<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 20-F

(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES
    EXCHANGE ACT OF 1934

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the fiscal year ended December 31, 2004

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

For the transition period from __________ or __________

Commission file number: 000-30374

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

                              The Republic of Korea
                 (Jurisdiction of incorporation or organization)

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

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

                                      None

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

            Title of Each Class                           Name of each exchange
                                                           on which registered

Class A common shares, par value Won 2,500 per share ...................... N/A

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

                                      None

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

Class A common shares, par value Won 2,500 per share .............. 7,802,601

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

      Yes [X] No ___

Indicate by check mark which financial statement item the registrant has
selected to follow.

      Item 17 ____ Item 18 [X]
<PAGE>

                                TABLE OF CONTENTS

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

   ITEM 1 -- IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS...................................................     2
   ITEM 2 -- OFFER STATISTICS AND EXPECTED TIMETABLE.................................................................     2
   ITEM 3 -- KEY INFORMATION.........................................................................................     2
   ITEM 4 -- INFORMATION ON THE COMPANY..............................................................................    12
   ITEM 5 -- OPERATING AND FINANCIAL REVIEW AND PROSPECTS............................................................    25

GENERAL..............................................................................................................    30

   ITEM 6 -- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..............................................................    33
   ITEM 7 -- MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.......................................................    37
   ITEM 8 -- FINANCIAL INFORMATION...................................................................................    40
   ITEM 9 -- THE OFFER AND LISTING...................................................................................    46
   ITEM 10 -- ADDITIONAL INFORMATION.................................................................................    48
   ITEM 11 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................    61
   ITEM 12 --  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES................................................    61

PART II..............................................................................................................    62

   ITEM 13 -- DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES........................................................    62
   ITEM 14 -- MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS...........................    62
   ITEM 15 -- CONTROLS AND PROCEDURES................................................................................    62
   ITEM 16 -- [RESERVED].............................................................................................    62

PART III.............................................................................................................    64

   ITEM 17 -- FINANCIAL STATEMENTS...................................................................................    64
   ITEM 18 -- FINANCIAL STATEMENTS...................................................................................    64
   ITEM 19 -- EXHIBITS...............................................................................................    64
</TABLE>
<PAGE>

                              CURRENCY TRANSLATION

      In this annual report, references to "Won" or "W" are to the currency of
Korea and all references to "Dollars," "$" or "US$" are to the currency of the
United States of America. Our financial statements are prepared in Won and
presented in accordance with U.S. GAAP for the fiscal years ended December 31,
2000, 2001, 2002, 2003 and 2004. Solely for the convenience of the reader, this
annual report contains translations of certain Won amounts into Dollars at
specified rates. All translations from Won to Dollars were made (unless
otherwise indicated) at the noon buying rate in The City of New York for cable
transfers in Won per US$1.00 as certified for customs purposes by the Federal
Reserve Bank of New York in effect on December 31, 2004, which was Won 1,035.10
to US$1.00. No representation is made that the Won or US$ amounts referred to in
this annual report could have been or could be converted into US$ or Won, as the
case may be, at any particular rate or at all. See "Item 3 -- Key Information --
Exchange Rates Information" for information regarding the rates of exchange
between the Won and the Dollar. On June 30, 2004, the noon buying rate was Won
1,034.50 to US$1.00.

                           FORWARD-LOOKING INFORMATION

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

      -     our future revenue opportunities;

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

      -     the future growth of our subscriber base;

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

      -     our future capital needs;

      -     future strategic partnerships or acquisitions; and

      -     future financial performance.

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

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

                                   REFERENCES

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

                                        1
<PAGE>

                                     PART I

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

      Not applicable.

                ITEM 2 -- OFFER STATISTICS AND EXPECTED TIMETABLE

      Not applicable.

                            ITEM 3 -- KEY INFORMATION

A. SELECTED FINANCIAL DATA

      The selected consolidated financial and other data set forth below should
be read in conjunction with our consolidated financial statements as of December
31, 2003 and 2004 and for each of the years in the three-year period ended
December 31, 2004, including the notes thereto, and "Item 5--Operating and
Financial Review and Prospects" included in this annual report. The selected
consolidated financial data set forth below for the fiscal years ended December
31, 2000, 2001, 2002, 2003 and 2004 are derived from our audited consolidated
financial statements. Our consolidated financial statements as of December 31,
2004 and for the fiscal year ended December 31, 2004 were audited by Deloitte
HanaAnjin LLC, an independent registered public accounting firm. The report of
Deloitte HanaAnjin LLC on the consolidated financial statements as of and for
the fiscal year ended December 31, 2004 includes an explanatory paragraph
relating to the Company's corporate reorganization proceedings in Korea. Our
consolidated financial statements are presented in accordance with U.S. GAAP.

      In July 2001, our board of directors approved a plan to dispose of our
cable television services business (which we had operated from January 2000). As
a result, we disposed of our interest in seven companies, including six cable
system operator subsidiaries, during 2001 and restated the results of operations
of such disposed subsidiaries for 2000 and 2001 as discontinued operations in
accordance with Accounting Principle Board Opinion No. 30. See Notes 1 and 2 to
our consolidated financial statements for more details.

      In August 2002, our shareholders approved a plan to dispose of our
enterprise network business (which we had operated from July 1997). As a result,
we sold the assets related to our enterprise network services to SK Global Co.,
Ltd. (which subsequently changed its name to SK Networks Co., Ltd.) in October
2002 and restated the results of operations of such disposed business for 1999,
2000, 2001 and 2002 as discontinued operations in accordance with Statement of
Financial Accounting Standards No. 144. See Notes 1 and 2 to our consolidated
financial statements for more details.

<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------------------------------------------
                                            2000           2001           2002            2003           2004           2004
                                         -----------    -----------    ------------    -----------    -----------    ------------
<S>                                      <C>            <C>            <C>             <C>            <C>            <C>
                                               (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                            AND PER SHARE, HOMES PASSED AND END USER DATA)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
  Broadband Internet services.......     W   142,346    W   361,408    W    421,062    W   393,600    W   356,252    $    344,171
  Portal services...................           3,015          7,724           6,079          5,182          3,545           3,425
                                         -----------    -----------    ------------    -----------    -----------    ------------
                                             145,361        369,132         427,141        398,782        359,797         347,596
Costs and expenses:
  Operating costs, excluding
    Depreciation and
    amortization:
    Broadband Internet..............         144,947        293,698         262,209        240,075        230,838         223,011
    Portal services.................           4,888         11,719          24,515         16,800          2,622           2,533
  Selling, general and                        48,226         43,040          65,004         48,150         39,408          38,071
  administrative....................
  Depreciation and amortization.....          60,765        107,026         104,646        107,565         79,900          77,191
  Impairment loss on intangible
   assets, property and                           --         23,717          27,261         56,324         44,006          42,514
   equipment........................
</TABLE>

                                        2
<PAGE>

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------------------------------------------
                                            2000           2001           2002            2003           2004           2004
                                         -----------    -----------    ------------    -----------    -----------    ------------
<S>                                      <C>            <C>            <C>             <C>            <C>            <C>
                                               (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                            AND PER SHARE, HOMES PASSED AND END USER DATA)

  Loss (gain) on disposition of
property and equipment, net.........          (2,072)          (312)         35,660          3,005         (1,613)         (1,558)
                                         -----------    -----------    ------------    -----------    -----------    ------------
                                             256,754        478,888         519,295        471,919        395,161         381,762
                                         -----------    -----------    ------------    -----------    -----------    ------------
    Operating loss..................        (111,393)      (109,756)        (92,154)       (73,137)       (35,364)        (34,166)

Other income (deductions):

  Interest income...................           3,988          4,466           6,847          7,264          4,357           4,209
  Interest expense..................         (23,662)       (72,833)        (81,259)       (56,230)       (51,389)        (49,647)
  Gain (loss) on foreign
    exchange transactions, net......          (1,320)        (3,870)          5,755          1,285          3,569           3,448
  Gain (loss) on disposition of
    investments, net................           6,945         (3,164)           (965)         1,089          3,518           3,399
  Impairment loss on investments....         (47,397)        (4,593)        (28,930)        (1,165)            --              --
  Loss on retirement of bond........              --             --        (129,681)            --             --              --
  Gain on extinguishment of debt....              --             --             870          5,738         21,923          21,180
  Other, net........................            (785)         2,008           2,654           (112)        10,639          10,278
                                         -----------    -----------    ------------    -----------    -----------    ------------
                                             (62,231)       (77,986)       (224,709)       (42,131)        (7,383)        (7,133)

Loss from continuing operations
  before taxes, equity in loss
  of affiliates and minority
  interest..........................        (173,624)      (187,742)       (316,863)      (115,268)       (42,747)        (41,299)
Equity in loss of affiliates, net...          (9,902)        (8,357)         (6,215)        (5,501)        (1,588)         (1,534)
Minority interest ..................             197          1,075           2,842           (230)         1,264           1,221
Income tax expense .................             582             --             131             --             --              --
                                         -----------    -----------    ------------    -----------    -----------    ------------
Net loss from continuing
  operations........................     W  (183,911)   W  (195,024)   W   (320,367)   W  (120,999)   W   (43,071)   $    (41,612)
                                         ===========    ===========    ============    ===========    ===========    ============

Discontinued operations:
  Loss from discontinued

    operations......................         (56,174)       (74,052)        (51,960)            --             --              --

  Gain (loss) from disposals .......              --          6,016         (63,775)            --             --              --
                                         -----------    -----------    ------------    -----------    -----------    ------------
Net income (loss) from
    discontinued operations ........         (56,174)       (68,036)       (115,735)            --             --              --
                                         ===========    ===========    ============    ===========    ===========    ============

Net loss ...........................     W  (240,085)   W  (263,060)   W   (436,102)   W  (120,999)   W   (43,071)   $    (41,612)
                                         ===========    ===========    ============    ===========    ===========    ============

Weighted average number of
  shares outstanding(1).............         299,824        401,876         719,541        964,989      3,894,426       3,894,426

Basic and diluted loss from
  continuing operations per
  common share .....................         (15,334)      (485,284)       (445,238)      (125,388)       (11,060)         (10.68)

Basic and diluted net loss from
  discontinued operations per
  common share .....................          (4,684)      (169,296)       (160,846)            --             --              --


Basic and diluted net loss per
  common share......................     W   (20,018)   W  (654,580)   W   (606,084)   W  (125,388)   W   (11,060)   $     (10.68)
                                         ===========    ===========    ============    ===========    ===========    ============

Cash dividends declared per
  share of common share ............              --             --              --             --             --              --
                                         -----------    -----------    ------------    -----------    -----------    ------------
CONSOLIDATED BALANCE SHEET DATA:

Cash and cash equivalents...........     W    39,443    W   156,526    W     55,226    W    53,946    W    61,467    $     59,382
Working capital.....................        (493,877)      (403,383)       (487,893)      (562,578)      (456,783)       (441,293)
Total assets........................       1,458,725      1,567,256         764,051        530,704        427,186         412,700
Net assets..........................         167,322        142,971         (80,608)      (204,395)      (208,034)       (200,979)
Bonds...............................         412,806        335,383         133,942         16,050        286,269         276,562
Long-term debt, excluding
  current portion...................         238,865        377,732           1,863          1,615         11,127          10,750
Common stock........................         179,895        256,602         194,088          4,852          9,756           9,425
Total stockholders' equity..........         167,322        142,971         (80,608)      (204,395)      (208,034)       (200,979)

OTHER DATA:

Capital expenditures................     W   679,763    W   259,114    W     48,456    W    15,835    W    12,277    $     11,861
Net cash provided (used) in
operating activities................         (35,067)       (35,841)         28,517        103,291         80,051          77,336
Net cash provided (used) in
investing activities................        (724,892)      (213,219)        396,276         13,316        (13,688)        (13,223)
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                         ----------------------------------------------------------------------------------------
                                            2000           2001           2002            2003           2004           2004
                                         -----------    -----------    ------------    -----------    -----------    ------------
<S>                                      <C>            <C>            <C>             <C>            <C>            <C>
                                               (AMOUNTS IN MILLIONS OF WON AND THOUSANDS OF DOLLARS EXCEPT NUMBER OF SHARES
                                                            AND PER SHARE, HOMES PASSED AND END USER DATA)

Net cash provided (used) by
  financing activities..............         609,278        366,144        (526,093)      (117,887)       (58,842)        (56,846)
EBITDA(2)...........................        (159,063)       (87,677)       (256,913)        35,532         84,185          81,330
Homes passed(3).....................       6,500,000      8,300,000       8,500,000      8,500,000      8,500,000       8,500,000
Broadband Internet end users........         760,822      1,312,248       1,301,620      1,293,364      1,287,916       1,287,916
</TABLE>

----------------
(1)   The weighted average number of shares outstanding for each of 2000, 2001,
      2002, 2003 and 2004 has been adjusted for the three-for-one reverse stock
      split, the forty-for-one reverse stock split and the two-for-one
      reverse stock split implemented by Thrunet in December 2002, February
      2004, and June 2005 respectively.

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

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

EXCHANGE RATE INFORMATION

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

<TABLE>
<CAPTION>
                               AT END       AVERAGE
YEAR ENDED DECEMBER 31,      OF PERIOD       RATE(1)       HIGH           LOW
-------------------------    ----------    ----------    ----------    ----------
                                             (WON PER US$1.00)
<S>                          <C>           <C>           <C>           <C>
2000 ....................    W  1,267.0    W  1,140.0    W  1,267.0    W  1,105.5
2001 ....................       1,313.5       1,293.4       1,369.0       1,234.0
2002 ....................       1,186.3       1,242.0       1,332.0       1,160.6
2003 ....................       1,192.0       1,193.0       1,262.0       1,146.0
2004 ....................       1,035.1       1,139.3       1,195.1       1,035.1
2005 (through June 30) ..       1,034.5       1,013.3       1,058.0         997.0
</TABLE>

<TABLE>
<CAPTION>
                      AT END
MONTH ENDED         OF PERIOD       HIGH           LOW
----------------    ----------    ----------    ----------
<S>                 <C>           <C>           <C>
January 2005 ...    W  1,026.9    W  1,058.0    W  1,024.0
February 2005 ..       1,000.9       1,044.0       1,004.9
March 2005 .....       1,015.4       1,023.9         997.5
April 2005 .....         997.0       1,019.0         997.0
May 2005 .......       1,005.0       1,009.0         997.0
June 2005 ......       1,034.5       1,034.5       1,003.0
</TABLE>

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

B. CAPITALIZATION AND INDEBTEDNESS

   Not Applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

   Not Applicable.

                                        4
<PAGE>

D. RISK FACTORS

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

RISKS RELATED TO OUR BUSINESS

A SIGNIFICANT PORTION OF OUR SHARES HAS BEEN ACQUIRED BY HANAROTELECOM
INCORPORATED (PREVIOUSLY KNOWN AS HANARO TELECOM, INC.) AND WE WILL BE MERGED
INTO HANAROTELECOM IN THE NEAR FUTURE.

      Due to the rapid expansion of our business and continued operating losses
since our incorporation, we had significant debt and debt service obligations,
which we failed to meet. As a result, on March 27, 2003, the Bankruptcy Division
of the Seoul District Court granted our petition for the commencement of
reorganization proceedings under the Corporate Reorganization Act of Korea. See
"Item 4 -- Information on the Company -- History and Development of the Company
-- Reorganization Proceedings" for more information on our reorganization
proceedings. Pursuant to our reorganization plan, we sought external investors
to provide funds to us to repay our reorganization claims to complete our
reorganization proceedings. As a result of these efforts, on December 15, 2004,
hanarotelecom was selected as a preferred bidder in our public auction to find
our new major shareholder.

      Pursuant to the investment agreement entered between hanarotelecom and us
in February 2005 and our amended reorganization plan approved by the Seoul
District Court on April 29, 2005, in June 2005, we issued new common stock,
representing approximately 96.2% of our issued and outstanding shares, to
hanarotelecom, thereby making hanarotelecom our new major shareholder.
hanarotelecom has been one of our competitors in the broadband Internet access
market and has a plan to merge us into its broadband Internet access business.
If we are merged, we cannot predict how much our creditors and shareholders will
receive for their claims and equity interests in us, if at all. Our shareholders
may receive hanarotelecom shares, cash or other form of consideration, if any,
for their equity holding in us.

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

      Since we established Korea.com Communications and transferred our
Korea.com portal business to it in June 2001, Korea.com Communications has
provided Korea.com portal services and other related services to its own and our
subscribers. On April 1, 2003, the Bankruptcy Division of the Seoul District
Court granted Korea.com Communications its petition for the commencement of
reorganization proceedings under the Corporate Reorganization Act of Korea. On
October 15, 2003, the Second District Court approved Korea.com Communications'
reorganization plan. Pursuant to its reorganization plan, we, as the largest
shareholder of Korea.com, were subject to a 90% capital reduction without
compensation on October 15, 2003 and our reorganizations claims against
Korea.com in the amount of Won 3.5 billion would be paid to us from 2009 until
2013 in five equal annual installments. On December 2, 2003, Korea.com
implemented a reverse stock split of all its remaining issued and outstanding
common shares in the ratio of 10:1. We currently own 53.47% of the voting shares
in Korea.com Communications. As of December 31, 2004, Korea.com Communications
owed us approximately Won 4,077 million, including Won 3,555 million in
reorganization claims and Won 522 million in accounts receivable.

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

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

      We have incurred operating losses in each year since our incorporation. We
incurred operating losses of Won 111.4 billion, Won 109.8 billion, Won 92.2
billion, Won 73.1 billion and Won 35.4 billion in 2000, 2001, 2002, 2003 and
2004, respectively. These operating losses resulted primarily from the
significant infrastructure, marketing, technology and other costs incurred in
the development of our services. In order to reduce our operating losses and
eventually achieve operating income, we will need

                                        5
<PAGE>

to continue to expand our end user base and increase our revenues. We cannot
assure you that we will achieve the end user or revenue growth necessary to
achieve or sustain operating income in the foreseeable future.

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

      The prices of communications services and products in general and Internet
access fees in particular have fallen historically, and we expect them to
continue to fall. In 2004, Internet access fees accounted for 99.0% of our
revenues. We anticipate that competitive pressures to reduce Internet access
fees will increase in the future. We have taken a number of steps to reduce our
network infrastructure costs, including entering into a long term international
bandwidth lease agreement and leasing dark fiber for our fiber optic backbone
instead of leasing bandwidth capacity. However, we believe that in order to
achieve and maintain profitability, we will need to continue to expand our end
user base and maintain adequate pricing levels. We cannot assure you that we
will be successful in further expanding our end user base or that prices for our
services will not fall more sharply or at a faster rate than we anticipate.
Failure to maintain adequate pricing levels or to achieve sufficient expansion
of our end user base could have a material adverse effect on our revenues and
the overall profitability of our business.

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

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

OUR AGREEMENTS WITH SYSTEM OPERATORS TO USE THEIR CABLE TELEVISION NETWORKS MAY
BE TERMINATED DUE TO THE CHANGE IN OUR LARGEST SHAREHOLDER.

      We have entered mutual cooperation agreements with 55 cable system
operators for our use of their cable television networks to connect our
broadband Internet services end users to our fiber optic backbone. Most of these
agreements allow system operators to terminate the agreements if our largest
shareholder is changed or if we are merged. Termination of any of these
agreements will result in service disruptions to our end users in areas served
by such system operators. In such case, we will have to find alternative
networks connecting such end users, install new networks ourselves or terminate
our services in such areas. We cannot provide any assurance that we will obtain
consents from all system operators to continue using their cable television
networks or that if any of the agreements are terminated, we will find an
alternative way to continue serving our end users in areas covered by such
agreements.

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

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

                                        6
<PAGE>

SYSTEM INSTABILITY MAY ADVERSELY AFFECT SERVICE QUALITY.

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

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

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

      As of December 31, 2004, the book value of our property and equipment, net
of accumulated depreciation, was Won 236 billion. As of the same date, our
depreciable assets were insured against fire and other casualty losses only up
to Won 156 billion, representing approximately 66% of the net book value of our
property and equipment. Any damage to our uninsured assets or any damage to our
assets in excess of the insurance coverage amount may have a material adverse
effect on our business.

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

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

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

OUR SHARES HAVE BEEN DELISTED FROM THE NASDAQ STOCK MARKET.

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

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

                                        7
<PAGE>

RISKS RELATED TO OUR INDUSTRY

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

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

      KT Corp. (previously known as Korea Telecom Corp.) and hanarotelecom are
our primary competitors in the broadband Internet services market in Korea. KT
provides broadband Internet access services via asymmetric digital subscriber
line, or ADSL. KT, the largest telephony services provider in Korea, has
extensive telephone and fiber optic backbone networks throughout Korea and has
significantly greater resources than we do. Currently, KT is the leading
broadband Internet access services provider in Korea, with a market share of
approximately 50.5% as of May 31, 2005. hanarotelecom provides ADSL and
cable-based broadband Internet access services and had a market share of
approximately 22.8% as of May 31, 2005. We had a market share of approximately
10.4% as of May 31, 2005.

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

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

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

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

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

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

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

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

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

                                        8
<PAGE>

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

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

      -     costly litigation.

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

WE ARE SUBJECT TO AN INVESTIGATION BY THE KOREAN FAIR TRADE COMMISSION INTO
HORIZONTAL COLLUSION WITH OTHER BROADBAND INTERNET SERVICE PROVIDERS.

            In March 2003, we have entered into an agreement concerning
broadband Internet services with other broadband Internet service providers,
including Dacom, Dreamline, Onse, hanarotelecom and KT. Under this agreement,
the parties to the agreement agreed not to provide unfair price discounts to end
users and excessive marketing commissions. In January 2005, the Fair Trade
Commission sent us a notice informing us that we, together with other
telecommunication companies, will be subject of an investigation by the Fair
Trade Commission into horizontal collusion, including formation of a price
cartel, among the telecommunication companies with respect to our broadband
Internet services from March 2003 until November 2004. The Fair Trade Commission
has already made its decision on the services areas of local telephony and
leased line services in May 2005, however, it has not yet completed its
investigation in other services areas, including broadband Internet services.
The Fair Trade Commission is expected to find us and several other broadband
Internet services providers guilty of horizontal collusion and make its final
determination on the amount of our fine before the end of July 2005. The Fair
Trade Commission has the power to impose a fine of up to 5% of our total
revenues derived from the collusion. The sanction level will be determined by
considering the totality of circumstances such as the size of the relevant
business affected by the collusion, our role in forming the collusion, the
period of the collusion being maintained and the impact of the collusion on
consumers in the respective markets. Pursuant to the investment agreement with
hanarotelecom, we have reserved Won 8 billion from the proceeds from
hanarotelecom's investment in us for our payment of the Fair Trade Commission's
fine. Although we expect our fine to be less than the reserved amount, we cannot
assure you that the reserved amount will be enough to pay all of such fine.

            The Fair Trade Commission's decision may also result in criminal and
civil liabilities against us or our officers and employees. Subscribers harmed
by the collusion may file a civil lawsuit against us based on the Fair Trade
Commission's decision. If a lawsuit is filed and damages are awarded to the
plaintiff in such lawsuit, we may face additional actions based on similar
grounds by other subscribers. In addition, the Fair Trade Commission's decision
and the outcome of any possible related lawsuit may affect the competitive
environment in which we operate.

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

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

RISKS RELATED TO KOREA

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

      We generate substantially all of our revenue from operations in Korea. Our
future performance will depend in large part on Korea's future economic growth.
Adverse developments in Korea's economy or in political or social conditions in
Korea may have an adverse effect on our number of subscribers, call volumes and
results of operations, which could have an adverse effect on our business.

      The pace of economic recovery in Korea over the past several years has
been volatile. The economic indicators in 2001, 2002, 2003 and 2004 have shown
mixed signs of recovery and uncertainty, and future recovery or growth of the
economy is subject to many factors beyond our control. Events related to
terrorist attacks in the United States that took place on September

                                        9
<PAGE>

11, 2001, recent developments in the Middle East, including the war in Iraq,
higher oil prices, the general weakness of the global economy and the outbreak
of severe acute respiratory syndrome, or SARS, in Asia and other parts of the
world have increased the uncertainty of world economic prospects in general and
continue to have an adverse effect on the Korean economy. Any future
deterioration of the Korean economy would adversely affect our financial
condition and results of operations.

      Developments that could adversely affect Korea's economy in the future
include:

      -     financial problems relating to chaebols, or their suppliers, and
            their potential adverse impact on Korea's financial sector;

      -     adverse changes or volatility in foreign currency reserve levels,
            commodity prices (including oil prices), exchange rates (including
            depreciation of the U.S. dollar or Japanese yen), interest rates and
            stock markets;

      -     adverse developments in the economies of countries such as the
            United States, China and Japan, to which Korea exports, or in
            emerging market economies in Asia or elsewhere, which developments
            could result in a loss of confidence in the Korean economy;

      -     social and labor unrest or declining consumer confidence or spending
            resulting from layoffs, increasing unemployment and lower levels of
            income; and

      -     a deterioration in economic or diplomatic relations between Korea
            and its trading partners or allies, including such deterioration
            resulting from trade disputes or disagreements in foreign policy.

      Developments that adversely affect Korea's economic recovery will likely
      also decrease demand for our services and adversely affect our results of
      operations.

INCREASED INTERNATIONAL TENSIONS WITH NORTH KOREA COULD HAVE AN ADVERSE EFFECT
ON US.

