##### 



As filed with the Securities and Exchange Commission on
June 28, 2005








SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.





Form 20-F





ANNUAL REPORT PURSUANT TO


SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2004


Commission file number 1-14926





KT Corporation


(Exact name of Registrant as specified in its charter)





The Republic of Korea


(Jurisdiction of incorporation or organization)


206 Jungja-dong


Bundang-ku, Sungnam


Gyunggi-do


463-711 Korea


(Address of principal executive offices)





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


|                                                                                            |                                                 |                                           |                               
|------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | ------------------------------
|Title of Each Class                                                                         |                                                 | Name of Each Exchange on Which Registered
|                                                                                            |                                                 |                                          
|American Depositary Shares, each
    representing one-half of one share
    of Common Stock |                                                 | New York Stock Exchange, Inc.            
|                                                                                            | Common Stock, par value
    Won 5,000 per share |                                           | New York Stock Exchange, Inc.*

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


None


(Title of Class)


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


1 2


5 8




(Title of Class)







210,758,982 shares of Common Stock, par value Won
5,000 per share


þ o


o þ


(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)


o o












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##### 










TABLE OF CONTENTS


|        |  |                                                         |  |           |    |                                                             |  |  |    |  |  | 
|------- |  | ------------------------------------------------------- |  | --------- | -- | ----------------------------------------------------------- |  |  | -- |  |  | 
|        |  |                                                         |  |           |    | Page                                                        | 
|        |  |                                                         |  |           |    |                                                             | 
|PART I  |  |                                                         |  |           | 1  |                                                            
|ITEM 1. |  | IDENTITY OF DIRECTORS, SENIOR MANAGERS AND
    ADVISORS |  |           | 1  |                                                            
|        |  |                                                         |  | Item 1.A. |    | Directors and Senior Management                             |  |  | 1  | 
|        |  |                                                         |  | Item 1.B. |    | Advisers                                                    |  |  | 1  | 
|        |  |                                                         |  | Item 1.C. |    | Auditors                                                    |  |  | 1  | 
|ITEM 2. |  | OFFER STATISTICS AND EXPECTED TIMETABLE                 |  |           | 1  |                                                            
|ITEM 3. |  | KEY INFORMATION                                         |  |           | 1  |                                                            
|        |  |                                                         |  | Item 3.A. |    | Selected Financial Data                                     |  |  | 1  | 
|        |  |                                                         |  | Item 3.B. |    | Capitalization and Indebtedness                             |  |  | 5  | 
|        |  |                                                         |  | Item 3.C. |    | Reasons for Offer and Use of Proceeds                       |  |  | 5  | 
|        |  |                                                         |  | Item 3.D. |    | Risk Factors                                                |  |  | 5  | 
|ITEM 4. |  | INFORMATION ON THE COMPANY                              |  |           | 13 |                                                            
|        |  |                                                         |  | Item 4.A. |    | History and Development of the Company                      |  |  | 13 | 
|        |  |                                                         |  | Item 4.B. |    | Business Overview                                           |  |  | 13 | 
|        |  |                                                         |  | Item 4.C. |    | Organizational Structure                                    |  |  | 39 | 
|        |  |                                                         |  | Item 4.D. |    | Property, Plants and Equipment                              |  |  | 39 | 
|ITEM 5. |  | OPERATING AND FINANCIAL REVIEW AND
    PROSPECTS        |  |           | 41 |                                                            
|        |  |                                                         |  | Item 5.A. |    | Operating Results                                           |  |  | 41 | 
|        |  |                                                         |  | Item 5.B. |    | Liquidity and Capital Resources                             |  |  | 55 | 
|        |  |                                                         |  | Item 5.C. |    | Research and Development, Patents,
    Licenses, Etc.       |  |  | 60 | 
|        |  |                                                         |  | Item 5.D. |    | Trend Information                                           |  |  | 61 | 
|        |  |                                                         |  | Item 5.E. |    | Off-balance Sheet Arrangements                              |  |  | 61 | 
|        |  |                                                         |  | Item 5.F. |    | Tabular Disclosure of Contractual
    Obligations           |  |  | 61 | 
|ITEM 6. |  | DIRECTORS, SENIOR MANAGEMENT AND
    EMPLOYEES          |  |           | 61 |                                                            
|        |  |                                                         |  | Item 6.A. |    | Directors and Senior Management                             |  |  | 61 | 
|        |  |                                                         |  | Item 6.B. |    | Compensation                                                |  |  | 65 | 
|        |  |                                                         |  | Item 6.C. |    | Board Practices                                             |  |  | 65 | 
|        |  |                                                         |  | Item 6.D. |    | Employees                                                   |  |  | 68 | 
|        |  |                                                         |  | Item 6.E. |    | Share Ownership                                             |  |  | 69 | 
|ITEM 7. |  | MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS   |  |           | 70 |                                                            
|        |  |                                                         |  | Item 7.A. |    | Major Shareholders                                          |  |  | 70 | 
|        |  |                                                         |  | Item 7.B. |    | Related Party Transactions                                  |  |  | 70 | 
|        |  |                                                         |  | Item 7.C. |    | Interests of Experts and Counsel                            |  |  | 71 | 
|ITEM 8. |  | FINANCIAL INFORMATION                                   |  |           | 71 |                                                            
|        |  |                                                         |  | Item 8.A. |    | Consolidated Statements and Other Financial
    Information |  |  | 71 | 
|        |  |                                                         |  | Item 8.B. |    | Significant Changes                                         |  |  | 74 | 

i



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##### 



|           |  |                                                                                  |  |            |     |                                        |  |  |     |  |  | 
|---------- |  | -------------------------------------------------------------------------------- |  | ---------- | --- | -------------------------------------- |  |  | --- |  |  | 
|           |  |                                                                                  |  |            |     | Page                                   | 
|           |  |                                                                                  |  |            |     |                                        | 
|ITEM 9.    |  | THE OFFER AND LISTING                                                            |  |            | 74  |                                       
|           |  |                                                                                  |  | Item 9.A.  |     | Offer and Listing Details              |  |  | 74  | 
|           |  |                                                                                  |  | Item 9.B.  |     | Plan of Distribution                   |  |  | 76  | 
|           |  |                                                                                  |  | Item 9.C.  |     | Markets                                |  |  | 76  | 
|           |  |                                                                                  |  | Item 9.D.  |     | Selling Shareholders                   |  |  | 81  | 
|           |  |                                                                                  |  | Item 9.E.  |     | Dilution                               |  |  | 81  | 
|           |  |                                                                                  |  | Item 9.F.  |     | Expenses of the Issuer                 |  |  | 81  | 
|ITEM 10.   |  | ADDITIONAL INFORMATION                                                           |  |            | 81  |                                       
|           |  |                                                                                  |  | Item 10.A. |     | Share Capital                          |  |  | 81  | 
|           |  |                                                                                  |  | Item 10.B. |     | Memorandum and Articles of Association |  |  | 81  | 
|           |  |                                                                                  |  | Item 10.C. |     | Material Contracts                     |  |  | 87  | 
|           |  |                                                                                  |  | Item 10.D. |     | Exchange Controls                      |  |  | 87  | 
|           |  |                                                                                  |  | Item 10.E. |     | Taxation                               |  |  | 90  | 
|           |  |                                                                                  |  | Item 10.F. |     | Dividends and Paying Agents            |  |  | 99  | 
|           |  |                                                                                  |  | Item 10.G. |     | Statements by Experts                  |  |  | 100 | 
|           |  |                                                                                  |  | Item 10.H. |     | Documents on Display                   |  |  | 100 | 
|ITEM 11.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                   |  |            | 100 |                                       
|ITEM 12.   |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES                       |  |            | 103 |                                       
|PART II    |  |                                                                                  |  |            | 112 |                                       
|ITEM 13.   |  | DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES                              |  |            | 112 |                                       
|ITEM 14.   |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF
    SECURITY HOLDERS AND USE OF PROCEEDS |  |            | 112 |                                       
|ITEM 15.   |  | CONTROLS AND PROCEDURES                                                          |  |            | 112 |                                       
|ITEM 16.A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                                 |  |            | 112 |                                       
|ITEM 16.B. |  | CODE OF ETHICS                                                                   |  |            | 112 |                                       
|ITEM 16.C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                           |  |            | 113 |                                       
|ITEM 16.D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR
    AUDIT COMMITTEES                   |  |            | 113 |                                       
|ITEM 16.E. |  | PURCHASES OF EQUITY SECURITIES BY THE
    ISSUER AND AFFILIATED PURCHASERS       |  |            | 114 |                                       
|PART III   |  |                                                                                  |  |            | 115 |                                       
|ITEM 17.   |  | FINANCIAL STATEMENTS                                                             |  |            | 115 |                                       
|ITEM 18.   |  | FINANCIAL STATEMENTS                                                             |  |            | 115 |                                       
|ITEM 19.   |  | EXHIBITS                                                                         |  |            | 116 |                                       

ii



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##### 



GLOSSARY













PART I







|        |                                                    
|------- | ---------------------------------------------------
|Item 1. | Identity of Directors, Senior Managers and Advisors






|          |                                
|--------- | -------------------------------
|Item 1.A. | Directors and Senior Management








|          |         
|--------- | --------
|Item 1.B. | Advisers








|          |         
|--------- | --------
|Item 1.C. | Auditors








|        |                                        
|------- | ---------------------------------------
|Item 2. | Offer Statistics and Expected Timetable








|        |                
|------- | ---------------
|Item 3. | Key Information






|          |                        
|--------- | -----------------------
|Item 3.A. | Selected Financial Data





1



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##### 



Income Statement Data


|                                                                                |  |                                                                     |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |   |  |     |        |  
|------------------------------------------------------------------------------- |  | ------------------------------------------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  | ---- | - | ------ | - |  | --- | ------ | -
|                                                                                |  | Year Ended December 31,                                             |       
|                                                                                |  |                                                                     |       
|                                                                                |  | 2000                                                                |        |  | 2001 |   |        | 2002 |  |   | 2003   |  |  | 2004 |        |  | 2004 |  
|                                                                                |  |                                                                     |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |  
|                                                                                |  | (In billions of Won and millions of Dollars, except per share data) |       
|Korean GAAP(1):                                                                 |  |                                                                     |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |   |  |     |        |  
|Operating revenues                                                              |  | W                                                                   | 13,538 |  |      | W | 15,978 |      |  | W | 16,437 |  |  | W    | 16,068 |  |      | W | 17,068 |   |  | US$ | 16,490 |  
|Operating expenses                                                              |  |                                                                     | 12,487 |  |      |   | 14,002 |      |  |   | 14,056 |  |  |      | 14,245 |  |      |   | 14,588 |   |  |     | 14,093 |  
|Operating income                                                                |  |                                                                     | 1,051  |  |      |   | 1,976  |      |  |   | 2,382  |  |  |      | 1,822  |  |      |   | 2,481  |   |  |     | 2,396  |  
|Donations and contribution payments(2)                                          |  |                                                                     | 145    |  |      |   | 157    |      |  |   | 145    |  |  |      | 182    |  |      |   | 147    |   |  |     | 142    |  
|Gain (loss) on disposition of available-for-sale securities(3)                  |  |                                                                     | 941    |  |      |   | 628    |      |  |   | 1,177  |  |  |      | 772    |  |      |   | (15    | ) |  |     | (15    | )
|Income taxes(4)                                                                 |  |                                                                     | 551    |  |      |   | 421    |      |  |   | 741    |  |  |      | 524    |  |      |   | 578    |   |  |     | 588    |  
|Net earnings                                                                    |  |                                                                     | 986    |  |      |   | 1,113  |      |  |   | 1,947  |  |  |      | 822    |  |      |   | 1,282  |   |  |     | 1,239  |  
|Basic earnings per share(5)                                                     |  |                                                                     | 3,165  |  |      |   | 3,576  |      |  |   | 7,504  |  |  |      | 3,802  |  |      |   | 6,084  |   |  |     | 5.88   |  
|Diluted earnings per share(6)                                                   |  |                                                                     | 3,165  |  |      |   | 3,576  |      |  |   | 6,601  |  |  |      | 3,313  |  |      |   | 5,697  |   |  |     | 5.50   |  
|Dividends per share(7)                                                          |  |                                                                     | 511    |  |      |   | 720    |      |  |   | 860    |  |  |      | 2,000  |  |      |   | 3,000  |   |  |     | 2.90   |  
|U.S. GAAP(8):                                                                   |  |                                                                     |        |  |      |   |        |      |  |   |        |  |  |      |        |  |      |   |        |   |  |     |        |  
|Operating revenues                                                              |  | W                                                                   | 10,512 |  |      | W | 11,588 |      |  | W | 11,508 |  |  | W    | 11,776 |  |      | W | 12,240 |   |  | US$ | 11,825 |  
|Operating income                                                                |  |                                                                     | 613    |  |      |   | 1,146  |      |  |   | 1,860  |  |  |      | 1,167  |  |      |   | 1,944  |   |  |     | 1,878  |  
|Income taxes                                                                    |  |                                                                     | 181    |  |      |   | 250    |      |  |   | 520    |  |  |      | 218    |  |      |   | 387    |   |  |     | 374    |  
|Net earnings                                                                    |  |                                                                     | 701    |  |      |   | 1,106  |      |  |   | 1,556  |  |  |      | 395    |  |      |   | 1,405  |   |  |     | 1,357  |  
|Basic earnings per share(5)                                                     |  |                                                                     | 2,251  |  |      |   | 3,233  |      |  |   | 5,997  |  |  |      | 1,830  |  |      |   | 6,663  |   |  |     | 6.44   |  
|Basic earnings per share before cumulative effect of accounting
    change(5)   |  |                                                                     | 2,966  |  |      |   | 3,233  |      |  |   | 5,997  |  |  |      | 1,830  |  |      |   | 6,663  |   |  |     | 6.44   |  
|Diluted earnings per share(6)                                                   |  |                                                                     | 2,251  |  |      |   | 3,233  |      |  |   | 4,972  |  |  |      | 1,655  |  |      |   | 6,215  |   |  |     | 6.00   |  
|Diluted earnings per share before cumulative effect of
    accounting change(6) |  |                                                                     | 2,966  |  |      |   | 3,233  |      |  |   | 4,972  |  |  |      | 1,655  |  |      |   | 6,215  |   |  |     | 6.00   |  

Balance Sheet Data


|                                                   |  |                                              |        |   |      |   |        |      |  |   |        |  |  |      |        |   |      |   |        |   |  |     |        |  
|-------------------------------------------------- |  | -------------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ | - | ---- | - | ------ | - |  | --- | ------ | -
|                                                   |  | Year Ended December 31,                      |       
|                                                   |  |                                              |       
|                                                   |  | 2000                                         |        |   | 2001 |   |        | 2002 |  |   | 2003   |  |  | 2004 |        |   | 2004 |  
|                                                   |  |                                              |        |   |      |   |        |      |  |   |        |  |  |      |        |   |      |  
|                                                   |  | (In billions of Won and millions of Dollars) |       
|Korean GAAP(1):                                    |  |                                              |        |   |      |   |        |      |  |   |        |  |  |      |        |   |      |   |        |   |  |     |        |  
|Working capital(9)                                 |  | W                                            | (3,252 | ) |      | W | (331   | )    |  | W | 499    |  |  | W    | (1,184 | ) |      | W | (1,526 | ) |  | US$ | (1,474 | )
|Net property, plants and equipment                 |  |                                              | 17,435 |   |      |   | 17,139 |      |  |   | 16,853 |  |  |      | 16,374 |   |      |   | 15,721 |   |  |     | 15,188 |  
|Total assets                                       |  |                                              | 28,393 |   |      |   | 30,012 |      |  |   | 29,050 |  |  |      | 25,557 |   |      |   | 26,473 |   |  |     | 25,576 |  
|Long-term debt, excluding current portion          |  |                                              | 5,319  |   |      |   | 6,513  |      |  |   | 9,877  |  |  |      | 9,050  |   |      |   | 6,985  |   |  |     | 6,748  |  
|Refundable deposits for telephone installation(10) |  |                                              | 3,040  |   |      |   | 2,349  |      |  |   | 1,534  |  |  |      | 1,227  |   |      |   | 1,087  |   |  |     | 1,050  |  
|Total stockholders equity                         |  |                                              | 12,370 |   |      |   | 13,759 |      |  |   | 9,833  |  |  |      | 8,397  |   |      |   | 9,026  |   |  |     | 8,720  |  
|U.S. GAAP(8):                                      |  |                                              |        |   |      |   |        |      |  |   |        |  |  |      |        |   |      |   |        |   |  |     |        |  
|Working capital(9)                                 |  | W                                            | (1,985 | ) |      | W | (666   | )    |  | W | 678    |  |  | W    | (99    | ) |      | W | (763   | ) |  | US$ | (737   | )
|Net property, plants and equipment                 |  |                                              | 13,600 |   |      |   | 12,804 |      |  |   | 11,995 |  |  |      | 11,515 |   |      |   | 10,846 |   |  |     | 10,479 |  
|Total assets                                       |  |                                              | 23,066 |   |      |   | 22,856 |      |  |   | 21,737 |  |  |      | 19,532 |   |      |   | 20,384 |   |  |     | 19,693 |  
|Total stockholders equity                         |  |                                              | 10,637 |   |      |   | 11,189 |      |  |   | 7,270  |  |  |      | 5,890  |   |      |   | 6,660  |   |  |     | 6,434  |  

2



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##### 



Operating Data


|                                           |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |        |  |  |  |        | 
|------------------------------------------ |  | ------------------ | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------ |  |  |  | ------ | 
|                                           |  | As of December 31, |       
|                                           |  |                    |       
|                                           |  | 2000               |        |  | 2001 |  |        | 2002 |  |  | 2003   |  |  | 2004 |       
|                                           |  |                    |        |  |      |  |        |      |  |  |        |  |  |      |       
|                                           |  | (Unaudited)        |       
|Lines installed (thousands)(11)            |  |                    | 24,383 |  |      |  | 24,854 |      |  |  | 25,062 |  |  |      | 25,202 |  |  |  | 25,577 | 
|Lines in service (thousands)(11)           |  |                    | 21,525 |  |      |  | 21,898 |      |  |  | 22,327 |  |  |      | 21,841 |  |  |  | 21,091 | 
|Lines in service per 100 inhabitants(12)   |  |                    | 44.1   |  |      |  | 44.9   |      |  |  | 46.8   |  |  |      | 45.6   |  |  |  | 43.1   | 
|Lines in service per employee(11)(13)      |  |                    | 473    |  |      |  | 497    |      |  |  | 511    |  |  |      | 580    |  |  |  | 559    | 
|PCS subscribers (thousands)(14)            |  |                    | 8,416  |  |      |  | 9,591  |      |  |  | 10,333 |  |  |      | 10,442 |  |  |  | 11,729 | 
|Broadband Internet subscribers (thousands) |  |                    | 1,729  |  |      |  | 3,858  |      |  |  | 4,922  |  |  |      | 5,589  |  |  |  | 6,078  | 

Other Financial Data


|                                                    |  |                                              |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |     |        |  
|--------------------------------------------------- |  | -------------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - | ---- | - | ------ | - |  | --- | ------ | -
|                                                    |  | Year Ended December 31,                      |       
|                                                    |  |                                              |       
|                                                    |  | 2000                                         |        |   | 2001 |   |        | 2002 |  |   | 2003   |   |  | 2004 |        |   | 2004 |  
|                                                    |  |                                              |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |  
|                                                    |  | (In billions of Won and millions of Dollars) |       
|Korean GAAP(1):                                     |  |                                              |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |     |        |  
|Net cash provided by operating activities           |  | W                                            | 2,651  |   |      | W | 3,629  |      |  | W | 4,827  |   |  | W    | 3,190  |   |      | W | 4,719  |   |  | US$ | 4,559  |  
|Net cash used in investing activities               |  |                                              | (5,486 | ) |      |   | (3,916 | )    |  |   | (4,065 | ) |  |      | (1,481 | ) |      |   | (3,618 | ) |  |     | (3,459 | )
|Net cash provided by (used in) financing activities |  |                                              | 2,842  |   |      |   | 755    |      |  |   | (844   | ) |  |      | (2,065 | ) |      |   | (106   | ) |  |     | (103   | )
|U.S. GAAP(8):                                       |  |                                              |        |   |      |   |        |      |  |   |        |   |  |      |        |   |      |   |        |   |  |     |        |  
|Net cash provided by operating activities           |  | W                                            | 2,196  |   |      | W | 2,317  |      |  | W | 2,973  |   |  | W    | 2,174  |   |      | W | 3,613  |   |  | US$ | 3,491  |  
|Net cash used in investing activities               |  |                                              | (4,651 | ) |      |   | (2,443 | )    |  |   | (2,639 | ) |  |      | (1,654 | ) |      |   | (2,607 | ) |  |     | (2,519 | )
|Net cash provided by (used in) financing activities |  |                                              | 2,450  |   |      |   | 299    |      |  |   | (254   | ) |  |      | (691   | ) |      |   | (19    | ) |  |     | (19    | )






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Effective January 1, 2003, we adopted Statements of Korea
    Accounting Standards (SKAS) No. 2 through
    No. 9. In accordance with these standards, the cumulative
    effects on prior years were adjusted to the beginning balance of
    retained earnings. In addition, certain accounts of the prior
    year consolidated financial statements were reclassified to
    conform to the current years presentation. See
    Note 2(a) to the Consolidated Financial Statements.                                                                                                                                                    
|
| | (2) | Includes donations and contributions to the Governments
    Information and Telecommunication Improvement Fund, the Korea
    Electronic Telecommunication Research Institute and other
    institutes supporting science and technology research. See
    Note 32 to the Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                 
|
| | (3) | Includes a gain of Won 921 billion in 2000 as a result
    of our disposition of 2,943,627 shares of SK Telecom to the
    major shareholders of Hansol M.com in connection with our
    acquisition of a 47.9% interest in Hansol M.com, a gain of
    Won 616 billion in 2001 as a result of our disposition
    of 2,674,580 shares of SK Telecom, a gain of
    Won 1,154 billion in 2002 as a result of our
    disposition of 5,457,635 shares of SK Telecom and a gain of
    Won 776 billion in 2003 as a result of our disposition
    of 3,809,288 shares of SK Telecom. See Note 8(b) to
    the Consolidated Financial Statements.
|
| | (4) | Includes deferred tax expense of Won 233 billion in
    2000 related to the write-off of deferred income tax assets of
    KT M.com due to KT M.coms conclusion in December 2000 that
    it was not likely that KT M.com would be able to realize the tax
    benefit of KT M.coms loss carryforward. Includes
    impairment of deferred tax asset of Won 134 billion in
    2003 and Won 170 billion in 2004 due to our conclusion
    in 2003 that we would not be able to realize the tax benefit of
    our equity in losses of affiliates. See Note 26 to the
    Consolidated Financial Statements.                                 

3



---



##### 





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Basic earnings per share under Korean GAAP and U.S. GAAP is
    calculated by dividing net earnings by the weighted average
    number of shares outstanding during the period. The weighted
    average number of shares outstanding during the period was
    259,450 thousand for 2002, 216,106 thousand for 2003
    and 210,759 thousand for 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (6) | Diluted earnings per share are calculated based on the effect of
    dilutive securities that were outstanding during the period. The
    denominator of the diluted earnings per share computation is
    adjusted to include the number of additional common shares that
    would have been outstanding if the dilutive securities had been
    converted into common stock. In addition, the numerator is
    adjusted to include the after-tax amount of interest recognized
    associated with convertible notes. The weighted average number
    of shares outstanding was 300,097 thousand for 2002,
    263,556 thousand for 2003 and 233,270 thousand for
    2004 (Under U.S. GAAP, 300,097 thousand for 2002,
    241,291 thousand for 2003 and 233,270 thousand for
    2004).
|
| | (7) | Dividends paid on a per share basis for shares owned by the
    Government differ from dividends paid on a per share basis to
    all the other shareholders. The Government completed the
    disposition of its ownership interest in us in May 2002. The
    calculation of dividends per share represents the weighted
    average dividends paid per share.                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | (8) | See Note 36 to the Consolidated Financial Statements for
    reconciliation to U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (9) | Working capital means current assets minus current
    liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | See Item 5. Operating and Financial Review and
    Prospects  Item 5.A. Operating
    Results  Non-refundable Service Installation
    Fee, Item 4. Information on the
    Company  Item 4.B. Business Overview 
    Revenues and Rates  Telephone Services 
    Local Telephone Service and Note 16 to the
    Consolidated Financial Statements for a discussion of changes in
    the telephone installation charge system.                                                                                                                                                                                                                                                                                   
|    
|(11) | Including public telephones.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(12) | Excluding public telephones.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(13) | Excluding employees of our subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(14) | Includes subscribers of KTF and resale subscribers of KT
    Corporation and as of December 31, 2000, subscribers of
    KT M.com. In June and October 2000, we acquired a 47.9%
    interest in KT M.com. KT M.com merged into KTF on
    May 1, 2001. As of December 31, 2002, KTF had
    approximately 8.9 million subscribers and KT Corporation
    had approximately 1.4 million resale subscribers. As of
    December 31, 2003, KTF had approximately 8.9 million
    subscribers and KT Corporation had approximately
    1.6 million resale subscribers. As of December 31,
    2004, KTF had approximately 9.5 million subscribers and KT
    Corporation had approximately 2.2 million resale
    subscribers.

4



---



##### 



Exchange Rate Information




|                       |                        |                   |         |         |         |  |         |         |  |  |         |         |  |  |         |         | 
|---------------------- | ---------------------- | ----------------- | ------- | ------- | ------- |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                       |                        | At End            |         |         | Average |  |         |         |  | 
|Period                 |                        | of Period         |         |         | Rate(1) |  |         | High    |  |  | Low     |        
|                       |                        |                   |         |         |         |  |         |         |  |  |         |        
|                       |                        | (Won per US$1.00) |        
|2000                   |                        |                   | 1,267.0 |         |         |  | 1,140.0 |         |  |  | 1,267.0 |         |  |  | 1,105.5 |        
|2001                   |                        |                   | 1,313.5 |         |         |  | 1,293.4 |         |  |  | 1,369.0 |         |  |  | 1,234.0 |        
|2002                   |                        |                   | 1,186.3 |         |         |  | 1,242.0 |         |  |  | 1,332.0 |         |  |  | 1,160.6 |        
|2003                   |                        |                   | 1,192.0 |         |         |  | 1,183.0 |         |  |  | 1,262.0 |         |  |  | 1,146.0 |        
|2004                   |                        |                   | 1,035.1 |         |         |  | 1,139.3 |         |  |  | 1,195.1 |         |  |  | 1,035.1 |        
|2005 (through June 24) |                        |                   | 1,013.5 |         |         |  | 1,009.8 |         |  |  | 1,058.0 |         |  |  | 997.0   |        
|                       | January                |                   |         | 1,026.9 |         |  |         | 1,038.0 |  |  |         | 1,058.0 |  |  |         | 1,024.0 | 
|                       | February               |                   |         | 1,000.9 |         |  |         | 1,023.1 |  |  |         | 1,044.0 |  |  |         | 1,000.9 | 
|                       | March                  |                   |         | 1,015.4 |         |  |         | 1,007.8 |  |  |         | 1,023.9 |  |  |         | 997.5   | 
|                       | April                  |                   |         | 997.0   |         |  |         | 1,010.1 |  |  |         | 1,019.0 |  |  |         | 997.0   | 
|                       | May                    |                   |         | 1,005.0 |         |  |         | 1,001.8 |  |  |         | 1,009.0 |  |  |         | 997.0   | 
|                       | June (through June 24) |                   |         | 1,013.5 |         |  |         | 1,009.6 |  |  |         | 1,016.0 |  |  |         | 1,003.0 | 




Source:




|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The average rate for each full year is calculated as the average
    of the noon buying rates on the last business day of each month
    during the relevant year. The average rate for a full month is
    calculated as the average of the noon buying rates on each
    business day during the relevant month (or portion thereof).








|          |                                
|--------- | -------------------------------
|Item 3.B. | Capitalization and Indebtedness








|          |                                      
|--------- | -------------------------------------
|Item 3.C. | Reasons for Offer and Use of Proceeds








|          |             
|--------- | ------------
|Item 3.D. | Risk Factors



Increased competition in Korea has had and may continue to
have an adverse effect on our results of operations and
financial condition




5



---



##### 





| |                              
| | -----------------------------
| | Fixed-line Telephone Services







| |            
| | -----------
| | PCS Service







6



---



##### 







| |                  
| | -----------------
| | Internet Services







| |              
| | -------------
| | WTO Agreement



Implementation of the IMT-2000 technology poses challenges
and risks to us






7



---



##### 





Disputes with our labor union may disrupt our business
operations






The Korean telecommunications industry has been subject to
the Governments regulation and change in Government policy
relating to the industry could have a material adverse effect on
our operations and financial condition






8



---



##### 



We are subject to various regulations under the Monopoly
Regulation and Fair Trade Act








Korea is our most important market, and our current business
and future growth could be materially and adversely affected if
economic conditions in Korea deteriorate










| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial problems or lack of progress in restructuring of
    chaebols, or Korean conglomerates, other large troubled
    companies, their suppliers or the financial sector, including
    credit card companies;
|
| |  | loss of investor confidence arising from corporate accounting
    irregularities and corporate governance issues of certain
    chaebols;                                                                          
|
| |  | a slowdown in consumer spending;                                                                                                                                                                                   
|
| |  | adverse changes or volatility in foreign currency reserve
    levels, commodity prices, exchange rates, interest rates or
    stock markets;                                                                       

9



---



##### 





| |   |                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | adverse developments in the economies of countries that are
    important export markets for Korea, such as the United States,
    Japan and China, or in emerging market economies in Asia or
    elsewhere;                                                                              
|
| |  | the continued emergence of the Chinese economy, to the extent
    its benefits (such as increased exports to China) are outweighed
    by its costs (such as competition in export markets or for
    foreign investment and the relocation of manufacturing base from
    Korea to China);
|
| |  | social and labor unrest;                                                                                                                                                                                                                                                                   
|
| |  | a decrease in tax revenues and a substantial increase in the
    Korean governments expenditures for unemployment
    compensation and other social programs that, together, would
    lead to an increased government budget deficit;                                                    
|
| |  | geo-political uncertainty and risk of further attacks by
    terrorist groups around the world;                                                                                                                                                                                            
|
| |  | the recurrence of SARS or avian flu in Asia and other parts of
    the world;                                                                                                                                                                                                              
|
| |  | deterioration in economic or diplomatic relations between Korea
    and its trading partners or allies, including deterioration
    resulting from trade disputes or disagreements in foreign policy;                                                                                      
|
| |  | political uncertainty or increasing strife among or within
    political parties in Korea;                                                                                                                                                                                                 
|
| |  | hostilities involving oil producing countries in the Middle East
    and any material disruption in the supply of oil or increase in
    the price of oil; and                                                                                                                             
|
| |  | an increase in the level of tension or an outbreak of
    hostilities between North Korea and Korea or the United States.                                                                                                                                                                  

Escalations in tension with North Korea could have an adverse
effect on us and the market value of our Notes








10



---



##### 



Depreciation of the value of the Won against the Dollar and
other major foreign currencies may have a material adverse
effect on the results of our operations and on the prices of our
securities








| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | dividends, which will be paid in Won to the depositary bank and
    converted by the depositary bank into Dollars;
|
| |  | the Dollar value of the proceeds which a holder will receive
    upon sale in Korea of the shares; and            
|
| |  | the secondary market price of the ADSs.                                                                           



If an investor surrenders his ADSs to withdraw the underlying
shares, he may not be allowed to deposit the shares again to
obtain ADSs.




Limitations on foreign ownership may have an adverse effect
on the conversion of our convertible notes.




11



---



##### 





A foreign investor may not be able to exercise voting rights
with respect to common shares exceeding the number of common
shares held by our largest domestic shareholder.




Holders of ADSs will not be able to exercise dissenters
rights unless they have withdrawn the underlying common stock
and become our direct shareholders.




An investor may not be able to exercise preemptive rights for
additional shares and may suffer dilution of his equity interest
in us.






| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | a registration statement filed by us under the Securities Act of
    1933, as amended, is in effect with respect to those
    shares; or
|
| |  | the offering and sale of those shares is exempt from or is not
    subject to the registration requirements of the Securities Act.      



You may not be able to find trading markets for your
bonds.




12



---



##### 



Forward-looking statements may prove to be inaccurate









|        |                           
|------- | --------------------------
|Item 4. | Information on the Company






|          |                                       
|--------- | --------------------------------------
|Item 4.A. | History and Development of the Company












|          |                  
|--------- | -----------------
|Item 4.B. | Business Overview





| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | telephone services, including local, domestic long-distance and
    international long-distance fixed-line telephone services and
    interconnection services to other telecommunications companies;
|
| |  | broadband Internet access service and other Internet-related
    services;                                                                                                                           
|
| |  | PCS mobile telecommunications service; and                                                                                                                                                           

13



---



##### 





| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | various other services, including leased line service and other
    data communication service, satellite service and system and
    network integration service.









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are currently the dominant provider of fixed-line telephone
    services in Korea with approximately 25.5 million installed
    lines, of which 21.0 million lines were in service as of
    March 31, 2005. As of March 31, 2005, our market share
    of the local market was 93.8% based on the number of local
    fixed-line subscribers in Korea. Based on revenues in March 2005
    estimated by us, our market share of the domestic long-distance
    market was 83.2% and our market share of the international
    long-distance market was 45.6%;
|
| |  | We are one of the worlds largest broadband Internet access
    providers and Koreas largest provider in terms of
    subscribers, with 6.1 million subscribers as of
    March 31, 2005, representing a market share of 50.7%;                                                                                                                                                                                                                                                                                                                                 
|
| |  | We are Koreas second largest mobile telecommunications
    service provider. KTF, our consolidated subsidiary, had
    approximately 12.0 million subscribers (including our
    resale subscribers) as of March 31, 2005, representing a
    market share of 32.5% of the total mobile service market in
    Korea based on the number of mobile subscribers; and                                                                                                                                                                                              
|
| |  | We are also the leading provider of data communication service
    in Korea, with a market share of 67.5% of the domestic leased
    line market in March 2005 based on revenues estimated by us.                                                                                                                                                                                                                                                                                                                                                                



The Telecommunications Industry in Korea






14



---



##### 





| |                                 
| | --------------------------------
| | Broadband Internet Access Market







| |                                         
| | ----------------------------------------
| | Mobile Telecommunications Service Market





|                              |  |                    |        |   |      |  |        |      |  |  |        |   |  |      |        |   |  |  |        |  
|----------------------------- |  | ------------------ | ------ | - | ---- |  | ------ | ---- |  |  | ------ | - |  | ---- | ------ | - |  |  | ------ | -
|                              |  | As of December 31, |       
|                              |  |                    |       
|                              |  | 2000               |        |   | 2001 |  |        | 2002 |  |  | 2003   |   |  | 2004 |       
|                              |  |                    |        |   |      |  |        |      |  |  |        |   |  |      |       
|Total Korean Population(1)    |  |                    | 47,008 |   |      |  | 47,343 |      |  |  | 47,640 |   |  |      | 47,925 |   |  |  | 48,199 |  
|Mobile Subscribers(2)         |  |                    | 26,817 |   |      |  | 29,046 |      |  |  | 32,342 |   |  |      | 33,592 |   |  |  | 36,586 |  
|PCS(2)                        |  |                    | 12,364 |   |      |  | 13,867 |      |  |  | 15,122 |   |  |      | 15,279 |   |  |  | 17,803 |  
|Cellular(2)                   |  |                    | 14,453 |   |      |  | 15,179 |      |  |  | 17,220 |   |  |      | 18,313 |   |  |  | 18,783 |  
|Mobile Subscriber Growth Rate |  |                    | 14.4   | % |      |  | 8.3    | %    |  |  | 11.3   | % |  |      | 3.9    | % |  |  | 8.9    | %
|Mobile Penetration(3)         |  |                    | 57.0   | % |      |  | 61.4   | %    |  |  | 67.9   | % |  |      | 70.1   | % |  |  | 75.9   | %






|    |                                                                                                   
|--- | --------------------------------------------------------------------------------------------------
|(1) | In thousands, based on population trend estimates by the
    National Statistical Office of Korea.
|   
|(2) | In thousands, based on information compiled by the Ministry of
    Information and Communication. 
|   
|(3) | Penetration is determined by dividing mobile subscribers by
    total Korean population.          



15



---



##### 





Competitive Strengths




| |                                                                                  
| | ---------------------------------------------------------------------------------
| | We are the only fully integrated telecommunications
    service provider in Korea







| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | We have a large customer base, dominant market position
    and strong brand recognition



|                               |  |                  |      |  |                |  |      |  
|------------------------------ |  | ---------------- | ---- |  | -------------- |  | ---- | -
|                               |  | Year Competition |      |  | KT Corporation | 
|Service                        |  | Introduced       |      |  | Market Share   | 
|                               |  |                  |      |  |                | 
|Local(1)                       |  |                  | 1999 |  |                |  | 93.8 | %
|Domestic long distance(2)      |  |                  | 1996 |  |                |  | 83.2 | %
|International long distance(2) |  |                  | 1991 |  |                |  | 45.6 | %
|Broadband Internet access(1)   |  |                  | 1998 |  |                |  | 50.7 | %






|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|(1) | In terms of subscribers as of March 31, 2005 announced by
    the Ministry of Information and Communication.
|   
|(2) | In terms of revenues in March 2005 estimated by us.                                                         



16



---



##### 





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | We have achieved critical mass in the mobile
    telecommunications service market





| |                                                                                
| | -------------------------------------------------------------------------------
| | We have a proven track record of improving our efficiency
    and profitability



Business Strategy










| |                                             
| | --------------------------------------------
| | Focus on high-growth, high-margin businesses



Internet Services.


PCS Service.


17



---



##### 





New Businesses.








| |                                                                 
| | ----------------------------------------------------------------
| | Leverage dominant market positions to maximize
    profitability







| |                                                  
| | -------------------------------------------------
| | Promote synergies within the KT Corporation group





| |   |                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have been successful in reselling PCS services through KT
    Corporation, with approximately 2.5 million resale
    subscribers as of March 31, 2005;                                                                                                                                                    
|
| |  | our Nespot Swing service and KTFs mobile service integrate
    wireless and fixed-line services by enabling subscribers with
    PDA phones access to high speed Internet in hot-spot zones,
    Megapass service in fixed-line environments and KTFs
    wireless data service outside the hot-spot zones;

18



---



##### 





| |   |                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our One Phone service integrates our fixed-line services and
    KTFs wireless service by enabling specially designed
    handsets to act as cordless phones within the transmission range
    of a users base transmitter, and to act as PCS mobile
    phones outside such areas; and
|
| |  | our enhanced video-on-demand services allow subscribers of both
    our Megapass broadband Internet access service and SkyLife
    satellite broadcasting service to experience higher-quality
    video and audio offerings on demand through an integrated
    set-top box.            



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Continue to improve operational efficiencies through
    company-wide process innovation



Our Services




| |                   
| | ------------------
| | Telephone Services

Fixed-line Telephone Services.


|                                                   |  |                                          |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|-------------------------------------------------- |  | ---------------------------------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  |  |  | ------- | 
|                                                   |  | As of or for the Year Ended December 31, |        
|                                                   |  |                                          |        
|                                                   |  | 2000                                     |         |  | 2001 |  |         | 2002 |  |  | 2003    |  |  | 2004 |        
|                                                   |  |                                          |         |  |      |  |         |      |  |  |         |  |  |      |        
|Lines installed (thousands)(1)                     |  |                                          | 24,383  |  |      |  | 24,854  |      |  |  | 25,104  |  |  |      | 25,202  |  |  |  | 25,577  | 
|Lines in service (thousands)(1)                    |  |                                          | 21,525  |  |      |  | 21,898  |      |  |  | 22,327  |  |  |      | 21,841  |  |  |  | 21,091  | 
|Lines in service per 100 inhabitants(2)            |  |                                          | 44.1    |  |      |  | 44.9    |      |  |  | 46.8    |  |  |      | 45.6    |  |  |  | 43.1    | 
|Percentage of lines connected to digital exchanges |  |                                          | 79.7    |  |      |  | 87.5    |      |  |  | 92.4    |  |  |      | 100.0   |  |  |  | 100.0   | 
|Lines in service per employee(3)                   |  |                                          | 473     |  |      |  | 497     |      |  |  | 511     |  |  |      | 580     |  |  |  | 559     | 
|Fiber optic cable (kilometers)                     |  |                                          | 111,728 |  |      |  | 118,815 |      |  |  | 122,243 |  |  |      | 128,478 |  |  |  | 133,181 | 
|Number of public telephones installed (thousands)  |  |                                          | 539     |  |      |  | 500     |      |  |  | 446     |  |  |      | 374     |  |  |  | 317     | 
|Domestic long-distance call minutes (millions)(4)  |  |                                          | 21,563  |  |      |  | 19,632  |      |  |  | 17,133  |  |  |      | 17,007  |  |  |  | 15,024  | 
|Local call pulses (millions)(5)                    |  |                                          | 34,691  |  |      |  | 30,968  |      |  |  | 26,859  |  |  |      | 23,597  |  |  |  | 20,585  | 






|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Including lines used for public telephones, which were 538,983
    lines, 499,566 lines, 446,367 lines, 374,000 lines and 317,000
    lines, respectively, for the years presented.
|   
|(2) | Source: KT Corporation. Excluding public telephones.                                                                                                                               
|   
|(3) | Excluding employees of our subsidiaries and including lines used
    for public telephones.                                                                                        
|   
|(4) | Including calls placed from public telephones.                                                                                                                                     
|   
|(5) | Including calls placed from public telephones.                                                                                                                                     



19



---



##### 







|                                           |       |                                 |       |         |      |  |       |         |  |  |       |         |  |      |       |         |  |  |       |         | 
|------------------------------------------ | ----- | ------------------------------- | ----- | ------- | ---- |  | ----- | ------- |  |  | ----- | ------- |  | ---- | ----- | ------- |  |  | ----- | ------- | 
|                                           |       | Year Ended December 31,         |      
|                                           |       |                                 |      
|                                           |       | 2000                            |       |         | 2001 |  |       | 2002    |  |  | 2003  |         |  | 2004 |      
|                                           |       |                                 |       |         |      |  |       |         |  |  |       |         |  |      |      
|                                           |       | (In millions of billed minutes) |      
|Incoming international long-distance calls |       |                                 | 460.1 |         |      |  | 515.8 |         |  |  | 544.0 |         |  |      | 528.8 |         |  |  | 569.8 |        
|Outgoing international long-distance calls |       |                                 | 552.1 |         |      |  | 552.9 |         |  |  | 572.3 |         |  |      | 524.7 |         |  |  | 527.4 |        
|                                           |       |                                 |       |         |      |  |       |         |  |  |       |         |  |      |      
|                                           | Total |                                 |       | 1,012.2 |      |  |       | 1,068.7 |  |  |       | 1,116.3 |  |      |       | 1,053.5 |  |  |       | 1,097.2 | 
|                                           |       |                                 |       |         |      |  |       |         |  |  |       |         |  |      |      





Interconnection.




| |                  
| | -----------------
| | Internet Services

Broadband Internet Access Service.


20



---



##### 







| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | xDSL services under the Megapass brand name;                                                                                                                                                                                                                            
|
| |  | fiber-optic cable-based service under the Ntopia
    brand name; and                                                                                                                                                                                                    
|
| |  | wireless LAN service under the Nespot brand name,
    which is designed to integrate fixed-line and wireless services
    by offering high speed wireless Internet access to laptops and
    PDAs in hot-spot zones and Megapass service in fixed-line
    environments.













21



---



##### 





Miscellaneous Internet-related Services.






bizmeka.com Bizmeka.com




| |            
| | -----------
| | PCS Service





22



---



##### 





|                                                   |  |                                          |            |  |      |  |            |      |  |  |            | 
|-------------------------------------------------- |  | ---------------------------------------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                                                   |  | As of or for the Year Ended December 31, |           
|                                                   |  |                                          |           
|                                                   |  | 2002                                     |            |  | 2003 |  |            | 2004 | 
|                                                   |  |                                          |            |  |      |  |            |      | 
|Outgoing Minutes (in thousands)                    |  |                                          | 16,130,211 |  |      |  | 16,035,117 |      |  |  | 19,950,143 | 
|Average Monthly Outgoing Minutes per Subscriber(1) |  |                                          | 153        |  |      |  | 159        |      |  |  | 181        | 
|Average Monthly Revenue per Subscriber(2)          |  |                                          | W38,694    |  |      |  | W38,539    |      |  |  | W39,890    | 
|Number of Subscribers (in thousands)(3)            |  |                                          | 10,333     |  |      |  | 10,442     |      |  |  | 11,729     | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The average monthly outgoing minutes per subscriber is computed
    by dividing the total minutes of usage for the period by the
    weighted average number of subscribers for the period and
    dividing the quotient by the number of months in the period. The
    weighted average number of subscribers is the sum of the total
    number of subscribers at the end of each month divided by the
    number of months in the period.
|   
|(2) | The average monthly revenue per subscriber is computed by
    dividing total monthly access fees, usage charges,
    interconnection fees and value-added service fees for the period
    by the weighted average number of subscribers and dividing the
    quotient by the number of months in the period.                                                                                                                                
|   
|(3) | Includes resale subscribers of KT Corporation who utilized
    KTFs network. KT Corporation had approximately
    2.2 million resale subscribers as of December 31, 2004.                                                                                                                                                                                                                                                                  









23



---



##### 







| |                           
| | --------------------------
| | Data Communication Service





| |                   
| | ------------------
| | Satellite Services









| |                       
| | ----------------------
| | Miscellaneous Services





| |   |                                        
| | - | ---------------------------------------
| |  | system and network integration service;
|
| |  | services provided by KTH; and          
|
| |  | real estate-related service.           



System and Network Integration Service.


KTH. paran.com hanmir.com) hanmir.com


24



---



##### 





Revenues and Rates




|                    |                                            |                         |                          |      |      |       |      |      |      |       |      |      |      |       |  
|------------------- | ------------------------------------------ | ----------------------- | ------------------------ | ---- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | -
|                    |                                            | Year Ended December 31, |                         
|                    |                                            |                         |                         
|                    |                                            | 2002                    |                          |      | 2003 |       |      | 2004 |     
|                    |                                            |                         |                          |      |      |       |      |      |     
|Telephone services: |                                            |                         |                          |      |      |       |      |      |      |       |      |     
|                    | Local service                              |                         |                          | 17.6 | %    |       |      | 18.8 | %    |       |      | 17.4 | %   
|                    | Non-refundable service installation fees   |                         |                          | 1.5  |      |       |      | 0.8  |      |       |      | 0.5  |     
|                    | Domestic long-distance service             |                         |                          | 6.5  |      |       |      | 5.8  |      |       |      | 5.0  |     
|                    | International long-distance service        |                         |                          | 3.3  |      |       |      | 2.8  |      |       |      | 2.5  |     
|                    | Land-to-mobile interconnection             |                         |                          | 13.1 |      |       |      | 12.9 |      |       |      | 10.9 |     
|                    |                                            |                         |                          |      |      |       |      |      |     
|                    |                                            | Sub-total               |                          |      | 42.0 |       |      |      | 41.1 |       |      |      | 36.3 |      
|                    |                                            |                         |                          |      |      |       |      |      |     
|Internet services:  |                                            |                         |                          |      |      |       |      |      |      |       |      |     
|                    | Broadband Internet access service          |                         |                          | 9.6  |      |       |      | 11.8 |      |       |      | 12.5 |     
|                    | Miscellaneous Internet-related services(1) |                         |                          | 2.5  |      |       |      | 3.0  |      |       |      | 2.8  |     
|                    |                                            |                         |                          |      |      |       |      |      |     
|                    |                                            | Sub-total               |                          |      | 12.1 |       |      |      | 14.8 |       |      |      | 15.3 |      
|                    |                                            |                         |                          |      |      |       |      |      |     
|PCS service         |                                            |                         | 25.1                     |      |      |       | 25.9 |      |      |       | 28.1 |     
|Sales of goods(2)   |                                            |                         | 8.3                      |      |      |       | 7.2  |      |      |       | 10.3 |     
|Other services:     |                                            |                         |                          |      |      |       |      |      |      |       |      |     
|                    | Data communications service                |                         |                          | 7.7  |      |       |      | 6.7  |      |       |      | 5.6  |     
|                    | Satellite service                          |                         |                          | 0.8  |      |       |      | 0.8  |      |       |      | 0.7  |     
|                    | Miscellaneous(3)                           |                         |                          | 4.1  |      |       |      | 3.5  |      |       |      | 3.7  |     
|                    |                                            |                         |                          |      |      |       |      |      |     
|                    |                                            | Sub-total               |                          |      | 12.5 |       |      |      | 11.0 |       |      |      | 10.0 |      
|                    |                                            |                         |                          |      |      |       |      |      |     
|                    |                                            |                         | Total operating revenues |      |      | 100.0 | %    |      |      | 100.0 | %    |      |      | 100.0 | %
|                    |                                            |                         |                          |      |      |       |      |      |     






|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes revenues from Kornet Internet connection service and
    services provided by our Internet data centers and
    bizmeka.com.
|   
|(2) | Includes PCS handset sales.                                                                                                          
|   
|(3) | Includes revenues from system and network integration services,
    KTH and real estate related service.                             



| |                   
| | ------------------
| | Telephone Services

Local Telephone Service.




| |   |                                                          
| | - | ---------------------------------------------------------
| |  | installation fees for new lines;                         
|
| |  | monthly basic charges; and                               
|
| |  | monthly usage charges based on the number of call pulses.



25



---



##### 





|                                   |                  |        |  |     |          |  |  |         |  |  |         |     |  |          |  |       |           |  |  |         |  |  |  |     |  |  |  |     | 
|---------------------------------- | ---------------- | ------ |  | --- | -------- |  |  | ------- |  |  | ------- | --- |  | -------- |  | ----- | --------- |  |  | ------- |  |  |  | --- |  |  |  | --- | 
|                                   |                  | May 1, |  |     | Feb. 10, |  |  | Aug. 1, |  |  | Dec. 1, |     |  | Sept. 1, |  |       | April 15, |  |  | Nov. 1, | 
|                                   |                  | 1991   |  |     | 1993     |  |  | 1994    |  |  | 1996    |     |  | 1997     |  |       | 2001      |  |  | 2001    | 
|                                   |                  |        |  |     |          |  |  |         |  |  |         |     |  |          |  |       |           |  |  |         | 
|Local Usage Charges (per pulse)(1) |                  |        |  |     |          |  |  |         |  |  |         |     |  |          |  |       |           |  |  |         |  |  |  |     |  |  |  |    
|                                   | Regular service  |        |  | W25 |          |  |  | W30     |  |  |         | W40 |  |          |  | W41.6 |           |  |  | W45     |  |  |  | W39 |  |  |  | W39 | 
|                                   | Public telephone |        |  | 20  |          |  |  | 30      |  |  |         | 40  |  |          |  | 40    |           |  |  | 50      |  |  |  | 50  |  |  |  | 70  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Since January 1, 1990, usage charges for local service in
    those metropolitan areas subject to measured service have been
    based on the number of pulses, which are a function of the
    duration and number of calls, and per pulse rates. Before
    January 1, 1993, in areas not subject to measured service,
    a pulse was triggered once for each local telephone call,
    regardless of the length of the call. Commencing January 1,
    1993, measured service applies to all lines in service. A pulse
    is triggered at the beginning of each local call and every three
    minutes thereafter from 8:00 a.m. to 9:00 p.m. on
    weekdays and every 258 seconds thereafter on holidays and from
    9:00 p.m. to 8:00 a.m. on weekdays.



|                                                            |  |                                                               |  |                                                      
|----------------------------------------------------------- |  | ------------------------------------------------------------- |  | -----------------------------------------------------
|Rates from September 1998 to April 14, 2001                 |  | Original Plan                                                 |  | Second Plan                                          
|                                                            |  |                                                               |  |                                                      
|Installation Deposit (refunded upon termination of service) |  | Between Won 122,000 to Won 242,000, depending on
    location |  | None                                                 
|Non-refundable Installation Fee                             |  | Won 8,000                                                     |  | Won 100,000                                          
|Monthly Basic Charge                                        |  | Between Won 1,500 to Won 2,500, depending on location         |  | Between Won 2,000 to Won 4,000, depending on location





|                                                            |  |                                                      
|----------------------------------------------------------- |  | -----------------------------------------------------
|Rates Starting April 15, 2001                               |  | New Plan                                             
|                                                            |  |                                                      
|Installation Deposit (refunded upon termination of service) |  | None                                                 
|Non-refundable Installation Fee                             |  | Won 60,000 (including value added tax)               
|Monthly Basic Charge                                        |  | Between Won 3,000 to Won 5,200, depending on location



26



---



##### 







Domestic Long-distance Telephone Service.




|                                                             |                  |                        |   |     |          |  |   |         |  |  |         |     |  |          |   |      |         |  |   |           |  |  |         |     |  |  |   |     |  |  |   |     | 
|------------------------------------------------------------ | ---------------- | ---------------------- | - | --- | -------- |  | - | ------- |  |  | ------- | --- |  | -------- | - | ---- | ------- |  | - | --------- |  |  | ------- | --- |  |  | - | --- |  |  | - | --- | 
|                                                             |                  | Date of Rate Change(1) |  
|                                                             |                  |                        |  
|                                                             |                  | May 1,                 |   |     | Feb. 10, |  |   | Aug. 1, |  |  | Dec. 1, |     |  | Sept. 1, |   |      | Dec. 1, |  |   | April 15, |  |  | Nov. 1, |    
|                                                             |                  | 1991                   |   |     | 1993     |  |   | 1994    |  |  | 1996    |     |  | 1997     |   |      | 2000    |  |   | 2001      |  |  | 2001    |    
|                                                             |                  |                        |   |     |          |  |   |         |  |  |         |     |  |          |   |      |         |  |   |           |  |  |         |    
|Domestic Long-Distance Charges
    (per three minutes)(1)(2) |                  |                        |   |     |          |  |   |         |  |  |         |     |  |          |   |      |         |  |   |           |  |  |         |     |  |  |   |     |  |  |   |    
|                                                             | Up to 30 km      |                        | W | 100 |          |  | W | 100     |  |  | W       | 40  |  |          | W | 41.6 |         |  | W | 45        |  |  | W       | 45  |  |  | W | 39  |  |  | W | 39  | 
|                                                             | Up to 100 km     |                        |   | 400 |          |  |   | 360     |  |  |         | 200 |  |          |   | 183  |         |  |   | 172       |  |  |         | 192 |  |  |   | 192 |  |  |   | 261 | 
|                                                             | 100 km or longer |                        |   | 900 |          |  |   | 675     |  |  |         | 313 |  |          |   | 277  |         |  |   | 245       |  |  |         | 252 |  |  |   | 252 |  |  |   | 261 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Domestic long-distance calls of up to 30 kilometers are billed
    on the same basis as local calls. Before April 15, 2001,
    for domestic long-distance calls in excess of 30 kilometers, a
    pulse was triggered at the beginning of each call and every 47
    seconds for calls up to 100 kilometers or every 33 seconds for
    calls in excess of 100 kilometers. Commencing April 15,
    2001, a pulse was triggered at the beginning of each call and
    every 30 seconds thereafter. Commencing November 1, 2001, a
    pulse is triggered at the beginning of each call and every 10
    seconds thereafter.
|   
|(2) | Rates for domestic long-distance calls in excess of 30
    kilometers are currently discounted (by an adjustment in the
    period between pulses) by 10% on holidays and from
    6:00 a.m. to 8:00 a.m. on weekdays, and by 30% from
    midnight to 6:00 a.m. everyday.                                                                                                                                                                                                                                                                                                                                                  



International Long-distance Service.




| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amounts we bill to customers for outgoing calls made to foreign
    countries (including customers who make calls to Korea from
    foreign countries under our home country direct-dial service);

27



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##### 





| |   |                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amounts we bill to foreign telecommunications carriers and
    administrations for connection to the Korean telephone network
    in respect of incoming calls (including calls placed in Korea by
    customers of the foreign carriers for home country direct-dial
    service); and
|
| |  | other revenues, including revenues from international calls
    placed from public telephones.                                                                                                                                                                                         







Interconnection.


Land-to-mobile Interconnection.




28



---



##### 





|           |  |                    |         |  |         |   |         |         |  |   |            |  |  |   |         | 
|---------- |  | ------------------ | ------- |  | ------- | - | ------- | ------- |  | - | ---------- |  |  | - | ------- | 
|           |  | Effective Starting |        
|           |  |                    |        
|           |  | May 1,             |         |  | July 1, |   |         | July 1, |  |   | January 1, | 
|           |  | 2002               |         |  | 2003    |   |         | 2004    |  |   | 2005       | 
|           |  |                    |         |  |         |   |         |         |  |   |            | 
|SK Telecom |  | W                  | on 45.7 |  |         | W | on 41.0 |         |  | W | on 31.8    |  |  | W | on 31.2 | 
|KTF(1)     |  | W                  | on 53.5 |  |         | W | on 48.0 |         |  | W | on 47.7    |  |  | W | on 46.7 | 
|LG Telecom |  | W                  | on 59.0 |  |         | W | on 52.9 |         |  | W | on 58.5    |  |  | W | on 55.0 | 






|    |                                                     
|--- | ----------------------------------------------------
|(1) | Eliminated in consolidation of financial statements.



|           |  |                    |         |  |         |   |         |              |  |   |         | 
|---------- |  | ------------------ | ------- |  | ------- | - | ------- | ------------ |  | - | ------- | 
|           |  | Effective Starting |        
|           |  |                    |        
|           |  | May 1,             |         |  | July 1, |   |         | September 1, | 
|           |  | 2002               |         |  | 2003    |   |         | 2004         | 
|           |  |                    |         |  |         |   |         |              | 
|Weekday    |  | W                  | on 93.8 |  |         | W | on 89.0 |              |  | W | on 87.0 | 
|Weekend    |  | W                  | on 88.9 |  |         | W | on 84.0 |              |  | W | on 82.0 | 
|Evening(1) |  | W                  | on 83.9 |  |         | W | on 79.2 |              |  | W | on 77.2 | 






|    |                                                                        
|--- | -----------------------------------------------------------------------
|(1) | Evening rates are applicable from 12:00 a.m. to
    6:00 a.m. everyday.





Land-to-land and Mobile-to-land Interconnection.




29



---



##### 





|                                                                 |  |                    |         |  |            |   |         |            |  |   |            |  |  |   |         | 
|---------------------------------------------------------------- |  | ------------------ | ------- |  | ---------- | - | ------- | ---------- |  | - | ---------- |  |  | - | ------- | 
|                                                                 |  | Effective Starting |        
|                                                                 |  |                    |        
|                                                                 |  | July 1,            |         |  | January 1, |   |         | January 1, |  |   | January 1, | 
|                                                                 |  | 2002               |         |  | 2003       |   |         | 2004       |  |   | 2005       | 
|                                                                 |  |                    |         |  |            |   |         |            |  |   |            | 
|Local land-to-land and mobile-to-land interconnection            |  | W                  | on 12.7 |  |            | W | on 11.3 |            |  | W | on 16.2    |  |  | W | on 16.5 | 
|Long-distance land-to-land and mobile-to-land interconnection(1) |  | W                  | on 16.2 |  |            | W | on 14.9 |            |  | W | on 17.8    |  |  | W | on 18.1 | 
|Long-distance land-to-land and mobile-to-land interconnection(2) |  | W                  | on 20.3 |  |            | W | on 19.0 |            |  | W | on 20.5    |  |  | W | on 20.8 | 




Source:




|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Interconnection between local switching centers and between
    local switching centers and domestic long-distance switching
    centers located within 30 kilometers.
|   
|(2) | Interconnection involving domestic long-distance switching
    centers located greater than 30 kilometers away.                                                       



| |                  
| | -----------------
| | Internet Services

Broadband Internet Access Service.


|                    |  |               |           |  |                |   |           | 
|------------------- |  | ------------- | --------- |  | -------------- | - | --------- | 
|                    |  | Maximum Speed |           |  | Monthly Fee(1) |  
|                    |  |               |           |  |                |  
|Megapass Special II |  |               | 50 Mbps   |  |                | W | on 45,000 | 
|Megapass Special I  |  |               | 20 Mbps   |  |                | W | on 42,000 | 
|Megapass Premium    |  |               | 8/13 Mbps |  |                | W | on 40,000 | 
|Megapass Lite       |  |               | 4 Mbps    |  |                | W | on 30,000 | 






|    |                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------
|(1) | We provide discounts of up to 20.0% for mandatory subscription
    periods ranging from one to three years.



| |                                  
| | ---------------------------------
| | PCS Service and PCS Handset Sales





| |   |                                                  
| | - | -------------------------------------------------
| |  | initial subscription fees;                       
|
| |  | monthly access fees;                             
|
| |  | usage charges for outgoing calls;                
|
| |  | usage charges for wireless data transmission; and
|
| |  | value-added monthly service fees.                



30



---



##### 









| |                           
| | --------------------------
| | Data Communication Service



Competition






| |                          
| | -------------------------
| | Network Service Providers





Local Telephone Service.


31



---



##### 







|                  |  |                  |      |  |        |  |     | 
|----------------- |  | ---------------- | ---- |  | ------ |  | --- | 
|                  |  | Market Share (%) |     
|                  |  |                  |     
|                  |  | KT Corporation   |      |  | Hanaro | 
|                  |  |                  |      |  |        | 
|December 31, 2002 |  |                  | 96.0 |  |        |  | 4.0 | 
|December 31, 2003 |  |                  | 95.8 |  |        |  | 4.2 | 
|December 31, 2004 |  |                  | 93.8 |  |        |  | 6.2 | 




Source:




Domestic Long-distance Telephone Service.




|     |  |                  |      |  |       |  |      |      |  |  |        |  |  |  |     | 
|---- |  | ---------------- | ---- |  | ----- |  | ---- | ---- |  |  | ------ |  |  |  | --- | 
|     |  | Market Share (%) |     
|     |  |                  |     
|     |  | KT Corporation   |      |  | DACOM |  |      | Onse |  |  | Hanaro | 
|     |  |                  |      |  |       |  |      |      |  |  |        | 
|2002 |  |                  | 85.0 |  |       |  | 10.6 |      |  |  | 4.4    |  |  |  |    | 
|2003 |  |                  | 84.3 |  |       |  | 11.5 |      |  |  | 4.2    |  |  |  |    | 
|2004 |  |                  | 84.4 |  |       |  | 11.0 |      |  |  | 3.8    |  |  |  | 0.8 | 




Source:




|                        |  |                  |     |  |       |   |     |      |  |   |        |  |  |           |     |  |  |   |     | 
|----------------------- |  | ---------------- | --- |  | ----- | - | --- | ---- |  | - | ------ |  |  | --------- | --- |  |  | - | --- | 
|                        |  | Market Share (%) |    
|                        |  |                  |    
|                        |  | KT Corporation   |     |  | DACOM |   |     | Onse |  |   | Hanaro |  |  | SK Telink |    
|                        |  |                  |     |  |       |   |     |      |  |   |        |  |  |           |    
|Up to 30 kilometers     |  | W                | 39  |  |       | W | 39  |      |  | W | 39     |  |  | W         | 39  |  |  | W | 39  | 
|30 kilometers or longer |  |                  | 261 |  |       |   | 250 |      |  |   | 254    |  |  |           | 248 |  |  |   | 248 | 




Source:


International Long-Distance Telephone Service.


32



---



##### 







|     |  |                  |      |  |       |  |      |           |  |  |      |  |  |  |      | 
|---- |  | ---------------- | ---- |  | ----- |  | ---- | --------- |  |  | ---- |  |  |  | ---- | 
|     |  | Market Share (%) |     
|     |  |                  |     
|     |  | KT Corporation   |      |  | DACOM |  |      | SK Telink |  |  | Onse | 
|     |  |                  |      |  |       |  |      |           |  |  |      | 
|2002 |  |                  | 66.5 |  |       |  | 22.1 |           |  |  |     |  |  |  | 11.4 | 
|2003 |  |                  | 64.4 |  |       |  | 24.0 |           |  |  | 1.0  |  |  |  | 10.6 | 
|2004 |  |                  | 53.7 |  |       |  | 23.1 |           |  |  | 14.7 |  |  |  | 8.5  | 




Source:




|              |  |                |       |  |       |   |       |      |  |   |        |  |  |   |       | 
|------------- |  | -------------- | ----- |  | ----- | - | ----- | ---- |  | - | ------ |  |  | - | ----- | 
|              |  | KT Corporation |       |  | DACOM |   |       | Onse |  |   | Hanaro | 
|              |  |                |       |  |       |   |       |      |  |   |        | 
|United States |  | W              | 288   |  |       | W | 288   |      |  | W | 276    |  |  | W | 276   | 
|Japan         |  |                | 690   |  |       |   | 678   |      |  |   | 672    |  |  |   | 672   | 
|China         |  |                | 996   |  |       |   | 996   |      |  |   | 984    |  |  |   | 984   | 
|Australia     |  |                | 1,092 |  |       |   | 1,086 |      |  |   | 1,044  |  |  |   | 1,044 | 
|Great Britain |  |                | 1,008 |  |       |   | 996   |      |  |   | 966    |  |  |   | 966   | 
|Germany       |  |                | 948   |  |       |   | 942   |      |  |   | 912    |  |  |   | 912   | 




Source:


Broadband Internet Access Service.




|                  |  |                  |      |  |        |  |      |               |  |  |                 |  |  |        |     |  |  |  |     | 
|----------------- |  | ---------------- | ---- |  | ------ |  | ---- | ------------- |  |  | --------------- |  |  | ------ | --- |  |  |  | --- | 
|                  |  | Market Share (%) |     
|                  |  |                  |     
|                  |  | KT Corporation   |      |  | Hanaro |  |      | Korea Thrunet |  |  | Cable Providers |  |  | Others |    
|                  |  |                  |      |  |        |  |      |               |  |  |                 |  |  |        |    
|December 31, 2002 |  |                  | 47.3 |  |        |  | 27.6 |               |  |  | 12.6            |  |  |        | 5.2 |  |  |  | 7.4 | 
|December 31, 2003 |  |                  | 50.0 |  |        |  | 24.4 |               |  |  | 11.6            |  |  |        | 7.1 |  |  |  | 6.9 | 
|December 31, 2004 |  |                  | 51.0 |  |        |  | 23.1 |               |  |  | 10.8            |  |  |        | 9.0 |  |  |  | 6.1 | 




Source:


33



---



##### 





|                                        |  |                |        |  |        |   |        |               |  |   |                    |  |  |   |        | 
|--------------------------------------- |  | -------------- | ------ |  | ------ | - | ------ | ------------- |  | - | ------------------ |  |  | - | ------ | 
|                                        |  | KT Corporation |        |  | Hanaro |   |        | Korea Thrunet |  |   | Cable Providers(1) | 
|                                        |  |                |        |  |        |   |        |               |  |   |                    | 
|Monthly subscription fee                |  | W              | 25,500 |  |        | W | 24,920 |               |  | W | 23,800             |  |  | W | 16,800 | 
|Monthly modem rental fee                |  |                | 3,000  |  |        |   | 3,000  |               |  |   | 3,000              |  |  |   | 1,000  | 
|Initial installation fee                |  |                | 30,000 |  |        |   | 30,000 |               |  |   | 30,000             |  |  |   | 55,000 | 
|Additional installation fee upon moving |  |                | 10,000 |  |        |   | 10,000 |               |  |   | 18,000             |  |  |   | 55,000 | 




Source:




|    |                                                     
|--- | ----------------------------------------------------
|(1) | These are fees typically charged by cable providers.

