sets forth the costs and fair values of the
above-discussed equity and debt securities as of December 31, 2002 and 2001:

                                                  As of December 31,
                                       -----------------------------------------
                                              2002                  2001
                                       -------------------   -------------------
                                        Cost    Fair Value    Cost    Fair Value
                                       ------   ----------   ------   ----------
                                              (Unit: in million won)
Debt unit trusts                       31,200       28,609   21,000       21,338
Equity securities                         512           59      663          512
Government bonds                        1,595        1,749    1,911        1,911

Interest Rate Risk

      Our debt obligations consist of several short-term credit lines at both
fixed and variable rates and a long-term credit line, which bears interest at a
fixed rate. As of December 31, 2002, the amount of borrowings we had under the
short-term credit lines with variable interest rates was (Won) 19,042 million.
We believe that because these are short-term borrowings, their risk exposure to
interest rate fluctuations is insignificant.


                                      -98-
<PAGE>

Foreign Currency Exchange Rate Risk

      As a consequence of the growing emphasis on our overseas businesses, our
operations and reported financial results and cash flows are exposed to the
risks associated with fluctuations in the exchange rate between the Korean won
and other major world currencies. In 2000, 2001 and 2002, sales outside of Korea
comprised 40.4%, 17.9% and 32.2%, respectively, of our total sales. As foreign
exchange rates change, translation of the statements of operations of our
international sales into won affects year on year comparability. Historically,
we have not hedged currency translation risks.

ITEM 12. Description of Securities Other Than Equity Securities

      Not applicable.

                                     PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

      None.

ITEM 14. Material Modifications to the Rights of Security Holders and Use of
         Proceeds

      Not applicable.

ITEM 15. Control and Procedures

      Our President and Chief Executive Officer and our Vice President and Chief
Financial Officer, after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rule 13a-15(c)) as of December 31,
2002, have concluded that, as of such date, our disclosure controls and
procedures were effective to ensure that material information relating to Mirae
was made known to them by others within the Company, particularly during the
period in which this Form 20-F was being prepared.

      There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date our President and Chief Executive Officer and our Vice President and Chief
Financial Officer completed their evaluation, nor were there any significant
deficiencies or material weaknesses in the Company's internal controls requiring
corrective actions.

ITEM 16. [Reserved]

                                    PART III

ITEM 17. Financial Statements

      Not applicable.


                                      -99-
<PAGE>

ITEM 18. Financial Statements

      Reference is made to Item 19 for a list of all financial statements filed
as part of this annual report.

ITEM 19. Exhibits

      (a) The following consolidated financial statements, together with the
report of Ahn Kwon & Co., a member firm of Deloitte Touche Tohmatsu, on the
annual financial statements referred to below, are filed as part of this annual
report:

                                                                            Page
                                                                            ----

Index to Consolidated Financial Statements ..............................    F-1

Independent Auditors' Report ............................................    F-2

Consolidated Balance Sheets as of December 31, 1998, 1999 and 2000 ......    F-5

Consolidated Statements of Operations for the Years Ended December 31,
   1998, 1999 and 2000 ..................................................    F-7

Consolidated Statements of Shareholders' Equity for the Years Ended
   December 31, 1998, 1999 and 2000 .....................................    F-8

Consolidated Statements of Cash Flows for the Years Ended December 31,
   1998, 1999 and 2000 ..................................................   F-10

Notes to the Consolidated Financial Statements ..........................   F-13

      (b) Documents filed as exhibits to this annual report:

            1.1   Articles of Incorporation of Mirae Corporation, incorporated
                  by reference to Exhibit 3.1 to Amendment No. 1 to our
                  Registration Statement on Form F-1 filed with the Securities
                  and Exchange Commission on February 4, 2000 (File No.
                  333-11390).

            1.2   By-laws of Mirae Corporation, incorporated by reference to
                  Exhibit 3.2 to Amendment No. 1 to our Registration Statement
                  on Form F-1 filed with the Securities and Exchange Commission
                  on February 4, 2000 (File No. 333-11390).


                                     -100-
<PAGE>

            4.1   Contract for the sale of Mirae Kang-nam building to Pagoda
                  Academy Co., dated May 24, 2002 (English summary),
                  incorporated by reference to our Current Report on Form 6-K
                  filed with the Securities and Exchange Commission on May 28,
                  2002 (File No. 000-30376).

            8.1   List of Subsidiaries.

            10.1  Certification of Mr. Hyung Yun Lee, Chief Executive Officer of
                  Mirae Corporation, pursuant to Rule 13a-14 or 15d-14 of the
                  Securities Exchange Act of 1934, as amended.

            10.2  Certification of Mr. Soon Do Kwon, Chief Financial Officer of
                  Mirae Corporation, pursuant to Rule 13a-14 or 15d-14 of the
                  Securities Exchange Act of 1934, as amended.

            10.3  Certification of Mr. Hyung Yun Lee, Chief Executive Officer of
                  Mirae Corporation, pursuant to 18 U.S.C. Section 1350.

            10.4  Certification of Mr. Soon Do Kwon, Chief Financial Officer of
                  Mirae Corporation, pursuant to 18 U.S.C. Section 1350.


                                     -101-
<PAGE>

                                   SIGNATURES

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


                                                   MIRAE CORPORATION
                                        ----------------------------------------
                                                      (Registrant)


                                        /s/ Kwon Soon Do
                                        ----------------------------------------
                                                       (Signature)
                                        Name:  Kwon Soon Do
                                        Title: Chief Financial Officer

Date: June 30, 2003

*Print the name and title of the signing officer under this signature.


                                     -102-
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----

Independent auditors' report ............................................    F-2

Consolidated balance sheets as of December 31, 2000, 2001 and 2002 ......    F-5

Consolidated statements of operations for the years ended December 31,
   2000, 2001 and 2002 ..................................................    F-7

Consolidated statements of shareholders' equity for the years ended
   December 31, 2000, 2001 and 2002 .....................................    F-8

Consolidated statements of cash flows for the years ended December 31,
   2000, 2001 and 2002 ..................................................   F-10

Notes to Consolidated Financial Statements ..............................   F-13

<PAGE>

INDEPENDENT AUDITORS' REPORT

      To the Board of Directors and Shareholders of Mirae Corporation

      We have audited the accompanying consolidated balance sheets of Mirae
Corporation (the "Company") and its subsidiaries as of December 31, 2000, 2001
and 2002, and the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended (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 audits.

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

      In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mirae Corporation and its
subsidiaries at December 31, 2000, 2001 and 2002, and the results of their
operations, the changes in their shareholders' equity, and their cash flows for
the years then ended, in conformity with financial accounting standards
generally accepted in Korea ("Korean GAAP").

      Our audits also comprehended the translation of the Korean won amounts
into U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2(a) to the consolidated financial
statements. Such U.S. dollar amounts are presented solely for the convenience of
readers outside of Korea.

      Financial accounting standards generally accepted in Korea vary in certain
respects from accounting principles generally accepted in the United States of
America. Application of accounting principles generally accepted in the United
States of America would have affected the determination of net income (loss) for
the years ended December 31, 2000, 2001 and 2002 and the determination of
shareholders' equity and financial position as of December 31, 2000, 2001 and
2002 to the extent summarized in Notes 29 and 30 to the consolidated financial
statements.

      Without qualifying our opinion, we draw attention to the following:

      As described in Note 2 to the accompanying consolidated financial
statements, common shares of SoftForum, one of the Company's consolidated
subsidiaries, have been listed on the Korea Securities Dealers Automated
Quotation ("KOSDAQ") market since October 30, 2001.

      As described in Note 2 to the accompanying consolidated financial
statements, product warranties expenditures had been classified as a cost of
sales item through 2000. Effective


                                      F-2
<PAGE>

January 1, 2001, product warranties expenditures incurred related to selling and
administrative activities are classified as an item of selling, general and
administrative expenses for a more appropriate financial statement presentation
as the Company established a customer satisfaction division. This change in
classification did not have any effect on the reported financial position of the
Company and its subsidiaries as of December 31, 2001 or their net loss for the
year then ended.

      As described in Note 7 to the accompanying consolidated financial
statements, as of December 31, 2002, a lawsuit relating to payment of
construction costs for a building, which was purchased by the Company in 2000,
is outstanding between the former building owner and his creditors. In
connection with this, the Company made a payment of (won)6 billion to a court on
behalf of the former building owner in order to protect its assets in 2001. The
payment was recorded as an advance payment. In 2002, the Company sold its
building to a third party. As of December 31, 2002, the Company provided an
allowance for the entire amount of the advance payments and recorded an
additional provision for guarantees of (won)0.65 billion.

      As discussed in Note 24 to the accompanying consolidated financial
statements, on August 1, 2001, the Company transferred its LCD division with
total assets of (won)1,445 million and total liabilities of (won)620 million to
DE&T Co., Ltd., which was an affiliated company in 2001, for (won)825 million in
accordance with a resolution made at the board of directors' meeting dated July
12, 2001.

      As described in Note 27 to the accompanying consolidated financial
statements, on December 18, 2000, Quad Systems Corporation ("Quad"), formerly
one of the Company's major customers, filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code of the United
States of America. Before Quad filed the voluntary petition for reorganization
under Chapter 11, on September 29, 2000, the Company entered into an agreement
with Quad to convert the Company's trade receivables to long-term loans and
accordingly, the Company reclassified those receivables to long-term loans in
the accompanying consolidated financial statements. For the year ended December
31, 2000, the Company provided an allowance for the entire amount of the loans
totaling (won)5,066 million, which was recorded as a loss in other expense. In
2001, such loans were fully written off as Company management believes that the
collectibility of such loans is remote.


                                      F-3
<PAGE>

      As described in Note 28 to the accompanying consolidated financial
statements, the operations of the Company and its subsidiaries have been
affected, and may continue to be affected for the foreseeable future, by the
general unstable economic conditions in the Republic of Korea and in the Asia
Pacific region. In addition, the Company and its subsidiaries have been
affected, and may continue to be affected for the foreseeable future, by rapid
technological changes and fluctuating product prices in the semiconductor
industry. The ultimate effect of these uncertainties of the financial position
of the Company and its subsidiaries as of the balance sheet date cannot
presently be determined.


/s/ Ahn Kwon & Co.
------------------

April 4, 2003


                                      F-4
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                          2000            2001            2002             2002
                                                      ------------    ------------    ------------    --------------
                                                                                                      (In thousands
                                                                                                         of U.S.
                                                                                                         dollars)
ASSETS                                                                 (In millions of Korean won)       (Note 2)
<S>                                                   <C>             <C>             <C>             <C>
Current assets:
   Cash and cash equivalents (Notes 2 and 12) .....    (won)34,914     (won)26,915     (won)19,008           $16,023
   Short-term financial instruments (Notes 4 and
     12) ..........................................            424          30,809          20,776            17,513
   Marketable securities (Note 2) .................          8,860          23,761          30,418            25,641
   Accounts receivable-trade, net (Notes 2, 11, 12
     and 21) ......................................         65,098          36,409          33,965            28,631
   Accounts receivable-other, net (Notes 2 and 11)           1,293           1,261           1,218             1,027
   Inventories (Notes 2 and 3) ....................         71,864          53,554          22,261            18,765
   Accrued interest income ........................            137             210             250               211
   Advance payments and other (Notes 2, 6 and 11) .          3,633          12,008           6,656             5,611
                                                      ------------    ------------    ------------    --------------
         Total Current Assets .....................        186,223         184,927         134,552           113,422
                                                      ------------    ------------    ------------    --------------

Non-current assets:
   Property, plant and equipment, net
     (Notes 2, 7, 11, 22 and 25) ..................        120,969         134,873          75,317            63,489
   Intangible assets-net (Notes 2 and 11)
      Development costs ...........................         14,440          13,637           4,054             3,417
      Other .......................................            633             989           2,957             2,493
   Investment securities (Notes 2 and 5) ..........         30,578           5,014           6,448             5,435
   Long-term restricted bank deposits (Note 4) ....            290              25             643               542
   Guarantee deposits .............................          4,894           3,653           8,909             7,510
   Deposits for severance indemnities
     (Notes 2 and 4) ..............................              7              --              --                --
   Long-term loans and other, net
     (Notes 2, 6, 11 and 27) ......................          7,375           8,004           7,632             6,433
   Deferred income tax assets (Notes 2 and 19) ....         13,763              --              --                --
                                                      ------------    ------------    ------------    --------------
         Total Non-Current Assets .................        192,949         166,195         105,960            89,319
                                                      ------------    ------------    ------------    --------------
              TOTAL ASSETS ........................   (won)379,172    (won)351,122    (won)240,512          $202,741
                                                      ============    ============    ============    ==============
</TABLE>

(Continued)


                                      F-5
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (continued)
                        DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                          2000            2001            2002             2002
                                                      ------------    ------------    ------------    --------------
                                                                                                      (In thousands
                                                                                                         of U.S.
                                                                                                         dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY                                   (In millions of Korean won)       (Note 2)
<S>                                                   <C>             <C>             <C>             <C>
Current liabilities:
   Accounts payable-trade (Notes 11 and 12) .......    (won)15,265      (won)5,538     (won)10,014            $8,442
   Short-term borrowings (Notes 8 and 12) .........          3,500          55,430          33,542            28,275
   Accounts payable-other (Note 11) ...............          4,997          15,694           2,621             2,209
   Income taxes payable ...........................          2,151             264              --                --
   Advance receipts from customers ................          1,316             276             323               272
   Dividends payable (Note 15) ....................          1,846             423             230               194
   Guarantee deposits payable (Note 11) ...........          7,300          11,761           1,737             1,464
   Provision for guarantees issued ................             --           3,739             649               547
   Current portion of long-term lease payable
     (Notes 2 and 9) ..............................             --             152             458               386
   Accrued expenses and other (Note 11) ...........          3,607           2,739           1,717             1,447
                                                      ------------    ------------    ------------    --------------
         Total Current Liabilities ................         39,982          96,016          51,291            43,236
                                                      ------------    ------------    ------------    --------------

Long-term liabilities:
   Long-term borrowings (Notes 10 and 12) .........             --              --           9,543             8,044
   Long-term guarantee deposits payable (Note 11) .          8,831           1,737             354               298
   Long-term lease payable (Notes 2 and 9) ........             --             307             621               523
   Accrued severance indemnities, net (Note 2) ....          2,988           3,032           4,047             3,411
                                                      ------------    ------------    ------------    --------------
         Total Long-Term Liabilities ..............         11,819           5,076          14,565            12,276
                                                      ------------    ------------    ------------    --------------
              Total Liabilities ...................         51,801         101,092          65,856            55,512
                                                      ------------    ------------    ------------    --------------

COMMITMENTS AND CONTINGENCIES (Note 23)

Shareholders' equity:
   Capital stock:
      Common stock - par value (won)100 per share;
        issued and outstanding 123.0 million
        shares, 123.0 million shares and 122.9
        million shares as of December 31, 2000,
        2001 and 2002, respectively (Note 13) .....         12,464          12,464          12,464            10,507
   Capital surplus:
      Additional paid-in capital (Note 13) ........        276,609         221,443         146,124           123,177
   Retained earnings (deficit):
      Appropriated retained earnings (Note 14) ....         28,020              --              --                --
      Unappropriated (undisposed) (Note 14) .......          4,838          (1,011)            281               237
   Capital adjustments:
      Treasury stock (Notes 2 and 16) .............         (4,843)         (4,843)         (4,814)           (4,058)
      Stock options (Notes 2 and 26) ..............            588             198             357               301
      Other capital adjustment ....................             --              --            (911)             (768)
   Minority interest in equity of consolidated
     subsidiaries .................................          9,695          21,779          21,155            17,833
                                                      ------------    ------------    ------------    --------------
         Total Shareholders' Equity ...............        327,371         250,030         174,656           147,229
                                                      ------------    ------------    ------------    --------------
              TOTAL LIABILITIES AND SHAREHOLDERS'
               EQUITY .............................   (won)379,172    (won)351,122    (won)240,512          $202,741
                                                      ============    ============    ============    ==============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                      F-6
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                            2000            2001            2002             2002
                                                        ------------    ------------    ------------    --------------
                                                                                                        (In thousands
                                                                                                           of U.S.
                                                                                                           dollars)
                                                                        (In millions of Korean won)        (Note 2)
<S>                                                     <C>             <C>             <C>             <C>
Sales (notes 2, 11, 17, 21 and 22) ..................   (won)146,099     (won)68,977     (won)64,430           $54,312
Cost of Sales (note 11) .............................       (111,377)        (63,590)        (56,863)          (47,933)
                                                        ------------    ------------    ------------    --------------
Gross Profit ........................................         34,722           5,387           7,567             6,379
Selling, General and Administrative Expenses (Notes
  11 and 18) ........................................        (27,223)        (45,321)        (37,651)          (31,738)
                                                        ------------    ------------    ------------    --------------
Operating Income (Loss) (Note 22) ...................          7,499         (39,934)        (30,084)          (25,359)
                                                        ------------    ------------    ------------    --------------
Other Income:
   Interest income (Note 11) ........................          6,548           3,284           2,532             2,134
   Gain on disposal and valuation of marketable
     securities .....................................          1,726           2,297           2,881             2,429
   Foreign exchange and translation gains (Note 2) ..          2,551           2,472             635               535
   Reversal of provision for guarantees issued
     (Note 23) ......................................             --              --           3,739             3,152
   Other (Note 11) ..................................          1,984           2,967           3,498             2,949
                                                        ------------    ------------    ------------    --------------
                                                              12,809          11,020          13,285            11,199
                                                        ------------    ------------    ------------    --------------
Other Expenses:
   Interest expense .................................         (2,616)         (3,093)         (3,663)           (3,088)
   Donations ........................................           (514)             (3)           (121)             (102)
   Foreign exchange and translation losses (Note 2) .           (670)           (221)         (2,102)           (1,772)
   Loss from valuation of inventories ...............           (844)        (16,837)        (20,409)          (17,204)
   Loss on disposal and valuation of marketable
     securities .....................................           (402)           (179)         (3,378)           (2,848)
   Provision for doubtful other accounts ............         (5,066)           (229)         (7,087)           (5,974)
   Provision for guarantees issued ..................             --          (3,739)           (649)             (547)
   Loss from impairment of deferred development
     costs (Note 2) .................................             --          (4,429)        (11,337)           (9,557)
   Loss from impairment of investment securities
     (Note 2) .......................................             --          (8,717)         (3,631)           (3,061)
   Equity in losses of affiliate (Notes 2 and 5) ....         (9,664)        (15,677)           (827)             (697)
   Other ............................................           (397)         (1,821)         (2,887)           (2,434)
                                                        ------------    ------------    ------------    --------------
                                                             (20,173)        (54,945)        (56,091)          (47,284)
                                                        ------------    ------------    ------------    --------------
Income (loss) before Income Taxes and Minority
  Interest ..........................................            135         (83,859)        (72,890)          (61,444)
Income Tax Expense (Benefit) (Notes 2 and 19) .......         (3,602)         14,234             277               233
                                                        ------------    ------------    ------------    --------------
Income (Loss) before Minority Interest ..............          3,737         (98,093)        (73,167)          (61,677)
                                                        ------------    ------------    ------------    --------------
Minority Interest in Net Loss (Gain) of Consolidated
  Subsidiaries ......................................            533          (1,055)            176               148
                                                        ------------    ------------    ------------    --------------
Net Income (Loss) ...................................    (won)4,270     ((won)99,148)   ((won)72,991)         ($61,529)
                                                        ============    ============    ============    ==============
Weighted Average Number of Common Stock Outstanding
  (in millions of shares) ...........................            121             120             123               123
                                                        ============    ============    ============    ==============
Income (Loss) per Share (Note 20)
  (in Korean won and U.S. Dollars) ..................        (won)35       ((won)825)      ((won)593)          ($0.500)
                                                        ============    ============    ============    ==============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                      F-7
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>