      Relations between Korea and North Korea have been tense over most of
Korea's history as a republic. The level of tension between Korea and North
Korea has fluctuated and may increase or change abruptly as a result of current
and future events, including ongoing contacts at the highest levels of the
governments of Korea and North Korea and increasing hostility between North
Korea and the United States. In December 2002, North Korea removed the seals and
surveillance equipment from its Yongbyon nuclear power plant and evicted
inspectors from the United Nations International Atomic Energy Agency, and has
reportedly resumed activity at its Yongbyon power plant. In January 2003, North
Korea announced its intention to withdraw from the Nuclear Non-Proliferation
Treaty, demanding that the United States sign a non-aggression pact as a
condition to North Korea dismantling its nuclear program. In August 2003,
representatives of Korea, the united States, North Korea, China, Japan and
Russia held multilateral talks in an effort to resolve issues relating to North
Korea's nuclear weapons program. While the talks concluded without resolution,
participants in the August meeting indicated that further negotiations may take
place in the future and, in February and June 2004, six-party talks were held in
Beijing, China. The third round of the six-party talks held in June 2004 ended
with an agreement by the parties to hold further talks in the near future. In
recent months, however, the level of tension between the two Koreas has
increased. In February 2005, North Korea declared that it had developed and is
in possession of nuclear weapons. It also announced withdrawal from the
six-party talks on its nuclear program. Any further increase in tensions
resulting, for example, from a breakdown in contact or an outbreak in military
hostilities, could hurt our business, result of operations and financial
condition.

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

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

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

      We do not intend to pay dividends on our shares in the foreseeable future.
However, if we declare cash dividends, such dividends will be declared in Won.
In order for us to pay such dividends outside Korea, such dividends will be
converted into Dollars and remitted to the shareholders, subject to certain
conditions. Fluctuations in the exchange rate between the Won and

                                       10
<PAGE>

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

EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

      We are exposed to foreign exchange risk related to foreign currency
denominated liabilities and anticipated foreign exchange payments. Anticipated
foreign exchange payments, principally in Dollars, relate primarily to net
settlements paid for certain equipment purchased from foreign suppliers. In
2004, we paid approximately US$925 million in foreign exchange payments. Foreign
currency denominated liabilities, principally in Dollars, relate primarily to
foreign currency denominated debt and vendor financing. Since most of our
reorganization claims were paid off pursuant to our amended corporate
reorganization plan during June 2005, at June 30, 2005, we had aggregate
outstanding foreign currency denominated indebtedness of approximately US$30,000
on a non-consolidated basis. As dividends on our shares, if any, will be
declared in Won and converted into Dollars, any depreciation in the value of the
Won relative to the Dollar will reduce the value of the dividends received by
holders of our shares in the United States.

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

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

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

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

                                       11
<PAGE>

                      ITEM 4 -- INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

      Korea Thrunet Co., Ltd. is a stock corporation organized under the laws of
the Republic of Korea. We were incorporated in Korea as Thrunet Co., Ltd. on
July 30, 1996 and renamed as Korea Thrunet Co., Ltd. on August 20, 1999. Our
principal office of business is located at 1337-20, Seocho-2dong, Seocho-ku,
Seoul, Korea 137-751, telephone (82-2) 6266-7114. Our agent for U.S. federal
securities law purposes is CT Corporation System, 111 Eighth Avenue, New York,
NY 10011.

REORGANIZATION PROCEEDINGS

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

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

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

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

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

      On October 25, 2003, we submitted a draft plan of reorganization with the
Seoul District Court. On November 28, 2003, the court held the second and third
meetings of interested parties for the deliberation and acceptance of the draft
plan of reorganization. However, certain major creditors including Korea
Development Bank raised different opinions as to certain terms of the draft
reorganization plan. Accordingly, the court adjourned the meeting until January
9, 2004, at which meeting our draft reorganization plan was adopted by the
interested parties and approved by the Seoul District Court. The 2004
reorganization plan contained provisions for the operation of our company during
the reorganization plan period ending in 2013 and a plan for our reorganization
claims, including a repayment schedule for the reorganization claims, a capital
reduction, a reverse stock split of our shares and a conversion of debt to
equity.

      On April 29, 2005, the court approved our amended reorganization plan
reflecting changes to our reorganization plan resulted from hanarotelecom's
investment in us. The 2005 reorganization plan contains, among other things,
terms of the investment agreement between hanarotelecom and us including our
agreement to issue new common stock and unsecured

                                       12
<PAGE>

corporate bonds to hanarotelecom, and a revised repayment schedule for our
reorganization claims.

      Following our repayment of reorganization claims pursuant to our amended
reorganization plan, on June 17, 2005, we filed a petition with the Bankruptcy
Division of the Seoul District Court for the termination of our corporate
reorganization proceedings. The Seoul District Court granted our petition to
terminate our corporate reorganization proceedings on June 23, 2005.

      See " -- Public Auction to Find a New Major Shareholder", " -- Repayment
of Reorganization Claims", " -- Capital Reduction and Reverse Stock Split" and "
-- Debt to Equity Conversion" below and "Item 8. Financial Information --
Significant Changes."

PUBLIC AUCTION TO FIND A NEW MAJOR SHAREHOLDER

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

      On December 13, 2004, we staged the second public auction to find a new
major shareholder at which hanarotelecom was selected as a preferred bidder. A
memorandum of understanding and the investment agreement were signed by
hanarotelecom and us on December 21, 2004 and February 4, 2005, respectively.
The aggregate amount of hanarotelecom's investment in us was Won 471.4 billion,
including Won 248.1 billion in our common shares and Won 223.3 billion in our
unsecured corporate bonds. On June 3, 2005, we issued 99,240,000 new shares,
representing approximately 96.2% of our issued and outstanding shares, to
hanarotelecom at Won 2,500 per share. On June 7, 2005, we issued unsecured
corporate bonds in the amount of Won 223.3 billion with a five-year maturity and
a fixed interest rate of 3.42% per annum.

      According to the investment agreement and our amended reorganization plan,
the proceeds from hanarotelecom's investment in us were used as follows:

      -     Won 16.5 billion is reserved for our two contingent liabilities (Won
            8.0 billion for the Fair Trade Commission's impending fine and Won
            8.5 billion for our contingent liability from disputes with
            Powercomm over our minimum usage fees for line facilities and dark
            fiber);

      -     Won 1.4 billion is reserved for the fees to be paid to our advisors
            in connection with hanarotelecom's investment in us;

      -     Won 1.7 billion is reserved for our unsettled reorganization claims;

      -     remaining cash other than the reserved amounts will be used to
            settle our reorganization claims; and

      -     after settling the Fair Trade Commission's impending fine, any
            remaining reserved fund will be used to repay our remaining
            reorganization claims.

      Won 8.0 billion reserved for the Fair Trade Commission's impending fine
will be held in escrow with a financial institute jointly selected by us and the
KDB, the representative of our creditors, and shall be dispensed as follows:

      -     In the event the Fair Trade Commission does not impose any fine on
            us, the entire escrow amount will be used to repay our
            reorganization claims as set forth in our amended reorganization
            plan.

      -     In the event the amount of the fine is not more than Won 4 billion,
            any amount remaining in the escrow account after paying the fine
            shall be used to repay our reorganization claims as set forth in our
            amended reorganization plan.

      -     In the event the amount of the fine is more than Won 4 billion but
            not more than Won 10 billion, the fine in the amount of Won 4
            billion plus two-thirds of the amount of fine exceeding Won 4
            billion will be paid by using the funds in the escrow account and
            any remaining fine will be paid by us. Any amount remaining in the
            escrow account after paying the fine will be used to repay our
            reorganization claims as set forth in our amended reorganization
            plan.

      -     In the event the amount of the fine is more than Won 10 billion, the
            entire escrow amount will be used to pay the fine and any remaining
            fine will be paid by us.

      hanarotelecom currently has a plan to merge us into its broadband Internet
business by offering its shares or cash to our shareholders in exchange for
their Thrunet shares in early 2006.

REPAYMENT OF REORGANIZATION CLAIMS

      As of January 9, 2004, the date on which our 2004 reorganization plan was
approved by the court, the aggregate amount of our outstanding reorganization
claims was Won 637.5 billion (excluding exempted claims of Won 7.5 billion),
including Won

                                       13
<PAGE>

280.4 billion in secured claims and Won 357.1 billion in unsecured claims. The
2004 reorganization plan included a repayment schedule for our reorganization
claims over a repayment period ranging from five to nine years, in certain cases
after a grace period of three to five years. During 2004, we repaid
approximately Won 610 billion in the aggregate, including Won 200 billion in
secured claims and Won 410 in unsecured claims. According to the repayment
schedule in our reorganization plan, part of unsecured claims was converted into
our shares. See " -- Debt to Equity Conversion" below.

      As of April 29, 2005, the date on which our amended reorganization plan
was approved by the court, the aggregate amount of our remaining reorganization
claims, including interests accrued since the commencement of our reorganization
proceedings, was Won 556.6 billion, including Won 277.0 billion in secured
claims and Won 279.7 billion in unsecured claims. Of these claims, we repaid Won
453.2 billion, including Won 255.7 billion in secured claims and Won 197.5
billion in unsecured claims, by using the proceeds from hanarotelecom's
investment in us after reserving Won 16.5 billion for our two contingent
liabilities according to our 2005 reorganization plan. Any remaining claims will
be repaid if there is any remaining balance in the escrow account after the
settlement of a fine, which may be imposed on us by the Fair Trade Commission,
pursuant to the terms of the investment agreement between us and hanarotelecom.
See " -- Public Auction to Find a New Major Shareholder" above. Any remaining
claims after such settlement will be forgiven. See Note 1 to our consolidated
financial statements for more details.

CAPITAL REDUCTION AND REVERSE STOCK SPLIT

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

      In June 2005, pursuant to our 2005 reorganization plan, we implemented (a)
a 100% capital reduction of 7,815 fractional shares resulted from the 40:1
reverse stock split in 2004 and (b) a reverse stock split of all our remaining
issued and outstanding common shares in the ratio of 2:1. As a result, the total
number of our outstanding shares was reduced to 3,894,426 shares from 7,802,601
shares (representing a 50.0% reduction in the number of our total issued and
outstanding shares) as of June 2, 2005.

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

      As of March 27, 2003, we had outstanding conversion rights on convertible
bonds, warrants and stock options to purchase a total of 29,723,724 shares,
28,532,198 shares and 1,398,244 shares, respectively, of our shares. According
to our 2004 reorganization plan, all of outstanding conversion rights on
convertible bonds, warrants and stock options that had not been exercised as of
the commencement of our reorganization proceedings on March 27, 2003, were
cancelled.

DEBT TO EQUITY CONVERSION

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

      Other significant developments of the Company include:

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

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

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

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

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

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

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

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

      -     In January 2001, an investor consortium led by SB Thrunet Fund, L.P.
            (which subsequently transferred all of its assets including its
            equity interest in Thrunet to SB-Thrunet Pte. Ltd.), TriGem Computer
            Inc., and Naray & Company, Inc. acquired our common stock and bonds
            with warrants in the aggregate amount of US$250 million.

                                       14
<PAGE>

      -     In June 2001, we established Korea.com Communications Co., Ltd., our
            subsidiary, and transferred our Korea.com portal business-related
            assets and employees to such subsidiary.

      -     In 2001, we sold our controlling equity interests in five cable
            television system operators.

      -     In February 2002, SB-Thrunet, TriGem and Naray exercised their
            warrants to purchase 33,152,000, 7,104,000 and 11,840,000 shares,
            respectively, of our common stock at Won 2,500 per share.

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

      -     In August 2002, we issued common shares in the aggregate amount of
            Won 88.8 billion to TriGem and Naray, as a result of the conversion
            of their bonds into common stock in the amount of Won 59.2 billion
            and Won 29.6 billion, respectively.

      -     In October 2002, we completed the sale of the assets related to our
            enterprise network services business to SK Global for Won 346.9
            billion.

      -     In December 2002, the total number of our outstanding shares was
            reduced to 77.63 million shares from 232.9 million shares as a
            result a reverse stock split of our common shares in the ratio of
            3:1.

      -     In March 2003, we filed a petition for a temporary stay order and a
            petition for commencement of reorganization proceedings with the
            Bankruptcy Division of the Seoul District Court, which was granted
            pursuant to the Corporate Reorganization Act of Korea. See " --
            Commencement of Reorganization Proceedings" above.

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

      -     In July 2003, we surrendered our license for the international
            private leased circuit leasing business to the Ministry of
            Information and Communication.

      -     In January 2004, our reorganization plan was approved by the Seoul
            District Court.

      -     In January 2004, the total number of our outstanding shares was
            reduced to 35,001,813 shares from 77,635,260 shares as a result of a
            100% capital reduction of our common shares held by our largest
            shareholders.

      -     In February 2004, the total number of our outstanding shares was
            reduced to 875,045 shares from 35,001,813 shares as a result of a
            reverse stock split of our common shares in the ratio of 40:1.

      -     In April 2004, the total number of our outstanding shares was
            reduced to 842,994 shares from 875,045 shares as a result of a 100%
            capital reduction of our common shares held by Naray, one of our
            largest shareholders.

      -     In June 2004, we issued 6,958,806 new shares to certain of our
            unsecured creditors at Won 5,000 per share as a result of a debt to
            equity conversion. See " -- Debt to Equity Conversion" above.

      -     In October 2004, a public announcement was made for a public auction
            to find a new major shareholder.

      -     In October 2004, we acquired a network service provider license for
            our broadband Internet services.

      -     In December 2004, hanarotelecom was selected as a preferred bidder
            at the public auction.

      -     In February 2005, hanarotelecom and we entered into an investment
            agreement in the aggregate investment amount of Won 471.4 billion.

      -     In April 2005, our amended reorganization plan was approved by the
            Seoul District Court.

      -     In June 2005, the total number of our outstanding shares was reduced
            to 3,894,426 shares from 7,802,601 shares as a result of a 100%
            capital reduction of fractional shares resulted from the reverse
            stock split in 2004 and a reverse stock split of our remaining
            common shares in the ratio of 2:1.

      -     In June 2005, we issued 99,240,000 new shares, representing
            approximately 96.2% of our issued and outstanding shares, to
            hanarotelecom at Won 2,500 per share in the aggregate amount of Won
            248.1 billion pursuant to the investment agreement. See " -- Public
            Auction to Find a New Major Shareholder" above.

      -     In June 2005, we issued unsecured corporate bonds in the aggregate
            amount of Won 223.3 billion to hanarotelecom pursuant to the
            investment agreement. See " -- Public Auction to Find a New Major
            Shareholder" above.

      -     In June 2005, we repaid our reorganization claims in the amount of
            Won 453.2 billion, including Won 255.7 billion in secured claims and
            Won 197.5 billion in unsecured claims, by using the proceeds from
            hanarotelecom's investment in us.

      -     In June 2005, the Seoul District Court granted our petition to
            terminate our corporate reorganization proceedings.

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

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

B. BUSINESS OVERVIEW

                                       15
<PAGE>

      We are a major provider of broadband Internet access services in Korea. We
had 1,273,381 paying end users as of May 31, 2005.

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

      For the fiscal years ended December 31, 2002, 2003 and 2004, we provided
the following services:

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

      -   2003:   broadband Internet services and portal services

      -   2004:   broadband Internet services and portal services

      For the fiscal years ended December 31, 2002, 2003 and 2004, we had the
following revenues(1):

<TABLE>
<CAPTION>
                                      FOR THE YEAR ENDED DECEMBER 31,
                                        (AMOUNTS IN MILLIONS OF WON)

                                     2002          2003           2004
<S>                              <C>            <C>            <C>
REVENUES:
  Broadband Internet services    W   421,062    W   393,600    W   356,252
  Portal services ...........          6,079          5,182          3,545
                                 -----------    -----------    -----------
     TOTAL ..................    W   427,141    W   398,782    W   359,797
                                 -----------    -----------    -----------
</TABLE>

(1)   Our operating result from continuing activities for 2002 has been
      restated to exclude the operating results from the sold enterprise
      networks business.

      Our revenues decreased from Won 398.8 billion in 2003 to Won 359.8 billion
in 2004. In 2004, we derived 99.0% of our revenues from broadband Internet
services and 1.0% from portal services. Our revenues for the first quarter of
2005, on an unaudited basis, were Won 79.5 billion, Won 77.2 billion of which
were derived from broadband Internet services.

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

      NETWORK. On August 6, 2002, we completed the sale of approximately 70% of
our HFC network system to Powercomm for Won 45.0 billion. We have a lease back
arrangement with Powercomm with respect to such HFC network for use in the
operation of our broadband Internet business. As of May 31, 2005, our owned and
leased broadband Internet services network passed approximately 8.5 million
homes, representing approximately 58% of all Korean homes. The term "homes
passed" refers to the number of homes that can be immediately connected to a
cable system.

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

      As of May 31, 2005, the HFC network we have installed passed 1.1 million
homes and the HFC networks we leased from Powercomm and system operator partners
passed 5.0 million homes and 2.4 million homes, respectively. These HFC networks
collectively comprise the largest HFC network in Korea that permits the two-way
communication necessary to access the full range of broadband services.
Currently, the majority of our broadband end users are linked to our network
through Powercomm's HFC network.

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

                                       16
<PAGE>

                           BROADBAND INTERNET SERVICES

PRODUCTS AND SERVICES

      We offer broadband Internet access services to residential subscribers for
a monthly fee of Won 38,000 (US$36.71). Monthly service includes unlimited
access time, a free Korea.com e-mail account with 100 megabytes of storage and
Web browser software. Residential subscribers to our Thrunet Saver service agree
to receive e-mail messages advertising Thrunet and other companies and are
charged a monthly fee of Won 34,000 (US$32.85) for the same monthly services as
our other broadband Internet services subscribers. We also provide Cable Lite
service, which offers Internet access at a slightly slower speed than the speed
of our usual broadband Internet services for a lower monthly fee of Won 28,000
(US$27.05). Almost all of our subscribers currently rent a cable modem from us.
New subscribers are charged a monthly cable modem rental fee ranging from Won
3,000 (US$2.90) to Won 9,000 (US$8.69) depending on the duration of their
service contracts.

      Depending on the service area, our installation companies, TG Ubase, the
system operators, or Thrunet are responsible for installation of the cable
modem. Regardless of the company installing the modem, residential subscribers
pay an installation fee of Won 30,000 (US$28.98).

      We also provide broadband Internet access mainly to SOHOs and other
commercial entities for a monthly fee of Won 58,000 (US$56.03) for two lines,
Won 99,000 (US$95.64) for three lines and Won 20,000 (US$19.32) for each
additional line. For some of our larger accounts, we offer special discount
packages.

      We also offer ADSL services to residential customers. Our ADSL services
offering targets densely populated residential areas such as apartment
complexes. Our ADSL services subscribers pay a monthly subscription fee of Won
28,000 (US$27.05) and a modem rental fee ranging from Won 3,000 (US$2.90) to Won
9,000 (US$8.69) depending on the duration of their service contracts.

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

SALES AND MARKETING

      We market our broadband Internet services to residential and commercial
subscribers throughout Korea. As of May 31, 2005, the total number of our end
users was 1,273,381.

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

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

      Cable system operators often participate in our promotional efforts. A
system operator may provide air time for our advertisements or include our
marketing materials in its customer bills. We also have a nationwide sales and
marketing network of more than 111 independent dealers.

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

      -     special promotions through various events, including concerts; and

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

                                       17
<PAGE>

OUR RELATIONSHIPS WITH SYSTEM OPERATORS

      We provide our broadband Internet services in 74 of 77 system operator
areas and in 55 areas we provide our broadband Internet services in cooperation
with regional cable system operators. In the areas where we provide our
broadband Internet services in cooperation with regional cable system operators,
our system operator partners provide marketing, installation or maintenance
services depending on our needs in each service area, and we pay each system
operator partner a percentage of the basic subscription fees we receive from
subscribers in the partner's service area based on the types of services the
system operator provides.

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

CUSTOMER SERVICE AND TECHNICAL SUPPORT

      We have an agreement with TG Ubase to outsource our customer care and
after-sales service functions. Currently, we outsource more than 528 customer
service representatives from TG Ubase. These service representatives are
available 24 hours per day, seven days per week to answer questions regarding
broadband Internet services areas, fees, sign-up procedures, cable-modem
questions and problems, basic computer and software configuration questions and
other frequently asked questions. They also accept applications for our
broadband Internet services and repair requests by telephone. We also provide
customer support services through our sales and marketing department and handle
problems referred by the call center agents.

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

INFORMATION SYSTEMS

      We currently utilize an information system network, which consists of
three separate systems: the customer support system, the operational support
system and the business support system. The customer support system handles all
information related to an individual subscriber, including customer care,
billing information and marketing and sales data. The operational support system
handles all data regarding management of our operations and acts as the
interface to the network management system, which monitors the performance of
our network and delivery of services 24 hours per day, seven days per week. This
interface allows for quick identification of network defaults and relays the
information to our customer support system. Finally, the business support system
handles data regarding internal business operations, including accounting and
personnel. For accounting purposes, we introduced an enterprise resource
planning, or ERP, system in the business support system. The ERP system
integrates and manages both our accounting and assets. Our information system is
designed to integrate all of our internal support services. The majority of the
integration of our internal support services has been completed.

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

COMPETITION

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

      KT, hanarotelecom and Thrunet are the three major service providers in the
Korean broadband Internet access market with a collective market share of
approximately 83.7% as of May 31, 2005. KT, the largest telephony services
provider in Korea, provides ADSL services through its own telephone network
utilizing an extensive one way fiber optic backbone network and last-mile
connections primarily consisting of copper lines. Currently, KT is the leading
broadband Internet access services

                                       18
<PAGE>

provider in Korea, with a market share of approximately 50.5% as of May 31,
2005. KT has been upgrading its last-mile connections and related facilities to
provide ADSL services through its nationwide telephone network. hanarotelecom
commenced providing cable-based Internet services in April 1999 and currently
provides those services through system operators using Powercomm's HFC network
and on its own HFC network. hanarotelecom offers services similar to our current
offerings. Together with hanarotelecom, we utilize almost all of Powercomm's
existing HFC network. hanarotelecom also provides ADSL services utilizing its
own fiber optic network. As of May 31, 2005, approximately 38% of
hanarotelecom's end users accessed their services through DSL connections. As of
May 31, 2005, hanarotelecom had a market share of approximately 22.8% and we had
a market share of approximately 10.4%. In addition to the three major service
providers, Dreamline provides cable-based Internet services and ADSL services,
and DACOM and Onsetel Co., Ltd. currently provide cable-based Internet services.

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

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

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

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

                                   SEASONALITY

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

                                    LICENSES

      Pursuant to the Integrated Cable Broadcasting Law, we were designated by
the Ministry of Information and Communication as a network operator in September
1999. As a network operator, we are permitted to install, operate and lease
network facilities to system operators throughout Korea's 77 regions. No fees
are required to be paid to the government of Korea in connection with such
designation. Our designation as a network operator requires that we establish
our transmission network in compliance with the technical standards set forth in
Article 25 of the Telecommunications Basic Law and obtain approval from the
Ministry of Information and Communication prior to providing network facilities
to system operators. As a licensed network provider until July 2003, we were not
under any filing or licensing requirement imposed by the Government to engage in
the delivery of our broadband Internet services.

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

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

      In October 2004, we acquired a network service provider ("NSP") license
from the Ministry of Information and Communication for our broadband Internet
services. Our NSP license is subject to satisfaction of certain terms and
condition, including the following:

      -     The license requires us to make annual contributions to the
            Information Promotion Fund for the purpose of research and
            development pursuant to the Telecommunications Business Law. Only
            the NSPs whose total broadband, voice and

                                       19
<PAGE>

            leased line services revenue amount for the preceding year was more
            than Won 30.0 billion (provided that broadband revenue will only be
            counted towards this threshold from 2005 onwards) and that realized
            a net profit in the preceding year, are required to make annual
            payments for the purpose of research and development in the amount
            of 0.5% of the total Broadband, voice and leased line services
            revenue, to the extent that the amount of such payment does not
            exceed the amount of the net profit for the receding year. The "net
            profit" which the Ministry of Information and Communication will use
            in its determination of the amount of our contribution is calculated
            using the Ministry of Information and Communication accounting
            standards, which differs in certain respects from Korean GAAP.

      -     We must comply with the business plan submitted to the Ministry of
            Information and Communication in all material respects. If
            necessary, the business plan may be revised in accordance with the
            procedures set out in the "Guidelines for Handling of Change of
            Business Plan of Network Service Provider." The initial service fee
            must be in compliance with the business plan. We must report to the
            Ministry of Information and Communication, the general terms
            (including the service fee of each service) together with supporting
            documentation.

      We also hold a special service provider license as a Type 2 reseller.
Services we are permitted to provide under this license include Internet phone
services and Internet access services. For more information on this type of
licenses, see " -- Korean Telecommunications Laws and Regulations --
Telecommunications Laws" below.

                 KOREAN TELECOMMUNICATIONS LAWS AND REGULATIONS

OVERVIEW

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

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

TELECOMMUNICATIONS LAWS

      Under the Telecommunications Basic Law and the Telecommunications Business
Law, telecommunications service providers are currently classified into three
categories: network service providers, value-added service providers and special
service providers.

      Network service providers provide specified types of basic
telecommunications services, including local, domestic long distance and
international telephone services, subscribed telegraph services, leased line
services, services through allocated radio frequencies (including cellular
communications services, paging services, PCS services, IMT-2000 services, and
trunked radio system services), Internet access services, and such other
services as designated by the Ministry of Information and Communication
(including certain VoIP services).

      Value-added service providers provide telecommunications services other
than those services specified for network service providers, such as data
communications using facilities leased from a network service provider following
notification to the Ministry of Information and Communication.

