cable & stainless steel solutions...joint accessories such as taihan's 345kv gis(gas...

Annual Report 2003

Cable & Stainless Steel Solutions

Profile

Financial Highlights 3

CEO message 4

Operating Outlines 6

Review of Operations 8

Cables and Wires 10

Stainless Steel 14

Overseas Activities 16

Optomagic 20

Financial Statements 21

Corporate Information 41

Organization 41

History 42

Contents

TAIHAN"a global leader

incable and stabusiness"

TAIHAN "a global leader in cable and stainless steel business"

Taihan Electric Wire Co., Ltd. (TAIHAN) has been contributing to global growth and development ofessential industrial goods in the cable and satainless steel business fields. By implementingstrategic reforms and innovative actions in order to improve the competitiveness and corporatevalue, TAIHAN has attained a superior reputation from its customers around the world.

TAIHAN concentrates all our energies to develop and commercialize high-tech products in the areaof cables, stainless steel and their related industries.

We, TAIHAN will exert our efforts in order to achieve a position as a global leader in this businesssector that constantly communicates effectively and operates in harmony with neighbors as well ascustomers around the globe.

Financial HighlightsFor the years ended December 31, 2003, 2002 and 2001

inless steel

Millions of Korean WonThousands of U.S. Dollars

2003 2002 2001 2003＼ 1,246,135 ＼ 1,252,151 ＼ 1,270,318 $ 1,040,353

62,259 88,251 70,379 51,97843,268 63,269 50,531 36,123

1,631,446 1,412,342 1,372,633 1,362,035662,593 603,412 580,577 553,175

Korean Won U.S Dollars ＼ 1,342 ＼ 1,990 ＼ 1,579 $ 1.12

SalesIncome before Income TaxesNet IncomeTotal AssetsStockholder's Equity

Earnings Per Share

Note : U.S. Dollar amounts have been translated, for convenience only, at the exchange rate of＼1,197.8=US$1, the rate in effect on December 31, 2003. See Note 2 of Notes to FinancialStatement.

Exports Ratio (%)

Net Income (Billion Won)

Sales (Billion Won)

Sales by Business Segment (2003)

Cable & Wires 69%

Stainless Steel30%

Others 1%

Chong-wook Lim / CEO

To TAIHAN's Shareholders

CEO Message

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Chong-wook Lim / CEO

We would like to express our most sincere gratitude to allof you for your support over the past years.

In 2003, unstable circumstances continued at home andabroad. As the war in Iraq concluded early, mostuncertainty in the global economy seemed to be solved.However, entering the second half of the year, unstableconditions in international financial markets, such as theUS dollar's weakness and interest rate hikes, hindered thetrend toward recovery of the world's economy.

Domestic market also experienced a very tough year. Therate of economic growth, a mere 2%, made us go througha recession in a real sense. Moreover, social uneasinessfrom excessive household debt, unstable labor relations,political problems and shrunken investment in companieshas adversely affected national economic recovery.

Despite such unfavorable economic circumstances, we didour best to overcome the crisis and improve ourcompetitive position through continuous restructuring,innovative actions like reorganization of managementresources centered to core business, and adoption of wagepeak system, and so on.

We achieved sound business performance in 2003 byrecording equivalent sales level compared with theprevious year. The cable division realized sales of 861.9billion won, the stainless steel division 370.2 billion won,and other areas 14 billion won, totaling to 1.246 trillionwon. The sales volume of stainless steel productsincreased 16%, thanks to a favorable turn in conditions ofdomestic marketplace. However, the cable division

endured a decline in sales of 4.6% due to investmentshrinkage in domestic public sector and a slump inhousehold consumption. Despite this adverse situation,TAIHAN realized a net profit of 43.3 billion won in the yearthrough the strengthening of marketing activities and thedevelopment of value added products.

The economic circumstances of Korea are expected to getbetter in compliance with recovery of the world economy.However, the sharp increase in the price of raw materialsin international market will be an obstacle to the recoverytrend occurring in the Korean economy.

The business environment will be not so favorable in 2004,considering the unstable status of critical economic factorsin the midst of very intensive competition.

We will continuously step forward to be a top contenderaround the world in our areas of operation and establish afirm position to enable long-term growth of the companythrough continuous restructuring and positive changes tocope with the environment.

We are confident that our efforts in managementinnovation will raise our corporate value and benefit ourshareholders and customers. We will work continuously toachieve these goals.

We would promise to provide you with a bright andprosperous future and would like to express ourgratefulness for your continued support.

Thank you.

We are confident that our efforts in management innovation will raise our corporate

value and benefit our shareholders and customers. We will work continuously to achieve

these goals.

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Operating Outlines

TAIHAN has a new vision to grow into a world-class enterprise by creating a new corporate culture full of

passion and actively practicing global management. We have steadily accomplished growth and diversification

thanks to our unrivaled extra high-voltage cables, optical communication business and stainless steel products

keeping in line with the ever-changing market situation.