                                                                                               Capital Adjustments
                                                                                  --------------------------------------------
                                                    Capital         Retained        Treasury         Stock
(In millions of Korean won)        Common Stock     Surplus         Earnings         Stock          Options          Other
                                   ------------   ------------    ------------    ------------    ------------    ------------
<S>                                <C>            <C>             <C>             <C>             <C>             <C>
Balance January 1, 2000 ........    (won)10,969   (won)116,334     (won)32,119     ((won)4,843)        (won)--         (won)--
  Net income ...................             --             --           4,270              --              --              --
  Issuance (Note 13) ...........          1,495        126,623              --              --              --              --
  Additional issuance by
    consolidated subsidiary
    to outside entity
    (Note 13) ..................             --          9,024              --              --              --              --
  Additional issuance by
    equity method-affiliate
    to outside entity (Note
    13) ........................             --         24,628              --              --              --              --
  Stock compensation plans
    (Notes 2 and 26) ...........             --             --              --              --             588              --
  Cash dividends (Note 15) .....             --             --          (1,846)             --              --              --
  Effect on prior year of
    reapplying the
    discontinued equity
    method (Notes 2 and 5) .....             --             --          (1,685)             --              --              --
  Increase in minority
    interest in equity of
    consolidated
    subsidiaries ...............             --             --              --              --              --              --
                                   ------------   ------------    ------------    ------------    ------------    ------------

Balance, December 31, 2000 .....         12,464        276,609          32,858          (4,843)            588              --
  Net loss .....................             --             --         (99,148)             --              --              --
  Additional issuance by
    consolidated subsidiary
    to outside entity
    (Note 13) ..................             --          2,649              --              --              --              --
  Gain on disposal of
    treasury stock (Note 13) ...             --          7,448              --              --              --              --
  Offsetting against
    deficit (Note 13) ..........             --        (65,263)         65,263              --              --              --
  Cancellation of stock
    compensation plans
    (Notes 2 and 26) ...........             --             --              --              --            (390)             --
  Increase in minority
    interest in equity of
    consolidated
    subsidiaries ...............             --             --              --              --              --              --
  Other ........................             --             --              16              --              --              --
                                   ------------   ------------    ------------    ------------    ------------    ------------

Balance, December 31, 2001 .....         12,464        221,443          (1,011)         (4,843)            198              --
  Net loss .....................             --             --         (72,991)             --              --              --
  Decrease in capital
    surplus relating to
    additional stock
    transactions by
    consolidated
    subsidiaries (Note 13) .....             --         (1,616)             --              --              --              --
  Gain on disposal of
    treasury stock (Note 13) ...             --             35              --              --              --              --
  Offsetting against
    deficit (Note 13) ..........             --        (73,738)         73,738              --              --              --
  Reversal of losses in
    excess of minority
    interest ...................             --             --             377              --              --              --
  Treasury stock
    transactions ...............             --             --              --              29              --              --
  Stock compensation plans
    (Notes 2 and 26) ...........             --             --              --              --             159              --
  Gain on valuation of
    investment securities ......             --             --              --              --              --             332
  Increase in treasury
    stock by consolidated
    subsidiary .................             --             --              --              --              --          (1,188)
  Decrease in minority
    interest in equity of
    consolidated
    subsidiaries ...............             --             --              --              --              --              --
  Other ........................             --             --             168              --              --             (55)
                                   ------------   ------------    ------------    ------------    ------------    ------------

Balance, December 31, 2002 .....    (won)12,464   (won)146,124        (won)281     ((won)4,814)       (won)357       ((won)911)
                                   ============   ============    ============    ============    ============    ============

<CAPTION>
                                     Minority
                                     Interest
                                    in Equity
                                        of             Total
                                   Consolidated    Shareholders'
(In millions of Korean won)        Subsidiaries       Equity
                                   ------------    ------------
<S>                                <C>             <C>
Balance January 1, 2000 ........     (won)1,272    (won)155,851
  Net income ...................             --           4,270
  Issuance (Note 13) ...........             --         128,118
  Additional issuance by
    consolidated subsidiary
    to outside entity
    (Note 13) ..................             --           9,024
  Additional issuance by
    equity method-affiliate
    to outside entity (Note
    13) ........................             --          24,628
  Stock compensation plans
    (Notes 2 and 26) ...........             --             588
  Cash dividends (Note 15) .....             --          (1,846)
  Effect on prior year of
    reapplying the
    discontinued equity
    method (Notes 2 and 5) .....             --          (1,685)
  Increase in minority
    interest in equity of
    consolidated
    subsidiaries ...............          8,423           8,423
                                   ------------    ------------

Balance, December 31, 2000 .....          9,695         327,371
  Net loss .....................             --         (99,148)
  Additional issuance by
    consolidated subsidiary
    to outside entity
    (Note 13) ..................             --           2,649
  Gain on disposal of
    treasury stock (Note 13) ...             --           7,448
  Offsetting against
    deficit (Note 13) ..........             --              --
  Cancellation of stock
    compensation plans
    (Notes 2 and 26) ...........             --            (390)
  Increase in minority
    interest in equity of
    consolidated
    subsidiaries ...............         12,084          12,084
  Other ........................             --              16
                                   ------------    ------------

Balance, December 31, 2001 .....         21,779         250,030
  Net loss .....................             --         (72,991)
  Decrease in capital
    surplus relating to
    additional stock
    transactions by
    consolidated
    subsidiaries (Note 13) .....             --          (1,616)
  Gain on disposal of
    treasury stock (Note 13) ...             --              35
  Offsetting against
    deficit (Note 13) ..........             --              --
  Reversal of losses in
    excess of minority
    interest ...................             --             377
  Treasury stock
    transactions ...............             --              29
  Stock compensation plans
    (Notes 2 and 26) ...........             --             159
  Gain on valuation of
    investment securities ......             --             332
  Increase in treasury
    stock by consolidated
    subsidiary .................             --          (1,188)
  Decrease in minority
    interest in equity of
    consolidated
    subsidiaries ...............           (624)           (624)
  Other ........................             --             113
                                   ------------    ------------

Balance, December 31, 2002 .....    (won)21,155    (won)174,656
                                   ============    ============
</TABLE>


                                      F-8
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>


                                                                                               Capital Adjustments
                                                                                  --------------------------------------------
                                                    Capital         Retained        Treasury         Stock
                                   Common Stock     Surplus         Earnings         Stock          Options          Other
                                   ------------   ------------    ------------    ------------    ------------    ------------
<S>                                <C>            <C>             <C>             <C>             <C>             <C>
(In thousands of U.S. dollars)
   (Note 2)
   Balance, December 31, 2001 ..        $10,507       $186,667           ($852)        ($4,082)           $167             $--
  Net loss .....................             --             --         (61,528)             --              --              --
  Decrease in capital surplus
    relating to additional stock
    transactions by consolidated
    subsidiaries (Note 13) .....             --         (1,362)             --              --              --              --
  Gain on disposal of treasury
    stock (Note 13) ............             --             30              --              --              --              --
  Offsetting against deficit
    (Note 13) ..................             --        (62,158)         62,158              --              --              --
  Reversal of losses in excess
    of minority interest .......             --             --             318              --              --              --
  Treasury stock transactions ..             --             --              --              24              --              --
  Stock compensation plans
    (Notes 2 and 26) ...........             --             --              --              --             134              --
  Gain on valuation of
    investment securities ......             --             --              --              --              --             280
  Increase in treasury stock by
    consolidated subsidiary ....             --             --              --              --              --          (1,002)
  Decrease in minority interest
    in equity of consolidated
    subsidiaries ...............             --             --              --              --              --              --
  Other ........................             --             --             141              --              --             (46)
                                   ------------   ------------    ------------    ------------    ------------    ------------

Balance, December 31, 2002 .....        $10,507       $123,177            $237         ($4,058)           $301           ($768)
                                   ============   ============    ============    ============    ============    ============

<CAPTION>
                                     Minority
                                     Interest
                                    in Equity
                                        of             Total
                                   Consolidated    Shareholders'
                                   Subsidiaries       Equity
                                   ------------    ------------
<S>                                <C>             <C>
(In thousands of U.S. dollars)
   (Note 2)
   Balance, December 31, 2001 ..        $18,359        $210,766
  Net loss .....................             --         (61,528)
  Decrease in capital surplus
    relating to additional stock
    transactions by consolidated
    subsidiaries (Note 13) .....             --          (1,362)
  Gain on disposal of treasury
    stock (Note 13) ............             --              30
  Offsetting against deficit
    (Note 13) ..................             --              --
  Reversal of losses in excess
    of minority interest .......             --             318
  Treasury stock transactions ..             --              24
  Stock compensation plans
    (Notes 2 and 26) ...........             --             134
  Gain on valuation of
    investment securities ......             --             280
  Increase in treasury stock by
    consolidated subsidiary ....             --          (1,002)
  Decrease in minority interest
    in equity of consolidated
    subsidiaries ...............           (526)           (526)
  Other ........................             --              95
                                   ------------    ------------

Balance, December 31, 2002 .....        $17,833        $147,229
                                   ============    ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                      F-9
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                            2000           2001           2002             2002
                                                                        ------------   ------------   ------------   --------------
                                                                                                                       (In thousand
                                                                                                                          of U.S.
                                                                                                                          dollars)
                                                                                        (In millions of Korean won)       (Note 2)
<S>                                                                     <C>            <C>            <C>             <C>
Cash Flows From Operating Activities:
   Net income (loss) .................................................    (won)4,270   ((won)99,148)  ((won)72,991)        ($61,529)
                                                                        ------------   ------------   ------------   --------------
   Expenses not involving cash payments:
      Depreciation and amortization ..................................        11,578         10,098          8,066            6,799
      Loss from impairment of deferred development cost ..............            --          4,429         11,337            9,557
      Provision for severance indemnities ............................         1,626          2,834          2,264            1,908
      Provision for doubtful accounts ................................         5,653         10,496         18,874           15,910
      Provision for guarantees issued ................................            --          3,739            649              547
      Loss from valuation of inventories .............................           844         16,837         20,409           17,204
      Loss on disposal and valuation of marketable
        securities ...................................................           402            179          3,378            2,848
      Foreign currency translation loss ..............................           208             --          1,419            1,196
      Equity in losses of affiliate ..................................         9,664         15,677            827              697
      Minority interest in net gain of consolidated
        affiliates ...................................................            --          1,055             --               --
      Loss from impairment of investment securities ..................            --          8,717          3,631            3,061
      Compensation cost related to stock options .....................           588            198            159              134
      Deferred income taxes ..........................................            --         13,763             --               --
      Other ..........................................................           251          1,053            542              458
                                                                        ------------   ------------   ------------   --------------
         Sub-total ...................................................        30,814         89,075         71,555           60,319
                                                                        ------------   ------------   ------------   --------------

   Income not involving cash receipts:
      Foreign currency translation gain ..............................        (1,286)          (899)          (542)            (457)
      Reversal of provision for doubtful accounts ....................            --           (588)            --               --
      Reversal of provision for guarantees issued ....................            --             --         (3,739)          (3,152)
      Gain on disposal and valuation of marketable
        securities ...................................................        (1,726)        (2,297)        (2,881)          (2,429)
      Gain on disposal of investment securities ......................            --           (665)           (86)             (72)
      Gain on disposal of property, plant and equipment ..............            --           (178)        (1,832)          (1,544)
      Minority interest in net loss of consolidated
        affiliates ...................................................          (533)            --           (176)            (148)
      Deferred income taxes ..........................................        (7,548)            --             --               --
      Other ..........................................................           (25)            (7)          (376)            (317)
                                                                        ------------   ------------   ------------   --------------
         Sub-total ...................................................       (11,118)        (4,634)        (9,632)          (8,119)
                                                                        ------------   ------------   ------------   --------------

   Changes in assets and liabilities related to operating activities:
      Accounts receivable - trade ....................................       (54,112)        19,317        (10,491)          (8,843)
      Accounts receivable - other ....................................          (803)            32           (345)            (291)
      Inventories ....................................................       (42,689)         1,474         10,783            9,090
      Accrued interest income ........................................            82            (73)           (40)             (34)
      Advance payments and other current assets ......................         5,391         (8,901)        (1,636)          (1,379)
      Accounts payable - trade .......................................          (482)        (9,723)         4,535            3,823
</TABLE>

(Continued)


                                      F-10
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                            2000           2001           2002             2002
                                                                        ------------   ------------   ------------   --------------
                                                                                                                       (In thousand
                                                                                                                          of U.S.
                                                                                                                          dollars)
                                                                                        (In millions of Korean won)       (Note 2)
<S>                                                                     <C>            <C>            <C>             <C>
      Accounts payable - other .......................................         2,964         11,156        (13,916)         (11,731)
      Income taxes payable ...........................................         2,062         (1,887)          (251)            (212)
      Advance receipts from customers ................................        (1,695)        (1,040)            47               40
      Accrued expenses and other current liabilities .................         3,374         (4,815)          (718)            (605)
      Severance indemnity payments ...................................          (595)        (2,790)        (1,240)          (1,045)
                                                                        ------------   ------------   ------------   --------------
         Sub-total ...................................................       (86,503)         2,750        (13,272)         (11,187)
                                                                        ------------   ------------   ------------   --------------

              Net cash used in operating activities ..................       (62,537)       (11,957)       (24,340)         (20,516)
                                                                        ------------   ------------   ------------   --------------

Cash Flows From Investing Activities:
   Proceeds from disposal of property, plant and
     equipment .......................................................      (won)279     (won)1,902    (won)58,655          $49,444
   Decrease (increase) in short-term financial
     instruments .....................................................        16,801        (30,385)         9,765            8,231
   Decrease in long-term loans .......................................         1,141          1,388          9,770            8,236
   Decrease in guarantee deposits ....................................         2,253          1,531            614              518
   Decrease (increase) in marketable securities - net ................         5,556        (12,783)        (7,153)          (6,030)
   Acquisition of property, plant and equipment ......................       (70,545)       (23,729)        (3,238)          (2,729)
   Acquisition of investment securities ..............................       (13,391)        (1,142)        (6,565)          (5,534)
   Decrease (increase) in long-term and restricted bank
     deposits - net ..................................................          (189)           265           (618)            (521)
   Increase in long-term loans .......................................          (328)        (1,435)        (3,200)          (2,697)
   Decrease (increase) in investments and other
     non-current assets ..............................................          (145)         1,587         (8,311)          (7,006)
   Increase in guarantee deposits ....................................        (2,250)          (290)        (5,879)          (4,956)
   Increase in deferred development costs ............................        (8,287)        (5,898)        (4,002)          (3,374)
   Disposal of deferred development costs ............................            --             --          1,250            1,054
   Increase in guarantee deposits payable ............................         6,953             --             --               --
   Increase (decrease) in long-term guarantee deposits
     payable .........................................................         8,831          1,737        (11,406)          (9,615)
                                                                        ------------   ------------   ------------   --------------
   Net cash provided by (used in) investing activities ...............       (53,321)       (67,252)        29,682           25,021
                                                                        ------------   ------------   ------------   --------------

Cash Flows From Financing Activities:
   Increase in short-term borrowings .................................         3,500         55,330             --               --
   Increase in long-term borrowings ..................................            --             --         10,000            8,430
   Increase in long-term lease payable ...............................            --             --            918              774
   Issuance of common stock ..........................................       128,118             --             --               --
   Increase (decrease) in minority interest in equity
     of consolidated affiliate .......................................         8,955         11,029           (218)            (184)
   Increase in additional paid-in capital ............................         9,024          2,649             --               --
   Disposal of treasury stock ........................................            --         17,448          1,273            1,073
   Payment of short-term borrowings ..................................            --         (3,400)       (21,885)         (18,448)
   Payment of current portion of long-term lease payable .............            --             --           (152)            (128)
</TABLE>

(Continued)


                                      F-11
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

<TABLE>
<CAPTION>
                                                                            2000           2001           2002             2002
                                                                        ------------   ------------   ------------   --------------
                                                                                                                       (In thousand
                                                                                                                          of U.S.
                                                                                                                          dollars)
                                                                                        (In millions of Korean won)       (Note 2)
<S>                                                                     <C>            <C>            <C>             <C>
   Payment of long-term lease payable ................................            --             --           (146)            (123)
   Acquisition of treasury stock .....................................            --        (10,000)        (1,499)          (1,264)
   Increase of other capital adjustment ..............................            --             --         (1,243)          (1,048)
   Payment of dividends ..............................................        (2,161)        (1,846)          (423)            (357)
                                                                        ------------   ------------   ------------   --------------
   Net cash provided by (used in) financing activities ...............       147,436         71,210        (13,375)         (11,275)
                                                                        ------------   ------------   ------------   --------------

Net Increase in Cash and Cash Equivalents from Changes
   in Consolidated Subsidiary ........................................            --             --            126              106
                                                                        ------------   ------------   ------------   --------------
Net Increase (Decrease) in Cash and Cash Equivalents .................        31,578         (7,999)        (7,907)          (6,665)
                                                                        ------------   ------------   ------------   --------------
Cash and Cash Equivalents at Beginning of Year .......................         3,336         34,914         26,915           22,688
                                                                        ------------   ------------   ------------   --------------
Cash and Cash Equivalents at End of Year .............................   (won)34,914    (won)26,915    (won)19,008          $16,023
                                                                        ============   ============   ============   ==============
Cash Paid for Interest, Net of Amount Capitalized ....................    (won)2,616     (won)3,247     (won)3,609           $3,042
                                                                        ============   ============   ============   ==============
Cash Paid (Refunded) for Income Taxes ................................     ((won)763)    (won)3,166       (won)220             $185
                                                                        ============   ============   ============   ==============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.


                                      F-12
<PAGE>

                     MIRAE CORPORATION AND ITS SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

1. GENERAL

      Mirae Corporation (the "Company") was incorporated in December 1990 under
the laws of the Republic of Korea ("Korea") and is currently engaged in the
manufacture of semiconductor-related equipment including handlers, SMD placement
systems for sale in domestic and overseas markets, as well as in the sale of
on-line electronic commerce security solution through its subsidiary, SoftForum
Co., Ltd. The Company's common shares and American Depositary Shares ("ADSs")
are listed on the Korea Stock Exchange and the Nasdaq National Market,
respectively. Each ADS represents two shares of common stock. As of December 31,
2002, the Company's largest shareholder was Mr. Moon-Soul Chung, the Company's
former president, with a shareholding of 14.93% and, including his family
members, 16.55%.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Significant accounting policies followed by the Company in the preparation
of the accompanying consolidated financial statements are summarized as follows:

            a. Basis of Presentation

      The official accounting records of the Company are expressed in Korean won
and are maintained in accordance with the relevant laws and regulations of
Korea. The accounting principles and reporting practices followed by the Company
and generally accepted in Korea ("Korean GAAP") may differ in certain respects
from accounting principles and reporting practices generally accepted in other
countries and jurisdictions.