      Special service providers are intended to occupy a middle ground between
network service providers and value-added service providers. The
Telecommunications Business Law provides that there are three types of special
service provider licenses as follows:

      -     Type 1 reseller licenses for entities that have their own switching
            facilities and resell or provide the network services;

                                       20
<PAGE>

      -     Type 2 reseller licenses for entities that do not have their own
            switching facilities and resell the network services; and

      -     Intra-building telecommunications service provider licenses for
            entities that provide telecommunications services within a specific
            building area through their own facilities.

      The Ministry of Information and Communication has the authority to
recommend that network service providers provide contributions to a
government-managed fund for the research and development of telecommunications
technology and related projects. Network service providers whose basic
telecommunication services revenue amount for the preceding year was more than
Won 30 billion and that realized a net profit in the preceding year, are
required to make annual payments for the purpose of research and development in
the amount of 0.5% of the annual total basic telecommunication services revenue,
to the extent that the amount of such payment does not exceed the amount of the
net profit for the preceding year.

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

KOREA COMMUNICATION COMMISSION

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

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

C. ORGANIZATIONAL STRUCTURE

      The following table lists information concerning our significant
subsidiaries and affiliates as of December 31, 2004:

<TABLE>
<CAPTION>
                                                            PERCENTAGE OF OWNERSHIP
                                       JURISDICTION OF     AND VOTING INTEREST HELD
              NAME                      INCORPORATION             BY THRUNET
----------------------------------     ---------------     ------------------------
<S>                                    <C>                 <C>
Korea.com Communications Co., Ltd.          Korea                   53.47%
Multiplus Limited(1)                        Korea                    5.00%

</TABLE>

--------------
(1)   The operation of Multiplus was included in our consolidated financial
      statements in accordance with Statement of Financial Accounting Standards
      ("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities" due to the fact that the
      transaction with Multiplus, our special purpose entity, did not qualify as
      a true sale, thus the operation of the special purpose entity was
      consolidated under US GAAP. Multiplus ceased its operation on August 2004
      and was in the process of liquidation as of December 31, 2004 and it is
      expected to be liquidated in 2005.

                                       21
<PAGE>

D. PROPERTY, PLANTS AND EQUIPMENT

FACILITIES

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

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

NETWORK

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

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

SHARED INFRASTRUCTURE

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

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

      METROPOLITAN LOOPS. We have deployed our metropolitan loops in Kangwon
Province and six major cities, including Seoul, Incheon, Taejon, Kwangju, Taegu
and Busan, using fiber optic cables we lease from Powercomm and SK Networks. Our
metropolitan loop network is a ring-type network and supports speeds of 2 Gbps.

      As of May 31, 2005, we have installed 25 units of DWDM equipment to
establish four ring-type metropolitan DWDM networks in major metropolitan areas,
including Seoul, Kyounggi and Incheon. Such ring-type metropolitan DWDM networks
are designed to enhance network stability by directing data traffic to
alternative routes in the event of unexpected network disconnection. By
utilizing the DWDM technology, we can upgrade our metropolitan networks to a
maximum capacity of 80 Gbps.

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

                                       22
<PAGE>

BROADBAND INTERNET SERVICES

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

                           BROADBAND INTERNET NETWORK

                                  [FLOW CHART]

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

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

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

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

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

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

                                       23
<PAGE>

developments will save us the cost of purchasing and installing cable modems for
subscribers and increase demand for our services.

      INTERNET GATEWAYS. Our backbone network has direct links to Internet
gateways in the United States via connections provided by various parties as
follows. In June 2002, we acquired from Dacom Crossing an indefeasible right to
use six international leased lines, each supporting a bandwidth capacity of
155 Mbytes, until December 2016, for a total price of US$12,000,000, which we
have paid. We also have agreements with Dacom Crossing and Onse Telecom,
pursuant to which we lease an aggregate of three international lines each
supporting a bandwidth capacity of 155 Mbytes, expiring in September and
November 2005, respectively. We pay Won 32.2 million and Won 11.9 million per
month to Dacom Crossing and Onse Telecom, respectively. In addition, we have
dedicated access lines to each of the domestic Internet exchanges, including
DACOM IX, KINX, KIDC and KT-IX.

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

                                       24
<PAGE>

             ITEM 5 -- OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

A.    OPERATING RESULTS

FISCAL 2004 COMPARED TO FISCAL 2003

      The following compares our operating results in the year ended December
31, 2004 to those of the year ended December 31, 2003.

      Revenues. Our revenues decreased by 9.8% from Won 398,782.4 million for
the year ended December 31, 2003 to Won 359,796.6 million for the year ended
December 31, 2004. This decrease in revenues reflected a 9.5% decrease in fees
received from our broadband Internet services subscribers from Won 393,600.4
million in 2003 to Won 356,251.7 million in 2004 and a 31.6% decrease in
revenues from our portal services from Won 5,182.0 million in 2003 to Won
3,544.8 million in 2004. The decrease in our broadband Internet access services
revenues was primarily due to a decrease in the number of our subscribers from
1,293,364 as of December 31, 2003 to 1,287,916 as of December 31, 2004. The
decrease in our portal services revenues was primarily due to a decrease in the
revenues of Korea.com, our consolidated subsidiary, as a result of the
commencement of its corporate reorganization proceedings.

      Operating Costs. Our total operating costs, excluding depreciation and
amortization, decreased by 9.1% from Won 256,875.4 million for 2003 to Won
233,459.8 million in 2004. The decrease in our total operating costs, excluding
depreciation and amortization, was primarily due to lease payments to Powercomm
and other network operators for the use of their HFC networks, decreases in
commission payments to our independent dealers and installment fees. Lease
payments to Powercomm and other network operators decreased by 14.1% from Won
90,563.2 million in 2003 to Won 77,767.6 million in 2004, primarily due to a
decrease in the number of our subscribers. Commission payments decreased by 4.1%
from Won 102,467.1 million in 2003 to Won 98,226.8 million in 2004, primarily
due to a decrease in the amount of incentive payments to independent dealers.
Installment fees decreased by 19.8% from Won 29,218.8 million in 2003 to Won
23,427.4 million in 2004, primarily due to a decrease in the number of new
subscribers.

      Selling, General and Administrative Expense. Selling, general and
administrative expense decreased by 18.2% from Won 48,150.6 million in 2003 to
Won 39,407.5 million in 2004, primarily due to decreases in advertising expenses
and fees and charges, offset in part by an increase in bad debt expenses.
Advertising expenses decreased by 25.6% from Won 12,431.3 million in 2003 to Won
9,245.8 million in 2004, primarily due to a decrease in our advertising
activities. Fees and charges decreased by 57.5% from Won 4,455.3 million in 2003
to Won 1,893.4 million in 2004, primarily due to a decrease in fees paid to our
legal and financial advisors and other consultants reflecting a reduced level of
our activities in 2004. Bad debt expenses increased by 18.8% from Won 17,725.5
million in 2003 to Won 21,064.3 million in 2004.

      Depreciation and Amortization Expense. Depreciation and amortization
expense decreased by 25.7% from Won 107,565.0 million in 2003 to Won 79,900.1
million in 2004 primarily as a result of our sale of equipment and network
facilities.

      Impairment Loss. Our impairment loss decreased by 21.9% from Won 56,323.8
million in 2003 to Won 44,005.9 million in 2004, due to a lower level of
obsolete equipment and facilities in 2004 compared to that in 2003.

      Loss on Disposition of Property and Equipment. In 2004, we recognized gain
on disposition of property and equipment of Won 1,613.0 million primarily as a
result of a downward adjustment in 2004 of the value of Korea.com Communications
appraised at the time of its spin-off in 2001. In 2003, we recognized loss on
disposition of property and equipment of Won 3,005.3 million primarily as a
result of our sale of additional enterprise network services business related
assets to SK Networks.

      Operating Loss. Our operating loss decreased by 51.6% from Won 73,136.6
million in 2003 to Won 35,363.5 in 2004, primarily as a result of a greater
decrease in our operating expenses than a decrease in our revenues in 2004.

      Other Income (Expense). Other expenses decreased by 82.5% from Won
42,130.9 million in 2003 to Won 7,383.1 million in 2004, primarily due to an
increase in gain on extinguishments of debt. Gain on extinguishments of debt
increased from Won 5,738.0 million in 2003 to Won 21,923.0 million in 2004,
primarily due to the repayment of the Multiplus asset backed loan.

                                       25

<PAGE>

      Income Tax. In 2004 as well as in 2003, we did not incur any income tax
expense. See Note 10 to our consolidated financial statements for more details.

      Net Loss. Our net loss decreased by 64.4% from Won 120,998.8 million in
2003 to Won 43,071.4 million in 2004, primarily due to an increase in gain on
extinguishments of debt and a decrease in our operating loss.

FISCAL 2003 COMPARED TO FISCAL 2002

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

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

      Operating Costs. Our total operating costs, excluding depreciation and
amortization, decreased by 10.4% from Won 286,723.5 million for 2002 to Won
256,875.4 million for 2003. The decrease in our total operating costs, excluding
depreciation and amortization, was primarily due to decreases in commission
payments to our independent dealers, lease payments to Powercomm and other
network operators for the use of their HFC networks, salaries paid to our
employees and repair expenses. Commission payments decreased by 11.1% from Won
115,289.9 million in 2002 to Won 102,467.1 million in 2003, primarily due to a
decrease in the amount of incentive payments to independent dealers. Lease
payments to Powercomm and other network operators decreased by 9.9% from Won
100,463.0 million in 2002 to Won 90,563.2 million in 2003 to Won 14,609.4
million in 2002 to , primarily due to a decrease in the number of our
subscribers. Labor expenses decreased by 24.3% from Won 14,609.4 million in 2002
5o Won 11,056.7 million in 2003, primarily due to a decrease in the number of
our employees and a reduction in bonus payments to our employees. Repair
expenses decreased by 22.9% from Won 14, 757.4 million in 2002 to Won 11,370.6
million in 2003.

      Selling, General and Administrative Expense. Selling, general and
administrative expense slightly decreased by 25.9% from Won 65,003.9 million in
2002 to Won 48,150.6 million in 2003, primarily reflecting decreases in bad debt
expenses, salaries paid to our employees, fees and charges and research and
development costs, offset in part by an increase in our advertising expenses.
Bad debt expenses decreased by 56.7% from Won 40,904.3 million in 2002 to Won
17,725.5 million in 2003. Labor expenses decreased by 49.2% from Won 5,629.9
million in 2002 to Won 2,862.5 million in 2003, primarily due to a decrease in
the number of our employees and a reduction in bonus payments to our employees.
Fees and charges decreased by 36.4% from Won 7,009.8 million in 2002 to Won
4,455.3 million in 2003, primarily due to a decrease in fees paid to our legal
and financial advisors and other consultants reflecting a reduced level of our
activities in 2003. Research and development expenses decreased from Won 2,073.2
million in 2002 to nil in 2003. Advertising expenses increased by 14.2% from Won
10,886.8 million in 2002 to Won 12,431.3 million in 2003, primarily due to an
increase in our advertising activities.

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

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

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

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

                                       26

<PAGE>

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

      Income Tax. In 2003, we did not incur any income tax expense. In 2002, we
recognized income tax expense of Won 131.4 million in 2002, reflecting income
tax paid by ENS Securitization Limited on its income. See Note 10 to our
consolidated financial statements for more details.

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

IMPACT OF INFLATION

      We do not consider that inflation in Korea has had a material impact on
our results of operations. Inflation in Korea in 2000, 2001, 2002, 2003 and 2004
was 2.3%, 4.1%, 2.7%, 3.6% and 3.6%, respectively. See "Item 3 -- Key
InformationXRisk FactorsXThere are unique economic and political risks
associated with investing in companies from Korea".

IMPACT OF FOREIGN CURRENCY FLUCTUATIONS

      See "Item 11 -- Quantitative and Qualitative Disclosures about Market
RiskXForeign Currency Risk".

GOVERNMENTAL, ECONOMIC, FISCAL, MONETARY OR POLITICAL POLICIES OR FACTORS

      See "Item 3 -- Key InformationXRisk FactorsXRisks Related to Korea" and
"Item 10 -- Additional Information -- Taxation".

B.    LIQUIDITY AND CAPITAL RESOURCES

      We were in corporate reorganization proceedings under the Corporate
Reorganization Act of Korea from March 27, 2003 until June 23, 2005. See "Item 4
-- Information on the Company -- History and Development of the Company --
Reorganization Proceedings" for more details on our corporate reorganization
proceedings.

      We had positive cash flows from operating activities of Won 28,517.2
million, Won 103,290.6 million and Won 80,051.3 million in 2002, 2003 and 2004,
respectively. Net cash provided by operating activities in 2004 primarily
reflected net income, adjusted by gain on extinguishment of debt (due to the
commencement of our corporate reorganization proceedings) and depreciation and
amortization. Net cash provided by operating activities in 2003 primarily
reflected net losses, adjusted by depreciation and amortization. Net cash
provided by operating activities in 2002 primarily reflected net losses,
adjusted by depreciation and amortization and loss.

      Net cash used in investing activities was Won 13,688.2 million, compared
to net cash provided by investing activities of Won 396,276.2 million and Won
13,316.6 million in 2002 and 2003, respectively. Net cash used in investing
activities in 2004 was primarily due to our acquisition of telecommunication
equipment such as CMTS and upgrading of the customer information system, or the
CIS. Net cash provided by investing activities in 2003 was primarily due to the
sale of our HFC network and headquarter building, offset in part by our
acquisition of telecommunication equipment such as cable moderns and CMTS. Net
cash provided by investing activities in 2002 was primarily the result of the
disposition of property and equipment in connection with the sale of our
enterprise networks business.

      As a result of the rapid expansion of our business and continued operating
losses since our incorporation, we have significant debt and debt service
obligations. Since 2002, we made significant efforts to reduce our liabilities
and used the proceeds from the sale of our assets to pay off a portion of our
long-term and short-term borrowings. As a result, we had net cash used in

                                       27

<PAGE>

financing activities of Won 526,093.8 million, Won 117,887.2 million and Won
58,842.3 million in 2002, 2003 and 2004, respectively. In 2004, we used Won
83,811 million in the aggregate in repayments of short-term borrowings and
long-term debts. In 2003, we used Won 76,485.8 million, Won 41,086.9 million and
Won 7,066.3 million in repayments of long-term debts, short-term borrowings and
bonds, respectively. In 2002, we used Won 198,348.0 million, Won 180,590.9
million and Won 230,933.7 million in repayments of bonds, short-term borrowings
and long-term debts, respectively. Since our inception, we have met our working
capital and other capital requirements principally from private and public sales
of our shares and bonds and bank borrowings. In 2004, we neither issued any
bonds nor raised any funds from short-term borrowings. Proceeds from the
issuance of a series of bonds totaled Won 49,333.1 million and Won 6,280.8
million in 2002 and 2003, respectively. We also raised Won 55,053.9 million and
Won 2,800.0 million from short-term borrowings in 2002 and 2003, respectively.
In 2002, 2003 and 2004, however, we did not raise any funds from issuance of our
shares and long-term debts. As of December 31, 2004, we had current liabilities
(including the current portion of long-term debts, the current portion of
capital lease obligations and the current portion of long-term accounts payable)
and long-term liabilities (including long-term debts and deferred installment
fees) of Won 607,579 million and Won 27,641 million, respectively, and our
current liabilities exceeded our current assets by Won 456,782.9 million.

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

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

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

      On June 3, 2005, we issued 99,240,000 shares of our common stock to
hanarotelecom pursuant to the investment agreement entered into between
hanarotelecom and us and our 2005 reorganization plan.

      See Note 7 to our consolidated financial statements for a description of
the types of financial instruments used, the maturity profile of debt, currency
and interest rate structure.

      In 2002, 2003 and 2004, we sold the following assets to raise funds to
satisfy our debt repayment and debt service obligations.

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

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

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

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

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

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

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

      -     On January 30, 2004, we sold our HFC network in Kangrung and Sokcho
            for Won 3.4 billion;

      -     On June 30, 2004, we sold our HFC network in Dong-gu, Daegu for Won
            1.7 billion; and

      -     On November 17, 2004, we sold 837,209 Ginam Broadcasting shares for
            Won 4.9 billion.

                                       28

<PAGE>

      As of December 31, 2004, we provided five blank promissory notes and one
blank check to KDB Capital, Woori Investment Bank, LG Card, Woori Bank and LG
Capital as collateral. As of the same date, we did not provide any financial
guarantees for any third parties. See Note 9 to our consolidated financial
statements for more details on our commitments and contingencies. It is common
practice for Korean companies to issue blank promissory notes with a maximum
note amount to financial institutions as collateral in credit transactions. In
the event a holder of a blank promissory note attempts to claim an amount in
excess of the maximum note amount, the issuer of such promissory note will be
required to pay the entire note amount. However, in such event, the issuer has a
right of indemnification from such holder with respect to the excess amount.

      Capital expenditures in property and equipment were Won 48,456.3 million,
Won 15,834.9 million and Won 12,277.0 million in 2002, 2003 and 2004,
respectively. Capital expenditures primarily consisted of transmission equipment
cable modems, other facilities and equipment and software.

      Our current capital expenditure plan calls for the expenditure of
approximately Won 21 billion, Won 14 billion and Won 16 billion in 2005, 2006
and 2007, respectively. None of those amounts represents contractually committed
capital expenditures. We had invested approximately Won 1.2 billion of the
planned 2005 capital expenditures as of June 30, 2005. The principal components
of our capital investment plan are:

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

      -     network infrastructure maintenance and repair; and

      -     general administrative infrastructure.

      In June 2005, we raised Won 471.4 billion from hanarotelecom's investment
in us by issuing 99,240,000 new shares in the amount of Won 248.1 billion and
unsecured corporate bonds in the amount of Won 223.3 billion. After reserving
Won 16.5 billion for our two contingent liabilities pursuant to the investment
agreement with hanarotelecom, we used Won 453.2 billion to repay our
reorganization claims. We plan to meet our debt service, debt repayment and
other repayment obligations and satisfy our currently anticipated capital
expenditure and working capital requirements in the second half of 2005 and 2006
through revenues from our broadband Internet services. Although we believe that,
with hanarotelecom's investment in us, we have sufficient working capital to
meet our currently anticipated debt repayment, capital expenditure and debt
service requirements and accounts payable in the second half of 2005 and 2006,
in order to maintain our competitive position and continue to meet the
increasing demands for service quality, availability and competitive pricing, we
may need to incur additional capital expenditures on enhancing our networks and
expanding our subscriber base.

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

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

D.    TREND INFORMATION

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

      Our operating costs consist primarily of (i) lease payments to Powercomm
and other network operators for the use of their HFC networks, (ii)
international bandwidth lease payments, (iii) commission payments to our
independent dealers, (iv) installation fees paid to our cable modem installation
contractors and (v) customer service fees paid to TG Ubase. As we have reached
our target business and network coverage, we do not expect substantial increases
in our future operating expenses.

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

      As a result of the rapid expansion of our business and continued operating
losses since our incorporation, we had significant debt and debt service
obligations. Furthermore, during the course of 2001, there was a significant
decline in the market value of telecommunication companies around the world as
well as a decline in the prices of communications services and products in

                                       29

<PAGE>

general, which affected our ability to achieve and sustain profitability.
Despite our efforts to improve our financial condition, we commenced our
corporate reorganization proceedings in March 2003.

      Even though our corporate reorganization proceedings were terminated in
June 2005 and we are expected to continue our business as a going concern, our
ability to generate future revenues will be dependent on a number of factors,
certain of which are beyond our control. The prices of communications services
and products in general and Internet access fees in particular have fallen
historically, and we expect them to continue to fall. In order to achieve and
maintain profitability, we will need to continue expanding our end user base and
maintain adequate pricing levels. See "Item 3"Key Information"Risk Factors"We
have experienced continuing operating losses." and "-Our ability to achieve and
sustain profitability may be adversely affected by a decline in prices for our
services or insufficient expansion of our end user base."

E.    OFF-BALANCE SHEET ARRANGEMENTS

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

F.    TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

      Our contractual obligations, including commitments for future payments
(including principal amounts and interests) under our 2004 reorganization plan
are summarized below. For more information on our corporate reorganization
proceedings and reorganization plan, see Note 1 to our financial statements.

<TABLE>
<CAPTION>
                                                  PAYMENTS DUE BY PERIOD
                                                  ----------------------
                                              LESS THAN                        MORE THAN 5
     CONTRACTUAL OBLIGATIONS         TOTAL     1 YEAR    1-3 YEARS  3-5 YEARS     YEARS
                                    -------   ---------  ---------  ---------  -----------
                                                   (IN MILLIONS OF WON)
<S>                                 <C>       <C>        <C>        <C>        <C>
Secured Borrowings                  366,417     21,551     85,257    114,955     144,654
Unsecured Borrowings                298,892     27,559     43,278     62,435     165,620
Short-term Borrowings                     -          -          -          -           -
Retirement and Severance Benefits     3,408          -          -          -       3,408
Total Contractual Cash Obligations  668,717     49,110    128,535    177,390     310,480
</TABLE>

      If our amended reorganization plan had been effective as of December 31,
2004, our future payment obligations (including principal amounts and interests)
would have been as follows:

<TABLE>
<CAPTION>
                                                  PAYMENTS DUE BY PERIOD
                                                  ----------------------
                                              LESS THAN                        MORE THAN 5
     CONTRACTUAL OBLIGATIONS         TOTAL     1 YEAR    1-3 YEARS  3-5 YEARS     YEARS
                                    -------   ---------  ---------  ---------  -----------
                                                   (IN MILLIONS OF WON)
<S>                                 <C>       <C>        <C>        <C>        <C>
Secured Borrowings                  255,729    255,729       -          -            -
Unsecured Borrowings                197,497    197,497       -          -            -
Short-term Borrowings                     -          -       -          -            -
Retirement and Severance Benefits     3,408          -       -          -        3,408
Total Contractual Cash Obligations  456,634    453,226       -          -        3,408
</TABLE>

G.    OTHER INFORMATION

CRITICAL ACCOUNTING POLICIES

      GENERAL

      The discussion and analysis of our operating and financial review and
prospects are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis,

                                       30

<PAGE>

management evaluates its estimates, including those related to revenue
recognition, bad debts, marketable securities, long-lived assets and useful
lives of property and equipment. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ materially from these estimates under
different assumptions or conditions.

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

      USE OF ESTIMATES

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

      ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

      INVESTMENT SECURITIES

      Impairment of Investment Securities and Recoveries

      If the decline in fair value is judged to be other than temporary, the
cost basis of the individual securities is written down to fair value as a new
cost basis and the amount of the write-down is included in current operations.
The subsequent increase in carrying amounts of the impaired and written-down
held-to-maturity debt securities and equity securities without readily
determinable fair value is not allowed. The subsequent increase in fair value of
available-for-sale securities is reported in other comprehensive income.

      LONG-LIVED ASSETS

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

      RETIREMENT AND SEVERANCE BENEFITS

      Employees and directors with one year or more of service are entitled to
receive a lump-sum payment upon termination of their employment with the
Company, based on their length of service and rate of pay at the time of
termination. The Company's estimated liability under the plan, equal to the
amount that would be payable assuming all employees were to resign as of
December 31, 2003 and 2004, has been accrued in the accompanying consolidated
financial statements. Under the National Pension Scheme of Korea, through March
31, 1999, the Company was required to transfer a certain percentage of
retirement benefits of employees to the National Pension Fund. The amount
transferred will reduce the retirement and severance benefit amount payable to
the employees when they leave the Company and is reflected as a direct deduction
from the retirement and severance benefits liability.

      REVENUE RECOGNITION

      Monthly customer subscription fees for broadband internet service are
recognized as revenue in the period services are provided. Included in
subscription revenues are fees related to rental of cable modems to customers in
connection with subscription contracts. Installation fees and the related
installation costs up to an amount not exceeding installation fees are deferred
and recognized as revenue and operating costs over the estimated customer
retention period of 4 years. Korea.com

                                       31

<PAGE>

Communications recognizes as revenue the fees received from us for its provision
of content offerings and email services and sales commissions from its
e-commerce services.

      FOREIGN CURRENCY TRANSACTIONS

      Monetary assets and liabilities denominated in a foreign currency are
converted into Korean Won at Won 1,197.80 to US$1.00 and Won 1,043.80 to
US$1.00, the equivalent rates of exchange at December 31, 2003 and 2004,
respectively. Revenue, expenses, gains and losses from foreign currency
transactions are converted at the exchange rate in effect at the transaction
date. All foreign exchange transaction gains and losses are included in current
operations.

      INCOME TAX

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

      EARNINGS (LOSS) PER SHARE

      Basic and diluted earnings (loss) per common share is calculated by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the fiscal year, which is 719,541 shares, 964,989
shares and 3,894,426 shares for the years ended December 31, 2002, 2003 and
2004, respectively. The warrants issued and stock options granted in 2000 and
2001 were not included in the calculation of loss per share for the years ended
December 31, 2002 and 2003 as their effect was anti-dilutive. Also, they are not
considered in 2004 as they were cancelled by the reorganization plan and their
effect was anti-dilutive.

      COMPREHENSIVE INCOME

      Comprehensive income consists of net income and other comprehensive income
(loss). Other comprehensive income (loss) refers to revenues, expenses, gains
and losses that are not included in net income, but rather are recorded directly
in stockholders' capital deficiency, such as unrealized gain or loss on
available-for-sale securities and foreign currency translation adjustments.