PCS Service.




|                  |  |                  |      |  |            |  |      |            |  |  |      | 
|----------------- |  | ---------------- | ---- |  | ---------- |  | ---- | ---------- |  |  | ---- | 
|                  |  | Market Share (%) |     
|                  |  |                  |     
|                  |  | KTF              |      |  | SK Telecom |  |      | LG Telecom | 
|                  |  |                  |      |  |            |  |      |            | 
|December 31, 2002 |  |                  | 32.0 |  |            |  | 53.2 |            |  |  | 14.8 | 
|December 31, 2003 |  |                  | 31.1 |  |            |  | 54.5 |            |  |  | 14.4 | 
|December 31, 2004 |  |                  | 32.1 |  |            |  | 51.3 |            |  |  | 16.6 | 
|March 31, 2005    |  |                  | 32.5 |  |            |  | 51.2 |            |  |  | 16.3 | 




Source:




|                            |  |     |        |  |            |   |          |            |  |   |        | 
|--------------------------- |  | --- | ------ |  | ---------- | - | -------- | ---------- |  | - | ------ | 
|                            |  | KTF |        |  | SK Telecom |   |          | LG Telecom | 
|                            |  |     |        |  |            |   |          |            | 
|Type of service             |  |     | PCS    |  |            |   | Cellular |            |  |   | PCS    | 
|Initial subscription fee    |  | W   | 30,000 |  |            | W | 55,000   |            |  | W | 30,000 | 
|Monthly access fee          |  |     | 13,000 |  |            |   | 13,000   |            |  |   | 12,000 | 
|Usage charge per 10 seconds |  |     | 18     |  |            |   | 20       |            |  |   | 18     | 




Source:


Data Communication Service.


34



---



##### 





| |                              
| | -----------------------------
| | Value-Added Service Providers





| |                           
| | --------------------------
| | Specific Service Providers





| |                    
| | -------------------
| | Foreign Competition



Regulation






| |   |                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | network service providers, such as us, which typically provide
    telecommunications services with their own telecommunications
    networks and related facilities. Their services may include
    local, domestic long-distance and international long-distance
    telephone services, mobile communications service, paging
    service and trunked radio system service;
|
| |  | value-added service providers, which provide telecommunications
    services other than those services specified for network service
    providers, such as data communications using telecommunications
    facilities leased from network service providers; and                                                                                                            
|
| |  | specific service providers, which may occupy a middle ground
    between network service providers and value-added service
    providers and are broadly defined by law as telecommunications
    service providers that provide network services using the
    telecommunications network facilities or services of network
    service providers.                           



35



---



##### 





| |      
| | -----
| | Rates





| |                 
| | ----------------
| | Other Activities





| |   |                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | engage in businesses other than certain businesses specified in
    the Presidential Decree under the Telecommunications Business
    Law such as telecommunications equipment manufacturing business
    and telecommunications network construction business;
|
| |  | change the conditions for its licenses;                                                                                                                                                                                                                        
|
| |  | transfer, terminate, suspend or spin off all or a part of the
    business for which it is licensed;                                                                                                                                                           
|
| |  | acquire all or a part of the business of another network service
    provider; or                                                                                                                                                                              
|
| |  | enter into a merger with another network service provider.                                                                                                                                                                                                     







| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | formulating the basic plan for the telecommunications industry;                                                            
|
| |  | preparing periodic reports to the National Assembly of Korea
    regarding developments in the telecommunications industry;
|
| |  | setting technical standards for all service providers; and                                                                 
|
| |  | promoting technological development and technological
    standardization.                                                 



36



---



##### 











| |                                
| | -------------------------------
| | Korea Communications Commission





| |   |                                                              
| | - | -------------------------------------------------------------
| |  | promote fair competition in the telecommunications industry; 
|
| |  | protect the rights of telecommunications services users; and 
|
| |  | settle disputes between telecommunications service providers.





| |                   
| | ------------------
| | Foreign Investment



37



---



##### 







| |                              
| | -----------------------------
| | Individual Shareholding Limit





Relationship with the Government




| |                          
| | -------------------------
| | Government as Shareholder





| |                        
| | -----------------------
| | Government as Regulator





| |                       
| | ----------------------
| | Government as Customer





| |                            
| | ---------------------------
| | Contributions to Government



Customers and Customer Billing




38



---



##### 







Insurance











|          |                         
|--------- | ------------------------
|Item 4.C. | Organizational Structure








|          |                               
|--------- | ------------------------------
|Item 4.D. | Property, Plants and Equipment







| |                                     
| | ------------------------------------
| | Exchanges and Transmission Equipment







| |             
| | ------------
| | Access Lines



39



---



##### 







| |                  
| | -----------------
| | Domestic Backbone







| |                                    
| | -----------------------------------
| | International Long-Distance Network









| |             
| | ------------
| | PCS Networks





| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cell sites, which are physical locations equipped with base
    transceiver stations consisting of transmitters, receivers and
    other equipment used to communicate through radio channels with
    subscribers mobile telephone handsets within the range of
    a cell;
|
| |  | base station controllers, which connect to and control, the base
    transceiver stations;                                                                                                                                                                                   
|
| |  | mobile switching centers, which in turn control the base station
    controllers and the routing of telephone calls; and                                                                                                                                                     
|
| |  | transmission lines, which connect the mobile switching centers,
    base station controllers, base transceiver stations and the
    public switched telephone network.                                                                                                       

40



---



##### 





|                                                       |  |  |         |  
|------------------------------------------------------ |  |  | ------- | -
|Mobile switching centers                               |  |  | 28      |  
|Base station controllers                               |  |  | 518     |  
|Base transceiver stations                              |  |  | 13,627  |  
|Indoor and outdoor repeaters                           |  |  | 157,580 |  
|Population coverage of 2.0 generation network          |  |  | 98      | %
|Population coverage of 2.5 generation network          |  |  | 87      | %
|Population coverage of 3.0 generation (W-CDMA) network |  |  | 27      | %







| |                                       
| | --------------------------------------
| | International Submarine Cable Networks







| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a 20.9% interest in the 1,762-kilometer R-J-K fiber optic
    submarine cable network connecting Korea, Japan and Russia,
    completed in January 1995;                                                       
|
| |  | a 2.3% interest in the 12,083-kilometer Asia Pacific Cable
    Network connecting Korea, Japan and Hong Kong with six Southeast
    Asian countries and Australia, completed in January 1997;                  
|
| |  | a 1.4% interest in the 29,000-kilometer Fiber Optic Link Around
    the Globe network connecting Korea, Southeast Asia, the Middle
    East and Europe, completed in April 1997;                               
|
| |  | a 2.0% interest in the 39,000-kilometer Southeast Asia-Middle
    East-Western Europe 3 Cable Network linking 34 countries,
    completed in December 1999;                                                    
|
| |  | a 6.7% interest in the 30,444-kilometer China-U.S. Cable
    Network linking Korea, China, Japan, Taiwan and the United
    States, completed in January 2000;                                                 
|
| |  | a 3.8% interest in the 19,000-kilometer Asia Pacific Cable
    Network 2 connecting Korea, China, Japan, Taiwan, Hong Kong,
    Philippines, Singapore and Malaysia, to be completed in
    September 2001; and
|
| |  | a 20.0% interest in the 500-kilometer Korea-Japan Cable Network
    linking Korea and Japan, completed in March 2002.                                                                                          






Item 5.     Operating and
Financial Review and Prospects







|          |                  
|--------- | -----------------
|Item 5.A. | Operating Results

Overview




41



---



##### 









|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |      |      |       | 
|---------------------------------- | ---------------------------------------- | ----------------------- | ------------------------ | ----------- | --------- | ------ | ---- | ----------- | ----------- | ----- | --------- | ------ | ----- | ----------- | ---- | ---- | --------- | ----- | ----- | ------ | ----- | ------ | ---- | ---- | ---- | ----- | 
|                                   |                                          | Year Ended December 31, |                         
|                                   |                                          |                         |                         
|                                   |                                          | 2002                    |                          |             | 2003      |        |      | 2004        |            
|                                   |                                          |                         |                          |             |           |        |      |             |            
|                                   |                                          |                         |                          | (Percentage |           |        |      |             | (Percentage |       |           |        |       | (Percentage |     
|                                   |                                          | (In                     |                          |             | of total  |        |      | (In         |             |       | of total  |        |       | (In         |      |      | of total  |      
|                                   |                                          | billions of             |                          |             | operating |        |      | billions of |             |       | operating |        |       | billions of |      |      | operating |      
|                                   |                                          | Won)                    |                          |             | revenues) |        |      | Won)        |             |       | revenues) |        |       | Won)        |      |      | revenues) |      
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|Operating revenues:                |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |     
|Telephone services:                |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |     
|                                   | Local service                            |                         | W                        | 2,897       |           |        |      | 17.6        | %           |       | W         | 3,026  |       |             |      | 18.8 | %         |       | W     | 2,975  |       |        |      | 17.4 | %   
|                                   | Non-refundable service installation fees |                         |                          | 251         |           |        |      | 1.5         |             |       |           | 125    |       |             |      | 0.8  |           |       |       | 79     |       |        |      | 0.5  |     
|                                   | Domestic long-distance service           |                         |                          | 1,061       |           |        |      | 6.5         |             |       |           | 932    |       |             |      | 5.8  |           |       |       | 854    |       |        |      | 5.0  |     
|                                   | International long-distance service      |                         |                          | 534         |           |        |      | 3.3         |             |       |           | 451    |       |             |      | 2.8  |           |       |       | 420    |       |        |      | 2.5  |     
|                                   | Land-to-mobile interconnection           |                         |                          | 2,152       |           |        |      | 13.1        |             |       |           | 2,075  |       |             |      | 12.9 |           |       |       | 1,861  |       |        |      | 10.9 |     
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|                                   |                                          | Sub-total               |                          |             | 6,895     |        |      |             | 42.0        |       |           |        | 6,611 |             |      |      | 41.1      |       |       |        | 6,189 |        |      |      | 36.3 |      
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|Internet services:                 |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |     
|                                   | Broadband Internet access service        |                         |                          | 1,572       |           |        |      | 9.6         |             |       |           | 1,885  |       |             |      | 11.8 |           |       |       | 2,135  |       |        |      | 12.5 |     
|                                   | Miscellaneous Internet-related services  |                         |                          | 418         |           |        |      | 2.5         |             |       |           | 485    |       |             |      | 3.0  |           |       |       | 472    |       |        |      | 2.8  |     
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|                                   |                                          | Sub-total               |                          |             | 1,990     |        |      |             | 12.1        |       |           |        | 2,370 |             |      |      | 14.8      |       |       |        | 2,607 |        |      |      | 15.3 |      
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|PCS service                        |                                          |                         | 4,127                    |             |           |        | 25.1 |             |             |       | 4,164     |        |       |             | 25.9 |      |           |       | 4,800 |        |       |        | 28.1 |     
|Sale of goods                      |                                          |                         | 1,367                    |             |           |        | 8.3  |             |             |       | 1,154     |        |       |             | 7.2  |      |           |       | 1,755 |        |       |        | 10.3 |     
|Others:                            |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |     
|                                   | Data communication service               |                         |                          | 1,262       |           |        |      | 7.7         |             |       |           | 1,084  |       |             |      | 6.7  |           |       |       | 963    |       |        |      | 5.6  |     
|                                   | Satellite service                        |                         |                          | 124         |           |        |      | 0.8         |             |       |           | 120    |       |             |      | 0.8  |           |       |       | 119    |       |        |      | 0.7  |     
|                                   | Miscellaneous(1)                         |                         |                          | 673         |           |        |      | 4.1         |             |       |           | 566    |       |             |      | 3.5  |           |       |       | 636    |       |        |      | 3.7  |     
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|                                   |                                          | Sub-total               |                          |             | 2,059     |        |      |             | 12.5        |       |           |        | 1,769 |             |      |      | 11.0      |       |       |        | 1,718 |        |      |      | 10.0 |      
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|                                   |                                          |                         | Total operating revenues |             |           | 16,437 |      |             |             | 100.0 |           |        |       | 16,068      |      |      |           | 100.0 |       |        |       | 17,068 |      |      |      | 100.0 | 
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|Operating expenses:                |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |       |       |        |       |        |      |     
|Salaries and related costs         |                                          |                         | 3,089                    |             |           |        | 18.8 |             |             |       | 3,710     |        |       |             | 23.1 |      |           |       | 2,737 |        |       |        | 16.0 |     
|Depreciation and amortization      |                                          |                         | 3,797                    |             |           |        | 23.1 |             |             |       | 3,757     |        |       |             | 23.4 |      |           |       | 3,797 |        |       |        | 22.2 |     
|Other operating and maintenance(2) |                                          |                         | 7,170                    |             |           |        | 43.6 |             |             |       | 6,778     |        |       |             | 42.2 |      |           |       | 8,054 |        |       |        | 47.2 |     
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|                                   | Total operating expenses                 |                         |                          | 14,056      |           |        |      | 85.5        |             |       |           | 14,245 |       |             |      | 88.7 |           |       |       | 14,588 |       |        |      | 85.5 |     
|                                   |                                          |                         |                          |             |           |        |      |             |             |       |           |        |       |             |      |      |           |      
|Operating income                   |                                          |                         | 2,381                    |             |           |        | 14.5 |             |             |       | 1,823     |        |       |             | 11.3 |      |           |       | 2,481 |        |       |        | 14.5 |     

42



---



##### 








|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes revenues from system and network integration services,
    KTH and real estate-related service.                                                
|   
|(2) | For a breakdown of other operating and maintenance expenses, see
     Item 5.A. Operating
    Results  Other Operating and Maintenance
    Expenses.







| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | developing and implementing IMT-2000 services;                                                                             
|
| |  | stock swap transactions with SK Telecom;                                                                                   
|
| |  | employee reductions and payment of severance and retirement
    benefits;                                                  
|
| |  | changes in the rate structure for interconnection;                                                                         
|
| |  | changes in the rate structure for local, domestic long-distance
    and international long-distance telephone services; and
|
| |  | fines imposed by the Fair Trade Commission.                                                                                





| |                                              
| | ---------------------------------------------
| | Developing and Implementing IMT-2000 Services





43



---



##### 







| |                                        
| | ---------------------------------------
| | Stock Swap Transactions with SK Telecom





| |                                                                         
| | ------------------------------------------------------------------------
| | Employee Reductions and Payment of Severance and
    Retirement Benefits





| |                                                   
| | --------------------------------------------------
| | A Change in the Rate Structure for Interconnection





| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | Changes in the Rate Structure for Local, Domestic
    Long-distance and International Long-distance Telephone
    Services



44



---



##### 





| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Fines for Unfair Collaborative Practices Imposed by the
    Fair Trade Commission



Critical Accounting Estimates












| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | allowances for doubtful accounts;                                                
|
| |  | useful lives of property, plant and equipment;                                   
|
| |  | impairment of long-lived assets including the IMT-2000 frequency
    usage right;
|
| |  | impairment of investment securities; and                                         
|
| |  | income taxes                                                                     



| |                                 
| | --------------------------------
| | Allowances for doubtful accounts



45



---



##### 







|                                                         |  |                      |         |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------- |  | -------------------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                         |  | 2002                 |         |   | 2003 |   |          | 2004 | 
|                                                         |  |                      |         |   |      |   |          |      | 
|                                                         |  | (In millions of Won) |        
|Balance at beginning of year                             |  | W                    | 330,345 |   |      | W | 430,066  |      |  | W | 646,273  |  
|Increase due to the changes of consolidated subsidiaries |  |                      | 483     |   |      |   | 65       |      |  |   |         |  
|Provision                                                |  |                      | 194,288 |   |      |   | 363,774  |      |  |   | 287,073  |  
|Write-offs                                               |  |                      | (95,050 | ) |      |   | (147,632 | )    |  |   | (230,711 | )
|                                                         |  |                      |         |   |      |   |          |      | 
|Balance at end of year                                   |  | W                    | 430,066 |   |      | W | 646,273  |      |  | W | 702,635  |  
|                                                         |  |                      |         |   |      |   |          |      | 





| |                                              
| | ---------------------------------------------
| | Useful lives of property, plant and equipment





| |                                                                                 
| | --------------------------------------------------------------------------------
| | Impairment of long-lived assets including the IMT-2000
    frequency usage right





46



---



##### 







| |                                    
| | -----------------------------------
| | Impairment of investment securities















| |             
| | ------------
| | Income Taxes



47



---



##### 









Operating Results




| |                           
| | --------------------------
| | Telephone Service Revenues

Local Service Revenues.






Non-refundable Service Installation Fee.


48



---



##### 





Domestic Long-distance Revenues.






International Long-distance Revenues.




| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amounts we bill to our customers for outgoing calls made to
    foreign countries (including customers who make calls to Korea
    from foreign countries under our home country direct-dial
    service);
|
| |  | amounts we bill to foreign telecommunications carriers and
    administrations for connection to the Korean telephone network
    in respect of incoming calls;                                           
|
| |  | amounts we charge to fixed-line competitors, mobile service
    providers and voice resellers as interconnection fees for using
    our international network in providing their services; and            
|
| |  | other revenues, including revenues from international calls
    placed from public telephones and international leased lines.                                                                             







49



---



##### 



Land-to-mobile Interconnection Revenues.








| |                          
| | -------------------------
| | Internet Service Revenues

bizmeka.com.


Broadband Internet Access Service Revenues.






Miscellaneous Internet-related Service Revenues. bizmeka.com






| |             
| | ------------
| | PCS Revenues





| |   |                                                  
| | - | -------------------------------------------------
| |  | initial subscription fees;                       
|
| |  | monthly access fees;                             
|
| |  | usage charges for outgoing calls;                
|
| |  | usage charges for wireless data transmission; and
|
| |  | value-added monthly service fees.                



50



---



##### 









| |              
| | -------------
| | Sale of Goods









| |               
| | --------------
| | Other Revenues











| |                           
| | --------------------------
| | Salaries and Related Costs







51



---



##### 





Wireline Communications.


PCS Service.




| |                              
| | -----------------------------
| | Depreciation and Amortization



Wireline Communications.


PCS Service.




| |                                         
| | ----------------------------------------
| | Other Operating and Maintenance Expenses



|                                                         |       |                         |       |       |                         |   |       |       |  |   |           |       |  |           |      |      |     |  |      |      |  
|-------------------------------------------------------- | ----- | ----------------------- | ----- | ----- | ----------------------- | - | ----- | ----- |  | - | --------- | ----- |  | --------- | ---- | ---- | --- |  | ---- | ---- | -
|                                                         |       | Year Ended December 31, |       |       | Year-Ended December 31, |  
|                                                         |       |                         |       |       |                         |  
|                                                         |       | 2002                    |       |       | 2003                    |   |       | 2004  |  |   | 2002/2003 |       |  | 2003/2004 |     
|                                                         |       |                         |       |       |                         |   |       |       |  |   |           |       |  |           |     
|                                                         |       | (In billions of Won)    |       |       |                         |   |      
|Commissions and cost of services and settlement payments |       | W                       | 2,344 |       |                         | W | 2,117 |       |  | W | 2,616     |       |  |           | (9.7 | ) %  |     |  | 23.6 | %   
|Cost of goods sold                                       |       |                         | 1,346 |       |                         |   | 1,131 |       |  |   | 1,782     |       |  |           | 16.0 |      |     |  | 57.5 |     
|Interconnection charge                                   |       |                         | 1,188 |       |                         |   | 1,077 |       |  |   | 973       |       |  |           | (9.3 | )    |     |  | (9.6 | )   
|Repairs and maintenance                                  |       |                         | 421   |       |                         |   | 451   |       |  |   | 488       |       |  |           | 7.1  |      |     |  | 8.2  |     
|Miscellaneous expenses                                   |       |                         | 1,871 |       |                         |   | 2,002 |       |  |   | 2,195     |       |  |           | 7.0  |      |     |  | 9.6  |     
|                                                         |       |                         |       |       |                         |   |       |       |  |   |           |       |  |           |     
|                                                         | Total |                         | W     | 7,170 |                         |   | W     | 6,778 |  |   | W         | 8,054 |  |           |      | (5.5 | ) % |  |      | 18.8 | %
|                                                         |       |                         |       |       |                         |   |       |       |  |   |           |       |  |           |     



52



---



##### 











Wireline Communications.


PCS Service.




| |                 
| | ----------------
| | Operating Income





Wireline Communications.


PCS Service.


53



---



##### 







| |             
| | ------------
| | Income Taxes





Wireline Communications.


PCS Services.




| |             
| | ------------
| | Net Earnings





54



---



##### 





Wireline Communications.


PCS Service.




| |          
| | ---------
| | Inflation








|          |                                
|--------- | -------------------------------
|Item 5.B. | Liquidity and Capital Resources



|                                                     |  |                                  |       |   |      |   |       |      |  |   |       | 
|---------------------------------------------------- |  | -------------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | 
|                                                     |  | For the Years Ended December 31, |      
|                                                     |  |                                  |      
|                                                     |  | 2002                             |       |   | 2003 |   |       | 2004 | 
|                                                     |  |                                  |       |   |      |   |       |      | 
|                                                     |  | (In billions of Won)             |      
|Net cash provided by operating activities            |  | W                                | 4,827 |   |      | W | 3,190 |      |  | W | 4,719 | 
|Net cash used in investing activities                |  |                                  | 4,065 |   |      |   | 1,481 |      |  |   | 3,618 | 
|Net cash used in financing activities                |  |                                  | 844   |   |      |   | 2,065 |      |  |   | 106   | 
|Cash and cash equivalents at beginning of period     |  |                                  | 1,169 |   |      |   | 1,087 |      |  |   | 761   | 
|Cash and cash equivalents at end of period           |  |                                  | 1,087 |   |      |   | 761   |      |  |   | 1,756 | 
|Net increase (decrease) in cash and cash equivalents |  |                                  | (82   | ) |      |   | (326  | )    |  |   | 995   | 

Capital Requirements








55



---



##### 

















|                                                                                |       |                        |        |           |        |   |       |       |  |     |       |       |         |       |       |       |  |   |       |       | 
|------------------------------------------------------------------------------- | ----- | ---------------------- | ------ | --------- | ------ | - | ----- | ----- |  | --- | ----- | ----- | ------- | ----- | ----- | ----- |  | - | ----- | ----- | 
|                                                                                |       | Payments Due by Period |       
|                                                                                |       |                        |       
|                                                                                |       |                        |        | Less than |        |   | 1-3   |       |  | 4-5 |       |       | After 5 |      
|Contractual Obligations(1)                                                      |       | Total                  |        |           | 1 Year |   |       | Years |  |     | Years |       |         | Years |      
|                                                                                |       |                        |        |           |        |   |       |       |  |     |       |       |         |       |      
|                                                                                |       | (In billions of Won)   |       
|Long-term debt obligations (including current portion of
    long-term debt)(2) |       | W                      | 11,731 |           |        | W | 4,714 |       |  | W   | 2,543 |       |         | W     | 1,852 |       |  | W | 2,622 |      
|Capital lease obligations                                                       |       |                        | 22     |           |        |   | 5     |       |  |     | 10    |       |         |       | 7     |       |  |   |      |      
|Operating lease obligations                                                     |       |                        | 184    |           |        |   | 68    |       |  |     | 73    |       |         |       | 12    |       |  |   | 31    |      
|Other long-term liabilities reflected on our balance sheet                      |       |                        | 704    |           |        |   | 54    |       |  |     | 90    |       |         |       | 240   |       |  |   | 320   |      
|                                                                                |       |                        |        |           |        |   |       |       |  |     |       |       |         |       |      
|                                                                                | Total |                        | W      | 12,641    |        |   | W     | 4,841 |  |     | W     | 2,716 |         |       | W     | 2,111 |  |   | W     | 2,973 | 
|                                                                                |       |                        |        |           |        |   |       |       |  |     |       |       |         |       |      






|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Contractual obligations represent on-balance sheet contractual
    liabilities as of the consolidated balance sheet date excluding
    refundable deposits for telephone installation and payments for
    customer call bonus points, which do not have definitive payment
    schedules.                                          
|   
|(2) | Includes: (1) the then outstanding amount of Won
    1,179 billion of convertible notes due 2007, of which
    Won 1,164 billion was repaid on January 4, 2005 upon
    election by noteholders to exercise their option to redeem the
    notes, (2) the then outstanding amount of
    Won 522 billion of bonds due 2005 issued to

56



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##### 



| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Microsoft Corporation, which we repaid on January 4, 2005
    upon maturity, and (3) the then outstanding amount of
    Won 1,323 billion of convertible bonds due 2005 issued
    to domestic investors, which we repaid, together with accrued
    interest, on May 25, 2005 upon maturity.

Capital Resources












| |          
| | ---------
| | Liquidity



57



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##### 





|                                                                                  |  |                      |       |  |      |   |       |      |  |   |       | 
|--------------------------------------------------------------------------------- |  | -------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                                                  |  | As of December 31,   |      
|                                                                                  |  |                      |      
|                                                                                  |  | 2002                 |       |  | 2003 |   |       | 2004 | 
|                                                                                  |  |                      |       |  |      |   |       |      | 
|                                                                                  |  | (In billions of Won) |      
|Cash and cash equivalents                                                         |  | W                    | 1,087 |  |      | W | 761   |      |  | W | 1,756 | 
|Short-term financial instruments                                                  |  |                      | 820   |  |      |   | 61    |      |  |   | 984   | 
|Current portion of available-for-sale securities                                  |  |                      | 853   |  |      |   | 287   |      |  |   | 258   | 
|Notes and accounts receivable  trade, net of
    allowance for doubtful accounts |  |                      | 2,983 |  |      |   | 2,647 |      |  |   | 2,793 | 
|Accounts receivable  other                                                       |  |                      | 513   |  |      |   | 323   |      |  |   | 365   | 
|Inventories                                                                       |  |                      | 244   |  |      |   | 365   |      |  |   | 374   | 





|                                   |  |                      |       |  |      |   |       |      |  |   |       | 
|---------------------------------- |  | -------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                   |  | As of December 31,   |      
|                                   |  |                      |      
|                                   |  | 2002                 |       |  | 2003 |   |       | 2004 | 
|                                   |  |                      |       |  |      |   |       |      | 
|                                   |  | (In billions of Won) |      
|Notes and accounts payable  trade |  | W                    | 1,167 |  |      | W | 1,023 |      |  | W | 853   | 
|Short-term borrowings              |  |                      | 1,116 |  |      |   | 632   |      |  |   | 439   | 
|Current portion of long-term debt  |  |                      | 1,846 |  |      |   | 2,173 |      |  |   | 4,756 | 
|Accounts payable  other           |  |                      | 1,485 |  |      |   | 1,233 |      |  |   | 1,123 | 





| |                     
| | --------------------
| | Capital Expenditures







| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expansion and modernization of our networks, which are expected
    to account for approximately 29.6% of all capital expenditures
    in 2005;  
|
| |  | capital investments for our Internet services, which are
    expected to account for approximately 20.8% of all capital
    expenditures in 2005;

58



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##### 





| |   |                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | capital investments in PCS and IMT-2000 mobile
    telecommunications services made by KTF, which are expected to
    account for approximately 31.1% of all capital expenditures in
    2005;                                                                                           
|
| |  | capital investments in data communications and related services
    (including investments for leased line service and other data
    communications services but excluding broadband), which are
    expected to account for approximately 8.9% of all capital
    expenditures in 2005;
|
| |  | capital investments in our fixed-line voice services, which are
    expected to account for approximately 3.6% of all capital
    expenditures in 2005; and                                                                                                                              
|
| |  | miscellaneous investment expenses which are expected to account
    for approximately 6.0% of all capital expenditures in 2005.                                                                                                                                                          



Recent Accounting Pronouncements in Korean GAAP Not Yet
Adopted




U.S. GAAP Reconciliation








| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | the difference in the treatment of minority interests;                           
|
| |  | the difference in the treatment of impairment loss relating to
    equity method;
|
| |  | the difference in the treatment of deferred service installation
    fees; and   
|
| |  | the difference in the treatment of depreciation,                                 





| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | other differences in the treatment of equity method
    affiliates; and      
|
| |  | the aggregate effect of deferred income taxes recognized under
    U.S. GAAP.

59



---



##### 







Recent Accounting Pronouncements in U.S. GAAP Not Yet
Adopted


Inventory Costs,


Employers Disclosures about Pensions and Other
Postretirement Benefits,


Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement
No. 143.







|          |                                                  
|--------- | -------------------------------------------------
|Item 5.C. | Research and Development, Patents, Licenses, Etc.





| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | a marketing and technology laboratory;                                                          
|
| |  | a convergence laboratory;                                                                       
|
| |  | a telecommunications network laboratory;                                                        
|
| |  | an operations support system laboratory; and                                                    
|
| |  | a new business planning group that organizes all of our research
    and development activities.





60



---



##### 









| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | integrated operations support system;                                                                               
|
| |  | enhanced Internet phone service;                                                                                    
|
| |  | home network and application services;                                                                              
|
| |  | next generation telecommunication network construction and
    engineering, including broadband convergence network;
|
| |  | Internet protocol infrastructure and access network engineering;                                                    
|
| |  | development of technology for installation of optical fiber to a
    subscribers home;                             
|
| |  | integration of wireless LAN and third generation services;                                                          
|
| |  | wireless broadband Internet access service; and                                                                     
|
| |  | various new products and services, including One Phone, Ann and
    dial-tone services.                             






|          |                  
|--------- | -----------------
|Item 5.D. | Trend Information








|          |                               
|--------- | ------------------------------
|Item 5.E. | Off-balance Sheet Arrangements








|          |                                              
|--------- | ---------------------------------------------
|Item 5.F. | Tabular Disclosure of Contractual Obligations








|        |                                           
|------- | ------------------------------------------
|Item 6. | Directors, Senior Management and Employees






|          |                                
|--------- | -------------------------------
|Item 6.A. | Directors and Senior Management

Directors






| |   |                                                            
| | - | -----------------------------------------------------------
| |  | up to four standing directors, including the President; and
|
| |  | up to eight outside directors.                             





61



---



##### 







|                      |  |                                                                |  |          |   |  |     |            |         |           |  |  |      | 
|--------------------- |  | -------------------------------------------------------------- |  | -------- | - |  | --- | ---------- | ------- | --------- |  |  | ---- | 
|                      |  |                                                                |  |          |   |  |     | Expiration |        
|                      |  |                                                                |  | Years as |   |  |     |            | of Term |          
|Name                  |  | Position                                                       |  | Director |   |  | Age |            |         | of Office | 
|                      |  |                                                                |  |          |   |  |     |            |         |           | 
|Standing Directors(1) |  |                                                                |  |          |   |  |     |            |         |           |  |  |      | 
|Yong-Kyung Lee        |  | President and Chief Executive Officer(2)                       |  |          | 3 |  |     |            | 61      |           |  |  | 2005 | 
|Woo-Sik Kim           |  | Executive Vice President                                       |  |          | 3 |  |     |            | 51      |           |  |  | 2006 | 
|Sang-Hoon Lee         |  | Executive Vice President                                       |  |          | 3 |  |     |            | 50      |           |  |  | 2006 | 
|Jeong-Soo Suh         |  | Senior Vice President                                          |  |          | 1 |  |     |            | 47      |           |  |  | 2006 | 
|Outside Directors(1)  |  |                                                                |  |          |   |  |     |            |         |           |  |  |      | 
|Sung-Deuk Park        |  | President of The Electronic Times                              |  |          | 5 |  |     |            | 65      |           |  |  | 2007 | 
|Kook-Hyun Moon        |  | Chief Executive Officer of Yuhan-Kimberly Corporation          |  |          | 3 |  |     |            | 56      |           |  |  | 2005 | 
|Stuart B. Solomon     |  | Chief Executive Officer of Metropolitan Life Insurance (Korea) |  |          | 4 |  |     |            | 55      |           |  |  | 2008 | 
|Jong-Sang Kim         |  | Chief Executive Officer of Seil Tax-Accounting Service         |  |          | 3 |  |     |            | 58      |           |  |  | 2006 | 
|Do-Hwan Kim           |  | Professor, Sejong University                                   |  |          | 3 |  |     |            | 46      |           |  |  | 2006 | 
|Jeong-Ro Yoon         |  | Professor, Korea Advanced Institute of Science and Technology  |  |          | 2 |  |     |            | 50      |           |  |  | 2007 | 
|Kon-Sik Kim           |  | Professor, Seoul National University                           |  |          | 2 |  |     |            | 50      |           |  |  | 2007 | 
|Thae-Surn Khwarg      |  | Chief Executive Officer of SEI Asset Korea                     |  |          | 1 |  |     |            | 46      |           |  |  | 2008 | 






|    |                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All of our standing and outside directors beneficially own less
    than one percent of the issued shares of KT Corporation in the
    aggregate.                                                                                                                                                                                                       
|   
|(2) | On June 18, 2005, the president recommendation committee
    announced the decision to recommend Joong Soo Nam as our next
    president and chief executive officer. Mr. Nam is currently
    the president and chief executive officer of KTF. Mr. Nam
    is expected to succeed Mr. Lee in August 2005, subject to
    approval by the shareholders.





| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | three outside directors who are elected from among our outside
    directors;                                                                                                                                                                                                                                                               
|
| |  | one person who is designated by the board of directors from
    among the ex-presidents or the current president (provided,
    however, that the incumbent president is prohibited from
    participation if seeking reelection); and                                                                                                      
|
| |  | one civilian designated by the board of directors, other than
    the President, standing directors, former and present officers
    and employees of any telecommunications business operator and
    any of their related persons as defined in the Monopoly
    Regulation and Fair Trade Act, as well as our officers and
    employees.



62



---



##### 







Senior Management






|                 |  |                                                          |  |            |      |  |          |  |    |     |  |  |    | 
|---------------- |  | -------------------------------------------------------- |  | ---------- | ---- |  | -------- |  | -- | --- |  |  | -- | 
|                 |  |                                                          |  | Current    |      |  | Years    |  |    |    
|                 |  |                                                          |  | Position   |      |  | with the |  |    |    
|Name(1)          |  | Title and Responsibilities                               |  | Held Since |      |  | Company  |  |    | Age | 
|                 |  |                                                          |  |            |      |  |          |  |    |     | 
|Hi-Chang Roh     |  | Senior Vice President, Management Strategy Office        |  |            | 2004 |  |          |  | 34 |     |  |  | 52 | 
|Jong-Lok Yoon    |  | Executive Vice President, New Business Planning Group    |  |            | 2003 |  |          |  | 25 |     |  |  | 47 | 
|Won-Pyo Hong     |  | Senior Vice President, Portable Internet Business Group  |  |            | 2004 |  |          |  | 10 |     |  |  | 45 | 
|Byoung-Kon Shin  |  | Senior Vice President, Metropolitan North Business Group |  |            | 2003 |  |          |  | 18 |     |  |  | 48 | 
|Tae-Poong Kang   |  | Vice President, Quality Management Office                |  |            | 2004 |  |          |  | 25 |     |  |  | 50 | 
|Han-Suk Kim      |  | Senior Vice President, Global Business Center            |  |            | 2004 |  |          |  | 14 |     |  |  | 49 | 
|Soo-Ho Maeng     |  | Senior Vice President, Corporate Relations Office        |  |            | 2004 |  |          |  | 15 |     |  |  | 45 | 
|Dong-Hoon Kim    |  | Vice President, Jeonbuk Regional Business Group          |  |            | 2003 |  |          |  | 34 |     |  |  | 54 | 
|Kyung-Choon Shin |  | Vice President, Voice Business Center                    |  |            | 2004 |  |          |  | 24 |     |  |  | 50 | 
|Yo-Dong Kim      |  | Senior Vice President, Chungnam Regional Business Group  |  |            | 2003 |  |          |  | 30 |     |  |  | 49 | 
|Gwang-Ju Seo     |  | Senior Vice President, Metropolitan South Business Group |  |            | 2004 |  |          |  | 24 |     |  |  | 48 | 
|Deok-Rae Lim     |  | Vice President, SI Business Center                       |  |            | 2003 |  |          |  | 24 |     |  |  | 50 | 
|Tae-Soek Ro      |  | Executive Vice President, Customer Service Group         |  |            | 2005 |  |          |  | 25 |     |  |  | 50 | 
|Dong-Hoon Han    |  | Vice President, Gangwon Regional Business Group          |  |            | 2004 |  |          |  | 23 |     |  |  | 45 | 
|Sung-Man Kim     |  | Vice President, Network Service Group                    |  |            | 2004 |  |          |  | 22 |     |  |  | 48 | 
|Ok-Kie Lee       |  | Vice President, Convergence Business Center              |  |            | 2004 |  |          |  | 21 |     |  |  | 46 | 
|Deok-Kyum Kim    |  | Vice President, Daegu Regional Business Group            |  |            | 2003 |  |          |  | 22 |     |  |  | 47 | 
|Young-Whan Kim   |  | Vice President, Special Business Center                  |  |            | 2004 |  |          |  | 22 |     |  |  | 47 | 
|Jong-Soo Lee     |  | Senior Vice President, Chungbuk Regional Business Group  |  |            | 2003 |  |          |  | 24 |     |  |  | 50 | 
|Ki-Yeoul Kim     |  | Senior Vice President, Management Research Laboratory    |  |            | 2004 |  |          |  | 25 |     |  |  | 48 | 
|Hee-Kyun Park    |  | Senior Vice President, Human Resource Office             |  |            | 2004 |  |          |  | 20 |     |  |  | 49 | 

63



---



##### 



|                 |  |                                                          |  |            |      |  |          |  |    |     |  |  |    | 
|---------------- |  | -------------------------------------------------------- |  | ---------- | ---- |  | -------- |  | -- | --- |  |  | -- | 
|                 |  |                                                          |  | Current    |      |  | Years    |  |    |    
|                 |  |                                                          |  | Position   |      |  | with the |  |    |    
|Name(1)          |  | Title and Responsibilities                               |  | Held Since |      |  | Company  |  |    | Age | 
|                 |  |                                                          |  |            |      |  |          |  |    |     | 
|Byung-Woo Lee    |  | Senior Vice President, Public Relations Office           |  |            | 2003 |  |          |  | 18 |     |  |  | 48 | 
|Haing Min Kwon   |  | Senior Vice President, Financial Management Office       |  |            | 2004 |  |          |  | 21 |     |  |  | 46 | 
|In-Sung Jun      |  | Senior Vice President, U-City Strategy Planning Center   |  |            | 2004 |  |          |  | 25 |     |  |  | 46 | 
|In-Kyu Park      |  | Vice President, Purchasing Strategy Office               |  |            | 2004 |  |          |  | 20 |     |  |  | 49 | 
|Seong-Beom Kim   |  | Vice President, Network Management & Support Center      |  |            | 2004 |  |          |  | 21 |     |  |  | 48 | 
|Sun-Cheol Gweon  |  | Vice President, Network Engineering Center               |  |            | 2004 |  |          |  | 14 |     |  |  | 43 | 
|Suk-Joon Park    |  | Vice President, Information Security Center              |  |            | 2004 |  |          |  | 24 |     |  |  | 47 | 
|Kil-Ho Song      |  | Vice President, Operation Support System Laboratory      |  |            | 2004 |  |          |  | 13 |     |  |  | 52 | 
|Young-Gwun Kim   |  | Vice President, Jeonnam Regional Business Group          |  |            | 2004 |  |          |  | 30 |     |  |  | 49 | 
|Sang-Heon Song   |  | Vice President, Construction Center                      |  |            | 2003 |  |          |  | 25 |     |  |  | 46 | 
|Jeong-Tae Park   |  | Vice President, New Business Development Center          |  |            | 2003 |  |          |  | 21 |     |  |  | 45 | 
|Yu-Yeol Seo      |  | Vice President, Business Market Sales Center             |  |            | 2004 |  |          |  | 26 |     |  |  | 48 | 
|Sang-Ho Lee      |  | Senior Vice President, Human Resource Development Center |  |            | 2003 |  |          |  | 22 |     |  |  | 53 | 
|Sang-Hong Lee    |  | Vice President, Convergence Laboratory                   |  |            | 2004 |  |          |  | 21 |     |  |  | 49 | 
|Won-Joong Song   |  | Vice President, Ethics Management Office                 |  |            | 2004 |  |          |  | 29 |     |  |  | 49 | 
|Tae-Il Park      |  | Vice President, Telecommunication Network Laboratory     |  |            | 2004 |  |          |  | 27 |     |  |  | 49 | 
|Yoon-Hak Bang    |  | Vice President(2)                                        |  |            | 2004 |  |          |  | 21 |     |  |  | 47 | 
|Heon-Chul Shin   |  | Senior Vice President, Metropolitan West Business Group  |  |            | 2003 |  |          |  | 24 |     |  |  | 46 | 
|Man-Doo Kim      |  | Vice President, Busan Regional Business Group            |  |            | 2003 |  |          |  | 33 |     |  |  | 54 | 
|Yeong-Geun Ryou  |  | Vice President, Jeju Regional Business Group             |  |            | 2003 |  |          |  | 22 |     |  |  | 49 | 
|Sang-Eun Woo     |  | Vice President, Chungnam Business Center                 |  |            | 2005 |  |          |  | 30 |     |  |  | 49 | 
|Eun-Hee Kwon     |  | Vice President(2)                                        |  |            | 2005 |  |          |  | 19 |     |  |  | 46 | 
|Sung-Ho Myung    |  | Vice President(2)                                        |  |            | 2005 |  |          |  | 21 |     |  |  | 47 | 
|Dong-Myun Lee    |  | Vice President(2)                                        |  |            | 2005 |  |          |  | 13 |     |  |  | 42 | 
|Hae-Jong Yun     |  | Vice President, U-City Planning Department               |  |            | 2005 |  |          |  | 22 |     |  |  | 47 | 
|Ki-Heon Yu       |  | Vice President, Seoul Joongbu Business Center            |  |            | 2005 |  |          |  | 22 |     |  |  | 48 | 
|Sang-Gyun Han    |  | Vice President, Incheon Business Center                  |  |            | 2005 |  |          |  | 21 |     |  |  | 51 | 
|Yong-Seok Yoon   |  | Vice President, Business Strategy Team                   |  |            | 2005 |  |          |  | 12 |     |  |  | 48 | 
|Byoung-Seon Jeon |  | Vice President, CEO Support Team                         |  |            | 2005 |  |          |  | 5  |     |  |  | 44 | 
|Kie-You Song     |  | Vice President, Financial Planning Team                  |  |            | 2005 |  |          |  | 15 |     |  |  | 45 | 
|Gil-Joo Lee      |  | Vice President, Media Relations Team                     |  |            | 2005 |  |          |  | 29 |     |  |  | 49 | 
|Jong-Jin Chae    |  | Vice President, Bizmeka Team                             |  |            | 2005 |  |          |  | 19 |     |  |  | 43 | 






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | All of our executive officers beneficially own less than one
    percent of the issued shares of KT Corporation in the aggregate.
|   
|(2) | Currently on sabbatical.                                                                                                         

64



---



##### 








|          |             
|--------- | ------------
|Item 6.B. | Compensation

Compensation of Directors and Executive Officers











|          |                
|--------- | ---------------
|Item 6.C. | Board Practices



Outside Director Candidate Nominating Committee




Evaluation and Compensation Committee




Business Strategy Committee




65



---



##### 



Executive Committee




Insider Trading Committee




Audit Committee








| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | engaging independent auditors;                                       
|
| |  | evaluating performance of independent auditors;                      
|
| |  | approving services to be provided by the independent auditors;       
|
| |  | reviewing annual financial statements;                               
|
| |  | reviewing audit results and reports;                                 
|
| |  | reviewing and evaluating our system of controls and
    policies; and
|
| |  | examining improprieties or suspected improprieties.                  



Differences in Corporate Governance Practices




66



---



##### 





|                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NYSE Corporate Governance Standards                                                                                                                                                                                   |  | KT Corporations Corporate Governance Practice                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Director independenceIndependent directors must comprise a majority of the board.                                                                                                                                     |  | The Securities and Exchange Act of Korea requires that our board
    of directors must comprise no less than a majority of outside
    directors. Our outside directors must meet the criteria for
    outside directorship set forth under the Securities and Exchange
    Act of Korea.
    The majority of our board of directors is independent (as
    defined in accordance with the New York Stock Exchanges
    standards), and 8 out of 12 directors are outside directors.                                     
|                                                                                                                                                                                                                     
|Nomination/ Corporate Governance CommitteeListed companies must have a nomination/corporate governance
    committee composed entirely of independent directors.                                                      |  | We have not established a separate nomination/corporate
    governance committee. However, we maintain an Outside Director
    Recommendation Committee composed of four outside directors and
    one standing director.                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                     
|Compensation CommitteeListed companies must have a compensation committee composed
    entirely of independent directors.                                                                                             |  | We maintain an Evaluation and Compensation Committee composed of
    five outside directors.                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                     
|Executive SessionListed companies must hold meetings solely attended by
    non-management directors to more effectively check and balance
    management directors.                                                  |  | Our outside directors hold meetings solely attended by outside
    directors in accordance with operation guidelines of our board
    of directors.                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                     
|Audit CommitteeListed companies must have an audit committee that is
    composed of more than three directors and satisfy the
    requirements of Rule 10A-3 under the Exchange Act.                                 |  | We maintain an Audit Committee comprised of four outside
    directors who meet the applicable independence criteria set
    forth under Rule 10A-3 under the Exchange Act.                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                     
|Shareholder Approval of Equity Compensation PlanListed companies must allow its shareholders to exercise
    their voting rights with respect to any material revision to the
    companys equity compensation plan. |  | We currently have two equity compensation plans: one providing
    for the grant of stock options to officers and directors; and an
    Employee Stock Ownership Program.
    All material matters related to the granting stock options are
    provided in our articles of incorporation, and any amendments to
    the articles of incorporation are subject to shareholders
    approval. Matters related to the Employee Stock Ownership
    Program are not subject to shareholders approval under
    Korean law.
|                                                                                                                                                                                                                     
|Corporate Governance GuidelinesListed companies must adopt and disclose corporate
    governance guidelines.                                                                                                          |  | We currently do not have a corporate governance guideline
    setting forth our practices with respect to relevant corporate
    governance matters.                                                                                                                                                                                                                                                                                                                                                                      

67



---



##### 



|                                                                                                                                                                                                                                              |  |                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|NYSE Corporate Governance Standards                                                                                                                                                                                                           |  | KT Corporations Corporate Governance Practice                                                                                                               
|                                                                                                                                                                                                                                              |  |                                                                                                                                                              
|Code of Business Conduct and EthicsListed companies must adopt and disclose a code of business
    conduct and ethics for directors, officers and employees, and
    promptly disclose any waivers of the code for or executive
    officers. |  | We have adopted a Code of Ethics for all directors, officers and
    employees. A copy of our Code of Ethics is available on our
    website at www.kt.co.kr.






|          |          
|--------- | ---------
|Item 6.D. | Employees







| |                                        
| | ---------------------------------------
| | The Voluntary Early Retirement Programs





| |                
| | ---------------
| | Labor Relations







68



---



##### 





| |                                      
| | -------------------------------------
| | Employee Stock Ownership and Benefits







| |                  
| | -----------------
| | Employee Training








|          |                
|--------- | ---------------
|Item 6.E. | Share Ownership

Common Stock




|                 |  |               |       | 
|---------------- |  | ------------- | ----- | 
|                 |  | Number of     |      
|                 |  | Common Shares |      
|Shareholders     |  | Owned         |      
|                 |  |               |      
|Yong-Kyung Lee   |  |               | 6,195 | 
|Woo-Sik Kim      |  |               | 500   | 
|Sang-Hoon Lee    |  |               | 1,731 | 
|Jeong-Soo Suh    |  |               | 3,040 | 
|Thae-Surn Khwarg |  |               | 250   | 

Stock Options




69



---



##### 





|                  |  |            |                    |                 |      |  |            |    |           |         |            |           |           |         |           |             |         |  |         |         |  |  |   |  |  |  |         | 
|----------------- |  | ---------- | ------------------ | --------------- | ---- |  | ---------- | -- | --------- | ------- | ---------- | --------- | --------- | ------- | --------- | ----------- | ------- |  | ------- | ------- |  |  | - |  |  |  | ------- | 
|                  |  |            |                    | Exercise Period |      |  |            |    | Number of |         |            | Number of |           |         | Number of |            
|                  |  |            |                    |                 |      |  | Exercise   |    |           | Granted |            |           | Exercised |         |           | Exercisable |        
|Directors         |  | Grant Date |                    |                 | From |  |            | To |           |         | Price      |           |           | Options |           |             | Options |  |         | Options | 
|                  |  |            |                    |                 |      |  |            |    |           |         |            |           |           |         |           |             |         |  |         |         | 
|Yong-Kyung Lee    |  |            | December 26, 2002  |                 |      |  | 12/27/2004 |    |           |         | 12/26/2009 |           |           | W       | 70,000    |             |         |  | 300,000 |         |  |  | 0 |  |  |  | 300,000 | 
|Sung-Deuk Park    |  |            | September 19, 2003 |                 |      |  | 9/17/2005  |    |           |         | 9/16/2010  |           |           | W       | 57,000    |             |         |  | 5,200   |         |  |  | 0 |  |  |  | 5,200   | 
|Kook-Hyun Moon    |  |            | September 19, 2003 |                 |      |  | 9/17/2005  |    |           |         | 9/16/2010  |           |           | W       | 57,000    |             |         |  | 5,200   |         |  |  | 0 |  |  |  | 5,200   | 
|Stuart B. Solomon |  |            | September 19, 2003 |                 |      |  | 9/17/2005  |    |           |         | 9/16/2010  |           |           | W       | 57,000    |             |         |  | 5,200   |         |  |  | 0 |  |  |  | 5,200   | 
|Do-Hwan Kim       |  |            | September 19, 2003 |                 |      |  | 9/17/2005  |    |           |         | 9/16/2010  |           |           | W       | 57,000    |             |         |  | 5,200   |         |  |  | 0 |  |  |  | 5,200   | 
|Jong-Sang Kim     |  |            | September 19, 2003 |                 |      |  | 9/17/2005  |    |           |         | 9/16/2010  |           |           | W       | 57,000    |             |         |  | 5,200   |         |  |  | 0 |  |  |  | 5,200   | 
|Sang-Hoon Lee     |  |            | December 12, 2003  |                 |      |  | 12/13/2005 |    |           |         | 12/12/2010 |           |           | W       | 65,000    |             |         |  | 60,000  |         |  |  | 0 |  |  |  | 60,000  | 
|Woo-Sik Kim       |  |            | December 12, 2003  |                 |      |  | 12/13/2005 |    |           |         | 12/12/2010 |           |           | W       | 65,000    |             |         |  | 60,000  |         |  |  | 0 |  |  |  | 60,000  | 
|Jeong-Ro Yoon     |  |            | February 4, 2005   |                 |      |  | 2/5/2007   |    |           |         | 2/4/2012   |           |           | W       | 54,600    |             |         |  | 5,400   |         |  |  | 0 |  |  |  | 5,400   | 
|Kon-Sik Kim       |  |            | February 4, 2005   |                 |      |  | 2/5/2007   |    |           |         | 2/4/2012   |           |           | W       | 54,600    |             |         |  | 5,400   |         |  |  | 0 |  |  |  | 5,400   | 
|Hi-Chang Roh      |  |            | February 4, 2005   |                 |      |  | 2/5/2007   |    |           |         | 2/4/2012   |           |           | W       | 54,600    |             |         |  | 60,000  |         |  |  | 0 |  |  |  | 60,000  | 
|Jeong-Soo Suh     |  |            | April 28, 2005     |                 |      |  | 4/29/2007  |    |           |         | 4/28/2012  |           |           | W       | 50,400    |             |         |  | 60,000  |         |  |  | 0 |  |  |  | 60,000  | 
|Thae-Surn Khwarg  |  |            | April 28, 2005     |                 |      |  | 4/29/2007  |    |           |         | 4/28/2012  |           |           | W       | 50,400    |             |         |  | 5,700   |         |  |  | 0 |  |  |  | 5,700   | 




Item 7.     Major Shareholders
and Related Party Transactions





Item 7.A.     Major
Shareholders




|                                                          |                     |           |             |             |          |  |       |        |  
|--------------------------------------------------------- | ------------------- | --------- | ----------- | ----------- | -------- |  | ----- | ------ | -
|                                                          |                     | Number of |             |             | Percent  | 
|Shareholders                                              |                     | Shares    |             |             | of Class | 
|                                                          |                     |           |             |             |          | 
|Employee stock ownership association                      |                     |           | 16,173,934  |             |          |  | 5.68  | %     
|National Pension Corporation                              |                     |           | 10,654,638  |             |          |  | 3.74  |       
|Directors as a group                                      |                     |           | 11,716      |             |          |  | 0.00  | (3)   
|Public                                                    |                     |           | 183,918,694 |             |          |  | 64.57 |       
|KT Corporation (held in the form of treasury stock)(1)(2) |                     |           | 74,090,418  |             |          |  | 26.01 |       
|                                                          |                     |           |             |             |          | 
|                                                          | Total issued shares |           |             | 284,849,400 |          |  |       | 100.00 | %
|                                                          |                     |           |             |             |          | 






|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 1,259,170 shares of treasury stock owned by our
    treasury stock fund.                                                            
|   
|(2) | Includes shares of treasury stock reserved for delivery upon
    conversion of the convertible bonds issued in January 2002 and
    May 2002.
|   
|(3) | Less than 0.01%.                                                                                                                             








Item 7.B.     Related Party
Transactions




70



---



##### 










Item 7.C.     Interests of
Experts and Counsel







Item 8.     Financial
Information





Item 8.A.     Consolidated
Statements and Other Financial Information




Legal Proceedings




| |                                           
| | ------------------------------------------
| | Investigation by the Fair Trade Commission







| |                                       
| | --------------------------------------
| | Dispute with the Fair Trade Commission



71



---



##### 





| |                                                                 
| | ----------------------------------------------------------------
| | Proceedings by the Ministry of Information and
    Communication





| |                             
| | ----------------------------
| | Retirement Benefits Disputes





| |                           
| | --------------------------
| | Dispute in the Philippines





| |                                               
| | ----------------------------------------------
| | Interruption and Slowdown of Internet Services



72



---



##### 







| |              
| | -------------
| | Miscellaneous



Dividends




|                        |  |              |     |  |              |  |       |                  |  |  |                      |  |  |  |        | 
|----------------------- |  | ------------ | --- |  | ------------ |  | ----- | ---------------- |  |  | -------------------- |  |  |  | ------ | 
|                        |  | Dividend per |     |  | Dividend per |  |       |                  |  | 
|                        |  | Common       |     |  | Common       |  |       |                  |  | 
|                        |  | Stock to     |     |  | Stock to     |  |       | Average Dividend |  |  | Total Amount of      | 
|Year Ended December 31, |  | Government   |     |  | Public       |  |       | per Share        |  |  | Dividend Declared    | 
|                        |  |              |     |  |              |  |       |                  |  |  |                      | 
|                        |  | (In Won)     |     |  | (In Won)     |  |       | (In Won)         |  |  | (In billions of Won) | 
|2000                    |  |              | 450 |  |              |  | 600   |                  |  |  | 511                  |  |  |  | 159.27 | 
|2001                    |  |              | 720 |  |              |  | 720   |                  |  |  | 720                  |  |  |  | 224.05 | 
|2002                    |  |              |    |  |              |  | 860   |                  |  |  | 860                  |  |  |  | 212.89 | 
|2003                    |  |              |    |  |              |  | 2,000 |                  |  |  | 2,000                |  |  |  | 421.52 | 
|2004                    |  |              |    |  |              |  | 3,000 |                  |  |  | 3,000                |  |  |  | 421.52 | 







73



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##### 








Item 8.B.     Significant
Changes







Item 9.     The Offer and
Listing





Item 9.A.     Offer and
Listing Details


Notes




Shares and ADSs




| |             
| | ------------
| | Common Stock



|     |                |          |         |                    |               |  |        |                |  |  |           |           | 
|---- | -------------- | -------- | ------- | ------------------ | ------------- |  | ------ | -------------- |  |  | --------- | --------- | 
|     |                | Price    |         |                    |              
|     |                |          |         |                    | Average Daily | 
|     |                | High     |         |                    | Low           |  |        | Trading Volume | 
|     |                |          |         |                    |               |  |        |                | 
|     |                |          |         | (Number of shares) |              
|     |                | (In Won) |         |                    |              
|1999 |                |          | 179,000 |                    |               |  | 33,550 |                |  |  | 977,499   |          
|     | First quarter  |          |         | 45,000             |               |  |        | 33,550         |  |  |           | 789,344   | 
|     | Second quarter |          |         | 79,000             |               |  |        | 41,800         |  |  |           | 1,025,689 | 
|     | Third quarter  |          |         | 91,500             |               |  |        | 72,200         |  |  |           | 730,069   | 
|     | Fourth quarter |          |         | 179,000            |               |  |        | 74,300         |  |  |           | 1,355,593 | 
|2000 |                |          | 169,000 |                    |               |  | 58,000 |                |  |  | 941,178   |          
|     | First quarter  |          |         | 169,000            |               |  |        | 94,000         |  |  |           | 1,366,174 | 
|     | Second quarter |          |         | 102,500            |               |  |        | 73,000         |  |  |           | 1,173,388 | 
|     | Third quarter  |          |         | 96,900             |               |  |        | 58,000         |  |  |           | 510,957   | 
|     | Fourth quarter |          |         | 73,000             |               |  |        | 59,000         |  |  |           | 696,727   | 
|2001 |                |          | 81,900  |                    |               |  | 40,500 |                |  |  | 716,042   |          
|     | First quarter  |          |         | 81,900             |               |  |        | 55,600         |  |  |           | 738,074   | 
|     | Second quarter |          |         | 63,000             |               |  |        | 51,100         |  |  |           | 729,157   | 
|     | Third quarter  |          |         | 54,600             |               |  |        | 40,500         |  |  |           | 606,358   | 
|     | Fourth quarter |          |         | 56,800             |               |  |        | 44,800         |  |  |           | 788,673   | 
|2002 |                |          | 65,000  |                    |               |  | 41,350 |                |  |  | 1,261,121 |          
|     | First quarter  |          |         | 65,000             |               |  |        | 44,300         |  |  |           | 1,772,568 | 
|     | Second quarter |          |         | 63,200             |               |  |        | 46,650         |  |  |           | 1,334,419 | 
|     | Third quarter  |          |         | 56,300             |               |  |        | 41,350         |  |  |           | 932,334   | 
|     | Fourth quarter |          |         | 55,000             |               |  |        | 48,100         |  |  |           | 1,031,093 | 

74



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##### 



|                       |                                  |                        |        |                    |               |  |        |                |        |  |         |         |         | 
|---------------------- | -------------------------------- | ---------------------- | ------ | ------------------ | ------------- |  | ------ | -------------- | ------ |  | ------- | ------- | ------- | 
|                       |                                  | Price                  |        |                    |              
|                       |                                  |                        |        |                    | Average Daily | 
|                       |                                  | High                   |        |                    | Low           |  |        | Trading Volume |       
|                       |                                  |                        |        |                    |               |  |        |                |       
|                       |                                  |                        |        | (Number of shares) |              
|                       |                                  | (In Won)               |        |                    |              
|2003                   |                                  |                        | 53,600 |                    |               |  | 41,900 |                |        |  | 867,991 |        
|                       | First quarter                    |                        |        | 53,600             |               |  |        | 41,900         |        |  |         | 760,406 |        
|                       | Second quarter                   |                        |        | 50,400             |               |  |        | 44,200         |        |  |         | 899,265 |        
|                       | Third quarter                    |                        |        | 46,900             |               |  |        | 42,650         |        |  |         | 875,808 |        
|                       | Fourth quarter                   |                        |        | 51,400             |               |  |        | 43,950         |        |  |         | 936,020 |        
|2004                   |                                  |                        | 47,550 |                    |               |  | 34,200 |                |        |  | 577,620 |        
|                       | First quarter                    |                        |        | 47,550             |               |  |        | 42,250         |        |  |         | 776,735 |        
|                       | Second quarter                   |                        |        | 42,150             |               |  |        | 35,900         |        |  |         | 591,403 |        
|                       | Third quarter                    |                        |        | 38,700             |               |  |        | 34,200         |        |  |         | 372,460 |        
|                       | Fourth quarter                   |                        |        | 43,900             |               |  |        | 35,600         |        |  |         | 584,547 |        
|2005 (through June 27) |                                  |                        | 43,250 |                    |               |  | 37,600 |                |        |  | 459,453 |        
|                       | First quarter                    |                        |        | 43,200             |               |  |        | 39,400         |        |  |         | 464,673 |        
|                       |                                  | January                |        |                    | 43,200        |  |        |                | 40,400 |  |         |         | 419,409 | 
|                       |                                  | February               |        |                    | 42,400        |  |        |                | 40,700 |  |         |         | 478,941 | 
|                       |                                  | March                  |        |                    | 41,950        |  |        |                | 39,400 |  |         |         | 497,065 | 
|                       | Second quarter (through June 27) |                        |        | 43,250             |               |  |        | 37,600         |        |  |         | 454,065 |        
|                       |                                  | April                  |        |                    | 39,400        |  |        |                | 37,600 |  |         |         | 572,227 | 
|                       |                                  | May                    |        |                    | 40,700        |  |        |                | 38,150 |  |         |         | 343,638 | 
|                       |                                  | June (through June 27) |        |                    | 43,250        |  |        |                | 40,750 |  |         |         | 451,607 | 






|        |                                             
|------- | --------------------------------------------
|Source: | Stock Market Division of the Korea Exchange.



| |     
| | ----
| | ADSs





|                   |                              |          |       |                  |               |  |       |                |       |  |         |           |         | 
|------------------ | ---------------------------- | -------- | ----- | ---------------- | ------------- |  | ----- | -------------- | ----- |  | ------- | --------- | ------- | 
|                   |                              | Price    |       |                  |              
|                   |                              |          |       |                  | Average Daily | 
|                   |                              | High     |       |                  | Low           |  |       | Trading Volume |      
|                   |                              |          |       |                  |               |  |       |                |      
|                   |                              |          |       | (Number of ADSs) |              
|                   |                              | (In US$) |       |                  |              
|1999 (from May 25) |                              |          | 74.75 |                  |               |  | 27.56 |                |       |  | 575,160 |          
|                   | Second quarter (from May 25) |          |       | 40.00            |               |  |       | 27.56          |       |  |         | 1,419,844 |        
|                   | Third quarter                |          |       | 44.25            |               |  |       | 31.75          |       |  |         | 440,850   |        
|                   | Fourth quarter               |          |       | 74.75            |               |  |       | 31.50          |       |  |         | 388,502   |        
|2000               |                              |          | 74.50 |                  |               |  | 26.88 |                |       |  | 467,352 |          
|                   | First quarter                |          |       | 74.50            |               |  |       | 41.13          |       |  |         | 582,749   |        
|                   | Second quarter               |          |       | 48.88            |               |  |       | 32.13          |       |  |         | 493,857   |        
|                   | Third quarter                |          |       | 49.88            |               |  |       | 30.75          |       |  |         | 353,878   |        
|                   | Fourth quarter               |          |       | 37.88            |               |  |       | 26.88          |       |  |         | 438,925   |        
|                   |                              | December |       |                  | 35.19         |  |       |                | 26.88 |  |         |           | 384,170 | 