      The financial statements are stated in Korean won, the currency of the
country in which the Company is incorporated and operates. The translation of
Korean won amounts into U.S. dollar amounts is included solely for the
convenience of readers outsides of Korea and have been made at the rate of
(won)1,186.30 to US$1, the Noon Buying Rate in the City of New York for cable
transfers in Korean won as certified for customs purposes by the Federal Reserve
Bank of New York on the last business day of the year ended December 31, 2002.
Such translations should not be construed as representations that the Korean won
amounts could be converted into U.S. dollars at that or any other rate.

            b. Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
and all subsidiaries. Significant inter-company accounts and transactions have
been eliminated in consolidation. The Company's 20%- to 50%-owned affiliates are
accounted for using the equity method of accounting (see Note 2(l)). The
Company's subsidiaries and its affiliates, which are accounted for using the
equity method of accounting, are as follows:


                                      F-13
<PAGE>

<TABLE>
<CAPTION>
                                               Year of        Ownership
                                            Establishment   Percentage (%)       Remark
                                            -------------   --------------    -------------
<S>                                         <C>             <C>               <C>
SoftForum Co., Ltd. ("SoftForum") .......            1999            41.51%   Consolidated
MR Tech Town Co. ("MR Tech") (formerly MR
   Tech Corporation) ....................            1999           100.00%   Consolidated
Mirae Online Co., Ltd. ("MOL") ..........            2000            81.38%   Consolidated
Korea Internet.com Co., Ltd. ("KIC") ....            2000            87.38%   Consolidated
Alpha Logics Co., Ltd. ("Alpha Logics") .            2002           100.00%   Consolidated
Mobile Game Co., Ltd. ("Mobile Game")
   (formerly Java Game Co.) .............            1999            29.99%   Equity method
AIO Corporation ("AIO") .................            1990            21.63%   Equity method
Mirae America, Inc. ("Mirae America") ...            2001            50.00%   Equity method
</TABLE>

      SoftForum was incorporated in April 1999 under the laws of Korea as a
70%-owned subsidiary of the Company and is currently engaged in providing
security solutions for on-line banking, trading and electronic commerce.
SoftForum's shares have been listed in the Korea Securities Dealers Automated
Quotation ("KOSDAQ") market since October 30, 2001. As of December 31, 2002,
SoftForum is 41.51%-owned by the Company, 6.94%-owned by Dongwon Venture Capital
Co., Ltd., 4.14%-owned by SoftForum employees and 47.41%-owned by others.
SoftForum's accounts were consolidated due to the Company's effective control
through the nomination of a majority of the board of directors by the Company.

      MR Tech was incorporated in April 1999 under the laws of Korea and the
Company acquired 100% equity interest in MR Tech on July 12, 1999. As of
December 31, 2002, MR Tech is engaged in providing building administration
services.

      MOL was incorporated in March 2000 under the laws of Korea in order to
engage in providing broadcasting program sending service. As of December 31,
2002, MOL is 81.38%-owned by the Company.

      KIC was incorporated in July 2000 under the laws of Korea as a joint
venture company between the Company and internet.com Corporation, a United
States corporation, in order to provide e-business related information,
real-time news, and information for internet professionals on the internet. As
of December 31, 2002, KIC is 87.38%-owned by the Company.

      Alpha Logics was incorporated in December 2002 under the laws of Korea in
order to develop and sell security solutions and related equipment. As of
December 31, 2002, Alpha Logics is 100%-owned by SoftForum, the Company's
subsidiary.

      Mobile Game was incorporated in December 1999 under the laws of Korea as a
59.98%-owned affiliate of the Company and is currently engaged in providing game
programs. In April 2002, Mobile Game was changed to equity method affiliate from
a consolidated subsidiary due to the Company's decrease in ownership percentage
from 59.98% to 29.99%.

      AIO Corporation was incorporated in the United States in 1990 in order to
design, manufacture and market silicon wafer cleaning systems, track systems and
ancillary equipment.


                                      F-14
<PAGE>

      Mirae America was incorporated in February 2001 under the laws of United
States of America as a joint venture company between the Company and Mr.
Hyung-Yun Lee, CEO of Mirae America. Mirae America currently sells products
manufactured by the Company and provides after-sales services for the products.

            c. Use of Estimates

      The preparation of the Company's financial statements, in conformity with
accounting principles generally accepted in Korea, requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.

            d. Revenue Recognition

      Sales are recognized as products are delivered because at that time
customers contractually assume all risks of ownership and the earnings process
is considered to be substantially complete. Legal title, however, passes to
customers upon final customer acceptance. Sales of software products are
recognized after the installation process is complete.

            e. Marketable Securities

      Marketable securities are stated at fair value, with unrealized gains and
losses included in current operations.

            f. Allowance for Doubtful Accounts

      An allowance for doubtful accounts is provided based on the estimated
collectibility of individual accounts and historical bad debt experience.

      Activity in the allowance for doubtful accounts balances for the years
ended December 31, 2000, 2001 and 2002 is as follows (in millions of Korean
won):

<TABLE>
<CAPTION>
                                                                           2000           2001            2002
                                                                       ------------   ------------    ------------
<S>                                                                    <C>            <C>             <C>
(Allowance for doubtful accounts receivable-trade)
Beginning balance ..................................................       (won)494       (won)657      (won)4,001
Provision (charged to selling, general and administrative expenses)             587         10,267          11,787
Offset against uncollectible trade receivables .....................           (424)        (6,923)         (1,466)
                                                                       ------------   ------------    ------------
Ending balance .....................................................       (won)657     (won)4,001     (won)14,322
                                                                       ============   ============    ============

(Allowance for doubtful advance payments, long-term loans and other)
Beginning balance ..................................................        (won)--     (won)5,066         (won)--
Provision (charged to other expenses) ..............................          5,066            229           7,087
Offset against uncollectible advance payments, long-term loans and
   other ...........................................................             --         (5,295)            (88)
                                                                       ------------   ------------    ------------
Ending balance .....................................................     (won)5,066        (won)--      (won)6,999
                                                                       ============   ============    ============
</TABLE>


                                      F-15
<PAGE>

            g. Inventories

      Inventories are stated at the lower of cost, determined using the weighted
average cost method (the specific identification method for
inventories-in-transit), or net realizable value.

            h. Property, Plant and Equipment

      Property, plant and equipment are stated at cost. Routine maintenance and
repairs are expensed as incurred. Expenditures which result in an enhancement of
the value or extension of the useful life of the facilities involved are
capitalized.

      Depreciation is computed using the declining balance or straight-line
methods over the estimated useful lives (one to sixty years) of the related
assets.

            i. Research and Development Costs

      Development costs which meet certain specific conditions such as new
product development, technological feasibility, marketability and usefulness are
deferred and amortized over five years, while all research and ordinary
development costs are expensed as incurred. Amortization of deferred development
costs is to commence when the related revenue or benefit is first realized. In
addition, the amortization of deferred development costs and research and
ordinary development expenses are classified as manufacturing or selling,
general and administrative expenses depending on their nature.

      During 2001 and 2002, the Company discontinued some of its research and
development projects. As a result, the Company wrote off related deferred
development costs of (won)4,429 million and 11,337 million for the years ended
December 31, 2001 and 2002, respectively.

      Expenditures on research and development activities for the years ended
December 31, 2000, 2001 and 2002 are as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                    2000           2001           2002            Remark
                                ------------   ------------   ------------   -----------------
<S>                             <C>            <C>            <C>            <C>
Research expenses ...........     (won)3,150     (won)3,315     (won)2,410   SG&A expenses
Ordinary development expenses          9,316          6,768          2,866   Cost of sales
Deferred development costs ..          8,286          5,898          4,002   Intangible assets
                                ------------   ------------   ------------   -----------------

Total .......................    (won)20,752    (won)15,981     (won)9,278
                                ============   ============   ============
</TABLE>

      Changes in deferred development costs for the years ended December 31,
2000, 2001 and 2002 are as follows (in millions of Korean won):

                                        2000           2001            2002
                                    ------------   ------------    ------------
Beginning balance ................    (won)8,574    (won)14,440     (won)13,637
Incurred .........................         8,286          5,898           4,002
Changes in consolidated subsidiary            --             --             (23)
Disposed .........................            --             --          (1,250)
Amortized ........................        (2,420)        (2,272)           (975)
Loss from impairment .............            --         (4,429)        (11,337)
                                    ------------   ------------    ------------

Total ............................   (won)14,440    (won)13,637      (won)4,054
                                    ============   ============    ============


                                      F-16
<PAGE>

            j. Other Intangible Assets

      Other intangible assets are stated at cost, less amortization, computed
using the straight-line method over five to ten years.

            k. Stock Issuance Costs

      Stock issuance costs are shown as a direct reduction to shareholders'
equity.

            l. Investment Securities

                  (1) Investments with 20% or more ownership interest

      Investment securities of non-consolidated affiliated companies, in which
the Company has a 20% or more ownership interest, are stated using the equity
method of accounting, whereby the Company's initial investment is recorded at
cost and the carrying value is subsequently increased or decreased to reflect
the Company's share of income or loss of the investee and dividends received
therefrom. The Company's share in net losses of its affiliates is reflected only
to the extent of its investment-carrying amount.

                  (2) Other Investments

      Investments in equity securities of listed companies are stated at fair
value and the net unrealized gain or loss on investments in equity securities of
listed companies is recorded as a capital adjustment. Other investments in
equity securities of non-listed companies are stated at acquisition cost. If the
fair value (or the net asset value for non-listed companies) of the investments
declines significantly below the acquisition cost and is not expected to
recover, such investments are carried at fair value (or net asset value) and the
resulting unrealized loss on investments is charged to current operations. In
addition, subsequent recoveries for impaired equity securities of non-listed
companies are also recorded in current operations up to the original cost of the
investment. In connection with this policy, the Company recorded a impairment
losses of (won)8,717 million and 3,631 million for the years ended December 31,
2001 and 2002, respectively, and recorded reversal of impairment losses of
(won)11 million for the year ended December 31, 2002.

            m. Accounting for Impairment

      When the book value of an asset exceeds its estimated recoverable value,
which is the greater of the net realizable value or useful value of the asset,
due to obsolescence, physical damage or a sharp decline in market value, and the
amount is material, the asset is recorded at its reduced value and the resulting
impairment loss is charged to current operations. In subsequent periods, if the
recoverable value exceeds the adjusted book value of the asset, the recoveries
of previously recognized losses is recognized as a gain in subsequent periods
until the net realizable value equals the original book value of the asset.


                                      F-17
<PAGE>

            n. Accrued Severance Indemnities

      In accordance with Korean labor laws, all employees with more than one
year of service are entitled to receive severance indemnities, based on length
of service and rate of pay, upon termination of their employment. Accruals for
severance indemnities are recorded to approximate the amount required to be paid
if all employees were to terminate at the balance sheet date.

      Funding of severance indemnities is not required. However, the Company and
subsidiaries maintain deposits for severance indemnities with insurance
companies, which are presented as non-current assets, to meet the requirements
for tax deduction purposes under the Korean corporate income tax law.

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

                                         2000           2001           2002
                                     ------------   ------------   ------------
Beginning balance ................     (won)1,957     (won)2,988     (won)3,032
Provision ........................          1,626          2,834          2,264
Changes in consolidated subsidiary             --             --             (9)
Payments .........................           (595)        (2,790)        (1,240)
                                     ------------   ------------   ------------

Ending balance ...................     (won)2,988     (won)3,032     (won)4,047
                                     ============   ============   ============

            o. Treasury Stock

      Treasury stock is shown separately as a capital adjustment item within
stockholders' equity. Gains on sales of treasury stock are credited to capital
surplus, and losses are charged against either capital surplus arising from
previous treasury stock transactions or against retained earnings.

            p. Costs for Product Warranties

      Through 2000, product warranty expenditures had been included as incurred
in manufacturing costs, which had been allocated between cost of sales and
inventories. Effective January 1, 2001, product warranties expenditures incurred
related to selling and administrative activities are classified as an item of
selling, general and administrative expenses for a more appropriate financial
statement presentation as the Company established a customer satisfaction
division. This change in classification did not have any significant effect on
the reported financial position of the Company and its subsidiaries as of
December 31, 2001 or their net loss for the year then ended.

            q. Income Taxes

      Deferred tax assets and liabilities are recorded for future tax
consequences of operating loss carry-forwards, tax credits and temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets are
recognized to the extent that they are expected to be realizable. Deferred tax
assets and liabilities are presented on the balance sheet as a single
non-current net number.


                                      F-18
<PAGE>

            r. Accounting for Foreign Currency Transactions

      The Company and its subsidiaries maintain their accounts in Korean won.
Transactions in foreign currencies are recorded in Korean won based on the
prevailing rate of exchange at the dates of transactions. Monetary assets and
liabilities denominated in foreign currencies are translated in the accompanying
consolidated financial statements at the Base Rates announced by the Korean
government on the balance sheet dates, which, for U.S. dollars, were
(won)1,259.70=$1.00, (won)1,326.10=$1.00 and (won)1,200.40=$1.00, at December
31, 2000, 2001 and 2002, respectively. The resulting gains and losses arising
from the translation or settlement of such assets and liabilities are included
in current operations.

            s. Valuation of Long-Term Receivables

      Long-term receivables resulting from long-term installment transactions
are stated at the present value of the expected future cash flows. Imputed
interest amounts are recorded in present value discount accounts which are
deducted directly from the related nominal receivable balances. Such imputed
interest is included in operations using the effective interest rate method over
the redemption period.

            t. Accounting for Employee Stock Option Compensation Plan

      The Company adopted the fair value based method of accounting for the
employee stock option compensation plan, which was established, effective as of
March 25, 2000, to reward the performance of individual officers and other
employees who have contributed, or have the ability to contribute, significantly
to the Company (see Note 26). Under the fair value based method, compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period. For stock options, fair value is determined
using an option-pricing model that takes into account the stock price at the
grant date, the exercise price, the expected life of the option, the volatility
of the underlying stock, the expected dividends, and a risk-free interest rate
over the expected life of the option. However, as permitted under Korean GAAP,
the Company excludes the volatility factor in estimating the value of its stock
options, which results in measurement at minimum value. The total compensation
cost at the grant date is not subsequently adjusted for changes in the price of
the underlying stock or its volatility, the expected life of the option,
dividends on the stock, or the risk-free interest rate.

            u. Accounting for Government Grants

      Government grants with an obligation of redemption are recorded as
liabilities. Government grants without an obligation of redemption are
classified as follows:

            (1)   For the purpose of acquisition of certain assets, government
                  grants are recorded as a deduction from related assets.

            (2)   Other government grants are recorded as liabilities first, and
                  offset against related expenses incurred, or if there are no
                  related expenses they are recognized as other operating
                  income.


                                      F-19
<PAGE>

            v. Accounting for Leases

      Lease agreements that include a bargain purchase option, result in
transfer of ownership at the end of the lease term, have a term longer than 75%
of the estimated economic life of the leased property or have present value of
minimum lease payments equal to or exceeding 90% of fair market value of the
leased property, are accounted for as capital leases. Leases that do not meet
any of these criteria are accounted for as operating leases.

      The leased properties and related capital lease obligations are recorded
at an amount equal to the total minimum lease payments over the lease term, less
the portion attributable to interest. Depreciation of leased properties
accounted for as capital leases is computed using the straight-line method over
the useful lives of related assets.

3. INVENTORIES

      Inventories as of December 31, 2000, 2001 and 2002 are as follows (in
millions of Korean won):

                                          2000           2001           2002
                                      ------------   ------------   ------------
Merchandise .......................     (won)6,907     (won)1,720     (won)2,840
Finished goods ....................         35,648         33,550          6,599
Work in-process ...................          2,018            289          2,478
Raw materials .....................         27,291         17,994         10,343
Inventories in-transit ............             --              1              1
                                      ------------   ------------   ------------

                                       (won)71,864    (won)53,554    (won)22,261
                                      ============   ============   ============

4. RESTRICTED DEPOSITS

      Restricted deposits as of December 31, 2000, 2001 and 2002 are as follows
(in millions of Korean won):

<TABLE>
<CAPTION>
                                                  2000           2001           2002
                                              ------------   ------------   ------------
<S>                                           <C>            <C>            <C>
Short-term financial instruments (Note) ...        (won)--    (won)18,152     (won)8,873
Long-term financial instruments ...........              6             23            110
Deposits for severance indemnities ........              7             --             --
                                              ------------   ------------   ------------
                                                   (won)13    (won)18,175     (won)8,983
                                              ============   ============   ============
</TABLE>

(Note) A treasury stock trust account amounting to (won)4,595 million was
       included in the above short-term financial instruments as of December 31,
       2002. According to the trust agreement, the use of the funds in the trust
       account is restricted and the restriction expires on February 10, 2003;
       six months from the trust agreement date.