                                       32

<PAGE>

              ITEM 6 -- DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    DIRECTORS AND SENIOR MANAGEMENT

      Following our filing of a petition for the commencement of reorganization
proceedings, on March 27, 2003, the bankruptcy court appointed Mr. Seog Won Park
as our receiver and he performed functions similar to those of a Chief Executive
Officer until June 23, 20005 when our reorganization proceedings were
terminated. Following hanarotelecom's investment in us and the termination of
our reorganization proceedings, new members of our board of directors and senior
executive officers (whose business addresses were at 1337-20 Seocho-2dong,
Seocho-ku, Seoul, Korea) were appointed as follows:

<TABLE>
<CAPTION>
         NAME                          AGE                       POSITION
         ----                          ---                       --------
<S>                                    <C>     <C>
Soon-Yub Samuel Kwon...........         48     Chief Executive Officer/Representative Director
Chang Lib Ko...................         59     Statutory Auditor
Jong Myung Rhee................         51     Senior Executive Vice President/Director
Young Wan Cho..................         46     Senior Vice President/Director
Matt Ki Lee....................         46     Senior Vice President/Director
Hyung Jun Song.................         47     Senior Vice President/Director
</TABLE>

      SOON-YUB SAMUEL KWON joined Thrunet in June 2005 as the Chief Executive
Officer and Representative Director of Thrunet. He has also served as a Senior
Executive Vice President of hanarotelecom since December 2003, the Chief
Corporate Officer since April 2004 and as the Head of hanarotelecom's Thrunet
M&A Division since January 2005. From October 2000 until November 2004, he
served as the Representative Director of Hansol iGlobe Co., Ltd. From January
2000 until September 2000, he served as an Executive Vice President of Hansol
M.com. From May 1987 until December 1999, he practiced law as an attorney at
Paul, Weiss, Rifkind, Wharton & Garrison LLP. Mr. Kwon received a bachelor of
law from Seoul National University in 1980 and masters in law from the
University of Pennsylvania in 1984 an a J.D. from Columbia University in 1987.

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

      JONG MYUNG RHEE joined Thrunet in June 2005 as a Senior Executive Vice
President. He has also served as a Senior Executive Vice President of
hanarotelecom since November 1999 and Chief Technology Officer of hanarotelecom
since November 2003, and was the Head of the IMT-2000 Business Division of
hanarotelecom. He received a bachelor of science in electronic engineering in
1976 and masters degree in electronic engineering in 1978, both from Seoul
National University. He received a Ph.D. in electronic engineering from North
Carolina State University in 1987 and obtained a post-doctorate standing from
University of Massachusetts in the area of designing DS-CDEMA in 1995.

      YOUNG WAN CHO joined Thrunet in June 2005 as a Senior Vice President. He
has also served as a Senior Vice President of hanarotelecom since December 2002
and is currently the Head of the Management Unit of hanarotelecom's Thrunet M&A
Division. He is also currently a Senior Vice President and Internal Auditor of
Hanaro T&I, Inc., a subsidiary of hanarotelecom. Form January 2002 until
December 2002, he served as a Managing Director and Head of the Finance Team of
hanarotelecom. From April 2000 until December 2001, he served as a Managing
Director and the Head of the Financial Strategy Unit of hanarotelecom. From
September 1997 until March 2000, he served as Senior Manager and Head of the
Finance Unit of hanarotelecom. From January 1985 until September 1997, he served
as a Senior Manager of the Finance Unit of Dacom. Mr. Cho received a bachelor of
arts in business administration from Korea University in 1983 and masters in
business administration from the Helsinki School of Economics and Business
Administration in 2000.

      MATT LEE joined Thrunet in June 2005 as a Senior Vice President. He has
also served as a Senior Vice President of hanarotelecom since November 2001 and
the Head of the Sales Management unit of hanarotelecom since January 2005. He
previously served as Vice President of Nokia Networks, Management Director of
Excel Tech, General Manager of Hyundai Electronics, and Member of Technical
Staff in AT&T Bell Laboratories. Mr. Lee received a bachelor of arts in
mathematics in 1984, masters in mathematics in 1985 and masters in statistics in
1986 from the University of Illinois, Urbana-Champaign.

      HYUNG JUN SONG joined Thrunet in June 2005 as a Senior Vice President. He
has also served as a Senior Vice President and the Head of the Business Unit of
hanarotelecom's Thrunet M&A Division since January 2005. He is also currently a
Senior Vice President and non-standing Director of Hanaro Realty Development &
Management Co., Ltd., a subsidiary of hanarotelecom.

                                       33

<PAGE>

From January 1982 to October 1997, he served as a Manager of the Business
Management team at KEPCO. Mr. Song received a bachelor of electronic engineering
from Hanyang University in 1982 and masters in information and communication
management from New York University in 2000.

B.    COMPENSATION

      We paid an aggregate amount of compensation during fiscal 2004 to our
directors and officers as a group equal to Won 355 million. The amount of
retirement and severance benefits paid to our executive officers and directors
in 2004 was Won 50 million. The amount of retirement and severance benefits
accrued for our executive officers and directors in 2004 was Won 170 million. We
are not required to disclose compensation to our directors and officers on an
individual basis under Korean law and do not publicly disclose such information.
No stock options were granted to our executive officers and independent
directors in 2004. There were no pension, retirement or other similar benefits
set aside for our executive officers and directors in 2004.

C.    BOARD PRACTICES

      During our reorganization proceedings from March 27, 2003 until June 23,
2005 our board meetings, audit committee, compensation committee and independent
directors were temporarily suspended. Subject to certain approvals and
supervision of the bankruptcy court, Mr. Seog Won Park, our receiver, and Mr.
Chang Lib Ko, our statutory auditor, had the power to perform the functions and
responsibilities of such bodies and the exclusive power and capacity to conduct
our business and to manage and dispose of any and all of our properties while we
were in reorganization proceedings. We are in the process of re-establishing our
normal board practices. We have neither appointed any independent directors nor
established our audit committee and compensation committee yet.

      The following is a description of our board of directors, audit committee
and independent directors as currently contained in our Articles of
Incorporation.

BOARD OF DIRECTORS

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

AUDIT COMMITTEE

      Our Articles of Incorporation, as currently in effect, provide for an
Audit Committee to ensure the impartial supervision of our accounting and
business operations. The Audit Committee must consist of three or more directors
and independent directors must comprise at least two-thirds of the members of
the Audit Committee. Under our Articles of Incorporation, the Audit Committee is
responsible for examining internal transactions and potential conflicts of
interest and reviewing accounting and other relevant matters. The Audit
Committee has the right to request the board of directors to convene a
shareholders' meeting by providing a document that sets forth the agenda and
reasons for such meeting.

D.    EMPLOYEES

      As of May 31, 2005 we had a total of 250 employees, including permanent
employees and contract employees. The following chart shows the number of
employees by main category of functional areas:

<TABLE>
<S>                                       <C>
SENIOR MANAGEMENT                           4
SALES & MARKETING                          97
ENGINEERING                                92
ADMINISTRATION AND FINANCE                 57
                                          ---
TOTAL                                     250
</TABLE>

                                       34

<PAGE>

      As of December 31, 2002, 2003 and 2004 we had 316, 283 and 248 employees,
respectively.

      A labor union was established in March 2004. Currently, 181 of our
employees are represented by the labor union. In accordance with Korean labor
laws, our labor union has been in negotiations with our management to improve
work conditions and benefits for our employees. We have not experienced any work
slowdowns or stoppages.

E.    SHARE OWNERSHIP

STOCK OPTION PLAN

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

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

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

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

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

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

      On August 20, 1999, March 24, 2000 and March 27, 2001, we granted stock
options to purchase our shares to our executive officers, independent directors
and employees. As of January 15, 2004, however, all of the stock options were
cancelled pursuant to our reorganization plan. See Note 12 to our consolidated
financial statements for more information about our stock options.

STOCK OWNERSHIP ASSOCIATION

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

                                       35

<PAGE>

employees and the regulations governing the association must contain certain
matters relating to the operation and management of the association.

      We established our employee stock ownership association in June 1997. As
of December 31, 2004, 48 employees of our company were members of the employee
stock ownership association and the association held 141 shares of our common
shares.

                                       36

<PAGE>

           ITEM 7 -- MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.    MAJOR SHAREHOLDERS

      The following table sets forth information with respect to the beneficial
ownership of our shares, on a fully diluted basis, as of June 30, 2005 by (1)
each person known to us to own beneficially more than five percent (5%) of our
shares, and (2) all of our directors and executive officers as a group. As of
June 30, 2005, we had approximately 16,655 beneficial owners of our shares,
including 4,883 beneficial owners of our shares in the United States.

<TABLE>
<CAPTION>
                                                    SHARES BENEFICIALLY
                                                 OWNED AS OF JUNE 30, 2005
                                                 -------------------------
                NAME                               NUMBER          PERCENT
-----------------------------------------------  ----------        -------
<S>                                              <C>               <C>
Hanarotelecom incorporated.....................  99,240,000         96.2%
Directors and Executive Officers(1)............           0            0%
</TABLE>

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

      The following table describes transactions known to us through publicly
available information involving holders of over 5% of our outstanding common
stock during the period beginning on January 1, 2002 and ending on June 30, 2005
that resulted in a change of greater than 1% in the percentage ownership by that
shareholder of our outstanding shares.

<TABLE>
<CAPTION>
                                                                       NUMBER OF
                                            SHARES OWNED                 SHARES     SHARES OWNED
                             DATE OF          PRIOR TO                 PURCHASED     AFTER THE
  NAME OF SHAREHOLDER      TRANSACTION      TRANSACTION   PERCENTAGE     (SOLD)     TRANSACTION   PERCENTAGE
-----------------------  -----------------  ------------  ----------  -----------   ------------  ----------
<S>                      <C>                <C>           <C>         <C>           <C>           <C>
TriGem Computer          February 28, 2002   14,965,048     14.58%      7,104,000    22,069,048     14.26%
SB-Thrunet Pte. Ltd.     February 28, 2002   14,208,000     14.50%     33,152,000    47,360,000     30.61%
Naray & Company          February 28, 2002    2,576,000      2.51%     11,840,000    14,416,000      9.32%
TriGem Computer(1)       August 28, 2002     22,069,048     14.26%     52,112,676    74,181,724     31.85%
Naray & Company          August 28, 2002     14,416,000      9.32%     26,056,338    40,472,338     17.38%
Naray & Company(1)       September 6, 2002   40,472,338     17.38%      9,560,000    50,032,338     21.48%
SB-Thrunet Pte. Ltd.(1)  September 6, 2002   47,360,000     30.61%      9,560,000    37,800,000     16.23%
SB-Thrunet Pte. Ltd.(2)  April 25, 2003      12,600,000     16.23%     (1,282,051)   11,317,949     14.58%
Naray & Company          April 25, 2003      16,677,446     21.48%      1,282,051    17,959,497     23.13%
TriGem Computer(3)       January 9, 2004     24,727,240     31.85%    (24,727,240)            0         0%
Naray & Company(2)(3)    January 9, 2004     17,959,497     23.13%    (16,677,446)    1,282,051      3.66%
Naray & Company(3)       April 8, 2004           32,051      3.66%        (32,051)            0         0%
Korea Development        June 1, 2004                 0         0%      1,912,950     1,912,950     24.52%
Bank(4)
Kookmin Bank(4)          June 1, 2004                 0         0%      1,342,532     1,342,532     17.21%
Powercomm(4)             June 1, 2004                 0         0%        834,552       834,552     10.70%
Sin Smale Agein SPE (4)  June 1, 2004                 0         0%        735,000       735,000      9.42%
Bond Park Echa SPE(4)    June 1, 2004                 0         0%        450,000       450,000      5.77%
Bond Park SPE(4)         June 1, 2004                 0         0%        450,000       450,000      5.77%
Kookmin Bank                     --           1,342,532     17.21%     (1,302,532)       40,000      1.02%
Hanmi Asset                      --                   0         0%        716,576       716,576     18.40%
Korea Development
Bank(5)                  June 2, 2005         1,912,950     24.52%       (956,475)      946,475     24.56%
Powercomm(5)             June 2, 2005           834,552     10.70%       (417,276)      417,276     10.71%
Shin Smale Agein SPE(5)  June 2, 2005           735,000      9.42%       (367,500)      367,500      9.43%
Bond Park Echa SPE(5)    June 2, 2005           450,000      5.77%       (225,000)      225,000      5.77%
Bond Park SPE(5)         June 2, 2005           450,000      5.77%       (225,000)      225,000      5.77%
hanarotelecom            June 3, 2005                 0         0%     99,240,000    99,240,000     96.22%
Korea Development        June 3, 2005
Bank(6)                                         956,475     24.56%              0       956,475      0.92%
Hanmi Asset(6)           June 3, 2005           716,576     18.40%              0       716,576      0.69%
Powercomm(6)             June 3, 2005           417,276     10.71%              0       417,276      0.40%
Shin Smale Agein SPE(6)  June 3, 2005           367,500      9.43%              0       367,500      0.35%
Bond Park Echa SPE(6)    June 3, 2005           225,000      5.77%              0       225,000      0.21%
Bond Park SPE(6)         June 3, 2005           225,000      5.77%              0       225,000      0.21%
</TABLE>

-------------------------
(1)   As a result of the reverse stock split of our common shares in the ratio
      of 3:1 on December 27, 2002.

(2)   As a result of the reverse stock split of our common shares in the ratio
      of 40:1 on January 9, 2004.

(3)   The 100% capital reduction of the common shares held by our largest
      shareholder, TriGem Computer, and its affiliates.

                                       37

<PAGE>

(4)   As a result of the debt to equity conversion on June 1, 2004.

(5)   As a result of the reverse stock split of our common shares in the ratio
      of 2:1 on June 2, 2005.

(6)   As a result of the issuance of our common shares to hanarotelecom on June
      3, 2005.

B.    RELATED PARTY TRANSACTIONS

RELATIONSHIP WITH HANAROTELECOM INCORPORATED

            On December 13, 2004, we staged the second public auction to find a
new major shareholder at which hanarotelecom was selected as a preferred bidder.
A memorandum of understanding and the investment agreement were signed by
hanarotelecom and us on December 21, 2004 and February 4, 2005, respectively.
The aggregate amount of hanarotelecom's investment in us was Won 471.4 billion,
including Won 248.1 billion in our common shares and Won 223.3 billion in our
unsecured corporate bonds. On June 3, 2005, we issued 99,240,000 new shares,
representing 96.2% of our issued and outstanding shares, at Won 2,500 per share
to hanarotelecom, thereby making hanarotelecom our major shareholder. According
to the investment agreement, hanarotelecom cannot dispose of 50% of the shares
during the one-year period commencing on the date of issuance of such shares. On
June 7, 2005, we also issued unsecured corporate bonds in the amount of Won
223.3 billion with a five-year maturity and a fixed interest rate of 3.42% per
annum.

            Five of our directors (all of our directors other than our Statutory
Auditor) are concurrently serving on hanarotelecom's board of directors.

RELATIONSHIP WITH KOREA.COM COMMUNICATIONS

      As of December 31, 2004, we owned 53.47% of the outstanding shares of
Korea.com Communications. On April 1, 2003, the Bankruptcy Division of the Seoul
District Court granted Korea.com Communications its petition for the
commencement of reorganization proceedings under the Corporate Reorganization
Act of Korea. Since we established Korea.com Communications and transferred our
Korea.com portal business to it in June 2001, Korea.com Communications has
provided Korea.com portal services and other related services to its own and our
subscribers. As of December 31, 2004, Korea.com Communications owed us
approximately Won 4,077 million, including Won 3,555 million in reorganization
claims and Won 552 million in accounts payable.

RELATIONSHIP WITH TRIGEM AND ITS AFFILIATES

      TriGem was one of our founding shareholders and together with its
affiliates was the largest shareholder until all of their equity interests in us
were cancelled without compensation pursuant to our 2004 reorganization plan.
None of TriGem and its affiliates currently owns any bonds or warrants to
purchase our common stock.

      We have an agreement with TG Ubase, a subsidiary of TriGem, under which we
outsource all of our customer care and after-service functions to TG Ubase.
Payments of call center service fees to TG Ubase in 2002, 2003 and 2004 were Won
17,078 million, Won 14,323 million and Won 12,967 million, respectively. We
believe that our agreement with TG Ubase was on terms no less favorable than
could have been obtained from independent third parties.

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

RELATIONSHIP WITH SOFTBANK

      As of December 31, 2004, SOFTBANK, through SB Thrunet, beneficially owned
3.63% of our outstanding shares. On January 26, 2001, we issued to SB Thrunet
bonds maturing on January 26, 2006, with interest accruing at the annual rate of
1.43% payable semi-annually, together with detachable warrants to purchase our
common stock for Won 2,500, exercisable at any time until January 26, 2006.
SOFTBANK's wholly-owned entity, SB Ginko, which is a general partner of SB
Thrunet, also held warrants to purchase a total of 35,520,000 shares of our
common stock at a per share exercise price of Won 2,500, exercisable at any time
until January 26, 2006. On February 28, 2002, SB-Thrunet exercised all of its
warrants to purchase 33,152,000 shares of our common stock. The subscription
money in Korea Won was used to repay the US$70 million bonds issued to SB
Thrunet. As a result of the difference in the exchange rate used to determine
the aggregate denominated amount of

                                       38

<PAGE>

the warrants and the exchange rate used for the payment of the subscription
money, bonds amounting to US$7,400,000 remained. As a result of the
implementation of our reorganization plan, the bonds held by SB Thrunet were
classified as secured borrowings and were repaid in full in June 2005. As of
January 9, 2004, all of the warrants held by SB Ginko were cancelled.

C.    INTERESTS OF EXPERTS AND COUNSEL

      Not applicable.

                                       39

<PAGE>

                         ITEM 8 -- FINANCIAL INFORMATION

A.    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

      See "Item 18 -- Financial Statements" and pages F-1 to F-31 following
Glossary.

                                LEGAL PROCEEDINGS

      REORGANIZATION PROCEEDINGS

      We were in corporate reorganization proceedings under the Corporate
Reorganization Act of Korea from March 27, 2003 until June 23, 2005. See "Item 4
-- Information on the Company -- History and Development of the Company --
Reorganization Proceedings".

      INVESTIGATION BY THE FAIR TRADE COMMISSION

      In March 2003, we have entered into an agreement concerning broadband
Internet services with other broadband Internet service providers, including
Dacom, Dreamline, Onse, hanarotelecom and KT. Under this agreement, the parties
to the agreement agreed not to provide unfair price discounts to end users and
excessive marketing commissions. In January 2005, the Fair Trade Commission sent
us a notice informing us that we, together with other telecommunication
companies, will be subject of an investigation by the Fair Trade Commission into
horizontal collusion, including formation of a price cartel, among the
telecommunication companies with respect to our broadband Internet services from
March 2003 until November 2004. The Fair Trade Commission has already made its
decision on the services areas of local telephony and leased line services in
May 2005, however, has not yet completed its investigation in other services
areas, including broadband Internet services. The Fair Trade Commission is
expected to find us and several other broadband Internet services providers
guilty of horizontal collusion and make its final determination on the amount of
our fine before the end of July 2005. The Fair Trade Commission has the power to
impose a fine of up to 5% of our total revenues derived from the collusion. The
sanction level will be determined by considering the totality of circumstances
such as the size of the relevant business affected by the collusion, our role in
forming the collusion, the period of the collusion being maintained and the
impact of the collusion on consumers in the respective markets. The Fair Trade
Commission's decision may also result in criminal and civil liabilities against
us or our officers and employees. Subscribers harmed by the collusion may file a
civil lawsuit against us based on the Fair Trade Commission's decision. If a
lawsuit is filed and damages are awarded to the plaintiff in such lawsuit, we
may face additional actions based on similar grounds by other subscribers.

      DISAGREEMENT WITH POWERCOMM

      In March 1999, we entered into an agreement with KEPCO to lease its cable
television network for lease payments equal to a fixed percentage of our
broadband internet services revenue. The agreement was transferred to Powercomm
in early 2000 when Powercomm was spun off from KEPCO. In January 2001, we
entered into an agreement with Powercomm on the provision of HFC network, which
supplements an earlier agreement concerning cable television network use dated
March 1999. Under this supplemental agreement, for our use of Powercomm's cable
television transmission network, we guaranteed to Powercomm the minimum monthly
usage fees per subscriber from January 2001 until March 2008.

      There have been disagreements between Powercomm and us as on the
interpretations of these agreements, especially on the calculation of our usage
fees. Depending on the final resolutions, we may have to make additional
payments to Powercomm.

      CLASS ACTION LAWSUIT

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

                                       40

<PAGE>

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

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

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

      On June 27, 2003, we entered into a memorandum of understanding with the
plaintiff, which contains among other things, an agreement to settle the
plaintiff's claim upon the condition that if the judgment sum is less than US$1
billion, the difference between the judgment sum and US$1 billion will be
covered by all the defendants to the claim.

      In June 2004, we entered into a stipulation and agreement of settlement
with defendant issuers and individuals with the same parties to the 2003
memorandum of understanding, which contains among other things, an agreement to
discharge all defendant issuers and their directors from any liability from the
claim and an agreement to allocate the difference between the judgment sum and
US$1 billion among the defendant issuers' insurance companies if the plaintiffs
collect less than US$1 billion from the underwriter and other defendant who
didn't agree to the settlement. Such agreement becomes effective when the court
approves it and the US District Court, Southern District of New York granted a
preliminary approval on the agreement on February 15, 2005.

      MOTOROLA LAWSUIT

      On December 3, 2002, General Instrument Corporation d/b/a the Broadband
Communications Sector of Motorola, Inc. filed suit in the United States District
Court for the Eastern District of Pennsylvania against us for breach of a
contract for cable modems. We responded to the complaint with a motion to
dismiss for lack of personal jurisdiction filed on April 1, 2003, which was
denied by the court on June 24, 2003. On April 24, 2003, General Instrument
Corporation filed a claim against us in the Seoul District Court for the
identical modems that were subject of the lawsuit in the United States. On June
30, 2003, we filed a petition pursuant to 11 U.S.C. 304 to commence a case
ancillary to a foreign proceeding, which was supplemented on September 22, 2003.
The petition was assigned to Chief Judge Bruce Fox of the United States
Bankruptcy Court for the Eastern District of Pennsylvania. In the petition, we
asked the U.S. Bankruptcy Court to stay the Motorola action since we are
currently in reorganization proceedings in Korea. On January 9, 2004, the Seoul
District Court approved our reorganization plan which provides for the payment
over time of US$8,221,912 to General Instrument Corporation in satisfaction of
its claim in the Seoul District Court. As a result, on February 6, 2004, General
Instrument Corporation and we executed a settlement agreement and release to
resolve all the disputes addressed in General Instrument Corporation's lawsuit
against us in the United States and our petition to the U.S. Bankruptcy Court.
Accordingly, on February 9, 2004, we withdrew our petition pursuant to 11 U.S.C.
304 to commence a case ancillary to a foreign proceeding and on February 19,
2004, by consent of General Instrument Corporation and us, a consent judgment
was entered in favor of General Instrument Corporation and against us in the
amount of US$8,679,072.83.

      DELISTING OF OUR SHARES FROM THE NASDAQ NATIONAL MARKET

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

                                       41

<PAGE>

reverse stock split, and thereafter regain compliance with the continued listing
standard of Nasdaq, including the minimum bid price requirement. On November 25,
2002, our shareholders approved the proposed reverse stock split of our common
shares in the ratio of 3:1. The reverse stock split took effect on January 20,
2003, on which date we issued new share certificates.

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

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

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

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

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

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

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

                                 DIVIDEND POLICY

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

B.    SIGNIFICANT CHANGES

                               RECENT DEVELOPMENTS

HANAROTELECOM'S INVESTMENT

      On December 13, 2004, we staged the second public auction to find a new
major shareholder at which hanarotelecom was selected as a preferred bidder. A
memorandum of understanding and the investment agreement were signed by
hanarotelecom and us on December 21, 2004 and February 4, 2005, respectively.
The aggregate amount of hanarotelecom's investment in us was Won 471.4 billion,
including Won 248.1 billion in our common shares and Won 223.3 billion in our
unsecured corporate

                                       42

<PAGE>

bonds. On June 3, 2005, we issued 99,240,000 new shares, representing
approximately 96.2% of our issued and outstanding shares, to hanarotelecom. On
June 7, 2005, we issued unsecured corporate bonds in the amount of Won 223.3
billion with a five-year maturity and a fixed interest rate of 3.42% per annum.

COURT APPROVAL OF THE AMENDED REORGANIZATION PLAN

      On April 29, 2005, the Bankruptcy Division of the Seoul District Court
approved our amended reorganization plan reflecting changes to our
reorganization plan mainly resulted from hanarotelecom's investment in us. The
2005 reorganization plan contains, among other things, terms of the investment
agreement between hanarotelecom and us including our plan to issue new common
shares and unsecured corporate bonds to hanarotelecom, and repay our
reorganization claims by using the proceeds from hanarotelecom's investment in
us.

CAPITAL REDUCTION AND REVERSE STOCK SPLIT

      Following the Seoul District Court's approval of our amended
reorganization plan on April 29, 2005, we implemented (a) a 100% capital
reduction of the common shares resulted from the 40:1 reverse stock split in
2004 and (b) a reverse stock split of all our remaining issued and outstanding
common shares in the ratio of 2:1. As a result, the total number of our
outstanding shares was reduced to 3,894,426 shares from 7,802,601 shares
(representing a 50.0% reduction in the number of our total issued and
outstanding shares) as of June 2, 2005.

COMPLETION OF THE REORGANIZATION PROCEEDINGS

      Following our repayment of reorganization claims pursuant to our amended
reorganization plan, on June 17, 2005, we filed a petition with the Bankruptcy
Division of the Seoul District Court for the termination of our corporate
reorganization proceedings. The Seoul District Court granted our petition to
terminate our corporate reorganization proceedings on June 23, 2005.