75



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##### 



|                       |                                  |                        |       |                  |               |  |       |                |       |  |           |           |         | 
|---------------------- | -------------------------------- | ---------------------- | ----- | ---------------- | ------------- |  | ----- | -------------- | ----- |  | --------- | --------- | ------- | 
|                       |                                  | Price                  |       |                  |              
|                       |                                  |                        |       |                  | Average Daily | 
|                       |                                  | High                   |       |                  | Low           |  |       | Trading Volume |      
|                       |                                  |                        |       |                  |               |  |       |                |      
|                       |                                  |                        |       | (Number of ADSs) |              
|                       |                                  | (In US$)               |       |                  |              
|2001                   |                                  |                        | 39.88 |                  |               |  | 16.39 |                |       |  | 1,085,253 |          
|                       | First quarter                    |                        |       | 39.88            |               |  |       | 22.50          |       |  |           | 541,265   |        
|                       | Second quarter                   |                        |       | 27.75            |               |  |       | 20.35          |       |  |           | 889,440   |        
|                       | Third quarter                    |                        |       | 21.87            |               |  |       | 16.39          |       |  |           | 1,235,822 |        
|                       | Fourth quarter                   |                        |       | 24.94            |               |  |       | 18.10          |       |  |           | 1,666,189 |        
|2002                   |                                  |                        | 24.64 |                  |               |  | 18.12 |                |       |  | 1,084,210 |          
|                       | First quarter                    |                        |       | 24.49            |               |  |       | 18.12          |       |  |           | 1,620,290 |        
|                       | Second quarter                   |                        |       | 24.64            |               |  |       | 21.45          |       |  |           | 1,100,248 |        
|                       | Third quarter                    |                        |       | 22.76            |               |  |       | 19.42          |       |  |           | 900,939   |        
|                       | Fourth quarter                   |                        |       | 22.60            |               |  |       | 19.43          |       |  |           | 749,067   |        
|2003                   |                                  |                        | 22.58 |                  |               |  | 16.85 |                |       |  | 878,552   |          
|                       | First quarter                    |                        |       | 22.58            |               |  |       | 16.85          |       |  |           | 904,731   |        
|                       | Second quarter                   |                        |       | 20.43            |               |  |       | 17.53          |       |  |           | 873,013   |        
|                       | Third quarter                    |                        |       | 20.35            |               |  |       | 18.15          |       |  |           | 801,345   |        
|                       | Fourth quarter                   |                        |       | 21.57            |               |  |       | 18.50          |       |  |           | 936,258   |        
|2004                   |                                  |                        | 22.73 |                  |               |  | 16.57 |                |       |  | 671,995   |          
|                       | First quarter                    |                        |       | 20.35            |               |  |       | 18.60          |       |  |           | 924,169   |        
|                       | Second quarter                   |                        |       | 19.21            |               |  |       | 16.57          |       |  |           | 840,529   |        
|                       | Third quarter                    |                        |       | 18.34            |               |  |       | 16.70          |       |  |           | 479,480   |        
|                       | Fourth quarter                   |                        |       | 22.73            |               |  |       | 17.89          |       |  |           | 454.298   |        
|2005 (through June 27) |                                  |                        | 23.21 |                  |               |  | 19.75 |                |       |  | 488,019   |          
|                       | First quarter                    |                        |       | 23.21            |               |  |       | 20.98          |       |  |           | 466,382   |        
|                       |                                  | January                |       |                  | 22.45         |  |       |                | 21.05 |  |           |           | 428,990 | 
|                       |                                  | February               |       |                  | 23.21         |  |       |                | 21.70 |  |           |           | 467,905 | 
|                       |                                  | March                  |       |                  | 23.20         |  |       |                | 20.98 |  |           |           | 499,059 | 
|                       | Second quarter (through June 27) |                        |       | 22.01            |               |  |       | 19.75          |       |  |           | 509,656   |        
|                       |                                  | April                  |       |                  | 21.52         |  |       |                | 19.82 |  |           |           | 678,676 | 
|                       |                                  | May                    |       |                  | 20.95         |  |       |                | 19.75 |  |           |           | 434,924 | 
|                       |                                  | June (through June 27) |       |                  | 22.01         |  |       |                | 21.05 |  |           |           | 405,442 | 






|        |                         
|------- | ------------------------
|Source: | New York Stock Exchange.






|          |                     
|--------- | --------------------
|Item 9.B. | Plan of Distribution








|          |        
|--------- | -------
|Item 9.C. | Markets

The Stock Market Division of the Korea Exchange






76



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##### 











|                       |  |         |          |  |      |  |          |     |  |                |         |  |          |           |          |  |             |  |      |  |  |  |      | 
|---------------------- |  | ------- | -------- |  | ---- |  | -------- | --- |  | -------------- | ------- |  | -------- | --------- | -------- |  | ----------- |  | ---- |  |  |  | ---- | 
|                       |  |         |          |  |      |  |          |     |  | Period Average |        
|                       |  |         |          |  |      |  |          |     |  |                |        
|                       |  |         |          |  |      |  |          |     |  | Dividend       |         |  | Price    |          
|                       |  |         |          |  |      |  |          |     |  | Yield(1)(2)    |         |  | Earnings |          
|Year                   |  | Opening |          |  | High |  |          | Low |  |                | Closing |  |          | (Percent) |          |  | Ratio(2)(3) | 
|                       |  |         |          |  |      |  |          |     |  |                |         |  |          |           |          |  |             | 
|1979                   |  |         | 131.28   |  |      |  | 131.28   |     |  |                | 104.38  |  |          |           | 118.97   |  |             |  | 17.8 |  |  |  | 3.8  | 
|1980                   |  |         | 100.00   |  |      |  | 119.36   |     |  |                | 100.00  |  |          |           | 106.87   |  |             |  | 20.9 |  |  |  | 2.6  | 
|1981                   |  |         | 97.95    |  |      |  | 165.95   |     |  |                | 93.14   |  |          |           | 131.37   |  |             |  | 13.2 |  |  |  | 3.1  | 
|1982                   |  |         | 123.60   |  |      |  | 134.49   |     |  |                | 106.00  |  |          |           | 127.31   |  |             |  | 10.5 |  |  |  | 3.4  | 
|1983                   |  |         | 122.52   |  |      |  | 134.46   |     |  |                | 115.59  |  |          |           | 121.21   |  |             |  | 6.9  |  |  |  | 3.8  | 
|1984                   |  |         | 116.73   |  |      |  | 142.46   |     |  |                | 114.37  |  |          |           | 142.46   |  |             |  | 5.1  |  |  |  | 4.5  | 
|1985                   |  |         | 139.53   |  |      |  | 163.37   |     |  |                | 131.40  |  |          |           | 163.37   |  |             |  | 5.3  |  |  |  | 5.2  | 
|1986                   |  |         | 161.40   |  |      |  | 279.67   |     |  |                | 153.85  |  |          |           | 272.61   |  |             |  | 4.3  |  |  |  | 7.6  | 
|1987                   |  |         | 264.82   |  |      |  | 525.11   |     |  |                | 264.82  |  |          |           | 525.11   |  |             |  | 2.6  |  |  |  | 10.9 | 
|1988                   |  |         | 532.04   |  |      |  | 922.56   |     |  |                | 527.89  |  |          |           | 907.20   |  |             |  | 2.4  |  |  |  | 11.2 | 
|1989                   |  |         | 919.61   |  |      |  | 1,007.77 |     |  |                | 844.75  |  |          |           | 909.72   |  |             |  | 2.0  |  |  |  | 13.9 | 
|1990                   |  |         | 908.59   |  |      |  | 928.82   |     |  |                | 566.27  |  |          |           | 696.11   |  |             |  | 2.2  |  |  |  | 12.8 | 
|1991                   |  |         | 679.75   |  |      |  | 763.10   |     |  |                | 586.51  |  |          |           | 610.92   |  |             |  | 2.6  |  |  |  | 11.2 | 
|1992                   |  |         | 624.23   |  |      |  | 691.48   |     |  |                | 459.07  |  |          |           | 678.44   |  |             |  | 2.2  |  |  |  | 10.9 | 
|1993                   |  |         | 697.41   |  |      |  | 874.10   |     |  |                | 605.93  |  |          |           | 866.18   |  |             |  | 1.6  |  |  |  | 12.7 | 
|1994                   |  |         | 879.32   |  |      |  | 1,138.75 |     |  |                | 855.37  |  |          |           | 1,027.37 |  |             |  | 1.2  |  |  |  | 16.2 | 
|1995                   |  |         | 1,013.57 |  |      |  | 1,016.77 |     |  |                | 847.09  |  |          |           | 882.94   |  |             |  | 1.2  |  |  |  | 16.4 | 
|1996                   |  |         | 888.85   |  |      |  | 986.84   |     |  |                | 651.22  |  |          |           | 651.22   |  |             |  | 1.3  |  |  |  | 17.8 | 
|1997                   |  |         | 653.79   |  |      |  | 792.29   |     |  |                | 350.68  |  |          |           | 376.31   |  |             |  | 1.5  |  |  |  | 17.0 | 
|1998                   |  |         | 385.49   |  |      |  | 579.86   |     |  |                | 280.00  |  |          |           | 562.46   |  |             |  | 1.9  |  |  |  | 10.8 | 
|1999                   |  |         | 587.57   |  |      |  | 1,028.07 |     |  |                | 498.42  |  |          |           | 1,028.07 |  |             |  | 1.1  |  |  |  | 13.5 | 
|2000                   |  |         | 1,059.04 |  |      |  | 1,059.04 |     |  |                | 500.60  |  |          |           | 504.62   |  |             |  | 1.6  |  |  |  | 18.6 | 
|2001                   |  |         | 520.95   |  |      |  | 704.50   |     |  |                | 468.76  |  |          |           | 693.70   |  |             |  | 2.0  |  |  |  | 14.2 | 
|2002                   |  |         | 724.95   |  |      |  | 937.61   |     |  |                | 584.04  |  |          |           | 627.55   |  |             |  | 1.4  |  |  |  | 17.8 | 
|2003                   |  |         | 635.17   |  |      |  | 822.16   |     |  |                | 515.24  |  |          |           | 810.71   |  |             |  | 2.2  |  |  |  | 10.9 | 
|2004                   |  |         | 821.26   |  |      |  | 936.06   |     |  |                | 719.59  |  |          |           | 895.92   |  |             |  | 2.1  |  |  |  | 15.8 | 
|2005 (through June 27) |  |         | 896.00   |  |      |  | 1,023.34 |     |  |                | 866.17  |  |          |           | 999.11   |  |             |  | 2.5  |  |  |  |     | 

77



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##### 








|        |                                                
|------- | -----------------------------------------------
|Source: | The Stock Market Division of the Korea Exchange



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Dividend yields are based on daily figures. Before 1983,
    dividend yields were calculated at the end of each month.
    Dividend yields after January 3, 1984 include cash
    dividends only.                                                                                                                                                                                                                                                          
|   
|(2) | Starting in April 2000, dividend yield and price earnings
    ratio are calculated based on KOSPI 200, an index
    of 200 equity securities listed on the Stock Market
    Division of the Korea Exchange. Starting in April 2000,
    excludes classified companies, companies which did not submit
    annual reports to the Stock Market Division of the
    Korea Exchange, and companies which received qualified
    opinion from external auditors.
|   
|(3) | The price earnings ratio is based on figures for companies that
    record a profit in the preceding year.                                                                                                                                                                                                                                                                                                                                                 





|                               |  |                 |       | 
|------------------------------ |  | --------------- | ----- | 
|Previous Days Closing Price   |  | Rounded Down To |      
|                               |  |                 |      
|Less than W5,000               |  | W               | 5     | 
|W5,000 to less than W10,000    |  | W               | 10    | 
|W10,000 to less than W50,000   |  | W               | 50    | 
|W50,000 to less than W100,000  |  | W               | 100   | 
|W100,000 to less than W500,000 |  | W               | 500   | 
|W500,000 or more               |  | W               | 1,000 | 





78



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##### 





|                       |  |                                |     |  |                               |  |             |               |  |  |             |  |  |              |         |  |               |  |           |  |  |  |           | 
|---------------------- |  | ------------------------------ | --- |  | ----------------------------- |  | ----------- | ------------- |  |  | ----------- |  |  | ------------ | ------- |  | ------------- |  | --------- |  |  |  | --------- | 
|                       |  | Market Capitalization          |     |  |                              
|                       |  | on the Last Day of Each Period |     |  | Average Daily Trading Volume, | 
|                       |  |                                |     |  | Value                         | 
|                       |  | Number of                      |     |  |                               |  |             |              
|                       |  | Listed                         |     |  | (Millions of                  |  |             | (Thousands of |  |  | Thousands   |  |  | (Millions of |         |  | (Thousands of | 
|Year                   |  | Companies                      |     |  | Won)                          |  |             | Dollars)(1)   |  |  | of Shares   |  |  | Won)         |         |  | Dollars)(1)   | 
|                       |  |                                |     |  |                               |  |             |               |  |  |             |  |  |              |         |  |               | 
|1979                   |  |                                | 355 |  |                               |  | 2,609,414   |               |  |  | 5,391,351   |  |  |              | 5,382   |  |               |  | 4,579     |  |  |  | 4,641     | 
|1980                   |  |                                | 352 |  |                               |  | 2,526,553   |               |  |  | 3,828,691   |  |  |              | 5,654   |  |               |  | 3,897     |  |  |  | 5,905     | 
|1981                   |  |                                | 343 |  |                               |  | 2,959,057   |               |  |  | 4,224,207   |  |  |              | 10,565  |  |               |  | 8,708     |  |  |  | 12,433    | 
|1982                   |  |                                | 334 |  |                               |  | 3,000,494   |               |  |  | 4,407,711   |  |  |              | 9,704   |  |               |  | 6,667     |  |  |  | 8,904     | 
|1983                   |  |                                | 328 |  |                               |  | 3,489,654   |               |  |  | 4,386,743   |  |  |              | 9,325   |  |               |  | 5,941     |  |  |  | 7,468     | 
|1984                   |  |                                | 336 |  |                               |  | 5,148,460   |               |  |  | 6,222,456   |  |  |              | 14,847  |  |               |  | 10,642    |  |  |  | 12,862    | 
|1985                   |  |                                | 342 |  |                               |  | 6,570,404   |               |  |  | 7,380,818   |  |  |              | 18,925  |  |               |  | 12,315    |  |  |  | 13,834    | 
|1986                   |  |                                | 355 |  |                               |  | 11,994,233  |               |  |  | 13,924,115  |  |  |              | 31,755  |  |               |  | 32,870    |  |  |  | 38,159    | 
|1987                   |  |                                | 389 |  |                               |  | 26,172,174  |               |  |  | 33,033,162  |  |  |              | 20,353  |  |               |  | 70,185    |  |  |  | 88,584    | 
|1988                   |  |                                | 502 |  |                               |  | 64,543,685  |               |  |  | 94,348,318  |  |  |              | 10,367  |  |               |  | 198,364   |  |  |  | 289,963   | 
|1989                   |  |                                | 626 |  |                               |  | 95,476,774  |               |  |  | 140,489,660 |  |  |              | 11,757  |  |               |  | 280,967   |  |  |  | 414,431   | 
|1990                   |  |                                | 669 |  |                               |  | 79,019,676  |               |  |  | 110,301,055 |  |  |              | 10,866  |  |               |  | 183,692   |  |  |  | 256,500   | 
|1991                   |  |                                | 686 |  |                               |  | 73,117,833  |               |  |  | 96,182,364  |  |  |              | 14,022  |  |               |  | 214,263   |  |  |  | 281,850   | 
|1992                   |  |                                | 688 |  |                               |  | 84,711,982  |               |  |  | 107,502,515 |  |  |              | 24,028  |  |               |  | 308,246   |  |  |  | 391,175   | 
|1993                   |  |                                | 693 |  |                               |  | 112,665,260 |               |  |  | 139,419,948 |  |  |              | 35,130  |  |               |  | 574,048   |  |  |  | 676,954   | 
|1994                   |  |                                | 699 |  |                               |  | 151,217,231 |               |  |  | 191,729,721 |  |  |              | 36,862  |  |               |  | 776,257   |  |  |  | 984,223   | 
|1995                   |  |                                | 721 |  |                               |  | 141,151,399 |               |  |  | 182,201,367 |  |  |              | 26,130  |  |               |  | 487,762   |  |  |  | 629,614   | 
|1996                   |  |                                | 760 |  |                               |  | 117,369,988 |               |  |  | 139,031,021 |  |  |              | 26,571  |  |               |  | 486,834   |  |  |  | 575,733   | 
|1997                   |  |                                | 776 |  |                               |  | 70,988,897  |               |  |  | 50,161,742  |  |  |              | 41,525  |  |               |  | 555,759   |  |  |  | 392,707   | 
|1998                   |  |                                | 748 |  |                               |  | 137,798,451 |               |  |  | 114,090,455 |  |  |              | 97,716  |  |               |  | 660,429   |  |  |  | 471,432   | 
|1999                   |  |                                | 725 |  |                               |  | 349,503,966 |               |  |  | 305,137,040 |  |  |              | 278,551 |  |               |  | 3,481,620 |  |  |  | 3,039,654 | 
|2000                   |  |                                | 704 |  |                               |  | 188,041,490 |               |  |  | 150,162,898 |  |  |              | 306,163 |  |               |  | 2,602,211 |  |  |  | 2,078,028 | 
|2001                   |  |                                | 689 |  |                               |  | 255,850,070 |               |  |  | 194,784,979 |  |  |              | 473,241 |  |               |  | 1,997,420 |  |  |  | 1,506,685 | 
|2002                   |  |                                | 683 |  |                               |  | 258,680,756 |               |  |  | 216,071,436 |  |  |              | 857,245 |  |               |  | 3,041,595 |  |  |  | 2,540,590 | 
|2003                   |  |                                | 684 |  |                               |  | 355,362,626 |               |  |  | 298,123,294 |  |  |              | 385,852 |  |               |  | 2,026,774 |  |  |  | 1,700,314 | 
|2004                   |  |                                | 683 |  |                               |  | 412,588,139 |               |  |  | 395,275,090 |  |  |              | 372,895 |  |               |  | 2,232,109 |  |  |  | 2,138,445 | 
|2005 (through June 27) |  |                                | 679 |  |                               |  | 460,342,240 |               |  |  | 454,703,912 |  |  |              | 439,159 |  |               |  | 2,456,361 |  |  |  | 2,426,475 | 




Source:




|    |                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Converted at the Concentration Base Rate of The Bank of Korea or
    the Market Average Exchange Rate as announced by the Seoul Money
    Brokerage Services Limited, as the case may be, at the end of
    the periods indicated.



79



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##### 



Further Opening of the Korean Securities Market










Protection of Customers Interest in Case of Insolvency
of Securities Companies












80



---



##### 










Item 9.D.Selling
Shareholders







Item 9.E.Dilution







Item 9.F.Expenses of
the Issuer







Item 10.     Additional
Information





Item 10.A.Share
Capital







Item 10.B.     Memorandum
and Articles of Association




Dividends






81



---



##### 









Distribution of Free Shares




Preemptive Rights and Issuance of Additional Shares








| |   |                                                               
| | - | --------------------------------------------------------------
| |  | publicly offered pursuant to the Securities and Exchange Act; 
|
| |  | issued to members of our employee stock ownership association;
|
| |  | represented by depositary receipts;                           

82



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| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | issued upon exercise of stock options granted to our officers
    and employees;                                                                                                                            
|
| |  | issued through an offering to public investors, the amount of
    which is no more than 10% of the issued Shares;                                                                                           
|
| |  | issued in order to satisfy specific needs such as strategic
    alliance, inducement of foreign funds or new technology,
    improvement of financial structure or other capital raising
    requirement; or
|
| |  | issued to domestic or foreign financial institutions when
    necessary for raising funds in emergency cases.                                                                                               





Limitation on Shareholdings




General Meeting of Shareholders






| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | as necessary;                                                                             
|
| |  | at the request of holders of an aggregate of 3.0% or more of our
    issued Common Shares;

83



---



##### 





| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | at the request of shareholders holding an aggregate of 1.5% or
    more of our issued Shares for at least six months; or
|
| |  | at the request of our audit committee.                                                                                  







Voting Rights








| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amending our articles of incorporation;                                                                                                                                                             
|
| |  | removing a director;                                                                                                                                                                                
|
| |  | effecting any dissolution, merger or consolidation of us;                                                                                                                                           
|
| |  | transferring the whole or any significant part of our business;                                                                                                                                     
|
| |  | effecting our acquisition of all of the business of any other
    company or our acquisition of a part of the business of any
    other company which will significantly affect our
    business; or
|
| |  | issuing any new Shares at a price lower than their par value.                                                                                                                                       



84



---



##### 





in abstentia




Rights of Dissenting Shareholders




Register of Shareholders and Record Dates






85



---



##### 



Annual Report






Transfer of Shares








Acquisition of Shares by Us








86



---



##### 





Liquidation Rights







Item 10.C.     Material
Contracts







Item 10.D.     Exchange
Controls


General






Government Review of Issuance of ADSs






Reporting Requirements for Holders of Substantial
Interests




87



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##### 







Restrictions Applicable to ADSs






Restrictions Applicable to Shares






| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | odd-lot trading of shares;                                                                                                                                                                                                
|
| |  | acquisition of shares (Converted Shares) by exercise
    of warrant, conversion right under convertible bonds or
    withdrawal right under depositary receipts issued outside of
    Korea by a Korean company;        
|
| |  | acquisition of shares as a result of inheritance, donation,
    bequest or exercise of shareholders rights, including
    preemptive rights or rights to participate in free distributions
    and receive dividends; and
|
| |  | over-the-counter transactions between foreigners of a class of
    shares for which the ceiling on aggregate acquisition by
    foreigners, as explained below, has been reached or exceeded.                             



88



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##### 













89



---



##### 














Item 10.E.Taxation




Korean Taxation






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | a resident of Korea;                                                                          
|
| |  | a corporation organized under Korean law; or                                                  
|
| |  | engaged in a trade or business in Korea through a permanent
    establishment or a fixed base.

90



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##### 





| |                           
| | --------------------------
| | Convertible Notes or Bonds



| |                
| | ---------------
| | Tax on Interest





| |                     
| | --------------------
| | Tax on Capital Gains









| |                             
| | ----------------------------
| | Inheritance Tax and Gift Tax





| |               
| | --------------
| | Shares or ADSs



| |                                            
| | -------------------------------------------
| | Dividends on Shares of Common Stock or ADSs



91



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##### 











| |              
| | -------------
| | Capital Gains









| |                             
| | ----------------------------
| | Inheritance Tax and Gift Tax



92



---



##### 







| |                           
| | --------------------------
| | Securities Transaction Tax





United States Federal Income Taxation






| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a dealer in securities or currencies;                                                                                                                            
|
| |  | a trader in securities that elects to use a mark-to-market
    method of accounting for your securities holdings;                                                
|
| |  | a bank;                                                                                                                                                          
|
| |  | a life insurance company;                                                                                                                                        
|
| |  | a tax-exempt organization;                                                                                                                                       
|
| |  | a person that holds convertible notes, bonds, shares of common
    stock or ADSs that are a hedge or that are hedged against
    interest rate or currency risks;
|
| |  | a person that holds convertible notes, bonds, shares of common
    stock or ADSs as part of a straddle or conversion transaction
    for tax purposes;           

93



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##### 





| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | a person whose functional currency for tax purposes is not the
    U.S. dollar; or
|
| |  | a person that owns or is deemed to own 10% or more of any class
    of our stock. 









| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a citizen or resident of the United States;                                                                                                                    
|
| |  | a U.S. domestic corporation; or                                                                                                                                
|
| |  | subject to U.S. federal income tax on a net income basis
    with respect to income from the convertible note, bond, warrant,
    share of common stock or ADS.



| |                  
| | -----------------
| | Convertible Notes



| |                
| | ---------------
| | Stated Interest





| |        
| | -------
| | Premium





| |                
| | ---------------
| | Market Discount





94



---



##### 







| |           
| | ----------
| | Conversion





| |                                   
| | ----------------------------------
| | Adjustment of the Conversion Price





| |                                    
| | -----------------------------------
| | Sale, Exchange or other Disposition





| |                                  
| | ---------------------------------
| | Foreign Tax Credit Considerations



95



---



##### 









| |          
| | ---------
| | The Bonds



| |                
| | ---------------
| | Stated Interest





| |                        
| | -----------------------
| | Original Issue Discount







| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) multiplying the adjusted issue price (as
    defined below) of the bond at the beginning of the accrual
    period by a fraction, the numerator of which is the annual yield
    to maturity (defined below) of the bond and the denominator of
    which is the number of accrual periods in a year; and
|
| | (ii) subtracting from that product the amount payable as
    stated interest allocable to that accrual period.                                                                                                                                                                                                 



96



---



##### 











| |        
| | -------
| | Premium







| |                
| | ---------------
| | Market Discount







| |                                           
| | ------------------------------------------
| | Sale, Exchange and Retirement of the Bonds



97



---



##### 







| |                                  
| | ---------------------------------
| | Foreign Tax Credit Considerations







| |                                    
| | -----------------------------------
| | The Shares of Common Stock and ADSs





| |          
| | ---------
| | Dividends





98



---



##### 









| |                             
| | ----------------------------
| | Sales and Other Dispositions





| |                                  
| | ---------------------------------
| | Foreign Tax Credit Considerations









| |                                                            
| | -----------------------------------------------------------
| | U.S. Information Reporting and Backup Withholding
    Rules






Item 10.F.     Dividends and
Paying Agents




99



---



##### 








Item 10.G.     Statements by
Experts







Item 10.H.     Documents on
Display









|         |                                                           
|-------- | ----------------------------------------------------------
|Item 11. | Quantitative and Qualitative Disclosures About Market Risk



Exchange Rate Risk






|            |  |                 |      |  |               |   |       |                         |  |                                     |  |                                 |  |                
|----------- |  | --------------- | ---- |  | ------------- | - | ----- | ----------------------- |  | ----------------------------------- |  | ------------------------------- |  | ---------------
|            |  | Contract Amount |      |  | Fixed Amount  |   |       |                         |  |                                     |  |                                
|Bank        |  | (In millions)   |      |  | (In billions) |   |       | Receiving Interest Rate |  | Paying Interest Rate                |  | Terminal Date                  
|            |  |                 |      |  |               |   |       |                         |  |                                     |  |                                
|J.P. Morgan |  |                 | $50  |  |               | W | 59.8  |                         |  | 4.30% per year in Dollars           |  | 6.17% per year in Won           |  | January 3, 2005
|J.P. Morgan |  |                 | $150 |  |               | W | 179.8 |                         |  | 3-month LIBOR plus 0.80% in Dollars |  | 3-month LIBOR plus 2.64% in Won |  | June 24, 2006  



100



---



##### 





|               |  |               |     |  |               |   |                 |               |  |                 |               |   |               |                                    |  |                
|-------------- |  | ------------- | --- |  | ------------- | - | --------------- | ------------- |  | --------------- | ------------- | - | ------------- | ---------------------------------- |  | ---------------
|               |  | Contract      |     |  |               |   | Fixed Receiving |               |  | Variable Paying |               |  
|               |  | Amount        |     |  | Amount        |   |                 | Interest Rate |  |                 | Interest Rate |   |              
|Bank           |  | (In millions) |     |  | (In billions) |   |                 | (1 year)      |  |                 | (6 months)    |   | Terminal Date
|               |  |               |     |  |               |   |                 |               |  |                 |               |   |              
|J.P. Morgan    |  | $             | 50  |  |               | W | 55 to 60        |               |  |                 | 4.3% (US$     | ) |               | 6-month LIBOR plus 4.55% W         |  | January 3, 2005
|J.P. Morgan(1) |  | $             | 100 |  |               | W | 116             |               |  |                 | 5.9% (US$     | ) |               | 6-month LIBOR plus 1.87% W         |  | June 24, 2014  
|               |  |               |     |  |               |   |                 |               |  |                 | 5.5% (Won     | ) |               |                                    |  |                
|J.P. Morgan(2) |  | $             | 200 |  |               | W | 231             |               |  |                 | 5.5% (Won     | ) |               | 6-month LIBOR plus 0.69% W         |  | June 24, 2014  
|               |  |               |     |  |               |   |                 |               |  |                 |               |   |               | 5.9% minus contingent spread (US$) |  |                
|Merrill Lynch  |  | $             | 100 |  |               | W | 116             |               |  |                 | 5.0% (Won     | ) |               | 5.9% minus contingent spread (US$) |  | June 24, 2014  
|Merrill Lynch  |  | $             | 50  |  |               | W | 53              |               |  |                 | 4.7% (Won     | ) |               | 5.9% minus contingent spread (US$) |  | June 24, 2014  
|Citibank       |  | $             | 25  |  |               | W | 28 to 30        |               |  |                 | 4.3% (US$     | ) |               | 6-month LIBOR plus 4.45% W         |  | January 3, 2005
|UBS Bank       |  | $             | 25  |  |               | W | 28 to 30        |               |  |                 | 4.3% (US$     | ) |               | 6-month LIBOR plus 4.45% W         |  | January 3, 2005
|Deutsche bank  |  | $             | 50  |  |               | W | 55 to 60        |               |  |                 | 4.3% (US$     | ) |               | 6-month LIBOR plus 4.57% W         |  | January 3, 2005
|Deutsche bank  |  | $             | 50  |  |               | W | 53              |               |  |                 | 4.7% (Won     | ) |               | 5.9% minus contingent spread (US$) |  | June 24, 2014  
|Shinhan bank   |  | $             | 50  |  |               | W | 55 to 60        |               |  |                 | 4.3% (US$     | ) |               | 6-month LIBOR plus 4.45% W         |  | January 3, 2005






|    |                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The interest will be received at 5.9% (US$) and paid at 6-month
    LIBOR plus 1.87% (Won) every six months over the first five
    years. Then, the interest will be received at 5.9% (US$) every
    six months and paid at 5.5% (Won) per year over the following
    five years.                                    
|   
|(2) | The interest will be received at 5.9%-contingent spread (US$)
    and paid at 6-month LIBOR plus 0.69% (Won) every six months over
    the first five years. Then, the interest will be received at
    5.9%-contingent spread (US$) every six months and paid at 5.5%
    (Won) per year over the following five years.



Interest Rate Risk






101



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##### 





|             |  |               |     |              |                  |  |        |                     |  |  |                        |  |  |                                                |                          |  |                    |  |                | 
|------------ |  | ------------- | --- | ------------ | ---------------- |  | ------ | ------------------- |  |  | ---------------------- |  |  | ---------------------------------------------- | ------------------------ |  | ------------------ |  | -------------- | 
|             |  |               |     | Fixed Amount |                  |  |        |                     |  |  |                       
|             |  | Nominal       |     |              | (In millions of  |  |        |                     |  |  |                        | 
|             |  | Premium       |     |              | Dollars and      |  |        | Fixed Interest Rate |  |  |                        |  | 
|Bank         |  | (In millions) |     |              | billions of Won) |  |        | (1 year)            |  |  | Variable Interest Rate |  |  | Terminal Date                                  |                         
|             |  |               |     |              |                  |  |        |                     |  |  |                        |  |  |                                                |                         
|J.P. Morgan  |  | $             | 1.6 |              |                  |  | US$150 |                     |  |  | 7.50%                  |  |  |                                                | 6-month LIBOR plus 4.32% |  |                    |  | June 1, 2006   | 
|J.P. Morgan  |  | $             | 0.5 |              |                  |  | US$200 |                     |  |  | 7.63%                  |  |  |                                                | 6-month LIBOR plus 4.61% |  |                    |  | April 15, 2007 | 
|Citibank     |  |               |    |              |                  |  | W110   |                     |  |  | 5.29%                  |  |  |                                                | 3-month LIBOR plus 1.47% |  |                    |  | April 30, 2008 | 
|Shinhan Bank |  |               |    |              |                  |  | W180   |                     |  |  | 6.35%                  |  |  | 3-month LIBOR plus 2.47%plus contingent spread |                          |  | September 30, 2007 | 
|Shinhan Bank |  |               |    |              |                  |  | W58    |                     |  |  | 4.70%                  |  |  |                                                | 6-month LIBOR plus 0.69% |  |                    |  | June 24, 2009  | 
|UBS          |  |               |    |              |                  |  | W58    |                     |  |  | 4.70%                  |  |  |                                                | 6-month LIBOR plus 0.69% |  |                    |  | June 24, 2009  | 
|UBS          |  |               |    |              |                  |  | W58    |                     |  |  | 4.64%                  |  |  |                                                | 6-month LIBOR plus 0.69% |  |                    |  | June 24, 2009  | 
|BNP Paribas  |  |               |    |              |                  |  | W110   |                     |  |  | 5.29%                  |  |  |                                                | 3-month LIBOR plus 1.54% |  |                    |  | April 30, 2008 | 
|CSFB         |  |               |    |              |                  |  | W58    |                     |  |  | 4.64%                  |  |  |                                                | 6-month LIBOR plus 0.69% |  |                    |  | June 24, 2009  | 



|         |  |                  |     |  |                     |  |      |                   |  |                              |               |  |                |      |  |  |         |  |  | 
|-------- |  | ---------------- | --- |  | ------------------- |  | ---- | ----------------- |  | ---------------------------- | ------------- |  | -------------- | ---- |  |  | ------- |  |  | 
|         |  | Swaption Premium |     |  | Fixed Interest Rate |  |      | Variable Interest |  |                              |               |  |               
|Bank     |  | (In billions)    |     |  | (1 year)            |  |      | Rate (3 months)   |  |                              | Exercise Date |  |                | Type | 
|         |  |                  |     |  |                     |  |      |                   |  |                              |               |  |                |      | 
|Citibank |  | W                | 1.9 |  |                     |  | 7.9% |                   |  | 91-day certifieddeposit rate |               |  | April 25, 2005 |      |  |  | Selling | 





102



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##### 





|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            |  |  |            |  |  |  |            |   |  |  |            | 
|----------------- | ------------------------ | ------------------------------ |  | ----------------- | ---- |  | ----------------- | --------- | - |  | ---- | --------- | - | ---- |  | ------- | ---------- |  |  | -------- | - |  | ---------- | --------- | - | ----- |  | ---------- | ---------- |  |  | ---------- |  |  |  | ---------- | - |  |  | ---------- | 
|                  |                          | Maturities                     | 
|                  |                          |                                | 
|                  |                          |                                |  | December 31, 2004 |      |  | December 31, 2003 |          
|                  |                          |                                |  |                   |      |  |                   |          
|                  |                          | 2005                           |  |                   | 2006 |  |                   | 2007      |   |  | 2008 |           |   | 2009 |  |         | Thereafter |  |  | Total(1) |   |  | Fair Value |           |   | Total |  |            | Fair Value | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 
|                  |                          | (In Won millions except rates) | 
|Local currency:   |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            |  |  |            |  |  |  |            |   |  |  |           
|                  | Fixed rate               |                                |  | 2,892,880         |      |  |                   | 813,874   |   |  |      | 1,050,560 |   |      |  | 840,000 |            |  |  | 990,000  |   |  |            | 1,890,033 |   |       |  | 8,477,347  |            |  |  | 8,776,448  |  |  |  | 8,442,367  |   |  |  | 8,333,449  | 
|                  | Average weighted rate(2) |                                |  | 5.17              | %    |  |                   | 5.30      | % |  |      | 4.62      | % |      |  | 4.46    | %          |  |  | 5.36     | % |  |            | 5.31      | % |       |  | 4.85       | %          |  |  |           |  |  |  | 5.41       | % |  |  |           | 
|                  | Variable rate            |                                |  | 239,693           |      |  |                   | 55,431    |   |  |      | 34,135    |   |      |  | 16,642  |            |  |  | 3,752    |   |  |            |          |   |       |  | 349,653    |            |  |  | 351,403    |  |  |  | 310,638    |   |  |  | 299,222    | 
|                  | Average weighted rate(2) |                                |  | 4.40              | %    |  |                   | 4.28      | % |  |      | 4.51      | % |      |  | 4.26    | %          |  |  |         |   |  |            |          |   |       |  | 3.97       | %          |  |  |           |  |  |  | 4.07       | % |  |  |           | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 
|                  | Sub-total                |                                |  | 3,132,573         |      |  |                   | 869,305   |   |  |      | 1,084,695 |   |      |  | 856,642 |            |  |  | 993,752  |   |  |            | 1,890,033 |   |       |  | 8,827,000  |            |  |  | 9,127,851  |  |  |  | 8,753,005  |   |  |  | 8,632,671  | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 
|Foreign currency: |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            |  |  |            |  |  |  |            |   |  |  |           
|                  | Fixed rate               |                                |  | 1,780,968         |      |  |                   | 203,595   |   |  |      | 223,572   |   |      |  | 0       |            |  |  | 0        |   |  |            | 730,660   |   |       |  | 2,938,795  |            |  |  | 2,909,679  |  |  |  | 2,660,429  |   |  |  | 2,525,139  | 
|                  | Average weighted rate(2) |                                |  | 5.69              | %    |  |                   | 5.13      | % |  |      | 5.97      | % |      |  | 5.97    | %          |  |  | 5.97     | % |  |            | 5.97      | % |       |  | 5.17       | %          |  |  |           |  |  |  | 2.37       | % |  |  |           | 
|                  | Variable rate            |                                |  | 238,556           |      |  |                   | 159,701   |   |  |      | 2,088     |   |      |  | 1,044   |            |  |  | 1,044    |   |  |            | 1,044     |   |       |  | 403,477    |            |  |  | 393,600    |  |  |  | 461,994    |   |  |  | 446,792    | 
|                  | Average weighted rate(2) |                                |  | 3.61              | %    |  |                   | 6.32      | % |  |      | 6.78      | % |      |  | 6.78    | %          |  |  | 6.78     | % |  |            |          |   |       |  | 3.13       | %          |  |  |           |  |  |  | 1.87       | % |  |  |           | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 
|                  | Subtotal                 |                                |  | 2,019,524         |      |  |                   | 363,296   |   |  |      | 225,660   |   |      |  | 1,044   |            |  |  | 1,044    |   |  |            | 731,704   |   |       |  | 3,342,272  |            |  |  | 3,303,279  |  |  |  | 3,122,423  |   |  |  | 2,971,931  | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 
|                  | Total                    |                                |  | 5,152,097         |      |  |                   | 1,232,601 |   |  |      | 1,310,355 |   |      |  | 857,686 |            |  |  | 994,796  |   |  |            | 2,621,737 |   |       |  | 12,169,272 |            |  |  | 12,431,130 |  |  |  | 11,875,428 |   |  |  | 11,604,602 | 
|                  |                          |                                |  |                   |      |  |                   |           |   |  |      |           |   |      |  |         |            |  |  |          |   |  |            |           |   |       |  |            |            | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes: (1) the then outstanding amount of Won 1,179
    billion of convertible notes due 2007, of which
    Won 1,164 billion was repaid on January 4, 2005
    upon election by noteholders to exercise their option to redeem
    the notes, (2) the then outstanding amount of Won 522
    billion of bonds due 2005 issued to Microsoft Corporation, which
    we repaid on January 4, 2005 upon maturity, and
    (3) the then outstanding amount of Won 1,323 billion
    of convertible bonds due 2005 issued to domestic investors,
    which we repaid, together with accrued interest, on May 25,
    2005 upon maturity.
|   
|(2) | Weighted average rates of the portfolio at the period end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            






|         |                                                       
|-------- | ------------------------------------------------------
|Item 12. | Description of Securities Other than Equity Securities

Description of American Depositary Shares








103



---



##### 









Dividends and Distributions




Distributions of Cash








Distributions of Shares






104



---



##### 







Distributions of Rights










| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | we do not timely request that the rights be distributed to you
    or we request that the rights not be distributed to you;
|
| |  | we fail to deliver satisfactory documents to the depositary
    bank; or                                                   
|
| |  | the depositary bank determines that it is not reasonably
    practicable to distribute the rights.                         



Other Distributions












| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | we do not request that the property be distributed to you or if
    we ask that the property not be distributed to you;
|
| |  | we do not deliver satisfactory documents to the depositary bank;
    or                                                
|
| |  | the depositary bank determines that all or a portion of the
    distribution to you is not reasonably practicable.     



105



---



##### 







Changes Affecting Common Stock






Issuance of ADSs upon Deposit of Common Stock










| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | the common stock is duly authorized, validly issued, fully paid,
    non-assessable and legally obtained;               
|
| |  | all preemptive (and similar) rights, if any, with respect to
    such common stock has been validly waived or exercised;

106



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##### 





| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | you are duly authorized to deposit the common stock;                                                                                                                                                                                                                                        
|
| |  | the common stock presented for deposit is free and clear of any
    lien, encumbrance, security interest, charge, mortgage or
    adverse claim, and is not, and the ADSs issuable upon such
    deposit will not be, restricted securities (as
    defined in the deposit agreement); and
|
| |  | the common stock presented for deposit has not been stripped of
    any rights or entitlements.                                                                                                                                                                                             



Withdrawal of Shares Upon Cancellation of ADSs










| |   |                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | temporary delays that may arise because (1) the transfer
    books for the common stock or ADSs are closed, or (2) the
    common stock is immobilized on account of a shareholders
    meeting or a payment of dividends;
|
| |  | obligations to pay fees, taxes and similar charges; and                                                                                                                                                                    
|
| |  | restrictions imposed because of laws or regulations applicable
    to ADSs or the withdrawal of securities on deposit.                                                                                                     





Voting Rights






107



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##### 







Fees and Charges




|                                                                                                                                                                                                                                                                                                   |  |                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|Service                                                                                                                                                                                                                                                                                            |  | Fees                      
|                                                                                                                                                                                                                                                                                                   |  |                           
|Issuance of ADSs                                                                                                                                                                                                                                                                                   |  | Up to 5¢ per ADS issued   
|Cancellation of ADSs                                                                                                                                                                                                                                                                               |  | Up to 5¢ per ADS cancelled
|Distributions (other than cash or stock dividends); Sale or
    exercise of rights; or other corporate action involving
    distributions to shareholders (including any distribution in the
    form of common stock, non-voting preferred stock or delivery of
    ADSs upon exercise of rights) |  | Up to 2¢ per ADS held     







| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fees for the transfer and registration of common stock charged
    by the registrar and transfer agent for the common stock in
    Korea (that is, upon deposit and withdrawal of common stock);            
|
| |  | expenses incurred for converting foreign currency into
    U.S. dollars;                                                                                                                                    
|
| |  | expenses for cable, telex and fax transmissions and for delivery
    of securities;                                                                                                                         
|
| |  | fees and expenses incurred by the depositary bank in connection
    with compliance with exchange control regulations and other
    regulatory requirements applicable to our shares, ADSs and
    ADRs; and
|
| |  | taxes and duties upon the transfer of securities (that is, when
    common stock is deposited or withdrawn from deposit).                                                                                   



Amendments and Termination






108



---



##### 









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | for a period of six months after termination, you will be
    able to request the cancellation of your ADSs and the withdrawal
    of the common stock represented by your ADSs and the delivery of
    all other property held by the depositary bank in respect of the
    common stock on the same terms as prior to the termination.
    During such six month period the depositary bank will continue
    to collect all distributions received on the common stock on
    deposit (e.g., dividends) but will not distribute any such
    property to you until you request the cancellation of your
    ADSs; and
|
| |  | after the expiration of such six month period, the
    depositary bank may sell the securities held on deposit. The
    depositary bank will hold the proceeds from such sale and any
    other funds then held for the holders of ADSs in a
    non-interest-bearing account. At that point, the depositary bank
    will have no further obligations to holders other than to
    account for the funds then held for the holders of ADSs still
    outstanding.                                                                                                                                                      

Books of Depositary






Limitations on Obligations and Liabilities






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we and the depositary bank are obligated only to take the
    actions specifically stated in the deposit agreement without
    negligence or bad faith;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | the depositary bank disclaims any liability for any failure to
    carry out voting instructions, for any manner in which a vote is
    cast or for the effect of any vote, provided it acts in good
    faith and in accordance with the terms of the deposit agreement;                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | the depositary bank disclaims any liability for any failure to
    determine the lawfulness or practicality of any action, for the
    content of any document forwarded to you on our behalf or for
    the accuracy of any translation of such a document, for the
    investment risks associated with investing in common stock, for
    the validity or worth of the common stock, for any tax
    consequences that result from the ownership of ADSs, for the
    credit-worthiness of any third party, for allowing any rights to
    lapse under the terms of the deposit agreement, for the
    timeliness of any of our notices or for our failure to give
    notice;
|
| |  | we and the depositary bank will not be obligated to perform any
    act that is inconsistent with the terms of the deposit agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | we and the depositary bank disclaim any liability if we are
    prevented or forbidden from acting on account of any law or
    regulation, any provision of our articles of incorporation, any
    provision of any securities on deposit or by reason of any act
    of God or war or other circumstances beyond our control;                                                                                                                                                                                                                                                                                                                                                  
|
| |  | we and the depositary bank disclaim any liability by reason of
    any exercise of, or failure to exercise, any discretion provided
    for in the deposit agreement or in our articles of incorporation
    or in any provisions of securities on deposit;                                                                                                                                                                                                                                                                                                                                                                                                                      

109



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we and the depositary bank further disclaim any liability for
    any action or inaction in reliance on the advice or information
    received from legal counsel, accountants, any person presenting
    common stock for deposit, any holder of ADSs or authorized
    representatives of such holder, or any other person believed by
    either of us in good faith to be competent to give such advice
    or information;
|
| |  | we and the depositary bank also disclaim liability for the
    inability by a holder to benefit from any distribution,
    offering, right or other benefit which is made available to
    holders of common stock but is not, under the terms of the
    deposit agreement, made available to you; and                                                                                                                        
|
| |  | we and the depositary bank may rely without any liability upon
    any written notice, request or other document believed to be
    genuine and to have been signed or presented by the proper
    parties.                                                                                                                                                                                                                    

Pre-Release Transactions




Taxes






Foreign Currency Conversion








| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | convert the foreign currency to the extent practical and lawful
    and distribute the U.S. dollars to the holders for whom the
    conversion and distribution is lawful and practical;
|
| |  | distribute the foreign currency to holders for whom the
    distribution is lawful and practical; and                                                                                   
|
| |  | hold the foreign currency (without liability for interest) for
    the applicable holders.                                                                                              

110



---



##### 



The Custodian




Governing Law




111



---



##### 






PART II







|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Defaults, Dividend Arrearages and Delinquencies








|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|Item 14. | Material Modifications to the Rights of Security Holders and
    Use of Proceeds








|         |                        
|-------- | -----------------------
|Item 15. | Controls and Procedures










|           |                                 
|---------- | --------------------------------
|Item 16.A. | Audit Committee Financial Expert








|           |               
|---------- | --------------
|Item 16.B. | Code of Ethics



112



---



##### 








|           |                                       
|---------- | --------------------------------------
|Item 16.C. | Principal Accountant Fees and Services

Audit and Non-Audit Fees




|                   |            |               |       |       |      |   |       |       | 
|------------------ | ---------- | ------------- | ----- | ----- | ---- | - | ----- | ----- | 
|                   |            | Year Ended    |      
|                   |            | December 31,  |      
|                   |            |               |      
|                   |            | 2003          |       |       | 2004 |  
|                   |            |               |       |       |      |  
|                   |            | (In millions) |      
|Audit fees         |            | W             | 1,847 |       |      | W | 2,053 |      
|Audit-related fees |            |               |      |       |      |   |      |      
|Tax fees           |            |               | 77    |       |      |   |      |      
|Other fees         |            |               | 172   |       |      |   | 154   |      
|                   |            |               |       |       |      |  
|                   | Total fees |               | W     | 2,096 |      |   | W     | 2,207 | 
|                   |            |               |       |       |      |  











Audit Committee Pre-Approval Policies and Procedures









|           |                                                               
|---------- | --------------------------------------------------------------
|Item 16.D. | Exemptions from the Listing Standards for Audit
    Committees



113



---



##### 








|           |                                                                           
|---------- | --------------------------------------------------------------------------
|Item 16.E. | Purchases of Equity Securities by the Issuer and
    Affiliated Purchasers



|                            |       |                  |   |               |                |   |                        |                          |  |                          |                           |   |  |  |   |   | 
|--------------------------- | ----- | ---------------- | - | ------------- | -------------- | - | ---------------------- | ------------------------ |  | ------------------------ | ------------------------- | - |  |  | - | - | 
|                            |       |                  |   | Average Price |                |   | Total Number of Shares |                          |  | Maximum Number of Shares |                          
|                            |       | Total Number of  |   |               | Paid per Share |   |                        | Purchased as Part of     |  |                          | that May Yet Be Purchased |  
|Period                      |       | Shares Purchased |   |               | (In Won)       |   |                        | Publicly Announced Plans |  |                          | Under the Plans           |  
|                            |       |                  |   |               |                |   |                        |                          |  |                          |                           |  
|January 1 to January 31     |       |                  | 0 |               |                | W |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|February 1 to February 29   |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|March 1 to March 31         |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|April 1 to April 30         |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|May 1 to May 31             |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|June 1 to June 30           |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|July 1 to July 31           |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|August 1 to August 31       |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|September 1 to September 30 |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|October 1 to October 31     |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|November 1 to November 30   |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|December 1 to December 31   |       |                  | 0 |               |                |   |                       |                          |  |                          | 0                         |   |  |  | 0 |  
|                            |       |                  |   |               |                |   |                        |                          |  |                          |                           |  
|                            | Total |                  |   | 0             |                |   | W                      |                         |  |                          |                           | 0 |  |  |   | 0 | 
|                            |       |                  |   |               |                |   |                        |                          |  |                          |                           |  

114



---



##### 






PART III







|         |                     
|-------- | --------------------
|Item 17. | Financial Statements








|         |                     
|-------- | --------------------
|Item 18. | Financial Statements

AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF KT
CORPORATION


|                                                                                                                   |  |      |     | 
|------------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                                   |  | Page |    
|                                                                                                                   |  |      |    
|Report of Independent Registered Public Accounting Firm                                                            |  |      | F-1 | 
|Consolidated Balance Sheets as of December 31, 2003 and 2004                                                       |  |      | F-2 | 
|Consolidated Statements of Earnings and Retained Earnings for
    the Years Ended December 31, 2002, 2003 and 2004 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2002, 2003 and 2004                     |  |      | F-5 | 
|Notes to Consolidated Financial Statements                                                                         |  |      | F-7 | 

AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF KT
FREETEL CO., LTD.*


|                                                                                                         |  |      |     | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                         |  | Page |    
|                                                                                                         |  |      |    
|Report of Independent Registered Public Accounting Firm                                                  |  |      | A-1 | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                             |  |      | A-2 | 
|Consolidated Statements of Income for the Years Ended
    December 31, 2002, 2003 and 2004               |  |      | A-4 | 
|Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2002, 2003 and 2004 |  |      | A-5 | 
|Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2002, 2003 and 2004           |  |      | A-6 | 
|Notes to Consolidated Financial Statements as of
    December 31, 2003 and 2004                          |  |      | A-9 | 






|  |                                                                                                   
|- | --------------------------------------------------------------------------------------------------
|* | Included pursuant to Rule 3-09 of Regulation S-X under
    the Securities Act of 1933, as amended.

115



---



##### 








|         |         
|-------- | --------
|Item 19. | Exhibits

| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1  |     |  | Articles of Incorporation of KT Corporation (English
    translation)                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2  | .1* |  | Form of Common Stock Certificate of KT Corporation,
    par value Won 5,000 per share (including translation
    in English) (incorporated herein by reference to
    Exhibit 4.3 of the Registrants Registration Statement (Registration No. 333-7630) on
    Form F-1)                                                                                                                                                                                                                       
| | 2  | .2* |  | Deposit Agreement dated as of May 25, 1999 entered into
    among KT Corporation, Citibank, N.A., as depositary, and
    all Holders and Beneficial Owners of American Depositary Shares
    evidenced by the American Depositary Receipts issued thereunder,
    including the form of American depositary receipt (incorporated
    herein by reference to Exhibit(a)(i) of the Registrants
    Registration Statement (Registration No. 333-13578) on
    Form F-6)                         
| | 2  | .3* |  | Form of Amendment No. 1 Deposit Agreement dated as of
    May 25, 1999 entered into among KT Corporation,
    Citibank, N.A., as depositary, and all Holders and Beneficial
    Owners of American Depositary Shares evidenced by the American
    Depositary Receipts issued thereunder, including the form of
    American depositary receipt (incorporated herein by reference to
    Exhibit(a)(ii) of the Registrants Registration Statement
    (Registration No. 333-13578) on Form F-6)
| | 2  | .4* |  | Letter from Citibank, N.A., as depositary, to the Registrant
    relating to the pre-release of the American depositary receipts
    (incorporated herein by reference to the Registrants
    Registration Statement (Registration No. 333-10330) on
    Form F-6)                                                                                                                                                                                                                             
| | 7  | .1  |  | Computation of ratio of earnings to fixed charges                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 8  | .1  |  | List of subsidiaries of KT Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 12 | .1  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 12 | .2  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 13 | .1  |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 15 | .1  |  | Consent of KPMG Samjong Accounting Corp. with respect
    to the financial statements of KT Corporation                                                                                                                                                                                                                                                                                                                                                                                         
| | 15 | .2  |  | Consent of Deloitte HanaAnjin LLC with respect to the financial
    statements of KT Freetel Co., Ltd.                                                                                                                                                                                                                                                                                                                                                                                          
| | 15 | .3  |  | The Telecommunications Basic Law (English translation)                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 15 | .4  |  | Enforcement Decree of the Telecommunications Basic Law (English
    translation)                                                                                                                                                                                                                                                                                                                                                                                                                
| | 15 | .5  |  | The Telecommunications Business Law (English translation)                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 15 | .6  |  | Enforcement Decree of the Telecommunications Business Act
    (English translation)                                                                                                                                                                                                                                                                                                                                                                                                             






|  |                               
|- | ------------------------------
|* | Filed previously as indicated.

116



---



##### 



Report of Independent Registered Public Accounting
Firm


The Board of Directors and Stockholders


KT Corporation:




















F-1



---



##### 



KT CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets


December 31, 2003 and 2004


|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |         |            |          |           |       |          | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | --------------------------------- | ----------- | ------- | ---------- | ---------- | ----------- | ------- | ---------- | -------- | --------- | ----- | -------- | 
|                                         |                                                                                                                                       |                                       |                                   |             |         | 2004       |           
|Assets                                   |                                                                                                                                       | 2003                                  |                                   |             | 2004    |            |            | (Note 3)    |        
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       | (In millions of Won and U.S. dollars) |                                  
|Current assets:                          |                                                                                                                                       |                                       |                                   |             |         |            |            |             |         |            |          |          
|                                         | Cash and cash equivalents (notes 4 and 5)                                                                                             |                                       | W                                 | 760,868     |         |            | W          | 1,755,929   |         |            | $        | 1,696.4   |      
|                                         | Short-term financial instruments (note 5)                                                                                             |                                       |                                   | 60,899      |         |            |            | 984,122     |         |            |          | 950.8     |      
|                                         | Current portion of investment securities (note 8):                                                                                    |                                       |                                   |             |         |            |            |             |         |            |          |           |      
|                                         |                                                                                                                                       | Trading securities                    |                                   |             | 52,397  |            |            |             | 6,186   |            |          |           | 6.0   |         
|                                         |                                                                                                                                       | Available-for-sale securities         |                                   |             | 286,757 |            |            |             | 257,803 |            |          |           | 249.1 |         
|                                         |                                                                                                                                       | Held-to-maturity securities           |                                   |             | 5,712   |            |            |             | 1,660   |            |          |           | 1.6   |         
|                                         | Notes and accounts receivable  trade, less allowance
    for doubtful accounts of W646,273 in 2003 and W702,635 in 2004
    (note 2) |                                       |                                   | 2,647,379   |         |            |            | 2,793,143   |         |            |          | 2,698.4   |      
|                                         | Accounts receivable  other                                                                                                           |                                       |                                   | 323,042     |         |            |            | 365,162     |         |            |          | 352.8     |      
|                                         | Inventories (note 6)                                                                                                                  |                                       |                                   | 364,833     |         |            |            | 374,319     |         |            |          | 361.6     |      
|                                         | Other current assets (note 7)                                                                                                         |                                       |                                   | 230,044     |         |            |            | 270,653     |         |            |          | 261.5     |      
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       |                                       | Total current assets              |             |         | 4,731,931  |            |             |         | 6,808,977  |          |           |       | 6,578.2  | 
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|Investment securities:                   |                                                                                                                                       |                                       |                                   |             |         |            |            |             |         |            |          |          
|                                         | Available-for-sale securities (note 8)                                                                                                |                                       |                                   | 260,642     |         |            |            | 218,757     |         |            |          | 211.3     |      
|                                         | Held-to-maturity securities (note 8)                                                                                                  |                                       |                                   | 111,409     |         |            |            | 94,404      |         |            |          | 91.2      |      
|                                         | Equity securities of affiliates (note 9)                                                                                              |                                       |                                   | 140,790     |         |            |            | 54,061      |         |            |          | 52.2      |      
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       |                                       | Total investment securities       |             |         | 512,841    |            |             |         | 367,222    |          |           |       | 354.7    | 
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|Property, plant and equipment (note 10): |                                                                                                                                       |                                       |                                   |             |         |            |            |             |         |            |          |          
|                                         | Land                                                                                                                                  |                                       |                                   | 1,154,955   |         |            |            | 1,167,683   |         |            |          | 1,128.1   |      
|                                         | Buildings and structures                                                                                                              |                                       |                                   | 4,282,494   |         |            |            | 4,555,427   |         |            |          | 4,401.0   |      
|                                         | Machinery and equipment                                                                                                               |                                       |                                   | 34,731,446  |         |            |            | 35,624,899  |         |            |          | 34,416.9  |      
|                                         | Vehicles                                                                                                                              |                                       |                                   | 82,911      |         |            |            | 89,316      |         |            |          | 86.3      |      
|                                         | Tools, furniture and fixtures                                                                                                         |                                       |                                   | 2,005,812   |         |            |            | 2,114,653   |         |            |          | 2,042.9   |      
|                                         | Construction in progress                                                                                                              |                                       |                                   | 750,267     |         |            |            | 487,461     |         |            |          | 470.9     |      
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       |                                       | 43,007,885                        |             |         |            | 44,039,439 |             |         |            | 42,546.1 |          
|                                         | Less accumulated depreciation                                                                                                         |                                       |                                   | (26,633,942 | )       |            |            | (28,317,984 | )       |            |          | (27,357.8 | )    
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       |                                       | Net property, plant and equipment |             |         | 16,373,943 |            |             |         | 15,721,455 |          |           |       | 15,188.3 | 
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|Other assets (notes 5, 11 and 26)        |                                                                                                                                       |                                       | 3,937,960                         |             |         |            | 3,575,578  |             |         |            | 3,454.3  |          
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        
|                                         |                                                                                                                                       | W                                     | 25,556,675                        |             |         | W          | 26,473,232 |             |         | $          | 25,575.5 |          
|                                         |                                                                                                                                       |                                       |                                   |             |         |            |            |             |        

See accompanying notes to consolidated financial
statements.


F-2



---



##### 



KT CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets, Continued


December 31, 2003 and 2004


|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |            |            |          |         |          |          | 
|------------------------------------------------------------ | ---------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------------- | --------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | -------- | ------- | -------- | -------- | 
|                                                             |                                                |                                                                                    |                            |           |            | 2004       |           
|Liabilities and Stockholders Equity                         |                                                | 2003                                                                               |                            |           | 2004       |            |            | (Note 3)  |           
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                | (In millions of Won and U.S. dollars,                                              |                           
|                                                             |                                                | except share data)                                                                 |                           
|Current liabilities:                                         |                                                |                                                                                    |                            |           |            |            |            |           |            |            |          |        
|                                                             | Notes and accounts payable  trade             |                                                                                    | W                          | 1,022,805 |            |            | W          | 853,381   |            |            | $        | 824.4   |         
|                                                             | Short-term borrowings (note 13)                |                                                                                    |                            | 631,689   |            |            |            | 438,592   |            |            |          | 423.8   |         
|                                                             | Current portion of long-term debt (note 15)    |                                                                                    |                            | 2,172,510 |            |            |            | 4,756,067 |            |            |          | 4,594.8 |         
|                                                             | Accounts payable  other                       |                                                                                    |                            | 1,233,422 |            |            |            | 1,123,323 |            |            |          | 1,085.2 |         
|                                                             | Advance receipts from customers                |                                                                                    |                            | 103,139   |            |            |            | 125,989   |            |            |          | 121.7   |         
|                                                             | Accrued expenses                               |                                                                                    |                            | 252,841   |            |            |            | 288,488   |            |            |          | 278.7   |         
|                                                             | Withholdings                                   |                                                                                    |                            | 147,233   |            |            |            | 187,579   |            |            |          | 181.2   |         
|                                                             | Income taxes payable                           |                                                                                    |                            | 219,348   |            |            |            | 284,102   |            |            |          | 274.5   |         
|                                                             | Other current liabilities (note 14 and 23)     |                                                                                    |                            | 132,614   |            |            |            | 276,969   |            |            |          | 267.5   |         
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                |                                                                                    | Total current liabilities  |           |            | 5,915,601  |            |           |            | 8,334,490  |          |         |          | 8,051.8  | 
|                                                            
|Long-term debt, excluding current portion (note 15)          |                                                |                                                                                    | 9,049,748                  |           |            |            | 6,985,071  |           |            |            | 6,748.2  |        
|Refundable deposits for telephone installation (note 16)     |                                                |                                                                                    | 1,227,355                  |           |            |            | 1,086,635  |           |            |            | 1,049.8  |        
|Accrual for retirement and severance benefits, net (note 17) |                                                |                                                                                    | 245,878                    |           |            |            | 314,789    |           |            |            | 304.1    |        
|Long-term accounts payable  other (note 12)                 |                                                |                                                                                    | 572,606                    |           |            |            | 554,024    |           |            |            | 535.2    |        
|Other long-term liabilities (note 18)                        |                                                |                                                                                    | 148,867                    |           |            |            | 171,843    |           |            |            | 166.0    |        
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                |                                                                                    | Total liabilities          |           |            | 17,160,055 |            |           |            | 17,446,852 |          |         |          | 16,855.1 | 
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|Stockholders equity (note 19):                              |                                                |                                                                                    |                            |           |            |            |            |           |            |            |          |        
|                                                             | Common stock of W5,000 par value:              |                                                                                    |                            |           |            |            |            |           |            |            |          |         |         
|                                                             |                                                | Authorized  1,000,000,000 shares
    Issued  284,849,400 shares in 2003 and 2004 |                            |           | 1,560,998  |            |            |           | 1,560,998  |            |          |         | 1,508.1  |         
|                                                             | Capital surplus (note 20)                      |                                                                                    |                            | 1,308,612 |            |            |            | 1,291,617 |            |            |          | 1,247.8 |         
|                                                             | Retained earnings:                             |                                                                                    |                            |           |            |            |            |           |            |            |          |         |         
|                                                             |                                                | Appropriated (note 21)                                                             |                            |           | 8,025,854  |            |            |           | 5,431,862  |            |          |         | 5,247.7  |         
|                                                             |                                                | Unappropriated (deficit)                                                           |                            |           | (342,554   | )          |            |           | 2,901,378  |            |          |         | 2,803.0  |         
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                |                                                                                    | 7,683,300                  |           |            |            | 8,333,240  |           |            |            | 8,050.7  |        
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             | Capital adjustments:                           |                                                                                    |                            |           |            |            |            |           |            |            |          |         |         
|                                                             |                                                | Treasury stock (note 22)                                                           |                            |           | (3,962,598 | )          |            |           | (3,962,568 | )          |          |         | (3,828.2 | )       
|                                                             |                                                | Loss on retirement of treasury stock (note 22)                                     |                            |           | (16,391    | )          |            |           | (16,388    | )          |          |         | (15.8    | )       
|                                                             |                                                | Foreign-based operations translation adjustment                                    |                            |           | (5,859     | )          |            |           | (2,847     | )          |          |         | (2.7     | )       
|                                                             |                                                | Unrealized gains (losses) on available-for-sale securities
    (note 8)            |                            |           | (24,799    | )          |            |           | 7,797      |            |          |         | 7.5      |         
|                                                             |                                                | Unrealized losses on equity securities of affiliates
    (note 9)                  |                            |           | (2,691     | )          |            |           | (6,732     | )          |          |         | (6.5     | )       
|                                                             |                                                | Stock options (note 29)                                                            |                            |           | 6,745      |            |            |           | 11,686     |            |          |         | 11.3     |         
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                |                                                                                    | (4,005,593                 | )         |            |            | (3,969,052 | )         |            |            | (3,834.4 | )      
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             | Minority interest in consolidated subsidiaries |                                                                                    |                            | 1,849,303 |            |            |            | 1,809,577 |            |            |          | 1,748.2 |         
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                |                                                                                    | Total stockholders equity |           |            | 8,396,620  |            |           |            | 9,026,380  |          |         |          | 8,720.4  | 
|Commitments and contingencies (note 23)                      |                                                |                                                                                    |                           |           |            |            |           |           |            |            |         |        
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           
|                                                             |                                                | W                                                                                  | 25,556,675                 |           |            | W          | 26,473,232 |           |            | $          | 25,575.5 |        
|                                                             |                                                |                                                                                    |                            |           |            |            |            |           |           

See accompanying notes to consolidated financial
statements


F-3



---



##### 



KT CORPORATION AND SUBSIDIARIES


Consolidated Statements of Earnings and Retained Earnings


Years ended December 31, 2002, 2003 and 2004


|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |          |           |   |          |        |         | 
|-------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------- | --------- | --------- | - | ---------- | -------- | --------- | - | ---------- | -------- | --------- | - | -------- | ------ | ------- | 
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            | 2004     |          
|                                                                                 |                                                                                          | 2002                                                             |            |           | 2003      |   |            | 2004     |           |   | (Note 3)   |         
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          | (In millions of Won and U.S. dollars, except earnings per share) |           
|Operating revenues (note 24)                                                     |                                                                                          | W                                                                | 16,437,422 |           |           | W | 16,067,779 |          |           | W | 17,068,371 |          |           | $ | 16,489.6 |       
|Operating expenses (note 25)                                                     |                                                                                          |                                                                  | 14,055,619 |           |           |   | 14,245,343 |          |           |   | 14,587,839 |          |           |   | 14,093.2 |       
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          | Operating income                                                 |            |           | 2,381,803 |   |            |          | 1,822,436 |   |            |          | 2,480,532 |   |          |        | 2,396.4 | 
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|Other income (expense):                                                          |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |          |           |   |          |       
|                                                                                 | Interest income                                                                          |                                                                  |            | 123,118   |           |   |            | 115,454  |           |   |            | 116,725  |           |   |          | 112.8  |        
|                                                                                 | Interest expense                                                                         |                                                                  |            | (650,460  | )         |   |            | (705,540 | )         |   |            | (678,514 | )         |   |          | (655.5 | )      
|                                                                                 | Equity in losses of affiliates, net (note 9)                                             |                                                                  |            | (17,009   | )         |   |            | (30,270  | )         |   |            | (79,350  | )         |   |          | (76.7  | )      
|                                                                                 | Foreign currency transaction and translation gain (loss), net
    (note 15)              |                                                                  |            | 99,845    |           |   |            | (27,074  | )         |   |            | 542,566  |           |   |          | 524.2  |        
|                                                                                 | Loss on disposition of property, plant and equipment, net                                |                                                                  |            | (116,106  | )         |   |            | (122,966 | )         |   |            | (103,513 | )         |   |          | (100.0 | )      
|                                                                                 | Gain (loss) on disposition of available-for-sale securities, net
    (note 8)            |                                                                  |            | 1,176,868 |           |   |            | 772,901  |           |   |            | (15,115  | )         |   |          | (14.6  | )      
|                                                                                 | Impairment loss on available-for-sale securities (note 8)                                |                                                                  |            | (3,339    | )         |   |            | (43,993  | )         |   |            | (5,831   | )         |   |          | (5.6   | )      
|                                                                                 | Impairment loss on held-to-maturity securities (note 8)                                  |                                                                  |            |          |           |   |            |         |           |   |            | (42,078  | )         |   |          | (40.7  | )      
|                                                                                 | Contributions received for losses on universal
    telecommunications services (note 33) |                                                                  |            | 113,908   |           |   |            | 28,539   |           |   |            | 80,310   |           |   |          | 77.6   |        
|                                                                                 | Prior years additional income tax refund (payment)
    (note 26)                        |                                                                  |            | 6,354     |           |   |            | (53,992  | )         |   |            | (943     | )         |   |          | (0.9   | )      
|                                                                                 | Contribution payments for research and development and donations
    (note 32)           |                                                                  |            | (145,405  | )         |   |            | (182,983 | )         |   |            | (146,779 | )         |   |          | (141.8 | )      
|                                                                                 | Derivatives transaction and valuation loss, net (note 23)                                |                                                                  |            | (7,618    | )         |   |            | (151     | )         |   |            | (146,937 | )         |   |          | (142.0 | )      
|                                                                                 | Other, net                                                                               |                                                                  |            | 43,247    |           |   |            | 8,699    |           |   |            | 7,963    |           |   |          | 7.7    |        
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          |                                                                  | 623,403    |           |           |   | (241,376   | )        |           |   | (471,496   | )        |           |   | (455.5   | )     
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          | Earnings before income taxes and minority interest               |            |           | 3,005,206 |   |            |          | 1,581,060 |   |            |          | 2,009,036 |   |          |        | 1,940.9 | 
|Income taxes (note 26)                                                           |                                                                                          |                                                                  | 741,354    |           |           |   | 523,631    |          |           |   | 577,889    |          |           |   | 558.3    |       
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          | Earnings before minority interest                                |            |           | 2,263,852 |   |            |          | 1,057,429 |   |            |          | 1,431,147 |   |          |        | 1,382.6 | 
|Minority interest in earnings of consolidated subsidiaries, net                  |                                                                                          |                                                                  | (316,918   | )         |           |   | (235,695   | )        |           |   | (148,931   | )        |           |   | (143.9   | )     
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|                                                                                 |                                                                                          | Net earnings                                                     |            | W         | 1,946,934 |   |            | W        | 821,734   |   |            | W        | 1,282,216 |   |          | $      | 1,238.7 | 
|Retained earnings at beginning of year                                           |                                                                                          |                                                                  | 6,718,943  |           |           |   | 8,274,482  |          |           |   | 7,683,300  |          |           |   | 7,422.8  |       
|Cumulative effect of accounting change (note 2)                                  |                                                                                          |                                                                  |           |           |           |   | (1,530     | )        |           |   |           |          |           |   |         |       
|Retirement of treasury stock (notes 19 and 22)                                   |                                                                                          |                                                                  | (167,341   | )         |           |   | (1,198,499 | )        |           |   |           |          |           |   |         |       
|Dividends (notes 2 and 27)                                                       |                                                                                          |                                                                  | (224,054   | )         |           |   | (212,887   | )        |           |   | (632,276   | )        |           |   | (610.8   | )     
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|Retained earnings at end of year                                                 |                                                                                          | W                                                                | 8,274,482  |           |           | W | 7,683,300  |          |           | W | 8,333,240  |          |           | $ | 8,050.7  |       
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|Basic earnings per share of common stock in Won and
    U.S. dollars (note 28)   |                                                                                          | W                                                                | 7,504      |           |           | W | 3,802      |          |           | W | 6,084      |          |           | $ | 5.88     |       
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         
|Diluted earnings per share of common stock in Won and
    U.S. dollars (note 28) |                                                                                          | W                                                                | 6,601      |           |           | W | 3,313      |          |           | W | 5,697      |          |           | $ | 5.50     |       
|                                                                                 |                                                                                          |                                                                  |            |           |           |   |            |          |           |   |            |         

See accompanying notes to consolidated financial
statements.