5. INVESTMENT SECURITIES

      Investment securities and investments in affiliates as of December 31,
2000, 2001 and 2002 are as follows (in millions of Korean won):


                                      F-20
<PAGE>

<TABLE>
<CAPTION>
                                                                                                    Net asset
                                        Ownership                                                   value or
                                        percentage                                                    fair
                                           (%)                                                       value
                                        ----------                                                 ----------
                                           2002           2000           2001           2002          2002
                                        ----------    ------------   ------------   ------------   ----------
<S>                                     <C>           <C>            <C>            <C>            <C>
(Investment in affiliates)
Mobile Game (Note a) ................        29.99%        (won)--        (won)--       (won)137     (won)137
Mirae America (Note b) ..............        50.00%             --             --             --           --
AIO Corporation preferred stock (Note
   c) ...............................        21.63%          3,513             --             --           --
Korea Internet Holdings .............                        1,944             --             --           --
                                                      ------------   ------------   ------------   ----------
Sub-total ...........................                        5,457             --            137          137
                                                      ------------   ------------   ------------   ----------

(Investment in equity securities of
   non-listed companies)
SK Communications Corporation
   (Formerly Lycos Korea)
   (Note d) .........................         4.54%         12,584            516          2,532        3,065
DE&T ................................           --              --            270             --           --
On-net Corporation (Note e) .........        14.71%            795            504            459          459
Intro System Co., Ltd. (formerly Sun
   Mentoring) (Note e) ..............        15.16%            500             --             --           --
JIT Corporation (Note e) ............         3.65%            100             --             --           --
Nara Vision (Note e) ................        17.43%          3,500            783            264          264
NetThru (Note e) ....................        19.73%            296             66             64           64
Cyber Bank Co., Ltd. (Note e) .......         1.36%          2,250             64             62           62
Infinity Telecom Co., Ltd.
   (Note e) .........................        16.70%            500             51             62           62
Korea Technology Transfer Center ....           --           1,500          1,500          1,500        1,379
TeleFree Co., Ltd. (Note e) .........         2.57%            504             90             62           62
Streambox Korea (Note e) ............         5.11%          1,500            205             --           --
NeoBill Co., Ltd. (Note e) ..........         4.37%            525             70             52           52
Mobens Co., Ltd. (Note e) ...........        16.42%             --             --             --           --
Mirae (HongKong) Co., Ltd. ..........        99.00%             --             --              2            2
Linxtek Co., Ltd. ...................         1.22%             --             28             28           24
Seoul Venture Base (Note e) .........         5.69%             --             --             --           --
EON Group (Note e) ..................         1.33%             --             13              6            6
CAMIS Co., Ltd. .....................         0.26%             --             10             10           17
YESS World Inc. .....................         0.73%             --             20             20           22
Sunwoo Information system ...........         1.00%             --             10              5            5
Dabonet Co., Ltd. ...................         0.79%             --              8              8            7
Digital Photo Corporation ...........         0.93%             --              5              5            2
Telinker ............................         0.75%             --             22             22           37
E-GIOS Corporation ..................         1.59%            200            200            200           59
Hackers Lab Co., Ltd. ...............         1.47%            250            112             81           36
Interchem Korea .....................         8.00%            100            100            100           46
Imobiz (Note e) .....................         2.32%             12             12             --           --
K Lab (Note e) ......................        11.10%             --             50             --           --
Other ...............................           --               5              5              5           --
                                                      ------------   ------------   ------------   ----------
Sub-total ...........................                       25,121          4,714          5,549        5,732
                                                      ------------   ------------   ------------   ----------
</TABLE>


                                      F-21
<PAGE>

<TABLE>
<CAPTION>
                                                                                                    Net asset
                                        Ownership                                                   value or
                                        percentage                                                    fair
                                           (%)                                                       value
                                        ----------                                                 ----------
                                           2002           2000           2001           2002          2002
                                        ----------    ------------   ------------   ------------   ----------
<S>                                     <C>           <C>            <C>            <C>            <C>
(Investment in convertible debt
   securities)
KMT Co., Ltd. (Note e) ..............                           --             --            762          762
Cen21 Co., Ltd. (Note e) ............                           --            300             --           --
                                                      ------------   ------------   ------------   ----------
Sub-total ...........................                           --            300            762          762
                                                      ------------   ------------   ------------   ----------
Total Investment Securities .........                  (won)30,578     (won)5,014     (won)6,448   (won)6,631
                                                      ============   ============   ============   ==========
</TABLE>

----------

(Note a)    In 2002, Mobile Game was changed to an equity method affiliate from
            a consolidated subsidiary.

(Note b)    As of December 31, 2002, Mirae America has a deficiency in assets.

(Note c)    AIO Corporation's fiscal year end is March 31. Through 2000, AIO
            Corporation's preferred stock was accounted for by the cost method.
            At the option of the Company, each share of AIO Corporation's
            preferred stock is convertible into ten shares of AIO Corporation's
            common stock, at any time. In addition, AIO's preferred stock does
            not have any restrictions on voting rights compared to common stock.
            In April 2000, AIO Corporation issued and sold an additional 2,660
            shares of preferred stock to third parties for US$ 2,500 thousand
            and granted 2,047 shares of preferred stock to existing preferred
            stockholders without consideration. This resulted in an increase in
            the converted ownership percentage of the Company from 15.0% to
            21.6% and the Company applied the equity method of accounting for
            the preferred stock in AIO Corporation from 2001. The carrying value
            was fully written down in 2001 since the Company's management
            believes that there is uncertainty relating to AIO Corporation's
            ability to continue as a going concern and recoverability of the
            carrying value was remote.

(Note d)    In 2002, Lycos Korea changed its name to SK Communications
            Corporation. In addition, in August 2002, the Company's ownership
            percentage decreased from 43.25% to 4.54% through a sale to SK
            Telecom Co., Ltd. As a result, the investment in SK Communications
            (formerly Lycos Korea) was accounted for using the equity method
            through July 2002 and the cost method of accounting thereafter. The
            Company's initial investment cost was (won)50 million. In 1999, the
            carrying value was subsequently reduced to zero to reflect the
            Company's share of SK Communications' loss for the year ended
            December 31, 1999 which exceeded the carrying amount of the common
            stock investment. In February 2000, SK Communications issued and
            sold 3,122 additional shares of its common stock at a premium to
            outside entities, including Mirae Asset Venture Capital, Sumitomo
            Corp., SingTel and Hikari, for (won)18,000,000 per share (par value:
            (won)5,000 per share). As a result of such issuance, the Company's
            equity ownership in SK Communications decreased from 50% to 43% and
            its investment increased by (won)24,628 million. The resulting gain
            on sale of stock by SK Communications was accounted for as an equity
            transaction and included in capital surplus. Also, the Company
            recognized its share of SK Communications' 1999 loss not recognized
            during 1999, amounting to (won)2,435 million, as an adjustment to
            retained earnings from prior periods. In addition, in 2000, 2001 and
            the seven-month period ended July 31, 2002, the carrying value was
            subsequently reduced by a charge to other expense to reflect the
            Company's share of SK Communications' loss for the years ended
            December 31, 2000, 2001 and the seven-month period ended July 31,
            2002, amounting to (won)9,608 million, (won)12,068 million and
            (won)848 million, respectively.

(Note e)    The carrying values of investments were adjusted to the relevant net
            asset value of each investee where the decline in net asset value is
            not deemed to be temporary.

      Changes in investment in equity method affiliates for the years ended
December 31, 2000, 2001 and 2002 are as follows (in millions of Korean won):


                                      F-22
<PAGE>

<TABLE>
<CAPTION>
                                      SK               AIO         Mirae                           Mobile
                                Communications     Corporation   America      KIH        DE&T       Game
                                --------------    ------------   --------   --------   --------   --------
<S>                             <C>               <C>            <C>        <C>        <C>        <C>
At January 1, 2000 ..........          (won)--      (won)3,513    (won)--    (won)--    (won)--    (won)--
Acquisition .................               --              --         --      2,000         --         --
Gain on valuation of
   investment securities
   (capital surplus) ........           24,628              --         --         --         --         --
Equity in losses of affiliate          (12,044)             --         --        (56)        --         --
                                --------------    ------------   --------   --------   --------   --------

At December 31, 2000 ........           12,584           3,513         --      1,944         --         --
Acquisition .................               --              --        126         --        239         --
Disposal ....................               --              --         --     (1,944)        --         --
Equity in gains (losses) of
   affiliate ................          (12,068)         (3,513)      (126)        --         31         --
                                --------------    ------------   --------   --------   --------   --------

At December 31, 2001 ........              516              --         --         --        270         --
Changes in consolidated
   subsidiary ...............               --              --         --         --         --        116
Gain on valuation of
   investment securities
   (capital surplus) ........              332              --         --         --         --         --
Disposal ....................               --              --         --         --       (270)        --
Equity in gains (losses) of
   affiliate ................             (848)             --         --         --         --         21
Acquisition .................            2,532              --         --         --         --         --
                                --------------    ------------   --------   --------   --------   --------
At December 31, 2002 ........       (won)2,532         (won)--    (won)--    (won)--    (won)--   (won)137
                                ==============    ============   ========   ========   ========   ========
</TABLE>

6. SHORT-TERM AND LONG-TERM LOANS TO EMPLOYEES

      Short-term and long-term loans to employees as of December 31, 2000, 2001
and 2002 are (won)1,640 million, (won)1,707 million and (won)1,561 million,
respectively.

7. PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment as of December 31, 2000, 2001 and 2002 are
as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                Useful
                                 lives
                                (years)           2000            2001            2002
                                -------   ------------    ------------    ------------
<S>                             <C>       <C>             <C>             <C>
Land ........................        --    (won)52,721     (won)52,176     (won)15,494
Buildings and structures ....    5-60           56,715          73,393          53,532
Machinery and equipment .....    4-10            5,468           6,620           6,871
Vehicles ....................     5-6              806             683             716
Tools, furniture and fixtures    1-10           26,313          29,318          30,184
                                          ------------    ------------    ------------

Total .......................                  142,023         162,190         106,797
Less accumulated depreciation                  (21,054)        (27,317)        (31,480)
                                          ------------    ------------    ------------

Net .........................             (won)120,969    (won)134,873     (won)75,317
                                          ============    ============    ============
</TABLE>


                                      F-23
<PAGE>

      The Korean government's declared standard value of land compared to the
book value of land owned as of December 31, 2000, 2001 and 2002 is as follows
(in million of Korean won):

                                          2000           2001           2002
                                      ------------   ------------   ------------
Standard value ....................    (won)23,260    (won)22,924    (won)15,596
Book Value ........................         52,721         52,176         15,494

      A certain portion of the Company's land and buildings is pledged as
collateral for the Company's short-term borrowings and long-term borrowings up
to (won)4,500 million with Korea Exchange Bank and (won)6,000 million and USD
4,600 thousand with Korea Development Bank.

      In addition, as of December 31, 2002, a lawsuit relating to payment of
construction costs for a building, which was purchased by the Company in 2000,
is outstanding between the former building owner and his creditors. In
connection with this, the Company made a payment of (won)6 billion to a court on
behalf of the former building owner in order to protect its assets in 2001. The
payment was recorded as an advance payment. In 2002, the Company sold its
building to a third party. As of December 31, 2002, the Company provided an
allowance for the entire amount of the advance payments and recorded an
additional provision for guarantees of (won)0.65 billion.

8. SHORT-TERM BORROWINGS

      Short-term borrowings as of December 31, 2000, 2001 and 2002 are as
follows (in millions of Korean won):

                             Annual
                            interest
Lender                      rate (%)       2000          2001           2002
-----------------------   ----------    ----------   ------------   ------------
Korea Exchange Bank ...     3.0%~8.4%     (won)100    (won)39,205    (won)20,542
Hana Bank .............           --         2,000          6,999             --
Kookmin Bank ..........          7.4%           --          7,000          4,000
Shinhan Bank ..........          5.7%        1,400          2,226          9,000
                                        ----------   ------------   ------------

Total .................                 (won)3,500    (won)55,430    (won)33,542
                                        ==========   ============   ============

9. LEASED PROPERTY AND LIABILITIES UNDER CAPITAL LEASES

      Lease payables as of December 31, 2000, 2001 and 2002 are as follows (in
millions of Korean won):

Leasing company                                   2000       2001        2002
---------------------------------------------   --------   --------   ----------
KDB Capital Co. .............................    (won)--   (won)459   (won)1,079
                                                ========   ========   ==========


                                      F-24
<PAGE>

      Leased property under capital leases as of December 31, 2001 and 2002 are
as follows (in millions of Korean won):

                                      2001                       2002
                          -------------------------   -------------------------
                              Tools,                      Tools,
                            furniture                   furniture
                          and fixtures    Machinery   and fixtures    Machinery
                          ------------   ----------   ------------   ----------
Acquisition cost .......       (won)--     (won)472       (won)799     (won)591
Accumulated depreciation            --           (4)          (507)         (61)
                          ------------   ----------   ------------   ----------
Net book value .........       (won)--     (won)468       (won)292     (won)530
                          ============   ==========   ============   ==========

      Future lease payments at December 31, 2002 are as follows (in millions of
Korean won):

Year ending                         Total lease
December 31,                           payment     Interest expense   Principal
---------------------------------   ------------   ----------------   ----------
2003  ...........................       (won)488            (won)30     (won)458
2004  ...........................            567                 15          552
2005  ...........................             70                  1           69
                                    ------------   ----------------   ----------
Total ...........................     (won)1,125            (won)46   (won)1,079
                                    ============   ================   ==========

10. LONG-TERM BORROWINGS

      Long-term borrowings denominated in Korean won as of December 31, 2000,
2001 and 2002 are as follows (in millions of Korean won):

                                      Annual
                                     interest
Lender                               rate (%)     2000       2001        2002
----------------------------------   --------   --------   --------   ----------
Korea Development Bank ...........       6.70    (won)--    (won)--   (won)5,000
                                                ========   ========   ==========

      Long-term borrowings denominated in foreign currency as of December 31,
2000, 2001 and 2002 are as follows (in millions of Korean won and thousands of
U.S. dollars):

                                      Annual
                                     interest
Lender                               rate (%)     2000       2001        2002
-----------------------------------  --------   --------   --------   ----------
Korea Development Bank ............      4.98      US$--      US$--     US$3,784
                                                --------   --------   ----------
Total foreign currency ............                US$--      US$--     US$3,784
                                                ========   ========   ==========
Equivalent in Korean won ..........              (won)--    (won)--   (won)4,543
                                                ========   ========   ==========


                                      F-25
<PAGE>

      The future maturities of long-term borrowings at December 31, 2002 are as
follows (in millions of Korean won and thousands of U.S. dollars):

                           Long-term    Long-term
                           borrowings   borrowings
                           in Korean    in foreign   Equivalent in
Year ending December 31,      won        currency      Korean won       Total
------------------------   ----------   ----------   --------------   ----------
2004  ..................     (won)938       US$710         (won)851   (won)1,789
2005  ..................        1,250          946            1,136        2,386
2006  ..................        1,250          946            1,136        2,386
2007  ..................        1,250          946            1,136        2,386
2008  ..................          312          236              284          596
                           ----------   ----------   --------------   ----------
Total ..................   (won)5,000     US$3,784       (won)4,543   (won)9,543
                           ==========   ==========   ==============   ==========

11. RELATED PARTY TRANSACTIONS

      Detailed related party transactions and account balances as of and for the
years ended December 31, 2000, 2001 and 2002 are as follows (in millions of
Korean won):

  Transactions with affiliates which are accounted for using the equity method

                                                2000       2001         2002
                                              --------   --------    ----------
Sales to:
   Mirae America .....................         (won)--   (won)352    (won)1,783
   DE&T ..............................              --      1,653            --
                                              --------   --------    ----------
   Total .............................              --      2,005         1,783
                                              --------   --------    ----------
Interest income from SK Communications             688        688            --
                                              --------   --------    ----------
Other income (expense) from:
   SK Communications .................             300        147            --
   Mirae America .....................              --       (211)          (26)
   Mobile Game .......................              --         --           253
   DE&T ..............................              --         29            --
                                              --------   --------    ----------
   Total .............................             300        (35)          227
                                              --------   --------    ----------
   Commissions to
   SK Communications .................             708         --            --
                                              --------   --------    ----------
   Acquisition of property and
   equipment from Mirae America ......              --          3            --
                                              --------   --------    ----------


                                      F-26
<PAGE>

                     Account balances with affiliates, which
                    are accounted for using the equity method

                                               2000         2001         2002
                                            ----------   ----------   ----------
(Assets) Accounts receivable - trade:
   Mirae America ........................      (won)--     (won)352   (won)1,977
   DE&T .................................           --          876           --
                                            ----------   ----------   ----------
   Sub-total ............................           --        1,228        1,977
                                            ----------   ----------   ----------
Accounts receivable - other:
   SK Communications ....................          303          150           --
   DE&T .................................           --          268           --
   Mobile Game ..........................           --           --            7
                                            ----------   ----------   ----------
   Sub-total ............................          303          418            7
                                            ----------   ----------   ----------
Advance payments:
   Mirae America ........................           --          419        1,102
   Mobile Game ..........................           --           --            2
                                            ----------   ----------   ----------
   Sub-total ............................           --          419        1,104
                                            ----------   ----------   ----------
   Long-term loans to SK Communications .        6,250        6,250           --
                                            ----------   ----------   ----------
   Total ................................   (won)6,553   (won)8,315   (won)3,088
                                            ==========   ==========   ==========

(Liabilities)
Accounts payable - trade  to DE&T .......      (won)--     (won)121      (won)--
                                            ----------   ----------   ----------
Accounts payable - other to SK
   Communications .......................           --           13           --
                                            ----------   ----------   ----------
Accrued expenses to Mirae America .......           --           42            2
                                            ----------   ----------   ----------
Guarantee deposits payable to SK
   Communications .......................        4,000           --           --
                                            ----------   ----------   ----------

Total ...................................   (won)4,000     (won)176       (won)2
                                            ==========   ==========   ==========

      As of December 31, 2002, SK Communications and DE&T are not affiliates of
the Company.

                     Transactions with other related parties

                                               2000         2001         2002
                                            ----------   ----------   ----------
Sales to Cyber Bank .....................      (won)--   (won)5,571   (won)3,974
                                            ----------   ----------   ----------
Disposition of property and equipment
   and intangible assets to Testech .....           --           --        1,338
                                            ----------   ----------   ----------
Interest income from Cyber Bank .........           --           54          235
                                            ----------   ----------   ----------
Other income from Testech ...............           --           --           10
                                            ----------   ----------   ----------
Purchase from Testech ...................        2,820        2,536        1,784
                                            ----------   ----------   ----------
Other expense to Testech ................           --           --           15
                                            ----------   ----------   ----------
Acquisition of investments from Cyber
   Bank .................................           --           --        1,800
                                            ----------   ----------   ----------

----------
(Note) Testech is a related company through common ownership.