                        RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

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

                                       43

<PAGE>

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

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

      In December 2003, the FASB released a revision of FIN No. 46 ("FIN No.
46R") in which the calculation of expected losses and expected residual returns
have been altered to reduce the impact of decision maker and guarantor fees. In
addition, FIN No. 46R changed the definition of a variable interest. The Company
as a foreign private issuer is required to apply either FIN 46 or FIN 46R to
variable interest entities ("VIEs") created after January 31, 2003. The Company
is also required to apply FIN 46R to the VIEs which existed prior to February 1,
2003 in 2004. Certain special purpose companies (SPC) established by the
Company, have been consolidated from the date of their establishment. There is
an entity created before February 1, 2003, other than the aforementioned
consolidated SPCs, for which is reasonably possible that the Company will be
deemed a primary beneficiary upon the application of FIN 46R to the entity in
2004. It is a joint venture established to operate wireless telecommunication
services in a country outside of Korea.

      In December 2004, the FASB issued SFAS No.153, "Exchange of Non-monetary
Assets, an amendment of APB Opinion No.29, Accounting for Non-monetary
Transaction". SFAS No.153 amends the APB Opinion No.29 exception to fair value
measurement for non-monetary exchanges to apply only to those exchanges, which
lack commercial substance as defined in SFAS No. 153, and is effective for
non-monetary asset exchanges that the Company enters into on or after July 1,
2005. The adoption of this standard is not expected to have a material impact on
the Company's financial position, operating results or cash flows.

      In December 2004, the FASB revised SFAS No.123, "Accounting for
Stock-Based Compensation". It supersedes APB Opinion No 25. "Accounting for
Stock Issued to Employees". This revised statement establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based in the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. This statement is effective for period beginning after
June 15, 2005 for public entities that do not file as small business issuers and
after December 15, 2005 for public entities filing as small business issuers and
after December 15, 2005 for non-public entities. The adoption of this statement
is not expected to have a material impact on the Company's financial position,
operating results or cash flows.

      In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a replacement of APB Opinion No.20 and SFAS No. 3". SFAS No 154
replaces APB Opinion No 20, "Accounting changes" and SFAS No 3."Reporting
Accounting Changes in Interim Financial Statements" and changes the requirement
for the accounting for and reporting of a change in accounting principles. It
applies to all voluntary changes in accounting principles. It also applies to
changes required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. When a
pronouncement includes specific transition provisions, those provisions should
be followed. The provision of this statement should be effective for accounting
changes made in fiscal year beginning after December 15, 2005. The adoption of
this statement is not expected to have a material impact on the Company's
financial position, operating results or cash flows.

      In July 2004, the EITF issue No. 02-14, "Whether an Investor Should Apply
the Equity Method of Accounting to Investments Other Than Common Stock if the
Investor Has the Ability to Exercise Significant Influence over the Operating
and Financial Policies of the Investee". EITF Issue No.02-14 was effective for
reporting periods beginning after September 15, 2004 and requires the use of the
equity method of accounting for investments that are in-substance common stock
when the investor has the ability to exercise significant influence over the
investee. The adoption of this guidance is not expected to have a material
impact on the Company's financial position, operating results or cash flows.

      In March 2004, the EITF supplement EITF Issue No.03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments".
EITF Issue No.03-1 provides guidance for evaluating whether an investment is
other-than-temporarily impaired and requires disclosures on unrealized losses on
available-for-sale debt and equity securities. In September 2004, the FASB
issued FASB Staff Position ("FSP") EITF Issue 03-1-1, "Effective Date of
Paragraphs 10-20 of EITF Issue 03-1", which deferred the effective date of the
recognition and measurement provisions of the consensus until further guidance
is

                                       44

<PAGE>

issued. The impact on future earnings, if any, of the recognition and
measurement provisions of EITF Issue No.03-1 will not be known until the FASB
issues its guidance.

                                       45

<PAGE>

                         ITEM 9 -- THE OFFER AND LISTING

A.    OFFER AND LISTING DETAILS

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

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

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

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

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

B.    PLAN OF DISTRIBUTION

      Not applicable.

C.    MARKETS

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

D.    SELLING SHAREHOLDERS

                                       46

<PAGE>

      Not applicable.

E.    DILUTION

      Not applicable.

F.    EXPENSES OF THE ISSUE

      Not applicable.

                                       47

<PAGE>

                        ITEM 10 -- ADDITIONAL INFORMATION

A.    SHARE CAPITAL

      Not applicable.

B.    ARTICLES OF INCORPORATION

      The following is a summary of certain provisions in our Articles of
Incorporation. During our reorganization proceedings, however, to the extent
that any provision of our Articles of Incorporation conflicted with any
provision of the Corporation Reorganization Act of Korea, the latter superseded
the former, and we had to comply with the provisions of the Corporation
Reorganization Act of Korea. Among other things, general meetings of
shareholders were not held and voting rights of shareholders were restricted.

OBJECTIVES

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

      -     lease of telecommunication lines facilities;

      -     wired and/or wireless telecommunication business;

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

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

      -     installation, operation and maintenance of facilities for the
            purpose of the businesses mentioned in each item above.

GENERAL

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

      As of the date hereof, 103,134,426 shares were issued and outstanding. No
Class B preferred shares are currently outstanding. All of our issued and
outstanding shares have a par value of Won 2,500 per share, are fully paid and
non-assessable, and are in registered form. Our authorized but unissued share
capital consists of 296,865,574 shares. We may issue additional shares without
further shareholder approval as provided in our Articles of Incorporation.

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

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

DIVIDENDS

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

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

                                       48

<PAGE>

any dividend as provided in our Articles of Incorporation, the effective period
of such Class B preferred shares will be extended until full payment of
dividends is made. However, no Class B preferred shares have been issued to
date.

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

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

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

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

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

DISTRIBUTION OF FREE SHARES

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

PREEMPTIVE RIGHTS AND ISSUANCE OF ADDITIONAL SHARES

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

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

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

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

      -     issued according to our Stock Option Plan;

      -     represented by depositary receipts;

      -     issued to foreign corporations or foreigners under the Foreign
            Investment Promotion Law or other relevant laws and regulations in
            accordance with the relevant laws and regulations including, but not
            limited to, the Telecommunication Business Law; or

                                       49

<PAGE>

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

      -     issued to an acquirer of Thrunet in connection with the acquirer's
            merger or acquisition of Thrunet.

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

GENERAL MEETING OF SHAREHOLDERS

      Under the Commercial Code, the ordinary general meeting of shareholders is
held within three months after the end of each fiscal year and, subject to board
resolution or court approval, an extraordinary general meeting of shareholders
may be held as necessary or at the request of holders of an aggregate of 3% or
more of the outstanding shares of a company or at the request of the company's
statutory auditor. Under the Commercial Code, written notices setting forth the
date, place and agenda of the meeting must be given to shareholders at least two
weeks prior to the date of the general meeting of shareholders. Shareholders not
on the shareholders' register as of the record date are not entitled to receive
notice of the general meeting of shareholders or attend or vote at such meeting.
Such notices to U.S. shareholders will be forwarded to The Bank of New York in
accordance with an agreement to be entered by and between Thrunet and The Bank
of New York as the U.S. transfer agent. The agenda of the general meeting of
shareholders is determined at the meeting of the board of directors. In
addition, shareholders holding an aggregate of 3% or more of the outstanding
shares may propose an agenda for the general meeting of shareholders. Such
proposal should be made in writing at least six weeks prior to the meeting. The
board of directors may decline such proposal if it is in violation of the
relevant laws and regulations or our Articles of Incorporation.

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

VOTING RIGHTS

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

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

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

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

                                       50

<PAGE>

LIMITATION ON SHAREHOLDINGS

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

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

REGISTRATION OF SHAREHOLDERS AND RECORD DATES

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

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

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

ANNUAL AND PERIODIC REPORTS

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

TRANSFER OF SHARES

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

ACQUISITION BY THE COMPANY OF SHARES

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

                                       51

<PAGE>

LIQUIDATION RIGHTS

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

INSPECTION OF BOOKS AND RECORDS

      Under the Commercial Code, any individual shareholder or shareholders
having at least 3% of all outstanding shares (irrespective of voting or
non-voting shares) of a Korean corporation may inspect the books and records of
the corporation.

EFFECT OF KOREAN LAWS

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

C.    MATERIAL CONTRACTS

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

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

      TRUST DEED BETWEEN THRUNET AND KOOKMIN BANK

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

      BENEFICIARY CERTIFICATES ASSIGNMENT AGREEMENT BETWEEN THRUNET AND ENS
SECURITIZATION LIMITED

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

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

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

                                       52

<PAGE>

      SUBSCRIBERS AND ASSETS TRANSFER AGREEMENT BETWEEN THRUNET AND SK TELECOM

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

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

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

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

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

      ASSET SALE AGREEMENT BETWEEN THRUNET AND SK GLOBAL

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

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

      ASSET SALE AGREEMENT BETWEEN THRUNET AND POWERCOMM

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

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

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

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

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

                                       53

<PAGE>

      LEASE AGREEMENT BETWEEN DAERUNG SEOCHO TOWER (LEE WHAN KEUN) AND KOREA
THRUNET CO., LTD.

      The building at 1337-20 Seocho-dong, Seocho-gu, Seoul, where our executive
offices are located, were transferred from CKR ABS Specialty L.L.C. to Daerung
Seocho Tower (Lee Whan Keun) in September 2004. Accordingly, we terminated the
lease agreement with CKR ABS Specialty L.L.C. and entered into a new lease
agreement with Daerung Seocho Tower (Lee Whan Keun) (the "Lessor") on August 23,
2004, under which the Lessor agreed to lease to us three floors of the building
for us to use as executive offices. The term of the lease is one year from
September 23, 2004 until September 22, 2005. We paid a key money deposit in the
amount of Won 657,524,100, which is refundable to us upon expiration of the
lease agreement or termination in accordance with the terms of the agreement.
The agreement provides for a monthly rent of Won 65,752,418 and monthly
maintenance fee of Won 28,691,964.

      INVESTMENT AGREEMENT FOR THE ACQUISITION OF AND INVESTMENT IN KOREA
THRUNET CO., LTD. BETWEEN HANAROTELECOM INCORPORATED AND KOREA THRUNET CO., LTD.

      On February 4, 2005, we entered into an investment agreement with
hanarotelecom pursuant to which we agreed to issue and hanarotelecom agreed to
subscribe (i) 99,240,000 new shares, representing approximately 96.2% of our
issued and outstanding shares, for Won 2,500 per share for the aggregate amount
of Won 248.1 billion and (ii) unsecured corporate bonds in the amount of Won
223.3 billion with a five-year maturity and a fixed interest rate of 3.42% per
annum. hanarotelecom agreed not to dispose 49,620,000 shares, representing 50%
of our shares subscribed, during the one-year period commencing on the date of
issuance of such shares and agreed to deposit share certificates for such shares
with the Korea Securities Depository during such period.

      Out of the total proceeds of Won 471.4 billion, Won 16.5 billion shall be
reserved for our two contingent liabilities (Won 8.0 billion for the Fair Trade
Commission's impending fine and Won 8.5 billion for our contingent liability
from disputes with Powercomm over our minimum usage fees for line facilities and
dark fiber) and the remaining proceeds shall be used to repaid our
reorganization claims and professional service fees incurred by our advisors for
this transaction.

      Won 8.0 billion reserved for the Fair Trade Commission's impending fine
shall be held in escrow with a financial institute jointly selected by Thrunet
and the KDB, the representative creditor of Thrunet, and shall be dispensed as
follows:

- In the event the Fair Trade Commission does not impose any fine on Thrunet,
the entire amount shall be used to repay reorganization claims of Thrunet as set
forth in the amended reorganization plan.

- In the event the amount of the fine is not more than Won 4 billion, any amount
remaining in the escrow account after paying the fine shall be used to repay
reorganization claims of Thrunet as set forth in the amended reorganization
plan.

- In the event the amount of the fine is more than Won 4 billion but not more
than Won 10 billion, the fine in the amount of Won 4 billion plus two-thirds of
the amount of fine exceeding Won 4 billion will be paid by using the funds in
the escrow account and any remaining fine will be paid by Thrunet. Any amount
remaining in the escrow account after paying the fine shall be used to repay
reorganization claims of Thrunet as set forth in the amended reorganization
plan.

- In the event the amount of the fine is more than Won 10 billion, the entire
escrow amount shall be used to pay the fine and any remaining fine will be paid
by Thrunet.

      AMENDED AGREEMENT ON PROVISION AND USE OF TELECOMMUNICATION FACILITIES
BETWEEN THRUNET AND SK NETWORKS

      Following our transfer of the assets related to our enterprise network
services business to SK Global (which subsequently changed its name to SK
Networks Co., Ltd.), we entered into various agreements with SK Networks
pursuant to which SK Networks agreed to lease back to us certain
telecommunication facilities we sold to SK Networks under the Asset Sale
Agreement (described above), including fiber optic cable, dark fiber, bandwidth
and other related telecommunication equipment and facilities, for our use in the
operation of our broadband Internet business. On April 1, 2005, we entered into
an agreement to amend the earlier agreements with SK Networks. Pursuant to the
amended agreement on provision and use of telecommunication facilities dated
April 1, 2005, we lease from SK Networks fiber optic cables, dark fiber and
bandwidth capacity for Won 784 million per month. The minimum mandatory lease
period is until October 27, 2005.

                                       54

<PAGE>

D.    EXCHANGE CONTROLS

GENERAL

      The Foreign Exchange Transaction Law of Korea and the Presidential Decree
and regulations established thereunder (collectively the "Foreign Exchange
Transaction Laws") regulate investment in Korean securities by non-residents and
issuance of securities outside Korea by Korean companies. Under the Foreign
Exchange Transaction Laws, non-residents may invest in Korean securities only to
the extent specifically allowed by such laws or otherwise permitted by the
Ministry of Finance and Economy. The Financial Supervisory Commission also has
adopted, pursuant to the delegated authority under the Securities and Exchange
Law of Korea, regulations that restrict investment by foreigners in Korean
securities and regulate issuance of securities outside Korea by Korean
companies.

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

GOVERNMENT REPORTING REQUIREMENTS

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

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

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

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

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

DIVIDEND TO BE DECLARED IN WON

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

                                       55

<PAGE>

E.    TAXATION

KOREAN TAXATION

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

Taxation of Dividends

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

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

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

Taxation of Capital Gains

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

      Under the U.S.-Korea tax treaty, capital gains realized by holders that
are residents of the United States eligible for treaty benefits will not be
subject to Korean taxation upon the disposition of our shares, with certain
exceptions.

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

Application of the U.S.-Korea Tax Treaty

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

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

                                       56

<PAGE>

Securities Transaction Tax

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

Inheritance Tax and Gift Tax

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

Withholding of Taxes

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

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

UNITED STATES FEDERAL INCOME TAXATION

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

-     dealers in securities or currencies;

-     financial institutions;

-     tax-exempt entities;

-     banks;

-     life insurance companies;

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

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

-     persons liable for the alternative minimum tax;

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

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

                                       57

<PAGE>

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

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

-     a citizen or resident of the United States;

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

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

-     a trust:

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

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

      This discussion addresses only United States federal income taxation.

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

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

Distributions on Our Shares

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

      -  a foreign corporation that is eligible for the benefits of a
         comprehensive income tax treaty with the United States that includes an
         exchange of information program; and

      -  a foreign corporation if its stock with respect to which a dividend is
         paid is readily tradable on an established securities market within the
         United States,

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

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

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

      Subject to certain limitations, the U.S. dollar value of the Korean tax
withheld from distributions will be deductible or

                                       58

<PAGE>

creditable against your United States federal income tax liability. For foreign
tax credit limitation purposes, the dividend will be foreign source income, but,
for taxable years beginning on or before December 31, 2006, generally will be
treated separately, together with other items of "passive income" or, in the
case of some United States financial service providers, "financial services
income." For taxable years beginning after December 31, 2006, dividends will be
treated as "passive category income" or "general category income". The rules
governing the foreign tax credit are complex. We urge you to consult your tax
advisors regarding the availability of the foreign tax credit under your
particular circumstances.

Sale, Exchange or Other Disposition of Our Shares

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

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

Passive Foreign Investment Company Rules

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

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

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

      We believe that we were not a PFIC in 2004 and will not be a PFIC in
subsequent taxable years. However, there can be no assurance in this regard.

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

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

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

Under these rules:

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

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

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

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

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

                                       59

<PAGE>

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

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

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

Information Reporting and Backup Withholding

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

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

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

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

F.    DIVIDENDS AND PAYING AGENTS

      Not applicable.

G.    STATEMENT BY EXPERTS

      Not applicable.

H.    DOCUMENTS ON DISPLAY

      Thrunet is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we file
reports and other information with the SEC. You may read and copy this
information at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can also request copies of the documents we file
with the SEC, upon payment of a duplicating fee, by writing to the Public
Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. The SEC also
maintains a website at http://www.sec.gov that contains reports and other
information regarding issuers that file electronically with the SEC.

      You may find these filings on our website at http://www.thrunet.com or
request a copy of these filings, at no cost, by writing or telephoning us at
1337-20, Seocho-2dong, Seocho-ku, Seoul, Korea 137-751, Attention: Investor
Relations Team, telephone number: (822) 6266-6959.

I.    SUBSIDIARY INFORMATION

Not applicable.

                                       60

<PAGE>

      ITEM 11 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

      In general, our primary market risk exposures are to fluctuations in
exchange rates, interest rates and equity prices.

      Historically, our exposure to foreign exchange risk has been primarily
related to our foreign currency denominated long-term debt. As of December 31,
2004, we had an aggregate of Won 11,494 million in Dollar-denominated long-term
borrowings, Won 11,507 million in Dollar-denominated non-trade payable and Won
29 million in Dollar-denominated accounts payable. We had no other significant
foreign currency denominated liabilities. As of December 31, 2004, 2.8% of our
long-term borrowings, 9.9% of our long-term non-trade payable and 0.2% of our
accounts payable were denominated in Dollars.

      In June 2005, pursuant to our amended reorganization plan approved by the
court on April 29, 2005, we repaid most of our reorganization claims and had
less than Won 30 million in foreign currency denominated liabilities as of June
30, 2005. Therefore, although substantially all of our revenues are denominated
in Won, due to our limited foreign currency denominated liabilities, changes in
the foreign exchange rate between the Won and the Dollar may not significantly
affect us.

      As of December 31, 2004, we had cash and cash equivalents of Won 61,467
million. A substantial part of this amount consists of highly liquid investments
with a remaining maturity at the date of purchase of less than 90 days. As of
the same date, we had cash on hand and demand deposits of Won 61,467 million and
short-term investments of Won 5,746 million. Short-term investments were
primarily money market deposits and money market funds. All of these amounts
were exposed to interest rate risk and will decrease in value if market interest
rates should increase. A hypothetical increase in market interest rates by 10%
from December 31, 2004 would cause the fair value of these instruments to
decline by an insignificant amount. Due to the short duration of these
investments, a change in interest rates would not have a material effect on our
financial condition results of operations. Declines in interest rates over time
will, however, reduce interest income related to the cash on hand and deposit
accounts.

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

        ITEM 12 -- DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

                                       61

<PAGE>

                                     PART II

           ITEM 13 -- DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

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

      As of April 29, 2005, the date on which our amended reorganization plan
was approved by the court, the aggregate amount of our remaining reorganization
claims, including interests accrued since the commencement of our reorganization
proceedings, was Won 556.6 billion, including Won 277.0 billion in secured
claims and Won 279.7 billion in unsecured claims. Of these claims, we plan to
repay Won 453.2 billion, including Won 255.7 billion in secured claims and Won
197.5 billion in unsecured claims, by using the proceeds from hanarotelecom's
investment in us after reserving Won 16.5 billion for our two contingent
liabilities according to our 2005 reorganization plan. Any remaining claims will
be repaid if there is any remaining balance in the escrow account after the
settlement of a fine, which may be imposed on us by the Fair Trade Commission,
pursuant to the terms of the investment agreement between us and hanarotelecom.
See "Item 4 -- Information on the Company -- History and Development of the
Company -- Public Auction to Find a New Major Shareholder". Any remaining claims
after such settlement will be forgiven. See Note 1 to our consolidated financial
statements for more details on our reorganization plan.

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

      None.

                       ITEM 15 -- CONTROLS AND PROCEDURES

      (a) Disclosure Controls and Procedures. Mr. Soon-Yub Samuel Kwon, our
Chief Executive Officer and Young Whan Cho, our Chief Financial Officer, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in the United States Exchange Act Rule 13a-15(e)) as of the end of the
period covered by this Form 20-F, have concluded that, as of such date, our
disclosure controls and procedures were effective to ensure that material
information required to be included in our periodic SEC reports relating to us,
is made known to them.

      (b) Internal Control over Financial Reporting. There have been no
significant changes in internal control over financial reporting that occurred
during the fiscal year ended December 31, 2004, that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

                              ITEM 16 -- [RESERVED]

                  ITEM 16.A -- AUDIT COMMITTEE FINANCIAL EXPERT

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

                           ITEM 16.B -- CODE OF ETHICS

      In January 2005, we adopted a written code of ethics for our directors,
officers and employees, a copy of an English translation of which is filed
herein as an exhibit. The original Korean version of our code of ethics is
available on our website at www.thrunet.com. There has been no amendment to such
code of ethics since its adoption.

               ITEM 16.C -- PRINCIPAL ACCOUNTANT FEES AND SERVICES

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<PAGE>

      Samil PricewaterhouseCoopers and Deloitte HanaAnjin LLC served as our
independent registered public accounting firm for the fiscal year ended December
31, 2003 and the fiscal year ended December 31, 2004, respectively. The
following table presents the aggregate fees for professional services and other
services rendered to us by Samil PricewaterhouseCoopers in 2003 and by Deloitte
HanaAnjin LLC in 2004:

<TABLE>
<CAPTION>
                                            2003                         2004
                                            ----                         ----
<S>                                  <C>                            <C>
(a) Audit Fees(1)                    Won 290 million(4)             Won 132 million
(b) Audit-Related Fees(2)
(c) Tax Fees(3)                               --                           --
(d) All Other Fees                            --                           --
</TABLE>

(1) Audit Fees consist of fees billed for professional services rendered by our
principal accountant for the audit of our annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings and engagements.

(2) Audit-Related Fees include fees billed for assurance and related services
rendered by our principal accountant that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported under (1) above.

(3) Tax Fees include fees billed for products and services rendered by our
principal accountant for tax compliance, tax advice and tax planning.

(4) In addition to Won 290 million paid to Samil PricewaterhouseCoopers as its
audit fees for the fiscal year ended December 31, 2003, we paid additional Won
30 million to Samil PricewaterhouseCoopers in 2005 in connection with the
preparation of our annual report on Form 20-F for the fiscal year ended December
31, 2004.

      While we were in reorganization proceedings, all audit and allowable
non-audit services, including tax services, had to be pre-approved by the
bankruptcy court. The bankruptcy court approved all of the Audit Fees described
above.

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

Not applicable.

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

      In August 2002, we acquired 1,289,259 shares of common stock for Won
1,126.8 million upon our dissenting shareholders' exercise of the right to sell
their shares to us in connection with the sale of our enterprise networks
service business. After the three-for-one reverse stock split in December 2002,
the number of our treasury stock decreased to 429,753 shares. We also acquired
an additional 6,349 shares of common stock for Won 16.6 million as fractional
shares resulted from the reverse stock split. After the forty-for-one reverse
stock split in January 2004, the number of our treasury stock decreased to
10,902 shares. As of December 31, 2004, we held 10,902 shares of treasury stock.

                                       63

<PAGE>

                                    PART III

                         ITEM 17 -- FINANCIAL STATEMENTS

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

                         ITEM 18 -- FINANCIAL STATEMENTS

See page F-1 to F-34 following Glossary.

                               ITEM 19 -- EXHIBITS

Documents filed as exhibits to this annual report:

<TABLE>
<CAPTION>
Exhibit
Number                             Description
------                             -----------
<S>      <C>
1.1      X  Articles of Incorporation of Thrunet as amended on April 29, 2005
            (English translation).

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

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

4.3      X  Agreement on the Establishment of, Contribution to and General
            Matters relating to Korea.com dated June 12, 2001, between Thrunet
            and Korea.com Communications (including English translation).(3)

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

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

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

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

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

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

4.10     X  Agreement on Provision of Transferred Facilities following Asset
            Transfer Agreement dated July 31, 2002, between Thrunet and
            Powercomm (English translation).(4)

4.11     X  Agreement Supplemental to the Agreement on Provision and Use of
            Fiber Optic Communication Cable Facilities dated January 1, 2004,
            between Thrunet and SK Telecom (English translation).(5)

4.12     X  Agreement for Acquisition of Korea Thrunet Co., Ltd. dated February
            4, 2005, between Thrunet and hanarotelecom incorporated (English
            translation).

8.1      X  A list of Thrunet's significant subsidiaries.

11.1     X  Code of Ethics (English translation).

12.1     X  Section 302 Certification of Chief Executive Officer or Equivalent
            pursuant to Rule 13a-14(a).

12.2     X  Section 302 Certification of Chief Financial Officer or Equivalent
            pursuant to Rule 13a-14(a).

13.1     X  Section 906 Certification required by Rule 13a-14(b) and 18 U.S.C.
            Section 1350.

14.1     X  Network Operator Designation (including English translation).(1)

14.2     X  Network Service Provider License for Internet Access Services
            (including English translation).

14.3     X  Special Service Provider (Type 2 Reseller) License as amended on
            April 21, 2005 (including English translation).
</TABLE>

-----------------------
*     Confidential treatment has been requested. Confidential materials have
      been redacted and have been separately filed with the Securities and
      Exchange Commission.