F-4



---



##### 



KT CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows


Years ended December 31, 2002, 2003 and 2004


|                                      |                                                                                         |                                                                      |                                                     |           |            |           |   |         |           |            |          |           |           |           |   |         |         |         |  
|------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------- | --------- | ---------- | --------- | - | ------- | --------- | ---------- | -------- | --------- | --------- | --------- | - | ------- | ------- | ------- | -
|                                      |                                                                                         |                                                                      |                                                     |           |            |           |   | 2004    |          
|                                      |                                                                                         | 2002                                                                 |                                                     |           | 2003       |           |   | 2004    |           |            | (Note 3) |          
|                                      |                                                                                         |                                                                      |                                                     |           |            |           |   |         |           |            |          |          
|                                      |                                                                                         | (In millions of Won and U.S. dollars)                                |                                                    
|Cash flows from operating activities: |                                                                                         |                                                                      |                                                     |           |            |           |   |         |           |            |          |           |           |           |   |        
|                                      | Net earnings                                                                            |                                                                      | W                                                   | 1,946,934 |            |           | W | 821,734 |           |            | W        | 1,282,216 |           |           | $ | 1,238.7 |        
|                                      | Adjustments to reconcile net earnings to net cash provided by
    operating activities: |                                                                      |                                                     |           |            |           |   |         |           |            |          |           |           |           |   |         |        
|                                      |                                                                                         | Depreciation                                                         |                                                     |           | 3,440,145  |           |   |         | 3,393,175 |            |          |           | 3,403,639 |           |   |         | 3,288.2 |        
|                                      |                                                                                         | Amortization                                                         |                                                     |           | 356,949    |           |   |         | 364,051   |            |          |           | 393,849   |           |   |         | 380.5   |        
|                                      |                                                                                         | Provision for doubtful accounts                                      |                                                     |           | 194,288    |           |   |         | 363,774   |            |          |           | 287,073   |           |   |         | 277.3   |        
|                                      |                                                                                         | Provision for retirement and severance benefits                      |                                                     |           | 275,007    |           |   |         | 1,067,076 |            |          |           | 281,453   |           |   |         | 271.9   |        
|                                      |                                                                                         | Equity in losses of affiliates                                       |                                                     |           | 17,009     |           |   |         | 30,270    |            |          |           | 79,350    |           |   |         | 76.7    |        
|                                      |                                                                                         | Loss on disposition of property, plant and equipment                 |                                                     |           | 116,106    |           |   |         | 122,966   |            |          |           | 103,513   |           |   |         | 100.0   |        
|                                      |                                                                                         | Loss (gain) on foreign currency translations, net                    |                                                     |           | (101,077   | )         |   |         | 27,555    |            |          |           | (546,335  | )         |   |         | (527.8  | )      
|                                      |                                                                                         | Loss (gain) on disposition of available-for-sale
    securities, net |                                                     |           | (1,176,868 | )         |   |         | (772,901  | )          |          |           | 15,115    |           |   |         | 14.6    |        
|                                      |                                                                                         | Impairment loss on available-for-sale securities                     |                                                     |           | 3,339      |           |   |         | 43,993    |            |          |           | 5,831     |           |   |         | 5.6     |        
|                                      |                                                                                         | Impairment loss on held-to-maturity securities                       |                                                     |           |           |           |   |         |          |            |          |           | 42,078    |           |   |         | 40.7    |        
|                                      |                                                                                         | Deferred income tax expense                                          |                                                     |           | 149,032    |           |   |         | 46,294    |            |          |           | 106,964   |           |   |         | 103.3   |        
|                                      |                                                                                         | Minority interest in earnings of consolidated subsidiaries           |                                                     |           | 316,918    |           |   |         | 235,695   |            |          |           | 148,931   |           |   |         | 143.9   |        
|                                      |                                                                                         | Changes in operating assets and liabilities:                         |                                                     |           |            |           |   |         |           |            |          |           |           |           |   |         |         |        
|                                      |                                                                                         |                                                                      | Notes and accounts receivable  trade               |           |            | (725,904  | ) |         |           | (742,487   | )        |           |           | (361,316  | ) |         |         | (349.1  | )
|                                      |                                                                                         |                                                                      | Accounts receivable  other                         |           |            |          |   |         |           | (387,518   | )        |           |           | (93,936   | ) |         |         | (90.7   | )
|                                      |                                                                                         |                                                                      | Inventories                                         |           |            | (275,813  | ) |         |           | (197,478   | )        |           |           | (15,564   | ) |         |         | (15.0   | )
|                                      |                                                                                         |                                                                      | Other asset (long-term accounts receivable  trade) |           |            | (175,358  | ) |         |           | 126,900    |          |           |           | (266,813  | ) |         |         | (257.8  | )
|                                      |                                                                                         |                                                                      | Notes and accounts payable  trade                  |           |            | 125,313   |   |         |           | (143,425   | )        |           |           | (150,771  | ) |         |         | (145.7  | )
|                                      |                                                                                         |                                                                      | Accounts payable  other                            |           |            | 378,531   |   |         |           | 60,928     |          |           |           | (107,901  | ) |         |         | (104.2  | )
|                                      |                                                                                         |                                                                      | Advance receipts from customers                     |           |            | 4,415     |   |         |           | (25,359    | )        |           |           | 22,850    |   |         |         | 22.1    |  
|                                      |                                                                                         |                                                                      | Accrued expenses                                    |           |            | 8,702     |   |         |           | (5,792     | )        |           |           | 35,647    |   |         |         | 34.4    |  
|                                      |                                                                                         |                                                                      | Income taxes payable                                |           |            | 269,886   |   |         |           | (240,025   | )        |           |           | (540      | ) |         |         | (0.5    | )
|                                      |                                                                                         |                                                                      | Withholdings                                        |           |            | (123,085  | ) |         |           | (23,451    | )        |           |           | 40,346    |   |         |         | 39.0    |  
|                                      |                                                                                         |                                                                      | Payment of retirement and severance benefits        |           |            | (42,942   | ) |         |           | (1,020,940 | )        |           |           | (93,178   | ) |         |         | (90.0   | )
|                                      |                                                                                         |                                                                      | Severance benefits insurance deposit                |           |            | (325,376  | ) |         |           | (180,801   | )        |           |           | (119,568  | ) |         |         | (115.5  | )
|                                      |                                                                                         |                                                                      | Other, net                                          |           |            | 170,709   |   |         |           | 226,166    |          |           |           | 226,434   |   |         |         | 218.8   |  
|                                      |                                                                                         |                                                                      |                                                     |           |            |           |   |         |           |            |          |          
|                                      |                                                                                         |                                                                      | Net cash provided by operating activities           |           | W          | 4,826,860 |   |         | W         | 3,190,400  |          |           | W         | 4,719,367 |   |         | $       | 4,559.4 |  
|                                      |                                                                                         |                                                                      |                                                     |           |            |           |   |         |           |            |          |          

See accompanying notes to consolidated financial
statements.


F-5



---



##### 



KT CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows, Continued


Years ended December 31, 2002, 2003 and 2004


|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |            |            |   |         |          |          |  
|------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------------------------- | --------- | ---------- | ---------- | - | --------- | ---------- | ---------- | - | --------- | ---------- | ---------- | - | ------- | -------- | -------- | -
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           | 2004       |           
|                                                                                                                          |                                                                            | 2002                                  |           |            | 2003       |   |           | 2004       |            |   | (Note 3)  |           
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|                                                                                                                          |                                                                            | (In millions of Won and U.S. dollars) |          
|Cash flows from investing activities:                                                                                     |                                                                            |                                       |           |            |            |   |           |            |            |   |           |            |            |   |         |         
|                                                                                                                          | Purchases of property, plant and equipment                                 |                                       | W         | (3,232,346 | )          |   | W         | (3,209,376 | )          |   | W         | (2,971,376 | )          |   | $       | (2,870.6 | )       
|                                                                                                                          | Proceeds from sale of property, plant and equipment                        |                                       |           | 52,966     |            |   |           | 253,137    |            |   |           | 109,469    |            |   |         | 105.7    |         
|                                                                                                                          | Decrease in accounts receivable  other                                    |                                       |           | 8,918      |            |   |           | 215,021    |            |   |           |           |            |   |         |         |         
|                                                                                                                          | Decrease (increase) in short-term financial instruments                    |                                       |           | (125,921   | )          |   |           | 758,916    |            |   |           | (923,223   | )          |   |         | (891.9   | )       
|                                                                                                                          | Purchases of available-for-sale securities                                 |                                       |           | (235,393   | )          |   |           | (315,553   | )          |   |           | (499,370   | )          |   |         | (482.4   | )       
|                                                                                                                          | Purchases of held-to-maturity securities                                   |                                       |           | (392       | )          |   |           | (11,412    | )          |   |           | (3,182     | )          |   |         | (3.1     | )       
|                                                                                                                          | Purchases of equity securities of affiliates                               |                                       |           | (6,180     | )          |   |           | (83,890    | )          |   |           |           |            |   |         |         |         
|                                                                                                                          | Proceeds from sale of available-for-sale securities                        |                                       |           | 294,694    |            |   |           | 210,121    |            |   |           | 589,977    |            |   |         | 570.0    |         
|                                                                                                                          | Proceeds from maturity of held-to-maturity securities                      |                                       |           | 9,994      |            |   |           | 218        |            |   |           | 12,992     |            |   |         | 12.5     |         
|                                                                                                                          | Decrease in other current assets                                           |                                       |           | 173,110    |            |   |           | 560,208    |            |   |           | 184,753    |            |   |         | 178.5    |         
|                                                                                                                          | Decrease (increase) in other assets                                        |                                       |           | (1,004,353 | )          |   |           | 141,738    |            |   |           | (117,851   | )          |   |         | (113.8   | )       
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|                                                                                                                          |                                                                            | Net cash used in investing activities |           |            | (4,064,903 | ) |           |            | (1,480,872 | ) |           |            | (3,617,811 | ) |         |          | (3,495.1 | )
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|Cash flows from financing activities:                                                                                     |                                                                            |                                       |           |            |            |   |           |            |            |   |           |            |            |   |         |         
|                                                                                                                          | Payment of dividends                                                       |                                       |           | (224,955   | )          |   |           | (213,308   | )          |   |           | (683,208   | )          |   |         | (660.0   | )       
|                                                                                                                          | Proceeds from sale of accounts receivable                                  |                                       |           | 470,000    |            |   |           | 512,000    |            |   |           |           |            |   |         |         |         
|                                                                                                                          | Proceeds from short-term borrowings, net                                   |                                       |           | (15,656    | )          |   |           | (484,696   | )          |   |           | (193,097   | )          |   |         | (186.6   | )       
|                                                                                                                          | Repayment of long-term debt                                                |                                       |           | (2,064,527 | )          |   |           | (1,989,381 | )          |   |           | (2,178,028 | )          |   |         | (2,104.2 | )       
|                                                                                                                          | Proceeds from issuance of long-term debt                                   |                                       |           | 5,558,966  |            |   |           | 1,285,653  |            |   |           | 3,235,976  |            |   |         | 3,126.2  |         
|                                                                                                                          | Decrease in refundable deposits for telephone installation                 |                                       |           | (750,394   | )          |   |           | (306,211   | )          |   |           | (140,720   | )          |   |         | (135.9   | )       
|                                                                                                                          | Increase (decrease) in other long-term liabilities                         |                                       |           | 12,893     |            |   |           | (2,781     | )          |   |           | 3,905      |            |   |         | 3.8      |         
|                                                                                                                          | Reacquisition of treasury stock                                            |                                       |           | (3,401,186 | )          |   |           | (412,247   | )          |   |           |           |            |   |         |         |         
|                                                                                                                          | Proceeds from sale of treasury stock                                       |                                       |           |           |            |   |           | 39,312     |            |   |           |           |            |   |         |         |         
|                                                                                                                          | Reacquisition of treasury stock in consolidated subsidiaries               |                                       |           |           |            |   |           | (69,747    | )          |   |           | (151,308   | )          |   |         | (146.2   | )       
|                                                                                                                          | Acquisition of additional equity interest in consolidated
    subsidiaries |                                       |           | (449,935   | )          |   |           | (426,052   | )          |   |           | (609       | )          |   |         | (0.6     | )       
|                                                                                                                          | Other, net                                                                 |                                       |           | 20,543     |            |   |           | 2,247      |            |   |           | 594        |            |   |         | 0.6      |         
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|                                                                                                                          |                                                                            | Net cash used in financing activities |           |            | (844,251   | ) |           |            | (2,065,211 | ) |           |            | (106,495   | ) |         |          | (102.9   | )
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|Net increase (decrease) in cash and cash equivalents from change
    of subsidiaries in consolidated financial statements |                                                                            |                                       | (22       | )          |            |   | 29,862    |            |            |   |          |            |            |   |        |         
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|Net increase (decrease) in cash and cash equivalents                                                                      |                                                                            |                                       | (82,316   | )          |            |   | (325,821  | )          |            |   | 995,061   |            |            |   | 961.4   |         
|Cash and cash equivalents at beginning of year                                                                            |                                                                            |                                       | 1,169,005 |            |            |   | 1,086,689 |            |            |   | 760,868   |            |            |   | 735.0   |         
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           
|Cash and cash equivalents at end of year                                                                                  |                                                                            | W                                     | 1,086,689 |            |            | W | 760,868   |            |            | W | 1,755,929 |            |            | $ | 1,696.4 |         
|                                                                                                                          |                                                                            |                                       |           |            |            |   |           |            |            |   |           |           

See accompanying notes to consolidated financial
statements.


F-6



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial Statements




|    |                                         
|--- | ----------------------------------------
|(1) | Organization and Description of Business













|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(2) | Summary of Significant Accounting Policies and Basis of
    Presenting Consolidated Financial Statements



|    |                                                          
|--- | ---------------------------------------------------------
|(a) | Basis of Presenting Consolidated Financial
    Statements





F-7



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Events Occurring After the Balance Sheet Date. Events
Occurring After the Balance Sheet Date




F-8



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                   |  |               |      |         |           |            |               |      |  |  |       |  |  |      |       |  |                  |  |       |  |  |                                             
|---------------------------------- |  | ------------- | ---- | ------- | --------- | ---------- | ------------- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---------------- |  | ----- |  |  | --------------------------------------------
|                                   |  |               |      |         |           | Percentage |               |      | 
|                                   |  |               |      | Year of |           |            | Ownership (%) |      |  | 
|                                   |  | Year of       |      |         | Obtaining |            |               |      |  |  |      
|Subsidiary                         |  | Establishment |      |         | Control   |            |               | 2002 |  |  | 2003  |  |  | 2004 |       |  | Primary Business
|                                   |  |               |      |         |           |            |               |      |  |  |       |  |  |      |       |  |                 
|KT Freetel Co., Ltd. (KTF)       |  |               | 1997 |         |           |            | 1997          |      |  |  | 40.3  |  |  |      | 46.9  |  |                  |  | 48.7  |  |  | PCS business                                
|KT Hitel Co., Ltd. (KTH)         |  |               | 1991 |         |           |            | 1992          |      |  |  | 65.9  |  |  |      | 65.9  |  |                  |  | 65.9  |  |  | Data communication                          
|KT Submarine Co., Ltd. (KTSC)    |  |               | 1995 |         |           |            | 1995          |      |  |  | 36.9  |  |  |      | 36.9  |  |                  |  | 36.9  |  |  | Submarine cable construction and maintenance
|KT Powertel Co., Ltd. (KTP)      |  |               | 1985 |         |           |            | 1985          |      |  |  | 45.4  |  |  |      | 44.8  |  |                  |  | 44.8  |  |  | Trunk radio system business                 
|KT Networks Corporation (KTN)    |  |               | 1986 |         |           |            | 1986          |      |  |  | 100.0 |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | Group telephone management                  
|KT Linkus Co., Ltd.                |  |               | 1988 |         |           |            | 1988          |      |  |  | 93.8  |  |  |      | 93.8  |  |                  |  | 93.8  |  |  | Public telephone maintenance                
|Korea Telecom America, Inc.        |  |               | 1993 |         |           |            | 1993          |      |  |  | 100.0 |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | Foreign telecommunication business          
|Korea Telecom Philippines, Inc.    |  |               | 1994 |         |           |            | 1994          |      |  |  | 100.0 |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | Foreign telecommunication business          
|New Telephone Company Inc. (NTC) |  |               | 1993 |         |           |            | 1998          |      |  |  | 72.5  |  |  |      | 72.5  |  |                  |  | 72.5  |  |  | Foreign telecommunication business          
|Korea Telecom Japan Co., Ltd.      |  |               | 1999 |         |           |            | 1999          |      |  |  | 100.0 |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | Foreign telecommunication business          
|KT ICOM Co., Ltd. (KTICOM)*      |  |               | 2001 |         |           |            | 2001          |      |  |  | 87.3  |  |  |      |      |  |                  |  |      |  |  | IMT-2000 service                            
|KTF Technologies Inc. (KTFT)**   |  |               | 2001 |         |           |            | 2002          |      |  |  | 57.4  |  |  |      | 57.4  |  |                  |  | 70.8  |  |  | PCS handset development                     
|KT Commerce Inc. (KTC)***        |  |               | 2002 |         |           |            | 2002          |      |  |  | 100.0 |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | B2C, B2B service                            
|KT Rental Corp. (KTR)****        |  |               | 1999 |         |           |            | 2003          |      |  |  | 48.8  |  |  |      | 98.8  |  |                  |  |      |  |  | Rental service                              
|KT China Co., Ltd. (KTCC)        |  |               | 2003 |         |           |            | 2003          |      |  |  |      |  |  |      | 100.0 |  |                  |  | 100.0 |  |  | Foreign telecommunication business          






| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| | * | The ownership percentage in KTICOM represents the ownership of
    this entity by KTF.



| |    |                                                                                           
| | -- | ------------------------------------------------------------------------------------------
| | ** | The 70.8% ownership percentage in KTFT represents the ownership
    of this entity by KTF.



| |     |                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------
| | *** | The 100.0% ownership percentage in KTC represents the ownership
    of this entity by KT (19.0%) and KTH (81.0%).



|     |                                                                                          
|---- | -----------------------------------------------------------------------------------------
|**** | The 98.8% ownership percentage in KTR represents the ownership
    of this entity by KTN.



F-9



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


















|           |  |          |        | 
|---------- |  | -------- | ------ | 
|Subsidiary |  | Millions |       
|           |  |          |       
|KTSC       |  | W        | 60,540 | 
|NTC        |  |          | 12,526 | 
|           |  |          |       
|           |  | W        | 73,066 | 
|           |  |          |       



|                                      |  |          |         |  |      |   |         | 
|------------------------------------- |  | -------- | ------- |  | ---- | - | ------- | 
|                                      |  | Millions |        
|                                      |  |          |        
|Balance Sheet Items                   |  | 2003     |         |  | 2004 |  
|                                      |  |          |         |  |      |  
|Notes and accounts receivable  trade |  | W        | 113,890 |  |      | W | 208,815 | 
|Accounts receivable  other           |  |          | 19,179  |  |      |   | 16,713  | 
|Convertible notes                     |  |          | 332,375 |  |      |   | 347,814 | 
|Accounts payable  other              |  |          | 188,054 |  |      |   | 193,794 | 
|Key money deposits                    |  |          | 48,895  |  |      |   | 41,599  | 

F-10



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                    |  |                                     |  |          |        |  |      |   |        | 
|------------------- |  | ----------------------------------- |  | -------- | ------ |  | ---- | - | ------ | 
|                    |  |                                     |  | Millions |       
|                    |  |                                     |  |          |       
|Transaction Parties |  | Balance Sheet Items                 |  | 2003     |        |  | 2004 |  
|                    |  |                                     |  |          |        |  |      |  
|KT  KDB             |  | Trade notes and accounts receivable |  | W        | 4,079  |  |      | W | 54,664 | 
|KT  Other           |  | Trade notes and accounts receivable |  |          | 1,526  |  |      |   | 1,120  | 
|KT  Infotech        |  | Accounts payable                    |  |          | 19,348 |  |      |   | 23,374 | 
|KT  eNtoB           |  | Accounts payable                    |  |          | 16,462 |  |      |   | 16,669 | 
|KT  KOID            |  | Accounts payable                    |  |          | 13,169 |  |      |   | 14,757 | 
|KT  KTRD            |  | Accounts payable                    |  |          | 12,664 |  |      |   | 6,633  | 
|KT  KOIS            |  | Accounts payable                    |  |          | 8,852  |  |      |   | 9,538  | 
|KT  Other           |  | Accounts payable                    |  |          | 1,178  |  |      |   | 1,963  | 



|                                                                               |  |          |         |  |      |   |         |      |  |   |           | 
|------------------------------------------------------------------------------ |  | -------- | ------- |  | ---- | - | ------- | ---- |  | - | --------- | 
|                                                                               |  | Millions |        
|                                                                               |  |          |        
|                                                                               |  | 2002     |         |  | 2003 |   |         | 2004 | 
|                                                                               |  |          |         |  |      |   |         |      | 
|Operating revenues                                                             |  | W        | 597,113 |  |      | W | 695,685 |      |  | W | 891,233   | 
|Operating expenses                                                             |  |          | 749,590 |  |      |   | 835,728 |      |  |   | 1,124,463 | 
|Contributions received for losses on universal
    telecommunications services |  |          | 40,052  |  |      |   | 44,250  |      |  |   | 25,557    | 
|Other income                                                                   |  |          | 10,471  |  |      |   | 10,103  |      |  |   | 10,307    | 



|                    |  |                        |  |          |        |  |      |   |        |      |  |   |         | 
|------------------- |  | ---------------------- |  | -------- | ------ |  | ---- | - | ------ | ---- |  | - | ------- | 
|                    |  |                        |  | Millions |       
|                    |  |                        |  |          |       
|Transaction Parties |  | Income Statement Items |  | 2002     |        |  | 2003 |   |        | 2004 | 
|                    |  |                        |  |          |        |  |      |   |        |      | 
|KT  KDB             |  | Sales                  |  | W        | 36,733 |  |      | W | 47,337 |      |  | W | 131,685 | 
|KT  KOID            |  | Sales                  |  |          | 8,609  |  |      |   | 8,942  |      |  |   | 10,676  | 
|KT  KOIS            |  | Sales                  |  |          | 5,936  |  |      |   | 6,480  |      |  |   | 7,934   | 
|KT  Other           |  | Sales                  |  |          | 2,109  |  |      |   | 1,367  |      |  |   | 1,872   | 
|KT  KOID            |  | Purchases              |  |          | 83,153 |  |      |   | 96,944 |      |  |   | 102,624 | 
|KT  KTRD            |  | Purchases              |  |          | 40,984 |  |      |   | 66,361 |      |  |   | 74,058  | 
|KT  KOIS            |  | Purchases              |  |          | 50,670 |  |      |   | 66,148 |      |  |   | 71,778  | 
|KT  Infotech        |  | Purchases              |  |          | 49,972 |  |      |   | 59,097 |      |  |   | 43,499  | 
|KT  NtoB            |  | Purchases              |  |          | 654    |  |      |   | 33,101 |      |  |   | 86,406  | 
|KT  Other           |  | Purchases              |  |          | 2,290  |  |      |   | 7,069  |      |  |   | 7,321   | 



|    |                 
|--- | ----------------
|(b) | Cash Equivalents



F-11



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                      
|--- | ---------------------
|(c) | Financial Instruments





|    |                                
|--- | -------------------------------
|(d) | Allowance for Doubtful Accounts





|                                                         |  |          |         |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------- |  | -------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                         |  | Millions |        
|                                                         |  |          |        
|                                                         |  | 2002     |         |   | 2003 |   |          | 2004 | 
|                                                         |  |          |         |   |      |   |          |      | 
|Balance at beginning of year                             |  | W        | 330,345 |   |      | W | 430,066  |      |  | W | 646,273  |  
|Increase due to the changes of consolidated subsidiaries |  |          | 483     |   |      |   | 65       |      |  |   |         |  
|Provision                                                |  |          | 194,288 |   |      |   | 363,774  |      |  |   | 287,073  |  
|Write-offs                                               |  |          | (95,050 | ) |      |   | (147,632 | )    |  |   | (230,711 | )
|                                                         |  |          |         |   |      |   |          |      | 
|Balance at end of year                                   |  | W        | 430,066 |   |      | W | 646,273  |      |  | W | 702,635  |  
|                                                         |  |          |         |   |      |   |          |      | 



|    |            
|--- | -----------
|(e) | Inventories

Inventories. Inventories




|    |                          
|--- | -------------------------
|(f) | Investments in Securities



F-12



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)










|    |                                                                
|--- | ---------------------------------------------------------------
|(g) | Investment Securities Under the Equity Method of
    Accounting







F-13



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)








|    |                              
|--- | -----------------------------
|(h) | Property, Plant and Equipment





|                               |                                                                                 |                        |      |       | 
|------------------------------ | ------------------------------------------------------------------------------- | ---------------------- | ---- | ----- | 
|                               |                                                                                 | Estimated Useful Lives |     
|                               |                                                                                 | (Years)                |     
|                               |                                                                                 |                        |     
|Buildings and structures       |                                                                                 |                        | 5-60 |      
|Machinery and equipment:       |                                                                                 |                        |      |      
|                               | Underground access to cable tunnels, and concrete and steel
    telephone poles |                        |      | 20-40 | 
|                               | Other                                                                           |                        |      | 3-15  | 
|Vehicles                       |                                                                                 |                        | 3-10 |      
|Tools, furniture and fixtures: |                                                                                 |                        |      |      
|                               | Steel safe boxes                                                                |                        |      | 20    | 
|                               | Tools, computer equipment, furniture and fixtures                               |                        |      | 2-8   | 

Capitalization of
Financing Costs




F-14



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                    
|--- | ---------------------------------------------------
|(i) | Contributions Received for Capital
    Expenditures





|    |                  
|--- | -----------------
|(j) | Intangible Assets



| |                 
| | ----------------
| | (i)     Goodwill









| |                                     
| | ------------------------------------
| | (ii)     Other Intangible
    Assets





| |                                             
| | --------------------------------------------
| | (iii)     Research and
    Development Costs







F-15



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |                  
|--- | -----------------
|(k) | Advertising Costs





|    |                                          
|--- | -----------------------------------------
|(l) | Valuation of Receivables at Present Value





|    |                                          
|--- | -----------------------------------------
|(m) | Convertible Notes and Bonds with Warrants

Convertible
Securities




|    |                                  
|--- | ---------------------------------
|(n) | Retirement and Severance Benefits







|    |                            
|--- | ---------------------------
|(o) | Customer Call Bonus Program



F-16



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                       
|--- | ----------------------
|(p) | Contingent Liabilities





|    |                    
|--- | -------------------
|(q) | Revenue Recognition







Revenue
Recognition,




|    |                             
|--- | ----------------------------
|(r) | Foreign Currency Translation



Capitalization of Financing Costs,




|    |            
|--- | -----------
|(s) | Derivatives





F-17



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |       
|--- | ------
|(t) | Leases





| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ownership of the leased property shall be transferred to the
    lessee at the end of the lease term without additional payment
    or for a contract price.
|
| |  | The lease has a bargain purchase option.                                                                                                                    
|
| |  | The lease term is equal to 75% or more of the estimated economic
    useful life of the leased property.                                                    
|
| |  | The present value at the beginning of the lease term of the
    minimum lease payments equals or exceeds 90% of the fair value
    of the leased property.  





|    |             
|--- | ------------
|(u) | Income Taxes







|    |                  
|--- | -----------------
|(v) | Dividends Payable





|    |              
|--- | -------------
|(w) | Stock Options





F-18



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                   
|--- | ------------------
|(x) | Earnings Per Share







|    |                 
|--- | ----------------
|(y) | Use of Estimates





|    |                                                   
|--- | --------------------------------------------------
|(z) | Minority Interest in Consolidated
    Subsidiaries





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | (aa)                      Foreign
    Currency Translation of Foreign Subsidiaries





| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | (ab)                      Accounting
    for the Disposition of an Equity Interest in a Consolidated
    Subsidiary





| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | (ac)                      Application
    of the Statements of Korea Financial Accounting
    Standards

Inventories Construction-Type Contracts Troubled Debt Restructuring




| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | (ad)                      Recent
    Changes in the Statements of Korea Financial Accounting
    Standards

Equity Method
Accounting Income
Taxes Provisions, Contingent
Liabilities and Contingent Assets


F-19



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






| |                                                                  
| | -----------------------------------------------------------------
| | (ae)                      Fair
    Value of Financial Instruments









|     |                      
|---- | ---------------------
|(ii) | Investment Securities





|      |                   
|----- | ------------------
|(iii) | Loans to Employees





|     |               
|---- | --------------
|(iv) | Long-term debt





|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|(v) | Interest rate swap, interest rate swaption, currency swap,
    interest currency swap, currency forward and currency
    option



F-20



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                          |                                      |            |            |         |            |  |            |         | 
|----------------------------------------- | ------------------------------------ | ---------- | ---------- | ------- | ---------- |  | ---------- | ------- | 
|                                          |                                      | 2003       |           
|                                          |                                      |            |           
|                                          |                                      | Carrying   |            |         |           
|                                          |                                      | Amount     |            |         | Fair Value | 
|                                          |                                      |            |            |         |            | 
|                                          |                                      | (Millions) |           
|Cash and cash equivalents                 |                                      |            | 760,868    |         |            |  | 760,868    |        
|Short-term financial instruments          |                                      |            | 60,899     |         |            |  | 60,899     |        
|Notes and accounts receivable  trade     |                                      |            | 2,647,379  |         |            |  | 2,647,379  |        
|Accounts receivable  other               |                                      |            | 323,042    |         |            |  | 323,042    |        
|Trading securities                        |                                      |            | 52,397     |         |            |  | 52,397     |        
|Available-for-sale securities:            |                                      |            |            |         |            |  |            |        
|                                          |  Practicable to estimate fair value |            |            | 339,640 |            |  |            | 339,640 | 
|                                          |  Not practicable                    |            |            | 207,759 |            |  |            | N/A     | 
|Held-to-maturity securities               |                                      |            | 117,121    |         |            |  | 117,205    |        
|Interest rate swap                        |                                      |            | 2,998      |         |            |  | 2,998      |        
|Interest rate swaption                    |                                      |            | 989        |         |            |  | 989        |        
|Interest currency swap                    |                                      |            | 5,083      |         |            |  | 5,083      |        
|Loans to employees                        |                                      |            | 684,711    |         |            |  | 572,083    |        
|Notes and accounts payable  trade        |                                      |            | 1,022,805  |         |            |  | 1,022,805  |        
|Short-term borrowings                     |                                      |            | 631,689    |         |            |  | 631,689    |        
|Accrued expenses                          |                                      |            | 252,841    |         |            |  | 252,841    |        
|Interest rate swap                        |                                      |            | 16,077     |         |            |  | 16,077     |        
|Currency swap                             |                                      |            | 3,554      |         |            |  | 3,554      |        
|Long-term debt, including current portion |                                      |            | 11,222,258 |         |            |  | 10,972,913 |        

F-21



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                          |                                      |            |            |         |            |  |            |         | 
|----------------------------------------- | ------------------------------------ | ---------- | ---------- | ------- | ---------- |  | ---------- | ------- | 
|                                          |                                      | 2004       |           
|                                          |                                      |            |           
|                                          |                                      | Carrying   |            |         |           
|                                          |                                      | Amount     |            |         | Fair Value | 
|                                          |                                      |            |            |         |            | 
|                                          |                                      | (Millions) |           
|Cash and cash equivalents                 |                                      |            | 1,755,929  |         |            |  | 1,755,929  |        
|Short-term financial instruments          |                                      |            | 984,122    |         |            |  | 984,122    |        
|Notes and accounts receivable  trade     |                                      |            | 2,793,143  |         |            |  | 2,793,143  |        
|Accounts receivable  other               |                                      |            | 365,162    |         |            |  | 365,162    |        
|Trading securities                        |                                      |            | 6,186      |         |            |  | 6,186      |        
|Available-for-sale securities:            |                                      |            |            |         |            |  |            |        
|                                          |  Practicable to estimate fair value |            |            | 279,842 |            |  |            | 279,842 | 
|                                          |  Not practicable                    |            |            | 196,718 |            |  |            | N/A     | 
|Held-to-maturity securities               |                                      |            | 96,064     |         |            |  | 96,207     |        
|Interest rate swap                        |                                      |            | 2,102      |         |            |  | 2,102      |        
|Interest rate swaption                    |                                      |            | 353        |         |            |  | 353        |        
|Currency forward                          |                                      |            | 206        |         |            |  | 206        |        
|Loans to employees                        |                                      |            | 611,366    |         |            |  | 542,417    |        
|Notes and accounts payable  trade        |                                      |            | 853,381    |         |            |  | 853,381    |        
|Short-term borrowings                     |                                      |            | 438,592    |         |            |  | 438,592    |        
|Accrued expenses                          |                                      |            | 288,488    |         |            |  | 288,488    |        
|Interest rate swap                        |                                      |            | 7,278      |         |            |  | 7,278      |        
|Currency swap                             |                                      |            | 40,799     |         |            |  | 40,799     |        
|Interest currency swap                    |                                      |            | 99,615     |         |            |  | 99,615     |        
|Currency forward                          |                                      |            | 10,025     |         |            |  | 10,025     |        
|Currency option                           |                                      |            | 1,349      |         |            |  | 1,349      |        
|Long-term debt, including current portion |                                      |            | 11,741,138 |         |            |  | 11,992,538 |        

F-22



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                  |  |                |      |               |          |   |         |        |  |                                             |           |  |  |          |           |            |        |  |           |  |  |  |         |  
|------------------------------------------------- |  | -------------- | ---- | ------------- | -------- | - | ------- | ------ |  | ------------------------------------------- | --------- |  |  | -------- | --------- | ---------- | ------ |  | --------- |  |  |  | ------- | -
|                                                  |  | Unaudited 2003 |     
|                                                  |  |                |     
|                                                  |  |                |      | Stockholders |          |   |        
|                                                  |  | Percentage     |      |               | Carrying |   |         | Total  |  |                                             | Equity    |  |  |          |           | Net Income |       
|                                                  |  | Ownership      |      |               | Amount   |   |         | Assets |  |                                             | (Deficit) |  |  | Revenues |           |            | (Loss) | 
|                                                  |  |                |      |               |          |   |         |        |  |                                             |           |  |  |          |           |            |        | 
|                                                  |  | (Millions)     |     
|Intelsat Ltd.                                     |  |                | 0.7  |               |          | W | 6,222   |        |  |                                             | 6,046,679 |  |  |          | 2,794,525 |            |        |  | 1,135,715 |  |  |  | 215,894 |  
|Inmarsat Venture plc                              |  |                | 2.3  |               |          |   | 15,015  |        |  |                                             | 1,653,212 |  |  |          | 1,110,008 |            |        |  | 552,025   |  |  |  | 195,729 |  
|Korea Software Financial
    Cooperative          |  |                | 1.4  |               |          |   | 1,000   |        |  |                                             | 101,779   |  |  |          | 96,305    |            |        |  | 6,542     |  |  |  | 3,260   |  
|Polytech Adventure Town, Inc.                     |  |                | 6.7  |               |          |   | 200     |        |  |                                             | 1,425     |  |  |          | 1,405     |            |        |  | 18        |  |  |  | (148    | )
|Real Telecom Corporation                          |  |                | 6.5  |               |          |   | 721     |        |  |                                             | 38,260    |  |  |          | 9,265     |            |        |  | 18,595    |  |  |  | (9,563  | )
|KT Internal Venture Fund No. 1                    |  |                | 89.3 |               |          |   | 3,303   |        |  |                                             | 12,481    |  |  |          | 12,410    |            |        |  | 5,230     |  |  |  | 5,131   |  
|KT Internal Venture Fund No. 2                    |  |                | 90.0 |               |          |   | 3,000   |        |  |                                             | 3,302     |  |  |          | 3,301     |            |        |  | 25        |  |  |  | 10      |  
|Korea Information Certificate
    Authority, Inc. |  |                | 9.4  |               |          |   | 2,000   |        |  |                                             | 25,363    |  |  |          | 18,067    |            |        |  | 15,062    |  |  |  | (26     | )
|Mirae Asset Securities Co., Ltd                   |  |                | 9.6  |               |          |   | 11,960  |        |  |                                             | 880,615   |  |  |          | 214,304   |            |        |  | 225,222   |  |  |  | 31,174  |  
|Korea Telecom Venture Fund No. 190.0              |  |                |      |               |          |   | 18,000  |        |  |                                             | 24,046    |  |  |          | 23,737    |            |        |  | 1,136     |  |  |  | 697     |  
|Kookmin Credit Information, Inc.                  |  |                | 13.0 |               |          |   | 1,202   |        |  |                                             | 6,457     |  |  |          | 3,378     |            |        |  | 8,481     |  |  |  | (5,894  | )
|Korea Information Technology
    Fund             |  |                | 33.3 |               |          |   | 100,000 |        |  |                                             | 309,459   |  |  |          | 309,459   |            |        |  |          |  |  |  | 9,459   |  
|On Game Network Inc.                              |  |                | 19.5 |               |          |   | 1,061   |        |  |                                             | 9,146     |  |  |          | 6,749     |            |        |  | 11,681    |  |  |  | 380     |  
|Other                                             |  |                |     |               |          |   | 44,075  |        |  | - - - - - - - Not available - - - - - - - -
|                                                  |  |                |      |               |          |   |         |       
|                                                  |  |                |      |               |          | W | 207,759 |        |  |                                             |           |  |  |          |           |            |        |  |           |  |  |  |         |  
|                                                  |  |                |      |               |          |   |         |        |  |                                             |           |  |  |          |           |            |        | 

F-23



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                              |  |                |      |               |          |   |         |        |     |                                             |           |  |  |          |           |        |        |  |           |  |  |  |         |  
|--------------------------------------------- |  | -------------- | ---- | ------------- | -------- | - | ------- | ------ | --- | ------------------------------------------- | --------- |  |  | -------- | --------- | ------ | ------ |  | --------- |  |  |  | ------- | -
|                                              |  | Unaudited 2004 |     
|                                              |  |                |     
|                                              |  |                |      | Stockholders |          |   |         |        | Net |                                            
|                                              |  | Percentage     |      |               | Carrying |   |         | Total  |     |                                             | Equity    |  |  |          |           | Income |       
|                                              |  | Ownership      |      |               | Amount   |   |         | Assets |     |                                             | (Deficit) |  |  | Revenues |           |        | (Loss) | 
|                                              |  |                |      |               |          |   |         |        |     |                                             |           |  |  |          |           |        |        | 
|                                              |  | (Millions)     |     
|Intelsat Ltd.                                 |  |                | 0.7  |               |          |   | 6,222   |        |     |                                             | 4,977,479 |  |  |          | 2,406,816 |        |        |  | 1,089,629 |  |  |  | (40,373 | )
|Inmarsat Group holdings., Ltd.                |  |                | 2.3  |               |          |   | 653     |        |     |                                             | 2,278,094 |  |  |          | 38,099    |        |        |  | 501,755   |  |  |  | 11,899  |  
|Korea Software Financial Cooperative          |  |                | 1.4  |               |          |   | 1,000   |        |     |                                             | 106,060   |  |  |          | 101,205   |        |        |  | 6,249     |  |  |  | 3,457   |  
|Polytech Adventure Town, Inc.                 |  |                | 6.7  |               |          |   | 200     |        |     |                                             | 2,910     |  |  |          | 2,610     |        |        |  | 984       |  |  |  | (160    | )
|Real Telecom Corporation                      |  |                | 6.5  |               |          |   | 721     |        |     |                                             | 26,977    |  |  |          | (3,338    | )      |        |  | 9,419     |  |  |  | (12,778 | )
|KT Internal Venture Fund No. 1                |  |                | 89.3 |               |          |   | 3,303   |        |     |                                             | 4,101     |  |  |          | 4,101     |        |        |  | 51        |  |  |  | 17      |  
|KT Internal Venture Fund No. 2                |  |                | 94.3 |               |          |   | 5,000   |        |     |                                             | 5,374     |  |  |          | 5,374     |        |        |  | 64        |  |  |  | 64      |  
|Korea Information Certificate Authority, Inc. |  |                | 9.4  |               |          |   | 2,000   |        |     |                                             | 20,224    |  |  |          | 13,213    |        |        |  | 15,015    |  |  |  | (2,980  | )
|Mirae Asset Securities Co., Ltd               |  |                | 4.4  |               |          |   | 5,000   |        |     |                                             | 896,905   |  |  |          | 238,554   |        |        |  | 197,726   |  |  |  | 25,723  |  
|Korea Telecom Venture Fund No. 1              |  |                | 90.0 |               |          |   | 18,000  |        |     |                                             | 21,170    |  |  |          | 20,876    |        |        |  | 2,866     |  |  |  | (1,277  | )
|Kookmin Credit Information, Inc.              |  |                | 13.0 |               |          |   | 1,202   |        |     |                                             | 5,003     |  |  |          | (214      | )      |        |  | 8,268     |  |  |  | (2,305  | )
|Korea Information Technology Fund             |  |                | 33.3 |               |          |   | 100,000 |        |     |                                             | 310,448   |  |  |          | 310,448   |        |        |  | 11,090    |  |  |  | 10,010  |  
|On Game Network Inc.                          |  |                | 19.5 |               |          |   | 1,061   |        |     |                                             | 19,556    |  |  |          | 13,565    |        |        |  | 17,007    |  |  |  | 1,401   |  
|Other                                         |  |                |     |               |          |   | 52,356  |        |     | - - - - - - - Not available - - - - - - - -
|                                              |  |                |      |               |          |   |         |       
|                                              |  |                |      |               |          | W | 196,718 |        |     |                                             |           |  |  |          |           |        |        |  |           |  |  |  |         |  
|                                              |  |                |      |               |          |   |         |        |     |                                             |           |  |  |          |           |        |        | 



|    |                                                           
|--- | ----------------------------------------------------------
|(3) | Basis of Translating Consolidated Financial
    Statements





|    |                          
|--- | -------------------------
|(4) | Cash and Cash Equivalents



|                  |  |          |         |  |      |   |           | 
|----------------- |  | -------- | ------- |  | ---- | - | --------- | 
|                  |  | Millions |        
|                  |  |          |        
|                  |  | 2003     |         |  | 2004 |  
|                  |  |          |         |  |      |  
|Cash on hand      |  | W        | 380     |  |      | W | 65        | 
|Checking accounts |  |          | 3,919   |  |      |   | 5,751     | 
|Passbook accounts |  |          | 17,859  |  |      |   | 22,290    | 
|Cash in transit   |  |          | 541,918 |  |      |   | 424,884   | 
|Time deposits     |  |          | 196,792 |  |      |   | 1,302,939 | 
|                  |  |          |         |  |      |  
|                  |  | W        | 760,868 |  |      | W | 1,755,929 | 
|                  |  |          |         |  |      |  

F-24



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                    
|--- | -------------------
|(5) | Restricted Deposits



|                                 |  |          |       |  |      |   |       | 
|-------------------------------- |  | -------- | ----- |  | ---- | - | ----- | 
|                                 |  | Millions |      
|                                 |  |          |      
|                                 |  | 2003     |       |  | 2004 |  
|                                 |  |          |       |  |      |  
|Cash and cash equivalents        |  | W        | 1,038 |  |      | W |      | 
|Short-term financial instruments |  |          | 3,127 |  |      |   | 5,800 | 
|Long-term financial instruments  |  |          | 61    |  |      |   | 92    | 
|                                 |  |          |       |  |      |  
|                                 |  | W        | 4,226 |  |      | W | 5,892 | 
|                                 |  |          |       |  |      |  



|    |            
|--- | -----------
|(6) | Inventories



|                                  |  |          |         |  |      |   |         |  
|--------------------------------- |  | -------- | ------- |  | ---- | - | ------- | -
|                                  |  | Millions |        
|                                  |  |          |        
|                                  |  | 2003     |         |  | 2004 |  
|                                  |  |          |         |  |      |  
|PCS handsets                      |  | W        | 225,809 |  |      | W | 282,652 |  
|Valuation allowance               |  |          |        |  |      |   | (21,471 | )
|Construction and repair materials |  |          | 72,924  |  |      |   | 29,331  |  
|Other                             |  |          | 66,100  |  |      |   | 83,807  |  
|                                  |  |          |         |  |      |  
|                                  |  | W        | 364,833 |  |      | W | 374,319 |  
|                                  |  |          |         |  |      |  



|    |                     
|--- | --------------------
|(7) | Other Current Assets



|                                                |  |          |         |  |      |   |         | 
|----------------------------------------------- |  | -------- | ------- |  | ---- | - | ------- | 
|                                                |  | Millions |        
|                                                |  |          |        
|                                                |  | 2003     |         |  | 2004 |  
|                                                |  |          |         |  |      |  
|Current portion of long-term loans to employees |  | W        | 118,629 |  |      | W | 136,047 | 
|Prepaid expenses                                |  |          | 28,412  |  |      |   | 28,203  | 
|Prepayments                                     |  |          | 49,371  |  |      |   | 74,030  | 
|Accrued interest income                         |  |          | 8,359   |  |      |   | 25,098  | 
|Refundable deposits                             |  |          | 8,721   |  |      |   | 4,154   | 
|Short-term loans                                |  |          | 6,526   |  |      |   | 271     | 
|Receivables from derivative contracts (note 23) |  |          | 9,070   |  |      |   | 2,661   | 
|Other                                           |  |          | 956     |  |      |   | 189     | 
|                                                |  |          |         |  |      |  
|                                                |  | W        | 230,044 |  |      | W | 270,653 | 
|                                                |  |          |         |  |      |  

F-25



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                          
|--- | -------------------------
|(8) | Investments in Securities





| |                                            
| | -------------------------------------------
| | (a)     Trading securities
    (fair value)

|             |  |          |        |  |      |   |       | 
|------------ |  | -------- | ------ |  | ---- | - | ----- | 
|             |  | Millions |       
|             |  |          |       
|             |  | 2003     |        |  | 2004 |  
|             |  |          |        |  |      |  
|Mutual funds |  | W        | 52,397 |  |      | W | 6,186 | 



| |                                          
| | -----------------------------------------
| | (b)     Available-for-sale
    securities



| |                                              
| | ---------------------------------------------
| | (i)                     Equity
    securities

|                |                        |               |  |     |          |  |  |      |  |   |       |       |  |   |       |       | 
|--------------- | ---------------------- | ------------- |  | --- | -------- |  |  | ---- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                |                        | Percentage of |  |     |         
|                |                        | Ownership (%) |  |     | Millions | 
|                |                        |               |  |     |          | 
|                |                        | 2003          |  |     | 2004     |  |  | 2003 |  |   | 2004  |      
|                |                        |               |  |     |          |  |  |      |  |   |       |      
|Current assets: |                        |               |  |     |          |  |  |      |  |   |       |       |  |   |       |      
|                | Knowledge Plant, Inc.* |               |  | 4.4 |          |  |  | 4.4  |  |   |       | 7,272 |  |   |       | 1,625 | 
|                | Mobilians Co., Ltd.*   |               |  |    |          |  |  | 12.2 |  |   |       |      |  |   |       | 4,893 | 
|                |                        |               |  |     |          |  |  |      |  |   |       |      
|                |                        |               |  |     |          |  |  |      |  | W | 7,272 |       |  | W | 6,518 |      
|                |                        |               |  |     |          |  |  |      |  |   |       |      

F-26



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                   |                                               |               |  |      |          |  |  |      |  |   |         |         |  |   |         |         | 
|------------------ | --------------------------------------------- | ------------- |  | ---- | -------- |  |  | ---- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                   |                                               | Percentage of |  |      |         
|                   |                                               | Ownership (%) |  |      | Millions | 
|                   |                                               |               |  |      |          | 
|                   |                                               | 2003          |  |      | 2004     |  |  | 2003 |  |   | 2004    |        
|                   |                                               |               |  |      |          |  |  |      |  |   |         |        
|Investment assets: |                                               |               |  |      |          |  |  |      |  |   |         |         |  |   |         |        
|                   | New Skies Satellites N.V.                     |               |  | 1.4  |          |  |  |     |  |   | W       | 15,917  |  |   | W       |        | 
|                   | Intelsat, Ltd.                                |               |  | 0.7  |          |  |  | 0.7  |  |   |         | 6,222   |  |   |         | 6,222   | 
|                   | Inmarsat Ventures plc                         |               |  | 2.3  |          |  |  |     |  |   |         | 15,015  |  |   |         |        | 
|                   | Inmarsat Group holdings., Ltd                 |               |  |     |          |  |  | 2.3  |  |   |         |        |  |   |         | 653     | 
|                   | Real Telecom Corporation                      |               |  | 6.5  |          |  |  | 6.5  |  |   |         | 721     |  |   |         | 721     | 
|                   | Korea Software Financial Cooperative          |               |  | 1.4  |          |  |  | 1.4  |  |   |         | 1,000   |  |   |         | 1,000   | 
|                   | Korea Information Certificate Authority, Inc. |               |  | 9.4  |          |  |  | 9.4  |  |   |         | 2,000   |  |   |         | 2,000   | 
|                   | KT Internal Venture Fund No. 1                |               |  | 89.3 |          |  |  | 89.3 |  |   |         | 3,303   |  |   |         | 3,303   | 
|                   | KT Internal Venture Fund No. 2                |               |  | 90.0 |          |  |  | 94.3 |  |   |         | 3,000   |  |   |         | 5,000   | 
|                   | Mirae Asset Securities Co., Ltd.              |               |  | 9.6  |          |  |  | 4.4  |  |   |         | 11,960  |  |   |         | 5,000   | 
|                   | Korea Telecom Venture Fund No. 1              |               |  | 90.0 |          |  |  | 90.0 |  |   |         | 18,000  |  |   |         | 18,000  | 
|                   | Sky Life Contents fund                        |               |  | 22.5 |          |  |  | 22.5 |  |   |         | 4,500   |  |   |         | 4,500   | 
|                   | Korea Information Technology Fund             |               |  | 33.3 |          |  |  | 33.3 |  |   |         | 100,000 |  |   |         | 100,000 | 
|                   | Kookmin Credit Information Inc.               |               |  | 13.0 |          |  |  | 13.0 |  |   |         | 1,202   |  |   |         | 1,202   | 
|                   | On Game Network Inc.                          |               |  | 19.5 |          |  |  | 19.5 |  |   |         | 1,061   |  |   |         | 1,061   | 
|                   | GaeaSoft Corp.*                               |               |  | 2.1  |          |  |  | 2.1  |  |   |         | 913     |  |   |         | 514     | 
|                   | KRTnet Corporation*                           |               |  | 7.5  |          |  |  | 7.5  |  |   |         | 4,454   |  |   |         | 3,634   | 
|                   | Sports Toto                                   |               |  | 6.7  |          |  |  | 6.7  |  |   |         | 13,500  |  |   |         | 13,500  | 
|                   | VACOM Wireless, INC.                          |               |  | 16.8 |          |  |  | 16.8 |  |   |         | 1,880   |  |   |         | 719     | 
|                   | ESTsoft Corp.                                 |               |  | 15.0 |          |  |  | 15.0 |  |   |         | 1,650   |  |   |         | 1,650   | 
|                   | CEC Mobile                                    |               |  | 16.7 |          |  |  | 16.7 |  |   |         | 4,456   |  |   |         | 4,456   | 
|                   | Onse Telecom                                  |               |  | 6.4  |          |  |  | 8.6  |  |   |         | 4,605   |  |   |         | 6,181   | 
|                   | Wide Telecom, Inc*                            |               |  | 0.5  |          |  |  | 0.5  |  |   |         | 24      |  |   |         | 11      | 
|                   | Dalsvyaz*                                     |               |  | 2.6  |          |  |  | 2.6  |  |   |         | 234     |  |   |         | 204     | 
|                   | Other                                         |               |  |     |          |  |  |     |  |   |         | 13,684  |  |   |         | 22,078  | 
|                   |                                               |               |  |      |          |  |  |      |  |   |         |        
|                   |                                               |               |  |      |          |  |  |      |  | W | 229,301 |         |  | W | 201,609 |        
|                   |                                               |               |  |      |          |  |  |      |  |   |         |        






|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Investments in these equity securities are recorded at fair
    value. All other equity securities that do not have readily
    determinable fair values are stated at cost.





F-27



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






| |                         
| | ------------------------
| | (ii)     Debt securities

|                   |                                               |          |  |          |      |   |         |         |  |   |         |         | 
|------------------ | --------------------------------------------- | -------- |  | -------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                   |                                               |          |  | Millions |     
|                   |                                               |          |  |          |     
|                   |                                               | Maturity |  |          | 2003 |   |         | 2004    | 
|                   |                                               |          |  |          |      |   |         |         | 
|Current assets:    |                                               |          |  |          |      |   |         |         |  |   |         |        
|                   | Beneficiary certificates                      |          |  | 2005     |      |   | W       | 216,105 |  |   | W       | 251,285 | 
|                   | Equity-linked securities                      |          |  |         |      |   |         | 63,380  |  |   |         |        | 
|                   |                                               |          |  |          |      |   |         |         | 
|                   |                                               |          |  |          |      | W | 279,485 |         |  | W | 251,285 |        
|                   |                                               |          |  |          |      |   |         |         | 
|Investment assets: |                                               |          |  |          |      |   |         |         |  |   |         |        
|                   | KTF Second Securitization Specialty Co., Ltd. |          |  |         |      |   |         | 19,254  |  |   |         |        | 
|                   | Other                                         |          |  |         |      |   |         | 12,087  |  |   | W       | 17,148  | 
|                   |                                               |          |  |          |      |   |         |         | 
|                   |                                               |          |  |          |      | W | 31,341  |         |  | W | 17,148  |        
|                   |                                               |          |  |          |      |   |         |         | 





|      |                                     
|----- | ------------------------------------
|(iii) | Changes in unrealized gains (losses)



|                                             |  |          |         |  
|-------------------------------------------- |  | -------- | ------- | -
|                                             |  | Millions |        
|                                             |  |          |        
|Beginning balance                            |  | W        | (24,799 | )
|Realized losses on disposition of securities |  |          | 27,844  |  
|Changes in unrealized gains and losses, net  |  |          | 4,752   |  
|                                             |  |          |        
|Net balance at end of year                   |  | W        | 7,797   |  
|                                             |  |          |        

F-28



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                            
|--- | ---------------------------
|(c) | Held-to-maturity securities

|                   |                                       |          |         |        |      |   |        |        | 
|------------------ | ------------------------------------- | -------- | ------- | ------ | ---- | - | ------ | ------ | 
|                   |                                       | Millions |        
|                   |                                       |          |        
|                   |                                       | 2003     |         |        | 2004 |  
|                   |                                       |          |         |        |      |  
|Current assets:    |                                       |          |         |        |      |   |        |       
|                   | Government and municipal bonds        |          | W       | 5,712  |      |   | W      | 1,660  | 
|Investment assets: |                                       |          |         |        |      |   |        |       
|                   | Government and municipal bonds        |          |         | 11,495 |      |   |        | 2,501  | 
|                   | Beneficiary certificates (note 23(j)) |          |         | 99,914 |      |   |        | 88,667 | 
|                   | Other                                 |          |         |       |      |   |        | 3,236  | 
|                   |                                       |          |         |        |      |  
|                   |                                       | W        | 111,409 |        |      | W | 94,404 |       
|                   |                                       |          |         |        |      |  





|    |                                                             
|--- | ------------------------------------------------------------
|(9) | Investments in Equity Securities of Affiliated
    Companies



|          |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |   |        |       |        |   |        |       |   | 
|--------- | --------------------------------------------------------- | ------------------------------------------------ |  | ---- | ---- | -------- |  | --------- | ---- | - | ---------- | ----- | ------ | --------- | ------- | ----- | ---------- | - | ------ | ----- | ------ | - | ------ | ----- | - | 
|          |                                                           |                                                  |  |      |      | Millions | 
|          |                                                           |                                                  |  |      |     
|          |                                                           | Percentage                                       |  |      |      |          | 
|          |                                                           | Ownership (%)                                    |  |      | 2003 |          |  | 2004      |     
|          |                                                           |                                                  |  |      |      |          |  |           |     
|          |                                                           | 2003                                             |  |      | 2004 |          |  | Net Asset |      |   | Book Value |       |        | Net Asset |         |       | Book Value |  
|          |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |  
|Listed*:  |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |   |        |       |        |   |        |      
|          | Hallim Venture Capital Corporation (HVCC)               |                                                  |  | 25.3 |      |          |  | 25.3      |      |   | W          | 7,700 |        |           | W       | 3,512 |            |   | W      | 2,466 |        |   | W      |      |  
|Unlisted: |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |   |        |       |        |   |        |      
|          | Mongolian Telecommunications Co.                          |                                                  |  | 40.0 |      |          |  | 40.0      |      |   |            | 4,982 |        |           |         | 4,982 |            |   |        | 8,183 |        |   |        | 8,183 |  
|          | Korea IT Venture Partners Inc.                            |                                                  |  | 28.0 |      |          |  | 28.0      |      |   |            | 9,227 |        |           |         | 9,227 |            |   |        | 9,228 |        |   |        | 9,228 |  
|          | KBSi Co., Ltd.                                            |                                                  |  | 32.4 |      |          |  | 32.4      |      |   |            | 1,386 |        |           |         | 1,386 |            |   |        | 1,667 |        |   |        | 1,667 |  
|          | Korea Telephone Directory Co., Ltd.                       |                                                  |  | 34.0 |      |          |  | 34.0      |      |   |            | 8,601 |        |           |         | 8,601 |            |   |        | 8,777 |        |   |        | 8,777 |  
|          | eNtoB Corp.                                               |                                                  |  | 23.8 |      |          |  | 23.8      |      |   |            | 3,420 |        |           |         | 3,420 |            |   |        | 3,803 |        |   |        | 3,803 |  
|          | KT Infotech Corporation                                   |                                                  |  | 15.6 |      |          |  | 15.6      |      |   |            | 4,350 |        |           |         | 3,955 |            |   |        | 3,334 |        |   |        | 3,059 |  
|          | Korea Telecom Realty Development and Management Co., Ltd. |                                                  |  | 19.0 |      |          |  | 19.0      |      |   |            | 1,964 |        |           |         | 1,921 |            |   |        | 2,172 |        |   |        | 2,172 |  
|          |                                                           | Korea Digital Satellite Broadcasting Co. (KDB) |  |      | 29.9 |          |  |           | 29.9 |   |            |       | 40,411 |           |         |       | 89,885     |   |        |       | (2,191 | ) |        |       |  | 
|          | Korea Information Data Corp.                              |                                                  |  | 19.0 |      |          |  | 19.0      |      |   |            | 6,864 |        |           |         | 6,864 |            |   |        | 9,138 |        |   |        | 9,138 |  
|          | Korea Information Service Corp.                           |                                                  |  | 19.0 |      |          |  | 19.0      |      |   |            | 4,552 |        |           |         | 4,552 |            |   |        | 6,007 |        |   |        | 6,007 |  
|          | KT Instrument & Communication Corp.                       |                                                  |  | 19.0 |      |          |  | 19.0      |      |   |            | 309   |        |           |         | 309   |            |   |        | 354   |        |   |        | 354   |  
|          | Bank Town Co., Ltd.                                       |                                                  |  | 19.0 |      |          |  | 19.0      |      |   |            | 444   |        |           |         | 433   |            |   |        | 569   |        |   |        | 569   |  
|          | Korea Telecom Hitel Global Co., Ltd.                      |                                                  |  | 49.0 |      |          |  | 49.0      |      |   |            | 293   |        |           |         | 293   |            |   |        |      |        |   |        |      |  
|          | Sports TOTO On-Line                                       |                                                  |  | 30.0 |      |          |  | 30.0      |      |   |            | 1,450 |        |           |         | 1,450 |            |   |        | 1,104 |        |   |        | 1,104 |  
|          |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |  
|          |                                                           |                                                  |  |      |      |          |  |           |      | W | 95,953     |       |        | W         | 140,790 |       |            | W | 54,611 |       |        | W | 54,061 |      
|          |                                                           |                                                  |  |      |      |          |  |           |      |   |            |       |        |           |         |       |            |  






|  |                                                                                                               
|- | --------------------------------------------------------------------------------------------------------------
|* | The quoted market value (based on closing KOSDAQ price) of HVCC
    as of December 31, 2004 is W2,990 million.