                                      F-27
<PAGE>

                   Account balances with other related parties

                                               2000         2001         2002
                                            ----------   ----------   ----------
(Assets)
Accounts receivable - trade to Cyber
   Bank .................................      (won)--   (won)2,382   (won)6,753
                                            ----------   ----------   ----------
Accounts receivable - other to
   Testech ..............................           --            4           --
                                            ----------   ----------   ----------
Total ...................................      (won)--   (won)2,386   (won)6,753
                                            ==========   ==========   ==========

(Liabilities)
Accounts payable - trade to Testech .....      (won)96     (won)979   (won)1,004
                                            ----------   ----------   ----------
Guarantee deposits payable to Cyber
   Bank .................................           --        3,822           --
                                            ----------   ----------   ----------
Total ...................................      (won)96   (won)4,801   (won)1,004
                                            ==========   ==========   ==========

12. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

      The details of monetary assets and liabilities denominated in foreign
currencies as of December 31, 2000, 2001 and 2002 are as follows (in millions of
Korean won, thousands of U.S. dollars, H.K. dollars, euros and yens):

                                                  Foreign currencies
                                      ------------------------------------------
                                          2000           2001           2002
                                      ------------   ------------   ------------
Cash and cash equivalents .........         $3,990         $3,179         $1,188
           " ......................        (yen)--    (yen)28,292         (yen)8
           " ......................          HKD--          HKD--         HKD288
Short-term financial instruments ..            $--            $--         $4,147
Accounts receivable - trade .......        $18,969        $10,218        $15,045
           " ......................        (yen)--       (yen)994       (yen)994
Accounts payable - trade ..........           $250             $9         $2,154
           " ......................   (yen)957,240     (yen)3,960       (yen)105
           " ......................          EUR--         EUR 13          EUR--
Short-term borrowings .............            $--            $--         $2,953
           " ......................        (yen)--        (yen)--    (yen)10,000
Long-term borrowings ..............            $--            $--         $3,784


                                      F-28
<PAGE>

                                                Korean won equivalent
                                      ------------------------------------------
                                          2000           2001           2002
                                      ------------   ------------   ------------
Cash and cash equivalents .........     (won)5,026     (won)4,215     (won)1,427
           " ......................             --            286             --
           " ......................             --             --             44
Short-term financial instruments ..             --             --          4,978
Accounts receivable - trade .......         23,895         13,550         18,060
           " ......................             --             10             10
Accounts payable - trade ..........            315             12          2,586
           " ......................         10,544             40              1
           " ......................             --             16             --
Short-term borrowings .............             --             --          3,545
           " ......................             --             --            101
Long-term borrowings ..............             --             --          4,543

13. CAPITAL STOCK AND CAPITAL SURPLUS

      The Company's capital stock consists entirely of common stock. The par
value and the number of shares authorized, issued and outstanding as of December
31, 2000, 2001 and 2002 are as follows:

                                          2000           2001           2002
                                      ------------   ------------   ------------
Par value (in Korean won) .........       (won)100       (won)100       (won)100
Authorized shares .................    351,000,000    351,000,000    351,000,000
Issued shares .....................    124,637,500    124,637,500    124,637,500
Outstanding shares, net of treasury
   stock ..........................    123,003,500    123,003,500    122,877,500

      Changes in capital stock and additional paid-in capital in 2000, 2001 and
2002 are as follows (in millions of Korean won except for share data):


                                      F-29
<PAGE>

<TABLE>
<CAPTION>
                                         Numbers of        Capital   Additional paid-
                                       share issued          stock         in capital
                                       ------------   ------------   ----------------
<S>                                    <C>            <C>            <C>
At January 1, 2000 .................    109,687,500    (won)10,969       (won)116,334
Issuance of ADSs (note a) ..........     14,950,000          1,495            126,623
Disposal of investment in the common
   stock of consolidated subsidiary
   (note b) ........................             --             --                247
Additional issuance by equity method
   affiliate to outside entity (note
   c) ..............................             --             --             24,628
Additional issuance by consolidated
   subsidiary to outside entity
   (note d) ........................             --             --              8,777
                                       ------------   ------------   ----------------
At December 31, 2000 ...............    124,637,500    (won)12,464       (won)276,609
Additional issuance by consolidated
   subsidiary to outside entity
   (note e) ........................             --             --              2,649
Gain on disposal of treasury stock .             --             --              7,448
Offset against deficit .............             --             --            (65,263)
                                       ------------   ------------   ----------------
At December 31, 2001 ...............    124,637,500    (won)12,464       (won)221,443
Decrease in capital surplus relating
   to additional stock transactions
   by consolidated subsidiaries
   (note f) ........................             --             --             (1,616)
Gain on disposal of treasury stock .             --             --                 35
Offset against deficit .............             --             --            (73,738)
                                       ------------   ------------   ----------------
At December 31, 2002 ...............    124,637,500    (won)12,464       (won)146,124
                                       ============   ============   ================
</TABLE>

----------
(Note a)    On February 22, 2000, the Company issued 7,475,000 American
            Depositary Shares ("ADSs") representing 14,950,000 shares of common
            stock at $8.04 per share, or $16.08 per ADS. The ADSs are evidenced
            by certificates called American Depositary Receipts. As a result of
            the issuance of ADSs, the Company's common stock and additional
            paid-in capital increased by (won)1,495 million and (won)126,623
            million, respectively.

(Note b)    During March 2000, the Company sold 16,000 shares of its common
            stock in SoftForum, a subsidiary of the Company, to SoftForum's
            employees at a price of (won)30,000 per share (par value: (won)5,000
            per share). As a result of such sale, a portion of the increased
            additional paid-in capital resulting from the equity transaction on
            September 21, 1999 was reduced by (won)55 million. In addition, the
            gain on disposal of 16,000 shares of its common stock in SoftForum,
            amounting to (won)302 million, net of income tax effect of (won)134
            million, was accounted for as additional paid-in capital in
            accordance with Korean GAAP.

(Note c)    In February 2000, SK Communications (formerly Lycos Korea) issued
            and sold 3,122 additional shares at a premium to outside entities
            including Mirae Asset Venture Capital, Sumitomo Corp., SingTel and
            Hikari, for (won)18,000,000 per share (par value: (won)5,000 per
            share). As a result of such issuance, the Company's equity ownership
            in SK Communications decreased from 50% to 43% and its investment
            increased by (won)24,628 million.

(Note d)    On March 29, 2000, SoftForum issued and sold 46,000 additional
            shares at a premium to Dongwon Venture Capital and Mirae Asset
            Venture Capital for (won)350,000 per share. As a result of such
            issuance, the Company's equity ownership in SoftForum decreased from
            60.1% to 55.5% and its investment increased by (won)8,777 million.

(Note e)    After registering its shares on the KOSDAQ market, SoftForum issued
            and sold 2,019,280 additional shares at a premium to public for
            (won)7,300 per share. As a result of such issuance, the Company's
            equity ownership in SoftForum decreased from 55.5% to 41.5% and its
            investment increased by (won)2,649 million.


                                      F-30
<PAGE>

(Note f)    MOL issued 2,560,000 additional shares for (won)5,000 per share to
            the Company in March 2002 and retired 2,366,429 shares in May 2002.
            As a result of such issuance and retirement, the Company's equity
            ownership in MOL increased from 64.78% to 81.39% and the Company's
            investment cost exceeding its proportionate share of net asset value
            of (won)1,166 million was deducted from additional paid-in capital.
            In addition, KIC issued 260,000 additional shares for (won)5,000 per
            share to the Company in May 2002. As a result of such issuance, the
            Company's equity ownership in KIC increased from 47.94% to 87.38%
            and the difference of (won)450 million between the Company's
            investment cost and its proportionate share of net asset value was
            deducted from additional paid-in capital.

14. RETAINED EARNINGS (DEFICIT)

      The details of appropriated retained earnings as of December 31, 2000,
2001 and 2002 are as follows (in millions of Korean won):

                                                  2000         2001       2002
                                              ------------   --------   --------
Legal reserve .............................     (won)1,670    (won)--    (won)--
Reserve for business rationalization ......          6,859         --         --
Reserve for improvement of financial
   structure ..............................          1,328         --         --
Reserve for overseas market
   exploration ............................             31         --         --
Reserve for investment in small and
   medium-sized companies .................            132         --         --
Reserve for technological development .....          2,000         --         --
Voluntary reserve .........................         16,000         --         --
                                              ------------   --------   --------
                                               (won)28,020    (won)--    (won)--
                                              ============   ========   ========


                                      F-31
<PAGE>

      Changes in unappropriated retained earnings (undisposed deficit) for the
years ended December 31, 2000, 2001 and 2002 are as follows (in millions of
Korean won):

<TABLE>
<CAPTION>
                                                   2000           2001            2002
                                                ----------    ------------    ------------
<S>                                             <C>           <C>             <C>
Unappropriated retained earnings
   (undisposed deficit) at beginning
   of the year ..............................   (won)6,208      (won)4,838    ((won)1,011)
Changes in unappropriated retained
   earnings:
Equity in net loss of affiliate .............       (1,685)             --              --
Reversal of losses in excess of
   minority interest ........................           --              --             377
Other .......................................           --              16             168
                                                ----------    ------------    ------------
Sub-total ...................................        4,523           4,854            (466)
                                                ----------    ------------    ------------
Transfers from appropriated reserves
   or disposition of deficit:
Legal reserve ...............................           --           1,670              --
Reserve for business rationalization
Reserve for improvement of financial ........           --           6,859              --
   structure ................................           --           1,329              --
Reserve for overseas market
   exploration ..............................           15              31              --
Reserve for investment in small and
   medium-sized companies ...................           66             132              --
Reserve for technological development .......        1,000           2,000              --
Voluntary reserve ...........................           --          16,000              --
Other capital surplus .......................           --           7,448              --
Additional paid-in capital ..................           --          57,814          73,738
                                                ----------    ------------    ------------
Sub-total ...................................        1,081          93,283          73,738
                                                ----------    ------------    ------------
Net income (loss) ...........................        4,270         (99,148)        (72,991)
                                                ----------    ------------    ------------
                                                     9,874          (1,011)            281
                                                ----------    ------------    ------------
Proposed appropriations:
Legal reserve ...............................         (190)             --              --
Reserve for business rationalization ........       (3,000)             --              --
Cash dividends ..............................       (1,846)             --              --
                                                ----------    ------------    ------------
Sub-total ...................................       (5,036)             --              --
                                                ----------    ------------    ------------

Unappropriated retained earnings
   (undisposed deficit) to be
   carried forward to the following
   year .....................................   (won)4,838    ((won)1,011)        (won)281
                                                ==========    ============    ============
</TABLE>

      Retained earnings available for dividends as of December 31, 2000, 2001
and 2002 were (won)20,838 million, nil and (won)281 million, respectively.

            a. Legal Reserve

      The Korean Commercial Code requires the Company to appropriate as a legal
reserve at least 10% of the cash dividends for each accounting period until the
reserve equals 50% of the capital stock. The legal reserve may not be utilized
for cash dividends, but may only be used to offset a future deficit, if any, or
may be transferred to capital stock.


                                      F-32
<PAGE>

            b. Reserve for Improvement of Financial Structure

      The Financial Control Regulation for listed companies in Korea requires
that at least 10% of net income (net of accumulated deficit), and an amount
equal to the net gain (net of related income taxes, if any) on the disposition
of property, plant and equipment be appropriated as a reserve for improvement of
financial structure until the ratio of shareholders' equity to total assets
reaches 30%. The reserve for improvement of financial structure may not be
utilized for cash dividends, but may only be used to offset a future deficit, if
any, or may be transferred to capital stock.

            c. Reserves for Overseas Market Exploration, Investment and
Technological Development

      Reserves for overseas market exploration, investment and technological
development were appropriated in order to recognize certain tax deductible
benefits through the early recognition of future expenditures. After certain
periods, these reserves are included in taxable income and can be used for cash
dividends after transfer to unappropriated retained earnings in accordance with
the relevant tax laws.

15. DIVIDEND DISCLOSURE

      Details of dividends which were recorded in the years ended December 31,
2000, 2001 and 2002 are as follows (in millions of Korean won, except for share
data):

                                 Number of
                  Dividend        shares                   Dividend
Fiscal year         type        outstanding   Face value    ratio     Dividends
-----------    --------------   -----------   ----------   --------   ----------
       2000    Cash dividends   123,003,500    (won)100       15.00%  (won)1,846
       2001    Cash dividends   123,003,500    (won)100          --%     (won)--
       2002    Cash dividends   122,877,500    (won)100          --%     (won)--

16. TREASURY STOCK

      As of December 31, 2002, the Company holds 1,760,000 shares of treasury
stock (book value: (won)4,814 million) purchased in order to stabilize the
market price of its stock. During the year ended December 31, 2002, the Company
acquired 900,000 shares of treasury stock in the market for (won)1,499 million
and later sold 774,000 shares for (won)1,563 million. A gain from disposal of
treasury stock amounting to (won)35 million was added to capital surplus.
Changes in treasury stock during the years ended December 31, 2000, 2001 and
2002 are as follows (in millions of Korean won except for share data):


                                      F-33
<PAGE>

                                                     Number of         Carrying
                                                   treasury stock        amount
                                                   --------------    ----------
At January 1, 2000 and 2001 .....................       1,634,000    (won)4,843
   Purchase of treasury stock ...................       7,700,000        10,000
   Disposal of treasury stock ...................      (7,700,000)      (10,000)
                                                   --------------    ----------

At December 31, 2001 ............................       1,634,000    (won)4,843
   Purchase of treasury stock ...................         900,000         1,499
   Disposal of treasury stock ...................        (774,000)       (1,528)
                                                   --------------    ----------

At December 31, 2002 ............................       1,760,000    (won)4,814
                                                   ==============    ==========

      The Company intends to sell its treasury stock in the market in the
future. No dividends will be paid on treasury stock.

17. SALES

      Details of sales for the years ended December 31, 2000, 2001 and 2002 are
as follows (in millions of Korean won):

                                          2000           2001           2002
                                      ------------   ------------   ------------
Handlers and components ...........    (won)43,754    (won)18,418    (won)14,434
SMD placement systems .............         71,251         20,992         23,486
TFT-LCD handlers and testers ......         11,166          5,608             --
Lead frame magazines ..............          4,733             --             --
Security solutions products and
   services .......................          9,501         15,517         15,881
Other .............................          5,694          8,442         10,629
                                      ------------   ------------   ------------
                                      (won)146,099    (won)68,977    (won)64,430
                                      ============   ============   ============

18. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      The details of selling, general and administrative expenses for the years
ended December 31, 2000, 2001 and 2002 are as follows (in millions of Korean
won):

                                          2000           2001           2002
                                      ------------   ------------   ------------
Salaries ..........................     (won)7,647    (won)11,343    (won)10,203
Commissions .......................          5,894          3,527          3,329
Travel ............................          1,405          1,165            745
Depreciation ......................          2,701          3,269          3,142
Entertainment .....................            752            707            826
Advertising .......................          2,685          2,349            941
Research and development ..........          3,464          3,576          2,410
Product warranty ..................             --          5,294          1,004
Bad debts .........................            587         10,267         11,786
Other .............................          2,088          3,824          3,265
                                      ------------   ------------   ------------
                                       (won)27,223    (won)45,321    (won)37,651
                                      ============   ============   ============


                                      F-34
<PAGE>

19. INCOME TAXES

      The following is a reconciliation between financial accounting income and
taxable income, together with a computation of income taxes for the years ended
December 31, 2000, 2001 and 2002 (in millions of Korean won):

<TABLE>
<CAPTION>
                                                         2000            2001            2002
                                                     ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>
Income (loss) before income taxes and minority
   interest ......................................       (won)135    ((won)83,859)   ((won)72,890)
Additions (deductions):
Provision for severance indemnities ..............            632              92             799
Loss from valuation of inventories ...............            153          16,020           2,497
Entertainment expenses ...........................            656           7,879             672
Accrued interest income ..........................             82             (74)            (39)
Gain (loss) on valuation of marketable securities           1,163            (158)          3,227
Reversal of tax-free reserves ....................          1,081           1,081           1,081
Net loss of consolidated affiliate ...............          4,163           1,680           3,943
Provision for doubtful accounts ..................          5,015           9,197           3,429
Depreciation .....................................          1,162            (401)             50
Foreign exchange gain ............................            (51)             --              --
Loss from impairment of deferred development costs             --           1,171           8,345
Loss from impairment of investments securities ...             --           8,457           3,830
Gain from disposal of treasury stock .............             --           7,448              --
Equity in losses of affiliate ....................          9,664          14,580          11,434
Other ............................................            431          (1,868)            957
                                                     ------------    ------------    ------------
Total ............................................         24,286         (18,755)        (32,665)
Add back
  - Net operating loss carry-forwards of the
   Company (Note a) ..............................             --          21,844          34,746
                                                     ------------    ------------    ------------
Net taxable income ...............................    (won)24,286      (won)3,089      (won)2,081
                                                     ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                         2000            2001            2002
                                                     ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>
Corporate income taxes at statutory Korean
   corporate income tax rates of 27% .............     (won)6,776        (won)843        (won)542
Special tax credit for small and medium-sized
   venture companies .............................           (362)           (415)           (266)
Tax credit for technology and human resource
   development and capital investments ...........         (2,861)             --             (24)
                                                     ------------    ------------    ------------
Corporate income taxes payable ...................          3,553             428             252
Resident surtax payable ..........................            355              43              25
Special surtax for agriculture and fishery
   industries ....................................             38              --              --
                                                     ------------    ------------    ------------
Total income taxes payable .......................     (won)3,946        (won)471        (won)277
                                                     ============    ============    ============
</TABLE>

----------
(Note a)    In Korea, there is no tax payment system based on consolidated
            taxable income (or loss). The net operating loss carry-forwards of
            the Company for the years ended December 31, 2001 and 2002, were
            added to show taxable income on a consolidated basis.

(Note b)    In 2002, the corporate tax rate declined from 28% to 27%.

      The provision for income taxes for the years ended December 31, 2000, 2001
and 2002 consists of the following (in millions of Korean won):


                                      F-35
<PAGE>

                                             2000            2001         2002
                                         ------------    ------------   --------
Currently payable ....................     (won)3,946        (won)471   (won)277
Deferred .............................         (8,298)         13,763         --
Adjustment (note a) ..................            750              --         --
                                         ------------    ------------   --------
Income tax expense (benefit) .........   ((won)3,602)     (won)14,234   (won)277
                                         ============    ============   ========

----------
(Note a)    In 2000, the Company recognized its share of SK Communications' 1999
            loss amounting to (won)1,685 million, net of income tax effect of
            (won)750 million, as an adjustment to beginning retained earnings
            during the year ended December 31, 2000. Accordingly, the tax effect
            of (won)750 million was also recognized as an adjustment to deferred
            tax assets as of January 1, 2000.

      The difference between income tax expense (benefit) computed using the
statutory income tax rate and the recorded income tax expense (benefit) for the
years ended December 31, 2000, 2001 and 2002 is attributable to the following
(in millions of Korean won):

<TABLE>
<CAPTION>
                                                           2000            2001            2002
                                                       ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>
Income tax expense (benefit) at statutory income tax
   rate of 27% .....................................        (won)38    ((won)23,481)   ((won)19,680)
Resident surtax ....................................              4          (2,348)         (1,968)
Tax credit for technology and human resource
   development and capital investments .............         (3,991)           (451)           (242)
Special tax credit for small and medium-sized
   venture companies ...............................           (398)           (457)           (293)
Tax effect of permanent differences ................            241           4,879             472
Change in valuation allowance ......................          1,282          36,480          22,037
Other ..............................................           (778)           (388)            (49)
                                                       ------------    ------------    ------------
Recorded income tax expense (benefit) ..............   ((won)3,602)     (won)14,234        (won)277
                                                       ============    ============    ============
</TABLE>

      The tax effects of each type of temporary difference, net operating loss
carry-forwards and tax credit carry-forwards that gave rise to a significant
portion of the deferred income tax assets at December 31, 2000, 2001 and 2002
are as follows (in millions of Korean won):


                                      F-36
<PAGE>

                                                 2000         2001       2002
                                             ------------   --------   --------
Current:
Accrued interest income ...................     ((won)42)   ((won)33)  ((won)56)
Gain on valuation of marketable securities             (9)       (48)       887
Loss from valuation of inventories ........           252      4,988      5,742
Tax-free reserves .........................          (333)      (321)        --
Other .....................................             3         --         --
                                             ------------   --------   --------

Sub-total .................................          (129)     4,586      6,573
                                             ------------   --------   --------
Non-current portion:
Provision for severance indemnities .......           552        530        693
Tax-free reserves .........................          (333)        --         --
Net operating loss carry-forwards (note b)             --      6,488     16,807
Net loss of consolidated subsidiaries .....         1,336      3,410      4,642
Tax credit carry-forwards (note b) ........         7,345      7,604      7,747
Deferred development costs ................            97       (142)     2,357
Impairment loss from investment securities             --      2,512      3,607
Equity in losses of affiliate .............         4,106      8,289     11,788
Depreciation ..............................           392        259        275
Provision for doubtful accounts ...........         1,545      4,221      5,229
Other .....................................           188         59        135
                                             ------------   --------   --------

Sub-total .................................        15,228     33,230     53,280
                                             ------------   --------   --------

Total deferred income tax assets ..........        15,099     37,816     59,853
Valuation allowance (note a) ..............        (1,336)   (37,816)   (59,853)
                                             ------------   --------   --------

Net deferred income tax assets ............   (won)13,763    (won)--    (won)--
                                             ============   ========   ========

----------

(Note a)    A full valuation allowance has been provided for deferred income tax
            assets as of December 31, 2002 since the Company's management
            believes that the realization of the deferred tax assets is
            uncertain.