                                       64

<PAGE>

(1)   Previously filed with the annual report on Form 20-F for the fiscal year
      ended December 31, 1999.

(2)   Previously filed with the annual report on Form 20-F for the fiscal year
      ended December 31, 2000.

(3)   Previously filed with the annual report on Form 20-F for the fiscal year
      ended December 31, 2001.

(4)   Previously filed with the annual report on Form 20-F for the fiscal year
      ended December 31, 2002.

(5)   Previously filed with the annual report on Form 20-F for the fiscal year
      ended December 31, 2003.

                                       65

<PAGE>

                                   SIGNATURES

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

Date: July 15, 2005

                                              KOREA THRUNET CO., LTD.

                                              By: /s/ Soon-Yub Samuel Kwon
                                                  ------------------------------
                                                  Name:  Soon-Yub Samuel Kwon
                                                  Title: Chief Executive Officer

                                       66

<PAGE>

                                    GLOSSARY

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

asymmetric digital
subscriber line (ADSL)...........  A technology that allows more data to be sent
                                   over existing copper telephone lines.

asynchronous transfer mode
   (ATM).........................  A high bandwidth, low-delay, high speed
                                   transmission technology. ATM is a
                                   communications standard that provides for
                                   information transfer in the form of
                                   fixed-length cells of 53 bytes each. The ATM
                                   format can be used to deliver voice, video
                                   and data traffic at varying rates.

backbone.........................  A centralized high speed network that
                                   interconnects smaller, independent networks.

bandwidth........................  The number of bits of information which can
                                   move over a communications medium in a given
                                   amount of time. Typically measured in Kbps
                                   and Mbps.

bps..............................  Bits per second. A measure of digital
                                   information transmission rates. A rate of one
                                   bps can transmit one bit in a second.

cable modem......................  A modem designed to operate over cable
                                   television lines. Because cable lines used by
                                   cable television generally provide much
                                   greater bandwidth than telephone lines, a
                                   cable modem can be used to achieve faster
                                   access to the world wide web.

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

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

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

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

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

                                       67

<PAGE>

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

fiber optics.....................  A technology that uses glass (or plastic)
                                   threads (fibers) to transmit data. A fiber
                                   optic line consists of a bundle of glass
                                   threads, each of which is capable of
                                   transmitting messages modulated onto light
                                   waves.

Gbps.............................  Gigabits per second. A measure of digital
                                   information transmission rates. One Gbps
                                   equals 1,000 Mbps, one million kpbs, or one
                                   billion bps.

HFC..............................  Hybrid Fiber Coaxial. HFC cable is used in
                                   broadband telecommunication systems. HFC can
                                   transmit between 500 MHz to 1,000 MHz of
                                   bandwidth in both directions.

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

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

leased line......................  A permanent telephone connection between two
                                   points set up by a network service provider.
                                   Typically, leased lines are used by
                                   businesses to connect geographically distant
                                   offices. The fee for the connection is
                                   usually a fixed monthly rate.

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

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

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

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

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

                                       68

<PAGE>

router...........................  A device that receives and transmits data
                                   packets between segments in a network or
                                   different networks.

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

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

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

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

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

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

                                       69

<PAGE>

KOREA THRUNET CO., LTD.
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2004
AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

                                       F-1

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Korea Thrunet
Co., Ltd and its subsidiaries (collectively referred to as the "Company") as of
December 31, 2004, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended, all expressed in
Korean won. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The consolidated financial statements of the
Company as of December 31, 2002 and 2003 were audited by other auditor, whose
report dated March 19, 2004 expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance on whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such 2004 financial statements referred to above present fairly,
in all material respects, the financial position of Korea Thrunet Co., Ltd. as
of December 31, 2004, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 1, on March 3, 2003, Korea Thrunet Co., Ltd. filed a
voluntary petition for corporate reorganization under the Korean Corporate
Reorganization Act. On January 9, 2004, Korea Thrunet Co., Ltd's reorganization
plan was accepted by its creditors and equity committee, and confirmed by the
Court. As a result, the receiver is now responsible for the implementation of
the reorganization plan. On December 15, 2004, hanarotelecom incorporated won
the bidding for the sale of the shares of the Korea Thrunet Co., Ltd. and the
reorganization plan was modified as hanarotelecom incorporated proposed a new
reorganization plan, which was approved by the Court on April 29, 2005. Based on
the modified reorganization plan, Korea Thrunet Co., Ltd.'s reorganization plan
will be terminated after the stock retirement, capital increase, issuance of
debentures and settlement of its debts. In addition, hanarotelecom incorporated
will be the largest stockholder of Korea Thrunet Co., Ltd.

Deloitte HanaAnjin LLC

Seoul, Korea
June 2, 2005

                                       F-2

<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                                                           Translation into
                                                                                   Korean Won            U.S. Dollars (Note 2)
                                                                         -----------------------------   ---------------------
                                                                             2003            2004                2004
                                                                         -------------   -------------   ---------------------
                                                                                 (In millions)              (In thousands)
<S>                                                                      <C>             <C>             <C>
                                ASSETS

Current assets:
   Cash and cash equivalents                                             (Won)  53,946   (Won)  61,467        $    59,382
   Restricted cash                                                               4,674          25,249             24,393
   Accounts receivable, net of allowance for doubtful accounts
     (Notes 3 and 15)                                                           63,808          49,344             47,671
   Other receivables, net of allowance for doubtful accounts  (Note 4)           4,570           7,475              7,222
   Other current assets                                                          1,052           7,261              7,014
                                                                         -------------   -------------        -----------
                                                                               128,050         150,796            145,682
                                                                         -------------   -------------        -----------

Non-current assets:
   Property and equipment, net (Note 5)                                        346,260         235,558            227,570
   Investment assets                                                            39,336          22,677             21,908
   Other non current assets                                                     17,058          18,155             17,540
                                                                         -------------   -------------        -----------
                                                                               402,654         276,390            267,018
                                                                         -------------   -------------        -----------
       Total Assets                                                            530,704         427,186            412,700
                                                                         =============   =============        ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Short-term borrowings (Note 7)                                                1,000               -                  -
   Current portion of long-term accounts payable                                   266             266                256
   Current portion of long-term debts (Note 7)                                 429,590         389,454            376,248
   Current portion of capital lease obligations  (Note 6)                       17,270          20,524             19,828
   Accounts payable (Note 15)                                                  179,841         133,277            128,758
   Accrued expenses (Note 15)                                                   57,206          35,172             33,979
   Other current liabilities                                                     5,455          28,886             27,906
                                                                         -------------   -------------        -----------
                                                                               690,628         607,579            586,975
                                                                         -------------   -------------        -----------
Long-term liabilities:
  Long-term accounts payable                                                     7,445           1,306              1,262
  Long-term debts, net of current portion (Note 7)                              17,665          11,127             10,750
  Deferred installation fee                                                     11,225           7,072              6,832
  Other non-current  liabilities (Note 8)                                        8,136           8,136              7,860
                                                                         -------------   -------------        -----------
                                                                                44,471          27,641             26,704
                                                                         -------------   -------------        -----------
       Total Liabilities                                                       735,099         635,220            613,679
                                                                         -------------   -------------        -----------

Stockholders' equity (Note 11):
  Common stock of (Won) 2,500 par value, authorized 400,000,000
     shares; issued and outstanding 970,440 shares in 2003 and
     3,894,426 shares in 2004                                                    4,852           9,756              9,425
  Additional paid-in capital                                                   907,531         936,134            904,390
  Loans to employees to acquire common stock                                       (66)            (31)               (30)
  Accumulated deficit                                                       (1,115,569)     (1,153,979)        (1,114,848)
  Accumulated other comprehensive income                                             -              96                 93
  Less: Treasury stock                                                          (1,143)            (10)                (9)
                                                                         -------------   -------------        -----------
       Total Stockholders' Equity                                             (204,395)       (208,034)          (200,979)
                                                                         -------------   -------------        -----------
       Total Liabilities and Stockholders' Equity                        (Won) 530,704   (Won) 427,186        $   412,700
                                                                         =============   =============        ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                                                         Translation into
                                                                        Korean Won                     U.S. Dollars (Note 2)
                                                        -------------------------------------------    ---------------------
                                                             2002          2003            2004                2004
                                                        -------------  -------------    -----------    ---------------------
                                                          (In millions, except  per share amounts)     (In thousands, except
                                                                                                         per share amounts)
<S>                                                     <C>            <C>              <C>            <C>
Revenues: (Note 15)
   Broadband Internet Access services                   (Won) 421,062  (Won) 393,600    (Won) 356,252        $   344,171
   Portal services                                              6,079          5,182            3,545              3,425
                                                        -------------  -------------    -------------        -----------
                                                              427,141        398,782          359,797            347,596
                                                        -------------  -------------    -------------        -----------
Costs of revenues, excluding depreciation
   and amortization: (Note 15)
   Broadband Internet Access services                         262,209        240,075          230,838            223,011
   Portal services                                             24,515         16,800            2,622              2,533
                                                        -------------  -------------    -------------        -----------
                                                              286,724        256,875          233,460            225,544

Selling, general and administrative expenses
  (Note 14)                                                    65,004         48,150           39,408             38,071
Depreciation and amortization                                 104,646        107,565           79,900             77,191
Impairment loss on intangible assets, and property
and equipment                                                  27,261         56,324           44,006             42,514
Gain (loss) on disposal of property and
  equipment, net                                               35,660          3,005           (1,613)            (1,558)
                                                        -------------  -------------    -------------        -----------
Operating loss                                                (92,154)       (73,137)         (35,364)           (34,166)
                                                        -------------  -------------    -------------        -----------

Other income (expenses):
   Interest income                                              6,847          7,264            4,357              4,209
   Interest expense (Note 15)                                 (81,259)       (56,230)         (51,389)           (49,647)
   Gain on foreign exchange transactions                        6,317          1,500            3,575              3,454
   Loss on foreign exchange transactions                         (562)          (215)              (6)                (6)
   Gain (loss) on disposal of investments, net                   (965)         1,089            3,518              3,399
   Impairment loss on investments                             (28,930)        (1,165)               -                  -
   Loss on retirement of bonds                               (129,681)             -                -                  -
   Gain on extinguishment of debt                                 870          5,738           21,923             21,180
   Others, net                                                  2,654           (112)          10,639             10,278
                                                        -------------  -------------    -------------        -----------
                                                             (224,709)       (42,131)          (7,383)            (7,133)
                                                        -------------  -------------    -------------        -----------
Loss  from continuing operations before taxes,
   equity in loss of affiliates and minority interests       (316,863)      (115,268)         (42,747)           (41,299)
   Income tax expense                                             131              -                -                  -
   Minority interests                                           2,842           (230)           1,264              1,221
   Equity in loss of affiliates, net                           (6,215)        (5,501)          (1,588)            (1,534)
                                                        -------------  -------------    -------------        -----------
Loss from continuing operations                         (Won)(320,367) (Won)(120,999)   (Won) (43,071)       $   (41,612)
                                                        -------------  -------------    -------------        -----------
</TABLE>

(Continued)

                                      F-5
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                                                         Translation into
                                                                          Korean Won                   U.S. Dollars (Note 2)
                                                        ---------------------------------------------- ---------------------
                                                             2002             2003          2004               2004
                                                        --------------   --------------  ------------- ---------------------
                                                            (In millions, except  per share amounts)   (In thousands, except
                                                                                                        per share amounts)
<S>                                                     <C>              <C>             <C>            <C>
Discontinued operations:
     Loss from discontinued operations                  (Won)  (51,960)  (Won)        -  (Won)       -      $          -
     Loss from disposals                                       (63,775)               -              -                 -
                                                        --------------   --------------  -------------      ------------
Loss from discontinued operations                             (115,735)               -              -                 -
                                                        --------------   --------------  -------------      ------------

Net loss                                                      (436,102)        (120,999)       (43,071)          (41,612)
                                                        --------------   --------------  -------------      ------------
Other comprehensive income (loss), net of tax
  Valuation gain on available-for-sale securities
   arising during the year                                           -                -             96                93
  Reclassification adjustment for loss on
   investment securities included in net loss, net
   of tax                                                       (3,269)               -              -                 -
  Effect of change in consolidated subsidiaries                      -           (2,498)             -                 -
                                                        --------------   --------------  -------------      ------------
Comprehensive loss                                      (Won) (439,371)  (Won) (123,497) (Won) (42,975)     $    (41,519)
                                                        ==============   ==============  =============      ============

Per Share Data: (Note 13)
  Basic and diluted net loss from continuing
  operations per common share                           (Won)  445,238   (Won)  125,388        (11,060)     $     (10.68)
  Basic and diluted loss from
  discontinued operations per common share                     160,846                -              -                 -
                                                        --------------   --------------  -------------      ------------
  Basic and diluted net loss per common share           (Won)  606,084   (Won)  125,388  (Won) (11,060)     $     (10.68)
                                                        ==============   ==============  =============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                    Korean Won (In millions)
                                 ---------------------------------------------------------------------------------------------
                                                              Loans to
                                                             employees                   Accumulated
                                                Additional   to acquire                     other
                                    Common       paid-in       common     Accumulated   comprehensive    Treasury
                                     stock       capital       stock        deficit        income          stock         Total
                                 ------------- ------------- ----------  -------------  -------------  ------------  -------------
<S>                              <C>           <C>           <C>         <C>            <C>            <C>           <C>
Balances at January 1, 2002      (Won) 256,601 (Won) 436,491 (Won) (561) (Won)(552,831) (Won)   3,269  (Won)      -  (Won) 142,969
Comprehensive loss:
Net loss for 2002                            -             -          -       (436,102)             -             -       (436,102)
Unrealized gains on investment
  securities, net of tax                     -             -          -              -              -             -              -
Less: reclassification
  adjustment for losses on
  investment securities
  included in net loss,
  net of tax                                 -             -          -              -         (3,269)            -         (3,269)
                                                                                                                     -------------

Total comprehensive loss                                                                                                  (439,371)
                                                                                                                     -------------
Issuance of 651,200 shares of
  common stock by exercise of
  warrants, net of issuance costs      130,240          (653)         -              -              -             -        129,587
Issuance of 977,127 shares of
  common stock by debt to equity
  conversion, net of issuance
  costs                                195,423      (107,562)         -              -              -             -         87,861
Decrease in equity due to
  disposal of subsidiaries' stock            -           (42)         -              -              -             -            (42)
Acquisition of treasury stock                -             -          -              -              -        (1,143)        (1,143)
Excess loss on minority interests            -             -          -         (1,048)             -             -         (1,048)
Decrease due to reverse stock
  split                               (388,176)      388,176          -              -              -             -              -
Stock compensation expense                   -           125          -              -              -             -            125
Collection of loans to employees
  to acquire common stock                    -             -        454              -              -             -            454
                                 ------------- ------------- ----------  -------------  -------------  ------------  -------------

Balances at December 31, 2002    (Won) 194,088 (Won) 716,535 (Won) (107) (Won)(989,981) (Won)       -  (Won) (1,143) (Won) (80,608)
                                 ------------- ------------- ----------  -------------  -------------  ------------  -------------
</TABLE>

(Continued)

                                      F-7
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                    Korean Won (In millions)
                                ---------------------------------------------------------------------------------------------------
                                                             Loans to
                                                            employees                     Accumulated
                                               Additional   to acquire                       other
                                   Common       paid-in       common       Accumulated    comprehensive   Treasury
                                   stock        capital       stock          deficit         income         stock         Total
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------
<S>                             <C>           <C>          <C>           <C>              <C>            <C>          <C>
Balances at December 31, 2002   (Won)194,088  (Won)716,535 (Won)   (107) (Won)  (989,981) (Won)       -  (Won)(1,143) (Won) (80,608)
Comprehensive loss:
 Net loss for 2003                         -             -            -         (120,999)             -            -       (120,999)
 Effect of change in
   consolidated subsidiaries               -             -            -           (2,498)             -            -         (2,498)
                                                                                                                      -------------

Total comprehensive loss                                                                                                   (123,497)
                                                                                                                      -------------

Capital surplus (differences
   due to changes in interests)            -         1,729            -                -              -            -          1,729
Excess loss on minority
   interests                               -             -            -           (2,091)             -            -         (2,091)
Decrease due to reverse stock
   split                            (189,236)      189,236            -                -              -            -              -
Stock compensation expense                 -            31            -                -              -            -             31
Collection of loans to
   employees to acquire
   common stock                            -             -           41                -              -            -             41
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------

Balances at December 31, 2003   (Won)  4,852       907,531 (Won)    (66) (Won)(1,115,569) (Won)       -  (Won)(1,143) (Won)(204,395)
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------
</TABLE>

(Continued)

                                      F-8
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                    Korean Won (In millions)
                                ---------------------------------------------------------------------------------------------------
                                                             Loans to
                                                            employees                     Accumulated
                                               Additional   to acquire                       other
                                   Common       paid-in      common        Accumulated    comprehensive   Treasury
                                   stock        capital      stock           deficit         income         stock        Total
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------
<S>                             <C>           <C>          <C>           <C>              <C>            <C>          <C>
Balances at December 31, 2003   (Won)  4,852  (Won)907,531 (Won)    (66) (Won)(1,115,569) (Won)       -  (Won)(1,143)(Won) (204,395)
Comprehensive income:
Net loss for 2004                          -             -            -          (43,071)             -            -        (43,071)
Valuation gain on available-
  for- sale securities                     -             -            -                -             96            -             96
                                                                                                                      -------------

Total comprehensive loss                                                                                                    (42,975)
                                                                                                                      -------------

Reverse stock splits                 (12,495)       11,362            -                -              -        1,133              -
Debt-to-equity swap                   17,399        17,241            -                -              -            -         34,640
Reversal of excess loss on
  minority interests                       -             -            -            4,661              -            -          4,661
Collection of loans to
  employees to acquire
  common stock                             -             -           35                -              -            -             35
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------

Balances at December 31, 2004   (Won)  9,756  (Won)936,134 (Won)    (31) (Won)(1,153,979) (Won)      96  (Won)   (10) (Won)(208,034)
                                ============  ============ ============  ===============  =============  ===========  =============
</TABLE>

(Continued)

                                      F-9
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                       Translation in to U.S. Dollars (In thousands) (Note 2)
                                ---------------------------------------------------------------------------------------------------
                                                             Loans to
                                                            employees                     Accumulated
                                               Additional   to acquire                       other
                                   Common       paid-in      common        Accumulated    comprehensive   Treasury
                                   stock        capital      stock           deficit         income         stock         Total
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------
<S>                             <C>           <C>          <C>           <C>              <C>            <C>          <C>
Balances at December 31, 2003   $      4,688  $    876,758 $        (64) $    (1,077,740) $           -  $    (1,105) $    (197,463)
Comprehensive income:                      -             -            -                -              -            -              -
Net loss for 2004                          -             -            -          (41,612)             -            -        (41,612)
Valuation gain on available
   -for-sale securities                    -             -            -                -             93            -             93
                                                                                                                      -------------

Total comprehensive loss                                                                                                    (41,519)
                                                                                                                      -------------

Reverse stock splits                 (12,072)       10,976            -                -              -        1,096              -
Debt-to-equity swap                   16,809        16,656            -                -              -            -         33,465
Reversal of excess loss on
   minority interests                      -             -            -            4,504              -            -          4,504
Collection of loans to
   employees to acquire
    common stock                           -             -           34                -              -            -             34
                                ------------  ------------ ------------  ---------------  -------------  -----------  -------------

Balances at December 31, 2004   $      9,425  $    904,390 $        (30) $    (1,114,848) $          93  $        (9) $    (200,979)
                                ============  ============ ============  ===============  =============  ===========  =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-10
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                                                               Translation into
                                                                                 Korean Won                  U.S. Dollars (Note 2)
                                                                 ------------------------------------------  ---------------------
                                                                     2002           2003           2004              2004
                                                                 -------------  -------------  ------------  ---------------------
                                                                                    (In millions)                (In thousands)
<S>                                                              <C>            <C>            <C>           <C>
Cash flows from operating activities:
Net loss
  Adjustments to reconcile net income (loss) to net
     cash provided by operating activities                       (Won)(436,102) (Won)(120,999) (Won)(43,071)      $ (41,612)

   Depreciation and amortization                                       164,165        107,565        79,900          77,191
   Accretion of discounts on bonds issued                               40,154         18,352             -               -
   Amortization of discounts                                            13,269          1,231        31,040          29,987
   Bad debt provision                                                   40,904         17,725        21,836          21,096
   Provision for retirement and severance benefits                       2,724          1,176         1,101           1,064
   Stock compensation expense                                              125             31             -               -
   Loss (gain) on disposal of property and equipment, net               35,660          3,005        (1,613)         (1,558)
   Loss on disposal of ENS Securitization Limited, net                  63,775              -             -               -
   Loss (gain) on disposal of investments, net                             965         (1,089)       (3,518)         (3,399)
   Gain on disposal of available-for-sale securities, net                   (3)             -             -               -
   Gain on foreign exchange transactions, net                           (3,343)        (1,461)       (3,569)         (3,448)
   Loss on valuation of forward contract                                    35              -             -               -
   Equity in loss of affiliates, net                                     6,215          5,501         1,588           1,534
   Loss (gain) on redemption of bonds                                  130,049              -        (7,302)         (7,055)
   Gain on extinguishment of debt                                       (1,238)        (5,738)      (21,923)        (21,180)
   Impairment loss on investments                                       28,930          1,165             -               -
   Impairment loss on intangible assets, property and equipment         42,329         56,324        44,006          42,514
   Minority interests                                                   (2,842)           230        (1,264)         (1,221)
   Reversal of allowance for doubtful accounts                               -              -          (421)           (406)
   Miscellaneous gain, net                                              (3,863)        (1,482)         (528)           (512)

Changes in operating assets and liabilities

   Decrease (increase) in accounts receivable                            4,277        (12,021)       (5,928)         (5,727)
   Decrease (increase) in other receivables                            (75,828)        46,549           734             711
   Decrease (increase) in other current assets                           2,748          8,357          (577)           (558)
   Decrease in accounts payable                                        (60,477)       (22,998)       (3,752)         (3,625)
   Increase (decrease) in accrued expenses                             (16,885)        33,796        (5,349)         (5,167)
   Increase (decrease) in other current liabilities                     52,774        (31,928)       (1,339)         (1,293)
                                                                 -------------  -------------  ------------       ---------
Net cash provided by operating activities                               28,517        103,291        80,051          77,336
                                                                 -------------  -------------  ------------       ---------
</TABLE>

(Continued)

                                      F-11
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004

<TABLE>
<CAPTION>
                                                                                                               Translation into
                                                                                 Korean Won                  U.S. Dollars (Note 2)
                                                                 ------------------------------------------  ---------------------
                                                                     2002           2003           2004              2004
                                                                 -------------  -------------  ------------  ---------------------
                                                                                    (In millions)                (In thousands)
<S>                                                              <C>            <C>            <C>           <C>
 Cash flows from investing activities:
   Disposition of property and equipment                         (Won)  83,902  (Won)  10,101  (Won)  6,733       $   6,505
   Proceeds from sale of discontinued operation                        346,860              -             -               -
   Acquisition of property and equipment                               (48,456)       (15,835)       (9,926)         (9,588)
   Disposition of investments                                            5,978          3,023        91,226          88,132
   Acquisition of investments                                           (4,298)          (441)     (110,186)       (106,450)
   Decrease in intangible assets and other assets, net                  12,290         16,468         8,465           8,178
                                                                 -------------  -------------  ------------       ---------
 Net cash provided by (used in) investing activities                   396,276         13,316       (13,688)        (13,223)
                                                                 -------------  -------------  ------------       ---------

 Cash flows from financing activities:
   Proceeds from short-term borrowings and long-term debts             104,387          9,081        25,198          24,344
   Repayment of short-term borrowings and long-term debts             (620,168)      (126,874)      (83,811)        (80,968)
   Decrease in other long-term liabilities                              (7,483)           (94)          (72)            (70)
   Issuance cost on common stock                                        (1,595)             -          (157)           (152)
   Acquisition of treasury stock                                        (1,127)             -             -               -
   Collection of loans to employees to acquire common stock               (107)             -             -               -
                                                                 -------------  -------------  ------------       ---------
 Net cash used in financing activities                                (526,093)      (117,887)      (58,842)        (56,846)
                                                                 -------------  -------------  ------------       ---------

 Net increase (decrease) in cash and cash equivalents                 (101,300)        (1,280)        7,521           7,267
 Cash and cash equivalents at beginning of the year                    156,526         55,226        53,946          52,115
                                                                 -------------  -------------  ------------       ---------
 Cash and cash equivalents at end of the year                    (Won)  55,226  (Won)  53,946  (Won) 61,467       $  59,382
                                                                 =============  =============  ============       =========
Supplemental disclosure of cash flow information

 Cash paid during the year for
 Interest                                                        (Won)  49,367  (Won)   4,755  (Won) 20,453       $  19,759
                                                                 =============  =============  ============       =========
 Income tax                                                      (Won)     952  (Won)       -  (Won)      -       $       -
                                                                 =============  =============  ============       =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-12
<PAGE>

                    KOREA THRUNET CO., LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

1. GENERAL:

(1) Korea Thrunet Co., Ltd.