F-29



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)










|     |          
|---- | ---------
|(10) | Insurance





|     |             
|---- | ------------
|(11) | Other Assets



|                                      |  |          |           |   |      |   |           |  
|------------------------------------- |  | -------- | --------- | - | ---- | - | --------- | -
|                                      |  | Millions |          
|                                      |  |          |          
|                                      |  | 2003     |           |   | 2004 |  
|                                      |  |          |           |   |      |  
|Frequency usage right, net (note 12)  |  | W        | 1,208,429 |   |      | W | 1,115,996 |  
|Long-term loans to employees          |  |          | 565,556   |   |      |   | 475,319   |  
|Leasehold rights and deposits         |  |          | 330,747   |   |      |   | 313,302   |  
|Goodwill                              |  |          | 944,326   |   |      |   | 731,694   |  
|Negative goodwill                     |  |          | (2,071    | ) |      |   | (1,553    | )
|Other intangible assets, net          |  |          | 276,714   |   |      |   | 338,552   |  
|Long-term accounts receivable  trade |  |          | 48,438    |   |      |   | 139,740   |  
|Long-term accounts receivable  other |  |          | 17,361    |   |      |   | 17,368    |  
|Deferred income tax assets (note 26)  |  |          | 415,396   |   |      |   | 373,726   |  
|Other                                 |  |          | 133,064   |   |      |   | 71,434    |  
|                                      |  |          |           |   |      |  
|                                      |  | W        | 3,937,960 |   |      | W | 3,575,578 |  
|                                      |  |          |           |   |      |  



|     |                      
|---- | ---------------------
|(12) | Frequency Usage Right



F-30



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                               |  |          |           |   |      |   |           |  
|------------------------------ |  | -------- | --------- | - | ---- | - | --------- | -
|                               |  | Millions |          
|                               |  |          |          
|                               |  | 2003     |           |   | 2004 |  
|                               |  |          |           |   |      |  
|Frequency usage right          |  | W        | 1,216,223 |   |      | W | 1,216,223 |  
|Less: Accumulated amortization |  |          | (7,794    | ) |      |   | (100,227  | )
|                               |  |          |           |   |      |  
|                               |  | W        | 1,208,429 |   |      | W | 1,115,996 |  
|                               |  |          |           |   |      |  



|                                   |  |          |          |   |      |   |          |  
|---------------------------------- |  | -------- | -------- | - | ---- | - | -------- | -
|                                   |  | Millions |         
|                                   |  |          |         
|                                   |  | 2003     |          |   | 2004 |  
|                                   |  |          |          |   |      |  
|Long-term accounts payable  other |  | W        | 650,000  |   |      | W | 650,000  |  
|Less: Present value discount       |  |          | (131,239 | ) |      |   | (111,793 | )
|                                   |  |          |          |   |      |  
|                                   |  | W        | 518,761  |   |      | W | 538,207  |  
|                                   |  |          |          |   |      |  



|     |  |          |         | 
|---- |  | -------- | ------- | 
|Year |  | Millions |        
|     |  |          |        
|2005 |  | W        |        | 
|2006 |  |          |        | 
|2007 |  |          | 90,000  | 
|2008 |  |          | 110,000 | 
|2009 |  |          | 130,000 | 
|2010 |  |          | 150,000 | 
|2011 |  |          | 170,000 | 
|     |  |          |        
|     |  | W        | 650,000 | 
|     |  |          |        



|     |                      
|---- | ---------------------
|(13) | Short-term Borrowings



|                                          |  |               |              |          |      |   |         |      |  |   |         | 
|----------------------------------------- |  | ------------- | ------------ | -------- | ---- | - | ------- | ---- |  | - | ------- | 
|                                          |  |               |              | Millions |     
|                                          |  | Interest Rate |              |          |      |  
|                                          |  | Per Annum (%) |              |          | 2003 |   |         | 2004 | 
|                                          |  |               |              |          |      |   |         |      | 
|Commercial paper                          |  |               | 3.96 , 4.80% |          |      | W | 478,000 |      |  | W | 215,000 | 
|Borrowings from banks                     |  |               | 4.18 , 6.00% |          |      |   | 119,817 |      |  |   | 195,883 | 
|Short-term borrowings in foreign currency |  |               | 0.60 , 4.71% |          |      |   | 33,872  |      |  |   | 27,709  | 
|                                          |  |               |              |          |      |   |         |      | 
|                                          |  |               |              |          |      | W | 631,689 |      |  | W | 438,592 | 
|                                          |  |               |              |          |      |   |         |      | 

F-31



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                          
|---- | -------------------------
|(14) | Other Current Liabilities



|                                               |  |          |         |  |      |   |         | 
|---------------------------------------------- |  | -------- | ------- |  | ---- | - | ------- | 
|                                               |  | Millions |        
|                                               |  |          |        
|                                               |  | 2003     |         |  | 2004 |  
|                                               |  |          |         |  |      |  
|Key money deposits                             |  | W        | 100,739 |  |      | W | 104,197 | 
|Unearned income                                |  |          | 4,932   |  |      |   | 4,002   | 
|Payables from interest rate swap (note 23)     |  |          | 16,077  |  |      |   | 7,278   | 
|Payables from interest currency swap (note 23) |  |          |        |  |      |   | 99,615  | 
|Payables from currency swap (note 23)          |  |          | 3,554   |  |      |   | 40,799  | 
|Payables from currency forward (note 23)       |  |          |        |  |      |   | 10,025  | 
|Payables from currency option (note 23)        |  |          |        |  |      |   | 1,349   | 
|Other                                          |  |          | 7,312   |  |      |   | 9,704   | 
|                                               |  |          |         |  |      |  
|                                               |  | W        | 132,614 |  |      | W | 276,969 | 
|                                               |  |          |         |  |      |  

F-32



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |               
|---- | --------------
|(15) | Long-term Debt



|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |        |           |   |            |        |           | 
|-------------------------- | ---------------------- | -------------------------------------------------- |  |  | --------------------- | -------- |  | ---- | --------- | - | ---------- | ------ | --------- | - | ---------- | ------ | --------- | 
|                           |                        |                                                    |  |  |                       | Millions | 
|                           |                        | Interest Rate                                      |  |  |                       |          |  |     
|                           |                        | Per Annum (%)                                      |  |  | Maturity Date         |          |  | 2003 |           |   | 2004       |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|Local currency (Won) debt: |                        |                                                    |  |  |                       |          |  |      |           |   |            |        |           |   |            |       
|                           |                        | Bonds                                              |  |  | 4.14,9.20             |          |  |      | 2005,2014 |   |            | W      | 6,425,001 |   |            | W      | 6,850,000 | 
|                           |                        | Convertible notes of KTF and KTFT                  |  |  | 1.00                  |          |  |      | 2005      |   |            |        | 38,880    |   |            |        | 38,600    | 
|                           |                        | Convertible notes issued in May 2002               |  |  | 3.00                  |          |  |      | 2005      |   |            |        | 1,322,563 |   |            |        | 1,322,530 | 
|                           |                        | Borrowings from banks                              |  |  | 4.90,7.25             |          |  |      | 2005,2007 |   |            |        | 90,680    |   |            |        | 72,223    | 
|                           |                        | Information and Telecommunication Improvement Fund |  |  | 3.53,6.85             |          |  |      | 2005,2009 |   |            |        | 173,070   |   |            |        | 132,764   | 
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   | 8,050,194  |        |           |   | 8,416,117  |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|                           | Foreign currency debt: |                                                    |  |  |                       |          |  |      |           |   |            |        |           |   |            |        |          
|                           |                        | Convertible notes issued in January 2002 (USD)     |  |  | 0.25                  |          |  |      | 2007      |   |            | W      | 1,483,628 |   |            | W      | 1,178,759 | 
|                           |                        | Bonds with warrants (Microsoft) (USD)              |  |  | 4.30                  |          |  |      | 2005      |   |            |        | 598,900   |   |            |        | 521,900   | 
|                           |                        | Yankee bonds (USD)                                 |  |  | 7.50,7.63             |          |  |      | 2006,2007 |   |            |        | 419,230   |   |            |        | 365,330   | 
|                           |                        | Bonds (USD)                                        |  |  | Libor+0.80            |          |  |      | 2006      |   |            |        | 179,670   |   |            |        | 156,570   | 
|                           |                        | MTNP notes (USD)                                   |  |  | 5.88,6.50             |          |  |      | 2014,2034 |   |            |        |          |   |            |        | 730,660   | 
|                           |                        | Bonds (JPY)                                        |  |  | 2.64,3.13             |          |  |      | 2005,2006 |   |            |        | 263,666   |   |            |        | 142,146   | 
|                           |                        | Loans (USD)                                        |  |  | Libor+0.45,Libor+3.50 |          |  |      | 2005,2009 |   |            |        | 248,451   |   |            |        | 219,198   | 
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   | 3,193,545  |        |           |   | 3,314,563  |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   | 11,243,739 |        |           |   | 11,730,680 |       
|                           | Add: Premium on bonds  |                                                    |  |  |                       |          |  |      |           |   |            | 30,997 |           |   |            | 52,828 |          
|                           | Less:                  |                                                    |  |  |                       |          |  |      |           |   |            |        |           |   |            |        |          
|                           |                        | Current portion, net of discount                   |  |  |                       |          |  |      |           |   |            |        | 2,172,510 |   |            |        | 4,756,067 | 
|                           |                        | Discount on bonds                                  |  |  |                       |          |  |      |           |   |            |        | 52,478    |   |            |        | 42,370    | 
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       
|                           |                        |                                                    |  |  |                       |          |  |      |           | W | 9,049,748  |        |           | W | 6,985,071  |       
|                           |                        |                                                    |  |  |                       |          |  |      |           |   |            |       





F-33



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)












|                                |  |          |            | 
|------------------------------- |  | -------- | ---------- | 
|Fiscal Year Ending December 31, |  | Millions |           
|                                |  |          |           
|2005                            |  | W        | 4,713,505  | 
|2006                            |  |          | 1,232,601  | 
|2007                            |  |          | 1,310,355  | 
|2008                            |  |          | 857,686    | 
|2009                            |  |          | 994,796    | 
|Thereafter                      |  |          | 2,621,737  | 
|                                |  |          |           
|                                |  | W        | 11,730,680 | 
|                                |  |          |           



|     |                                               
|---- | ----------------------------------------------
|(16) | Refundable Deposits for Telephone Installation





F-34



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|     |                                              
|---- | ---------------------------------------------
|(17) | Accrual for Retirement and Severance Benefits



|                                                            |                            |          |          |         |      |   |            |         |  |   |          |         | 
|----------------------------------------------------------- | -------------------------- | -------- | -------- | ------- | ---- | - | ---------- | ------- |  | - | -------- | ------- | 
|                                                            |                            | Millions |         
|                                                            |                            |          |         
|                                                            |                            | 2002     |          |         | 2003 |   |            | 2004    | 
|                                                            |                            |          |          |         |      |   |            |         | 
|Estimated severance benefits liability at beginning of year |                            | W        | 474,438  |         |      | W | 379,606    |         |  | W | 245,878  |        
|Provision for the year                                      |                            |          | 275,007  |         |      |   | 1,067,076  |         |  |   | 281,453  |        
|Increase due to change of consolidated subsidiaries         |                            |          | (1,853   | )       |      |   | 600        |         |  |   |         |        
|Payments                                                    |                            |          | (42,942  | )       |      |   | (1,020,940 | )       |  |   | (93,178  | )      
|Withdrawal from the National Pension Fund, net              |                            |          | 332      |         |      |   | 337        |         |  |   | 204      |        
|Payment for deposit of severance benefits insurance         |                            |          | (325,376 | )       |      |   | (180,801   | )       |  |   | (119,568 | )      
|                                                            |                            |          |          |         |      |   |            |         | 
|                                                            | Net balance at end of year |          | W        | 379,606 |      |   | W          | 245,878 |  |   | W        | 314,789 | 
|                                                            |                            |          |          |         |      |   |            |         | 





|     |                            
|---- | ---------------------------
|(18) | Other Long-term Liabilities



|                                       |  |          |         |  |      |   |         | 
|-------------------------------------- |  | -------- | ------- |  | ---- | - | ------- | 
|                                       |  | Millions |        
|                                       |  |          |        
|                                       |  | 2003     |         |  | 2004 |  
|                                       |  |          |         |  |      |  
|Accrual for customer call bonus points |  | W        | 105,391 |  |      | W | 128,397 | 
|Advance receipt                        |  |          | 17,099  |  |      |   | 16,390  | 
|Key money deposits from customers      |  |          | 20,963  |  |      |   | 24,868  | 
|Other                                  |  |          | 5,414   |  |      |   | 2,188   | 
|                                       |  |          |         |  |      |  
|                                       |  | W        | 148,867 |  |      | W | 171,843 | 
|                                       |  |          |         |  |      |  

F-35



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                     
|---- | --------------------
|(19) | Stockholders Equity



|                                      |  |                     |             |  |                      |  |             |      |  |  |             |  |  |      |        |   |      |  |        |   |  |  |        |  
|------------------------------------- |  | ------------------- | ----------- |  | -------------------- |  | ----------- | ---- |  |  | ----------- |  |  | ---- | ------ | - | ---- |  | ------ | - |  |  | ------ | -
|                                      |  | No. of Shares Owned |             |  | Ownership Percentage | 
|                                      |  |                     |             |  |                      | 
|                                      |  | 2002                |             |  | 2003                 |  |             | 2004 |  |  | 2002        |  |  | 2003 |        |   | 2004 | 
|                                      |  |                     |             |  |                      |  |             |      |  |  |             |  |  |      |        |   |      | 
|National Pension Corporation          |  |                     | 7,859,178   |  |                      |  | 9,461,792   |      |  |  | 10,654,638  |  |  |      | 2.54   |   |      |  | 3.32   |   |  |  | 3.74   |  
|Employee Stock Ownership Associations |  |                     | 17,678,198  |  |                      |  | 16,394,226  |      |  |  | 16,173,934  |  |  |      | 5.72   |   |      |  | 5.76   |   |  |  | 5.68   |  
|Treasury stock                        |  |                     | 76,988,771  |  |                      |  | 74,090,974  |      |  |  | 74,090,418  |  |  |      | 24.91  |   |      |  | 26.01  |   |  |  | 26.01  |  
|Others, including private companies   |  |                     | 206,551,512 |  |                      |  | 184,902,408 |      |  |  | 184,930,410 |  |  |      | 66.83  |   |      |  | 64.91  |   |  |  | 64.57  |  
|                                      |  |                     |             |  |                      |  |             |      |  |  |             |  |  |      |        |   |      | 
|                                      |  |                     | 309,077,659 |  |                      |  | 284,849,400 |      |  |  | 284,849,400 |  |  |      | 100.00 | % |      |  | 100.00 | % |  |  | 100.00 | %
|                                      |  |                     |             |  |                      |  |             |      |  |  |             |  |  |      |        |   |      | 



|                             |                                                  |               |             |             |          |  |            |   | 
|---------------------------- | ------------------------------------------------ | ------------- | ----------- | ----------- | -------- |  | ---------- | - | 
|                             |                                                  | Number of     |             |             |         
|                             |                                                  | Shares Issued |             |             | Millions | 
|                             |                                                  |               |             |             |          | 
|Balance at January 1, 2002   |                                                  |               | 312,199,659 |             |          |  | W1,560,998 |  
|                             | Retirement of treasury stock on October 9, 2002  |               |             | (3,122,000  | )        |  |            |  | 
|                             |                                                  |               |             |             |          | 
|Balance at December 31, 2002 |                                                  |               | 309,077,659 |             |          |  | 1,560,998  |  
|                             |                                                  |               |             |             |          | 
|                             | Retirement of treasury stock on January 6, 2003  |               |             | (15,454,659 | )        |  |            |  | 
|                             | Retirement of treasury stock on June 20, 2003    |               |             | (2,937,000  | )        |  |            |  | 
|                             | Retirement of treasury stock on December 9, 2003 |               |             | (5,836,600  | )        |  |            |  | 
|                             |                                                  |               |             |             |          | 
|Balance at December 31, 2003 |                                                  |               | 284,849,400 |             |          |  | 1,560,998  |  
|                             |                                                  |               |             |             |          | 
|                             | Retirement of treasury stock during 2004         |               |             |            |          |  |            |  | 
|                             |                                                  |               |             |             |          | 
|Balance at December 31, 2004 |                                                  |               | 284,849,400 |             |          |  | W1,560,998 |  
|                             |                                                  |               |             |             |          | 



F-36



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                                                                     |              |           |                   |         |   |           |              |   |         |                |         |          |             |           |           |          |   |            |            |   |   |           |          |   |   |            |            |  
|---------------------------- | ----------------------------------------------------------------------------------- | ------------ | --------- | ----------------- | ------- | - | --------- | ------------ | - | ------- | -------------- | ------- | -------- | ----------- | --------- | --------- | -------- | - | ---------- | ---------- | - | - | --------- | -------- | - | - | ---------- | ---------- | -
|                             |                                                                                     | Millions     |          
|                             |                                                                                     |              |          
|                             |                                                                                     |              |           | Retained Earnings |         |   |          
|                             |                                                                                     |              |           | Capital           |         |   |           |              |   | Capital |                |         | Minority |             |           |          
|                             |                                                                                     | Common Stock |           |                   | Surplus |   |           | Appropriated |   |         | Unappropriated |         |          | Adjustments |           |           | Interest |   |            | Total      |  
|                             |                                                                                     |              |           |                   |         |   |           |              |   |         |                |         |          |             |           |           |          |   |            |            |  
|Balance at January 1, 2002   |                                                                                     | W            | 1,560,998 |                   |         | W | 1,446,149 |              |   | W       | 5,579,108      |         |          | W           | 1,139,835 |           |          | W | 2,211,133  |            |   | W | 2,046,080 |          |   | W | 13,983,303 |           
|                             | Net earnings                                                                        |              |           |                  |         |   |           |             |   |         |                |        |          |             |           | 1,946,934 |          |   |            |           |   |   |           |         |   |   |            | 1,946,934  |  
|                             | Appropriations of retained earnings                                                 |              |           |                  |         |   |           |             |   |         |                | 863,157 |          |             |           | (863,157  | )        |   |            |           |   |   |           |         |   |   |            |           |  
|                             | Retirement of treasury stock                                                        |              |           |                  |         |   |           |             |   |         |                |        |          |             |           | (167,341  | )        |   |            |           |   |   |           |         |   |   |            | (167,341   | )
|                             | Dividends                                                                           |              |           |                  |         |   |           |             |   |         |                |        |          |             |           | (224,054  | )        |   |            |           |   |   |           |         |   |   |            | (224,054   | )
|                             | Increase in treasury stock, net                                                     |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            | (4,021,094 | ) |   |           |         |   |   |            | (4,021,094 | )
|                             | Loss on retirement of treasury stock                                                |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            | (6,638     | ) |   |           |         |   |   |            | (6,638     | )
|                             | Increase (decrease) in unrealized gains on available-for-sale
    securities        |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            | (1,566,580 | ) |   |           | 1,310    |   |   |            | (1,565,270 | )
|                             | Unrealized losses on equity securities of affiliate                                 |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            | (2,923     | ) |   |           | (178     | ) |   |            | (3,101     | )
|                             | Minority interest in earnings of consolidated subsidiaries, net                     |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            |           |   |   |           | 316,918  |   |   |            | 316,918    |  
|                             | Issuance of common stock of a consolidated subsidiary                               |              |           |                  |         |   |           | 2,526        |   |         |                |        |          |             |           |          |          |   |            |           |   |   |           | 22,169   |   |   |            | 24,695     |  
|                             | Changes in subsidiaries included in consolidation                                   |              |           |                  |         |   |           |             |   |         |                |        |          |             |           |          |          |   |            |           |   |   |           | 238      |   |   |            | 238        |  
|                             | Goodwill of additional equity in consolidated subsidiaries
    acquired during 2002 |              |           |                  |         |   |           | (217         | ) |         |                |        |          |             |           |          |          |   |            |           |   |   |           | (449,774 | ) |   |            | (449,991   | )
|                             | Other                                                                               |              |           |                  |         |   |           | (507         | ) |         |                |        |          |             |           |          |          |   |            | (857       | ) |   |           | (669     | ) |   |            | (2,033     | )
|                             |                                                                                     |              |           |                   |         |   |           |              |   |         |                |         |          |             |           |           |          |   |            |            |  
|Balance at December 31, 2002 |                                                                                     | W            | 1,560,998 |                   |         | W | 1,447,951 |              |   | W       | 6,442,265      |         |          | W           | 1,832,217 |           |          | W | (3,386,959 | )          |   | W | 1,936,094 |          |   | W | 9,832,566  |           
|                             |                                                                                     |              |           |                   |         |   |           |              |   |         |                |         |          |             |           |           |          |   |            |            |  

F-37



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |   |   |           |          |   |   |           |            |  
|---------------------------- | ------------------------------------------------------------------------------------- | ------------ | --------- | ----------------- | ------- | - | --------- | ------------ | - | ------- | -------------- | ---------- | -------- | ----------- | --------- | ---------- | -------- | - | ---------- | -------- | - | - | --------- | -------- | - | - | --------- | ---------- | -
|                             |                                                                                       | Millions     |          
|                             |                                                                                       |              |          
|                             |                                                                                       |              |           | Retained Earnings |         |   |          
|                             |                                                                                       |              |           | Capital           |         |   |           |              |   | Capital |                |            | Minority |             |           |           
|                             |                                                                                       | Common Stock |           |                   | Surplus |   |           | Appropriated |   |         | Unappropriated |            |          | Adjustments |           |            | Interest |   |            | Total    |  
|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |  
|Balance at January 1, 2003   |                                                                                       | W            | 1,560,998 |                   |         | W | 1,447,951 |              |   | W       | 6,442,265      |            |          | W           | 1,832,217 |            |          | W | (3,386,959 | )        |   | W | 1,936,094 |          |   | W | 9,832,566 |           
|                             | Net earnings                                                                          |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | 821,734    |          |   |            |         |   |   |           |         |   |   |           | 821,734    |  
|                             | Appropriations of retained earnings                                                   |              |           |                  |         |   |           |             |   |         |                | 1,583,589  |          |             |           | (1,583,589 | )        |   |            |         |   |   |           |         |   |   |           |           |  
|                             | Retirement of treasury stock                                                          |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | (1,198,499 | )        |   |            |          |   |   |           |         |   |   |           | (1,198,499 | )
|                             | Dividends (note 27)                                                                   |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | (212,887   | )        |   |            |         |   |   |           |         |   |   |           | (212,887   | )
|                             | Cumulative effect of an accounting change (note 2(a))                                 |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | (1,530     | )        |   |            |         |   |   |           | (2,198   | ) |   |           | (3,728     | )
|                             | Increase (decrease) in unrealized gains (losses) on
    available-for-sale securities |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | (768,362 | ) |   |           | 2,541    |   |   |           | (765,821   | )
|                             | Unrealized losses on equity securities of affiliate                                   |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 1,575    |   |   |           | 1,937    |   |   |           | 3,512      |  
|                             | Decrease of treasury stock, net (note 22)                                             |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 149,627  |   |   |           |         |   |   |           | 149,627    |  
|                             | Loss on retirement of treasury stock                                                  |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | (9,753   | ) |   |           |         |   |   |           | (9,753     | )
|                             | Stock options                                                                         |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 6,192    |   |   |           | 774      |   |   |           | 6,966      |  
|                             | Changes in translation adjustments of foreign subsidiaries                            |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 2,087    |   |   |           | 160      |   |   |           | 2,247      |  
|                             | Changes in subsidiaries included in consolidation                                     |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | 27,379   |   |   |           | 27,379     |  
|                             | Acquisition of additional equity in consolidated subsidiaries                         |              |           |                  |         |   |           | (165,642     | ) |         |                |           |          |             |           |           |          |   |            |         |   |   |           | (260,410 | ) |   |           | (426,052   | )
|                             | Equity change of subsidiary from merger transaction                                   |              |           |                  |         |   |           | 26,181       |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | (92,958  | ) |   |           | (66,777    | )
|                             | Minority interest in earnings of consolidated subsidiaries, net                       |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | 235,695  |   |   |           | 235,695    |  
|                             | Other                                                                                 |              |           |                  |         |   |           | 122          |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | 289      |   |   |           | 411        |  
|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |  
|Balance at December 31, 2003 |                                                                                       | W            | 1,560,998 |                   |         | W | 1,308,612 |              |   | W       | 8,025,854      |            |          | W           | (342,554  | )          |          | W | (4,005,593 | )        |   | W | 1,849,303 |          |   | W | 8,396,620 |           
|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |  
|Balance at January 1, 2004   |                                                                                       | W            | 1,560,998 |                   |         | W | 1,308,612 |              |   | W       | 8,025,854      |            |          | W           | (342,554  | )          |          | W | (4,005,593 | )        |   | W | 1,849,303 |          |   | W | 8,396,620 |           
|                             | Net earnings                                                                          |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | 1,282,216  |          |   |            |         |   |   |           |         |   |   |           | 1,282,216  |  
|                             | Appropriations of retained earnings                                                   |              |           |                  |         |   |           |             |   |         |                | (2,593,992 | )        |             |           | 2,593,992  |          |   |            |         |   |   |           |         |   |   |           |           |  
|                             | Retirement of treasury stock in consolidated subsidiaries                             |              |           |                  |         |   |           | (14,784      | ) |         |                |           |          |             |           |           |          |   |            |         |   |   |           | (135,069 | ) |   |           | (149,853   | )
|                             | Dividends (note 27)                                                                   |              |           |                  |         |   |           |             |   |         |                |           |          |             |           | (632,276   | )        |   |            |         |   |   |           |         |   |   |           | (632,276   | )
|                             | Dividends in consolidated subsidiaries                                                |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | (50,037  | ) |   |           | (50,037    | )
|                             | Increase (decrease) in unrealized gains (losses) on
    available-for-sale securities |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 32,596   |   |   |           | (1,418   | ) |   |           | 31,178     |  
|                             | Unrealized losses on equity securities of affiliates                                  |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | (4,041   | ) |   |           | (1,281   | ) |   |           | (5,322     | )
|                             | Stock options                                                                         |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 4,941    |   |   |           | 1,188    |   |   |           | 6,129      |  
|                             | Changes in translation adjustments of foreign subsidiaries                            |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            | 3,012    |   |   |           | (2,814   | ) |   |           | 198        |  
|                             | Minority interest in earnings of consolidated subsidiaries                            |              |           |                  |         |   |           |             |   |         |                |           |          |             |           |           |          |   |            |         |   |   |           | 148,931  |   |   |           | 148,931    |  
|                             | Other                                                                                 |              |           |                  |         |   |           | (2,211       | ) |         |                |           |          |             |           |           |          |   |            | 33       |   |   |           | 774      |   |   |           | (1,404     | )
|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |  
|Balance at December 31, 2004 |                                                                                       | W            | 1,560,998 |                   |         | W | 1,291,617 |              |   | W       | 5,431,862      |            |          | W           | 2,901,378 |            |          | W | (3,969,052 | )        |   | W | 1,809,577 |          |   | W | 9,026,380 |           
|                             |                                                                                       |              |           |                   |         |   |           |              |   |         |                |            |          |             |           |            |          |   |            |          |  

F-38



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                
|---- | ---------------
|(20) | Capital Surplus



|                                                           |  |          |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------- |  | -------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                           |  | Millions |          
|                                                           |  |          |          
|                                                           |  | 2002     |           |   | 2003 |   |           | 2004 | 
|                                                           |  |          |           |   |      |   |           |      | 
|Paid-in capital in excess of par value                     |  | W        | 1,440,258 |   |      | W | 1,440,258 |      |  | W | 1,440,258 |  
|Goodwill of additional equity in consolidated subsidiaries |  |          | (16,007   | ) |      |   | (181,649  | )    |  |   | (181,649  | )
|Other, net                                                 |  |          | 23,700    |   |      |   | 50,003    |      |  |   | 33,008    |  
|                                                           |  |          |           |   |      |   |           |      | 
|                                                           |  | W        | 1,447,951 |   |      | W | 1,308,612 |      |  | W | 1,291,617 |  
|                                                           |  |          |           |   |      |   |           |      | 





|     |                               
|---- | ------------------------------
|(21) | Appropriated Retained Earnings



|                     |                                                       |          |           |           |      |   |           |           |  |   |           |           | 
|-------------------- | ----------------------------------------------------- | -------- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                     |                                                       | Millions |          
|                     |                                                       |          |          
|                     |                                                       | 2002     |           |           | 2003 |   |           | 2004      | 
|                     |                                                       |          |           |           |      |   |           |           | 
|Involuntary reserve: |                                                       |          |           |           |      |   |           |           |  |   |           |          
|                     | Legal reserve                                         |          | W         | 780,499   |      |   | W         | 780,499   |  |   | W         | 780,499   | 
|Voluntary reserve:   |                                                       |          |           |           |      |   |           |           |  |   |           |          
|                     | Reserve for business rationalization                  |          |           | 193,101   |      |   |           | 443,416   |  |   |           | 443,416   | 
|                     | Reserve for technology and human resource development |          |           | 6,667     |      |   |           | 3,334     |  |   |           |          | 
|                     | Reserve for social overhead capital                   |          |           | 23,333    |      |   |           | 3,333     |  |   |           |          | 
|                     | Reserve for business expansion                        |          |           | 5,230,718 |      |   |           | 6,587,325 |  |   |           | 4,000,000 | 
|                     | Reserve for redemption of telephone bonds             |          |           | 207,947   |      |   |           | 207,947   |  |   |           | 207,947   | 
|                     |                                                       |          |           |           |      |   |           |           | 
|                     |                                                       | W        | 6,442,265 |           |      | W | 8,025,854 |           |  | W | 5,431,862 |          
|                     |                                                       |          |           |           |      |   |           |           | 









F-39



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|     |               
|---- | --------------
|(22) | Treasury Stock



|    |           
|--- | ----------
|(a) | Trust fund





|    |                              
|--- | -----------------------------
|(b) | Issuance to the notes holders





|    |                                          
|--- | -----------------------------------------
|(c) | Purchase and retirement of treasury stock







|    |                                                                  
|--- | -----------------------------------------------------------------
|(d) | Sale and contribution to Employee Stock Ownership
    Association



F-40



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                        |           |            |             |          |   |           |            |   |  |            |      |   |   |           |     |  
|---------------------------- | -------------------------------------- | --------- | ---------- | ----------- | -------- | - | --------- | ---------- | - |  | ---------- | ---- | - | - | --------- | --- | -
|                             |                                        | 2003      |            |             | 2004     |  
|                             |                                        |           |            |             |          |  
|                             |                                        | Number of |            |             |          |   | Number of |            |   | 
|                             |                                        | Shares    |            |             | Millions |   |           | Shares     |   |  | Millions   |     
|                             |                                        |           |            |             |          |   |           |            |   |  |            |     
|Balance at beginning of year |                                        |           | 76,988,771 |             |          | W | 4,112,225 |            |   |  | 74,090,974 |      |   | W | 3,962,598 |    
|                             | Purchase of the Companys common stock |           |            | 23,127,274  |          |   |           | 1,142,537  |   |  |            |     |   |   |           |    |  
|                             | Issuance to convertible note holders   |           |            | (2,356      | )        |   |           | (127       | ) |  |            | (556 | ) |   |           | (30 | )
|                             | Purchase by trust fund, net            |           |            | 8,840       |          |   |           | 414        |   |  |            |     |   |   |           |    |  
|                             | Retirement of treasury stock           |           |            | (24,228,259 | )        |   |           | (1,198,499 | ) |  |            |     |   |   |           |    |  
|                             | Sale and contribution to ESOA          |           |            | (1,803,296  | )        |   |           | (93,952    | ) |  |            |     |   |   |           |    |  
|                             |                                        |           |            |             |          |   |           |            |   |  |            |     
|Balance at end of year       |                                        |           | 74,090,974 |             |          | W | 3,962,598 |            |   |  | 74,090,418 |      |   | W | 3,962,568 |    
|                             |                                        |           |            |             |          |   |           |            |   |  |            |     



|     |                              
|---- | -----------------------------
|(23) | Commitments and Contingencies



| |                                  
| | ---------------------------------
| | (a)             Legal
    matters







| |                                       
| | --------------------------------------
| | (b)             Interest
    rate swap



|         |  |            |        |  |          |  |          |               |  |  |                   |   |  |               |                |  |      |  |                |  |  |  |         | 
|-------- |  | ---------- | ------ |  | -------- |  | -------- | ------------- |  |  | ----------------- | - |  | ------------- | -------------- |  | ---- |  | -------------- |  |  |  | ------- | 
|         |  | Swaption   |        |  |          |  | Fixed    |               |  |  |                   |   |  |              
|         |  | Premium    |        |  | Notional |  |          | Interest Rate |  |  | Variable Interest |   |  |               |                | 
|Bank     |  | (Millions) |        |  | Amount   |  |          | (1 Year)      |  |  | Rate (3 Months)   |   |  | Exercise Date |                |  | Type | 
|         |  |            |        |  |          |  |          |               |  |  |                   |   |  |               |                |  |      | 
|Citibank |  |            | W1,913 |  |          |  | W100,000 |               |  |  | 7.9               | % |  |               | 91-Day CD rate |  |      |  | April 25, 2005 |  |  |  | Selling | 



F-41



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                                       
| | --------------------------------------
| | (c)             Interest
    rate swap



|             |  |            |     |  |            |   |         |               |  |  |                        |  |  |               |                       |  |  |  |                    | 
|------------ |  | ---------- | --- |  | ---------- | - | ------- | ------------- |  |  | ---------------------- |  |  | ------------- | --------------------- |  |  |  | ------------------ | 
|             |  | Nominal    |     |  | Notional   |   |         |               |  |  |                        | 
|             |  | Premium    |     |  | Amount     |   |         | Fixed         |  |  |                        |  | 
|Bank         |  | (Millions) |     |  | (Millions) |   |         | Interest Rate |  |  | Variable Interest Rate |  |  | Terminal Date |                      
|             |  |            |     |  |            |   |         |               |  |  |                        |  |  |               |                      
|J.P. Morgan  |  | $          | 1.6 |  |            |   | US$ 150 |               |  |  | 7.50%                  |  |  |               | 6-month LIBOR + 4.32% |  |  |  | June 1, 2006       | 
|J.P. Morgan  |  | $          | 0.5 |  |            |   | US$ 200 |               |  |  | 7.63%                  |  |  |               | 6-month LIBOR + 4.61% |  |  |  | April 15, 2007     | 
|Citibank     |  |            |    |  |            | W | 110,000 |               |  |  | 5.29%                  |  |  |               | 3-month LIBOR + 1.47% |  |  |  | April 30, 2008     | 
|Shinhan Bank |  |            |    |  |            | W | 180,000 |               |  |  | 6.35%                  |  |  |               | 3-month LIBOR + 2.47% |  |  |  |                    | 
|             |  |            |     |  |            |   |         |               |  |  |                        |  |  |               | + Contingent spread   |  |  |  | September 30, 2007 | 
|Shinhan Bank |  |            |    |  |            | W | 57,810  |               |  |  | 4.70%                  |  |  |               | 6-month LIBOR + 0.69% |  |  |  | June 24, 2009      | 
|UBS          |  |            |    |  |            | W | 57,810  |               |  |  | 4.70%                  |  |  |               | 6-month LIBOR + 0.69% |  |  |  | June 24, 2009      | 
|UBS          |  |            |    |  |            | W | 57,810  |               |  |  | 4.64%                  |  |  |               | 6-month LIBOR + 0.69% |  |  |  | June 24, 2009      | 
|BNP Paribas  |  |            |    |  |            | W | 110,000 |               |  |  | 5.29%                  |  |  |               | 3-month LIBOR + 1.54% |  |  |  | April 30, 2008     | 
|CSFB         |  |            |    |  |            | W | 57,810  |               |  |  | 4.64%                  |  |  |               | 6-month LIBOR + 0.69% |  |  |  | June 24, 2009      | 







| |                                  
| | ---------------------------------
| | (d)             Currency
    swap



|            |  |            |     |  |            |  |          |                         |  |                            |  |                             |  |  |                 | 
|----------- |  | ---------- | --- |  | ---------- |  | -------- | ----------------------- |  | -------------------------- |  | --------------------------- |  |  | --------------- | 
|            |  | Receiving  |     |  | Paying     |  |          |                         |  |                            |  |                            
|            |  | Amount     |     |  | Amount     |  |          |                         |  |                            |  |                            
|Bank        |  | (Millions) |     |  | (Millions) |  |          | Receiving Interest Rate |  | Paying Interest Rate       |  | Terminal Date               | 
|            |  |            |     |  |            |  |          |                         |  |                            |  |                             | 
|J.P. Morgan |  | US$        | 50  |  |            |  | W 59,750 |                         |  | 4.30% (US$) per year       |  | 6.17% (Won) per year        |  |  | January 3, 2005 | 
|J.P. Morgan |  | US$        | 150 |  |            |  | W179,760 |                         |  | 3-month LIBOR + 0.80%(US$) |  | 3-month LIBOR + 2.64% (Won) |  |  | June 24, 2006   | 





| |                                           
| | ------------------------------------------
| | (e)             Interest
    currency swap



F-42



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                |  |            |     |  |               |   |               |                |  |                                   |  |                                                          |  |  |                 | 
|--------------- |  | ---------- | --- |  | ------------- | - | ------------- | -------------- |  | --------------------------------- |  | -------------------------------------------------------- |  |  | --------------- | 
|                |  | Receiving  |     |  |               |   |               |                |  |                                   | 
|                |  | Amount     |     |  | Paying Amount |   |               | Fixed Interest |  |                                   |  |                                                         
|Bank            |  | (Millions) |     |  | (Millions)    |   |               | Rate (1 Year)  |  | Variable Interest Rate (6 Months) |  | Terminal Date                                            | 
|                |  |            |     |  |               |   |               |                |  |                                   |  |                                                          | 
|J.P. Morgan     |  | US$        | 50  |  |               | W | 55,000,60,000 |                |  | 4.3% (US$)                        |  | 6-month LIBOR + 4.55% (Won)                              |  |  | January 3, 2005 | 
|J.P. Morgan(*)  |  | US$        | 100 |  |               | W | 115,620       |                |  | 5.9% (US$)                        |  | 6-month LIBOR + 1.87% (Won)                              |  |  |                 | 
|                |  |            |     |  |               |   |               |                |  | 5.5% (Won)                        |  |                                                          |  |  | June 24, 2014   | 
|J.P. Morgan(**) |  | US$        | 200 |  |               | W | 231,240       |                |  | 5.5% (Won)                        |  | 6-month LIBOR + 0.69% (Won) 5.9%-Contingent Spread (US$) |  |  | June 24, 2014   | 
|Merrill Lynch   |  | US$        | 100 |  |               | W | 116,400       |                |  | 5.0% (Won)                        |  | 5.9%-Contingent Spread (US$)                             |  |  | June 24, 2014   | 
|Merrill Lynch   |  | US$        | 50  |  |               | W | 53,325        |                |  | 4.7% (Won)                        |  | 5.9%-Contingent Spread (US$)                             |  |  | June 24, 2014   | 
|Citibank        |  | US$        | 25  |  |               | W | 27,500,30,000 |                |  | 4.3% (US$)                        |  | 6-month LIBOR + 4.45% (Won)                              |  |  | January 3, 2005 | 
|UBS             |  | US$        | 25  |  |               | W | 27,500,30,000 |                |  | 4.3% (US$)                        |  | 6-month LIBOR + 4.45% (Won)                              |  |  | January 3, 2005 | 
|Deutsche Bank   |  | US$        | 50  |  |               | W | 55,000,60,000 |                |  | 4.3% (US$)                        |  | 6-month LIBOR + 4.57% (Won)                              |  |  | January 3, 2005 | 
|Deutsche Bank   |  | US$        | 50  |  |               | W | 53,325        |                |  | 4.7% (Won)                        |  | 5.9%-Contingent Spread (US$)                             |  |  | June 24, 2014   | 
|Shinhan Bank    |  | US$        | 50  |  |               | W | 55,000,60,000 |                |  | 4.3% (US$)                        |  | 6-month LIBOR + 4.45% (Won)                              |  |  | January 3, 2005 | 






| |     |                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (*) | The interest will be received at 5.9% (US$) and paid at 6-month
    LIBOR + 1.87% (Won) every six months over the first five
    years. Then, the interest will be received at 5.9% (US$) every
    six months and paid at 5.5% (Won) per year over the following
    five years.



|     |                                                                                                                                                                                                                                                                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(**) | The interest will be received at 5.9%-contingent spread (US$)
    and paid at 6-month LIBOR + 0.69% (Won) every six months
    over the first five years. Then, the interest will be received
    at 5.9%-contingent spread (US$) every six months and paid at
    5.5% (Won) per year over the following five years.





|    |                 
|--- | ----------------
|(f) | Currency Forward







F-43



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                
|--- | ---------------
|(g) | Currency option



|             |  |            |           |  |          |  |                   |               |  |  |               |  |  |  |                | 
|------------ |  | ---------- | --------- |  | -------- |  | ----------------- | ------------- |  |  | ------------- |  |  |  | -------------- | 
|             |  | Contract   |           |  |          |  |                   |               | 
|             |  | Amount     |           |  |          |  | Fixed             |               |  | 
|Bank         |  | (millions) |           |  | Position |  |                   | Exchange Rate |  |  | Terminal Date | 
|             |  |            |           |  |          |  |                   |               |  |  |               | 
|Shinhan Bank |  |            | JPY 2,000 |  |          |  | JPY Call/ JPY Put |               |  |  | 10.30,10.85   |  |  |  | May 24 2005    | 
|Shinhan Bank |  |            | JPY 2,000 |  |          |  | JPY Call/ JPY Put |               |  |  | 10.65,13.40   |  |  |  | April 20, 2006 | 





|    |                     
|--- | --------------------
|(h) | Loans and Borrowings













|    |                                    
|--- | -----------------------------------
|(i) | Guarantee Provided by a Third Party





|    |                                    
|--- | -----------------------------------
|(j) | Disposal of KTF accounts receivable





F-44



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |       
|--- | ------
|(k) | Leases



|    |                 
|--- | ----------------
|(i) | Operating leases



|                         |  |          |         | 
|------------------------ |  | -------- | ------- | 
|Year Ending December 31, |  | Millions |        
|                         |  |          |        
|2005                     |  | W        | 67,600  | 
|2006                     |  |          | 66,819  | 
|2007                     |  |          | 6,268   | 
|2008                     |  |          | 5,915   | 
|2009                     |  |          | 5,915   | 
|Thereafter               |  |          | 31,621  | 
|                         |  |          |        
|                         |  | W        | 184,138 | 
|                         |  |          |        



|     |               
|---- | --------------
|(ii) | Capital leases



|                                   |  |          |        |  
|---------------------------------- |  | -------- | ------ | -
|Year Ending December 31,           |  | Millions |       
|                                   |  |          |       
|2005                               |  | W        | 4,955  |  
|2006                               |  |          | 4,955  |  
|2007                               |  |          | 4,955  |  
|2008                               |  |          | 4,782  |  
|2009                               |  |          | 2,123  |  
|                                   |  |          |       
|                                   |  |          | 21,770 |  
|Less: amount representing interest |  |          | (1,683 | )
|                                   |  |          |       
|                                   |  | W        | 20,087 |  
|                                   |  |          |       

F-45



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                   
|---- | ------------------
|(24) | Operating Revenues



|                            |  |          |            |  |      |  |             |      |  |  |             | 
|--------------------------- |  | -------- | ---------- |  | ---- |  | ----------- | ---- |  |  | ----------- | 
|                            |  | Millions |           
|                            |  |          |           
|                            |  | 2002     |            |  | 2003 |  |             | 2004 | 
|                            |  |          |            |  |      |  |             |      | 
|Internet services           |  | W        | 1,989,915  |  |      |  | W2,369,593  |      |  |  | W2,606,852  | 
|Data communication services |  |          | 1,262,377  |  |      |  | 1,083,093   |      |  |  | 962,627     | 
|Telephone services          |  |          | 6,895,301  |  |      |  | 6,610,982   |      |  |  | 6,189,290   | 
|PCS services                |  |          | 4,127,323  |  |      |  | 4,164,286   |      |  |  | 4,799,586   | 
|Sales of PCS handsets       |  |          | 1,366,548  |  |      |  | 1,153,505   |      |  |  | 1,754,968   | 
|Satellite services          |  |          | 123,616    |  |      |  | 119,639     |      |  |  | 119,412     | 
|Other                       |  |          | 672,342    |  |      |  | 566,681     |      |  |  | 635,636     | 
|                            |  |          |            |  |      |  |             |      | 
|                            |  | W        | 16,437,422 |  |      |  | W16,067,779 |      |  |  | W17,068,371 | 
|                            |  |          |            |  |      |  |             |      | 



F-46



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                   
|---- | ------------------
|(25) | Operating Expenses



|                  |                                                                                                    |                                                    |            |           |         |   |            |           |         |   |            |           |         | 
|----------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---------- | --------- | ------- | - | ---------- | --------- | ------- | - | ---------- | --------- | ------- | 
|                  |                                                                                                    | Millions                                           |           
|                  |                                                                                                    |                                                    |           
|                  |                                                                                                    | 2002                                               |            |           | 2003    |   |            | 2004      |        
|                  |                                                                                                    |                                                    |            |           |         |   |            |           |        
|Cost of services: |                                                                                                    |                                                    |            |           |         |   |            |           |         |   |            |          
|                  | Salaries and wages                                                                                 |                                                    | W          | 2,065,564 |         |   | W          | 1,918,479 |         |   | W          | 1,870,317 |        
|                  | Provision for retirement and severance benefits, including early
    retirement payments (note 17) |                                                    |            | 257,619   |         |   |            | 999,607   |         |   |            | 264,754   |        
|                  | Employee benefits                                                                                  |                                                    |            | 588,615   |         |   |            | 569,463   |         |   |            | 479,244   |        
|                  | Communications                                                                                     |                                                    |            | 33,729    |         |   |            | 34,549    |         |   |            | 30,458    |        
|                  | Utilities                                                                                          |                                                    |            | 156,853   |         |   |            | 176,554   |         |   |            | 191,657   |        
|                  | Taxes and dues                                                                                     |                                                    |            | 86,309    |         |   |            | 92,497    |         |   |            | 97,333    |        
|                  | Rent                                                                                               |                                                    |            | 149,746   |         |   |            | 138,677   |         |   |            | 183,560   |        
|                  | Depreciation                                                                                       |                                                    |            | 3,351,008 |         |   |            | 3,305,255 |         |   |            | 3,319,305 |        
|                  | Amortization                                                                                       |                                                    |            | 59,762    |         |   |            | 67,155    |         |   |            | 169,435   |        
|                  | Repairs and maintenance                                                                            |                                                    |            | 408,953   |         |   |            | 444,867   |         |   |            | 484,108   |        
|                  | Automobile maintenance                                                                             |                                                    |            | 24,006    |         |   |            | 23,811    |         |   |            | 24,492    |        
|                  | Commissions and professional fees                                                                  |                                                    |            | 526,166   |         |   |            | 552,593   |         |   |            | 718,101   |        
|                  | Entertainment                                                                                      |                                                    |            | 3,256     |         |   |            | 2,969     |         |   |            | 6,060     |        
|                  | Advertising                                                                                        |                                                    |            | 113,616   |         |   |            | 101,503   |         |   |            | 111,344   |        
|                  | Education and training                                                                             |                                                    |            | 11,484    |         |   |            | 15,102    |         |   |            | 14,140    |        
|                  | Research and development                                                                           |                                                    |            | 116,747   |         |   |            | 99,130    |         |   |            | 102,747   |        
|                  | Travel                                                                                             |                                                    |            | 33,199    |         |   |            | 32,326    |         |   |            | 32,373    |        
|                  | Supplies                                                                                           |                                                    |            | 36,315    |         |   |            | 36,997    |         |   |            | 36,177    |        
|                  | Cost of services (commissions for system integration service and
    other miscellaneous service)  |                                                    |            | 743,055   |         |   |            | 532,424   |         |   |            | 420,149   |        
|                  | Cost of goods sold                                                                                 |                                                    |            | 1,345,950 |         |   |            | 1,131,475 |         |   |            | 1,782,140 |        
|                  | Interconnection charges                                                                            |                                                    |            | 1,187,882 |         |   |            | 1,077,082 |         |   |            | 973,429   |        
|                  | International line usage                                                                           |                                                    |            | 173,779   |         |   |            | 184,326   |         |   |            | 194,143   |        
|                  | Other                                                                                              |                                                    |            | 47,656    |         |   |            | 70,495    |         |   |            | 72,963    |        
|                  |                                                                                                    |                                                    |            |           |         |   |            |           |        
|                  |                                                                                                    |                                                    | 11,521,269 |           |         |   | 11,607,336 |           |         |   | 11,578,429 |          
|                  |                                                                                                    | Less: amounts included in construction in progress |            |           | 143,538 |   |            |           | 119,986 |   |            |           | 125,600 | 
|                  |                                                                                                    |                                                    |            |           |         |   |            |           |        
|                  |                                                                                                    |                                                    | 11,377,731 |           |         |   | 11,487,350 |           |         |   | 11,452,829 |          
|                  | Selling, general and administrative expenses                                                       |                                                    |            | 2,677,888 |         |   |            | 2,757,993 |         |   |            | 3,135,010 |        
|                  |                                                                                                    |                                                    |            |           |         |   |            |           |        
|                  |                                                                                                    | W                                                  | 14,055,619 |           |         | W | 14,245,343 |           |         | W | 14,587,839 |          
|                  |                                                                                                    |                                                    |            |           |         |   |            |           |        



F-47



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|                   |                                                                                                    |          |           |         |      |   |           |         |  |   |           |         | 
|------------------ | -------------------------------------------------------------------------------------------------- | -------- | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                   |                                                                                                    | Millions |          
|                   |                                                                                                    |          |          
|                   |                                                                                                    | 2002     |           |         | 2003 |   |           | 2004    | 
|                   |                                                                                                    |          |           |         |      |   |           |         | 
|Salaries and wages |                                                                                                    | W        | 129,186   |         |      | W | 119,987   |         |  | W | 75,397    |        
|                   | Compensation expenses (note 29)                                                                    |          |           | 1,172   |      |   |           | 6,966   |  |   |           | 6,129   | 
|                   | Provision for retirement and severance benefits, including early
    retirement payments (note 17) |          |           | 17,388  |      |   |           | 67,469  |  |   |           | 16,699  | 
|                   | Employee benefits                                                                                  |          |           | 29,351  |      |   |           | 28,396  |  |   |           | 24,613  | 
|                   | Travel                                                                                             |          |           | 7,107   |      |   |           | 5,643   |  |   |           | 4,969   | 
|                   | Communications                                                                                     |          |           | 28,978  |      |   |           | 29,682  |  |   |           | 26,155  | 
|                   | Utilities                                                                                          |          |           | 4,834   |      |   |           | 4,805   |  |   |           | 2,693   | 
|                   | Taxes and dues                                                                                     |          |           | 44,597  |      |   |           | 47,794  |  |   |           | 44,290  | 
|                   | Rent                                                                                               |          |           | 66,380  |      |   |           | 55,653  |  |   |           | 86,107  | 
|                   | Depreciation                                                                                       |          |           | 89,137  |      |   |           | 87,920  |  |   |           | 84,334  | 
|                   | Amortization                                                                                       |          |           | 297,187 |      |   |           | 296,896 |  |   |           | 224,414 | 
|                   | Repairs and maintenance                                                                            |          |           | 12,109  |      |   |           | 5,683   |  |   |           | 4,299   | 
|                   | Automobile maintenance                                                                             |          |           | 2,410   |      |   |           | 1,871   |  |   |           | 1,856   | 
|                   | Commissions and professional fees                                                                  |          |           | 268,755 |      |   |           | 282,253 |  |   |           | 343,625 | 
|                   | Commissions to sales agent                                                                         |          |           | 631,964 |      |   |           | 565,082 |  |   |           | 940,039 | 
|                   | Entertainment                                                                                      |          |           | 1,051   |      |   |           | 1,576   |  |   |           | 1,843   | 
|                   | Advertising                                                                                        |          |           | 213,399 |      |   |           | 182,466 |  |   |           | 182,918 | 
|                   | Education and training                                                                             |          |           | 49,824  |      |   |           | 44,152  |  |   |           | 36,232  | 
|                   | Research and development                                                                           |          |           | 128,808 |      |   |           | 145,495 |  |   |           | 162,460 | 
|                   | Supplies                                                                                           |          |           | 9,913   |      |   |           | 10,099  |  |   |           | 2,632   | 
|                   | Promotion                                                                                          |          |           | 406,833 |      |   |           | 376,834 |  |   |           | 537,927 | 
|                   | Provision for doubtful accounts                                                                    |          |           | 194,288 |      |   |           | 363,774 |  |   |           | 287,073 | 
|                   | Other                                                                                              |          |           | 43,217  |      |   |           | 27,497  |  |   |           | 38,306  | 
|                   |                                                                                                    |          |           |         |      |   |           |         | 
|                   |                                                                                                    | W        | 2,677,888 |         |      | W | 2,757,993 |         |  | W | 3,135,010 |        
|                   |                                                                                                    |          |           |         |      |   |           |         | 



|     |             
|---- | ------------
|(26) | Income Taxes



|                   |  |           |       |  |                     |  |       | 
|------------------ |  | --------- | ----- |  | ------------------- |  | ----- | 
|Taxable Earnings   |  | 2002-2004 |       |  | 2005 and Thereafter | 
|                   |  |           |       |  |                     | 
|Up to W100 million |  |           | 16.5% |  |                     |  | 14.3% | 
|Over W100 million  |  |           | 29.7% |  |                     |  | 27.5% | 



F-48



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                            |                           |          |         |         |      |   |         |         |  |   |         |         | 
|--------------------------- | ------------------------- | -------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                            |                           | Millions |        
|                            |                           |          |        
|                            |                           | 2002     |         |         | 2003 |   |         | 2004    | 
|                            |                           |          |         |         |      |   |         |         | 
|Current income tax expense  |                           | W        | 592,322 |         |      | W | 477,337 |         |  | W | 470,925 |        
|Deferred income tax expense |                           |          | 149,032 |         |      |   | 46,294  |         |  |   | 106,964 |        
|                            |                           |          |         |         |      |   |         |         | 
|                            | Income taxes for the year |          | W       | 741,354 |      |   | W       | 523,631 |  |   | W       | 577,889 | 
|                            |                           |          |         |         |      |   |         |         | 



|                                              |                                                                  |          |         |          |      |   |         |          |   |   |         |          |  
|--------------------------------------------- | ---------------------------------------------------------------- | -------- | ------- | -------- | ---- | - | ------- | -------- | - | - | ------- | -------- | -
|                                              |                                                                  | Millions |        
|                                              |                                                                  |          |        
|                                              |                                                                  | 2002     |         |          | 2003 |   |         | 2004     |  
|                                              |                                                                  |          |         |          |      |   |         |          |  
|Provision for income taxes at normal tax rate |                                                                  | W        | 892,546 |          |      | W | 469,575 |          |   | W | 596,684 |         
|                                              | Tax effect of prior years income tax additional payment (refund) |          |         | (1,887   | )    |   |         | 16,036   |   |   |         | 280      |  
|                                              | Tax effect of permanent differences, net                         |          |         | 56,955   |      |   |         | 85,689   |   |   |         | 39,024   |  
|                                              | Utilization of loss carryforwards                                |          |         | (44,744  | )    |   |         | (40,273  | ) |   |         | (32,628  | )
|                                              | Investment tax credits                                           |          |         | (161,516 | )    |   |         | (174,952 | ) |   |         | (206,344 | )
|                                              | Effect of tax rate change                                        |          |         |         |      |   |         | 33,974   |   |   |         | 6,535    |  
|                                              | Impairment of deferred tax asset                                 |          |         |         |      |   |         | 133,582  |   |   |         | 174,338  |  
|                                              |                                                                  |          |         |          |      |   |         |          |  
|Income taxes for the year                     |                                                                  | W        | 741,354 |          |      | W | 523,631 |          |   | W | 577,889 |         
|                                              |                                                                  |          |         |          |      |   |         |          |  



F-49



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                 |                                                |                                       |         |         |         |  |         |         |         | 
|-------------------------------- | ---------------------------------------------- | ------------------------------------- | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                                 |                                                | Millions                              |        
|                                 |                                                |                                       |        
|                                 |                                                | 2003                                  |         |         | 2004    | 
|                                 |                                                |                                       |         |         |         | 
|Deferred income tax assets:      |                                                |                                       |         |         |         |  |         |        
|                                 | Retirement and severance benefits              |                                       | W       | 9,309   |         |  | W       | 8,357   |        
|                                 | Allowance for doubtful accounts                |                                       |         | 161,473 |         |  |         | 149,093 |        
|                                 | Refundable deposits for telephone installation |                                       |         | 20,022  |         |  |         | 18,157  |        
|                                 | Equity in losses of affiliates                 |                                       |         | 221,957 |         |  |         | 352,926 |        
|                                 | Investment securities                          |                                       |         | 50,469  |         |  |         | 36,669  |        
|                                 | Tax credit carryforwards                       |                                       |         | 25,816  |         |  |         | 61,526  |        
|                                 | Loss carryforwards                             |                                       |         |        |         |  |         | 22,283  |        
|                                 | Other, net                                     |                                       |         | 90,355  |         |  |         | 107,347 |        
|                                 |                                                |                                       |         |         |         | 
|                                 |                                                | Total deferred income tax assets      |         |         | 579,401 |  |         |         | 756,358 | 
|                                 |                                                |                                       |         |         |         | 
|Deferred income tax liabilities: |                                                |                                       |         |         |         |  |         |        
|                                 | Accumulated depreciation                       |                                       | W       | 28,166  |         |  | W       | 64,708  |        
|                                 | Accrued interest income                        |                                       |         | 2,257   |         |  |         | 10,004  |        
|                                 |                                                |                                       |         |         |         | 
|                                 |                                                | Total deferred income tax liabilities |         |         | 30,423  |  |         |         | 74,712  | 
|                                 |                                                |                                       |         |         |         | 
|Write-off                        |                                                |                                       | 133,582 |         |         |  | 307,920 |        
|                                 |                                                |                                       |         |         |         | 
|                                 |                                                | Deferred income tax asset, net        |         | W       | 415,396 |  |         | W       | 373,726 | 
|                                 |                                                |                                       |         |         |         | 









F-50



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)








|     |          
|---- | ---------
|(27) | Dividends



|    |                  
|--- | -----------------
|(a) | Interim dividends



|               |  |      |   |  |          |  |      |      |  |   |      |  |  |  |         | 
|-------------- |  | ---- | - |  | -------- |  | ---- | ---- |  | - | ---- |  |  |  | ------- | 
|               |  | Rate |   |  | Millions | 
|               |  |      |   |  |          | 
|               |  | 2003 |   |  | 2004     |  |      | 2003 |  |   | 2004 | 
|               |  |      |   |  |          |  |      |      |  |   |      | 
|Dividends paid |  |      |  |  |          |  | 20.0 | %    |  | W |     |  |  |  | 210,759 | 
|               |  |      |   |  |          |  |      |      |  |   |      | 



|                   |  |      |      |   |          |  |      |      |  |  |      |   |  |      |         |  |      |   |         |  |  |   |         | 
|------------------ |  | ---- | ---- | - | -------- |  | ---- | ---- |  |  | ---- | - |  | ---- | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|                   |  | Rate |      |   | Millions | 
|                   |  |      |      |   |          | 
|                   |  | 2002 |      |   | 2003     |  |      | 2004 |  |  | 2002 |   |  | 2003 |         |  | 2004 |  
|                   |  |      |      |   |          |  |      |      |  |  |      |   |  |      |         |  |      |  
|Dividends proposed |  |      | 17.2 | % |          |  | 40.0 | %    |  |  | 40.0 | % |  | W    | 212,887 |  |      | W | 421,517 |  |  | W | 421,518 | 
|                   |  |      |      |   |          |  |      |      |  |  |      |   |  |      |         |  |      |  





|     |                   
|---- | ------------------
|(28) | Earnings Per Share





|    |                         
|--- | ------------------------
|(a) | Basic earnings per share

|                                                                     |  |                          |           |  |      |   |         |      |  |   |           | 
|-------------------------------------------------------------------- |  | ------------------------ | --------- |  | ---- | - | ------- | ---- |  | - | --------- | 
|                                                                     |  | Millions                 |          
|                                                                     |  | (Except Number of Shares |          
|                                                                     |  | and Earnings per Share)  |          
|                                                                     |  |                          |          
|                                                                     |  | 2002                     |           |  | 2003 |   |         | 2004 | 
|                                                                     |  |                          |           |  |      |   |         |      | 
|Net earnings                                                         |  | W                        | 1,946,934 |  |      | W | 821,734 |      |  | W | 1,282,216 | 
|Weighted-average number of shares of common stock
    (in thousands) |  |                          | 259,450   |  |      |   | 216,106 |      |  |   | 210,759   | 
|                                                                     |  |                          |           |  |      |   |         |      | 
|Basic earnings per share (in Won)                                    |  | W                        | 7,504     |  |      | W | 3,802   |      |  | W | 6,084     | 
|                                                                     |  |                          |           |  |      |   |         |      | 

F-51



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                           
|--- | --------------------------
|(b) | Diluted earnings per share

|                                                                                  |                                       |                          |           |        |      |   |         |        |  |   |           |        | 
|--------------------------------------------------------------------------------- | ------------------------------------- | ------------------------ | --------- | ------ | ---- | - | ------- | ------ |  | - | --------- | ------ | 
|                                                                                  |                                       | Millions                 |          
|                                                                                  |                                       | (Except Number of Shares |          
|                                                                                  |                                       | and Earnings per Share)  |          
|                                                                                  |                                       |                          |          
|                                                                                  |                                       | 2002                     |           |        | 2003 |   |         | 2004   | 
|                                                                                  |                                       |                          |           |        |      |   |         |        | 
|Net earnings                                                                      |                                       | W                        | 1,946,934 |        |      | W | 821,734 |        |  | W | 1,282,216 |       
|Adjustments:                                                                      |                                       |                          |           |        |      |   |         |        |  |   |           |       
|                                                                                  | Interest expense on convertible notes |                          |           | 34,070 |      |   |         | 51,373 |  |   |           | 46,662 | 
|                                                                                  |                                       |                          |           |        |      |   |         |        | 
|Net earnings available for common and common equivalent shares                    |                                       |                          | 1,981,004 |        |      |   | 873,107 |        |  |   | 1,328,878 |       
|Weighted-average number of common and common equivalent shares
    (in thousands) |                                       |                          | 300,097   |        |      |   | 263,556 |        |  |   | 233,270   |       
|                                                                                  |                                       |                          |           |        |      |   |         |        | 
|Diluted earnings per share (in Won)                                               |                                       | W                        | 6,601     |        |      | W | 3,313   |        |  | W | 5,697     |       
|                                                                                  |                                       |                          |           |        |      |   |         |        | 





|                            |  |                    |        |  |      |  |        | 
|--------------------------- |  | ------------------ | ------ |  | ---- |  | ------ | 
|                            |  | No. of Potentially |       
|                            |  | Dilutive Shares    |       
|                            |  | (Thousands)        |       
|                            |  |                    |       
|                            |  | 2003               |        |  | 2004 | 
|                            |  |                    |        |  |      | 
|Convertible notes (note 15) |  |                    | 45,770 |  |      |  | 22,511 | 
|Stock options (note 29)     |  |                    | 616    |  |      |  | 512    | 





|     |              
|---- | -------------
|(29) | Stock Options



|                        |  |                                 |                       |                                 |           |                                 |                     |           |  |  |                       | 
|----------------------- |  | ------------------------------- | --------------------- | ------------------------------- | --------- | ------------------------------- | ------------------- | --------- |  |  | --------------------- | 
|                        |  | 1st Grant                       |                       |                                 | 2nd Grant |                                 |                     | 3rd Grant | 
|                        |  |                                 |                       |                                 |           |                                 |                     |           | 
|Grant date              |  |                                 | 2002.12.26            |                                 |           |                                 | 2003. 9.16          |           |  |  | 2003.12.12            | 
|Exercise price (in Won) |  |                                 | 70,000                |                                 |           |                                 | 57,000              |           |  |  | 65,000                | 
|Number of shares        |  |                                 | 371,632               |                                 |           |                                 | 34,200              |           |  |  | 106,141               | 
|Exercise period         |  |                                 | 2004.12.27,2009.12.26 |                                 |           |                                 | 2005.9.17,2010.9.16 |           |  |  | 2005.12.13,2010.12.12 | 
|Valuation method        |  | Fair value(Black-Scholes model) |                       | Fair value(Black-Scholes model) |           | Fair value(Black-Scholes model) |                    



F-52



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)












|                                          |  |           |                         |  |           |  |           |           |  |  |                         | 
|----------------------------------------- |  | --------- | ----------------------- |  | --------- |  | --------- | --------- |  |  | ----------------------- | 
|                                          |  | 1st Grant |                         |  | 2nd Grant |  |           | 3rd Grant | 
|                                          |  |           |                         |  |           |  |           |           | 
|Risk free interest rate                   |  |           | 5.46%                   |  |           |  | 4.45%     |           |  |  | 5.09%                   | 
|Expected option life                      |  |           | 4.5 years to 5.5  years |  |           |  | 4.5 years |           |  |  | 4.5 years to 5.5  years | 
|Expected volatility                       |  |           | 49.07% , 49.90%         |  |           |  | 34.49%    |           |  |  | 31.26% , 33.90%         | 
|Expected dividend yield ratio             |  |           | 1.10%                   |  |           |  | 1.57%     |           |  |  | 1.57%                   | 
|Fair value per option (in Won)            |  |           | W22,364                 |  |           |  | W12,443   |           |  |  | W10,926                 | 
|Total compensation cost
    (in millions) |  |           | W8,311                  |  |           |  | W426      |           |  |  | W1,160                  | 





|                                             |                                              |          |        |        |  
|-------------------------------------------- | -------------------------------------------- | -------- | ------ | ------ | -
|                                             |                                              | Millions |       
|                                             |                                              |          |       
|Adjusted total cost of compensation          |                                              |          |        |       
|                                             | Total cost of compensation before adjustment |          | W      | 12,215 |  
|                                             | Cost of compensation  forfeited             |          |        | (2,318 | )
|                                             |                                              |          |       
|                                             |                                              |          | 9,897  |       
|                                             |                                              |          |       
|Accumulated cost recognized in prior periods |                                              |          | (5,479 | )     
|Cost recognized for the year                 |                                              |          |        |       
|                                             | Cost of compensation  forfeited             |          |        | 1,167  |  
|                                             | Cost of compensation for the year            |          |        | (4,887 | )
|                                             |                                              |          |       
|                                             |                                              |          | (3,720 | )     
|Cost to be recognized in future years        |                                              | W        | 698    |       
|                                             |                                              |          |       



F-53



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|     |                    
|---- | -------------------
|(30) | Segment Information







F-54



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |            |            |   |   |            |            | 
|---------------------------- | ----------------------------------- | -------------- | ---------- | ---------- | ------------ | ---------- | ----------- | ------------- |  | - | ----------- | ------- | - | ------------ | ---------- | ---------- | - | - | ---------- | ---------- | 
|                             |                                     | 2002           |           
|                             |                                     |                |           
|                             |                                     | Wireline       |            |            |              |            | Reconciling |               |  |  
|                             |                                     | Communications |            |            | PCS Services |            |             | Miscellaneous |  |   | Adjustments |         |   | Consolidated |           
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|                             |                                     |                |            |            |              | (Millions) |             |               |  |   |            
|Operating revenues:          |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |            |            |   |   |            |           
|                             | External customers                  |                | W          | 11,291,130 |              |            | W           | 4,806,875     |  |   | W           | 339,417 |   |              | W          |           |   |   | W          | 16,437,422 | 
|                             | Intersegment                        |                |            | 455,113    |              |            |             | 552,334       |  |   |             | 358,745 |   |              |            | (1,366,192 | ) |   |            |           | 
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|                             |                                     |                | 11,746,243 |            |              |            | 5,359,209   |               |  |   | 698,162     |         |   |              | (1,366,192 | )          |   |   | 16,437,422 |           
|Operating expenses:          |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |            |            |   |   |            |           
|                             | Depreciation and amortization       |                |            | 2,714,437  |              |            |             | 728,845       |  |   |             | 62,713  |   |              |            | 291,099    |   |   |            | 3,797,094  | 
|                             | Other                               |                |            | 7,200,342  |              |            |             | 3,841,340     |  |   |             | 626,417 |   |              |            | (1,409,574 | ) |   |            | 10,258,525 | 
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|                             |                                     |                | 9,914,779  |            |              |            | 4,570,185   |               |  |   | 689,130     |         |   |              | (1,118,475 | )          |   |   | 14,055,619 |           
|                             | Operating income (loss)             |                |            | 1,831,464  |              |            |             | 789,024       |  |   |             | 9,032   |   |              |            | (247,717   | ) |   |            | 2,381,803  | 
|Interest income              |                                     |                | 53,890     |            |              |            | 57,976      |               |  |   | 12,280      |         |   |              | (1,028     | )          |   |   | 123,118    |           
|Interest expense             |                                     |                | (425,482   | )          |              |            | (216,092    | )             |  |   | (9,914      | )       |   |              | 1,028      |            |   |   | (650,460   | )         
|Other income (expenses), net |                                     |                | 1,155,746  |            |              |            | (19,710     | )             |  |   | (22,779     | )       |   |              | (279,430   | )          |   |   | 833,827    |           
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|                             | Earnings (loss) before income taxes |                |            | 2,615,618  |              |            |             | 611,198       |  |   |             | (11,381 | ) |              |            | (527,147   | ) |   |            | 2,688,288  | 
|Income taxes                 |                                     |                | 651,801    |            |              |            | 79,921      |               |  |   | 11,129      |         |   |              | (1,497     | )          |   |   | 741,354    |           
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|                             | Net earnings (loss)                 |                | W          | 1,963,817  |              |            | W           | 531,277       |  |   | W           | (22,510 | ) |              | W          | (525,650   | ) |   | W          | 1,946,934  | 
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|Total assets                 |                                     | W              | 21,761,117 |            |              | W          | 8,909,766   |               |  | W | 893,828     |         |   | W            | (2,514,565 | )          |   | W | 29,050,146 |           
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           
|Capital expenditures         |                                     | W              | 2,145,210  |            |              | W          | 1,034,693   |               |  | W | 56,722      |         |   | W            | (4,279     | )          |   | W | 3,232,346  |           
|                             |                                     |                |            |            |              |            |             |               |  |   |             |         |   |              |           