(Note b)    At December 31, 2002, the Company had tax credit carry-forwards for
            tax purposes relating to technology and human resource development
            and capital investments, of which (won)388 million will expire in
            2004, (won)3,403 million in 2006, (won)3,262 million in 2007,
            (won)451 million in 2008 and (won)243 million in 2009. The Company
            also had net operating loss carry-forwards, of which (won)21,844
            million will expire in 2006 and (won)34,746 million in 2007.

20. INCOME (LOSS) PER COMMON SHARE

      Net income (loss) per common share for the years ended December 31, 2000,
2001 and 2002 are computed as follows (in millions of Korean won, except for
share data):

<TABLE>
<CAPTION>
                                                      2000           2001           2002
                                                  ------------   ------------   ------------
<S>                                               <C>            <C>            <C>
Net income (loss) .............................     (won)4,270   ((won)99,148)  ((won)72,991)
Weighted average number of shares outstanding .    120,838,609    120,124,021    123,017,210
                                                  ------------   ------------   ------------
Basic income (loss) per common share (in Korean
   won) (note a) ..............................        (won)35     ((won)825)     ((won)593)
                                                  ============   ============   ============
</TABLE>

----------
(Note a)    Weighted average number of shares outstanding for the years ended
            December 31, 2000, 2001 and 2002 is calculated as follows:


                                      F-37
<PAGE>

2000

                                                             Weighted number of
                                    Number of shares   Days        shares
                                    ----------------   ----  ------------------
Beginning balance ................       109,687,500    366      40,145,625,000
Issuance of ADSs .................        14,950,000    313       4,679,350,000
Treasury stock ...................        (1,634,000)   366        (598,044,000)
                                    ----------------         ------------------
Total ............................       123,003,500             44,226,931,000
                                    ================
                                                                (divided by)366
                                                             ------------------
Weighted average number of shares                                   120,838,609
                                                             ==================

2001

                                                             Weighted number of
                                    Number of shares   Days        shares
                                    ----------------   ----  ------------------
Beginning balance ................       124,637,500    365      45,492,687,500
Treasury stock ...................        (1,634,000)   365        (596,410,000)
Acquisition of treasury stock ....        (7,700,000)   144      (1,108,800,000)
Disposal of treasury stock .......           720,000     18          12,960,000
   " .............................           533,650     15           8,004,750
   " .............................           180,000     14           2,520,000
   " .............................           430,000      8           3,440,000
   " .............................         3,260,000      6          19,560,000
   " .............................         1,000,000      5           5,000,000
   " .............................         1,576,350      4           6,305,400
                                    ----------------         ------------------
Total ............................       123,003,500             43,845,267,650
                                    ================
                                                                (divided by)365
                                                             ------------------
Weighted average number of shares                                   120,124,021
                                                             ==================

2002

                                                             Weighted number of
                                    Number of shares   Days        shares
                                    ----------------   ----  ------------------
Beginning balance ................       124,637,500    365      45,492,687,500
Treasury stock ...................        (1,634,000)   365        (596,410,000)
Disposal of treasury stock .......           174,000    224          38,976,000
Acquisition of treasury stock ....          (290,000)   219         (63,510,000)
   " .............................          (190,000)   218         (41,420,000)
   " .............................          (120,000)   216         (25,920,000)
Disposal of treasury stock .......           300,000    173          51,900,000
   " .............................           278,000    170          47,260,000
   " .............................            22,000    169           3,718,000
Acquisition of treasury stock ....          (300,000)    20          (6,000,000)
                                    ----------------         ------------------
Total ............................       122,877,500             44,901,281,500
                                    ================
                                                                (divided by)365
                                                             ------------------
Weighted average number of shares                                   123,017,210
                                                             ==================


                                      F-38
<PAGE>

      Diluted loss per share for the year ended December 31, 2002 is computed as
follows (in millions of Korean won, except for share data):

Basic net loss .................................................   ((won)72,991)
Stock option ...................................................            159
                                                                   ------------
Diluted net loss ...............................................        (72,832)
Adjusted weighted average number of shares outstanding .........    123,241,508
                                                                   ------------
Diluted loss per common share (in Korean won) (note b) .........     ((won)591)
                                                                   ============
Basic loss per common share (in Korean won) ....................     ((won)593)
                                                                   ============

(note b)    Assuming that dilutive stock options were exercised, as of December
            31, 2002, such effect would be anti-dilutive shown as the above
            table. In addition, the outstanding stock options as of December 31,
            2001 and 2000 were not included in the computation of diluted
            earnings per share because the options exercise price were greater
            than the average market price of the common shares during the years
            ended December 31, 2001 and 2000 and therefore, the effect would be
            anti-dilutive.

21. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

      A substantial portion of the Company and its subsidiaries' sales for the
years ended December 31, 2000, 2001 and 2002 are made to customers in the
semiconductor industry. Details of customers accounting for 10% or more of the
Company and its subsidiaries' sales are as follows (in millions of Korean won):

Customers                                 2000           2001           2002
-----------------------------------   ------------   ------------   ------------
Samsung Electronics Co., Ltd. .....    (won)19,459    (won)15,212     (won)4,804
Other .............................        126,640         53,765         59,626
                                      ------------   ------------   ------------
                                      (won)146,099    (won)68,977    (won)64,430
                                      ============   ============   ============

      The related accounts receivable balances from the above major customers as
of December 31, 2000, 2001 and 2002 are as follows (in millions of Korean won):

Customers                                  2000            2001            2002
--------------------------------   ------------    ------------    ------------
Samsung Electronics Co., Ltd. ..       (won)890        (won)863          (won)1
Other ..........................         64,973          39,548          48,287
                                   ------------    ------------    ------------
Total ..........................         65,863          40,411          48,288
Allowance for doubtful accounts            (657)         (4,002)        (14,323)
Present value discount .........           (108)             --              --
                                   ------------    ------------    ------------
Net ............................    (won)65,098     (won)36,409     (won)33,965
                                   ============    ============    ============


                                      F-39
<PAGE>

22. SEGMENT INFORMATION

            a. Export Sales

      The Company had foreign export sales amounting to 40.42%, 17.87% and
32.24% of total sales for the years ended December 31, 2000, 2001 and 2002,
respectively. The export sales were made principally to the following locations:

                                                      2000      2001      2002
                                                     ------    ------    ------
Asia .............................................    24.81%    10.16%    12.21%
Europe ...........................................     6.16%     5.56%    15.32%
United States ....................................     9.45%     2.15%     4.71%
                                                     ------    ------    ------
                                                      40.42%    17.87%    32.24%
                                                     ======    ======    ======

            b. Business Segment Information

      Through 1998, the Company operated in one major business segment, the
handler manufacturing business. As the Company expanded its sales of SMD
placement systems and security solutions, additional business segments were
designated. Sales, operating income (loss), identifiable assets, capital
expenditures and depreciation as of and for the years ended December 31, 2000,
2001 and 2002, pertaining to the business segments in which the Company and its
subsidiaries operated are presented as follows (in millions of Korean won):


                                      F-40
<PAGE>

<TABLE>
<CAPTION>
                                                                                                   Depreciation of
   (As of and for the year ended                     Operating     Identifiable       Capital      property, plant
        December 31, 2000)             Sales       income (loss)      assets       expenditures     and equipment
--------------------------------   -------------   -------------   -------------   -------------   ---------------
<S>                                <C>             <C>             <C>             <C>             <C>
Handlers and components ........     (won)43,754      (won)6,420     (won)40,420        (won)431          (won)976
SMD placement systems ..........          71,251             944         126,532           2,946             3,556
TFT-LCD handlers and testers ...          11,166           1,860           4,173             318               426
Lead frame magazines ...........           4,733             277           1,650              --                12
Security solutions .............           9,501           1,643          19,972             919               330
Research and development
   center ......................              --              --          15,964           1,923             2,257
LCD merchandise business .......           5,050             302          10,980              --                --
Other ..........................             644          (3,947)             --          63,871             1,455
                                   -------------   -------------   -------------   -------------   ---------------
Consolidated ...................    (won)146,099      (won)7,499    (won)219,691     (won)70,408        (won)9,012
                                   =============   =============   =============   =============   ===============

<CAPTION>
                                                                                                   Depreciation of
   (As of and for the year ended                     Operating     Identifiable       Capital      property, plant
        December 31, 2001)             Sales       income (loss)      assets       expenditures     and equipment
--------------------------------   -------------   -------------   -------------   -------------   ---------------
<S>                                <C>             <C>             <C>             <C>             <C>
Handlers and components ........     (won)18,418    ((won)11,059)    (won)36,077        (won)134          (won)717
SMD placement systems ..........          20,992         (18,334)         91,642             205             1,925
TFT-LCD handlers and testers ...           5,608          (1,753)             --              --               119
Security solutions .............          15,517           1,406          37,017             318               468
Research and development
   center ......................              --              --          25,217          17,421             1,754
Other ..........................           8,442         (10,194)             --           5,515             2,588
                                   -------------   -------------   -------------   -------------   ---------------
Consolidated ...................     (won)68,977    ((won)39,934)   (won)189,953     (won)23,593        (won)7,571
                                   =============   =============   =============   =============   ===============

<CAPTION>
                                                                                                   Depreciation of
   (As of and for the year ended                     Operating     Identifiable       Capital      property, plant
        December 31, 2002)             Sales       income (loss)      assets       expenditures     and equipment
--------------------------------   -------------   -------------   -------------   -------------   ---------------
<S>                                <C>             <C>             <C>             <C>             <C>
Handlers and components ........     (won)14,434     ((won)8,468)    (won)18,515        (won)327          (won)594
SMD placement systems ..........          23,486         (16,760)         37,469             537               977
Security solutions .............          15,881              99          38,897             215               321
Research and development
   center ......................              --              --          20,441             189               343
Other ..........................          10,629          (4,955)             --           1,970             4,476
                                   -------------   -------------   -------------   -------------   ---------------
Consolidated ...................     (won)64,430    ((won)30,084)   (won)115,322      (won)3,238        (won)6,711
                                   =============   =============   =============   =============   ===============
</TABLE>


                                      F-41
<PAGE>

23. COMMITMENTS AND CONTINGENCIES

            a. Checks and Promissory Notes Provided as Collateral

      In accordance with normal Korean business practices the Company has
provided two blank checks to Seoul Guarantee Insurance Company ("Seoul
Guarantee") as collateral for performance guarantees it has provided to certain
of the Company's significant customers for the timely delivery of goods an
satisfaction of warranty obligations. In the event Seoul Guarantee pays claims
on such guarantees, the blank checks would be utilized by Seoul Guarantee to
recover resulting losses from the Company up to a total maximum amount of
(won)1,000 million. Company management does not currently anticipate any such
losses.

      In addition, in accordance with normal Korean business practices, at the
request of a significant customer the Company has provided a blank promissory
note to such customer in order to guarantee the timely delivery of goods and
satisfaction of warranty obligations. In the event the Company failed to
properly perform its contractual obligations to such customer, the blank note
would be utilized by the customer to recover resulting losses. There is no legal
limit to the exposure of the Company in connection with this arrangement.
Because of the general nature of the underlying contractual agreement with such
customer, it is not possible to determine the Company's potential loss exposure
associated with this arrangement. Company management does not currently
anticipate any such loss.

      The Company has provided a blank promissory note to Samsung Card Co., Ltd.
as collateral for repayment of lease payable in accordance with normal Korean
business practices. In the event the Company fails to repay its lease payable to
Samsung Card, the blank note would be utilized by Samsung Card. Company
management does not currently anticipate any such loss.

            b. Guarantees Provided by the Company and Subsidiaries

      The Company has provided its employee association with guarantees totaling
(won)1,056 million for the Company's common stock purchases.

      In 2002, the Company reversed a provision for guarantee of (won)3,739
million, which was recorded on December 31, 2001 as a provision for a guarantee
issued for MOL, one of its consolidated subsidiaries. The guarantee was
dissolved.


                                      F-42
<PAGE>

            c. Guarantees Received from Other Parties

      Guarantees received by the Company from other companies as of December 31,
2002 are as follows (in millions of Korean won and thousands of U.S. dollars):

                              Amount    Remark
                        ------------    ----------------------------------------
Seoul Guarantee .....     (won)2,353    Guarantees for timely delivery and other
KEB .................          6,542    Letters of credit and other
                           (US$5,450)
   " ................          1,364    Local letters of credit
Woori Bank ..........          1,200    Stand-by letters of credit
                           (US$1,000)
                        ------------
                         (won)11,459
                        ============

24. TRANSFER OF LCD DIVISION

      On August 1, 2001, the Company transferred its LCD division with total
assets of (won)1,445 million and total liabilities of (won)620 million to DE&T
Co., Ltd., which was an affiliated company in 2001, for (won)825 million in
accordance with a resolution made at the board of directors' meeting dated July
12, 2001. The condensed financial information of the transferred LCD division
for the year ended December 31, 2000 and for the seven months ended July 31,
2001 is as follows (in millions of Korean won):

                                            2000 (12 months)   2001 (7 months)
                                            ----------------   ----------------
Sales ...................................             11,166              5,608
Operating income (loss) .................              1,859             (1,753)

25. INSURANCE

      At December 31, 2002, certain of the Company's assets are insured with
local insurance companies as follows (in millions of Korean won and thousands of
U.S. dollars):

<TABLE>
<CAPTION>
            Asset                             Risk                   Book value       Coverage
-----------------------------   --------------------------------   ------------   ------------
<S>                                                                <C>            <C>
                                                                                   (won)51,377
Property, plant and equipment   Fire and comprehensive liability    (won)50,660       US$1,122
                                                                   ============   ============
</TABLE>

      The Company carries director and officer liability insurance policies with
up to US$3 million and (won)1,000 million of coverage against losses arising
from any claims made against the directors and officers for any alleged wrongful
acts in their respective capacities as directors or officers of the Company. In
addition to, the Company carries e-Biz @ liability insurance policies with up to
(won)500 million of coverage against losses arising from providing security
solutions for trading and electronic commerce.


                                      F-43
<PAGE>

26. STOCK OPTION COMPENSATION PLAN

      In accordance with the approval of the Company's shareholders, the Company
granted stock options to its employees. Changes in options outstanding for the
years ended December 31, 2000, 2001 and 2002 are as follows (in Korean won):

                                                                Weighted average
                                            Number of shares     exercise price
                                            ----------------    ----------------
Options outstanding - December 31, 2000              969,000               8,018
Granted ................................           2,480,000               1,780
Cancelled ..............................          (1,179,000)              6,907
                                            ----------------    ----------------
Options outstanding - December 31, 2001            2,270,000               1,780
Granted ................................             840,000               1,610
Cancelled ..............................            (575,000)              1,762
                                            ----------------    ----------------
Options outstanding - December 31, 2002            2,535,000               1,728
                                            ================    ================

      The stock options shall become exercisable after two to three years from
the date of grant and shall be exercisable within five years from the first
exercisable date. When the length of employment is less than two years after the
grant of stock option, the Company may cancel the stock options awarded. Upon
exercise of stock options, in accordance with the sole discretion of the board
of directors, the Company may (1) grant newly issued common stock, (2) grant
treasury stock or (3) grant the net difference between the exercise price and
the market price with either cash or treasury stock.

      As described in Note 2, the Company adopted the fair value based method of
accounting for the stock option compensation plan, in which fair value is
determined using the Black-Scholes option-pricing model, without considering a
volatility factor in estimating the value of its stock options, as permitted
under Korean GAAP. Under these accounting policies, total compensation costs
were measured at (won)1,528 million, (won)768 million and (won)617 million for
options granted in 2000, 2001 and 2002 and are recognized over the service
period (2 years). Such compensation costs amounting to (won)588 million in 2000,
(won)198 million in 2001 and (won)159 million in 2002 were recognized. In
addition, because all stock options granted in 2000 were cancelled prior to
December 31, 2001, compensation cost recognized in 2000 was reversed and
recorded as other income for the year ended December 31, 2001.

      Assuming the Company had considered a volatility factor in estimating the
value of its stock options, the pro forma consolidated net income and
consolidated net income per common share for the years ended December 31, 2000 ,
2001 and 2002 would have been as follows (in millions of Korean won except per
share data):

                                         2000          2001            2002
                                      ----------   ------------    ------------
Net income (loss):
As reported .......................   (won)4,270   ((won)99,148)   ((won)72,991)
Pro forma .........................        3,662        (99,529)        (73,449)
Income (loss) per share:
As reported .......................      (won)35     ((won)825)      ((won)593)
Pro forma .........................           30           (829)           (597)


                                      F-44
<PAGE>

      The assumptions and variables used by the Company in measuring the fair
value of stock options granted in the respective years are as follows:

                                                 2000        2001        2002
                                               --------    --------    --------
Risk free interest rate ....................       8.65%       6.70%       5.80%
Expected life ..............................    4 years     4 years     4 years
Volatility factor ..........................      64.25%      72.21%      92.14%
Dividend yield .............................       18.5%       17.5%       11.6%
Expected expiration rate of rights .........        --%         --%         --%

27. ALLOWANCE FOR DOUBTFUL LONG-TERM LOANS

      On December 18, 2000, Quad Systems Corporation, one of the Company's major
customers, filed a voluntary petition for reorganization under Chapter 11 of the
Federal Bankruptcy Code of the United States of America. Before Quad filed the
voluntary petition for reorganization under Chapter 11, on September 29, 2000
the Company entered into an agreement with Quad to convert the Company's trade
receivables to long-term loans, which bear a fixed interest rate of 9% and have
a maturity of 2 years, and accordingly, the Company reclassified those
receivables to long-term loans in the accompanying consolidated financial
statements. For the year ended December 31, 2000, the Company provided an
allowance for the entire amount of the loans totaling (won)5,066 million, which
was recorded as a loss in other expense. In 2001, such loans were fully written
off as the Company management believes that the collectibility of such loans is
remote.

28. UNCERTAINTIES IN BUSINESS ENVIRONMENT

      In response to general unstable economic conditions, the Korean government
and the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming the
banking industry.

      The Korean government continues to apply pressure to Korean companies to
restructure into more efficient and profitable firms. The Company and
subsidiaries may be either directly or indirectly affected by these general
unstable economic conditions and the reform program described above.

      The accompanying financial statements reflect management's assessment of
the impact to date of the economic situation on the financial position of the
Company and subsidiaries. Actual results may differ materially from management's
current assessment.

      The semiconductor industry in Korea is highly competitive and
concentrated, with a relatively small number of large semiconductor
manufacturers. The industry is characterized by rapid technological changes and
fluctuating product prices. The rapid rate of technological change within the
industry will require the Company to continually develop new and improved
products and processes to maintain its competitive position. The Company's
future operating results will be affected by a wide variety of factors,
including general economic conditions and conditions specific to
semiconductor-related industries, timing of new product introductions


                                      F-45
<PAGE>

(both by the Company and its competitors), competitive pricing, timely and
efficient completion of product design and the availability of new manufacturing
technologies.

29. RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
    STATES OF AMERICA

      The consolidated financial statements have been prepared in accordance
with Korean GAAP, which differs in certain respects from accounting principles
generally accepted in the United States of America ("US GAAP"). The significant
differences are described below. Other differences were determined not to have a
significant effect on either the Company and its subsidiaries' consolidated net
income or shareholders' equity.

            a. Deferred Income Taxes (see Note 2)

      The need for a valuation allowance on deferred tax assets depends on the
likelihood of realization. Under US GAAP, the realization of deferred tax assets
depends on an objectively verifiable estimate of future income which is commonly
based on pretax accounting income (or losses) of the current and immediate two
preceding years. Under Korean GAAP, no such practice has evolved.

      Under US GAAP, deferred tax assets and liabilities are separated into
their current and non-current portions based on the classification of related
asset or liability for financial reporting purposes. Under Korean GAAP, deferred
tax assets and liabilities are presented on the balance sheet as a single
non-current net number.

            b. Research and Development Costs (see Note 2)

      Under Korean GAAP, the Company defers development costs which meet
specific conditions such as new product development, technological feasibility,
marketability and usefulness, and expenses research costs and ordinary
development costs as incurred. Amortization of deferred development costs and
research and ordinary development expenses are classified as manufacturing costs
or selling, general and administrative expenses depending on their nature.

      All research and development costs are charged to expense as incurred
under US GAAP, which totaled (won)20,752 million, (won)15,981 million and (won)
9,278 million for the years ended December 31, 2000, 2001 and 2002,
respectively.

            c. Marketable Securities and Investment Securities (see Notes 2(e)
and 2(l))

      Debt and equity securities bought and held for the purpose of selling them
in the near term are considered marketable securities and other securities are
investment securities.

      Under Korean GAAP, marketable securities and equity investment securities
in listed companies are stated at fair value; and equity investment securities
in non-listed companies are generally stated at cost.


                                      F-46
<PAGE>

      Under US GAAP, Statement of Financial Accounting Standards No. 115 (SFAS
No. 115) "Accounting for Certain Investments in Debt and Equity Securities",
requires that equity securities with readily determinable fair value and all
debt securities be classified into three categories and be accounted for as
follows:

      o     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.

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

      o     Debt and equity securities not classified as either held-to-maturity
            securities or trading securities are classified as
            available-for-sale securities and reported at fair value, with
            unrealized gains and losses excluded from earnings and reported in
            other comprehensive income.

      Under US GAAP, the Company's marketable securities are classified as
trading securities at December 31, 2000, 2001 and 2002. All investment
securities consist of equity investments in affiliates or non-listed companies,
which are not affected by SFAS No. 115. Gross proceeds from the sale of
marketable securities were (won)107,756 million, (won)127,529 million and
(won)187,908 million for the years ended December 31, 2000, 2001 and 2002,
respectively. The net realized gains arising from such sales were (won)3,378
million, (won)1,959 million and (won)2,580 million for the years ended December
31, 2000, 2001 and 2002, respectively.

      Information with respect to marketable securities affected by SFAS No. 115
at December 31, 2000, 2001 and 2002 is as follows (in millions of Korean won):

                                           Gross          Gross
                                       unrealized     unrealized     Fair value
                           Cost          gains          losses      (book value)
                       ------------   ------------   -----------    ------------
At December 31, 2000:
   Debt securities       (won)8,831        (won)29       (won)--      (won)8,860
                       ------------   ------------   -----------    ------------
                         (won)8,831        (won)29       (won)--      (won)8,860
                       ============   ============   ===========    ============
At December 31, 2001:
   Equity securities       (won)663        (won)--     ((won)151)       (won)512
   Debt securities           22,911            338            --          23,249
                       ------------   ------------   -----------    ------------
                        (won)23,574       (won)338     ((won)151)    (won)23,761
                       ============   ============   ===========    ============
At December 31, 2002:
   Equity securities       (won)512        (won)--     ((won)453)        (won)59
   Debt securities           32,795            371        (2,807)         30,359
                       ------------   ------------   -----------    ------------
                        (won)33,307       (won)371   ((won)3,260)    (won)30,418
                       ============   ============   ===========    ============

            d. Revenue Recognition

      Under Korean GAAP, sales are recognized at the time products are delivered
to customers. Under US GAAP, product sales are recognized upon final customer
acceptance and passage of legal title. Final customer acceptance and passage of
legal title first require the completion of


                                      F-47
<PAGE>

installation and final calibration of the products within the customer's
production line, which typically occurs between one month and one year after
product delivery. Under US GAAP, amounts received on products where delivery has
occurred but final customer acceptance and passage of legal title have not yet
occurred are recorded as advance receipts from customers in the current
liabilities section of the balance sheets.

      Under US GAAP, sales recognition is not permitted where there is an
obligation to repurchase finished or semi-finished products from an outsourced
manufacturer. Under Korean accounting practices, sales recognition is permitted
in such cases.

            e. Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of

      US GAAP (SFAS No. 144) requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity, be reviewed for
impairment whenever events or changes in circumstance indicate that the carrying
amount of an asset may not be recoverable. If the sum of the expected future
cash flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss is recognized. Otherwise, an impairment
loss is not recognized. Measurement of an impairment loss for long-lived assets
and identifiable intangibles that an entity expects to hold and use is based on
the fair value of the asset.

      SFAS No. 144 also requires that long-lived assets and certain identifiable
intangibles to be disposed of by sale be reported at the lower of the carrying
amount or fair value, less cost to sell. Under US GAAP after an asset write-
down, representing the new carrying amount, subsequent recoveries in value may
not be recognized, whereas under Korean GAAP, such recoveries are recognized as
gains to the extent of impairment losses previously recognized.

      The Company has made significant additions to its facilities in recent
years. Because of a decline in sales, the Company has reviewed its long-lived
assets for potential impairment in accordance with the provisions of SFAS No.
144 and determined the carrying values are appropriately recorded.

            f. Costs for Product Warranties (see Note 2)

      Under Korean GAAP, product warranty expenditures have been included as
incurred in manufacturing costs, which have been allocated between cost of sales
and inventories. Effective January 1, 2001 such expenditures are classified as
an item of selling, general and administrative expenses for more appropriate
financial statement presentation. Under US GAAP, warranty costs are accrued and
expensed at the time of sale based on historical experience and expected future
costs and classified as cost of sales.

      Changes in reserve for product warranties at December 31, 2000, 2001 and
2002 are as follows (in millions of Korean won):

                                                2000         2001        2002
                                             ----------   ----------   --------
Beginning balance ........................     (won)522   (won)1,856   (won)674
Provided .................................        3,712        1,349      1,313
Incurred .................................       (2,378)      (2,531)    (1,380)
                                             ----------   ----------   --------
Ending balance ...........................   (won)1,856     (won)674   (won)607
                                             ==========   ==========   ========


                                      F-48
<PAGE>

            g. Comprehensive Income

      Under Korean GAAP, there is no requirement to present comprehensive
income. Under US GAAP, comprehensive income and its components must be presented
in the financial statements. Comprehensive income includes all changes in
shareholders' equity during a period except those resulting from investments by,
or distributions to, owners, including certain items not included in the current
results of operations. There were no such changes in the Company's shareholders'
equity in all periods presented.

            h. Dividends

      Under Korean GAAP, proposed cash dividends are recorded as a current
liability. Under US GAAP, a liability for cash dividends is not recorded until
the dividends have been approved.

            i. Loss from Valuation of Inventories

      Under Korean GAAP, loss from valuation of inventories is classified as
other expense, while loss from valuation of inventories is classified as cost of
sales under US GAAP.

            j. Applying the Equity Method of Accounting

      Under US GAAP, when an investor holds other types of interest (for
example, loans and preferred stock) in addition to common stock of an investee
accounted for by the equity method of accounting and the investor's share of
losses of the investee exceed the carrying amount of the common stock
investment, additional equity method losses are recognized by the investor.
Under Korean GAAP, no such additional losses are required to be recognized by
the investor. If the investee subsequently reports net income or issues its
common stock, the investor shall resume applying the equity method and recognize
its share of the net loss not recognized during the period the equity method was
suspended as an adjustment to retained earnings from prior periods, under Korean
GAAP.

            k. Sales of Stock by Subsidiary and Affiliate and Purchase of
               Noncontrolling Equity Interest

      Under US GAAP, a parent company or investor may elect to reflect the
accounting effect of sales of stock by a subsidiary or affiliate which is
accounted for by the equity method, in either the income statement or as an
equity transaction depending on certain criteria being met. Such election must
be applied consistently and on a prospective basis for all subsidiary and/or
affiliate stock transactions. The Company elected income statement recognition
in accounting for the sales of stock by its subsidiary and affiliate. Under
Korean GAAP, a parent company or investor is required to account for sales of
stock by a subsidiary or affiliate which is accounted for by the equity method,
as an equity transaction included in capital surplus.

      Under Korean GAAP, purchase by a subsidiary of the noncontrolling equity
interest in the subsidiary is presented as a capital adjustment in the
consolidated financial statements in proportion to the parent's equity interest,
while under US GAAP such purchase is accounted for using the purchase method in
the consolidated financial statements.


                                      F-49
<PAGE>

            l. Depreciation

      As allowed under Korean GAAP, six months' depreciation expense is recorded
for assets placed in service in the second half of the year in accordance with
Korean tax law. Effective from 2002, depreciation expense commences in the month
the related asset is placed in service. Under US GAAP, depreciation expense
commences in the month the related asset is placed in service.

            m. Accounting for Employee Stock Option Compensation Plan

      Korean GAAP permits all entities to exclude the volatility factor in
estimating the value of their stock options, which results in minimizing the
measurement. Under US GAAP, public entities are not permitted to exclude the
volatility factor in estimating the value of their stock options. In addition,
under US GAAP, a modification of the terms of a stock-based compensation award
is accounted for based on a comparison of the fair value of the modified option
at the date it is granted and the value at that date of the old option that is
repurchased (immediately before its terms are modified) determined based on the
shorter of (a) its remaining initially estimated expected life or (b) the
expected life of the modified option. If the fair value of the modified option
exceeds the value of the old option repurchased, the entity recognizes
additional compensation cost for the difference. Under Korean GAAP, however, no
such practice has evolved.

            n. Gain on Disposal of the Investments in Common Stock of Subsidiary

      Under Korean GAAP, gain on disposal of investments in common stock of
subsidiary incurred from a transaction between the Company and its subsidiary's
employees, which should be included in capital surplus, is measured based on the
actual selling price and the carrying value of such investment. Under US GAAP,
however, if the actual selling price differs from the fair value of the
investment at the transaction date, such gain should be measured based on the
fair value of the investment and the difference between the fair value and the
actual selling price should be recorded as an employee benefits expense.

            o. Provision for Doubtful Other Accounts

      Under Korean GAAP, provisions for doubtful accounts other than trade
receivables are classified as other expenses while provisions for doubtful trade
receivables are classified as selling, general and administrative expenses. In
2000, the Company reclassified trade receivables due from Quad Systems
Corporation as long-term loans, provided a full allowance for those loans, and
recorded a loss in other expenses in accordance with Korean GAAP. Under US GAAP,
however, this provision was recorded as selling, general and administrative
expenses considering the original nature of those receivables.

            p. Minority Interest in Equity of Consolidated Subsidiaries

      Under previous Korean GAAP, minority interest in equity of consolidated
subsidiaries was presented as a separate item from shareholders' equity.
Effective January 1, 2000, Korean GAAP was changed to require that minority
interest in equity of consolidated subsidiaries be


                                      F-50
<PAGE>

included in shareholders' equity. Under US GAAP, minority interest is presented
as a separate item from shareholders' equity.

            q. Financing to Purchase Treasury Shares

      Under Korean GAAP, loans provided to the Company's employee association to
finance purchase of the Company's shares are presented as receivables of the
Company. Payment guarantees provided by the Company to a lender who gave loans
to the Company's employee association for the same purpose are presented as a
contingency. Under U.S. GAAP, such loans are presented as a deduction of
stockholders' equity of the Company and such payment guarantees are presented as
liabilities of the Company with a corresponding deduction of stockholders'
equity.

            r. Recently Issued Accounting Pronouncement

      In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, which rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishments
of Debts", SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements", and SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers". This statement also amends SFAS No. 13, "Accounting for Leases". The
Company does not believe such rescissions and amendments described above will
not have a significant impact on its future consolidated financial position or
results of operations.

      In June 2002, the Financial Accounting Standards Board issued SFAS No. 146
"Accounting For Costs Associated with Exit or Disposal Activities". This
statement nullifies Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Costs Incurred in Restructuring". This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred rather than the date of an
entity's commitment to an exit plan. The Company is required to implement SFAS
No. 146 on January 1, 2003. The Company does not believe the adoption of SFAS
No. 146 will have a significant impact on its consolidated financial position or
results of operations.

      In December 2002, the Financial Accounting Standards Board issued SFAS No.
148 "Accounting for Stock-Based Compensation-Transition and Disclosure", which
is an amendment of SFAS No. 123, "Accounting for Stock-Based Compensation". In
response to a growing number of companies announcing plans to record expenses
for the fair value of stock options, SFAS No. 148 provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require more prominent and
more frequent disclosures in financial statements about the effects of
stock-based compensation. The Company has already adopted the fair value method
to account for stock options and the Company does not believe the adoption of
SFAS No. 148 will have a significant impact on its consolidated financial
position or results of operations

      In December 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, including indirect guarantees of Indebtedness of
others". FIN 45 elaborates on the disclosure to


                                      F-51
<PAGE>

be made by a guarantor about its obligations under certain guarantees issued. It
also clarifies that a guarantor is required to recognize, at the inception of
certain guarantees, a liability for the fair value of the obligation undertaken
in issuing the guarantee. The initial recognition and measurement provisions of
FIN 45 apply on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosures are effective for the Company's annual
financial statements for the year ending December 31, 2002. The Company does not
believe the adoption of this interpretation will have a significant impact on
its consolidated financial position or results of operations.

      On January 2003, the FASB issued interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", which addresses consolidation by
business enterprises where equity investors do not bear the residual economic
risks and rewards. These entities have been commonly referred to as "special
purpose entities". The underlying principle behind the new interpretation is
that if a business enterprise is the primary beneficiary of a variable interest
entity, the assets, liabilities and results of the activities of the variable
interest entity should be included in the financial statements with those of the
business enterprise. The interpretation also explains how to identify variable
interest entities and how an enterprise should assess its interest in an entity
when deciding whether or not to consolidate that entity. The Company does not
believe the adoption of this interpretation will have a significant impact on
its consolidated financial position or results of operations.

      Sales, cost of sales, gross profit, operating expenses, operating income
(loss) and net income (loss) under US GAAP in 2000, 2001 and 2002 are as follows
(in millions of Korean won):

                                       2000            2001            2002
                                   ------------    ------------    ------------
Sales ..........................   (won)143,643     (won)69,827     (won)69,715
Cost of sales ..................        100,098          78,020          76,786
Gross profit (loss) ............         43,545          (8,193)         (7,071)
Operating expenses .............         55,448          54,494          43,124
Operating loss (*) .............        (11,903)        (62,687)        (50,195)
Net income (loss) (*) ..........          9,290         (84,811)        (62,607)

----------

      (*) See reconciliation of amounts from Korean GAAP to US GAAP below.

      The following table reconciles net income (loss) and operating income
(loss) for the years ended December 31, 2000, 2001 and 2002 and shareholders'
equity as of December 31, 2000, 2001 and 2002 under Korean GAAP, as reported in
the consolidated financial statements, to the net income (loss), operating
income (loss) and shareholders' equity amounts determined under US GAAP, giving
effect to adjustments for the differences listed above (in millions of Korean
won, except per share amounts):


                                      F-52
<PAGE>

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Net income (loss) based on Korean GAAP ..................     (won)4,270     ((won)99,148)   ((won)72,991)
Adjustments:
Revenue recognition timing difference related to
   deliveries awaiting final customer acceptance ........           (378)           1,958             (51)
Revenue recognition timing difference related to sales
   with obligation to repurchase ........................             85               --              --
Warranty cost accrual ...................................         (1,334)           1,182              67
Development costs recorded as intangible assets .........         (5,865)          (3,627)         (1,755)
Research and development costs charged to ending
   Inventory cost .......................................             --           (3,424)          3,006
Write-off of impaired deferred development costs under
   Korean GAAP ..........................................             --            4,429          11,337
Depreciation ............................................             --             (597)             --
Equity in losses of affiliate ...........................          2,435               --              --
Sales of stock by subsidiary and affiliate ..............         33,350            2,650              --
Loss relating to additional stock transactions by
   consolidated subsidiaries ............................             --               --          (1,616)
Employee benefits related to disposal of subsidiary's
   stock ................................................         (5,120)              --              --
Employee benefits related to consolidated subsidiary's
   treasury stock purchased from employee exceeding fair
   value ................................................             --               --            (359)
Compensation cost related to stock options ..............           (880)          (1,997)           (611)
Reversal of loss from impairment of investment securities             --               --             (11)
Reversal of losses in excess of minority interest .......             --               --             377
Deferred income taxes ...................................        (17,273)          13,763              --
                                                            ------------     ------------    ------------
Net income (loss) based on US GAAP ......................     (won)9,290     ((won)84,811)   ((won)62,607)
                                                            ============     ============    ============
Net income (loss) per share (basic and diluted) based on
   US GAAP (in Korean won) ..............................        (won)77       ((won)706)      ((won)509)
                                                            ============     ============    ============
</TABLE>


                                      F-53
<PAGE>

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Operating income (loss) based on Korean GAAP ............     (won)7,499     ((won)39,934)   ((won)30,084)
Adjustments:
Revenue recognition timing difference related to
   deliveries awaiting final customer acceptance ........           (169)           2,172            (686)
Revenue recognition timing difference related to
   sales with obligation to repurchase ..................             85               --              --
Warranty cost accrual ...................................         (1,543)             968             702
Development costs recorded as intangible assets .........         (5,865)          (3,627)         (1,755)
Research and development costs charged to ending
   inventory cost .......................................             --           (3,424)          3,006
Depreciation ............................................             --             (597)             --
Employee benefits related to disposal of
   subsidiary's stock ...................................         (5,120)              --              --
Employee benefits related to consolidated
   subsidiary's treasury stocks purchased from
   employee exceeding fair value ........................             --               --            (359)
Compensation cost related to stock options ..............           (880)          (1,409)           (611)
Provision for doubtful other accounts ...................         (5,066)              --              --
Loss from valuation of inventories ......................           (844)         (16,836)        (20,408)
                                                            ------------     ------------    ------------
Operating loss based on US GAAP .........................   ((won)11,903)    ((won)62,687)   ((won)50,195)
                                                            ============     ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Shareholders' equity based on Korean GAAP ...............   (won)327,370     (won)250,030    (won)174,656
Adjustments:
Revenue recognition timing difference related to
   deliveries awaiting final customer acceptance ........         (1,388)             784              98
Warranty cost accrual ...................................         (2,426)          (1,457)           (756)
Development costs recorded to intangible assets .........        (14,440)         (13,637)         (4,054)
Research and development costs charged to ending
   inventory cost .......................................             --           (3,425)           (419)
Depreciation ............................................            597               --              --
Deferred income taxes ...................................        (13,763)              --              --
Proposed dividends ......................................          1,846               --              --
Reversal of loss from impairment of investment
   securities ...........................................             --               --             (11)
Minority interest in equity of consolidated
   subsidiaries .........................................         (9,695)         (21,779)        (21,155)
Other adjustments due to consolidated subsidiaries'
   stock transactions ...................................             --             (997)           (108)
                                                            ------------     ------------    ------------
Shareholders' equity based on US GAAP ...................   (won)288,101     (won)209,519    (won)148,251
                                                            ============     ============    ============
</TABLE>