Korea Thrunet Co., Ltd. ("Thrunet") was incorporated in July 1996 to provide
broadband internet and portal services in Korea. Starting in July 1998, Thrunet
was the first to offer broadband internet access services in Korea. The number
of broadband internet subscribers was 1,301,620, 1,293,364 and 1,287,916 as of
December 31, 2002, 2003 and 2004, respectively. Thrunet provides broadband
internet services via cable modem to residential area customers and small
offices throughout Korea. Thrunet acquired the domain name "Korea.com" in March
2000 and launched its Korea.com portal services in September 2000. Korea.com is
a broadband oriented mega-portal featuring multi-access capability providing a
variety of services such as interactive multimedia-concentrated content
services, free e-mail and other multimedia communications services and
e-commerce hosting. On June 12, 2001, Thrunet established Korea.com
Communications, its subsidiary, to which Thrunet transferred all of its
Korea.com portal business-related assets and approximately 100 employees.
Thrunet also invested approximately (Won) 12,000 million in cash. In January
2000, Thrunet began to provide cable television services through its cable
system operator subsidiaries. However, in September 2001, Thrunet discontinued
its cable television business by selling its six subsidiaries. Enterprise
network services, which began in July 1997, consists primarily of leasing
dedicated fiber lines to corporate customers for transmitting voice and data.
Thrunet provides enterprise network services to corporate customers including
certain major Korean telecommunications companies and offered internet
protocol-based leased line services, via dedicated fiber optic lines, to small
and medium-sized enterprises and other corporate customers. As part of its
enterprise network business, Thrunet provides co-location services by offering a
secured location for servers, a controlled environment, monitoring and
high-speed connection to the internet via fiber optic network. On October 28,
2002, Thrunet discontinued its enterprise network service business, except the
co-location service, by selling its related assets, including the local fiber
optic network and related equipment.

Thrunet was listed on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") in the United States of America on November 18,
1999. However, on April 7, 2003, its shares were delisted due to the
reorganization proceedings discussed below and began trading on the
over-the-counter market, or otherwise known as the "Grey Market" in the United
States of America.

Since its inception, Thrunet has experienced recurring losses and negative cash
flows from operations. Thrunet has recorded net losses from continuing
operations of (Won) 320,367 million, (Won) 120,999 million and
(Won) 43,071 million for the years ended December 31, 2002, 2003 and 2004,
respectively. Thrunet's liabilities exceeded its assets by (Won) 208,034
million as of December 31, 2004.

(2) Reorganization Proceedings

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

                                      F-13
<PAGE>

In 2003, the Court appointed a professional firm to perform an independent
assessment of Thrunet's going concern value and liquidation value. Based on the
report submitted by the professional firm to the Court on June 21, 2003,
Thrunet's going concern value was higher than its liquidation value. On June 25,
2003, the Court approved Thrunet's corporate reorganization proceedings and
ordered Thrunet to submit a reorganization plan. The first and second assembly
for creditors and equity committee were held on June 25, 2003 and November 28,
2003, respectively. On January 9, 2004, Thrunet's reorganization plan was
accepted by its creditors and equity committee and confirmed by the Court.
Thrunet is currently operating its business under the jurisdiction of the
Bankruptcy Court. During the restructuring proceedings, Thrunet continues to
restructure its operations to improve its ability to operate as a going concern.
Furthermore, after the disposal of the enterprise network services business in
2002, Thrunet focused on the broadband internet access business. Thrunet
improved its results of operations and minimized cash outflows by reducing
discretionary expenses, such as promotion and advertising expenses, labor costs
and rental costs.

On March 6, 2003, Korea.com Communications (the "Korea.com"), Thrunet's
subsidiary, also filed a voluntary petition for a stay order and for corporate
reorganization proceedings with the Court. On April 1, 2003, the Court ordered
the commencement of the corporate reorganization proceedings and appointed the
receiver to evaluate Korea.com's corporate reorganization plan. On October 15,
2003, the Court approved Korea.com's corporate reorganization plan.

(3) Details of the Reorganization Plan of Thrunet Approved by the Court on
January 9, 2004

A. Terms of Reorganization Plan:

1) Secured borrowings from financial institutions and others

The principal of secured borrowings is to be repaid in equal installments for
six years after a three year grace period. Interest incurred prior to the
Commencement amounting to (Won) 52 million is fully exempted, whereas an
interest rate of 7 % is applied to the secured borrowings after the
Commencement. Interest incurred during the preparative period, which is from
March 27, 2003 to January 9, 2004, is to be repaid in accordance with the
approved schedule of principal redemption (the "Schedule") by the Court and
interest incurred after the preparative period is to be repaid as incurred.

2) Unsecured borrowings from financial institutions and others

15% of the total principal amount of unsecured borrowings will be redeemed
through a debt to equity conversion, with the remaining principal payable to be
repaid in equal installments over five years after a five year grace period.
Interest incurred prior to the Commencement amounting to (Won) 5,169 million
is forgiven, whereas an interest rate of 2 % is applied to the unsecured
borrowings after the Commencement. Interest incurred during the preparative
period is to be repaid in accordance with the schedule of principal redemption
and interest incurred after the preparative period is to be repaid as incurred.

3) Secured accounts payable

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

4) Unsecured accounts payable

Unsecured accounts payable with a principal amount of less than (Won) 20,000
million are to be repaid up to (Won) 200 million, (Won) 300 million,
(Won) 1,000 million and (Won) 2,000 million during the first, second, third
and fourth year, respectively, under the reorganization plan. For the period
from the fifth through the eighth year under the reorganization plan, the
principal amount up to (Won) 3,000 million is to be repaid annually and the
remaining principal amount is to be fully repaid in the ninth year.

                                      F-14
<PAGE>

For unsecured accounts payable over (Won) 20,000 million, 15 % of the total
principal amount of unsecured accounts payable will be redeemed through a debt
to equity conversion. The remaining principal amount is repaid up to
(Won) 1,500 million and (Won) 2,000 million for the third and fourth year
under the reorganization plan after a two year of grace period. The principal
amount up to (Won) 3,000 million is annually repaid from the fifth to the
eighth year under the reorganization plan. The remaining principal amount is
fully redeemed in the ninth year of the reorganization plan. Interest incurred
before and after the Commencement is forgiven.

5) Unsecured debts payable to related parties

The principal amount of unsecured debts with affiliated companies are payable up
to (Won) 200 million and (Won) 300 million during the first and second year,
respectively, under the reorganization plan. From the third through the sixth
year, the principal amount up to (Won) 500 million will be redeemed annually
and the remaining principal amount is fully payable in the seventh year.
Interest incurred before and after the commencement of the reorganization plan
is forgiven.

6) Other

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

7) Changes in stockholders' rights:

a) Retirement of shares owned by the largest stockholder, its affiliates and
related parties

An aggregate number of 42,633,447 shares (changed to 43,915,498 shares later
with the approval of the Court) of total 77,635,260 common shares that are owned
by the largest shareholder, its affiliates and related parties are retired
without any consideration.

b) Reduction of capital by reverse stock split

Thrunet authorized a forty-for-one reverse stock split for the remaining shares
after the aforementioned retirement. As a result, Thrunet decreased its common
stock issued and outstanding by 32,876,768 shares.

c) Cancellation of stock options and warrants

Warrants attached with the bonds before the Commencement amounting to
(Won) 58,537 million, and stock options granted to directors and employees
before the Commencement amounting to (Won) 5,582 million, are effectively
cancelled on January 9, 2004.

B. Event subsequent to the balance sheet date - sale of Thrunet's shares to
hanarotelelcom incorporated

Thrunet has sought external investors to repay its secured and unsecured debts
to complete the reorganization proceedings. As a result of these efforts, on
December 15, 2004, hanarotelecom incorporated was chosen as the winning bidder
for the sale of Thrunet's shares and an investment contract between Thrunet and
hanarotelecom incorporated was entered into on February 14, 2005. hanarotelecom
incorporated will pay (Won) 471,390 million, among of which (Won) 248,100
million is for the new shares that will be held by hanarotelecom incorporated
and the remaining amount of (Won) 223,290 million is for the debentures to be
acquired by hanarotelecom incorporated.

The reorganization plan was modified on April 29, 2005, since hanarotelecom
incorporated was chosen as a new investor in Thrunet.

Details of the revised reorganization plan are as follows:

1)    (Won) 16,500 million will be reserved for the two contingent liabilities
      ((Won) 8,000 million for the Fair Trade Commission's fine and (Won) 8,500
      million for contingent liability from disputes with Powercomm Inc. over
      minimum usage fee of the line facilities and dark fiber).

                                      F-15
<PAGE>

2)    Remaining cash other than the reserved portion will be used to settle
      secured and unsecured debts.

3)    Remaining reserved amounts, if any, after the settlement of the contingent
      liability from the Fair Trade Commission will be used to repay the secured
      and unsecured debts, after that, all outstanding secured and unsecured
      debts will be forgiven.

4)    Reverse stock split of 2 to 1

The retirement of the largest shareholder's shares, a forty-for-one reverse
stock split, a two-for-one reverse stock split and debt-to-equity conversions,
which are mentioned above, are reflected in the accompanying financial
statements.

The Court approved this modified reorganization plan on April 29, 2005.

Thrunet's reorganization proceedings will be terminated after completing all
procedures mentioned above, with approval of the Court. The Company expects the
settlement of debts and termination of the reorganization proceedings with the
approval of the Court in 2005.

C. Pro forma balance sheets

If the modified restructuring plan had been effective as of December 31, 2004,
the condensed balance sheets would be as follows (won in millions).

<TABLE>
<S>                                               <C>
Current assets                                    (Won) 167,296
Non-current assets                                      276,390
                                                  -------------
   Total assets                                         443,686
                                                  =============

Current liabilities                                      40,074
Non-current liabilities                                 237,738
                                                  -------------
   Total liabilities                                    277,812
                                                  -------------
Stockholders' equity                                    165,874
                                                  -------------
   Total liabilities and stockholders' equity           443,686
                                                  =============
</TABLE>

(4) Reorganization Plan of Korea.com

Details of the Korea.com's reorganization plan, which was approved on October
15, 2003, are summarized as follows:

A. Redemption of Debts

1) Principal amounts

30% of the total principal amount from commercial transactions will be forgiven
and the remaining 70% will be repaid. If the principal amount is less than
(Won) 250 million, the whole amount will be repaid without any debt
forgiveness as follows:

      -   Total amount of (Won) 266 million will be repaid in the first year
          (2004), among which (Won) 1 million will be repaid to each creditor up
          to (Won) 138 million, and the remaining (Won) 128 million will be
          distributed in proportion of outstanding debt amounts.

      -   From 2005 to 2008, remaining debts will be repaid annually by 25%.

Borrowings from related parties, 55% of the total borrowings of (Won) 5,528
million, will be forgiven and the remaining amount will be repaid annually by
20% from the sixth year.

Accounts payable owed to related parties, 45% of the total accounts payable of
(Won) 3,341 million, will be forgiven and the remaining amount will be repaid
annually by 20% from the sixth year.

                                      F-16
<PAGE>

2) Interest

All interest incurred will be forgiven.

                                      F-17
<PAGE>

B. Changes in Stockholder's Right

1) Retirement of shares owned by Thrunet, the largest shareholder

Pursuant to the reorganization plan of Korea.com, 90% of the total Thrunet's
ownership in Korea.com is to be retired without any consideration.

2) Reduction of capital by reverse stock split.

Subsequent to the retirement of shares, Korea.com authorized a ten-for-one
reverse stock split. As a result of the retirement of shares and the reverse
stock split, Thrunet's ownership interest in Korea.com was reduced from 91.95%
to 53.47%.

(5) Consolidated Subsidiaries

The consolidated financial statements include the accounts of Thrunet and its
subsidiaries. The following table reflects Thrunet's ownership percentage and
acquisition dates of its consolidated subsidiaries as of December 31, 2003 and
2004.

<TABLE>
<CAPTION>
                                                  Ownership
                                                percentage (%)
                             Acquisition       ---------------
        Subsidiary              date            2003      2004         Primary business
        ----------           -----------       -----     -----    ------------------------------
<S>                                <C>         <C>       <C>
Korea.com Communications      June 2001        53.47     53.47    Portal service
Multiplus Limited             June 2001         5.00      5.00    Special Purpose Entity ("SPE")
</TABLE>

On June 29, 2001, Thrunet established Multiplus Limited. ("Multiplus"), a
special purpose entity ("SPE"), in order to transfer rights to future
receivables to be held by Thrunet. These receivables reflect four years of
broadband internet access service that will be paid by Thrunet's customers with
credit cards issued by three designated credit card companies. The transaction
was consummated on June 29, 2001. Based on this transaction, Thrunet entered
into an asset backed loan agreement with financial institutions in 2001, and the
borrowings have been fully repaid in 2004 with the gains on debt repayment of
(Won) 7,302 million. Multiplus Limited has outstanding capital stock of
(Won) 10 million as of December 31, 2004.

The operations of Multiplus Limited are included in the consolidation of the
Company in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". As Multiplus Limited did not qualify as a true
sale, the operation of SPE is consolidated based on SFAS No 140. Multiplus
Limited ceased its operations on August 2004 and is in the process of
liquidation as of December 31, 2004 and it is expected to be liquidated in 2005.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(1) Basis of Consolidated Financial Statement Presentation

The Company maintains its accounts in accordance with accounting principles and
practices employed in the Republic of Korea, whereas the accompanying financial
statements reflect certain adjustments not recorded on the Company's book, to
present these statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP").

(2) Basis of Translating Financial Statements

The accompanying financial statements are stated in Korean Won, the currency of
the country in which the Company is incorporated and operates. The translation
of the Korean Won amounts into U.S. dollar amounts are included solely for the
convenience of the readers outside of the Republic of Korea and have been made
at the rate of (Won) 1,035.10 to US$1.00, the noon buying rate in the City of
New York for cable transfers in won as certified for customs purposes by the
Federal Reserve Bank of New York at December 31, 2004. Such

                                      F-18
<PAGE>

translations should not be construed as representations that the Korean won
amounts could be converted at that or any other rate.

(3) Principles of Consolidation

All significant inter-company transactions and balances with subsidiaries have
been eliminated in the consolidation. The consolidated financial statements
include the accounts of Thrunet and its subsidiaries. Equity investments of 20%
to 50% ownership interest or where the Company has the ability to exercise
significant influence over the investee are accounted for using the equity
method of accounting and are reported in "Investments". The Company's share of
earnings and losses of these companies are included in "Equity in net gain
(loss) of affiliates".

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

(4) Use of Estimates

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

(5) Cash and cash equivalents

Cash and cash equivalents are composed of cash on hand, demand deposits, money
market deposits accounts and money market funds. All such amounts have an
original maturity of 90 days or less. Current assets and non-current assets
include (Won) 4,674 million and (Won) 8,448 million, respectively, of
restricted cash as of December 31, 2003, and (Won) 25,249 million and
(Won) 25 million, respectively, as of December 31, 2004.

(6) Allowance for Doubtful Accounts

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

(7) Investment Securities

1) Classification of Securities

Equity securities with readily determinable fair values and all debt securities
are classified into three categories and accounted for as follows:

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

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

      -     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 income and reported in
            other comprehensive income.

2) Impairment of Investment Securities and Recoveries

If the decline in fair value is judged to be other than temporary, the cost
basis of the individual securities is written down to fair value as a new cost
basis and the amount of the write-down is included in current operations. The
subsequent increase in carrying amounts of the impaired and written-down
held-to-maturity debt securities and equity securities without readily
determinable fair value is not allowed. The subsequent increase in fair value of
available-for-sale securities is reported in other comprehensive income.

                                      F-19
<PAGE>

(8)  Value-Added Taxes

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

(9) Property and Equipment

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

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

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

(10) Long-lived Assets

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

(11) Leases

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

(12) Stock-Based Compensation

The Company applies the intrinsic value-based method of accounting prescribed by
APB Opinion No 25, "Accounting for Stock Issued to Employees", and related
interpretations, in accounting for its fixed stock option plan. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. SFAS No.123,
"Accounting for Stock-Based Compensation" established accounting and disclosure
requirements using a fair value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company elected to
apply the intrinsic value-based method of accounting described above, and has
adopted the disclosure requirements of SFAS No123. Thrunet's stock-based
compensation plan was cancelled by the reorganization plan on January 9, 2004.

                                      F-20
<PAGE>

(13) Discounts on Debentures

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

(14) Retirement and Severance Benefits

Employees and directors with one year or more of service are entitled to receive
a lump-sum payment upon termination of their employment with the Company, based
on their length of service and rate of pay at the time of termination. The
Company's estimated liability under the plan, equal to the amount that would be
payable assuming all employees were to resign as of December 31, 2003 and 2004,
has been accrued in the accompanying consolidated financial statements. Under
the National Pension Scheme of Korea, through March 31, 1999, the Company was
required to transfer a certain percentage of retirement benefits of employees to
the National Pension Fund. The amount transferred will reduce the retirement and
severance benefit amount payable to the employees when they leave the Company
and is reflected as a direct deduction from the retirement and severance
benefits liability.

(15) Revenue Recognition

Monthly customer subscription fees for broadband internet service are recognized
as revenue in the period services are provided. Included in subscription
revenues are fees related to rental of cable modems to customers in connection
with subscription contracts. Installation fees and the related installation
costs up to an amount not exceeding installation fees, are deferred and
recognized as revenue and operating costs over the estimated customer retention
period of 4 years.

(16) Foreign Currency Transactions

Monetary assets and liabilities denominated in a foreign currency are converted
into Korean Won at (Won)1,197.80 to US$1.00 and (Won)1,043.80 to US$1.00,
the equivalent rates of exchange at December 31, 2003 and 2004, respectively.
Revenue, expenses, gains and losses from foreign currency transactions are
converted at the exchange rate in effect at the transaction date.

All foreign exchange transaction gains and losses are included in current
operations.

(17) Income Tax

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

(18) Earnings (Loss) Per Share

Basic and diluted earnings (loss) per common share is calculated by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the fiscal year, which is 719,541 shares, 964,989 shares
and 3,894,426 shares for the years ended December 31, 2002, 2003 and 2004,
respectively. The warrants issued and stock options granted in 2000 and 2001
were not included in the calculation of loss per share for the years ended
December 31, 2002, 2003 and 2004 as their effect was anti-dilutive. And they
were cancelled by the reorganization plan in 2004.

(19) Comprehensive Income

Comprehensive income consists of net income and other comprehensive income
(loss). Other comprehensive income (loss) refers to revenues, expenses, gains
and losses that are not included in net income, but rather are recorded directly
in stockholders' capital deficiency, such as unrealized gain or loss on
available-for - sale securities and foreign currency translation adjustments.

                                      F-21
<PAGE>

(20) Recent Accounting Pronouncements

      A.    In January and December 2003, the FASB issued and then revised FIN
            No.46 "Consolidation of Variable Interest Entities", which is
            effective immediately for all variable interest entities created
            after January 31, 2003. FIN No.46 requires existing unconsolidated
            variable interest entities to be consolidated by their primary
            beneficiaries if the entities do not effectively disperse risks
            among the parties involved. A primary beneficiary absorbs the
            majority of the entity's losses or receives a majority of the
            entity's residual returns, if they occur, or both. The Company fully
            adopted FIN No. 46 during 2004. The adoption of this statement did
            not have a significant impact on the accompanying financial
            statements.

      B.    In December 2004, the FASB issued SFAS No.153, "Exchange of
            Non-monetary Assets, an amendment of APB Opinion No.29, Accounting
            for Non-monetary Transaction". SFAS No.153 amends the APB Opinion
            No.29 exception to fair value measurement for non-monetary exchanges
            to apply only to those exchanges, which lack commercial substance as
            defined in SFAS No. 153, and is effective for non-monetary asset
            exchanges that the Company enters into on or after July 1, 2005. The
            adoption of this standard is not expected to have a material impact
            on the Company's financial position, operating results or cash
            flows.

      C.    In December 2004, the FASB revised SFAS No.123, "Accounting for
            Stock-Based Compensation". It supersedes APB Opinion No 25.
            "Accounting for Stock Issued to Employees". This revised statement
            establishes standards for the accounting for transactions in which
            an entity exchanges its equity instruments for goods or services. It
            also addresses transactions in which an entity incurs liabilities in
            exchange for goods or services that are based in the fair value of
            the entity's equity instruments or that may be settled by the
            issuance of those equity instruments. This statement is effective
            for period beginning after June 15, 2005 for public entities that do
            not file as small business issuers and after December 15, 2005 for
            public entities filing as small business issuers and after December
            15, 2005 for non public entities. The adoption of this statement is
            not expected to have a material impact on the Company's financial
            position, operating results or cash flows.

      D.    In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
            Error Corrections, a replacement of APB Opinion No.20 and SFAS No.
            3". SFAS No 154 replaces APB Opinion No 20, "Accounting changes" and
            SFAS No 3."Reporting Accounting Changes in Interim Financial
            Statements" and changes the requirement for the accounting for and
            reporting of a change in accounting principles. It applies to all
            voluntary changes in accounting principles. It also applies to
            changes required by an accounting pronouncement in the unusual
            instance that the pronouncement does not include specific transition
            provisions. When a pronouncement includes specific transition
            provisions, those provisions should be followed. The provision of
            this statement should be effective for accounting changes made in
            fiscal year beginning after December 15, 2005. The adoption of this
            statement is not expected to have a material impact on the Company's
            financial position, operating results or cash flows.

      E.    In July 2004, the EITF issue No. 02-14, "Whether an Investor Should
            Apply the Equity Method of Accounting to Investments Other Than
            Common Stock if the Investor Has the Ability to Exercise Significant
            Influence over the Operating and Financial Policies of the
            Investee". EITF Issue No.02-14 was effective for reporting periods
            beginning after September 15, 2004 and requires the use of the
            equity method of accounting for investments that are in-substance
            common stock when the investor has the ability to exercise
            significant influence over the investee. The adoption of this
            guidance is not expected to have a material impact on the Company's
            financial position, operating results or cash flows.

      F.    In March 2004, the EITF supplement EITF Issue No.03-1, "The Meaning
            of Other-Than-Temporary Impairment and Its Application to Certain
            Investments". EITF Issue No.03-1 provides guidance for evaluating
            whether an investment is other-than-temporarily impaired and
            requires disclosures on unrealized losses on available-for-sale debt
            and equity securities. In September 2004, the FASB issued FASB Staff
            Position ("FSP") EITF Issue 03-1-1, "Effective Date of Paragraphs
            10-20 of EITF Issue 03-1", which deferred the effective date of the
            recognition and measurement provisions of the consensus until
            further guidance is issued. The impact on future earnings, if any,
            of the recognition and measurement provisions of EITF Issue No.03-1
            will not be known until the FASB issues its guidance.

                                      F-22
<PAGE>

(21) Discontinued Operation

On October 28, 2002, the Company sold its enterprise network service business to
SK Networks (formerly SK Global) and recognized an aggregate loss of
(Won)63,775 million from the disposal of related property and equipment. The
book value of property and equipment at the date of sale totaled (Won)410,635
million. The disposal of related assets was considered as a disposal of a
component of the Company and was accounted for as a discontinued operation under
the provision of SFAS No. 144 "Accounting for the Impairment or Disposal of a
Long-lived Assets", which superseded APB Opinion No. 30. Operating loss from the
discontinued operations amounted to (Won)51,960 million in 2002.

The operation results of enterprise network service business are shown
separately as discontinued operations in the accompanying statements of
operations. Tax benefits for the loss from discontinued operations were nil in
2002.

(22) Reclassification

Certain amounts of prior years' financial statements were reclassified to
confirm to the current year's presentation.

3. ACCOUNTS RECEIVABLE:

Accounts receivable as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                                     2003          2004
                                 ------------  ------------
<S>                              <C>           <C>
Accounts receivable-trade        (Won) 92,061  (Won) 91,410
Allowance for doubtful accounts       (28,253)      (42,066)
                                 ------------  ------------
                                 (Won) 63,808  (Won) 49,344
                                 ============  ============
</TABLE>

Changes in allowance for doubtful accounts for the years ended December 31,
2002, 2003 and 2004 are as follows (won in millions).

<TABLE>
<CAPTION>
                                 2002          2003           2004
                              ------------  ------------  ------------
<S>                           <C>           <C>           <C>
Balance at beginning of year  (Won)  8,361  (Won) 16,065  (Won) 28,253
Write-offs                               -          (961)       (7,251)
Provision for the year               7,704        13,149        21,064
                              ------------  ------------  ------------
Balance at end of year        (Won) 16,065  (Won) 28,253  (Won) 42,066
                              ============  ============  ============
</TABLE>

4. OTHER RECEIVABLES:

Other receivables as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                                    2003             2004
                                 ------------  ------------
<S>                              <C>           <C>
Accounts receivable-other        (Won) 23,449  (Won) 25,702
Present value discounted                  (58)          (30)
Allowance for doubtful accounts       (18,821)      (18,197)
                                 ------------  ------------
                                 (Won)  4,570  (Won)  7,475
                                 ============  ============
</TABLE>

Changes in allowance for doubtful accounts for the years ended December 31,
2002, 2003 and 2004 are as follows (won in millions).