F-55



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |            |            |   |   |            |            | 
|---------------------------- | ----------------------------------- | -------------- | ---------- | ---------- | ------------ | - | ----------- | ------------- |  | - | ----------- | ------- | - | ------------ | ---------- | ---------- | - | - | ---------- | ---------- | 
|                             |                                     | 2003           |           
|                             |                                     |                |           
|                             |                                     | Wireline       |            |            |              |   | Reconciling |               |  |  
|                             |                                     | Communications |            |            | PCS Services |   |             | Miscellaneous |  |   | Adjustments |         |   | Consolidated |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|                             |                                     | (Millions)     |           
|Operating revenues:          |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |            |            |   |   |            |           
|                             | External customers                  |                | W          | 11,090,939 |              |   | W           | 4,520,348     |  |   | W           | 456,492 |   |              | W          |           |   |   | W          | 16,067,779 | 
|                             | Intersegment                        |                |            | 483,610    |              |   |             | 566,999       |  |   |             | 462,716 |   |              |            | (1,513,325 | ) |   |            |           | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|                             |                                     |                | 11,574,549 |            |              |   | 5,087,347   |               |  |   | 919,208     |         |   |              | (1,513,325 | )          |   |   | 16,067,779 |           
|Operating expenses:          |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |            |            |   |   |            |           
|                             | Depreciation and amortization       |                |            | 2,514,299  |              |   |             | 849,500       |  |   |             | 101,874 |   |              |            | 291,553    |   |   |            | 3,757,226  | 
|                             | Other                               |                |            | 7,817,106  |              |   |             | 3,459,638     |  |   |             | 775,515 |   |              |            | (1,564,142 | ) |   |            | 10,488,117 | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|                             |                                     |                | 10,331,405 |            |              |   | 4,309,138   |               |  |   | 877,389     |         |   |              | (1,272,589 | )          |   |   | 14,245,343 |           
|                             | Operating income (loss)             |                |            | 1,243,144  |              |   |             | 778,209       |  |   |             | 41,819  |   |              |            | (240,736   | ) |   |            | 1,822,436  | 
|Interest income              |                                     |                | 78,670     |            |              |   | 34,842      |               |  |   | 12,046      |         |   |              | (10,104    | )          |   |   | 115,454    |           
|Interest expense             |                                     |                | (432,200   | )          |              |   | (272,992    | )             |  |   | (10,452     | )       |   |              | 10,104     |            |   |   | (705,540   | )         
|Other income (expenses), net |                                     |                | 400,055    |            |              |   | (76,937     | )             |  |   | (55,685     | )       |   |              | (154,418   | )          |   |   | 113,015    |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|                             | Earnings (loss) before income taxes |                |            | 1,289,669  |              |   |             | 463,122       |  |   |             | (12,272 | ) |              |            | (395,154   | ) |   |            | 1,345,365  | 
|Income taxes                 |                                     |                | 459,603    |            |              |   | 51,657      |               |  |   | 11,671      |         |   |              | 700        |            |   |   | 523,631    |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|                             | Net earnings (loss)                 |                | W          | 830,066    |              |   | W           | 411,465       |  |   | W           | (23,943 | ) |              | W          | (395,854   | ) |   | W          | 821,734    | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|Total assets                 |                                     | W              | 19,573,181 |            |              | W | 7,591,888   |               |  | W | 1,229,309   |         |   | W            | (2,837,703 | )          |   | W | 25,556,675 |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           
|Capital expenditures         |                                     | W              | 2,083,370  |            |              | W | 953,377     |               |  | W | 186,830     |         |   | W            | (14,201    | )          |   | W | 3,209,376  |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |         |   |              |           

F-56



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |            |            |   |   |            |            | 
|---------------------------- | ----------------------------------- | -------------- | ---------- | ---------- | ------------ | - | ----------- | ------------- |  | - | ----------- | --------- | - | ------------ | ---------- | ---------- | - | - | ---------- | ---------- | 
|                             |                                     | 2004           |           
|                             |                                     |                |           
|                             |                                     | Wireline       |            |            |              |   | Reconciling |               |  |  
|                             |                                     | Communications |            |            | PCS Services |   |             | Miscellaneous |  |   | Adjustments |           |   | Consolidated |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|                             |                                     | (Millions)     |           
|Operating revenues:          |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |            |            |   |   |            |           
|                             | External customers                  |                | W          | 11,315,054 |              |   | W           | 5,206,380     |  |   | W           | 546,937   |   |              | W          |           |   |   | W          | 17,068,371 | 
|                             | Intersegment                        |                |            | 535,765    |              |   |             | 634,890       |  |   |             | 724,857   |   |              |            | (1,895,512 | ) |   |            |           | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|                             |                                     |                | 11,850,819 |            |              |   | 5,841,270   |               |  |   | 1,271,794   |           |   |              | (1,895,512 | )          |   |   | 17,068,371 |           
|Operating expenses:          |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |            |            |   |   |            |           
|                             | Depreciation and amortization       |                |            | 2,361,257  |              |   |             | 1,090,645     |  |   |             | 135,583   |   |              |            | 210,003    |   |   |            | 3,797,488  | 
|                             | Other                               |                |            | 7,362,443  |              |   |             | 4,211,186     |  |   |             | 1,136,658 |   |              |            | (1,919,936 | ) |   |            | 10,790,351 | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|                             |                                     |                | 9,723,700  |            |              |   | 5,301,831   |               |  |   | 1,272,241   |           |   |              | (1,709,933 | )          |   |   | 14,587,839 |           
|Operating income (loss)      |                                     |                | 2,127,119  |            |              |   | 539,439     |               |  |   | (447        | )         |   |              | (185,579   | )          |   |   | 2,480,532  |           
|Interest income              |                                     |                | 102,398    |            |              |   | 12,691      |               |  |   | 21,056      |           |   |              | (19,420    | )          |   |   | 116,725    |           
|Interest expense             |                                     |                | (450,740   | )          |              |   | (220,606    | )             |  |   | (26,588     | )         |   |              | 19,420     |            |   |   | (678,514   | )         
|Other income (expenses), net |                                     |                | 20,748     |            |              |   | (22,914     | )             |  |   | (27,902     | )         |   |              | (28,570    | )          |   |   | (58,638    | )         
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|                             | Earnings (loss) before income taxes |                |            | 1,799,525  |              |   |             | 308,610       |  |   |             | (33,881   | ) |              |            | (214,149   | ) |   |            | 1,860,105  | 
|Income taxes                 |                                     |                | 544,003    |            |              |   | 24,709      |               |  |   | 9,209       |           |   |              | (32        | )          |   |   | 577,889    |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|                             | Net earnings (loss)                 |                | W          | 1,255,522  |              |   | W           | 283,901       |  |   | W           | (43,090   | ) |              | W          | (214,117   | ) |   | W          | 1,282,216  | 
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|Total assets                 |                                     | W              | 20,114,036 |            |              | W | 7,960,430   |               |  | W | 1,285,758   |           |   | W            | (2,886,992 | )          |   | W | 26,473,232 |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           
|Capital expenditures         |                                     | W              | 1,818,507  |            |              | W | 945,623     |               |  | W | 210,482     |           |   | W            | (3,236     | )          |   | W | 2,971,376  |           
|                             |                                     |                |            |            |              |   |             |               |  |   |             |           |   |              |           

(31) Non-cash Financing and Investing
Activities




|                                                                                          |  |          |           |   |      |   |           | 
|----------------------------------------------------------------------------------------- |  | -------- | --------- | - | ---- | - | --------- | 
|                                                                                          |  | Millions |          
|                                                                                          |  |          |          
|                                                                                          |  | 2003     |           |   | 2004 |  
|                                                                                          |  |          |           |   |      |  
|Change in unrealized gains (losses) on available-for-sale
    securities                  |  | W        | (13,045   | ) |      | W | 4,752     | 
|Change in unrealized gains (losses) due to the sales of
    available-for-sale securities |  |          | (781,406  | ) |      |   | 27,844    | 
|Available-for-sale securities transferred to treasury stock                               |  |          | 730,704   |   |      |   |          | 
|Exchange on available-for-sale securities                                                 |  |          |          |   |      |   | 18,798    | 
|Construction in progress transferred to property, plant and
    equipment                 |  |          | 2,473,599 |   |      |   | 2,585,478 | 

(32) Contribution Payments for Research and
Development and Donations




F-57



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




(33) Contributions Received for Losses on Universal
Telecommunications Services




(34) Fourth Quarter Information (Unaudited)




|                         |  |                         |           |  |      |   |           | 
|------------------------ |  | ----------------------- | --------- |  | ---- | - | --------- | 
|                         |  | Millions                |          
|                         |  | (Except per Share Data) |          
|                         |  |                         |          
|                         |  | 2003                    |           |  | 2004 |  
|                         |  |                         |           |  |      |  
|Operating revenues       |  | W                       | 3,977,336 |  |      | W | 4,187,416 | 
|Operating income         |  |                         | 491,410   |  |      |   | 430,921   | 
|Net earnings             |  |                         | 82,516    |  |      |   | 383,998   | 
|Basic earnings per share |  |                         | 382       |  |      |   | 1,822     | 

(35) Subsequent Events






(36) Reconciliation to United States Generally
Accepted Accounting Principles




F-58



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                                    
|--- | -----------------------------------
|(a) | Companies Included in Consolidation



|          |      |                         |  |      |                           |  |  |      |  |  |      |      |  |      |  |           |     |  |  |           | 
|--------- | ---- | ----------------------- |  | ---- | ------------------------- |  |  | ---- |  |  | ---- | ---- |  | ---- |  | --------- | --- |  |  | --------- | 
|          |      | Percentage of Ownership |  |      | Carrying Value (Millions) | 
|          |      | December 31,            |  |      | December 31,              | 
|          |      |                         |  |      |                           | 
|Entity    |      | 2002                    |  |      | 2003                      |  |  | 2004 |  |  | 2003 |      |  | 2004 | 
|          |      |                         |  |      |                           |  |  |      |  |  |      |      |  |      | 
|Listed:   |      |                         |  |      |                           |  |  |      |  |  |      |      |  |      |  |           |     |  |  |          
|          | KTF  |                         |  | 40.3 |                           |  |  | 46.9 |  |  |      | 48.7 |  |      |  | 1,712,126 | (*) |  |  | 1,678,164 | 
|          | KTSC |                         |  | 36.9 |                           |  |  | 36.9 |  |  |      | 38.9 |  |      |  | 23,311    |     |  |  | 22,710    | 
|Unlisted: |      |                         |  |      |                           |  |  |      |  |  |      |      |  |      |  |           |     |  |  |          
|          | KTP  |                         |  | 45.4 |                           |  |  | 44.8 |  |  |      | 44.8 |  |      |  | 39,148    |     |  |  | 43,313    | 





|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | As discussed at Note 36(d), for the year ended
    December 31, 2003, the Company recognized an impairment
    loss amounting to W789,603 million relating to KTF due to
    the significant decrease of the quoted market value of KTF.





|                    |                   |          |           |           |      |   |           |           | 
|------------------- | ----------------- | -------- | --------- | --------- | ---- | - | --------- | --------- | 
|                    |                   | Millions |          
|                    |                   |          |          
|                    |                   | 2003     |           |           | 2004 |  
|                    |                   |          |           |           |      |  
|Current assets      |                   | W        | 1,314,125 |           |      | W | 1,808,900 |          
|Other assets        |                   |          | 6,628,830 |           |      |   | 6,558,844 |          
|                    |                   |          |           |           |      |  
|                    | Total assets      |          |           | 7,942,955 |      |   |           | 8,367,744 | 
|                    |                   |          |           |           |      |  
|Current liabilities |                   |          | 2,464,485 |           |      |   | 2,516,174 |          
|Other liabilities   |                   |          | 2,175,495 |           |      |   | 2,479,817 |          
|                    |                   |          |           |           |      |  
|                    | Total liabilities |          |           | 4,639,980 |      |   |           | 4,995,991 | 
|                    |                   |          |           |           |      |  
|Net assets          |                   | W        | 3,302,975 |           |      | W | 3,371,753 |          
|                    |                   |          |           |           |      |  

|                   |  |          |           |  |      |   |           |      |  |   |           | 
|------------------ |  | -------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|                   |  | Millions |          
|                   |  |          |          
|                   |  | 2002     |           |  | 2003 |   |           | 2004 | 
|                   |  |          |           |  |      |   |           |      | 
|Operating revenues |  | W        | 5,589,271 |  |      | W | 5,414,326 |      |  | W | 6,352,211 | 
|Operating income   |  |          | 791,933   |  |      |   | 779,982   |      |  |   | 542,599   | 
|Net earnings       |  | W        | 538,529   |  |      | W | 423,943   |      |  | W | 298,232   | 

F-59



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                     |  |          |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------- |  | -------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                     |  | Millions |           
|                                                     |  |          |           
|                                                     |  | 2002     |            |   | 2003 |   |            | 2004 | 
|                                                     |  |          |            |   |      |   |            |      | 
|Cash flows from operating activities                 |  | W        | 1,853,459  |   |      | W | 1,016,529  |      |  | W | 1,105,929  |  
|Cash flows from investing activities                 |  |          | (1,426,192 | ) |      |   | (173,047   | )    |  |   | (1,010,857 | )
|Cash flows from financing activities                 |  |          | (590,395   | ) |      |   | (1,344,627 | )    |  |   | (87,174    | )
|                                                     |  |          |            |   |      |   |            |      | 
|Net increase (decrease) in cash and cash equivalents |  |          | (163,128   | ) |      |   | (155,051   | )    |  |   | 7,898      |  
|Cash and cash equivalents at beginning of year       |  |          | 363,708    |   |      |   | 200,580    |      |  |   | 45,529     |  
|                                                     |  |          |            |   |      |   |            |      | 
|Cash and cash equivalents at end of year             |  | W        | 200,580    |   |      | W | 45,529     |      |  | W | 53,427     |  
|                                                     |  |          |            |   |      |   |            |      | 





|    |                           
|--- | --------------------------
|(b) | Debt and Equity Securities



Accounting for Certain Investments in Debt and Equity
Securities. Accounting for Certain Investments in Debt and Equity
Securities




| |   |                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Debt securities that the enterprise has the positive intent and
    ability to hold to maturity are classified as held-to-maturity
    securities and reported at amortized cost.                                                                                                                                                         
|
| |  | Debt and equity securities that are bought and held principally
    for the purpose of selling in the short term are classified as
    trading securities and reported at fair value, with unrealized
    gains and losses included in earnings.                                                                                          
|
| |  | Debt and equity securities not classified as either
    held-to-maturity securities or trading securities are classified
    as available-for-sale securities and reported at fair value,
    with unrealized gains and losses excluded from earnings and
    reported in a separate component of stockholders equity
    until realized.

F-60



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Accounting for Certain
Investments in Debt and Equity Securities


|                  |                      |            |          |         |            |  |         |            |  |  |            |        |  |  |          |         | 
|----------------- | -------------------- | ---------- | -------- | ------- | ---------- |  | ------- | ---------- |  |  | ---------- | ------ |  |  | -------- | ------- | 
|                  |                      | 2003       |         
|                  |                      |            |         
|                  |                      |            |          | Gross   |            |  | Gross   |            |  | 
|                  |                      | Cost or    |          |         | Unrealized |  |         | Unrealized |  |  |           
|                  |                      | Amortized  |          |         | Holding    |  |         | Holding    |  |  |           
|                  |                      | Cost       |          |         | Gains      |  |         | Losses     |  |  | Fair Value |       
|                  |                      |            |          |         |            |  |         |            |  |  |            |       
|                  |                      | (Millions) |         
|Equity securities |                      |            |          |         |            |  |         |            |  |  |            |        |  |  |          |        
|                  | (available-for-sale) |            |          | W14,523 |            |  |         | W3,170     |  |  |            | W481   |  |  |          | W17,212 | 
|Debt securities   |                      |            |          |         |            |  |         |            |  |  |            |        |  |  |          |        
|                  | (available-for-sale) |            |          | 669,838 |            |  |         | 11,010     |  |  |            | 12,594 |  |  |          | 668,254 | 
|Debt securities   |                      |            |          |         |            |  |         |            |  |  |            |        |  |  |          |        
|                  | (held-to-maturity)   |            |          | 12,068  |            |  |         |           |  |  |            |       |  |  |          | 12,068  | 
|                  |                      |            |          |         |            |  |         |            |  |  |            |       
|                  |                      |            | W696,429 |         |            |  | W14,180 |            |  |  | W13,075    |        |  |  | W697,534 |        
|                  |                      |            |          |         |            |  |         |            |  |  |            |       

|                  |                      |            |          |         |            |  |         |            |  |  |            |      |  |  |          |         | 
|----------------- | -------------------- | ---------- | -------- | ------- | ---------- |  | ------- | ---------- |  |  | ---------- | ---- |  |  | -------- | ------- | 
|                  |                      | 2004       |         
|                  |                      |            |         
|                  |                      |            |          | Gross   |            |  | Gross   |            |  | 
|                  |                      | Cost or    |          |         | Unrealized |  |         | Unrealized |  |  |           
|                  |                      | Amortized  |          |         | Holding    |  |         | Holding    |  |  |           
|                  |                      | Cost       |          |         | Gains      |  |         | Losses     |  |  | Fair Value |     
|                  |                      |            |          |         |            |  |         |            |  |  |            |     
|                  |                      | (Millions) |         
|Equity securities |                      |            |          |         |            |  |         |            |  |  |            |      |  |  |          |        
|                  | (available-for-sale) |            |          | W1,776  |            |  |         | W         |  |  |            | W511 |  |  |          | W1,265  | 
|Debt securities   |                      |            |          |         |            |  |         |            |  |  |            |      |  |  |          |        
|                  | (available-for-sale) |            |          | 581,721 |            |  |         | 26,184     |  |  |            |     |  |  |          | 607,905 | 
|Debt securities   |                      |            | 13,297   |         |            |  |        |            |  |  |           |      |  |  | 13,297   |        
|                  | (held-to-maturity)   |            |          |         |            |  |         |            |  |  |            |      |  |  |          |         | 
|                  |                      |            |          |         |            |  |         |            |  |  |            |     
|                  |                      |            | W596,794 |         |            |  | W26,184 |            |  |  | W511       |      |  |  | W622,467 |        
|                  |                      |            |          |         |            |  |         |            |  |  |            |     









F-61



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


, The Meaning of
Other-Than-Temporary Impairment and its Application to Certain
Investments.




|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |   |         |  |  |   |        | 
|------------------------------------- |  | ---------- | - |  | ----------------- | - | - | ----- |  | - | ---------- |  |  | ----- | ------ |  | ---------- | - | ------- |  |  | - | ------ | 
|                                      |  | 2003       |  
|                                      |  |            |  
|                                      |  | Less than  |   |  |                   |   |  
|                                      |  | 12 Months  |   |  | 12 Months or More |   |   | Total | 
|                                      |  |            |   |  |                   |   |   |       | 
|                                      |  | Fair       |   |  | Unrealized        |   |   | Fair  |  |   | Unrealized |  |  | Fair  |        |  | Unrealized |  
|                                      |  | Value      |   |  | Losses            |   |   | Value |  |   | Losses     |  |  | Value |        |  | Losses     |  
|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |  
|                                      |  | (Millions) |  
|Equity-linked notes                   |  | W          |  |  |                   | W |  |       |  | W | 116,248    |  |  | W     | 12,594 |  |            | W | 116,248 |  |  | W | 12,594 | 
|Common stock                          |  |            |  |  |                   |   |  |       |  |   | 1,295      |  |  |       | 481    |  |            |   | 1,295   |  |  |   | 481    | 
|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |  
|Total temporarily impaired securities |  | W          |  |  |                   | W |  |       |  | W | 117,543    |  |  | W     | 13,075 |  |            | W | 117,543 |  |  | W | 13,075 | 
|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |  
|Common stock                          |  | W          |  |  |                   | W |  |       |  | W | 1,265      |  |  | W     | 511    |  |            | W | 1,265   |  |  | W | 511    | 
|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |  
|Total temporarily impaired securities |  | W          |  |  |                   | W |  |       |  | W | 1,265      |  |  | W     | 511    |  |            | W | 1,265   |  |  | W | 511    | 
|                                      |  |            |   |  |                   |   |   |       |  |   |            |  |  |       |        |  |            |  



|    |                      
|--- | ---------------------
|(c) | Business Combinations







|    |                                                          
|--- | ---------------------------------------------------------
|(d) | Goodwill Impairment including Investor-level
    Goodwill



F-62



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Goodwill and Other Intangible Assets






|                                    |  |             |          |   |               |  |     |       |  |  |          |  
|----------------------------------- |  | ----------- | -------- | - | ------------- |  | --- | ----- |  |  | -------- | -
|                                    |  | Millions    |         
|                                    |  |             |         
|                                    |  | PCS Service |          |   | Miscellaneous |  |     | Total | 
|                                    |  |             |          |   |               |  |     |       | 
|Balance as of January 1, 2003       |  |             | W755,644 |   |               |  | W14 |       |  |  | W755,658 |  
|Goodwill acquired during the period |  |             |         |   |               |  |    |       |  |  |         |  
|Impairment loss                     |  |             | (755,644 | ) |               |  |    |       |  |  | (755,644 | )
|                                    |  |             |          |   |               |  |     |       | 
|Balance as of December 31, 2003     |  |             | W       |   |               |  | W14 |       |  |  | W14      |  
|                                    |  |             |          |   |               |  |     |       | 
|Balance as of January 1, 2004       |  |             | W       |   |               |  | W14 |       |  |  | W14      |  
|Goodwill acquired during the period |  |             |         |   |               |  |    |       |  |  |         |  
|Impairment loss                     |  |             |         |   |               |  |    |       |  |  |         |  
|                                    |  |             |          |   |               |  |     |       | 
|Balance as of December 31, 2004     |  |             | W       |   |               |  | W14 |       |  |  | W14      |  
|                                    |  |             |          |   |               |  |     |       | 



|    |                                                                      
|--- | ---------------------------------------------------------------------
|(e) | Additional Equity Investments in and Transactions of
    Subsidiaries







|    |             
|--- | ------------
|(f) | Depreciation



F-63



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)












|                         |                                                                                 |                                                   |            |             |           | 
|------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------------- | ---------- | ----------- | --------- | 
|                         |                                                                                 | Estimated Useful Lives                            |           
|                         |                                                                                 |                                                   |           
|Buildings and structures |                                                                                 |                                                   | 5-60 years |            
|                         | Underground access to cable tunnels, and concrete and steel
    telephone poles |                                                   |            | 10-40 years |          
|                         | Machinery and equipment                                                         |                                                   |            | 8-10 years  |          
|Vehicles                 |                                                                                 |                                                   | 3-5 years  |            
|                         | Tools, furniture and fixtures:                                                  |                                                   |            |             |          
|                         |                                                                                 | Steel safe boxes                                  |            |             | 20 years  | 
|                         |                                                                                 | Tools, computer equipment, furniture and fixtures |            |             | 2-8 years | 



|    |                     
|--- | --------------------
|(g) | Special Depreciation





|    |                        
|--- | -----------------------
|(h) | Interest Capitalization

Capitalization of Financing Costs.


F-64



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                |  |          |         |  |      |   |         |      |  |   |         | 
|------------------------------- |  | -------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                |  | Millions |        
|                                |  |          |        
|                                |  | 2002     |         |  | 2003 |   |         | 2004 | 
|                                |  |          |         |  |      |   |         |      | 
|Total interest costs incurred   |  | W        | 488,970 |  |      | W | 443,078 |      |  | W | 467,365 | 
|Less amounts charged to expense |  |          | 461,117 |  |      |   | 421,609 |      |  |   | 455,211 | 
|                                |  |          |         |  |      |   |         |      | 
|Interest capitalized            |  | W        | 27,853  |  |      | W | 21,469  |      |  | W | 12,154  | 
|                                |  |          |         |  |      |   |         |      | 



|    |                  
|--- | -----------------
|(i) | Intangible Assets

Intangible Assets Intangible Assets.




|                                          |  |                |         |  |              |   |             |            |  |   |         | 
|----------------------------------------- |  | -------------- | ------- |  | ------------ | - | ----------- | ---------- |  | - | ------- | 
|                                          |  | 2003           |        
|                                          |  |                |        
|                                          |  | Gross Carrying |         |  |              |   | Accumulated |           
|Amortized intangible assets:              |  | Amount         |         |  | Amortization |   |             | Net Amount | 
|                                          |  |                |         |  |              |   |             |            | 
|                                          |  | (Millions)     |        
|Internal-use software                     |  | W              | 284,523 |  |              | W | 107,028     |            |  | W | 177,495 | 
|Buildings and facility utilization rights |  |                | 103,443 |  |              |   | 41,630      |            |  |   | 61,813  | 
|Purchased consumer data                   |  |                | 946     |  |              |   | 128         |            |  |   | 818     | 
|Other                                     |  |                | 16,231  |  |              |   | 6,254       |            |  |   | 9,977   | 
|                                          |  |                |         |  |              |   |             |            | 
|Total                                     |  | W              | 405,143 |  |              | W | 155,040     |            |  | W | 250,103 | 
|                                          |  |                |         |  |              |   |             |            | 

|                                          |  |                |         |  |              |  |          |            |  |  |          | 
|----------------------------------------- |  | -------------- | ------- |  | ------------ |  | -------- | ---------- |  |  | -------- | 
|                                          |  | 2004           |        
|                                          |  |                |        
|                                          |  | Gross Carrying |         |  | Accumulated  |  |          |           
|Amortized intangible assets:              |  | Amount         |         |  | Amortization |  |          | Net Amount | 
|                                          |  |                |         |  |              |  |          |            | 
|                                          |  | (Millions)     |        
|Internal-use software                     |  | W              | 386,343 |  |              |  | W150,795 |            |  |  | W235,548 | 
|Buildings and facility utilization rights |  |                | 111,796 |  |              |  | 46,920   |            |  |  | 64,876   | 
|Purchased consumer data                   |  |                | 954     |  |              |  | 137      |            |  |  | 817      | 
|Other                                     |  |                | 16,572  |  |              |  | 6,422    |            |  |  | 10,150   | 
|                                          |  |                |         |  |              |  |          |            | 
|Total                                     |  | W              | 515,665 |  |              |  | W204,274 |            |  |  | W311,391 | 
|                                          |  |                |         |  |              |  |          |            | 

F-65



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                     |  |   |                 |  |  |  |  |  |  |  |  | 
|------------------------------------ |  | - | --------------- |  |  |  |  |  |  |  |  | 
|Amortization expense:                |  |   |                 |  |  |  |  |  |  |  |  | 
|For the year ended December 31, 2003 |  | W | 47,489  million |  |  |  |  |  |  |  |  | 
|For the year ended December 31, 2004 |  | W | 66,547  million |  |  |  |  |  |  |  |  | 



|                             |  |          |        | 
|---------------------------- |  | -------- | ------ | 
|For Years Ended December 31, |  | Millions |       
|                             |  |          |       
|2005                         |  |          | 64,399 | 
|2006                         |  |          | 60,082 | 
|2007                         |  |          | 42,869 | 
|2008                         |  |          | 22,630 | 
|2009                         |  |          | 15,800 | 





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

Convertible
Securities Convertible
Securities


Convertible Securities






|    |                    
|--- | -------------------
|(k) | Revenue Recognition







|    |                              
|--- | -----------------------------
|(l) | Foreign Currency Transactions



F-66



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Capitalization of
Financing Costs.










|    |                         
|--- | ------------------------
|(m) | Equity-Linked Securities









|    |                  
|--- | -----------------
|(n) | Convertible Notes

Convertible Securities


Accounting for Derivative Instruments and Hedging
Activities


F-67



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |             
|--- | ------------
|(o) | Income Taxes











|    |                                                   
|--- | --------------------------------------------------
|(p) | Minority Interest in Consolidated
    Subsidiaries







|    |      
|--- | -----
|(q) | Other





|    |                     
|--- | --------------------
|(r) | Comprehensive Income

Reporting Comprehensive
Income


F-68



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |       |         |   |         |     |      |  
|------------------------------------------------------------------------ | ----------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ------ | -------- | - | --------- | ----- | -------- | - | ---------- | ----- | ------- | - | ------- | --- | ---- | -
|                                                                         |                                           | Millions                                                                                                                                                 |          
|                                                                         |                                           |                                                                                                                                                          |          
|                                                                         |                                           | As of and for the Years Ended December 31,                                                                                                               |          
|                                                                         |                                           |                                                                                                                                                          |          
|                                                                         |                                           |                                                                                                                                                          |           | 2004   |         
|                                                                         |                                           | 2002                                                                                                                                                     |           |        | 2003     |   |           | 2004  |          |   | (Note 3)   |      
|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |      
|Net earnings as adjusted in accordance with U.S. GAAP                    |                                           | W                                                                                                                                                        | 1,556,262 |        |          |   | W395,443  |       |          |   | W1,404,616 |       |         | $ | 1,357.0 |    
|Other comprehensive income, net of taxes:                                |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |       |         |   |         |    
|                                                                         | Foreign currency translation adjustments  |                                                                                                                                                          |           | (1,339 | )        |   |           | 2,087 |          |   |            | 3,012 |         |   |         | 2.9 |     
|                                                                         | Unrealized gains (losses) on investments: |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |       |         |   |         |     |     
|                                                                         |                                           | Unrealized holding gains (losses) net of tax of,
    W(54,057) million, W6,215 million and
    W3,842 million in 2002, 2003 and 2004, respectively       |           |        | (127,952 | ) |           |       | 10,276   |   |            |       | 10,128  |   |         |     | 9.8  |  
|                                                                         |                                           | Less: reclassification adjustment, net of tax of,
    (W396,319) million, (W226,842) million and
    W1,997 million in 2002, 2003 and 2004, respectively |           |        | (938,090 | ) |           |       | (536,936 | ) |            |       | 4,257   |   |         |     | 4.1  |  
|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |      
|Comprehensive income (loss) as adjusted in accordance with
    U.S. GAAP |                                           | W                                                                                                                                                        | 488,881   |        |          |   | W(129,130 | )     |          |   | W1,422,013 |       |         | $ | 1,373.8 |    
|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |      
|Accumulated other comprehensive income (loss) balances:                  |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |       |         |   |         |    
|                                                                         |                                           | Foreign currency translation adjustments                                                                                                                 |           | W      | (7,946   | ) |           |       | W(5,859  | ) |            |       | W(2,847 | ) |         | $   | (2.7 | )
|                                                                         |                                           | Unrealized gains on investments                                                                                                                          |           |        | 527,840  |   |           |       | 1,180    |   |            |       | 15,565  |   |         |     | 15.0 |  
|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |      
|                                                                         |                                           | W                                                                                                                                                        | 519,894   |        |          |   | W(4,679   | )     |          |   | W12,718    |       |         | $ | 12.3    |    
|                                                                         |                                           |                                                                                                                                                          |           |        |          |   |           |       |          |   |            |      



|    |                        
|--- | -----------------------
|(s) | Statement of Cash Flows







|    |                            
|--- | ---------------------------
|(t) | Recent Changes in U.S. GAAP

Inventory Costs,


F-69



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Employers Disclosures about Pensions and Other
Postretirement Benefits


Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement
No. 143




|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|(u) | Impact on Reconciliation of Adoption of Statement of
    Korean Accounting Standards

Interim Financial Reports Revenue Recognition Tangible Assets. Inventories Construction-Type Contracts Troubled Debt Restructuring




Intangible
Assets


Subsequent Events after the Balance
Sheet Date Subsequent
Events after the Balance Sheet Date


Capitalization
of Financing Costs


Investments in Securities Accounting for Certain Investments in Debt and Equity
Securities Investments in Securities


F-70



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Convertible
Securities




|    |                          
|--- | -------------------------
|(v) | U.S. GAAP Reconciliations



|                                                      |                                                               |                                             |           |         |          |   |          |          |          |   |           |          |         |   |         |        |       |  
|----------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------- | --------- | ------- | -------- | - | -------- | -------- | -------- | - | --------- | -------- | ------- | - | ------- | ------ | ----- | -
|                                                      |                                                               | Millions                                    |          
|                                                      |                                                               |                                             |          
|                                                      |                                                               | Years Ended December 31,                    |          
|                                                      |                                                               |                                             |          
|                                                      |                                                               |                                             |           | 2004    |         
|                                                      |                                                               | 2002                                        |           |         | 2003     |   |          | 2004     |          |   | (Note 3)  |         
|                                                      |                                                               |                                             |           |         |          |   |          |          |          |   |           |         
|Net earnings in accordance with Korean GAAP           |                                                               | W                                           | 1,946,934 |         |          | W | 821,734  |          |          | W | 1,282,216 |          |         | $ | 1,238.7 |       
|Adjustments:                                          |                                                               |                                             |           |         |          |   |          |          |          |   |           |          |         |   |         |       
|                                                      | Intangible assets                                             |                                             |           | 7,424   |          |   |          | 10,264   |          |   |           | 3,767    |         |   |         | 3.6    |      
|                                                      | Special depreciation                                          |                                             |           | (189    | )        |   |          |         |          |   |           |         |         |   |         |       |      
|                                                      | Depreciation                                                  |                                             |           | (85,008 | )        |   |          | (135,905 | )        |   |           | (71,534  | )       |   |         | (69.1  | )    
|                                                      | Equity in earnings of equity method affiliates                |                                             |           |         |          |   |          |          |          |   |           |          |         |   |         |        |      
|                                                      |                                                               | Reversal of goodwill amortization           |           |         | 130,113  |   |          |          | 130,113  |   |           |          | 130,113 |   |         |        | 125.7 |  
|                                                      |                                                               | Different useful life of intangibles        |           |         | 7,807    |   |          |          | 7,807    |   |           |          | 22,682  |   |         |        | 21.9  |  
|                                                      |                                                               | Additional acquisitions of equity investees |           |         | (12,506  | ) |          |          | (40,591  | ) |           |          | (48,631 | ) |         |        | (47.0 | )
|                                                      |                                                               | Impairment loss relating to equity investee |           |         | (663,345 | ) |          |          | (789,503 | ) |           |          |        |   |         |        |      |  
|                                                      | Goodwill impairment                                           |                                             |           | (12,947 | )        |   |          |         |          |   |           |         |         |   |         |       |      
|                                                      | U.S. GAAP adjustments of equity method affiliates             |                                             |           | 24,528  |          |   |          | 33,171   |          |   |           | (4,737   | )       |   |         | (4.6   | )    
|                                                      | Interest capitalization (including related depreciation), net |                                             |           | 24,608  |          |   |          | 54,089   |          |   |           | 27,487   |         |   |         | 26.6   |      
|                                                      | Capitalized foreign exchange transactions, net                |                                             |           | 5,879   |          |   |          | 5,859    |          |   |           | 2,133    |         |   |         | 2.1    |      
|                                                      | Foreign currency translation of convertible notes             |                                             |           | 139,730 |          |   |          | (6,426   | )        |   |           | (130,247 | )       |   |         | (125.8 | )    
|                                                      | Service installation fees                                     |                                             |           | (17,528 | )        |   |          | 20,729   |          |   |           | 8,059    |         |   |         | 7.8    |      
|                                                      | Reversal of gain on disposition of investment                 |                                             |           | (25,256 | )        |   |          | (17,628  | )        |   |           |         |         |   |         |       |      
|                                                      | Equity-linked securities                                      |                                             |           | (25,095 | )        |   |          | 3,613    |          |   |           | 21,482   |         |   |         | 20.8   |      
|                                                      | Convertible notes of KTF                                      |                                             |           | (14,427 | )        |   |          | (9,810   | )        |   |           | 1,106    |         |   |         | 1.1    |      
|                                                      | Bonds with stock warrants                                     |                                             |           | (7,435  | )        |   |          | (6,043   | )        |   |           | (6,376   | )       |   |         | (6.2   | )    
|                                                      | Deferred income tax  methodology difference                  |                                             |           |        |          |   |          | 133,582  |          |   |           | 172,982  |         |   |         | 167.1  |      
|                                                      | Deferred income tax effects of U.S. GAAP adjustments          |                                             |           | 132,975 |          |   |          | 180,388  |          |   |           | (5,886   | )       |   |         | (5.7   | )    
|                                                      |                                                               |                                             |           |         |          |   |          |          |          |   |           |         
|                                                      |                                                               |                                             | (390,672  | )       |          |   | (426,291 | )        |          |   | 122,400   |          |         |   | 118.3   |       
|                                                      |                                                               |                                             |           |         |          |   |          |          |          |   |           |         
|Net earnings as adjusted in accordance with U.S. GAAP |                                                               | W                                           | 1,556,262 |         |          | W | 395,443  |          |          | W | 1,404,616 |          |         | $ | 1,357.0 |       
|                                                      |                                                               |                                             |           |         |          |   |          |          |          |   |           |         

F-71



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                            |  |                                 |           |      |      |   |         |      |  |   |           |  |  |   |         | 
|----------------------------------------------------------- |  | ------------------------------- | --------- | ---- | ---- | - | ------- | ---- |  | - | --------- |  |  | - | ------- | 
|                                                            |  | Millions, Except per Share Data |          
|                                                            |  |                                 |          
|                                                            |  | Years Ended December 31,        |          
|                                                            |  |                                 |          
|                                                            |  |                                 |           | 2004 |     
|                                                            |  | 2002                            |           |      | 2003 |   |         | 2004 |  |   | (Note 3)  | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Net earnings as adjusted in accordance with
    U.S. GAAP   |  | W                               | 1,556,262 |      |      | W | 395,443 |      |  | W | 1,404,616 |  |  | $ | 1,357.0 | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Basic earnings per share in accordance with
    U.S. GAAP   |  | W                               | 5,997     |      |      | W | 1,830   |      |  | W | 6,663     |  |  | $ | 6.44    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Diluted earnings per share in accordance with
    U.S. GAAP |  | W                               | 4,972     |      |      | W | 1,655   |      |  | W | 6,215     |  |  | $ | 6.00    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Dividend per share in accordance with
    U.S. GAAP         |  | W                               | 720       |      |      | W | 860     |      |  | W | 3,000     |  |  | $ | 2.90    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 



|                                                            |  |                                 |           |      |      |   |         |      |  |   |           |  |  |   |         | 
|----------------------------------------------------------- |  | ------------------------------- | --------- | ---- | ---- | - | ------- | ---- |  | - | --------- |  |  | - | ------- | 
|                                                            |  | Millions, Except per Share Data |          
|                                                            |  |                                 |          
|                                                            |  | Years Ended December 31,        |          
|                                                            |  |                                 |          
|                                                            |  |                                 |           | 2004 |     
|                                                            |  | 2002                            |           |      | 2003 |   |         | 2004 |  |   | (Note 3)  | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Net earnings available to common shareholders               |  | W                               | 1,556,262 |      |      | W | 395,443 |      |  | W | 1,404,616 |  |  | $ | 1,357.0 | 
|Dilutive effect of convertible notes                        |  |                                 | (64,161   | )    |      |   | 3,431   |      |  |   | 45,452    |  |  |   | 43.9    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|                                                            |  |                                 | 1,492,101 |      |      |   | 398,874 |      |  |   | 1,450,068 |  |  |   | 1,400.9 | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Weighted average outstanding shares of common stock         |  |                                 | 259.5     |      |      |   | 216.1   |      |  |   | 210.8     |  |  |   |         | 
|Dilutive effect of convertible notes                        |  |                                 | 40.6      |      |      |   | 25.2    |      |  |   | 22.5      |  |  |   |         | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Common stock and common stock equivalents                   |  |                                 | 300.1     |      |      |   | 241.3   |      |  |   | 233.3     |  |  |   |         | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Basic earnings per share in accordance with
    U.S. GAAP   |  | W                               | 5,997     |      |      | W | 1,830   |      |  | W | 6,663     |  |  | $ | 6.44    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 
|Diluted earnings per share in accordance with
    U.S. GAAP |  | W                               | 4,972     |      |      | W | 1,653   |      |  | W | 6,215     |  |  | $ | 6.00    | 
|                                                            |  |                                 |           |      |      |   |         |      |  |   |           | 



F-72



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                                  |                                                   |                                             |            |            |            |   |            |            |            |   |          |          |          |  
|----------------------------------------------------------------- | ------------------------------------------------- | ------------------------------------------- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | - | -------- | -------- | -------- | -
|                                                                  |                                                   | Millions                                    |           
|                                                                  |                                                   |                                             |           
|                                                                  |                                                   | Years Ended December 31,                    |           
|                                                                  |                                                   |                                             |           
|                                                                  |                                                   |                                             |            | 2004       |           
|                                                                  |                                                   | 2003                                        |            |            | 2004       |   |            | (Note 3)   |           
|                                                                  |                                                   |                                             |            |            |            |   |            |            |           
|Stockholders equity in accordance with Korean GAAP               |                                                   | W                                           | 8,396,620  |            |            | W | 9,026,380  |            |            | $ | 8,720.4  |         
|Adjustments:                                                      |                                                   |                                             |            |            |            |   |            |            |            |   |          |         
|                                                                  | Intangible assets                                 |                                             |            | (5,701     | )          |   |            | (1,934     | )          |   |          | (1.9     | )       
|                                                                  | Depreciation                                      |                                             |            | (16,474    | )          |   |            | (88,008    | )          |   |          | (85.0    | )       
|                                                                  | Equity in earnings of equity method affiliates:   |                                             |            |            |            |   |            |            |            |   |          |          |         
|                                                                  |                                                   | Reversal of goodwill amortization           |            |            | 260,226    |   |            |            | 390,339    |   |          |          | 377.1    |  
|                                                                  |                                                   | Different useful life of intangibles        |            |            | 96,449     |   |            |            | 119,131    |   |          |          | 115.1    |  
|                                                                  |                                                   | Additional acquisitions of equity investees |            |            | 352,650    |   |            |            | 304,972    |   |          |          | 294.6    |  
|                                                                  |                                                   | Impairment loss relating to equity investee |            |            | (1,452,848 | ) |            |            | (1,452,848 | ) |          |          | (1,403.6 | )
|                                                                  | Goodwill impairment                               |                                             |            | (12,947    | )          |   |            | (12,947    | )          |   |          | (12.5    | )       
|                                                                  | U.S. GAAP adjustments of equity method affiliates |                                             |            | 46,129     |            |   |            | 46,517     |            |   |          | 44.9     |         
|                                                                  | Interest capitalization, net                      |                                             |            | (55,629    | )          |   |            | (28,142    | )          |   |          | (27.2    | )       
|                                                                  | Capitalized foreign exchange transactions, net    |                                             |            | (5,280     | )          |   |            | (3,147     | )          |   |          | (3.0     | )       
|                                                                  | Foreign currency translation of convertible notes |                                             |            | 133,304    |            |   |            | 3,057      |            |   |          | 3.0      |         
|                                                                  | Deferred service installation fees                |                                             |            | (521,897   | )          |   |            | (513,838   | )          |   |          | (496.4   | )       
|                                                                  | Bonds with stock warrants                         |                                             |            | 6,376      |            |   |            |           |            |   |          |         |         
|                                                                  | Deferred tax effects of U.S. GAAP adjustments     |                                             |            | 385,303    |            |   |            | 379,417    |            |   |          | 366.5    |         
|                                                                  | Deferred tax-methodology difference               |                                             |            | 133,582    |            |   |            | 306,564    |            |   |          | 296.1    |         
|                                                                  | Deferred income taxes on investment securities    |                                             |            | (65        | )          |   |            | (5,904     | )          |   |          | (5.7     | )       
|                                                                  | Minority interests                                |                                             |            | (1,849,303 | )          |   |            | (1,809,577 | )          |   |          | (1,748.2 | )       
|                                                                  |                                                   |                                             |            |            |            |   |            |            |           
|                                                                  |                                                   |                                             | (2,506,125 | )          |            |   | (2,366,348 | )          |            |   | (2,286.2 | )       
|                                                                  |                                                   |                                             |            |            |            |   |            |            |           
|Stockholders equity as adjusted in accordance with
    U.S. GAAP |                                                   | W                                           | 5,890,495  |            |            | W | 6,660,032  |            |            | $ | 6,434.2  |         
|                                                                  |                                                   |                                             |            |            |            |   |            |            |           

F-73



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                           
|--- | ----------------------------------------------------------
|(w) | Condensed Consolidated U.S. GAAP Financial
    Information



|                                   |                                       |                      |            |           |           |   |            |           |           |   |          |         |         | 
|---------------------------------- | ------------------------------------- | -------------------- | ---------- | --------- | --------- | - | ---------- | --------- | --------- | - | -------- | ------- | ------- | 
|                                   |                                       | Millions             |           
|                                   |                                       |                      |           
|                                   |                                       |                      |            | 2004      |          
|                                   |                                       | 2003                 |            |           | 2004      |   |            | (Note 3)  |          
|                                   |                                       |                      |            |           |           |   |            |           |          
|ASSETS                            
|Current assets                     |                                       |                      |            |           |           |   |            |           |           |   |          |        
|                                   | Notes and accounts receivable  trade |                      | W          | 1,878,179 |           |   | W          | 1,682,923 |           |   | $        | 1,625.9 |        
|                                   | Other current assets                  |                      |            | 1,845,458 |           |   |            | 4,089,151 |           |   |          | 3,950.5 |        
|                                   |                                       |                      |            |           |           |   |            |           |          
|                                   |                                       | Total current assets |            |           | 3,723,637 |   |            |           | 5,772,074 |   |          |         | 5,576.4 | 
|Investments                        |                                       |                      | 2,501,212  |           |           |   | 1,957,154  |           |           |   | 1,890.8  |        
|Property, plant and equipment, net |                                       |                      | 11,515,315 |           |           |   | 10,846,328 |           |           |   | 10,478.5 |        
|Other assets                       |                                       |                      | 1,791,955  |           |           |   | 1,808,176  |           |           |   | 1,746.8  |        
|                                   |                                       |                      |            |           |           |   |            |           |          
|                                   |                                       | W                    | 19,532,119 |           |           | W | 20,383,732 |           |           | $ | 19,692.5 |        
|                                   |                                       |                      |            |           |           |   |            |           |          

|                                               |                                    |                           |           |           |            |   |            |           |            |   |          |         |          | 
|---------------------------------------------- | ---------------------------------- | ------------------------- | --------- | --------- | ---------- | - | ---------- | --------- | ---------- | - | -------- | ------- | -------- | 
|                                               |                                    | Millions                  |          
|                                               |                                    |                           |          
|                                               |                                    |                           |           | 2004      |           
|                                               |                                    | 2003                      |           |           | 2004       |   |            | (Note 3)  |           
|                                               |                                    |                           |           |           |            |   |            |           |           
|LIABILITIES                                   
|Current liabilities                            |                                    |                           |           |           |            |   |            |           |            |   |          |        
|                                               | Notes and accounts payable  trade |                           | W         | 925,567   |            |   | W          | 745,341   |            |   | $        | 720.1   |         
|                                               | Other current liabilities          |                           |           | 2,897,098 |            |   |            | 5,789,425 |            |   |          | 5,593.1 |         
|                                               |                                    |                           |           |           |            |   |            |           |           
|                                               |                                    | Total current liabilities |           |           | 3,822,665  |   |            |           | 6,534,766  |   |          |         | 6,313.2  | 
|Long-term debt, excluding current portion      |                                    |                           | 7,669,463 |           |            |   | 5,160,254  |           |            |   | 4,985.3  |        
|Other long-term liabilities                    |                                    |                           | 2,059,782 |           |            |   | 1,947,202  |           |            |   | 1,881.2  |        
|                                               |                                    |                           |           |           |            |   |            |           |           
|                                               |                                    | Total liabilities         |           |           | 13,551,910 |   |            |           | 13,642,222 |   |          |         | 13,179.7 | 
|                                               |                                    |                           |           |           |            |   |            |           |           
|Minority interest in consolidated subsidiaries |                                    |                           | 89,714    |           |            |   | 81,478     |           |            |   | 78.6     |        
|                                               |                                    |                           |           |           |            |   |            |           |           
|Stockholders equity                           |                                    |                           | 5,890,495 |           |            |   | 6,660,032  |           |            |   | 6,434.2  |        
|                                               |                                    |                           |           |           |            |   |            |           |           
|                                               |                                    | W                         | 9,532,119 |           |            | W | 20,383,732 |           |            | $ | 19,692.5 |        
|                                               |                                    |                           |           |           |            |   |            |           |           

F-74



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                         |  |                          |            |      |      |   |            |      |  |   |            |   |  |   |          |  
|-------------------------------------------------------- |  | ------------------------ | ---------- | ---- | ---- | - | ---------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                                                         |  | Millions                 |           
|                                                         |  |                          |           
|                                                         |  | Years Ended December 31, |           
|                                                         |  |                          |           
|                                                         |  |                          |            | 2004 |     
|                                                         |  | 2002                     |            |      | 2003 |   |            | 2004 |  |   | (Note 3)   |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Operating revenues                                       |  | W                        | 11,507,729 |      |      | W | 11,776,189 |      |  | W | 12,240,151 |   |  | $ | 11,825.1 |  
|Cost of services                                         |  |                          | 8,862,201  |      |      |   | 9,467,818  |      |  |   | 8,932,097  |   |  |   | 8,629.2  |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Gross profit                                             |  |                          | 2,645,528  |      |      |   | 2,308,371  |      |  |   | 3,308,054  |   |  |   | 3,195.9  |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Selling, general and administration expenses             |  |                          | 813,124    |      |      |   | 1,166,197  |      |  |   | 1,306,068  |   |  |   | 1,261.8  |  
|Other operating income (expense), net                    |  |                          | 27,676     |      |      |   | 24,486     |      |  |   | (58,339    | ) |  |   | (56.3    | )
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Operating income                                         |  |                          | 1,860,080  |      |      |   | 1,166,660  |      |  |   | 1,943,647  |   |  |   | 1,877.8  |  
|Gain on disposition of available-for-sale securities     |  |                          | 1,151,353  |      |      |   | 752,117    |      |  |   | 5,821      |   |  |   | 5.6      |  
|Impairment loss of equity method affiliates              |  |                          | (663,345   | )    |      |   | (789,503   | )    |  |   | (37,030    | ) |  |   | (35.8    | )
|Foreign currency translation gain, net                   |  |                          | 236,047    |      |      |   | 3,674      |      |  |   | 395,542    |   |  |   | 382.1    |  
|Other expense, net                                       |  |                          | (511,453   | )    |      |   | (519,959   | )    |  |   | (518,190   | ) |  |   | (500.6   | )
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Earnings before income tax and minority interest         |  |                          | 2,072,682  |      |      |   | 612,989    |      |  |   | 1,789,790  |   |  |   | 1,729.1  |  
|Income tax                                               |  |                          | 519,642    |      |      |   | 217,568    |      |  |   | 386,934    |   |  |   | 373.8    |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Earnings before minority interest                        |  |                          | 1,553,040  |      |      |   | 395,421    |      |  |   | 1,402,856  |   |  |   | 1,355.3  |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Minority interest in losses of consolidated subsidiaries |  |                          | 3,222      |      |      |   | 22         |      |  |   | 1,760      |   |  |   | 1.7      |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  
|Net earnings                                             |  | W                        | 1,556,262  |      |      | W | 395,443    |      |  | W | 1,404,616  |   |  | $ | 1,357.0  |  
|                                                         |  |                          |            |      |      |   |            |      |  |   |            |  



|                                                                                            |  |          |            |      |      |   |            |      |  |   |           |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | -------- | ---------- | ---- | ---- | - | ---------- | ---- |  | - | --------- | - |  | - | ------- | -
|                                                                                            |  | Millions |           
|                                                                                            |  |          |           
|                                                                                            |  |          |            | 2004 |     
|                                                                                            |  | 2002     |            |      | 2003 |   |            | 2004 |  |   | (Note 3)  |  
|                                                                                            |  |          |            |      |      |   |            |      |  |   |           |  
|Beginning of year                                                                           |  | W        | 11,189,176 |      |      | W | 7,270,245  |      |  | W | 5,890,495 |   |  | $ | 5,690.7 |  
|Net earnings                                                                                |  |          | 1,556,262  |      |      |   | 395,443    |      |  |   | 1,404,616 |   |  |   | 1,357.0 |  
|Foreign currency translation adjustments                                                    |  |          | (1,339     | )    |      |   | 2,087      |      |  |   | 3,012     |   |  |   | 2.9     |  
|Unrealized earning (losses) on investments, net of tax                                      |  |          | (1,066,042 | )    |      |   | (526,660   | )    |  |   | 14,385    |   |  |   | 13.9    |  
|Treasury stock                                                                              |  |          | (4,188,435 | )    |      |   | (1,048,872 | )    |  |   | 30        |   |  |   |        |  
|Dividends                                                                                   |  |          | (224,054   | )    |      |   | (212,887   | )    |  |   | (632,276  | ) |  |   | (610.8  | )
|Other, net of tax of W5,182 million and
    W(4,019) million in 2003 and 2004, respectively |  |          | 4,677      |      |      |   | 11,139     |      |  |   | (20,230   | ) |  |   | (19.5   | )
|                                                                                            |  |          |            |      |      |   |            |      |  |   |           |  
|End of year                                                                                 |  | W        | 7,270,245  |      |      | W | 5,890,495  |      |  | W | 6,660,032 |   |  | $ | 6,434.2 |  
|                                                                                            |  |          |            |      |      |   |            |      |  |   |           |  

F-75



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                          |                                                                                         |                                                                                     |                                               |           |            |          |           |         |           |          |           |           |           |          |         |         |         |        |  
|----------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------------------- | --------- | ---------- | -------- | --------- | ------- | --------- | -------- | --------- | --------- | --------- | -------- | ------- | ------- | ------- | ------ | -
|                                          |                                                                                         | Millions                                                                            |                                              
|                                          |                                                                                         |                                                                                     |                                              
|                                          |                                                                                         |                                                                                     |                                               | 2004      |           
|                                          |                                                                                         | 2002                                                                                |                                               |           | 2003       |          |           | 2004    |           |          | (Note 3)  |          
|                                          |                                                                                         |                                                                                     |                                               |           |            |          |           |         |           |          |           |          
|Cash flows from operating activities:     |                                                                                         |                                                                                     |                                               |           |            |          |           |         |           |          |           |           |           |          |         |        
|                                          | Net earnings                                                                            |                                                                                     | W                                             | 1,556,262 |            |          | W         | 395,443 |           |          | W         | 1,404,616 |           |          | $       | 1,357.0 |        
|                                          | Adjustments to reconcile net earnings to net cash provided by
    operating activities: |                                                                                     |                                               |           |            |          |           |         |           |          |           |           |           |          |         |         |        
|                                          |                                                                                         | Depreciation and amortization                                                       |                                               |           | 2,772,281  |          |           |         | 2,683,464 |          |           |           | 2,505,800 |          |         |         | 2,420.8 |       
|                                          |                                                                                         | Provision for doubtful accounts                                                     |                                               |           | 170,250    |          |           |         | 305,652   |          |           |           | 249,884   |          |         |         | 241.4   |       
|                                          |                                                                                         | Loss on disposition of property, plant and equipment                                |                                               |           | 84,696     |          |           |         | 52,326    |          |           |           | 89,456    |          |         |         | 86.4    |       
|                                          |                                                                                         | Equity in losses (gains) of affiliates including intangible
    assets amortization |                                               |           | (51,519    | )        |           |         | 5,000     |          |           |           | 19,531    |          |         |         | 18.9    |       
|                                          |                                                                                         | Deferred income tax expense (benefit)                                               |                                               |           | 22,220     |          |           |         | (240,922  | )        |           |           | (107,417  | )        |         |         | (103.8  | )     
|                                          |                                                                                         | Gain on disposition of available-for-sale securities                                |                                               |           | (1,151,353 | )        |           |         | (752,117  | )        |           |           | (5,821    | )        |         |         | (5.6    | )     
|                                          |                                                                                         | Impairment losses of equity method affiliates                                       |                                               |           | 663,345    |          |           |         | 789,503   |          |           |           | 37,030    |          |         |         | 35.8    |       
|                                          |                                                                                         | Foreign currency translation gain, net                                              |                                               |           | (236,047   | )        |           |         | (3,674    | )        |           |           | (395,542  | )        |         |         | (382.1  | )     
|                                          |                                                                                         |                                                                                     | Changes in assets and liabilities:            |           |            |          |           |         |           |          |           |           |           |          |         |         |         |        |  
|                                          |                                                                                         |                                                                                     | Notes and accounts receivable  trade         |           |            | (334,046 | )         |         |           | (287,510 | )         |           |           | 34,128   |         |         |         | 33.0   |  
|                                          |                                                                                         |                                                                                     | Inventories                                   |           |            | (174,806 | )         |         |           | (151,198 | )         |           |           | 57,850   |         |         |         | 55.9   |  
|                                          |                                                                                         |                                                                                     | Notes and accounts payable  trade            |           |            | (1,130   | )         |         |           | 46,684   |           |           |           | (133,327 | )       |         |         | (128.8 | )
|                                          |                                                                                         |                                                                                     | Advance receipts from customers               |           |            | 7,500    |           |         |           | (21,897  | )         |           |           | 11,077   |         |         |         | 10.7   |  
|                                          |                                                                                         |                                                                                     | Income taxes payable                          |           |            | 237,475  |           |         |           | (229,368 | )         |           |           | 72,917   |         |         |         | 70.4   |  
|                                          |                                                                                         |                                                                                     | Prepaid expenses                              |           |            | (2,275   | )         |         |           | (3,612   | )         |           |           | (8,924   | )       |         |         | (8.6   | )
|                                          |                                                                                         |                                                                                     | Withholdings                                  |           |            | (109,025 | )         |         |           | 2,657    |           |           |           | (11,219  | )       |         |         | (10.8  | )
|                                          |                                                                                         |                                                                                     | Accrued expenses                              |           |            | (15,056  | )         |         |           | (52,181  | )         |           |           | 2,899    |         |         |         | 2.8    |  
|                                          |                                                                                         |                                                                                     | Accounts payable-other                        |           |            | 341,357  |           |         |           | 154,646  |           |           |           | (37,091  | )       |         |         | (35.8  | )
|                                          |                                                                                         |                                                                                     | Refundable deposits of telephone installation |           |            | (749,546 | )         |         |           | (307,026 | )         |           |           | (140,720 | )       |         |         | (135.9 | )
|                                          |                                                                                         |                                                                                     | Retirement and severance benefits             |           |            | 223,875  |           |         |           | 43,464   |           |           |           | 183,138  |         |         |         | 176.9  |  
|                                          |                                                                                         |                                                                                     | Other, net                                    |           |            | (281,057 | )         |         |           | (255,463 | )         |           |           | (214,827 | )       |         |         | (207.6 | )
|                                          |                                                                                         |                                                                                     |                                               |           |            |          |           |         |           |          |           |          
|Net cash provided by operating activities |                                                                                         |                                                                                     | 2,973,401                                     |           |            |          | 2,173,871 |         |           |          | 3,613,438 |           |           |          | 3,491.0 |        
|                                          |                                                                                         |                                                                                     |                                               |           |            |          |           |         |           |          |           |          

F-76



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |            |            |   |         |          |          |  
|----------------------------------------------------- | ------------------------------------------------------- | ------------------------------------- | ------- | ---------- | ---------- | - | -------- | ---------- | ---------- | - | --------- | ---------- | ---------- | - | ------- | -------- | -------- | -
|                                                      |                                                         | Millions                              |        
|                                                      |                                                         |                                       |        
|                                                      |                                                         |                                       |         | 2004       |           
|                                                      |                                                         | 2002                                  |         |            | 2003       |   |          | 2004       |            |   | (Note 3)  |           
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|Cash flows from investing activities:                 |                                                         |                                       |         |            |            |   |          |            |            |   |           |            |            |   |         |         
|                                                      | Additions to property, plant and equipment              |                                       |         | (2,187,075 | )          |   |          | (2,219,902 | )          |   |           | (1,966,224 | )          |   |         | (1,899.5 | )       
|                                                      | Proceeds from sale of property, plant and equipment     |                                       |         | 45,605     |            |   |          | 115,914    |            |   |           | 106,487    |            |   |         | 102.9    |         
|                                                      | Decrease (increase) in short-term financial instruments |                                       |         | (71,720    | )          |   |          | 198,724    |            |   |           | (911,223   | )          |   |         | (880.3   | )       
|                                                      | Proceeds from the sale of available-for-sale securities |                                       |         | 306,552    |            |   |          | 166,281    |            |   |           | 577,616    |            |   |         | 558.0    |         
|                                                      | Proceeds from the sale of equity security of affiliates |                                       |         | 553,921    |            |   |          | 18,401     |            |   |           | 46,877     |            |   |         | 45.3     |         
|Proceeds from maturity on held-to-maturity securities |                                                         |                                       | 9,994   |            |            |   | 218      |            |            |   | 17,985    |            |            |   | 17.4    |         
|                                                      | Purchases of available-for-sale securities              |                                       |         | (540,331   | )          |   |          | (312,881   | )          |   |           | (492,696   | )          |   |         | (476.0   | )       
|                                                      | Purchases of equity security of affiliates              |                                       |         |           |            |   |          | (483,886   | )          |   |           |           |            |   |         |         |         
|                                                      | Purchases of held-to-maturity securities                |                                       |         | (392       | )          |   |          | (11,412    | )          |   |           | (3,075     | )          |   |         | (3.0     | )       
|                                                      | Decrease (increase) in accounts receivable
     other  |                                       |         | (27,149    | )          |   |          | 527,954    |            |   |           | (865       | )          |   |         | (0.8     | )       
|                                                      | Other, net                                              |                                       |         | (728,116   | )          |   |          | 346,670    |            |   |           | 18,164     |            |   |         | 17.5     |         
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|                                                      |                                                         | Net cash used in investing activities |         |            | (2,638,711 | ) |          |            | (1,653,919 | ) |           |            | (2,606,954 | ) |         |          | (2,518.5 | )
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|Cash flows from financing activities:                 |                                                         |                                       |         |            |            |   |          |            |            |   |           |            |            |   |         |         
|                                                      | Payment of dividends                                    |                                       |         | (224,955   | )          |   |          | (213,308   | )          |   |           | (633,171   | )          |   |         | (611.7   | )       
|                                                      | Increase (decrease) in short-term borrowings, net       |                                       |         | 81,702     |            |   |          | (237,621   | )          |   |           | (211,410   | )          |   |         | (204.2   | )       
|                                                      | Repayments of long-term debt                            |                                       |         | (1,391,816 | )          |   |          | (1,150,639 | )          |   |           | (1,117,240 | )          |   |         | (1,079.4 | )       
|                                                      | Proceeds from long-term debt                            |                                       |         | 4,675,158  |            |   |          | 1,282,661  |            |   |           | 1,944,080  |            |   |         | 1,878.2  |         
|                                                      | Acquisition of treasury stock                           |                                       |         | (3,401,186 | )          |   |          | (412,247   | )          |   |           |           |            |   |         |         |         
|                                                      | Other, net                                              |                                       |         | 7,219      |            |   |          | 40,432     |            |   |           | (1,580     | )          |   |         | (1.5     | )       
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|                                                      |                                                         | Net cash used in financing activities |         |            | (253,878   | ) |          |            | (690,722   | ) |           |            | (19,321    | ) |         |          | (18.6    | )
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|Increase (decrease) in cash and cash equivalents      |                                                         |                                       | 80,812  |            |            |   | (170,770 | )          |            |   | 987,163   |            |            |   | 953.9   |         
|Cash and cash equivalents at beginning of year        |                                                         |                                       | 805,297 |            |            |   | 886,109  |            |            |   | 715,339   |            |            |   | 691.1   |         
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|Cash and cash equivalents at end of year              |                                                         | W                                     | 886,109 |            |            | W | 715,339  |            |            | W | 1,702,502 |            |            | $ | 1,645.0 |         
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           
|Supplemental schedule                                 |                                                         |                                       |         |            |            |   |          |            |            |   |           |            |            |   |         |         
|                                                      | Interest payment                                        |                                       |         | 391,728    |            |   |          | 437,195    |            |   |           | 454,983    |            |   |         | 439.6    |         
|                                                      | Income tax payment                                      |                                       |         | 288,316    |            |   |          | 670,674    |            |   |           | 419,596    |            |   |         | 405.4    |         
|                                                      | Non-cash investing and financing activities*            |                                       | W       | 786,666    |            |   | W        | 730,704    |            |   | W         |           |            |   | $       |         |         
|                                                      |                                                         |                                       |         |            |            |   |          |            |            |   |           |           






|  |                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The Company financed W786,666 million and
    W730,704 million of its purchase of treasury stock in 2002
    and in 2003, respectively, through the transfer of shares of SK
    Telecom which the Company previously held as available-for-sale
    securities.



|    |                                 
|--- | --------------------------------
|(x) | Additional U.S. GAAP Disclosures