                                      F-54
<PAGE>

      Changes in shareholders' equity based on US GAAP for the years ended
December 31, 2000, 2001 and 2002 are as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Balance, beginning of the period ........................   (won)145,964     (won)288,101    (won)209,519
Net income (loss) for the period ........................          9,290          (84,811)        (62,607)
Cash dividends ..........................................         (2,161)          (1,845)             --
Issuance of common stock ................................        128,118               --              --
Gain on disposal of treasury stock ......................             --            7,448              35
Stock options ...........................................          1,468            1,607             770
Treasury stock transactions .............................             --               --              29
Gain on valuation of investment securities ..............             --               --             332
Other adjustments due to consolidated subsidiaries
   stock transactions ...................................             --             (997)              5
Gain on disposal of the investment in common stock
   of subsidiary ........................................          5,422               --              --
Other ...................................................             --               16             168
                                                            ------------     ------------    ------------
Balance, end of the period ..............................   (won)288,101     (won)209,519    (won)148,251
                                                            ============     ============    ============
</TABLE>


                                      F-55
<PAGE>

      A reconciliation of the significant balance sheet accounts, except for the
shareholders' equity items listed above, to the amounts determined under US GAAP
as of December 31, 2000, 2001 and 2002, is as follows (in millions of Korean
won):

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Current assets:
As reported .............................................   (won)186,223     (won)184,927    (won)134,552

US GAAP adjustments
- accounts receivable - trade ...........................         (1,115)            (920)           (126)
- inventories ...........................................          5,703            3,388           1,057
                                                            ------------     ------------    ------------

As adjusted .............................................        190,811          187,395         135,483
                                                            ------------     ------------    ------------

Non-current assets:
As reported .............................................        192,949          166,195         105,960
US GAAP adjustments
- deferred income tax assets ............................        (13,763)              --              --
- deferred development costs ............................        (14,440)         (13,637)         (4,054)
- property, plant and equipment .........................            597               --              --
- investment securities .................................             --               --             (11)
- long-term loans .......................................             --           (1,346)         (1,201)
                                                            ------------     ------------    ------------

As adjusted .............................................        165,343          151,212         100,694
                                                            ------------     ------------    ------------

Total assets based on US GAAP ...........................   (won)356,154     (won)338,607    (won)236,177
                                                            ============     ============    ============

Current liabilities:
As reported .............................................    (won)39,982      (won)96,016     (won)51,291

US GAAP adjustments
- advance receipts from customers .......................          6,546            5,892           1,401
- provision for warranty cost ...........................          1,856              674             607
- payment guarantee for purchase of treasury shares .....             --            1,056           1,056
- dividends payable .....................................         (1,845)            (423)           (230)
                                                            ------------     ------------    ------------

As adjusted .............................................         46,539          103,215          54,125
                                                            ------------     ------------    ------------

Long-term liabilities:
As reported .............................................         11,819            5,076          14,565
US GAAP adjustments .....................................             --               --              --
                                                            ------------     ------------    ------------

As adjusted .............................................         11,819            5,076          14,565
                                                            ------------     ------------    ------------

Minority interest in equity of consolidated subsidiaries:
As reported .............................................             --               --              --
US GAAP adjustments .....................................          9,695           20,797          19,236
                                                            ------------     ------------    ------------

As adjusted .............................................          9,695           20,797          19,236
                                                            ------------     ------------    ------------

Total liabilities and minority interest based on
   US GAAP ..............................................    (won)68,053     (won)129,088     (won)87,926
                                                            ============     ============    ============
</TABLE>


                                      F-56
<PAGE>

      The following table reconciles cash flows from operating, investing and
financing activities for the years ended December 31, 2000, 2001 and 2002 under
Korean GAAP, as reported in the consolidated financial statement, to cash flows
from operating, investing and financing activities for the years ended December
31, 2000, 2001 and 2002 under US GAAP, giving effect to adjustments for the
differences listed in this Note (in millions of Korean won):

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Cash flows from operating activities based on
   Korean GAAP ..........................................   ((won)62,537)    ((won)11,957)   ((won)24,340)
Adjustments:
Reclassification of payments for research and
   development ..........................................         (8,287)          (5,898)         (2,752)
Reclassification of other capital adjustments ...........             --               --            (359)
                                                            ------------     ------------    ------------

Cash flows from operating activities based on US
   GAAP .................................................   ((won)70,824)    ((won)17,855)   ((won)27,451)
                                                            ============     ============    ============

Cash flows from investing activities based on
   Korean GAAP ..........................................   ((won)53,321)    ((won)67,252)    (won)29,682
Adjustments:
Reclassification of payments for research and
   development ..........................................          8,287            5,898           2,752
Long-term loans to employee .............................             --            1,346            (145)
                                                            ------------     ------------    ------------

Cash flows from investing activities based on US
   GAAP .................................................   ((won)45,034)    ((won)60,008)    (won)32,289
                                                            ============     ============    ============

Cash flows from financing activities based on
   Korean GAAP ..........................................   (won)147,436      (won)71,210    ((won)13,375)
Adjustments:
Reclassification of other capital adjustments ...........             --           (1,346)            504
                                                            ------------     ------------    ------------

Cash flows from financing activities based on US
   GAAP .................................................   (won)147,436      (won)69,864    ((won)12,871)
                                                            ============     ============    ============
</TABLE>

30. ADDITIONAL DISCLOSURES REQUIRED BY US GAAP

            a. Income Taxes

      Income tax expense under US GAAP for the years ended December 31, 2000,
2001 and 2002 is as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Currently payable .......................................     (won)3,946         (won)471        (won)277
Deferred ................................................          9,724               --              --
                                                            ------------     ------------    ------------

Income tax expense ......................................    (won)13,670         (won)471        (won)277
                                                            ============     ============    ============
</TABLE>

      The difference between income tax expense computed using the statutory
income tax rate and the recorded income tax expense for the years ended December
31, 2000, 2001 and 2002 is attributable to the following (in millions of Korean
won):


                                      F-57
<PAGE>

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Income tax expense (benefit) at statutory Korean
   corporate income tax rates of 27% ....................     (won)7,714     ((won)23,320)   ((won)16,876)
Resident surtax .........................................            771           (2,332)         (1,688)
Tax credit for technology and human resource
   development and capital investments ..................         (3,991)            (451)           (242)
Special tax credit for small and medium-sized
   venture companies ....................................           (398)            (457)           (293)
Tax effect of permanent differences .....................            241            4,879             472
Change in valuation allowance ...........................         10,111           22,723          18,953
Other ...................................................           (778)            (571)            (49)
                                                            ------------     ------------    ------------

Recorded income tax expense .............................    (won)13,670         (won)471        (won)277
                                                            ============     ============    ============

Effective tax rate ......................................          59.54%              --              --
                                                            ============     ============    ============
</TABLE>

      The tax effects of each type of temporary difference, net operating loss
carry-forwards and the tax credit carry-forwards that gave rise to a significant
portion of the deferred tax assets and liabilities at December 31, 2000, 2001
and 2002, computed under US GAAP, and a description of the financial statement
items that created these differences are as follows (in millions of Korean won):


                                      F-58
<PAGE>

<TABLE>
<CAPTION>
                                                                2000             2001            2002
                                                            ------------     ------------    ------------
<S>                                                         <C>              <C>             <C>
Current:
Accrued interest income .................................      ((won)42)        ((won)33)       ((won)56)
Gain on valuation of marketable securities ..............             (9)             (48)            887
Loss from valuation of inventories ......................            252            4,988           5,742
Revenue recognition timing difference related to
   deliveries awaiting final customer acceptance ........            428             (233)            (29)
Warranty cost accrual ...................................            747              433             225
Tax-free reserves .......................................           (333)            (321)             --
                                                            ------------     ------------    ------------
Other ...................................................              2               --              --
                                                            ------------     ------------    ------------
                                                                   1,045            4,786           6,769
Non-Current:
Provision for severance indemnities .....................            552              530             693
Tax-free reserves .......................................           (333)              --              --
Net operating loss carry-forwards (note b) ..............             --            6,488          16,807
Net loss of consolidated subsidiaries ...................          1,336            3,410           4,642
Tax credit carry-forwards (note b) ......................          7,345            7,604           7,747
Research and development costs ..........................          4,544            4,926           3,686
Impairment loss from investment securities ..............             --            2,512           3,607
Equity in losses of affiliate ...........................          4,106            8,289          11,788
Sales of stock by subsidiary and affiliate ..............        (10,643)         (11,050)        (11,050)
Stock options ...........................................            452              913           1,142
Depreciation ............................................           (208)             259             275
Provision for bad debt accounts .........................          1,545            4,221           5,229
Other ...................................................            424               --             506
                                                            ------------     ------------    ------------
                                                                   9,120           28,102          45,072
                                                            ------------     ------------    ------------

Total deferred income tax assets ........................         10,165           32,888          51,841
Valuation allowance (note a) ............................        (10,165)         (32,888)        (51,841)
                                                            ------------     ------------    ------------

Net deferred income tax assets ..........................        (won)--          (won)--         (won)--
                                                            ============     ============    ============
</TABLE>

----------
(Note a)    A full valuation allowance has been provided for the tax effect of
            deferred income tax assets as of December 31, 2002 because the
            Company's management believes that the realization of the deferred
            tax assets is uncertain.

(Note b)    At December 31, 2002, the Company had tax credit carry-forwards for
            tax purposes relating to technology and human resource development
            and capital investments, of which (won)388 million will expire in
            2004, (won)3,403 million in 2006, (won)3,262 million in 2007,
            (won)451 million in 2008 and (won)243 million in 2009. The Company
            also had net operating loss carry-forwards, of which (won)21,844
            million will expire in 2006 and (won)34,746 million in 2007,
            respectively.

            b. Fair Value of Financial Instruments

      The following methods and assumptions were used to estimate the fair value
of each class of financial instruments as of December 31, 2000, 2001 and 2002.

      Cash and Cash Equivalents, Short-term Financial Instruments, Accounts
Receivable (trade and other), Short-term Loans, Accounts Payable (trade and
other) and Short-Term Borrowings

      The carrying amount approximates fair value due to the short maturity of
these instruments.


                                      F-59
<PAGE>

      Marketable Securities and Investment Securities

      The fair value of marketable securities is estimated based on quoted
market price. For non-marketable equity securities held for investment purposes,
a reasonable estimate of fair value could not be made without incurring
excessive costs. Additional information pertinent to these investments is
provided in Note 5.

      Long-Term Bank Deposits

      The carrying amount approximates fair value based on interest rates
currently available for similar deposits.

      Long-Term Loans and Long-Term Receivables

      The fair value of long-term loans and long-term receivables is estimated
by discounting the future cash flows using the current interest rate of time
deposits with a maturity of one year.

      Long-Term Borrowings and Lease Payables

      The fair value of long-term borrowings and lease payables is estimated by
discounting the future cash flows using the current interest rate of time
deposits with a maturity of one year.

      The fair value of financial instruments under US GAAP as of December 31,
2000, 2001 and 2002 is as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                              2000                          2001                          2002
                                   ---------------------------   ---------------------------   ---------------------------
                                     Carrying         Fair         Carrying         Fair         Carrying         Fair
                                      amount          value         amount          value         amount          value
                                   ------------   ------------   ------------   ------------   ------------   ------------
<S>                                <C>            <C>            <C>            <C>            <C>            <C>
Financial assets:
Cash and cash equivalents ......    (won)34,914    (won)34,914    (won)26,915    (won)26,915    (won)19,008    (won)19,008
Short-term financial instruments            424            424         30,809         30,809         20,776         20,776
Marketable securities ..........          8,860          8,860         23,761         23,761         30,418         30,418
Accounts receivable (trade and
   other) including long-term
   receivable ..................         65,276         65,276         36,751         36,751         41,178         41,178
Investment securities,
   excluding investments
   accounted for under the
   equity method ...............         16,050            N/A          4,228            N/A          6,311            N/A
Long-term bank deposits ........            284            284              2              2            533            533
Restricted deposits ............              6              6             23             23            110            110
Short-term and long-term loans .          7,890          7,549          6,611          6,592            465            464
                                   ------------                  ------------                  ------------
                                   (won)133,704                  (won)129,100                  (won)118,799
                                   ============                  ============                  ============
Financial liabilities:
Accounts payable (trade and
   other) ......................    (won)20,261    (won)20,261    (won)21,232    (won)21,232    (won)12,635    (won)12,635
Short-term borrowings ..........          3,500          3,500         55,430         55,430         33,542         33,542
Lease payable ..................             --             --            459            459          1,079          1,079
Long-term borrowings ...........             --             --             --             --          9,543          9,543
                                   ------------                  ------------                  ------------
                                    (won)23,761                   (won)77,121                   (won)56,799
                                   ============                  ============                  ============
</TABLE>


                                      F-60
<PAGE>

            c. Segment Information

Export Sales

      The Company had foreign export sales under US GAAP amounting to 41.13%,
17.64% and 29.79% of total sales for the years ended December 31, 2000, 2001 and
2002, respectively. The export sales under US GAAP were made principally to the
following locations:

                                                       2000      2001      2002
                                                     ------    ------    ------
Asia .............................................    25.24%    10.03%    11.28%
Europe ...........................................     6.27%     5.49%    14.16%
United States ....................................     9.62%     2.12%     4.35%
                                                     ------    ------    ------
                                                      41.13%    17.64%    29.79%
                                                     ======    ======    ======

Business Segment

      Through 1998, the Company had operated in one major business segment, the
handler manufacturing business. As the Company expanded its sales of SMD
placement systems and security solutions, additional business segments were
designated. Sales, operating income, identifiable assets, capital expenditures
and depreciation under US GAAP as of and for the years ended December 31, 2000,
2001 and 2002, pertaining to the business segments in which the Company and its
subsidiaries operated are presented as follows (in millions of Korean won):

<TABLE>
<CAPTION>
                                                                                    Depreciation
                                        Operating                                   of property,
                                          income      Identifiable     Capital       plant and
                           Sales          (loss)         assets      expenditures    equipment
                        ------------   ------------   ------------   ------------   ------------
                                    (As of and for the year ended December 31, 2000)
<S>                     <C>            <C>            <C>            <C>            <C>
Handlers and
   components .......    (won)43,604     (won)4,507    (won)42,452       (won)431       (won)976
SMD placement systems         71,250         (8,072)       117,442          2,946          3,556
TFT-LCD handlers and
   testers ..........          8,861            992          4,779            318            426
Lead frame magazines           4,733            277          1,650             --             12
Security solutions ..          9,501         (4,122)        19,145            919            330
Research and
   development center             --             --         15,964          1,923          2,257
LCD merchandise
   business .........          5,050            302         10,980             --             --
Other (note a) ......            644         (5,787)            --         63,871          1,455
                        ------------   ------------   ------------   ------------   ------------

Consolidated ........   (won)143,643   ((won)11,903)  (won)212,412    (won)70,408     (won)9,012
                        ============   ============   ============   ============   ============
</TABLE>


                                      F-61
<PAGE>

<TABLE>
<CAPTION>
                                                                                           Depreciation
                                               Operating                                   of property,
                                                 income      Identifiable     Capital       plant and
                                  Sales          (loss)         assets      expenditures    equipment
                               ------------   ------------   ------------   ------------   ------------
                                           (As of and for the year ended December 31, 2001)
<S>                            <C>            <C>            <C>            <C>            <C>
Handlers and components ....    (won)19,823   ((won)14,184)   (won)36,215       (won)134       (won)803
SMD placement systems ......         20,992        (35,485)        82,026            205          2,348
TFT-LCD handlers and testers          5,053         (1,458)         2,860             --            207
Security solutions .........         15,517            494         35,671            318            468
Research and development
   center ..................             --             --         23,562         17,421          1,754
Other ......................          8,442        (12,054)            --          5,515          2,588
                               ------------   ------------   ------------   ------------   ------------

Consolidated ...............    (won)69,827   ((won)62,687)  (won)180,334    (won)23,593     (won)8,168
                               ============   ============   ============   ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                           Depreciation
                                               Operating                                   of property,
                                                 income      Identifiable     Capital       plant and
                                  Sales          (loss)         assets      expenditures    equipment
                               ------------   ------------   ------------   ------------   ------------
                                           (As of and for the year ended December 31, 2002)
<S>                            <C>            <C>            <C>            <C>            <C>
Handlers and components ....    (won)16,859   ((won)14,192)   (won)19,794       (won)327       (won)594
SMD placement systems ......         23,486        (30,472)        35,404            537            977
TFT-LCD handlers and testers          2,860             19             --             --             --
Security solutions .........         15,881           (788)        35,360            215            321
Research and development
   center ..................             --             --         20,441            189            343
Other ......................         10,629         (4,762)            --          1,970          4,476
                               ------------   ------------   ------------   ------------   ------------

Consolidated ...............    (won)69,715   ((won)50,195)  (won)110,999     (won)3,238     (won)6,711
                               ============   ============   ============   ============   ============
</TABLE>

      In addition to business segment identifiable assets, total assets as of
December 31, 2000, 2001 and 2002 of (won)356,154 million, (won)338,607 million
and (won)236,177 million, respectively, include unallocated corporate assets
consisting of cash and investments ((won)60,755 million, (won)60,347 million and
(won)60,496 million as of December 31, 2000, 2001 and 2002, respectively), land
((won)44,790 million, (won)31,208 million and (won)7,749 million as of December
31, 2000, 2001 and 2002, respectively), loans - net ((won)7,890 million,
(won)6,513 million and (won)441 million as of December 31, 2000, 2001 and 2002,
respectively) and other ((won)30,307 million, (won)60,204 million and
(won)56,492 million as of December 31, 2000, 2001 and 2002, respectively).

      The unallocated other corporate assets of (won)30,307 million as of
December 31, 2000 mainly consisted of building of (won)19,915 million and other
assets of (won)10,392 million. Unallocated other corporate assets of (won)60,204
million as of December 31, 2001 mainly consisted of buildings of (won)29,690
million, advance payments of (won)8,883 million and other assets of


                                      F-62
<PAGE>

(won)21,631 million. Unallocated other corporate assets of (won)56,492 million
as of December 31, 2002 mainly consisted of buildings of (won)16,311 million,
long-term receivable-net of (won)6,099 million and other assets of (won)34,082
million.

----------

(Note a)    In 2000, other capital expenditures included land and building
            acquired for head office for (won)36,459 million and (won)19,915
            million, respectively.


                                      F-63