<TABLE>
<CAPTION>
                                   2002         2003           2004
                              ------------  ------------  -------------
<S>                           <C>           <C>           <C>
Balance at beginning of year  (Won)     78  (Won) 21,778  (Won)  18,821
Write-offs                               -        (5,641)        (1,396)
Provision for the year              21,700         2,684            772
                              ------------  ------------  -------------
Balance at end of year        (Won) 21,778  (Won) 18,821  (Won)  18,197
                              ============  ============  =============
</TABLE>

                                      F-23
<PAGE>

5. PROPERTY AND EQUIPMENT:

Property and equipment as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                                      2003           2004
                                 -------------  -------------
<S>                              <C>            <C>
Land                             (Won)  12,252  (Won)  12,252
Buildings                               17,878         17,878
Communication circuit equipment        144,258        121,473
Transmission and communications
  equipment                            434,105        423,155
Furniture, tools and vehicles            9,207          9,358
Construction-in-progress                11,359          9,477
                                 -------------  -------------
                                       629,059        593,593
Less : accumulated depreciation       (282,799)      (358,035)
                                 -------------  -------------
                                 (Won) 346,260  (Won) 235,558
                                 =============  =============
</TABLE>

Depreciable assets are insured against fire and other casualty losses up to
(Won)155,742 million at December 31, 2004. Some of the Company's property and
equipment and investments are provided to financial institutions as collateral
for its borrowings of (Won)232,493 million, with which the financial
institutions can claim up to (Won) 697,452 million. But due to the
reorganization plan, the rights of the financial institutions to dispose of its
collateral to collect the loans are restricted as of December 31, 2004.

During 2002, the Company disposed of its Hybrid Fiber Coaxial (the "HFC")
leased-line, land and building, enterprise network equipment and other. On
August 6, 2002, a sales contract with Powercomm Inc. for the HFC lease-line was
completed and the Company incurred a loss of (Won)41,487 million. On August 9,
2002, a sales contract with Carlyle Korea Special Purpose for the land and
buildings was completed and the Company made a gain of (Won)6,203 million. The
Company also recognized a loss of (Won)376 million on sale of miscellaneous
assets in 2002. On October 28, 2002, a sales contract with SK Networks (formerly
SK Global) regarding its enterprise network business was completed and the
Company incurred a loss of (Won)63,775 million.

During 2003, the Company recognized a loss of (Won)51 million in connection with
the sale of tools with a carrying value of (Won)53 million. On December 31,
2003, a sales contract with SK Networks for communication circuit equipment and
transmission and communications equipment used for enterprise network business
with carrying value of (Won)13,037 million was signed resulting in a loss of
(Won)2,954 million in 2003.

For the year ended December 31, 2002, the Company recognized an impairment loss
of (Won)17,467 million as the carrying amount of equipment was not recoverable.

For the year ended December 31, 2003, the Company recognized an impairment loss
of (Won) 55,272 million on tangible assets. As part of the reorganization
proceedings, the Court required the Company to evaluate all fixed assets. During
this process, the Company identified (Won)28,094 million as obsolete assets.

The Company performed a valuation of certain assets as of July 1, 2004 and
recognized an impairment loss of (Won)43,890 million on property and equipment
and (Won)116 million on intangibles.

6. LEASE:

The Company is obligated under various capital leases for equipment as of
December 31, 2003 and 2004. Equipment and related accumulated depreciation
recorded under capital leases as of December 31, 2003 and 2004 are as follows
(won in millions).

                                      F-24
<PAGE>

<TABLE>
<CAPTION>
                                                2003          2004
                                           -------------  ------------
<S>                                        <C>            <C>
Transmission and communications equipment  (Won)  34,068  (Won) 33,303
Accumulated depreciation                         (26,249)      (27,829)
                                           -------------  ------------
                                           (Won)   7,819  (Won)  5,474
                                           =============  ============
</TABLE>

Total lease liabilities of (Won)20,524 million are to be settled in 2005 in
accordance with the modified reorganization plan.

7. DEBTS:

(1) Present value of debts

The Company applies the effective interest rate in valuating its debts, which
equals the present value of future cash outflows by the reorganization plan and
the actual repayment due amounts, expected to be financed by hanarotelecom
incorporated. Due to the restructuring of debts by the reorganization plan,
which was subsequently modified, the Company recognized a gain on extinguishment
of debt of (Won)153,403 million in 2004.

(2) Short-term borrowings

Short-term borrowings as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                          2003        2004
                       -----------  -------
<S>                    <C>          <C>
General purpose loans  (Won) 1,000  (Won) -
</TABLE>

(3) Long-term debts

In 2003, as a result of the Company's reorganization proceedings, certain
covenants were violated. In accordance with debts agreements, these liabilities
were due on call and were therefore classified as current liabilities in the
consolidated financial statements as of the end of 2003.

Long-term debts as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                                                                       2003           2004
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Won denominated:
  Secured bonds                                                   (Won) 153,905  (Won) 153,905
  Unsecured bonds                                                       123,500        123,500
  Unsecured loans, representing obligations principally to banks         20,823         20,823
  Secured loans, representing obligations principally to banks          136,282         91,317
                                                                  -------------  -------------
                                                                        434,510        389,545
                                                                  -------------  -------------
Less : Current portion                                                 (425,190)      (385,054)
Less : Discount on bonds issued                                            (519)          (519)
                                                                  -------------  -------------
  Sub-total                                                               8,801          3,972
                                                                  -------------  -------------
U.S. dollar denominated:
  Secured bonds                                                   (Won)   8,864  (Won)   8,864
  Secured loans, representing obligations principally to banks            4,400          2,691
                                                                  -------------  -------------
                                                                         13,264         11,555
                                                                  -------------  -------------
Less : Current portion                                                   (4,400)        (4,400)
Less : Discount on bonds issued                                               -              -
                                                                  -------------  -------------
  Sub-total                                                               8,864          7,155
                                                                  -------------  -------------
  Total                                                           (Won)  17,665  (Won)  11,127
                                                                  =============  =============
</TABLE>

In 2002, the Company modified the contract with Korea Development Bank, the
holder of the 5th convertible bond by fixing the conversion price at (Won)1,136
in accordance with modified contract at August 28, 2002. Aforementioned
conversion price was agreed with Korea Development Bank in accordance with
assignment of convertible bonds attached contract dated August 28, 2002. The 5th
convertible bonds agreement contains debt covenants. At December 31, 2002, the
Company was in breach of the debt covenants. Under the terms of the agreements,
the lender may call the loan if the Company was in violation of any restrictive
covenants. As of December 31, 2002, the lender did not waived the capital
requirements, and accordingly, (Won)100,000 million of

                                      F-25
<PAGE>

convertible bonds were reclassified to current portion of convertible bonds.

At March 21, 2002, the Company issued the 20th convertible bonds with total
principal amount of (Won)952 million for cash of (Won)833 million, which were to
be redeemed on March 21, 2005. The bonds had a coupon interest rate of 4.0
percent per annum, payable on an annual basis starting at the end of the first
year after the issuance date. However, for all or a portion of the bonds that
were not converted into the Company's common shares, additional compound
interest at a rate of 12.0 percent per annum, calculated on an annual basis from
the issuance date to the redemption date, would be payable on the redemption
date. The bond were convertible into the Company's shares of common stock from
July 22, 2002 to February 21, 2005, at the conversion price of (Won)100
thousand. None of this had been exercised for the period ended December 31,
2002.

On February 28, 2002, Softbank, Naray and TriGem exercised their warrants to
acquire 828,800, 296,000 and 177,600 shares of the Company's common stock,
respectively. Pursuant to the original agreement, Softbank, Naray and TriGem
elected to tender their bonds to the Company with par value equal to the
exercise price of the warrant. At the time of the issuance, the par value of the
US $ 62,600,000 was equivalent to (Won)82,800 million in accordance with the
exchange rate published by the Korea Financial Telecommunications and Clearing
Institute on the day immediately preceding the date of exercise. To compensate
Softbank for the difference between the par value of the bond surrendered and
the exercise price of its warrants, the Company issued a par value of US $7,400
thousand debenture at the exact same term as the bond surrendered to Softbank.
All of the Company's 654,183 of cable modems as well as 35,000,000 shares of
Korea.com were pledged as collateral. The Company recognized a loss of
(Won)81,029 million, net of income tax benefit of (Won)61 million on the early
retirement of the bonds.

The conversion features of all the Company's convertible bonds were cancelled by
reorganization plan.

On August 2002, the Company entered into an agreement to exercise a debt to
equity conversion on the bonds with warrants held by Trigem and Naray. The
conversion took place on August 2002, with the Company issuing 1,302,816 and
651,408 shares of common stock at (Won)45 thousand per share in exchange for par
value (Won)59,200 million and (Won)29,600 million of the bonds with warrants.
The Company recognized a loss of (Won)48,014 million on the early retirement of
the bonds. Warrants to purchase 296,000 shares of common stock at revised
exercise price of (Won)300 thousand per share remain outstanding.

Accretion of bond discount was (Won)3,922 million and (Won)1,549 million for the
years ended December 31, 2001 and 2002, respectively. These amounts were
recorded as interest expense.

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

As explained in Note 1, all of Thrunet's long-term debts are to be repaid during
2005 with the approval of modified reorganization plan by the Court on April 29,
2005.

8.    RETIREMENT AND SEVERANCE BENEFITS:

Other non-current liabilities include the liability for retirement and severance
benefits as of December 31, 2003 and 2004 are as follows (won in millions).

<TABLE>
<CAPTION>
                                                               2003               2004
                                                           -------------      -------------
<S>                                                        <C>                <C>
Balance, beginning of year                                 (Won)   2,779      (Won)   2,906
Provision for retirement and severance benefits                    1,176              1,101
Payments                                                          (1,049)              (597)
                                                           -------------      -------------
                                                                   2,906              3,410
                                                           -------------      -------------
Cumulative transfer to the National Pension Fund                     (31)               (27)
Payment made to severance insurance deposit fund                    (396)              (361)
                                                           -------------      -------------
Balance, end of year                                       (Won)   2,479      (Won)   3,022
                                                           =============      =============
</TABLE>

Payments made to the severance insurance deposit fund are used to reduce the
Company's accrued severance benefit liabilities. As of December 31, 2004, the
amount placed to the severance insurance deposits fund was 10.59% of the
Company's total severance benefit liability. The beneficiaries of the severance
insurance deposits

                                      F-26

<PAGE>

are the Company's employees.

The amount that the Company expects to pay for future benefits to its employees
upon their retirement at normal retirement age is as follows (won in millions):

<TABLE>
<CAPTION>
Year ending
December 31          Amount
-----------       ------------
<S>               <C>
   2005           (Won)     46
   2006                      -
   2007                      -
   2008                      -
   2009                      -
 2010-2014                   -
</TABLE>

The above amounts were determined based on the employees' current salary rates
and the number of service years that will be accumulated upon their retirement
date. These amounts do not include amounts that might be paid to employees that
will cease working with the Company before their normal retirement age.

9.    COMMITMENTS AND CONTINGENCIES:

      A.    The Company has entered into an Internet System License Agreement
            with Microsoft to provide Microsoft Internet System License and
            technical support to the Company, and renewed the contract on July
            30, 2003. Details of the contract are as follows:

            (1)   Total acquisition cost of the permanent license is (Won)780
                  million and has been fully paid.

            (2)   The Company does not pay an e-mail access license fee to
                  Microsoft until the number of its e-mail users reaches
                  1,500,000. If it is over 1,500,000, the Company is obligated
                  to pay US$ 0.10 per every additional user.

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

                                      F-27

<PAGE>

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

            The network facilities include cable television electrical
            transmission network, HFC network, cable modem termination system,
            dynamic host configuration protocol servers and fiber optic gigabit
            switch. The period of this agreement is three years from February
            27, 2001 and shall be extended for another three years unless a
            party demands to terminate or amend this agreement in writing. Under
            this agreement, the Company should pay a fixed amount of basic fees
            depending on the area, and monthly fees per subscribers. During
            2002, 2003 and 2004, the Company paid (Won)53,215 million,
            (Won)58,408 million and (Won)53,112 million, respectively, under
            this agreement. There have been disagreements between Thrunet and
            Powercomm Inc. in regards to the interpretations of these contracts.
            Depending on the final resolutions, the Company may have to make
            additional payments to Powercomm Inc.

      D.    In January 2001, the Company entered into another agreement with
            Powercomm Inc., which supplements the Agreement Concerning Provision
            of Facilities dated June 1997 and the Agreement on Provision of Line
            Facilities and Dark Fiber dated January 2001. Under this agreement,
            Powercomm Inc. and the Company agreed that the period applicable for
            the minimum usage fees guaranteed to Powercomm Inc. under the
            agreement on the provision of line facilities and dark fiber shall
            be from July 1, 2000 to June 30, 2002. The minimum usage fees
            applicable thereafter shall be determined by the parties by June 30,
            2002. During 2002, 2003 and 2004, the Company paid (Won)29,640
            million, (Won)2,241 million and (Won)2,152 million, respectively,
            under this agreement.

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

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

      G.    In October 1999 and January 2000, the Company entered into
            agreements with GNG Networks and SK Telecom Co., Ltd., respectively,
            to lease dark fiber for lease payments based on usage. During 2000
            and 2001, the Company paid (Won)3,421 million and (Won)2,455
            million, respectively, under such leases, In 2003, the agreement
            with GNG Networks were terminated. The Company paid (Won)2,454
            million and (Won)2,266 million to SK Telecom co., Ltd in 2003 and
            2004, respectively.

      H.    In 1998, the Company entered into an agreement with Dacom
            Corporation and in 2000, the Company entered into agreements with
            Onse Telecom and MCI Com to lease international private leased
            circuit for fixed monthly payments. In 2001, the Company entered
            into an agreement with Naray Telecom to lease international private
            leased circuit for fixed monthly payments. During 2002, 2003 and
            2004, the Company paid a total of (Won)28,626 million, (Won)12,708
            million and (Won)680 million, respectively,

                                      F-28

<PAGE>

            under such leases.

      I.    The Company has entered into mutual cooperation agreements with
            cable television operators and distributors in relation to internet
            access service marketing and paid fees by the agreements, amounting
            to (Won)66,584 million, (Won)60,076 million and (Won)57,368 million
            for the years ended December 31, 2002, 2003 and 2004, respectively.

      J.    On December 30, 2003, the Company entered into an agreement with On
            Media to dispose of its HFC Network and transferred those assets on
            June 30, 2004. According to the contract, the Company is liable for
            any claims for damages related to the period prior up to the final
            contract date. Also, the Company must exclusively lease the HFC
            Network from On Media for the next ten years. With proceeds from the
            sales, the Company has repaid its borrowings from Korea Development
            Bank, prior to its maturity. The Company had provided the HFC
            Network to Korea Development Bank as collateral before the disposal.

      K.    As of December 31, 2004, the Company is a defendant in 11 lawsuits
            seeking approximately (Won)420 million of damages in Korea and one
            class action lawsuit along with other defendants in the United
            States of America. These lawsuits are currently pending and the
            final outcome cannot be determined.

      L.    As of December 31, 2004, the Company has provided 5 blank promissory
            notes and 1 blank check as collateral to financial institutions in
            relation to the borrowings.

      M.    The Fair Trade Commission has been investigating the violation of
            the Fair Trade Act by communication companies including the Company
            and based on the final results of the investigation, the Fair Trade
            Commission may fine the Company. The amount of the fine cannot be
            determined as of December 31, 2004. The Company will pay the fine,
            if any, with the reserved money financed by hanarotelecom
            incorporated as explained in Note 1.

      N.    Debt repayment guarantees by third parties amounting to (Won)289,472
            million are provided to the Company as of December 31, 2004.

      O.    The Company does not provide any debt repayment guarantees for third
            parties as of December 31, 2004.

10.   INCOME TAX:

The components of income tax expense attributable to loss before provision for
income taxes and extraordinary item for the years ended December 31, 2002, 2003
and 2004 are summarized as follows:

<TABLE>
<CAPTION>
                                                                    2002           2003           2004
                                                               -------------  -------------  -------------
<S>                                                            <C>            <C>            <C>
(in millions of Korean won)
   Current:                                                    (Won)     131  (Won)       -  (Won)       -
   Deferred:                                                               -              -              -
                                                               -------------  -------------  -------------
   Total                                                                 131              -              -
   Income tax (benefit) allocated to discontinued operations               -              -              -
   Income tax (benefit) allocated to disposal of discontinued
      operations                                                           -              -              -
                                                               -------------  -------------  -------------
   Continuing operations                                       (Won)     131  (Won)       -  (Won)       -
                                                               =============  =============  =============
</TABLE>

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

<TABLE>
<CAPTION>
   Taxable earnings               Rate
   ----------------               ----
<S>                               <C>
Up to (Won)100 million            16.5%
 Over (Won)100 million            29.7%
</TABLE>

                                      F-29

<PAGE>

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

The statutory tax rate, applicable to the Company for 2002, 2003 and 2004 was
29.7%. The reconciliation from income taxes calculated using the statutory tax
rate to the effective tax rate for each of the period is as follows:

<TABLE>
<CAPTION>
                                                                 2002            2003            2004
                                                            -------------   -------------   -------------
<S>                                                         <C>             <C>             <C>
(in millions of Korean won)
   Taxes at Korean statutory tax rate                       (Won)(129,522)  (Won) (35,937)  (Won) (12,792)
   Permanent differences                                            7,730           5,810          (5,281)
   Tax benefits not recognized in current period                  121,923          27,895          18,073
   Effect of change in tax rate                                         -           2,232               -
   Special tax levied to gains on sale of certain property              -               -               -
                                                            -------------   -------------   -------------
   Total income tax provision                               (Won)     131   (Won)       -   (Won)       -
                                                            =============   =============   =============
</TABLE>

The tax effects of temporary differences that resulted in significant portions
of the deferred tax assets and liabilities at December 31, 2003 and 2004 and a
description of the financial statement items that created these differences are
as follows:

<TABLE>
<CAPTION>
                                                                      2003            2004
                                                                 -------------   -------------
<S>                                                              <C>             <C>
(in millions of Korean won)
Deferred tax assets:
   Accounts receivable                                           (Won)  12,682   (Won)  16,082
   Investment securities                                                20,100          14,523
   Other investment                                                      7,726               -
   Property and equipment                                                2,192          16,045
   Intangible assets                                                       913             822
   Net operation loss carry forward                                    194,288         182,752
   Tax credit                                                           17,254               -
   Others                                                                  559           7,701
                                                                 -------------   -------------
                    Total deferred tax assets                    (Won) 255,714   (Won) 237,925
                                                                 =============   =============

Deferred tax liabilities:
   Others                                                                 (122)        (45,932)
                                                                 -------------   -------------
   Total deferred tax liabilities                                         (122)        (45,932)
                                                                 -------------   -------------
   Deferred tax assets (liabilities) before valuation allowance        255,592         191,993
   Valuation allowance                                                (255,592)       (191,993)
                                                                 -------------   -------------
   Net deferred tax assets (liabilities)                         (Won)       -   (Won)       -
                                                                 =============   =============
</TABLE>

At December 31, 2004, the Company had (Won)664,551 million of net operating loss
carry forwards ("NOLs") available to offset future taxable income. These losses
expire in the periods ranging from 2005 to 2009.

Deferred income tax assets are recognized only to the extent that realization of
the related tax benefit is more likely than not. Management believes it is
uncertain whether the Company is able to generate sufficient profits to offset
their tax losses prior to the expiration of prior year NOLs. Accordingly, a
valuation allowance totaling (Won)255,592 million and (Won)191,993 million in
2003 and 2004, respectively, was established for deferred income tax assets that
may not be realized.

11.   STOCKHOLDERS' EQUITY:

In January and December 31, 2001, the Company issued an additional 651,200
shares and 109,122 shares of common stock for total cash consideration of
(Won)64,744 million and (Won)12,690 million, respectively.

                                      F-30

<PAGE>

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

In August of 2002, the Company issued an additional 1,954,225 common shares at
(Won)45,440 per share by means of converting bonds with warrants into common
shares.

In November of 2002, the Company authorized a three-for-one reverse stock split,
as a result, the Company decreased from 5,826,644 common stock issued and
outstanding to 1,940,881 and decreased from (Won)582,264 million common stock
par value to (Won)194,088 million.

In August 2002, the Company acquired 32,321 shares of common stock for
(Won)1,126 million. After the three-for-one reverse stock split, the Company
decreased its treasury stock to 10,743 shares. Subsequently, the Company
acquired an additional 159 shares of common stock for (Won)16 million. At
December 31, 2002, the Company held 10,902 shares of treasury stock.

As of December 31, 2003 and 2004, the Company has 400,000,000 authorized shares,
consisting of voting common shares and voting preferred shares of (Won)2,500 at
par value. Under its articles of incorporation, the Company may issue up to
40,000,000 non-voting preferred shares. There were no non-voting preferred
shares outstanding as of December 31, 2003 and 2004.

As explained in Note 1, the Company authorized the retirement of the largest
shareholder's shares, a forty-for-one reverse stock split, a two-for-one reverse
stock split and debt-to-equity conversion, which are reflected in the
accompanying financial statements.

12.   STOCK-BASED COMPENSATION:

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

On March 24, 2000, the Company granted options for 13,916 common shares to
certain executive officers, directors and employees. The exercise price of the
options granted was (Won)5,808 thousand per share. The options vested on March
25, 2002 and were exercisable from March 25, 2003 until March 24, 2010.

On March 27, 2001, the Company granted options for 22,558 common shares to
certain executive officers, directors and employees. The exercise price of the
options granted was (Won)864 thousand per share. The options vested on March 28,
2003 and were to become exercisable from March 28, 2004 until March 27, 2011.

On January 9, 2004, all outstanding stock options given to the Company's
employees and directors were cancelled according to the reorganization plan.

13.   EARNINGS (LOSS) PER SHARE:

Earnings (loss) per share for the years ended December 31, 2002, 2003 and 2004
were calculated as follows.

                                      F-31

<PAGE>

<TABLE>
<CAPTION>
                                                              2002               2003             2004
                                                         --------------    ---------------   --------------
<S>                                                      <C>               <C>               <C>
(in millions of Korean won)
   Loss  from continuing operations                      (Won) (320,367)   (Won) (120,999)   (Won)  (43,071)
   Loss from discontinued operations                           (115,735)                -                 -
                                                         --------------    --------------    --------------
   Net loss attributable to common shares                (Won) (436,102)   (Won) (120,999)   (Won)  (43,071)
                                                         ==============    ==============    ==============
   Weighted average number of common shares outstanding         719,541           964,989         3,894,426

(in Korean won)
Loss Per Share
   Loss from continuing operations                       (Won)  445,238   (Won)   125,388    (Won)  (11,060)
   Loss from discontinued operations                            160,846                 -                 -
                                                         --------------    --------------    --------------
   Basic (diluted ) net loss per share                   (Won)  606,084    (Won)  125,388    (Won)  (11,060)
                                                         ==============    ==============    ==============
</TABLE>

14.   ADVERTISING COSTS:

Advertising costs, amounting to (Won)10,886 million, (Won)12,431 million and
(Won)9,246 million for the years ended December 31, 2002, 2003 and 2004,
respectively, were expensed as incurred.

                                      F-32

<PAGE>

15.   RELATED PARTY TRANSACTIONS:

The followings are major balances and transactions with related parties as of
and for the years ended December 31, 2002, 2003 and 2004 (won in millions).

<TABLE>
<CAPTION>
                                2002           2003           2004
                           -------------  -------------  -------------
<S>                        <C>            <C>            <C>
Trigem Computer, Inc (*).
   Revenues                (Won)     384  (Won)      51  (Won)     535
   Purchases                           -              -          2,802
   Accounts payable                  228              1            346
   Interest expense                2,321              -              -
   Accounts receivable               469              4             76

TG Ubase, Inc. (*)
   Accounts receivable             1,343             82              -
   Commission expense             36,530         29,788         23,575
   Accounts payable               13,740              -          4,984
   Revenues                           77              1             21
   Other assets                    2,118              -            873

Microsoft Corporation
   Commission expense              2,763          2,519              -
   Accrued expenses                3,445              -              -

Nowcom Co., Ltd. (*)
   Revenues                          583            304             20
   Commission expense              1,278              -              -
   Purchase                            -            738            349
   Accounts receivable                60             73             31
   Accounts payable                  460            333            115

Softbank
   Revenues                          712              -              -
   Interest expense                  995              -              -
   Accrued expenses                   54              -              -
   Bonds                           7,097              -              -

Naray & Company Inc. (*)
   Interest expenses               1,346          1,346              -
   Loans to others                11,500         11,500              -
   Revenues                            -              2              -

Kinam Broadcasting Inc.
   Revenues                            -            252            673
   Commission expense                  -              -            319
   Accounts receivable                 -            144             67
   Accounts payable                    -              -            529
</TABLE>

(*) These companies had been the stockholders of the Company until the shares
were cancelled by the restructuring plan, as explained in Note 1.

The Company's transactions with its related parties are incurred in the normal
course of operations including call center service fees and others.

                                      F-33

<PAGE>

16.   FAIR VALUE OF FINANCIAL INSTRUMENTS:

The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate methodologies;
however, considerable judgment is required in interpreting market data to
develop estimates for fair value. Accordingly, these estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The estimated fair value of the Company's long term
debt and bonds as of December 31, 2003 and 2004 are as follows (won in
millions).

<TABLE>
<CAPTION>
                                          2003                            2004
                            ------------------------------  ------------------------------
                            Carrying amount   Fair value    Carrying amount    Fair value
                            ---------------  -------------  ---------------  -------------
<S>                         <C>              <C>            <C>              <C>
Long - term debt,
 Including current portion  (Won)   161,505  (Won) 160,312  (Won)   114,831  (Won)  87,496
Bonds                               294,716        294,725          282,269        215,076
</TABLE>

17.   SEGMENT INFORMATION:

Under U.S. GAAP, companies report segment information based on the way
management disaggregates the company for making operating decisions. The Company
operates in primarily one segment: broadband internet access services. In 2004,
the activity in the Company's other operating segments, portal services and the
special purpose entity were below the quantitative thresholds of SFAS No. 131-
"Disclosures about Segments of an Enterprise and Related Information" and the
Company does not believe that disaggregated segment information for prior years
has any continuing significance.

There are no revenues from transactions with a single external customer that
amount to 10 percent or more of the consolidated revenues of the Company.

                                      F-34