F-77



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|                                      |                    |          |          |          |      |   |          |         |  |   |          |         |  |   |        |       | 
|------------------------------------- | ------------------ | -------- | -------- | -------- | ---- | - | -------- | ------- |  | - | -------- | ------- |  | - | ------ | ----- | 
|                                      |                    | Millions |         
|                                      |                    |          |         
|                                      |                    |          |          | 2004     |     
|                                      |                    | 2002     |          |          | 2003 |   |          | 2004    |  |   | (Note 3) |        
|                                      |                    |          |          |          |      |   |          |         |  |   |          |        
|Current income tax expense            |                    |          | W497,422 |          |      | W | 458,490  |         |  | W | 494,351  |         |  | $ | 477.6  |      
|Deferred income net expense (benefit) |                    |          | 22,220   |          |      |   | (240,922 | )       |  |   | (107,417 | )       |  |   | (103.8 | )    
|                                      |                    |          |          |          |      |   |          |         |  |   |          |        
|                                      | Income tax expense |          |          | W519,642 |      |   | W        | 217,568 |  |   | W        | 386,934 |  |   | $      | 373.8 | 
|                                      |                    |          |          |          |      |   |          |         |  |   |          |        



|                                                   |  |          |          |      |      |   |          |      |  |   |          |   |  |   |        |  
|-------------------------------------------------- |  | -------- | -------- | ---- | ---- | - | -------- | ---- |  | - | -------- | - |  | - | ------ | -
|                                                   |  | Millions |         
|                                                   |  |          |         
|                                                   |  |          |          | 2004 |     
|                                                   |  | 2002     |          |      | 2003 |   |          | 2004 |  |   | (Note 3) |  
|                                                   |  |          |          |      |      |   |          |      |  |   |          |  
|Provision for income taxes at statutory tax rates  |  | W        | 615,587  |      |      | W | 182,058  |      |  | W | 531,078  |   |  | $ | 513.1  |  
|Prior years income tax additional payment (refund) |  |          | (6,354   | )    |      |   | 61,928   |      |  |   | 2,105    |   |  |   | 2.0    |  
|Nondeductible expenses                             |  |          | 60,990   |      |      |   | 66,748   |      |  |   | 29,698   |   |  |   | 28.7   |  
|Nontaxable income                                  |  |          | (9,251   | )    |      |   | (5,945   | )    |  |   | (1,844   | ) |  |   | (1.8   | )
|Investment tax credits                             |  |          | (141,330 | )    |      |   | (152,041 | )    |  |   | (174,968 | ) |  |   | (169.0 | )
|Effect of tax rate change                          |  |          |         |      |      |   | 64,820   |      |  |   | 865      |   |  |   | 0.8    |  
|                                                   |  |          |          |      |      |   |          |      |  |   |          |  
|Actual provision for income taxes                  |  | W        | 519,642  |      |      | W | 217,568  |      |  | W | 386,934  |   |  | $ | 373.8  |  
|                                                   |  |          |          |      |      |   |          |      |  |   |          |  



F-78



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                         |                                                |                                |   |         |         |   |   |          |         |   |   |       |       |  
|------------------------ | ---------------------------------------------- | ------------------------------ | - | ------- | ------- | - | - | -------- | ------- | - | - | ----- | ----- | -
|                         |                                                | Millions                       |  
|                         |                                                |                                |  
|                         |                                                | Years Ended December 31,       |  
|                         |                                                |                                |  
|                         |                                                |                                |   | 2004    |        
|                         |                                                | 2003                           |   |         | 2004    |   |   | (Note 3) |        
|                         |                                                |                                |   |         |         |   |   |          |        
|Deferred tax assets      |                                                |                                |   |         |         |   |   |          |         |   |   |      
|                         | Accrual for retirement and severance benefits  |                                | W | 3,207   |         |   | W | 2,076    |         |   | $ | 2.0   |      
|                         | Allowance for doubtful accounts                |                                |   | 122,880 |         |   |   | 129,825  |         |   |   | 125.4 |      
|                         | Refundable deposits for telephone installation |                                |   | 20,022  |         |   |   | 18,157   |         |   |   | 17.5  |      
|                         | Investment securities                          |                                |   | 27,417  |         |   |   | 20,481   |         |   |   | 19.8  |      
|                         | Inventories                                    |                                |   | 479     |         |   |   | 5,444    |         |   |   | 5.3   |      
|                         | Intangible assets                              |                                |   | 1,568   |         |   |   | 532      |         |   |   | 0.5   |      
|                         | Unearned income                                |                                |   | 143,522 |         |   |   | 141,305  |         |   |   | 136.5 |      
|                         | Equity securities of affiliates                |                                |   | 488,375 |         |   |   | 553,182  |         |   |   | 534.4 |      
|                         | Tax credit carryforwards                       |                                |   |        |         |   |   | 34,393   |         |   |   | 33.2  |      
|                         | Other                                          |                                |   | 24,762  |         |   |   | 69,571   |         |   |   | 67.2  |      
|                         |                                                |                                |   |         |         |   |   |          |        
|                         |                                                | Total deferred tax assets      |   |         | 832,232 |   |   |          | 974,966 |   |   |       | 941.8 |  
|                         |                                                |                                |   |         |         |   |   |          |        
|Deferred tax liabilities |                                                |                                |   |         |         |   |   |          |         |   |   |      
|                         | Investment securities                          |                                |   | (65     | )       |   |   | (5,904   | )       |   |   | (5.7  | )    
|                         | Property, plant and equipment                  |                                |   | (8,732  | )       |   |   | (32,634  | )       |   |   | (31.5 | )    
|                         | Accrued interest income                        |                                |   | (2,171  | )       |   |   | (9,567   | )       |   |   | (9.2  | )    
|                         |                                                |                                |   |         |         |   |   |          |        
|                         |                                                | Total deferred tax liabilities |   |         | (10,968 | ) |   |          | (48,105 | ) |   |       | (46.4 | )
|                         |                                                |                                |   |         |         |   |   |          |        
|                         |                                                | Net deferred tax assets        |   | W       | 821,264 |   |   | W        | 926,861 |   |   | $     | 895.4 |  
|                         |                                                |                                |   |         |         |   |   |          |        





F-79



---



##### 



KT CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                    |  |                          |            |      |      |   |            |          |  |   |          | 
|----------------------------------- |  | ------------------------ | ---------- | ---- | ---- | - | ---------- | -------- |  | - | -------- | 
|                                    |  | Millions                 |           
|                                    |  |                          |           
|                                    |  | Years Ended December 31, |           
|                                    |  |                          |           
|                                    |  |                          |            | 2004 |     
|                                    |  | 2003                     |            |      | 2004 |   |            | (Note 3) | 
|                                    |  |                          |            |      |      |   |            |          | 
|Gross property, plant and equipment |  | W                        | 34,695,320 |      |      | W | 34,774,357 |          |  | $ | 33,595.2 | 
|Accumulated depreciation            |  |                          | 23,180,005 |      |      |   | 23,928,029 |          |  |   | 23,116.7 | 
|                                    |  |                          |            |      |      |   |            |          | 
|Net property, plant and equipment   |  | W                        | 11,515,315 |      |      | W | 10,846,328 |          |  | $ | 10,478.5 | 
|                                    |  |                          |            |      |      |   |            |          | 



|                             |  |          |         | 
|---------------------------- |  | -------- | ------- | 
|For Years Ended December 31, |  | Millions |        
|                             |  |          |        
|2005                         |  |          | W1,573  | 
|2006                         |  |          | 1,719   | 
|2007                         |  |          | 2,716   | 
|2008                         |  |          | 5,049   | 
|2009                         |  |          | 6,821   | 
|2010-2014                    |  |          | 129,827 | 







F-80



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
























A-1



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


AS OF DECEMBER 31, 2003 AND 2004


|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |            |  |           |           |           | 
|------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | --------- | ---------------- | --------------------- |  | --------- | --------- | ---------- |  | --------- | --------- | --------- | 
|                    |                                                                                                                                                                                                                                              |               |           | Translation into |                      
|                    |                                                                                                                                                                                                                                              | Korean Won    |           |                  | U.S. Dollars (Note 2) | 
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       | 
|                    |                                                                                                                                                                                                                                              | 2003          |           |                  | 2004                  |  |           | 2004      |           
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           
|                    |                                                                                                                                                                                                                                              |               |           | (In thousands)   |                      
|                    |                                                                                                                                                                                                                                              | (In millions) |           |                  |                      
|ASSETS             
|CURRENT ASSETS:     |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |            |  |           |          
|                    | Cash and cash equivalents (Note 18)                                                                                                                                                                                                          |               |           | W20,424          |                       |  |           | W30,941   |            |  | $         | 29,892    |          
|                    | Short-term investment securities (Note 6)                                                                                                                                                                                                    |               |           | 7,788            |                       |  |           | 6,551     |            |  |           | 6,329     |          
|                    | Trade accounts and notes receivable, net of allowance for
    doubtful accounts of W163,016 million in 2003 and
    W140,561 million in 2004, and net of discount on present
    value of W5,145 million in 2004 (Notes 2, 4, 18
    and 20) |               |           | 831,487          |                       |  |           | 1,185,079 |            |  |           | 1,144,893 |          
|                    | Accounts receivable-other, net of allowance for doubtful
    accounts of W4,714 million in 2003 and W2,577 million
    in 2004 (Notes 2 and 20)                                                                                              |               |           | 67,549           |                       |  |           | 97,658    |            |  |           | 94,346    |          
|                    | Prepaid expenses                                                                                                                                                                                                                             |               |           | 13,490           |                       |  |           | 11,320    |            |  |           | 10,936    |          
|                    | Inventories, net of allowance of W1,681 million in 2004                                                                                                                                                                                      |               |           | 192,165          |                       |  |           | 257,802   |            |  |           | 249,060   |          
|                    | Short-term loans (Note 5)                                                                                                                                                                                                                    |               |           | 7,915            |                       |  |           | 20,196    |            |  |           | 19,511    |          
|                    | Other current assets                                                                                                                                                                                                                         |               |           | 18,950           |                       |  |           | 31,437    |            |  |           | 30,371    |          
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           
|                    |                                                                                                                                                                                                                                              |               | 1,159,768 |                  |                       |  | 1,640,984 |           |            |  | 1,585,338 |          
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           
|NON-CURRENT ASSETS: |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |            |  |           |          
|                    | Long-term financial instruments (Note 3)                                                                                                                                                                                                     |               |           | 52               |                       |  |           | 25        |            |  |           | 24        |          
|                    | Long-term investment securities (Note 7)                                                                                                                                                                                                     |               |           | 175,779          |                       |  |           | 144,967   |            |  |           | 140,051   |          
|                    | Investment securities using the equity method (Note 8)                                                                                                                                                                                       |               |           | 3,178            |                       |  |           |          |            |  |           |          |          
|                    | Longterm trade accounts and notes receivable, net of
    discount on present value of W6,336 million in 2004
    (Note 2)                                                                                                                   |               |           |                 |                       |  |           | 83,046    |            |  |           | 80,230    |          
|                    | Long-term loans (Notes 5 and 18)                                                                                                                                                                                                             |               |           | 51,191           |                       |  |           | 37,879    |            |  |           | 36,595    |          
|                    | Guarantee deposits, net of allowance for doubtful accounts of
    W4,989 million in 2003 and W2,012 million 2004                                                                                                                             |               |           | 239,111          |                       |  |           | 210,030   |            |  |           | 202,908   |          
|                    | Deferred income tax assets (Note 17)                                                                                                                                                                                                         |               |           | 97,464           |                       |  |           | 114,444   |            |  |           | 110,563   |          
|                    | Property and equipment, net (Notes 9 and 11)                                                                                                                                                                                                 |               |           | 4,685,914        |                       |  |           | 4,613,488 |            |  |           | 4,457,046 |          
|                    | Intangibles (Note 10)                                                                                                                                                                                                                        |               |           | 1,239,633        |                       |  |           | 1,153,903 |            |  |           | 1,114,774 |          
|                    | Other non-current assets                                                                                                                                                                                                                     |               |           | 8,752            |                       |  |           | 11,292    |            |  |           | 10,909    |          
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           
|                    |                                                                                                                                                                                                                                              |               | 6,501,074 |                  |                       |  | 6,369,074 |           |            |  | 6,013,025 |          
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           
|                    |                                                                                                                                                                                                                                              | Total Assets  |           |                  | W7,660,842            |  |           |           | W8,010,058 |  |           | $         | 7,738,438 | 
|                    |                                                                                                                                                                                                                                              |               |           |                  |                       |  |           |           |           



A-2



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##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS (CONTINUED)


AS OF DECEMBER 31, 2003 AND 2004


|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |         |           |           |           |         |           | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------------ | ---------------- | --------------------- | --------- | --------- | --------- | ------- | --------- | --------- | --------- | ------- | --------- | 
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            | Translation into |                      
|                                     |                                                                                                                                                                                                                 | Korean Won                                                             |                                            |                  | U.S. Dollars (Note 2) |          
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |          
|                                     |                                                                                                                                                                                                                 | 2003                                                                   |                                            |                  | 2004                  |           |           | 2004      |        
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            | (In thousands)   |                      
|                                     |                                                                                                                                                                                                                 | (In millions)                                                          |                                            |                  |                      
|LIABILITIES AND SHAREHOLDERS EQUITY
|CURRENT LIABILITIES:                 |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |         |           |           |          
|                                     | Short-term borrowings (Note 12)                                                                                                                                                                                 |                                                                        | W                                          | 293,339          |                       |           | W         | 326,286   |         |           | $         | 315,222   |        
|                                     | Trade accounts and notes payable (Notes 18 and 20)                                                                                                                                                              |                                                                        |                                            | 209,323          |                       |           |           | 202,663   |         |           |           | 195,791   |        
|                                     | Current portion of long-term debt, net of discount on debentures
    of W 4,997 million in 2003 and W565 million in 2004
    and addition of accrued interest of W 17,013 million in
    2004 (Notes 12 and 13) |                                                                        |                                            | 1,050,812        |                       |           |           | 1,036,370 |         |           |           | 1,001,227 |        
|                                     | Accounts payable-other (Notes 18 and 20)                                                                                                                                                                        |                                                                        |                                            | 584,177          |                       |           |           | 517,754   |         |           |           | 500,197   |        
|                                     | Accrued expenses                                                                                                                                                                                                |                                                                        |                                            | 113,445          |                       |           |           | 145,661   |         |           |           | 140,721   |        
|                                     | Withholdings                                                                                                                                                                                                    |                                                                        |                                            | 75,037           |                       |           |           | 124,586   |         |           |           | 120,361   |        
|                                     | Income tax payable                                                                                                                                                                                              |                                                                        |                                            | 34,342           |                       |           |           | 26,214    |         |           |           | 25,325    |        
|                                     | Other current liabilities                                                                                                                                                                                       |                                                                        |                                            | 16,495           |                       |           |           | 28,422    |         |           |           | 27,458    |        
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        | 2,376,970                                  |                  |                       |           | 2,407,956 |           |         |           | 2,326,302 |          
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|LONG-TERM LIABILITIES:               |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |         |           |           |          
|                                     | Debentures, net (Note 13)                                                                                                                                                                                       |                                                                        |                                            | 1,579,953        |                       |           |           | 1,819,182 |         |           |           | 1,757,494 |        
|                                     | Long-term accounts payable-other, net (Note 15)                                                                                                                                                                 |                                                                        |                                            | 518,761          |                       |           |           | 538,207   |         |           |           | 519,957   |        
|                                     | Accrued severance indemnities, net (Note 2)                                                                                                                                                                     |                                                                        |                                            | 32,740           |                       |           |           | 37,517    |         |           |           | 36,245    |        
|                                     | Other long-term liabilities                                                                                                                                                                                     |                                                                        |                                            | 9,380            |                       |           |           | 17,047    |         |           |           | 16,469    |        
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        | 2,140,834                                  |                  |                       |           | 2,411,953 |           |         |           | 2,330,165 |          
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        | Total Liabilities                          |                  |                       | 4,517,804 |           |           |         | 4,819,909 |           |           |         | 4,656,467 | 
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|SHAREHOLDERS EQUITY:                |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |         |           |           |          
|                                     | Common stock (Note 16)                                                                                                                                                                                          |                                                                        |                                            | 955,702          |                       |           |           | 955,702   |         |           |           | 923,294   |        
|                                     | Capital surplus                                                                                                                                                                                                 |                                                                        |                                            | 1,327,625        |                       |           |           | 1,324,536 |         |           |           | 1,279,621 |        
|                                     | Retained earnings                                                                                                                                                                                               |                                                                        |                                            | 945,501          |                       |           |           | 985,573   |         |           |           | 952,152   |        
|                                     | Capital adjustments:                                                                                                                                                                                            |                                                                        |                                            |                  |                       |           |           |           |         |           |           |          |        
|                                     |                                                                                                                                                                                                                 | Treasury stock (Note 16)                                               |                                            |                  | (97,587               | )         |           |           | (93,798 | )         |           |           | (90,617 | )        
|                                     |                                                                                                                                                                                                                 | Loss on disposal of treasury stock                                     |                                            |                  | (1,535                | )         |           |           |        |           |           |           |        |          
|                                     |                                                                                                                                                                                                                 | Gain on valuation of available-for-sale securities (Notes 6
    and 7) |                                            |                  | 7,377                 |           |           |           | 5,031   |           |           |           | 4,860   |          
|                                     |                                                                                                                                                                                                                 | Stock compensation (Note 16)                                           |                                            |                  | 2,655                 |           |           |           | 5,064   |           |           |           | 4,893   |          
|                                     | Minority interests                                                                                                                                                                                              |                                                                        |                                            | 3,300            |                       |           |           | 8,041     |         |           |           | 7,768     |        
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        | Total Shareholders Equity                 |                  |                       | 3,143,038 |           |           |         | 3,190,149 |           |           |         | 3,081,971 | 
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        
|                                     |                                                                                                                                                                                                                 |                                                                        | Total Liabilities and Shareholders Equity |                  | W                     | 7,660,842 |           |           | W       | 8,010,058 |           |           | $       | 7,738,438 | 
|                                     |                                                                                                                                                                                                                 |                                                                        |                                            |                  |                       |           |           |           |        



A-3



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##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME


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


|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |          |   |   |           |          |  
|------------------------------------------------------------------------ | -------------------------------------------------------------------- | --------------------------------------- | --------- | --------------------- | --------------------- | - | --------- | -------- | - | - | --------- | -------- | - | - | --------- | -------- | -
|                                                                         |                                                                      |                                         |           | Translation into      |                      
|                                                                         |                                                                      | Korean Won                              |           |                       | U.S. Dollars (Note 2) |  
|                                                                         |                                                                      |                                         |           |                       |                       |  
|                                                                         |                                                                      | 2002                                    |           |                       | 2003                  |   |           | 2004     |   |   | 2004      |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|                                                                         |                                                                      |                                         |           | (In thousands, except |                      
|                                                                         |                                                                      | (In millions, except per share amounts) |           |                       | per share amounts)    |  
|OPERATING REVENUE (Notes 19, 20 and 22)                                  |                                                                      | W                                       | 5,320,028 |                       |                       | W | 5,123,612 |          |   | W | 5,942,892 |          |   | $ | 5,741,370 |         
|OPERATING EXPENSES (Notes 19 and 20)                                     |                                                                      |                                         | 4,475,837 |                       |                       |   | 4,341,960 |          |   |   | 5,402,745 |          |   |   | 5,219,539 |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|OPERATING INCOME                                                         |                                                                      |                                         | 844,191   |                       |                       |   | 781,652   |          |   |   | 540,147   |          |   |   | 521,831   |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|OTHER INCOME (EXPENSES), NET:                                            |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |          |   |   |           |         
|                                                                         | Interest income                                                      |                                         |           | 17,950                |                       |   |           | 24,502   |   |   |           | 12,832   |   |   |           | 12,397   |  
|                                                                         | Rental income                                                        |                                         |           | 11,526                |                       |   |           | 11,074   |   |   |           | 10,560   |   |   |           | 10,202   |  
|                                                                         | Gain on foreign currency transactions, net                           |                                         |           | 1,083                 |                       |   |           | 565      |   |   |           | 8,409    |   |   |           | 8,124    |  
|                                                                         | Gain (loss) on foreign currency translation, net                     |                                         |           | 2,182                 |                       |   |           | (28,111  | ) |   |           | 18,857   |   |   |           | 18,218   |  
|                                                                         | Interest expense                                                     |                                         |           | (216,092              | )                     |   |           | (274,885 | ) |   |           | (222,688 | ) |   |           | (215,137 | )
|                                                                         | Loss on disposal of trade accounts and notes receivable
    (Note 4) |                                         |           | (15,147               | )                     |   |           | (10,222  | ) |   |           | (12,186  | ) |   |           | (11,773  | )
|                                                                         | Loss on valuation of inventories                                     |                                         |           | (2,155                | )                     |   |           | (975     | ) |   |           |         |   |   |           |         |  
|                                                                         | Loss on valuation using the equity method of accounting
    (Note 8) |                                         |           | (122                  | )                     |   |           | (2,257   | ) |   |           | (1,042   | ) |   |           | (1,007   | )
|                                                                         | Gain (loss) on disposal of short-term investment securities, net     |                                         |           |                      |                       |   |           | (1,746   | ) |   |           | 423      |   |   |           | 409      |  
|                                                                         | Loss on disposal of long-term investment securities, net             |                                         |           | (36                   | )                     |   |           | (2,773   | ) |   |           | (3,541   | ) |   |           | (3,421   | )
|                                                                         | Loss on disposal of property and equipment, net                      |                                         |           | (45,606               | )                     |   |           | (70,559  | ) |   |           | (14,053  | ) |   |           | (13,576  | )
|                                                                         | Impairment loss on investment securities (Note 7)                    |                                         |           | (2,774                | )                     |   |           | (2,280   | ) |   |           | (45,856  | ) |   |           | (44,301  | )
|                                                                         | Recovery of impairment loss on investment securities                 |                                         |           |                      |                       |   |           | 3,579    |   |   |           |         |   |   |           |         |  
|                                                                         | Loss on valuation of currency options (Note 14)                      |                                         |           |                      |                       |   |           |          |   |   |           | (1,349   | ) |   |           | (1,303   | )
|                                                                         | Other, net                                                           |                                         |           | 17,443                |                       |   |           | 28,092   |   |   |           | 25,075   |   |   |           | 24,225   |  
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|                                                                         |                                                                      |                                         | (231,748  | )                     |                       |   | (325,996  | )        |   |   | (224,559  | )        |   |   | (22,922   | )       
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|ORDINARY INCOME                                                          |                                                                      |                                         | 612,443   |                       |                       |   | 455,656   |          |   |   | 315,588   |          |   |   | 304,888   |         
|EXTRAORDINARY ITEM                                                       |                                                                      |                                         |          |                       |                       |   |          |          |   |   |          |          |   |   |          |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|INCOME BEFORE INCOME TAX                                                 |                                                                      |                                         | 612,443   |                       |                       |   | 455,656   |          |   |   | 315,588   |          |   |   | 304,888   |         
|INCOME TAX EXPENSE (Note 17)                                             |                                                                      |                                         | (80,280   | )                     |                       |   | (50,702   | )        |   |   | (25,566   | )        |   |   | (24,699   | )       
|MINORITY INTERESTS IN NET LOSS (INCOME) OF CONSOLIDATED
    SUBSIDIARIES |                                                                      |                                         |          |                       |                       |   | 1,075     |          |   |   | (2,159    | )        |   |   | (2,086    | )       
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|NET INCOME                                                               |                                                                      | W                                       | 532,163   |                       |                       | W | 406,029   |          |   | W | 287,863   |          |   | $ | 278,103   |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|EARNINGS PER SHARE (Note 2)                                              |                                                                      | W                                       | 2,904     |                       |                       | W | 2,167     |          |   | W | 1,566     |          |   | $ | 1.513     |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         
|DILUTED EARNINGS PER SHARE (Note 2)                                      |                                                                      | W                                       | 2,894     |                       |                       | W | 2,105     |          |   | W | 1,535     |          |   | $ | 1.483     |         
|                                                                         |                                                                      |                                         |           |                       |                       |   |           |          |   |   |           |         



A-4



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##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


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


|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |   |          |   |  |   |            |  
|---------------------------------------------------------------------- |  | ------------- | -------- |  | ------- | - | ---------- | -------- |  | - | ----------- | - |  | --------- | -------- | - | ----- | - | -------- | - |  | - | ---------- | -
|                                                                       |  | Korean Won    |         
|                                                                       |  |               |         
|                                                                       |  | Common        |          |  | Capital |   |            | Retained |  |   | Capital     |   |  | Minority  |          |   |      
|                                                                       |  | Stock         |          |  | Surplus |   |            | Earnings |  |   | Adjustments |   |  | Interests |          |   | Total |  
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|                                                                       |  | (In millions) |         
|Balance at December 31, 2001                                           |  | W             | 920,290  |  |         | W | 1,132,834  |          |  | W | 10,481      |   |  | W         | (31,609  | ) |       | W |         |   |  | W | 2,031,996  |  
|Net income for 2002                                                    |  |               |         |  |         |   |           |          |  |   | 532,163     |   |  |           |         |   |       |   |         |   |  |   | 532,163    |  
|Effect of changes in consolidated subsidiaries                         |  |               |         |  |         |   | (3,265     | )        |  |   |            |   |  |           | 2,104    |   |       |   | 235,842  |   |  |   | 234,681    |  
|Compensation expense resulting from with stock options                 |  |               |         |  |         |   |           |          |  |   |            |   |  |           | 1,064    |   |       |   |         |   |  |   | 1,064      |  
|Loss on valuation of investment securities using the equity
    method |  |               |         |  |         |   | (295       | )        |  |   |            |   |  |           |         |   |       |   |         |   |  |   | (295       | )
|Gain on valuation of available-for-sale securities                     |  |               |         |  |         |   |           |          |  |   |            |   |  |           | 698      |   |       |   |         |   |  |   | 698        |  
|Purchase of treasury stock                                             |  |               |         |  |         |   |           |          |  |   |            |   |  |           | (1       | ) |       |   |         |   |  |   | (1         | )
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|Balance at December 31, 2002                                           |  |               | 920,290  |  |         |   | 1,129,274  |          |  |   | 542,644     |   |  |           | (27,744  | ) |       |   | 235,842  |   |  |   | 2,800,306  |  
|Net income for 2003                                                    |  |               |         |  |         |   |           |          |  |   | 406,029     |   |  |           |         |   |       |   | (1,075   | ) |  |   | 404,954    |  
|Merger                                                                 |  |               | 35,412   |  |         |   | 192,654    |          |  |   |            |   |  |           |         |   |       |   |         |   |  |   | 228,066    |  
|Effect of changes in consolidated subsidiaries                         |  |               |         |  |         |   | 3,561      |          |  |   | (16         | ) |  |           | (1,614   | ) |       |   | (231,467 | ) |  |   | (229,536   | )
|Amortization of organization cost                                      |  |               |         |  |         |   |           |          |  |   | (3,156      | ) |  |           |         |   |       |   |         |   |  |   | (3,156     | )
|Compensation expense resulting from with stock options                 |  |               |         |  |         |   |           |          |  |   |            |   |  |           | 1,591    |   |       |   |         |   |  |   | 1,591      |  
|Gain on valuation of investment securities using the equity
    method |  |               |         |  |         |   | 2,136      |          |  |   |            |   |  |           |         |   |       |   |         |   |  |   | 2,136      |  
|Gain on valuation of available-for-sale securities                     |  |               |          |  |         |   |            |          |  |   |             |   |  |           | 5,266    |   |       |   |         |   |  |   | 5,266      |  
|Purchase of treasury stock                                             |  |               |         |  |         |   |           |          |  |   |            |   |  |           | (66,589  | ) |       |   |          |   |  |   | (66,589    | )
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|Balance at December 31, 2003                                           |  | W             | 955,702  |  |         | W | 1,327,625  |          |  | W | 945,501     |   |  | W         | (89,090  | ) |       | W | 3,300    |   |  | W | 3,143,038  |  
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|Net income for 2004                                                    |  |               |         |  |         |   |           |          |  |   | 287,863     |   |  |           |         |   |       |   |         |   |  |   | 287,863    |  
|Effect of changes in consolidated subsidiaries                         |  |               |         |  |         |   | (953       | )        |  |   | (2,266      | ) |  |           |         |   |       |   | 2,582    |   |  |   | (637       | )
|Retirement of treasury stock                                           |  |               |         |  |         |   |            |          |  |   | (149,853    | ) |  |           | 149,853  |   |       |   |         |   |  |   |            |  
|Dividends                                                              |  |               |         |  |         |   |            |          |  |   | (94,137     | ) |  |           |         |   |       |   |         |   |  |   | (94,137    | )
|Loss on disposal of treasury stock                                     |  |               |         |  |         |   |            |          |  |   | (1,535      | ) |  |           | 1,535    |   |       |   |         |   |  |   |           |  
|Compensation expense resulting from with stock options                 |  |               |         |  |         |   |           |          |  |   |            |   |  |           | 2,409    |   |       |   |         |   |  |   | 2,409      |  
|Gain on valuation of investment securities using the equity
    method |  |               |         |  |         |   | (2,136     | )        |  |   |            |   |  |           |         |   |       |   |         |   |  |   | (2,136     | )
|Gain on valuation of available-for-sale securities                     |  |               |         |  |         |   |           |          |  |   |            |   |  |           | (2,346   | ) |       |   |         |   |  |   | (2,346     | )
|Effect of changes in minority interests                                |  |               |         |  |         |   |           |          |  |   |            |   |  |           |         |   |       |   | 2,159    |   |  |   | 2,159      |  
|Purchase of treasury stock                                             |  |               |         |  |         |   |           |          |  |   |            |   |  |           | (146,064 | ) |       |   |         |   |  |   | (146,064   | )
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|Balance at December 31, 2004                                           |  | W             | 955,702  |  |         | W | 1,324,536  |          |  | W | 985,573     |   |  | W         | (83,703  | ) |       | W | 8,041    |   |  | W | 3,190,149  |  
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  
|Translation into U.S. Dollars (In thousands) (Note 2)                  |  |               | $923,294 |  |         |   | $1,279,621 |          |  |   | $952,152    |   |  |           | $(80,864 | ) |       |   | $7,768   |   |  |   | $3,081,971 |  
|                                                                       |  |               |          |  |         |   |            |          |  |   |             |   |  |           |          |   |       |  



A-5



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


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


|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |          |   |   |         |          |  
|------------------------------------------------------------ | ------------------------------------------------------------ | ------------- | -------- | -------------- | -------- |  | --------- | ---------------- | - |  | --------- | -------- | - | - | ------- | -------- | -
|                                                             |                                                              |               |          |                |          |  |           | Translation into |  
|                                                             |                                                              |               |          | U.S. Dollars   |         
|                                                             |                                                              | Korean Won    |          |                | (Note 2) | 
|                                                             |                                                              |               |          |                |          | 
|                                                             |                                                              | 2002          |          |                | 2003     |  |           | 2004             |   |  | 2004      |         
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|                                                             |                                                              |               |          | (In thousands) |         
|                                                             |                                                              | (In millions) |          |                |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                              |               |          |                |          |  |           |                  |   |  |           |          |   |   |         |         
|Net income                                                   |                                                              |               | W532,163 |                |          |  | W406,029  |                  |   |  | W287,863  |          |   | $ | 278,103 |         
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|Addition of expenses not involving cash outflows:            |                                                              |               |          |                |          |  |           |                  |   |  |           |          |   |   |         |         
|                                                             | Loss on disposal of property and equipment, net              |               |          | 45,606         |          |  |           | 70,559           |   |  |           | 14,053   |   |   |         | 13,576   |  
|                                                             | Depreciation                                                 |               |          | 723,667        |          |  |           | 839,430          |   |  |           | 997,110  |   |   |         | 963,298  |  
|                                                             | Amortization of intangibles                                  |               |          | 1,832          |          |  |           | 19,287           |   |  |           | 110,692  |   |   |         | 106,938  |  
|                                                             | Long-term accrued interest                                   |               |          |               |          |  |           | 7,420            |   |  |           | 7,643    |   |   |         | 7,384    |  
|                                                             | Amortization of discounts on debentures                      |               |          | 33,452         |          |  |           | 11,883           |   |  |           | 12,789   |   |   |         | 12,355   |  
|                                                             | Amortization of discounts on long-term payable-other         |               |          |               |          |  |           | 14,722           |   |  |           | 20,015   |   |   |         | 19,336   |  
|                                                             | Provision for severance indemnities                          |               |          | 15,100         |          |  |           | 12,311           |   |  |           | 12,670   |   |   |         | 12,240   |  
|                                                             | Loss on disposal of trade accounts and notes receivable      |               |          | 15,147         |          |  |           | 10,222           |   |  |           | 12,186   |   |   |         | 11,773   |  
|                                                             | Loss on valuation using the equity method of accounting      |               |          | 122            |          |  |           | 2,257            |   |  |           | 1,042    |   |   |         | 1,007    |  
|                                                             | Loss on disposal of short-term investment securities, net    |               |          |               |          |  |           | 1,746            |   |  |           |         |   |   |         |         |  
|                                                             | Loss on disposal of long-term investment securities, net     |               |          | 36             |          |  |           | 2,773            |   |  |           | 3,541    |   |   |         | 3,421    |  
|                                                             | Loss on valuation of inventories                             |               |          | 2,155          |          |  |           | 975              |   |  |           |         |   |   |         |         |  
|                                                             | Loss on foreign currency translation, net                    |               |          |               |          |  |           | 28,111           |   |  |           |         |   |   |         |         |  
|                                                             | Stock compensation                                           |               |          | 1,064          |          |  |           | 4,560            |   |  |           | 2,409    |   |   |         | 2,327    |  
|                                                             | Impairment loss on investment securities                     |               |          | 2,774          |          |  |           | 2,280            |   |  |           | 45,856   |   |   |         | 44,301   |  
|                                                             | Bad debt expense                                             |               |          | 23,555         |          |  |           | 52,488           |   |  |           | 25,485   |   |   |         | 24,621   |  
|                                                             | Loss on valuation of currency options                        |               |          |               |          |  |           |                 |   |  |           | 1,349    |   |   |         | 1,303    |  
|                                                             | Minority interest in net income of consolidated subsidiaries |               |          |               |          |  |           |                 |   |  |           | 2,159    |   |   |         | 2,086    |  
|                                                             | Other                                                        |               |          | 2,161          |          |  |           | 1,617            |   |  |           | 5,172    |   |   |         | 4,997    |  
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|                                                             |                                                              |               | 866,671  |                |          |  | 1,082,641 |                  |   |  | 1,274,171 |          |   |   | 79,635  |         
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|Deduction of revenues not involving cash inflows:            |                                                              |               |          |                |          |  |           |                  |   |  |           |          |   |   |         |         
|                                                             | Gain on foreign currency translation, net                    |               |          | 2,182          |          |  |           |                 |   |  |           | 19,023   |   |   |         | 18,378   |  
|                                                             | Gain on disposal of short-term investment securities, net    |               |          |               |          |  |           |                 |   |  |           | 423      |   |   |         | 409      |  
|                                                             | Recovery of impairment loss in investment securities         |               |          |               |          |  |           | 3,579            |   |  |           |         |   |   |         |         |  
|                                                             | Minority interest in net loss of consolidated subsidiaries   |               |          |               |          |  |           | 1,075            |   |  |           |         |   |   |         |         |  
|                                                             | Other                                                        |               |          | 3              |          |  |           | 676              |   |  |           | 2,974    |   |   |         | 2,873    |  
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|                                                             |                                                              |               | 2,185    |                |          |  | 5,330     |                  |   |  | 22,420    |          |   |   | 2,873   |         
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|Changes in assets and liabilities resulting from operations: |                                                              |               |          |                |          |  |           |                  |   |  |           |          |   |   |         |         
|                                                             | Increase in trade accounts and notes receivable              |               |          | (396,750       | )        |  |           | (433,633         | ) |  |           | (388,636 | ) |   |         | (375,457 | )
|                                                             | Decrease (Increase) in accounts receivable-other             |               |          | 27,537         |          |  |           | (3,991           | ) |  |           | (19,815  | ) |   |         | (19,143  | )
|                                                             | Decrease (Increase) in prepaid expenses                      |               |          | (1,908         | )        |  |           | 14,504           |   |  |           | 9,123    |   |   |         | 8,814    |  
|                                                             | Increase in inventories                                      |               |          | (88,072        | )        |  |           | (32,229          | ) |  |           | (68,182  | ) |   |         | (65,870  | )
|                                                             | Decrease (Increase) in other current assets                  |               |          | (23,173        | )        |  |           | 34,534           |   |  |           | (18,686  | ) |   |         | (18,052  | )
|                                                             | Payment of severance indemnities                             |               |          | (9,487         | )        |  |           | (13,873          | ) |  |           | (8,219   | ) |   |         | (7,940   | )
|                                                             | Increase (Decrease) in trade accounts and notes payable      |               |          | 168,328        |          |  |           | (199,829         | ) |  |           | (32,619  | ) |   |         | (31,513  | )
|                                                             | Increase (Decrease) in accounts payable-other                |               |          | 334,530        |          |  |           | (151,212         | ) |  |           | (82,732  | ) |   |         | (79,927  | )
|                                                             | Increase in accrued expenses                                 |               |          | 29,083         |          |  |           | 28,838           |   |  |           | 32,439   |   |   |         | 31,339   |  
|                                                             | Increase (Decrease) in withholdings                          |               |          | (10,308        | )        |  |           | (29,529          | ) |  |           | 49,549   |   |   |         | 47,869   |  
|                                                             | Increase (Decrease) in income tax payable                    |               |          | 40,804         |          |  |           | (9,101           | ) |  |           | (8,883   | ) |   |         | (8,582   | )
|                                                             | Increase (Decrease) in other current liabilities             |               |          | (19,509        | )        |  |           | (6,303           | ) |  |           | 11,764   |   |   |         | 11,365   |  
|                                                             | Increase in long-term trade accounts and notes receivable    |               |          |               |          |  |           |                 |   |  |           | (83,046  | ) |   |         | (80,230  | )
|                                                             | Decrease in National Pension                                 |               |          | 325            |          |  |           | 337              |   |  |           | 144      |   |   |         | 139      |  
|                                                             | Increase in deferred income tax assets                       |               |          | (2,025         | )        |  |           | (20,919          | ) |  |           | (18,378  | ) |   |         | (17,755  | )
|                                                             | Increase in other long-term liabilities                      |               |          | 4,165          |          |  |           | 4,028            |   |  |           | 6,561    |   |   |         | 6,339    |  
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|                                                             |                                                              |               | 53,540   |                |          |  | (818,378  | )                |   |  | (619,616  | )        |   |   | (11,416 | )       
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         
|                                                             | Net cash provided by operating activities                    |               |          | 1,450,189      |          |  |           | 664,962          |   |  |           | 919,998  |   |   |         | 888,802  |  
|                                                             |                                                              |               |          |                |          |  |           |                  |   |  |           |         



A-6



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


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


|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |            |  
|----------------------------------------------------------------- | --------------------------------------------------------- | ------------- | ---------- | -------------- | -------- | - | ---------- | ---------------- | - | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                  |                                                           |               |            |                |          |   |            | Translation into |  
|                                                                  |                                                           |               |            | U.S. Dollars   |         
|                                                                  |                                                           | Korean Won    |            |                | (Note 2) |  
|                                                                  |                                                           |               |            |                |          |  
|                                                                  |                                                           | 2002          |            |                | 2003     |   |            | 2004             |   |   | 2004       |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  |                                                           |               |            | (In thousands) |         
|                                                                  |                                                           | (In millions) |            |                |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                             |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|Cash inflows from investing activities                            |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|                                                                  | Proceeds from sale of short-term investment securities    |               | W          |               |          |   | W          | 417,249          |   |   | W          | 100,437    |   |   | $          | 97,031     |  
|                                                                  | Collection of short-term loans                            |               |            | 33,170         |          |   |            | 24,432           |   |   |            | 22,844     |   |   |            | 22,069     |  
|                                                                  | Proceeds from sale of long-term investment securities     |               |            | 5,101          |          |   |            | 23,145           |   |   |            | 19,147     |   |   |            | 18,498     |  
|                                                                  | Withdrawal of guarantee deposits                          |               |            | 25,439         |          |   |            | 48,750           |   |   |            | 60,530     |   |   |            | 58,477     |  
|                                                                  | Withdrawal of short-term financial instruments            |               |            | 2,500          |          |   |            | 370,000          |   |   |            |           |   |   |            |           |  
|                                                                  | Proceeds from disposal of property and equipment          |               |            | 6,553          |          |   |            | 137,114          |   |   |            | 2,927      |   |   |            | 2,828      |  
|                                                                  | Proceeds from disposal of intangibles                     |               |            | 4              |          |   |            | 100              |   |   |            | 236        |   |   |            | 228        |  
|                                                                  | Other                                                     |               |            | 169            |          |   |            | 93               |   |   |            | 27         |   |   |            | 26         |  
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  |                                                           |               | 72,936     |                |          |   | 1,020,883  |                  |   |   | 206,148    |            |   |   | 3,082      |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|Cash outflow from investing activities                            |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|                                                                  | Purchase of short-term financial instruments              |               |            |               |          |   |            | (35,000          | ) |   |            | (520       | ) |   |            | (502       | )
|                                                                  | Purchase of short-term investment securities              |               |            |               |          |   |            | (35,684          | ) |   |            | (100,000   | ) |   |            | (96,609    | )
|                                                                  | Purchase of long-term investment securities               |               |            | (1,354,787     | )        |   |            | (2,614           | ) |   |            | (7,943     | ) |   |            | (7,674     | )
|                                                                  | Payment of guarantee deposits                             |               |            | (34,307        | )        |   |            | (46,131          | ) |   |            | (32,763    | ) |   |            | (31,652    | )
|                                                                  | Acquisition of property and equipment                     |               |            | (1,014,278     | )        |   |            | (935,326         | ) |   |            | (955,119   | ) |   |            | (922,731   | )
|                                                                  | Increase in intangibles                                   |               |            | (3,443         | )        |   |            | (31,205          | ) |   |            | (23,318    | ) |   |            | (22,527    | )
|                                                                  | Extension of long-term loans                              |               |            | (34,537        | )        |   |            | (32,152          | ) |   |            | (22,156    | ) |   |            | (21,405    | )
|                                                                  | Other                                                     |               |            | (382           | )        |   |            | (5               | ) |   |            | (781       | ) |   |            | (755       | )
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  |                                                           |               | (2,441,734 | )              |          |   | (1,118,117 | )                |   |   | (1,142,600 | )          |   |   | (1,097,691 | )         
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  | Net cash used in investing activities                     |               |            | (2,368,798     | )        |   |            | (97,234          | ) |   |            | (936,452   | ) |   |            | (904,698   | )
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                             |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|Cash inflows from financing activities                            |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|                                                                  | Proceeds from sale of trade accounts and notes receivable |               |            | 470,000        |          |   |            | 512,000          |   |   |            |           |   |   |            |           |  
|                                                                  | Proceeds from short-term borrowings                       |               |            | 1,295,000      |          |   |            | 3,876,831        |   |   |            | 5,775,000  |   |   |            | 5,579,171  |  
|                                                                  | Proceeds from issuance of debentures                      |               |            | 1,111,208      |          |   |            |                 |   |   |            | 1,275,396  |   |   |            | 1,232,148  |  
|                                                                  | Proceeds from long-term debt                              |               |            | 100,000        |          |   |            |                 |   |   |            |           |   |   |            |           |  
|                                                                  | Increase from merger                                      |               |            |               |          |   |            | 314,610          |   |   |            |           |   |   |            |           |  
|                                                                  | Other                                                     |               |            |               |          |   |            |                 |   |   |            | 13,361     |   |   |            | 12,908     |  
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  |                                                           |               | 2,976,208  |                |          |   | 4,703,441  |                  |   |   | 7,063,757  |            |   |   | 12,908     |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|Cash outflows from financing activities                           |                                                           |               |            |                |          |   |            |                  |   |   |            |            |   |   |            |           
|                                                                  | Repayment of short-term borrowings                        |               |            | (1,415,000     | )        |   |            | (4,130,000       | ) |   |            | (5,741,052 | ) |   |            | (5,546,374 | )
|                                                                  | Repayment of debentures                                   |               |            |               |          |   |            | (177             | ) |   |            | (94,137    | ) |   |            | (90,945    | )
|                                                                  | Repayment of current portion of long-term debt            |               |            | (672,290       | )        |   |            | (831,802         | ) |   |            | (1,055,529 | ) |   |            | (1,019,736 | )
|                                                                  | Repayment of long-term debt                               |               |            |               |          |   |            | (315,775         | ) |   |            |           |   |   |            |           |  
|                                                                  | Acquisition of treasury stock                             |               |            | (1             | )        |   |            | (4,317           | ) |   |            | (146,064   | ) |   |            | (141,111   | )
|                                                                  | Repayment of other non-current liabilities                |               |            | (10            | )        |   |            | (19              | ) |   |            | (4         | ) |   |            | (4         | )
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  |                                                           |               | (2,087,301 | )              |          |   | (5,282,090 | )                |   |   | (7,036,786 | )          |   |   | (6,798,170 | )         
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|                                                                  | Net cash provided by (used in) financing activities       |               |            | 888,907        |          |   |            | (578,649         | ) |   |            | 26,971     |   |   |            | 26,057     |  
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              |                                                           |               | (29,702    | )              |          |   | (10,921    | )                |   |   | 10,517     |            |   |   | 10,161     |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|INCREASE (DECREASE) FROM CHANGES IN CONSOLIDATED
    SUBSIDIARIES |                                                           |               | 124,895    |                |          |   | (116,210   | )                |   |   |           |            |   |   |           |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                      |                                                           |               | 52,362     |                |          |   | 147,555    |                  |   |   | 20,424     |            |   |   | 19,731     |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           
|CASH AND CASH EQUIVALENTS, END OF YEAR                            |                                                           | W             | 147,555    |                |          | W | 20,424     |                  |   | W | 30,941     |            |   | $ | 29,892     |           
|                                                                  |                                                           |               |            |                |          |   |            |                  |   |   |            |           

A-7



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


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


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION


|                                 |                                                                                                              |               |   |                  |                       |  |   |         |  |  |      |           |  |  |   |         | 
|-------------------------------- | ------------------------------------------------------------------------------------------------------------ | ------------- | - | ---------------- | --------------------- |  | - | ------- |  |  | ---- | --------- |  |  | - | ------- | 
|                                 |                                                                                                              |               |   | Translation into |                      
|                                 |                                                                                                              | Korean Won    |   |                  | U.S. Dollars (Note 2) | 
|                                 |                                                                                                              |               |   |                  |                       | 
|                                 |                                                                                                              | 2002          |   |                  | 2003                  |  |   | 2004    |  |  | 2004 |          
|                                 |                                                                                                              |               |   |                  |                       |  |   |         |  |  |      |          
|                                 |                                                                                                              |               |   | (In thousands)   |                      
|                                 |                                                                                                              | (In millions) |   |                  |                      
|TRANSACTIONS NOT INVOLVING CASH: |                                                                                                              |               |   |                  |                       |  |   |         |  |  |      |           |  |  |   |        
|                                 | Transfer of trade accounts and notes receivable to long-term
    investment securities                       |               | W | 43,430           |                       |  | W | 119,168 |  |  | W    | 30,831    |  |  | $ | 29,786  | 
|                                 | Transfer of debentures to current portion of long term debt                                                  |               |   | 571,103          |                       |  |   | 994,014 |  |  |      | 1,014,556 |  |  |   | 980,153 | 
|                                 | Transfer of long-term obligation under capital lease to current
    portion of long-term debt                |               |   | 2,235            |                       |  |   | 550     |  |  |      | 15,732    |  |  |   | 15,199  | 
|                                 | Transfer of interest expense to construction in progress                                                     |               |   | 34,116           |                       |  |   |        |  |  |      |          |  |  |   |        | 
|                                 | Transfer of long-term debt to current portion of long-term debt                                              |               |   |                  |                       |  |   | 216,994 |  |  |      | 100,000   |  |  |   |        | 
|                                 | Transfer of long-term loans to short-term loans                                                              |               |   | 17,672           |                       |  |   | 26,752  |  |  |      | 34,534    |  |  |   | 33,363  | 
|                                 | Transfer of long-term investment securities to trade accounts
    and notes receivable                       |               |   |                 |                       |  |   | 22,332  |  |  |      |          |  |  |   |        | 
|                                 | Transfer of long-term investment securities to short-term
    investment securities                          |               |   |                 |                       |  |   | 1,420   |  |  |      |          |  |  |   |        | 
|                                 | Transfer of property and equipment to accounts receivable-other                                              |               |   |                 |                       |  |   |        |  |  |      | 12,030    |  |  |   | 11,622  | 
|                                 | Retirement of treasury stock                                                                                 |               |   |                 |                       |  |   |        |  |  |      | 149,853   |  |  |   | 144,772 | 
|                                 | Recognition of loss on valuation of investment securities using
    the equity method as capital adjustments |               |   | 296              |                       |  |   | 58,197  |  |  |      | 2,117     |  |  |   | 2,045   | 



A-8



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


AS OF DECEMBER 31, 2003 AND 2004




|   |         
|-- | --------
|1. | GENERAL:



| |                                         
| | ----------------------------------------
| | (1)             KT
    Freetel Co., Ltd.





|                      |  |           |             |  |               |  |        | 
|--------------------- |  | --------- | ----------- |  | ------------- |  | ------ | 
|                      |  | Number of |             |  | Percentage of | 
|                      |  | Shares    |             |  | Ownership (%) | 
|                      |  |           |             |  |               | 
|KT Corporation        |  |           | 89,640,088  |  |               |  | 48.70  | 
|Qualcomm Incorporated |  |           | 4,416,350   |  |               |  | 2.40   | 
|HyoSung Corp.         |  |           | 3,017,276   |  |               |  | 1.64   | 
|Microsoft Corp.       |  |           | 2,030,000   |  |               |  | 1.10   | 
|SSB-WTCO NA           |  |           | 1,580,690   |  |               |  | 0.86   | 
|NTC-GOV SPORE         |  |           | 1,118,240   |  |               |  | 0.61   | 
|Others                |  |           | 82,264,675  |  |               |  | 44.69  | 
|                      |  |           |             |  |               | 
|                      |  |           | 184,067,319 |  |               |  | 100.00 | 
|                      |  |           |             |  |               | 



| |                                            
| | -------------------------------------------
| | (2)             Consolidated
    Subsidiary



|                           |                      |              |      |                         |      |  |       |      |  |  |       |  |  |                  |       |  |  |                              |                
|-------------------------- | -------------------- | ------------ | ---- | ----------------------- | ---- |  | ----- | ---- |  |  | ----- |  |  | ---------------- | ----- |  |  | ---------------------------- | ---------------
|                           |                      |              |      | Ownership Percentage(%) |      |  |      
|                           |                      | Year Control |      |                         |      |  |       |     
|Subsidiary                 |                      | Was Obtained |      |                         | 2002 |  |       | 2003 |  |  | 2004  |  |  | Primary Business
|                           |                      |              |      |                         |      |  |       |      |  |  |       |  |  |                 
|KTF Technologies Co., Ltd. |                      |              | 2002 |                         |      |  | 57.40 |      |  |  | 57.40 |  |  |                  | 70.75 |  |  | Developing and manufacturing
|                           | (KTF Technologies) |              |      |                         |      |  |       |      |  |  |       |  |  |                  |       |  |  |                              | of PCS handsets





A-9



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                                            
|-- | -------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



| |                                          
| | -----------------------------------------
| | Basis of Financial Statement Presentation









| |                                                                         
| | ------------------------------------------------------------------------
| | Adoption of Newly Effective Statements of Korea
    Accounting Standards





| |                 
| | ----------------
| | Use of Estimates





| |                    
| | -------------------
| | Revenue Recognition





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



A-10



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                                   |  |      |          |   |      |  |          |      |  |  |          |  
|-------------------------------------------------- |  | ---- | -------- | - | ---- |  | -------- | ---- |  |  | -------- | -
|                                                   |  | 2002 |          |   | 2003 |  |          | 2004 | 
|                                                   |  |      |          |   |      |  |          |      | 
|Beginning of year                                  |  |      | W176,313 |   |      |  | W163,617 |      |  |  | W167,730 |  
|Write-offs                                         |  |      | (36,734  | ) |      |  | (48,375  | )    |  |  | (50,077  | )
|                                                   |  |      |          |   |      |  |          |      | 
|                                                   |  |      | 139,579  |   |      |  | 115,242  |      |  |  | 117,653  |  
|Provision                                          |  |      | 23,555   |   |      |  | 52,488   |      |  |  | 25,485   |  
|Increase from changes in consolidated subsidiaries |  |      | 483      |   |      |  |         |      |  |  |         |  
|                                                   |  |      |          |   |      |  |          |      | 
|End of year                                        |  |      | W163,617 |   |      |  | W167,730 |      |  |  | W143,138 |  
|                                                   |  |      |          |   |      |  |          |      | 



| |            
| | -----------
| | Inventories





| |                                                                                 
| | --------------------------------------------------------------------------------
| | Investment Securities Other than those Accounted for
    Using the Equity Method



|    |                             
|--- | ----------------------------
|(1) | Classification of Securities





|    |                        
|--- | -----------------------
|(2) | Valuation of Securities





A-11



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|    |                               
|--- | ------------------------------
|(3) | Reclassification of Securities





| |                                                  
| | -------------------------------------------------
| | Investment Securities Using the Equity
    Method





| |                       
| | ----------------------
| | Property and Equipment



A-12



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                         |  |                        |              | 
|------------------------ |  | ---------------------- | ------------ | 
|                         |  | Estimated Useful Lives |             
|                         |  |                        |             
|Buildings and structures |  |                        | 15  30 years | 
|Machinery and equipment  |  |                        | 8 years      | 
|Vehicles                 |  |                        | 4  8 years   | 
|Other                    |  |                        | 4  8 years   | 



| |                                  
| | ---------------------------------
| | Capitalization of Financing Costs





| |                  
| | -----------------
| | Long-Lived Assets





| |       
| | ------
| | Leases





| |            
| | -----------
| | Intangibles



|                             |  |                        |              | 
|---------------------------- |  | ---------------------- | ------------ | 
|                             |  | Estimated Useful Lives |             
|                             |  |                        |             
|Frequency use rights         |  |                        | 13 years     | 
|Goodwill                     |  |                        | 5 years      | 
|Intellectual property rights |  |                        | 5  10 years  | 
|Facility use rights          |  |                        | 10  20 years | 
|Development costs            |  |                        | 4  5 years   | 
|Other                        |  |                        | 5 years      | 

A-13



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




| |                                        
| | ---------------------------------------
| | Long-term Accounts and Notes Receivable





| |                  
| | -----------------
| | Convertible bonds





| |                        
| | -----------------------
| | Discounts on Debentures





| |                              
| | -----------------------------
| | Accrued Severance Indemnities







|                                                   |  |      |        |   |      |   |         |      |  |   |        |  
|-------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                   |  | 2002 |        |   | 2003 |   |         | 2004 | 
|                                                   |  |      |        |   |      |   |         |      | 
|Beginning of year                                  |  | W    | 25,792 |   |      | W | 31,604  |      |  | W | 33,897 |  
|Severance payments                                 |  |      | (9,487 | ) |      |   | (13,873 | )    |  |   | (8,219 | )
|                                                   |  |      |        |   |      |   |         |      | 
|                                                   |  |      | 16,305 |   |      |   | 17,731  |      |  |   | 25,678 |  
|Provision                                          |  |      | 15,100 |   |      |   | 12,311  |      |  |   | 13,076 |  
|Increase due to merger                             |  |      | 18     |   |      |   | 3,292   |      |  |   | 52     |  
|Increase from changes in consolidated subsidiaries |  |      | 181    |   |      |   | 563     |      |  |   |       |  
|                                                   |  |      |        |   |      |   |         |      | 
|End of year                                        |  | W    | 31,604 |   |      | W | 33,897  |      |  | W | 38,806 |  
|                                                   |  |      |        |   |      |   |         |      | 



| |                                                                 
| | ----------------------------------------------------------------
| | Accounting for Foreign Currency Transactions and
    Translation

The Company maintains its accounts in Korean won.


A-14



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






| |                                      
| | -------------------------------------
| | Accounting for Derivative Instruments





| |           
| | ----------
| | Income Tax





| |                           
| | --------------------------
| | Stock Compensation Expense





| |                                                                       
| | ----------------------------------------------------------------------
| | Basic and Diluted Ordinary Income per Share and
    Earnings per Share





A-15



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|                  |   |                               |                               |                           |              |        |  |         | 
|----------------- | - | ----------------------------- | ----------------------------- | ------------------------- | ------------ | ------ |  | ------- | 
|                  |   |                               |                               | Number of                 |             
|                  |   |                               |                               | Common Shares             |             
|                  |   | Exercise Period               |                               |                           | to be Issued |       
|                  |   |                               |                               |                           |              |       
|Convertible bonds |   | Nov. 29, 2003Nov. 29, 2005   |                               |                           | 9,946,236    |       
|Stock options     |   | March 29, 2004March 28, 2009 |                               |                           | 18,000       |       
|                  |  |                               | March 25, 2005March 24, 2010 |                           |              | 44,800 | 
|                  |  |                               |                               | Sep. 9. 2005Sep. 8. 2010 |              |        |  | 629,500 | 



|   |                     
|-- | --------------------
|3. | RESTRICTED DEPOSITS:





|   |                                                     
|-- | ----------------------------------------------------
|4. | DISPOSAL OF TRADE ACCOUNTS AND
    NOTES RECEIVABLE:







|   |                    
|-- | -------------------
|5. | LOANS TO EMPLOYEES:



A-16



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                                  
|-- | ---------------------------------
|6. | SHORT-TERM INVESTMENT SECURITIES:



|                               |                          |      |       |       |      |   |       |       | 
|------------------------------ | ------------------------ | ---- | ----- | ----- | ---- | - | ----- | ----- | 
|                               |                          | 2003 |       |       | 2004 |  
|                               |                          |      |       |       |      |  
|Trading securities:            |                          |      |       |       |      |   |       |      
|                               | Beneficiary certificates |      | W     | 516   |      |   | W     |      | 
|Available-for-sale securities: |                          |      |       |       |      |   |       |      
|                               | Listed equity securities |      |       | 7,272 |      |   |       | 6,551 | 
|                               |                          |      |       |       |      |  
|                               |                          | W    | 7,788 |       |      | W | 6,551 |      
|                               |                          |      |       |       |      |  



| |     |                                                                                                
| | --- | -----------------------------------------------------------------------------------------------
| | (2) | Listed equity securities as of December 31, 2003 and 2004
    are as follows (won in millions):

|                         |  |            |       |             |      |   |       |            |         |   |           |  |  |   |       | 
|------------------------ |  | ---------- | ----- | ----------- | ---- | - | ----- | ---------- | ------- | - | --------- |  |  | - | ----- | 
|                         |  | 2003       |       |             | 2004 |  
|                         |  |            |       |             |      |  
|                         |  |            |       | Acquisition |      |   |       |            | Gain on |  
|                         |  | Fair Value |       |             | Cost |   |       | Fair Value |         |   | Valuation | 
|                         |  |            |       |             |      |   |       |            |         |   |           | 
|Listed equity securities |  | W          | 7,272 |             |      | W | 2,918 |            |         | W | 6,551     |  |  | W | 3,633 | 





|   |                                 
|-- | --------------------------------
|7. | LONG-TERM INVESTMENT SECURITIES:



|                               |                              |      |         |        |      |   |         |        | 
|------------------------------ | ---------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | 
|                               |                              | 2003 |         |        | 2004 |  
|                               |                              |      |         |        |      |  
|Available-for-sale securities: |                              |      |         |        |      |   |         |       
|                               | Listed equity securities     |      | W       | 5,391  |      |   | W       | 4,687  | 
|                               | Non-listed equity securities |      |         | 8,500  |      |   |         | 11,040 | 
|                               | Investments in funds         |      |         | 40,633 |      |   |         | 38,382 | 
|                               | Debt securities              |      |         | 21,341 |      |   |         | 2,191  | 
|Held-to maturity securities:   |                              |      |         |        |      |   |         |       
|                               | Beneficiary certificates     |      |         | 99,914 |      |   |         | 88,667 | 
|                               |                              |      |         |        |      |  
|                               |                              | W    | 175,779 |        |      | W | 144,967 |       
|                               |                              |      |         |        |      |  



|                         |  |            |       |             |      |   |       |            |                |   |           |  |  |   |       |  
|------------------------ |  | ---------- | ----- | ----------- | ---- | - | ----- | ---------- | -------------- | - | --------- |  |  | - | ----- | -
|                         |  | 2003       |       |             | 2004 |  
|                         |  |            |       |             |      |  
|                         |  |            |       | Acquisition |      |   |       |            | Gain (Loss) on |  
|                         |  | Fair Value |       |             | Cost |   |       | Fair Value |                |   | Valuation | 
|                         |  |            |       |             |      |   |       |            |                |   |           | 
|Wide Telecom Co.         |  | W          | 24    |             |      | W | 300   |            |                | W | 11        |  |  | W | (289  | )
|Gaeasoft Co., Ltd.       |  |            | 913   |             |      |   | 532   |            |                |   | 514       |  |  |   | (18   | )
|KRTnet Corp.             |  |            | 4,454 |             |      |   | 1,954 |            |                |   | 3,634     |  |  |   | 1,680 |  
|Beneficiary Certificates |  |            |      |             |      |   | 503   |            |                |   | 528       |  |  |   | 25    |  
|                         |  |            |       |             |      |   |       |            |                |   |           | 
|                         |  | W          | 5,391 |             |      | W | 3,289 |            |                | W | 4,687     |  |  | W | 1,398 |  
|                         |  |            |       |             |      |   |       |            |                |   |           | 



A-17



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                |  |       |       |  |           |  |       |             |  |   |           |  |  |       |        |  |  |   |        | 
|------------------------------- |  | ----- | ----- |  | --------- |  | ----- | ----------- |  | - | --------- |  |  | ----- | ------ |  |  | - | ------ | 
|                                |  | 2003  |       |  | 2004      | 
|                                |  |       |       |  |           | 
|                                |  | Book  |       |  | Ownership |  |       | Acquisition |  |   | Net Asset |  |  | Book  |       
|                                |  | Value |       |  | (%)       |  |       | Cost        |  |   | Value     |  |  | Value |       
|                                |  |       |       |  |           |  |       |             |  |   |           |  |  |       |       
|Mondex Korea Co., Ltd.          |  | W     |      |  |           |  | 6.02  |             |  | W | 920       |  |  | W     |       |  |  | W |       | 
|Internet Metix Inc.             |  |       | 23    |  |           |  | 2.00  |             |  |   | 200       |  |  |       | 21     |  |  |   | 23     | 
|Geotel Co., Ltd.                |  |       | 263   |  |           |  | 10.55 |             |  |   | 263       |  |  |       | 498    |  |  |   | 263    | 
|Inews24. Co., Ltd.              |  |       |      |  |           |  | 3.58  |             |  |   | 350       |  |  |       |       |  |  |   |       | 
|ENtoB Corp.                     |  |       | 500   |  |           |  | 3.13  |             |  |   | 500       |  |  |       | 483    |  |  |   | 500    | 
|The Radio News Co., Ltd.        |  |       |      |  |           |  | 10.73 |             |  |   | 624       |  |  |       |       |  |  |   |       | 
|Prime Venture Capital Co., Ltd. |  |       | 1,000 |  |           |  | 10.00 |             |  |   | 1,000     |  |  |       |       |  |  |   | 93     | 
|Onse Telecom Corp.              |  |       | 105   |  |           |  | 0.17  |             |  |   | 2,148     |  |  |       | 162    |  |  |   | 105    | 
|NAZCA Entertainment Co., Ltd.   |  |       | 46    |  |           |  | 11.74 |             |  |   | 500       |  |  |       | 111    |  |  |   | 46     | 
|Toysoft Co., Ltd                |  |       | 80    |  |           |  | 8.78  |             |  |   | 500       |  |  |       | 41     |  |  |   | 80     | 
|Ohmylove Co., Ltd.              |  |       | 1,200 |  |           |  | 12.06 |             |  |   | 1,200     |  |  |       | 131    |  |  |   | 131    | 
|Vacom Wireless, Inc.            |  |       | 1,880 |  |           |  | 16.77 |             |  |   | 1,880     |  |  |       | 719    |  |  |   | 719    | 
|Citylover Co., Ltd.             |  |       | 38    |  |           |  | 3.45  |             |  |   | 38        |  |  |       |       |  |  |   |       | 
|MDS Planning Co., Ltd.          |  |       | 120   |  |           |  | 4.00  |             |  |   | 120       |  |  |       |       |  |  |   |       | 
|Directmedia Co., Ltd.           |  |       |      |  |           |  | 16.09 |             |  |   | 435       |  |  |       | 233    |  |  |   | 435    | 
|KTFMhows Co., Ltd.              |  |       |       |  |           |  | 51.00 |             |  |   | 2,550     |  |  |       | 2,550  |  |  |   | 2,550  | 
|Harex Info Tech Ltd.            |  |       |       |  |           |  | 23.12 |             |  |   | 3,375     |  |  |       | 1,896  |  |  |   | 3,375  | 
|Others                          |  |       | 3,245 |  |           |  |      |             |  |   | 3,423     |  |  |       | 3,202  |  |  |   | 2,720  | 
|                                |  |       |       |  |           |  |       |             |  |   |           |  |  |       |       
|                                |  | W     | 8,500 |  |           |  |       |             |  | W | 20,026    |  |  | W     | 10,047 |  |  | W | 11,040 | 
|                                |  |       |       |  |           |  |       |             |  |   |           |  |  |       |       





|                            |  |           |       |  |             |   |        |           |  |   |           |  |  |             |       |  |           |   |        |  |  |   |        | 
|--------------------------- |  | --------- | ----- |  | ----------- | - | ------ | --------- |  | - | --------- |  |  | ----------- | ----- |  | --------- | - | ------ |  |  | - | ------ | 
|                            |  | 2003      |       |  | 2004        |  
|                            |  |           |       |  |             |  
|                            |  | Ownership |       |  | Acquisition |   |        | Net Asset |  |   | Ownership |  |  | Acquisition |       |  | Net Asset |  
|                            |  | (%)       |       |  | Cost        |   |        | Value     |  |   | (%)       |  |  | Cost        |       |  | Value     |  
|                            |  |           |       |  |             |   |        |           |  |   |           |  |  |             |       |  |           |  
|CEC Mobile Ltd.             |  |           | 16.67 |  |             | W | 4,456  |           |  | W | 4,456     |  |  |             | 16.67 |  |           | W | 4,456  |  |  | W | 4,456  | 
|PT. KTF Indonesia           |  |           | 99.00 |  |             |   | 234    |           |  |   | 234       |  |  |             | 99.00 |  |           |   | 234    |  |  |   | 234    | 
|Korea IT Fund               |  |           | 10.00 |  |             |   | 30,000 |           |  |   | 30,000    |  |  |             | 10.00 |  |           |   | 30,000 |  |  |   | 30,000 | 
|Korea Telecom Strategy Fund |  |           | 10.00 |  |             |   | 2,000  |           |  |   | 2,000     |  |  |             | 10.00 |  |           |   | 2,000  |  |  |   | 2,000  | 
|KT Freetel Internal Venture |  |           | 95.00 |  |             |   | 950    |           |  |   | 950       |  |  |             |      |  |           |   |       |  |  |   |       | 
|Others                      |  |           |      |  |             |   | 2,993  |           |  |   | 2,993     |  |  |             |      |  |           |   | 1,692  |  |  |   | 1,692  | 
|                            |  |           |       |  |             |   |        |           |  |   |           |  |  |             |       |  |           |  
|                            |  |           |       |  |             | W | 40,633 |           |  | W | 40,633    |  |  |             |       |  |           | W | 38,382 |  |  | W | 38,382 | 
|                            |  |           |       |  |             |   |        |           |  |   |           |  |  |             |       |  |           |  



A-18



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                              |  |             |        |  |       |   |        |             |  |   |       |  |  |   |       | 
|--------------------------------------------- |  | ----------- | ------ |  | ----- | - | ------ | ----------- |  | - | ----- |  |  | - | ----- | 
|                                              |  | 2003        |        |  | 2004  |  
|                                              |  |             |        |  |       |  
|                                              |  | Acquisition |        |  | Book  |   |        | Acquisition |  |   | Book  | 
|                                              |  | Cost        |        |  | Value |   |        | Cost        |  |   | Value | 
|                                              |  |             |        |  |       |   |        |             |  |   |       | 
|KTF Second Securitization Specialty Co., Ltd. |  | W           | 19,254 |  |       | W | 19,254 |             |  | W |      |  |  | W |      | 
|Government bonds                              |  |             | 1,587  |  |       |   | 1,587  |             |  |   | 1,691 |  |  |   | 1,691 | 
|Convertible bonds                             |  |             | 500    |  |       |   | 500    |             |  |   | 500   |  |  |   | 500   | 
|                                              |  |             |        |  |       |   |        |             |  |   |       | 
|                                              |  | W           | 21,341 |  |       | W | 21,341 |             |  | W | 2,191 |  |  | W | 2,191 | 
|                                              |  |             |        |  |       |   |        |             |  |   |       | 



|                  |  |           |       |  |            |   |   | 
|----------------- |  | --------- | ----- |  | ---------- | - | - | 
|                  |  | 2-5 Years |       |  | 6-10 Years |  
|                  |  |           |       |  |            |  
|Government bonds  |  | W         | 1,688 |  |            | W | 3 | 
|Convertible bonds |  |           | 500   |  |            |   |  | 
|                  |  |           |       |  |            |  
|                  |  | W         | 2,188 |  |            | W | 3 | 
|                  |  |           |       |  |            |  



|                         |  |             |        |  |       |   |        |             |  |   |         |  |  |   |        | 
|------------------------ |  | ----------- | ------ |  | ----- | - | ------ | ----------- |  | - | ------- |  |  | - | ------ | 
|                         |  | 2003        |        |  | 2004  |  
|                         |  |             |        |  |       |  
|                         |  | Acquisition |        |  | Book  |   |        | Acquisition |  |   | Book    | 
|                         |  | Cost        |        |  | Value |   |        | Cost        |  |   | Value   | 
|                         |  |             |        |  |       |   |        |             |  |   |         | 
|Beneficiary certificates |  | W           | 99,914 |  |       | W | 99,914 |             |  | W | 130,745 |  |  | W | 88,667 | 





|   |                                               
|-- | ----------------------------------------------
|8. | INVESTMENT SECURITIES USING THE EQUITY METHOD:



|                                                   |  |           |      |      |             |   |       |       |  |   |             |  |  |       |       |  |  |   |   | 
|-------------------------------------------------- |  | --------- | ---- | ---- | ----------- | - | ----- | ----- |  | - | ----------- |  |  | ----- | ----- |  |  | - | - | 
|                                                   |  |           |      | 2003 |             |   | 2004  |      
|                                                   |  |           |      |      |             |   |       |      
|                                                   |  | Ownership |      |      | Acquisition |   |       | Book  |  |   | Acquisition |  |  | Book  |      
|                                                   |  | (%)       |      |      | Cost        |   |       | Value |  |   | Cost        |  |  | Value |      
|                                                   |  |           |      |      |             |   |       |       |  |   |             |  |  |       |      
|Korea Digital Satellite
    Broadcasting Co., Ltd. |  |           | 2.38 |      |             | W | 9,954 |       |  | W | 3,178       |  |  | W     | 9,954 |  |  | W |  | 



|                                                   |  |              |       |  |           |   |        |               |  |        |        |   |  |   |   | 
|-------------------------------------------------- |  | ------------ | ----- |  | --------- | - | ------ | ------------- |  | ------ | ------ | - |  | - | - | 
|                                                   |  | Beginning of |       |  | Loss on   |   |        |               |  | End of |       
|                                                   |  | Year         |       |  | Valuation |   |        | Other Changes |  |        | Year   |  
|                                                   |  |              |       |  |           |   |        |               |  |        |        |  
|Korea Digital Satellite
    Broadcasting Co., Ltd. |  | W            | 3,178 |  |           | W | (1,042 | )             |  | W      | (2,136 | ) |  | W |  | 

A-19



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|   |                        
|-- | -----------------------
|9. | PROPERTY AND EQUIPMENT:





|                         |  |           |           |          |             |   |          |       |  |            |              |  |  |        |         |  |              |   |         |      |  |   |        |  |  |   |           | 
|------------------------ |  | --------- | --------- | -------- | ----------- | - | -------- | ----- |  | ---------- | ------------ |  |  | ------ | ------- |  | ------------ | - | ------- | ---- |  | - | ------ |  |  | - | --------- | 
|                         |  |           |           | Increase |             |   | Decrease |       |  | Changes in |              |  | 
|                         |  | Beginning |           |          |             |   |          |       |  |            | Consolidated |  |  | End of |        
|                         |  | of Year   |           |          | Acquisition |   |          | Other |  |            | Disposal     |  |  | Other  |         |  | Subsidiaries |   |         | Year | 
|                         |  |           |           |          |             |   |          |       |  |            |              |  |  |        |         |  |              |   |         |      | 
|Land                     |  | W         | 124,401   |          |             | W | 2,388    |       |  | W          |             |  |  | W      | 4,077   |  |              | W |        |      |  | W |       |  |  | W | 122,712   | 
|Buildings and structures |  |           | 284,979   |          |             |   | 25,484   |       |  |            | 479          |  |  |        | 8,128   |  |              |   |        |      |  |   | 29     |  |  |   | 302,843   | 
|Machinery and equipment  |  |           | 5,563,211 |          |             |   | 465,831  |       |  |            | 351,079      |  |  |        | 134,058 |  |              |   | 243     |      |  |   | 14,543 |  |  |   | 6,260,364 | 
|Vehicles                 |  |           | 10,099    |          |             |   | 295      |       |  |            | 501          |  |  |        | 506     |  |              |   |        |      |  |   | 1,334  |  |  |   | 11,723    | 
|Other                    |  |           | 461,027   |          |             |   | 111,869  |       |  |            | 20,806       |  |  |        | 10,072  |  |              |   | 1,802   |      |  |   | 113    |  |  |   | 581,363   | 
|Construction in progress |  |           | 514,108   |          |             |   | 329,480  |       |  |            |             |  |  |        | 130,306 |  |              |   | 370,820 |      |  |   | 12,206 |  |  |   | 354,668   | 
|                         |  |           |           |          |             |   |          |       |  |            |              |  |  |        |         |  |              |   |         |      | 
|                         |  | W         | 6,957,825 |          |             | W | 935,347  |       |  | W          | 372,865      |  |  | W      | 287,147 |  |              | W | 372,865 |      |  | W | 28,225 |  |  | W | 7,633,673 | 
|                         |  |           |           |          |             |   |          |       |  |            |              |  |  |        |         |  |              |   |         |      | 

|                               |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      |  |   |        |   |  |   |           | 
|------------------------------ |  | --------- | --------- | -------- | ------------ | - | -------- | ----- |  | ---------- | ------------ |  |  | ------ | ------ |  | ------------ | - | ------ | ---- |  | - | ------ | - |  | - | --------- | 
|                               |  |           |           | Increase |              |   | Decrease |       |  | Changes in |              |  | 
|                               |  | Beginning |           |          |              |   |          |       |  |            | Consolidated |  |  | End of |       
|                               |  | of Year   |           |          | Depreciation |   |          | Other |  |            | Disposal     |  |  | Other  |        |  | Subsidiaries |   |        | Year | 
|                               |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      | 
|Less: Accumulated depreciation |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      |  |   |        |   |  |   |           | 
|Buildings and structures       |  | W         | 39,232    |          |              | W | 10,079   |       |  | W          | 4            |  |  | W      | 1,656  |  |              | W |       |      |  | W |       |   |  | W | 47,659    | 
|Machinery and equipment        |  |           | 1,910,743 |          |              |   | 726,207  |       |  |            | 10,963       |  |  |        | 70,701 |  |              |   | 9,721  |      |  |   | (697   | ) |  |   | 2,566,794 | 
|Vehicles                       |  |           | 4,576     |          |              |   | 1,786    |       |  |            |             |  |  |        | 304    |  |              |   |       |      |  |   | (71    | ) |  |   | 5,987     | 
|Other                          |  |           | 231,521   |          |              |   | 101,358  |       |  |            |             |  |  |        | 5,519  |  |              |   | 162    |      |  |   | (706   | ) |  |   | 326,492   | 
|Accumulated impairment loss    |  |           | 577       |          |              |   |         |       |  |            | 250          |  |  |        |       |  |              |   |       |      |  |   |       |   |  |   | 827       | 
|                               |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      | 
|                               |  |           | 2,186,649 |          |              |   | 839,430  |       |  |            | 11,217       |  |  |        | 78,180 |  |              |   | 11,096 |      |  |   | (1,474 | ) |  |   | 2,947,759 | 
|                               |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      | 
|                               |  | W         | 4,771,176 |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      |  |   |        |   |  | W | 4,685,914 | 
|                               |  |           |           |          |              |   |          |       |  |            |              |  |  |        |        |  |              |   |        |      | 



|                         |  |           |           |          |             |   |          |       |  |   |          |  |  |       |        |  |      |   |         |  |  |   |           | 
|------------------------ |  | --------- | --------- | -------- | ----------- | - | -------- | ----- |  | - | -------- |  |  | ----- | ------ |  | ---- | - | ------- |  |  | - | --------- | 
|                         |  |           |           | Increase |             |   | Decrease |       |  |  
|                         |  | Beginning |           |          |             |   |          |       |  |   | End of   | 
|                         |  | of Year   |           |          | Acquisition |   |          | Other |  |   | Disposal |  |  | Other |        |  | Year |  
|                         |  |           |           |          |             |   |          |       |  |   |          |  |  |       |        |  |      |  
|Land                     |  | W         | 122,712   |          |             | W | 88       |       |  | W |         |  |  | W     | 960    |  |      | W |        |  |  | W | 121,840   | 
|Buildings and structures |  |           | 302,843   |          |             |   | 3,182    |       |  |   | 5,773    |  |  |       | 3,408  |  |      |   | 76      |  |  |   | 308,314   | 
|Machinery and equipment  |  |           | 6,260,364 |          |             |   | 357,825  |       |  |   | 671,977  |  |  |       | 32,472 |  |      |   | 70,607  |  |  |   | 7,187,087 | 
|Vehicles                 |  |           | 11,723    |          |             |   | 402      |       |  |   |         |  |  |       | 242    |  |      |   |        |  |  |   | 11,883    | 
|Other                    |  |           | 581,363   |          |             |   | 53,195   |       |  |   | 104,724  |  |  |       | 6,367  |  |      |   | 65      |  |  |   | 732,850   | 
|Construction in progress |  |           | 354,668   |          |             |   | 540,427  |       |  |   | 51       |  |  |       |       |  |      |   | 711,867 |  |  |   | 183,279   | 
|                         |  |           |           |          |             |   |          |       |  |   |          |  |  |       |        |  |      |  
|                         |  | W         | 7,633,673 |          |             | W | 955,119  |       |  | W | 782,525  |  |  | W     | 43,449 |  |      | W | 782,615 |  |  | W | 8,545,253 | 
|                         |  |           |           |          |             |   |          |       |  |   |          |  |  |       |        |  |      |  

A-20



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                               |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |   |        |  |  |   |           | 
|------------------------------ |  | --------- | --------- | -------- | ------------ | - | -------- | ----- |  | - | -------- |  |  | ----- | ------ |  | ---- | - | ------ |  |  | - | --------- | 
|                               |  |           |           | Increase |              |   | Decrease |       |  |  
|                               |  | Beginning |           |          |              |   |          |       |  |   | End of   | 
|                               |  | of Year   |           |          | Depreciation |   |          | Other |  |   | Disposal |  |  | Other |        |  | Year |  
|                               |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |  
|Less: Accumulated depreciation |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |   |        |  |  |   |           | 
|Buildings and structures       |  | W         | 47,659    |          |              | W | 10,816   |       |  | W |         |  |  | W     | 779    |  |      | W |       |  |  | W | 57,696    | 
|Machinery and equipment        |  |           | 2,566,794 |          |              |   | 846,067  |       |  |   |         |  |  |       | 8,857  |  |      |   | 30,799 |  |  |   | 3,373,205 | 
|Vehicles                       |  |           | 5,987     |          |              |   | 1,859    |       |  |   |         |  |  |       | 116    |  |      |   |       |  |  |   | 7,730     | 
|Other                          |  |           | 326,492   |          |              |   | 139,274  |       |  |   | 30,798   |  |  |       | 4,704  |  |      |   |       |  |  |   | 491,860   | 
|Accumulated impairment loss    |  |           | 827       |          |              |   | 447      |       |  |   |         |  |  |       |       |  |      |   |       |  |  |   | 1,274     | 
|                               |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |  
|                               |  |           | 2,947,759 |          |              |   | 998,463  |       |  |   | 30,798   |  |  |       | 14,456 |  |      |   | 30,799 |  |  |   | 3,931,765 | 
|                               |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |  
|                               |  | W         | 4,685,914 |          |              |   |          |       |  |   |          |  |  |       |        |  |      |   |        |  |  | W | 4,613,488 | 
|                               |  |           |           |          |              |   |          |       |  |   |          |  |  |       |        |  |      |  







|    |             
|--- | ------------
|10. | INTANGIBLES:





|                             |  |              |           |          |             |   |          |       |  |            |              |  |  |       |        |   |              |   |       |             |  |   |        |   |  |   |           |  
|---------------------------- |  | ------------ | --------- | -------- | ----------- | - | -------- | ----- |  | ---------- | ------------ |  |  | ----- | ------ | - | ------------ | - | ----- | ----------- |  | - | ------ | - |  | - | --------- | -
|                             |  |              |           | Increase |             |   | Decrease |       |  | Changes in |              |  | 
|                             |  | Beginning of |           |          |             |   |          |       |  |            | Consolidated |  |  |      
|                             |  | Year         |           |          | Acquisition |   |          | Other |  |            | Amortization |  |  | Other |        |   | Subsidiaries |   |       | End of Year | 
|                             |  |              |           |          |             |   |          |       |  |            |              |  |  |       |        |   |              |   |       |             | 
|Goodwill                     |  | W            | 1,951     |          |             | W | 12,798   |       |  | W          |             |  |  | W     | 1,608  |   |              | W |      |             |  | W |       |   |  | W | 13,141    |  
|Intellectual property rights |  |              | 1,038     |          |             |   | 608      |       |  |            |             |  |  |       | 311    |   |              |   | 1     |             |  |   |       |   |  |   | 1,334     |  
|Facility use rights          |  |              | 9,832     |          |             |   | 814      |       |  |            |             |  |  |       | 1,044  |   |              |   | 2,070 |             |  |   |       |   |  |   | 7,532     |  
|Frequency use rights         |  |              | 1,208,854 |          |             |   | 7,369    |       |  |            |             |  |  |       | 7,794  |   |              |   |      |             |  |   |       |   |  |   | 1,208,429 |  
|Development costs            |  |              | 4,639     |          |             |   | 12,535   |       |  |            |             |  |  |       | 4,193  |   |              |   | 3,254 |             |  |   | (4,314 | ) |  |   | 5,593     |  
|Organization cost            |  |              | 3,645     |          |             |   |         |       |  |            |             |  |  |       |       |   |              |   | 3,645 |             |  |   |       |   |  |   |          |  
|Other                        |  |              | 1,655     |          |             |   | 6,707    |       |  |            |             |  |  |       | 1,528  |   |              |   | 640   |             |  |   |       |   |  |   | 6,194     |  
|Negative goodwill            |  |              | (3,258    | )        |             |   |         |       |  |            |             |  |  |       | (668   | ) |              |   |      |             |  |   |       |   |  |   | (2,590    | )
|                             |  |              |           |          |             |   |          |       |  |            |              |  |  |       |        |   |              |   |       |             | 
|                             |  | W            | 1,228,356 |          |             | W | 40,831   |       |  | W          |             |  |  | W     | 15,810 |   |              | W | 9,610 |             |  | W | (4,314 | ) |  | W | 1,239,633 |  
|                             |  |              |           |          |             |   |          |       |  |            |              |  |  |       |        |   |              |   |       |             | 



|                             |  |           |           |          |             |   |          |       |  |   |              |  |  |       |         |   |      |   |     |  |  |   |           |  
|---------------------------- |  | --------- | --------- | -------- | ----------- | - | -------- | ----- |  | - | ------------ |  |  | ----- | ------- | - | ---- | - | --- |  |  | - | --------- | -
|                             |  |           |           | Increase |             |   | Decrease |       |  |  
|                             |  | Beginning |           |          |             |   |          |       |  |   | End of       | 
|                             |  | of Period |           |          | Acquisition |   |          | Other |  |   | Amortization |  |  | Other |         |   | Year |  
|                             |  |           |           |          |             |   |          |       |  |   |              |  |  |       |         |   |      |  
|Goodwill                     |  | W         | 13,141    |          |             | W | 3,565    |       |  | W | 90           |  |  | W     | 3,626   |   |      | W | 209 |  |  | W | 12,961    |  
|Intellectual property rights |  |           | 1,334     |          |             |   | 768      |       |  |   |             |  |  |       | 387     |   |      |   |    |  |  |   | 1,715     |  
|Facility use rights          |  |           | 7,532     |          |             |   | 2,112    |       |  |   |             |  |  |       | 1,252   |   |      |   | 31  |  |  |   | 8,361     |  
|Frequency use rights         |  |           | 1,208,429 |          |             |   |         |       |  |   |             |  |  |       | 92,433  |   |      |   |    |  |  |   | 1,115,996 |  
|Development costs            |  |           | 5,593     |          |             |   | 15,488   |       |  |   |              |  |  |       | 11,046  |   |      |   | 277 |  |  |   | 9,758     |  
|Other                        |  |           | 6,194     |          |             |   | 3,359    |       |  |   |              |  |  |       | 2,498   |   |      |   |     |  |  |   | 7,055     |  
|Negative goodwill            |  |           | (2,590    | )        |             |   |         |       |  |   |             |  |  |       | (647    | ) |      |   |    |  |  |   | (1,943    | )
|                             |  |           |           |          |             |   |          |       |  |   |              |  |  |       |         |   |      |  
|                             |  | W         | 1,239,633 |          |             | W | 25,292   |       |  | W | 90           |  |  | W     | 110,595 |   |      | W | 517 |  |  | W | 1,153,903 |  
|                             |  |           |           |          |             |   |          |       |  |   |              |  |  |       |         |   |      |  

A-21



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|    |               
|--- | --------------
|11. | LEASED ASSETS:



|     |  |               |         | 
|---- |  | ------------- | ------- | 
|     |  | Operating     |        
|Year |  | Lease Payment |        
|     |  |               |        
|2005 |  | W             | 61,307  | 
|2006 |  |               | 60,527  | 
|     |  |               |        
|     |  | W             | 121,834 | 
|     |  |               |        



|    |            
|--- | -----------
|12. | BORROWINGS:



|                            |  |               |           |  |      |     |           |      |  |     |           |  
|--------------------------- |  | ------------- | --------- |  | ---- | --- | --------- | ---- |  | --- | --------- | -
|                            |  | Interest Rate |           |  |      |     |          
|                            |  | per Annum (%) |           |  |      |     |          
|                            |  | 2004          |           |  | 2003 |     |           | 2004 | 
|                            |  |               |           |  |      |     |           |      | 
|General loans               |  |               | 4.18,4.19 |  |      |     | W 60,000  |      |  |     | W 105,000 |  
|Discounted promissory notes |  |               | 3.96,4.02 |  |      |     | 213,000   |      |  |     | 205,000   |  
|Usance                      |  |               | 0.60,1.80 |  |      |     | 10,185    |      |  |     | 8,208     |  
|                            |  |               |           |  |      | US$ | (8,503    | )    |  | US$ | (7,863    | )
|                            |  |               | 0.60,1.80 |  |      |     | 10,154    |      |  |     | 8,078     |  
|                            |  |               |           |  |      |     | JPY(907   | )    |  |     | JPY(798   | )
|                            |  |               |           |  |      |     |           |      | 
|                            |  |               |           |  |      |     | W 293,339 |      |  |     | W 326,286 |  
|                            |  |               |           |  |      |     |           |      | 



|                                  |                       |               |  |   |      |   |   |         |   |   |   |   | 
|--------------------------------- | --------------------- | ------------- |  | - | ---- | - | - | ------- | - | - | - | - | 
|                                  |                       | Interest Rate |  |   |      |   |  
|                                  |                       | per Annum (%) |  |   |      |   |  
|                                  |                       | 2004          |  |   | 2003 |   |   | 2004    |  
|                                  |                       |               |  |   |      |   |   |         |  
|Long-term debt in local currency: |                       |               |  |   |      |   |   |         |   |   |   |  
|                                  | General loans         |               |  |  |      |   | W | 50,000  |   |   | W |  | 
|                                  | Less: Current portion |               |  |   |      |   |   | (50,000 | ) |   |   |  | 
|                                  |                       |               |  |   |      |   |   |         |  
|                                  |                       |               |  |   |      | W |  |         |   | W |  |  
|                                  |                       |               |  |   |      |   |   |         |  

A-22



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |            
|--- | -----------
|13. | DEBENTURES:



|                                |                        |               |           |  |      |   |            |         |   |   |            |        |  
|------------------------------- | ---------------------- | ------------- | --------- |  | ---- | - | ---------- | ------- | - | - | ---------- | ------ | -
|                                |                        | Interest Rate |           |  |      |   |           
|                                |                        | per Annum (%) |           |  |      |   |           
|                                |                        | 2004          |           |  | 2003 |   |            | 2004    |  
|                                |                        |               |           |  |      |   |            |         |  
|General debentures              |                        |               | 2.64-7.00 |  |      | W | 2,213,666  |         |   | W | 2,472,147  |       
|Convertible bonds               |                        |               | 1.00      |  |      |   | 375,080    |         |   |   | 374,800    |       
|                                |                        |               |           |  |      |   |            |         |  
|                                |                        |               |           |  |      |   | 2,588,746  |         |   |   | 2,846,947  |       
|Less: Current portion           |                        |               |           |  |      |   | (1,005,274 | )       |   |   | (1,019,922 | )     
|                                | Discount on debentures |               |           |  |      |   |            | (11,608 | ) |   |            | (7,843 | )
|Add: Long-term accrued interest |                        |               |           |  |      |   | 8,089      |         |   |   |           |       
|                                |                        |               |           |  |      |   |            |         |  
|                                |                        |               |           |  |      | W | 1,579,953  |         |   | W | 1,819,182  |       
|                                |                        |               |           |  |      |   |            |         |  



|       |  |          |               |               |      |  |      |      |  |  |            |   |  |  |            |  
|------ |  | -------- | ------------- | ------------- | ---- |  | ---- | ---- |  |  | ---------- | - |  |  | ---------- | -
|       |  |          |               | Interest Rate |      |  |      |      | 
|       |  |          |               | per Annum (%) |      |  |      |      | 
|       |  | Due Date |               |               | 2004 |  |      | 2003 |  |  | 2004       |  
|       |  |          |               |               |      |  |      |      |  |  |            |  
|20th   |  |          | Feb. 9, 2006  |               |      |  | 6.00 |      |  |  | W300,000   |   |  |  | W300,000   |  
|21st   |  |          | Mar. 19, 2004 |               |      |  | 6.00 |      |  |  | 400,000    |   |  |  |           |  
|22nd   |  |          | Apr. 18, 2004 |               |      |  | 2.70 |      |  |  | 104,994    |   |  |  |           |  
|       |  |          |               |               |      |  |      |      |  |  | JPY (9,391 | ) |  |  |           |  
|23rd   |  |          | Apr. 20, 2006 |               |      |  | 3.13 |      |  |  | 52,492     |   |  |  | 47,025     |  
|       |  |          |               |               |      |  |      |      |  |  | JPY(4,695  | ) |  |  | JPY(4,695  | )
|28th   |  |          | Apr. 8, 2004  |               |      |  | 7.00 |      |  |  | 200,000    |   |  |  |           |  
|37th   |  |          | May 24, 2005  |               |      |  | 2.64 |      |  |  | 106,180    |   |  |  | 95,122     |  
|       |  |          |               |               |      |  |      |      |  |  | JPY(9,497  | ) |  |  | JPY(9,497  | )
|38th   |  |          | July 16,2004  |               |      |  | 6.00 |      |  |  | 300,000    |   |  |  |           |  
|40th   |  |          | Feb. 18, 2005 |               |      |  | 6.00 |      |  |  | 350,000    |   |  |  | 350,000    |  
|41st   |  |          | Aug. 26, 2005 |               |      |  | 5.92 |      |  |  | 200,000    |   |  |  | 200,000    |  
|42nd   |  |          | Nov. 14, 2007 |               |      |  | 5.94 |      |  |  | 200,000    |   |  |  | 200,000    |  
|44th   |  |          | Feb. 19, 2009 |               |      |  | 5.66 |      |  |  |           |   |  |  | 360,000    |  
|45th   |  |          | Mar. 15, 2008 |               |      |  | 5.24 |      |  |  |           |   |  |  | 320,000    |  
|46th   |  |          | May 10, 2007  |               |      |  | 4.61 |      |  |  |           |   |  |  | 300,000    |  
|47-1st |  |          | July 13, 2009 |               |      |  | 4.95 |      |  |  |           |   |  |  | 230,000    |  
|47-2nd |  |          | July 12, 2011 |               |      |  | 5.32 |      |  |  |           |   |  |  | 70,000     |  
|       |  |          |               |               |      |  |      |      |  |  |            |  
|       |  |          |               |               |      |  |      |      |  |  | W2,213,666 |   |  |  | W2,472,147 |  
|       |  |          |               |               |      |  |      |      |  |  | JPY(23,583 | ) |  |  | JPY(14,192 | )
|       |  |          |               |               |      |  |      |      |  |  |            |  



A-23



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|     |  |          |               |               |        |  |            |            |  |  |       |  |  |        |        |  |  |   |         | 
|---- |  | -------- | ------------- | ------------- | ------ |  | ---------- | ---------- |  |  | ----- |  |  | ------ | ------ |  |  | - | ------- | 
|     |  |          |               | Interest Rate |        |  |            |            | 
|     |  |          |               | per Annum (%) |        |  |            |            | 
|     |  |          |               |               |        |  | Conversion |            |  | 
|     |  | Due Date |               |               | Coupon |  |            | Guaranteed |  |  | Price |  |  | Amount |       
|     |  |          |               |               |        |  |            |            |  |  |       |  |  |        |       
|3rd  |  |          | Sep. 11, 2005 |               |        |  |           |            |  |  | 9.00  |  |  |        | 33,202 |  |  | W | 4,800   | 
|43rd |  |          | Nov. 29, 2005 |               |        |  |           |            |  |  | 3.00  |  |  |        | 37,200 |  |  |   | 370,000 | 
|     |  |          |               |               |        |  |            |            |  |  |       |  |  |        |       
|     |  |          |               |               |        |  |            |            |  |  |       |  |  |        |        |  |  | W | 374,800 | 
|     |  |          |               |               |        |  |            |            |  |  |       |  |  |        |       





|     |  |        |           | 
|---- |  | ------ | --------- | 
|Year |  | Amount |          
|     |  |        |          
|2005 |  | W      | 1,019,922 | 
|2006 |  |        | 347,025   | 
|2007 |  |        | 500,000   | 
|2008 |  |        | 320,000   | 
|2009 |  |        | 590,000   | 
|2011 |  |        | 70,000    | 
|     |  |        |          
|     |  | W      | 2,846,947 | 
|     |  |        |          



|    |             
|--- | ------------
|14. | DERIVATIVES:



|             |  |      |                      |  |                 |  |                  |                      |  |  |                  |  |  |  |            | 
|------------ |  | ---- | -------------------- |  | --------------- |  | ---------------- | -------------------- |  |  | ---------------- |  |  |  | ---------- | 
|             |  |      |                      |  |                 |  |                  | Exercisable Exchange | 
|             |  | Term |                      |  | Contract Amount |  |                  | Type                 |  |  | Rate (JPY/W)     | 
|             |  |      |                      |  |                 |  |                  |                      |  |  |                  | 
|Shinhan Bank |  |      | 2004.05.10-2005.5.24 |  |                 |  | JPY2,000,000,000 |                      |  |  | JPY Call/JPY Put |  |  |  | 10.3-10.85 | 
|             |  |      | 2004.05.10-2006.4.20 |  |                 |  | JPY2,000,000,000 |                      |  |  | JPY Call/JPY Put |  |  |  | 10.65-13.4 | 





|    |                                  
|--- | ---------------------------------
|15. | LONG-TERM ACCOUNTS PAYABLE-OTHER:



A-24



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                |  |      |          |   |      |   |          |  
|------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                |  | 2003 |          |   | 2004 |  
|                                |  |      |          |   |      |  
|Long-term account payable-other |  | W    | 650,000  |   |      | W | 650,000  |  
|Discount                        |  |      | (131,239 | ) |      |   | (111,793 | )
|                                |  |      |          |   |      |  
|                                |  | W    | 518,761  |   |      | W | 538,207  |  
|                                |  |      |          |   |      |  



|     |  |        |         | 
|---- |  | ------ | ------- | 
|Year |  | Amount |        
|     |  |        |        
|2007 |  | W      | 90,000  | 
|2008 |  |        | 110,000 | 
|2009 |  |        | 130,000 | 
|2010 |  |        | 150,000 | 
|2011 |  |        | 170,000 | 
|     |  |        |        
|     |  | W      | 650,000 | 
|     |  |        |        



|    |                      
|--- | ---------------------
|16. | SHAREHOLDERS EQUITY:



|    |              
|--- | -------------
|(1) | Capital stock







|    |               
|--- | --------------
|(2) | Treasury stock







|    |                  
|--- | -----------------
|(3) | Stock Option Plan



|           |  |          |                      |           |        |  |          |             |  |   |         |  |  |                 |                 |  |  |  |                     | 
|---------- |  | -------- | -------------------- | --------- | ------ |  | -------- | ----------- |  | - | ------- |  |  | --------------- | --------------- |  |  |  | ------------------- | 
|           |  |          |                      | Number of |        |  | Exercise |             |  |   |         | 
|Grant Date |  | Employee |                      |           | Shares |  |          | Price/Share |  |   | Methods |  |  | Exercise Period |                
|           |  |          |                      |           |        |  |          |             |  |   |         |  |  |                 |                
|2001. 3.29 |  |          | Former CEO           |           |        |  | 18,000   |             |  | W | 41,273  |  |  |                 | New stock issue |  |  |  | 2004.3.29,2009.3.28 | 
|2002. 3.25 |  |          | Senior managers      |           |        |  | 44,800   |             |  |   | 45,178  |  |  |                 | New stock issue |  |  |  | 2005.3.25,2010.3.24 | 
|2003. 9. 8 |  |          | CEO, Senior managers |           |        |  | 541,900  |             |  |   | 30,000  |  |  |                 | New stock issue |  |  |  | 2005.9.9,2010.9.8   | 

A-25



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |          
|--- | ---------
|(4) | Dividends





|    |                                      
|--- | -------------------------------------
|17. | INCOME TAX AND DEFERRED INCOME TAXES:



|                                              |                                                       |      |          |        |      |   |          |         |   |   |          |         |  
|--------------------------------------------- | ----------------------------------------------------- | ---- | -------- | ------ | ---- | - | -------- | ------- | - | - | -------- | ------- | -
|                                              |                                                       | 2002 |          |        | 2003 |   |          | 2004    |  
|                                              |                                                       |      |          |        |      |   |          |         |  
|Income before income tax                      |                                                       | W    | 612,443  |        |      | W | 455,656  |         |   | W | 315,588  |        
|Adjustments:                                  |                                                       |      |          |        |      |   |          |         |   |   |          |        
|Permanent differences                         |                                                       |      | 8,163    |        |      |   | 16,624   |         |   |   | 17,458   |        
|Temporary differences, net                    |                                                       |      | (5,949   | )      |      |   | 46,499   |         |   |   | 20,402   |        
|                                              |                                                       |      |          |        |      |   |          |         |  
|                                              |                                                       |      | 2,214    |        |      |   | 63,123   |         |   |   | 37,860   |        
|                                              |                                                       |      |          |        |      |   |          |         |  
|Taxable income before tax loss carryforward   |                                                       |      | 614,657  |        |      |   | 518,779  |         |   |   | 353,448  |        
|Tax loss carryforward                         |                                                       |      | (150,653 | )      |      |   | (135,600 | )       |   |   | (109,860 | )      
|                                              |                                                       |      |          |        |      |   |          |         |  
|Taxable income                                |                                                       |      | 464,004  |        |      |   | 383,179  |         |   |   | 243,588  |        
|Tax rate (%)                                  |                                                       |      | 29.7     |        |      |   | 29.7     |         |   |   | 29.7     |        
|                                              |                                                       |      |          |        |      |   |          |         |  
|Tax calculated on taxable income              |                                                       |      | 137,809  |        |      |   | 113,804  |         |   |   | 72,346   |        
|Tax credit                                    |                                                       |      | (55,505  | )      |      |   | (42,485  | )       |   |   | (28,402  | )      
|                                              |                                                       |      |          |        |      |   |          |         |  
|Income tax currently payable                  |                                                       |      | 82,304   |        |      |   | 71,319   |         |   |   | 43,944   |        
|Foreign income tax                            |                                                       |      |         |        |      |   | 35       |         |   |   |         |        
|Decrease (Increase) in deferred income taxes: |                                                       |      |          |        |      |   |          |         |   |   |          |        
|                                              | Temporary differences                                 |      |          | 1,767  |      |   |          | (12,978 | ) |   |          | (4,486  | )
|                                              | Utilization of accumulated tax losses carried forward |      |          | 5,518  |      |   |          |        |   |   |          | (13,750 | )
|                                              | Utilization of accumulated tax credit carried forward |      |          | (9,309 | )    |   |          | (7,674  | ) |   |          | (142    | )
|                                              |                                                       |      |          |        |      |   |          |         |  
|Income tax expense                            |                                                       | W    | 80,280   |        |      | W | 50,702   |         |   | W | 25,566   |        
|                                              |                                                       |      |          |        |      |   |          |         |  



|                                                   |  |      |        |   |      |   |        |      |  |   |         |  
|-------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                   |  | 2002 |        |   | 2003 |   |        | 2004 | 
|                                                   |  |      |        |   |      |   |        |      | 
|Beginning of year                                  |  | W    | 75,657 |   |      | W | 68,508 |      |  | W | 97,464  |  
|Increase                                           |  |      | 9,309  |   |      |   | 37,261 |      |  |   | 18,377  |  
|Decrease                                           |  |      | (7,285 | ) |      |   |       |      |  |   |        |  
|Decrease from changes in consolidated subsidiaries |  |      | (9,173 | ) |      |   | (8,305 | )    |  |   | (1,397  | )
|                                                   |  |      |        |   |      |   |        |      | 
|End of year                                        |  | W    | 68,508 |   |      | W | 97,464 |      |  | W | 114,444 |  
|                                                   |  |      |        |   |      |   |        |      | 

A-26



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                                              
|--- | -------------------------------------------------------------
|18. | ASSETS AND LIABILITIES DENOMINATED IN FOREIGN
    CURRENCIES:



|                                    |  |              |       |  |                |   |       |              |  |   |                |  |  |   |        | 
|----------------------------------- |  | ------------ | ----- |  | -------------- | - | ----- | ------------ |  | - | -------------- |  |  | - | ------ | 
|                                    |  | 2003         |       |  | 2004           |  
|                                    |  |              |       |  |                |  
|Account                             |  | U.S. Dollars |       |  | Won Equivalent |   |       | U.S. Dollars |  |   | Won Equivalent | 
|                                    |  |              |       |  |                |   |       |              |  |   |                | 
|Cash and cash equivalents           |  | $            | 163   |  |                | W | 195   |              |  | $ | 1,026          |  |  | W | 1,075  | 
|Trade accounts and notes receivable |  |              | 1,447 |  |                |   | 1,733 |              |  |   |               |  |  |   |       | 
|Long-term loans                     |  |              | 1,450 |  |                |   | 1,737 |              |  |   | 7,185          |  |  |   | 7,500  | 
|Trade accounts and notes payable    |  |              | 6,623 |  |                |   | 7,933 |              |  |   | 6,205          |  |  |   | 6,477  | 
|Accounts payable- other             |  |              | 3,019 |  |                |   | 3,616 |              |  |   | 19,289         |  |  |   | 20,134 | 



|    |                                
|--- | -------------------------------
|19. | OPERATING REVENUE AND EXPENSES:



|                      |  |      |           |  |      |   |           |      |  |   |           | 
|--------------------- |  | ---- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|                      |  | 2002 |           |  | 2003 |   |           | 2004 | 
|                      |  |      |           |  |      |   |           |      | 
|PCS service           |  | W    | 4,208,409 |  |      | W | 4,246,131 |      |  | W | 4,695,733 | 
|Sales of PCS handsets |  |      | 1,111,619 |  |      |   | 877,481   |      |  |   | 1,247,159 | 
|                      |  |      |           |  |      |   |           |      | 
|                      |  | W    | 5,320,028 |  |      | W | 5,123,612 |      |  | W | 5,942,892 | 
|                      |  |      |           |  |      |   |           |      | 

A-27



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                    |  |      |           |  |      |   |            |      |  |   |           | 
|----------------------------------- |  | ---- | --------- |  | ---- | - | ---------- | ---- |  | - | --------- | 
|                                    |  | 2002 |           |  | 2003 |   |            | 2004 | 
|                                    |  |      |           |  |      |   |            |      | 
|Salaries and wages                  |  | W    | 133,695   |  |      | W | 146,271    |      |  | W | 175,541   | 
|Provision for severance indemnities |  |      | 15,100    |  |      |   | 12,257     |      |  |   | 12,485    | 
|Employee welfare                    |  |      | 23,686    |  |      |   | 27,041     |      |  |   | 29,665    | 
|Rent                                |  |      | 80,885    |  |      |   | 100,925    |      |  |   | 114,220   | 
|Lease                               |  |      | 50,383    |  |      |   | 40,839     |      |  |   | 61,307    | 
|Commissions                         |  |      | 353,628   |  |      |   | 424,255    |      |  |   | 439,524   | 
|Depreciation                        |  |      | 723,667   |  |      |   | 838,747    |      |  |   | 996,044   | 
|Amortization                        |  |      | 1,832     |  |      |   | 15,288     |      |  |   | 108,243   | 
|Tax and dues                        |  |      | 41,451    |  |      |   | 47,887     |      |  |   | 45,400    | 
|Interconnection charges             |  |      | 462,117   |  |      |   | 464,264    |      |  |   | 506,982   | 
|Leased line charges                 |  |      | 367,800   |  |      |   | 355,936    |      |  |   | 357,257   | 
|Ordinary development costs          |  |      | 19,991    |  |      |   | 13,146     |      |  |   | 9,583     | 
|Sales promotion                     |  |      | 173,646   |  |      |   | 131,394    |      |  |   | 180,574   | 
|Sales commissions                   |  |      | 553,015   |  |      |   | 457,760    |      |  |   | 718,089   | 
|Advertisements                      |  |      | 144,938   |  |      |   | 123,842    |      |  |   | 135,663   | 
|Bad debt                            |  |      | 23,555    |  |      |   | 52,488     |      |  |   | 25,485    | 
|Water and electricity               |  |      | 39,521    |  |      |   | 43,980     |      |  |   | 49,686    | 
|Communications                      |  |      | 28,125    |  |      |   | 29,397     |      |  |   | 28,907    | 
|Repairs and maintenance             |  |      | 71,597    |  |      |   | 59,373     |      |  |   | 58,456    | 
|Cost of PCS handset sales           |  |      | 1,102,273 |  |      |   | 881,678    |      |  |   | 1,268,367 | 
|Other                               |  |      | 64,932    |  |      |   | 75,192     |      |  |   | 81,267    | 
|                                    |  |      |           |  |      |   |            |      | 
|                                    |  | W    | 4,475,837 |  |      | W | 4,341,9600 |      |  | W | 5,402,745 | 
|                                    |  |      |           |  |      |   |            |      | 



|    |                            
|--- | ---------------------------
|20. | RELATED PARTY TRANSACTIONS:



Revenues:


|               |  |             |                                    |  |      |   |         |      |  |   |         |  |  |   |         | 
|-------------- |  | ----------- | ---------------------------------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|               |  | Transaction |                                    |  | 2002 |   |         | 2003 |  |   | 2004    | 
|               |  |             |                                    |  |      |   |         |      |  |   |         | 
|KT Corporation |  |             | Interconnection charges and others |  |      | W | 549,493 |      |  | W | 599,176 |  |  | W | 631,544 | 
|KT Solutions   |  |             | Interconnection charges and others |  |      |   | 5,671   |      |  |   | 9,683   |  |  |   | 8,772   | 
|KT Hitel       |  |             |                                   |  |      |   | 25      |      |  |   |        |  |  |   | 43      | 
|Others         |  |             |                                   |  |      |   | 511     |      |  |   | 775     |  |  |   | 1,478   | 
|               |  |             |                                    |  |      |   |         |      |  |   |         | 
|               |  |             |                                    |  |      | W | 555,700 |      |  | W | 609,634 |  |  | W | 641,837 | 
|               |  |             |                                    |  |      |   |         |      |  |   |         | 

A-28



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Expenses:


|               |  |             |                                    |  |      |   |           |      |  |   |         |  |  |   |         | 
|-------------- |  | ----------- | ---------------------------------- |  | ---- | - | --------- | ---- |  | - | ------- |  |  | - | ------- | 
|               |  | Transaction |                                    |  | 2002 |   |           | 2003 |  |   | 2004    | 
|               |  |             |                                    |  |      |   |           |      |  |   |         | 
|KT Corporation |  |             | Leased line charges and others     |  |      | W | 1,270,716 |      |  | W | 475,648 |  |  | W | 482,900 | 
|KT Solutions   |  |             | Interconnection charges and others |  |      |   | 261       |      |  |   | 2,437   |  |  |   | 8,258   | 
|KT Hitel       |  |             |                                   |  |      |   | 539       |      |  |   | 280     |  |  |   | 6,933   | 
|Others         |  |             |                                   |  |      |   | 1,196     |      |  |   | 3,591   |  |  |   | 2,191   | 
|               |  |             |                                    |  |      |   |           |      |  |   |         | 
|               |  |             |                                    |  |      | W | 1,272,712 |      |  | W | 481,956 |  |  | W | 500,282 | 
|               |  |             |                                    |  |      |   |           |      |  |   |         | 



| |     |                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------
| | (2) | Receivables and payables with related parties as of
    December 31, 2003 and 2004 are as follows (won in millions):

|               |  |             |         |  |          |   |         |      |  |   |         |  |  |   |         | 
|-------------- |  | ----------- | ------- |  | -------- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|               |  | Receivables |         |  | Payables |  
|               |  |             |         |  |          |  
|               |  | 2003        |         |  | 2004     |   |         | 2003 |  |   | 2004    | 
|               |  |             |         |  |          |   |         |      |  |   |         | 
|KT Corporation |  | W           | 160,042 |  |          | W | 155,301 |      |  | W | 354,893 |  |  | W | 389,725 | 
|KT Solutions   |  |             | 150     |  |          |   | 300     |      |  |   | 201     |  |  |   | 377     | 
|KT Hitel       |  |             |        |  |          |   |        |      |  |   | 28      |  |  |   | 2,584   | 
|Others         |  |             | 17      |  |          |   | 384     |      |  |   | 1,323   |  |  |   | 293     | 
|               |  |             |         |  |          |   |         |      |  |   |         | 
|               |  | W           | 160,209 |  |          | W | 155,985 |      |  | W | 356,445 |  |  | W | 392,979 | 
|               |  |             |         |  |          |   |         |      |  |   |         | 



|    |            
|--- | -----------
|21. | COMMITMENT:





|    |                     
|--- | --------------------
|22. | SEGMENT INFORMATION:





|                               |  |             |           |          |         |   |        |          |  |   |       |  |  |   |           | 
|------------------------------ |  | ----------- | --------- | -------- | ------- | - | ------ | -------- |  | - | ----- |  |  | - | --------- | 
|                               |  |             |           | IMT 2000 |         |   | PCS    |          |  |  
|2002                           |  | PCS Service |           |          | Service |   |        | Handsets |  |   | Total | 
|                               |  |             |           |          |         |   |        |          |  |   |       | 
|Operating revenue              |  | W           | 5,320,028 |          |         | W |       |          |  | W |      |  |  | W | 5,320,028 | 
|Operating income               |  |             | 844,191   |          |         |   |       |          |  |   |      |  |  |   | 844,191   | 
|Ordinary income                |  |             | 612,443   |          |         |   |       |          |  |   |      |  |  |   | 612,443   | 
|Depreciation                   |  |             | 723,667   |          |         |   |       |          |  |   |      |  |  |   | 723,667   | 
|Property and equipment, net(*) |  |             | 4,241,471 |          |         |   | 11,732 |          |  |   | 3,865 |  |  |   | 4,257,068 | 

A-29



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                               |  |             |           |          |         |   |        |          |  |   |        |   |  |   |           | 
|------------------------------ |  | ----------- | --------- | -------- | ------- | - | ------ | -------- |  | - | ------ | - |  | - | --------- | 
|                               |  |             |           | IMT 2000 |         |   | PCS    |          |  |  
|2003                           |  | PCS Service |           |          | Service |   |        | Handsets |  |   | Total  |  
|                               |  |             |           |          |         |   |        |          |  |   |        |  
|Operating revenue              |  | W           | 5,076,526 |          |         | W |       |          |  | W | 47,086 |   |  | W | 5,123,612 | 
|Operating income               |  |             | 782,231   |          |         |   |       |          |  |   | (579   | ) |  |   | 781,652   | 
|Ordinary income                |  |             | 459,084   |          |         |   |       |          |  |   | (3,428 | ) |  |   | 455,656   | 
|Depreciation                   |  |             | 837,971   |          |         |   |       |          |  |   | 1,459  |   |  |   | 839,430   | 
|Property and equipment, net(*) |  |             | 4,272,653 |          |         |   | 49,714 |          |  |   | 8,879  |   |  |   | 4,331,246 | 

|                               |  |             |           |          |         |   |        |          |  |   |         |  |  |   |           | 
|------------------------------ |  | ----------- | --------- | -------- | ------- | - | ------ | -------- |  | - | ------- |  |  | - | --------- | 
|                               |  |             |           | IMT 2000 |         |   | PCS    |          |  |  
|2004                           |  | PCS Service |           |          | Service |   |        | Handsets |  |   | Total   | 
|                               |  |             |           |          |         |   |        |          |  |   |         | 
|Operating revenue              |  | W           | 5,830,818 |          |         | W |       |          |  | W | 112,074 |  |  | W | 5,942,892 | 
|Operating income               |  |             | 528,987   |          |         |   |       |          |  |   | 11,160  |  |  |   | 540,147   | 
|Ordinary income                |  |             | 308,610   |          |         |   |       |          |  |   | 6,978   |  |  |   | 315,588   | 
|Depreciation                   |  |             | 992,900   |          |         |   |       |          |  |   | 3,144   |  |  |   | 996,044   | 
|Property and equipment, net(*) |  |             | 4,340,936 |          |         |   | 76,679 |          |  |   | 12,594  |  |  |   | 4,430,209 | 






|    |                                          
|--- | -----------------------------------------
|(*) | construction in progress is not included.



|    |                                          
|--- | -----------------------------------------
|23. | EVENT OCCURRING AFTER BALANCE SHEET DATE:





|    |        
|--- | -------
|24. | MERGER:





|    |                              
|--- | -----------------------------
|(1) | Relation of the two companies





|    |                   
|--- | ------------------
|(2) | Schedule of merger





|    |                        
|--- | -----------------------
|(3) | Exchange rate of shares





|    |                     
|--- | --------------------
|(4) | Result of the merger





A-30



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)






|    |                                                                                 
|--- | --------------------------------------------------------------------------------
|(5) | Summarized financial statements of KT ICOM are as
    follows (won in millions):



| |                          
| | -------------------------
| | Summarized Balance Sheets

|                   |              |          |           |           |            |   |           |           | 
|------------------ | ------------ | -------- | --------- | --------- | ---------- | - | --------- | --------- | 
|                   |              | 2003.3.5 |           |           | 2002.12.31 |  
|                   |              |          |           |           |            |  
|Current assets     |              | W        | 1,080,950 |           |            | W | 1,114,766 |          
|Non-current assets |              |          | 1,378,039 |           |            |   | 1,349,660 |          
|                   |              |          |           |           |            |  
|                   | Total assets |          | W         | 2,458,989 |            |   | W         | 2,464,426 | 
|                   |              |          |           |           |            |  

|                              |                                           |          |           |           |            |   |           |           | 
|----------------------------- | ----------------------------------------- | -------- | --------- | --------- | ---------- | - | --------- | --------- | 
|                              |                                           | 2003.3.5 |           |           | 2002.12.31 |  
|                              |                                           |          |           |           |            |  
|Current liabilities           |                                           | W        | 196,745   |           |            | W | 130,625   |          
|Long-term liabilities         |                                           |          | 510,417   |           |            |   | 515,619   |          
|                              |                                           |          |           |           |            |  
|                              | Total liabilities                         |          |           | 707,162   |            |   |           | 646,244   | 
|                              |                                           |          |           |           |            |  
|Capital stock                 |                                           |          | 500,000   |           |            |   | 500,000   |          
|Capital surplus               |                                           |          | 1,300,000 |           |            |   | 1,300,000 |          
|Accumulated retained earnings |                                           |          | 18,604    |           |            |   | 18,182    |          
|Capital adjustments           |                                           |          | (66,777   | )         |            |   |          |          
|                              |                                           |          |           |           |            |  
|                              | Total shareholders equity                |          |           | 1,751,827 |            |   |           | 1,818,182 | 
|                              |                                           |          |           |           |            |  
|                              | Total liabilities and shareholders equity |          | W         | 2,458,989 |            |   | W         | 2,464,426 | 
|                              |                                           |          |           |           |            |  

Summarized
Statements of Income


|                       |  |                   |         |   |                     |   |         |  
|---------------------- |  | ----------------- | ------- | - | ------------------- | - | ------- | -
|                       |  | 2003.1.1-2003.3.5 |         |   | 2002.1.1-2002.12.31 |  
|                       |  |                   |         |   |                     |  
|Operating revenue      |  | W                 |        |   |                     | W |        |  
|Operating expenses     |  |                   | 14,570  |   |                     |   | 61,303  |  
|                       |  |                   |         |   |                     |  
|Operating loss         |  |                   | (14,570 | ) |                     |   | (61,303 | )
|Other income           |  |                   | 10,571  |   |                     |   | 60,058  |  
|                       |  |                   |         |   |                     |  
|Ordinary loss          |  |                   | (3,999  | ) |                     |   | (1,245  | )
|Extraordinary item     |  |                   |        |   |                     |   |        |  
|                       |  |                   |         |   |                     |  
|Loss before income tax |  |                   | (3,999  | ) |                     |   | (1,245  | )
|Income tax benefits    |  |                   | (8,038  | ) |                     |   | (359    | )
|                       |  |                   |         |   |                     |  
|Net income (loss)      |  | W                 | 4,039   |   |                     | W | (886    | )
|                       |  |                   |         |   |                     |  



|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|25. | RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
    IN THE UNITED STATES:



A-31



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                                                               
|--- | --------------------------------------------------------------
|(1) | Capitalization of foreign currency translation gain
    (loss)







|    |                        
|--- | -----------------------
|(2) | Interest Capitalization





|    |               
|--- | --------------
|(3) | Licensing Cost







|    |                 
|--- | ----------------
|(4) | Deferred Charges







|    |                    
|--- | -------------------
|(5) | Revenue Recognition





(6)     Merger
with KTM.Com Co., Ltd.








A-32



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|    |                    
|--- | -------------------
|(7) | Merger with KT ICOM







|    |                               
|--- | ------------------------------
|(8) | Goodwill and Other Intangibles







|        |  |  |                     |                |  |                      |           |  |  |      |         |  |      |   |         |  |  |   |         | 
|------- |  |  | ------------------- | -------------- |  | -------------------- | --------- |  |  | ---- | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|        |  |  |                     |                |  | Amortization Expense |          
|        |  |  |                     |                |  |                      |          
|        |  |  |                     | Initial Amount |  |                      | 2002      |  |  | 2003 |         |  | 2004 |  
|        |  |  |                     |                |  |                      |           |  |  |      |         |  |      |  
|KTM.Com |  |  | Goodwill            |                |  | W                    | 558,505   |  |  | W    |        |  |      | W |        |  |  | W |        | 
|        |  |  | Subscriber base     |                |  |                      | 605,563   |  |  |      | 126,159 |  |      |   | 162,204 |  |  |   | 162,204 | 
|        |  |  | License cost        |                |  |                      | 83,875    |  |  |      |        |  |      |   |        |  |  |   |        | 
|KT ICOM |  |  | Frequency use right |                |  |                      | 1,209,883 |  |  |      |        |  |      |   | 7,753   |  |  |   | 91,945  | 



|    |                                                    
|--- | ---------------------------------------------------
|(9) | Disposal of Trade Accounts and
    Notes Receivable





|     |                                              
|---- | ---------------------------------------------
|(10) | Minority Interests in Consolidated Subsidiary





|     |                           
|---- | --------------------------
|(11) | Accrued Severance Benefits



A-33



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)










|     |  |        |       | 
|---- |  | ------ | ----- | 
|Year |  | Amount |      
|     |  |        |      
|2012 |  | W      | 439   | 
|2013 |  |        | 207   | 
|2014 |  |        | 1,029 | 
|     |  |        |      
|     |  | W      | 1,675 | 
|     |  |        |      





|     |                     
|---- | --------------------
|(12) | Comprehensive Income





|                                                                  |                                                                                                                                    |               |         |       |      |   |         |       |  |   |         |        |  
|----------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------- | ----- | ---- | - | ------- | ----- |  | - | ------- | ------ | -
|                                                                  |                                                                                                                                    | Korean Won    |        
|                                                                  |                                                                                                                                    |               |        
|                                                                  |                                                                                                                                    | 2002          |         |       | 2003 |   |         | 2004  | 
|                                                                  |                                                                                                                                    |               |         |       |      |   |         |       | 
|                                                                  |                                                                                                                                    | (In millions) |        
|Net income as adjusted in accordance with U.S. GAAP               |                                                                                                                                    | W             | 460,679 |       |      | W | 332,756 |       |  | W | 173,856 |       
|                                                                  |                                                                                                                                    |               |         |       |      |   |         |       | 
|Other comprehensive income, net of tax:                           |                                                                                                                                    |               |         |       |      |   |         |       |  |   |         |       
|                                                                  | Unrealized gain (loss) on investments, net of tax of
    W745 million in 2002, W1,540 million in 2003 and
    W697 million in 2004 |               |         | 1,762 |      |   |         | 3,646 |  |   |         | (1,649 | )
|Reclassification adjustment                                       |                                                                                                                                    |               |        |       |      |   | (548    | )     |  |   |        |       
|                                                                  |                                                                                                                                    |               |         |       |      |   |         |       | 
|Comprehensive income as adjusted in accordance with
    U.S. GAAP |                                                                                                                                    | W             | 462,441 |       |      | W | 335,854 |       |  | W | 172,207 |       
|                                                                  |                                                                                                                                    |               |         |       |      |   |         |       | 

A-34



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|     |                                                    
|---- | ---------------------------------------------------
|(13) | Effect on Net Earnings and Shareholders
    Equity



|                                             |                                                                          |      |         |          |      |   |         |          |   |   |          |          |  
|-------------------------------------------- | ------------------------------------------------------------------------ | ---- | ------- | -------- | ---- | - | ------- | -------- | - | - | -------- | -------- | -
|                                             |                                                                          | 2002 |         |          | 2003 |   |         | 2004     |  
|                                             |                                                                          |      |         |          |      |   |         |          |  
|Net income under Korean GAAP                 |                                                                          | W    | 532,163 |          |      | W | 406,029 |          |   | W | 287,863  |         
|Adjustments:                                 |                                                                          |      |         |          |      |   |         |          |   |   |          |         
|                                             | (1)  Capitalization of foreign currency translation
    gain (loss), net |      |         | 1,278    |      |   |         | 820      |   |   |          | 820      |  
|                                             | (2)  Interest capitalization                                             |      |         | 4,398    |      |   |         | 75,867   |   |   |          | 12,402   |  
|                                             | (4)  Deferred charges                                                    |      |         | 248      |      |   |         | (3,210   | ) |   |          | (3,693   | )
|                                             | (5)  Revenue recognition                                                 |      |         | 4,482    |      |   |         | 4,150    |   |   |          | (1,075   | )
|                                             | (7)  Merger with KT ICOM                                                 |      |         |         |      |   |         | 240      |   |   |          | 2,884    |  
|                                             | (8)  Amortization of subscriber base                                     |      |         | (126,159 | )    |   |         | (162,204 | ) |   |          | (162,204 | )
|                                             | (9)  Disposal of trade accounts and notes receivable                     |      |         | 14,068   |      |   |         | (7,357   | ) |   |          | (6,385   | )
|Deferred tax effect of U.S. GAAP adjustments |                                                                          |      | 30,201  |          |      |   | 18,421  |          |   |   | 43,244   |         
|                                             |                                                                          |      |         |          |      |   |         |          |  
|                                             |                                                                          |      | (71,484 | )        |      |   | (73,273 | )        |   |   | (114,007 | )       
|                                             |                                                                          |      |         |          |      |   |         |          |  
|                                             | Adjusted net income under U.S. GAAP                                      |      | W       | 460,679  |      |   | W       | 332,756  |   |   | W        | 173,856  |  
|                                             |                                                                          |      |         |          |      |   |         |          |  
|                                             | Basic earnings per share                                                 |      | W       | 2,514    |      |   | W       | 1,776    |   |   | W        | 946      |  
|                                             |                                                                          |      |         |          |      |   |         |          |  

|                                             |                                                                          |      |           |         |      |   |           |         |  
|-------------------------------------------- | ------------------------------------------------------------------------ | ---- | --------- | ------- | ---- | - | --------- | ------- | -
|                                             |                                                                          | 2003 |           |         | 2004 |  
|                                             |                                                                          |      |           |         |      |  
|Shareholders equity under Korean GAAP       |                                                                          | W    | 3,143,038 |         |      | W | 3,190,149 |        
|Adjustments:                                 |                                                                          |      |           |         |      |   |           |        
|                                             | (1)  Capitalization of foreign currency translation
    gain (loss), net |      |           | (2,246  | )    |   |           | (1,427  | )
|                                             | (2)  Interest capitalization                                             |      |           | 57,386  |      |   |           | 69,789  |  
|                                             | (3)  Licensing cost                                                      |      |           | 44,953  |      |   |           | 44,953  |  
|                                             | (4)  Deferred charges                                                    |      |           | (3,210  | )    |   |           | (6,903  | )
|                                             | (5)  Revenue recognition                                                 |      |           | (1,743  | )    |   |           | (2,818  | )
|                                             | (6)  Merger with KTM.Com                                                 |      |           | 793,800 |      |   |           | 631,596 |  
|                                             | (7)  Merger with KT ICOM                                                 |      |           | (37,249 | )    |   |           | (34,365 | )
|                                             | (9)  Disposal of trade accounts and notes receivable                     |      |           | 6,711   |      |   |           | 326     |  
|                                             | (10)  Minority interests in consolidated subsidiary                      |      |           | (3,300  | )    |   |           | (8,040  | )
|Deferred tax effect of U.S. GAAP adjustments |                                                                          |      | (237,247  | )       |      |   | (194,003  | )      
|                                             |                                                                          |      |           |         |      |  
|                                             |                                                                          |      | 617,855   |         |      |   | 499,108   |        
|                                             |                                                                          |      |           |         |      |  
|Shareholders equity under U.S. GAAP         |                                                                          | W    | 3,760,893 |         |      | W | 3,689,257 |        
|                                             |                                                                          |      |           |         |      |  

A-35



---



##### 



KT FREETEL CO., LTD. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)




|                                               |                        |      |           |           |      |   |           |           | 
|---------------------------------------------- | ---------------------- | ---- | --------- | --------- | ---- | - | --------- | --------- | 
|                                               |                        | 2003 |           |           | 2004 |  
|                                               |                        |      |           |           |      |  
|Assets:                                        |                        |      |           |           |      |   |           |          
|                                               | Current assets         |      | W         | 1,770,935 |      |   | W         | 1,986,830 | 
|                                               | Property and equipment |      |           | 4,710,105 |      |   |           | 4,653,296 | 
|                                               | Intangible assets      |      |           | 2,127,992 |      |   |           | 1,876,382 | 
|                                               | Other assets           |      |           | 358,894   |      |   |           | 399,296   | 
|                                               |                        |      |           |           |      |  
|                                               |                        | W    | 8,967,926 |           |      | W | 8,915,804 |          
|                                               |                        |      |           |           |      |  
|Liabilities:                                   |                        |      |           |           |      |   |           |          
|                                               | Current liabilities    |      | W         | 2,604,848 |      |   | W         | 2,414,635 | 
|                                               | Long-term liabilities  |      |           | 2,600,613 |      |   |           | 2,805,940 | 
|                                               |                        |      |           |           |      |  
|                                               |                        |      | 5,205,461 |           |      |   | 5,220,575 |          
|Minority interest in consolidated subsidiaries |                        |      | 1,572     |           |      |   | 5,972     |          
|Shareholders equity                           |                        |      | 3,760,893 |           |      |   | 3,689,257 |          
|                                               |                        |      |           |           |      |  
|                                               |                        | W    | 8,967,926 |           |      | W | 8,915,804 |          
|                                               |                        |      |           |           |      |  

A-36



---



##### 



SIGNATURES






| |                                             
| | --------------------------------------------
| | KT CORPORATION                              
| | (Registrant)                                
|
| | /s/ Yong-Kyung Lee                          
| |                                             
| | Name: Yong-Kyung Lee                        
| | Title: President and Chief Executive Officer





---



##### 



Exhibit Index


| |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1  |     |  | Articles of Incorporation of KT Corporation (English translation)                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 2  | .1* |  | Form of Common Stock Certificate of KT Corporation, par value
    Won 5,000 per share (including translation in English)
    (incorporated herein by reference to Exhibit 4.3 of the
    Registrants Registration Statement (Registration
    No. 333-7630) on Form F-1).                                                                                                                                                                                                                        
| | 2  | .2* |  | Deposit Agreement dated as of May 25, 1999 entered into
    among KT Corporation, Citibank, N.A., as depositary, and
    all Holders and Beneficial Owners of American Depositary Shares
    evidenced by the American Depositary Receipts issued thereunder,
    including the form of American depositary receipt (incorporated
    herein by reference to Exhibit (a)(i) of the
    Registrants Registration Statement (Registration
    No. 333-13578) on Form F-6).                         
| | 2  | .3* |  | Form of Amendment No. 1 Deposit Agreement dated as of
    May 25, 1999 entered into among KT Corporation,
    Citibank, N.A., as depositary, and all Holders and Beneficial
    Owners of American Depositary Shares evidenced by the American
    Depositary Receipts issued thereunder, including the form of
    American depositary receipt (incorporated herein by reference to
    Exhibit (a)(ii) of the Registrants Registration
    Statement (Registration No. 333-13578) on Form F-6).
| | 2  | .4* |  | Letter from Citibank, N.A., as depositary, to the Registrant
    relating to the pre-release of the American depositary receipts
    (incorporated herein by reference to the Registrants
    Registration Statement (Registration No. 333-10330) on
    Form F-6).                                                                                                                                                                                                                              
| | 7  | .1  |  | Computation of ratio of earnings to fixed charges                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 8  | .1  |  | List of subsidiaries of KT Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 12 | .1  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 12 | .2  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 13 | .1  |  | Certification pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 15 | .1  |  | Consent of KPMG Samjong Accounting Corp. with respect to
    the financial statements of KT Corporation                                                                                                                                                                                                                                                                                                                                                                                           
| | 15 | .2  |  | Consent of Deloitte HanaAnjin LLC with respect to the financial
    statements of KT Freetel Co., Ltd.                                                                                                                                                                                                                                                                                                                                                                                            
| | 15 | .3  |  | The Telecommunications Basic Law (English translation)                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 15 | .4  |  | Enforcement Decree of the Telecommunications Basic Law (English
    translation)                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 15 | .5  |  | The Telecommunications Business Law (English translation)                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 15 | .6  |  | Enforcement Decree of the Telecommunications Business Act
    (English translation)                                                                                                                                                                                                                                                                                                                                                                                                               






|  |                               
|- | ------------------------------
|* | Filed previously as indicated.