Today TAIHAN's valuable and worldwide reputation is the result of endless efforts in

technical reforms and R&D as well as our well-organized management system. These

factors have propelled TAIHAN into a world-class enterprise with two core businesses;

cables and stainless products. These have provided TAIHAN with annual average sales of

approximately 1.3 trillion won. Owing to successful business restructuring, we could have

high competitiveness in the business sector and achieve remarkable operating performance

in the midst of recent severe circumstances.

Providing our customers with a one-stop solution for cables and stainless steel, TAIHAN is rapidly expanding its

business activities throughout the world. We have been producing and supplying our quality products on time in

compliance with any specific requirements of the customers on the firm foundation of qualified manpower and

advanced technology. We will never stop developing and upgrading our technologies with the global industry

and thereby promoting our contribution to society.

Look no further than TAIHAN, a world-class manufacturer of cables and stainless steel.

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Look no further than TAIHAN, a world-class manufacturer of cables and stainless steel.

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Review of Operations

Taihan Electric Wire Co., Ltd. is a one-stop solution

for the supply of cables, wires, and stainless steel

products. With its highly efficient production capacity,

TAIHAN supplies high-quality products that meet

customers' requirements and specifications anytime,

anywhere.

Cables and Wires 10

Stainless Steel 14

Overseas Activities 16

Optomagic 20

Cables and Wires

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The cable division recorded sales of 861.9 billion won in 2003, a year-on-year decrease of 5%, consisting of 343.8billion won from the domestic market and 518.1 billion won from exports. Our company achieved soundmarketing performance in sales of this business sector in the face of unfavorable market situation at home andabroad.

In the area of the electric power cable division, price competition was much intensified in themedium-low voltage cable sector, and high voltage cable also has been increasingly going intoprice competition. The surplus production capacity under sluggish economic situation causedmaturation of the market. In order to keep our position as a market leader, we have continuedour effort in the development of better products and technology. We will focus on theimprovement of competitiveness for the high value added products such as the extra high voltagecable on the excellent technology base. Demand of the Korea Electric Power Corporation(KEPCO) for the high voltage cable is on a trend in rise.

Sales in the communication cable sector became lower last operation year because IT industry fell into adepression and the foundation of infrastructure in this field has been almost constructed. From 2004, thedemand for optical fiber cable is predicted to increase on a gradual basis owing to the recovery trend in theworld economy and the IT industry. TAIHAN will expand its sales volume for this product on the basis ofadvanced facilities, technical power, and highly qualified human resources.

Sales volume of copper rod products has been considerably increased due to a shortage of supply in thematerials market. Sales at home and abroad increased by 29% and 10% respectively, which represents 13%growth in total amount compared to the previous year. In the meantime, sales of magnet wire products, havedeclined by 12% compared to 2002 due to sluggish trend of demand in this field.

We are aiming to be a leading company in the cable and wire business fields, and our efforts to achieve this goalwill be continued.

Sales (Billion Won) Sales Ratio (2003)

Domestic 40% Power

27% Copper Rod 54%

5%Engineering

Magnet Wire

5%Communication 9%

Export60%

Sales Portfolio (2003)

We are aiming to be a leading company

in the cable and wire business fields, and our efforts

to achieve this goal will be continued.

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TAIHAN has concentrated on the design, manu-facture, and construction works of 345kV XLPECable and its accessories since 1997. We acquiredtype test certification from Korea ElectrotechnologyResearch Institute(KERI) and successfully passedprequalification tests based on IEC and KEPCOstandards.

345kV XLPE insulated cable for undergroundtransmission lines requires the optimal controllingtechnology to secure the clean materialsmanagement that prevents any microscopic dirtfrom being injected to the insulated materials andthe technology that detects fine dirt.

The joint accessories for extra high voltage XLPEpower cables have been developed on our owntechnology basis. Our quality products have beenhighly acknowledged at the market through strictquality management in whole process such asmold assembly in state of clean room as well asapplication of closing system to prevent dirt-injection at the moment of materials input.

Joint accessories such as TAIHAN's 345kV GIS(GasInsulated Switchgear), Outdoor Termination, andPrefabricated Type Accessories are very significantelements in power cable system, whose prominentproperty enables them to accomplish high qualityand short assembly time by easy assemblytechnique.

The 345kV extra high voltage cable and accessoriesare controlled in constant conditions of 20℃,humidity under 80%, air purity under 100,000 class,and 0.5~5㎛ particle size through clean unit &booth, etc. in the clean room to strictly keep thequality.

Out of new joint accessories recently developed byTAIHAN, PMJ(Pre Molded Joint) is highly preferredby users because it has short connection time andlow reliance on connection skill. It is expected to becommercialized in 2004 through the test based onKEPCO standards. Moreover, TJ(Transition Joint)has been increasingly used due to the limit of

expanding new underground lines and fastapplication of pro-environmental and convenientlymaintained XLPE cable compared with OF cable.

The development of a new type of TJ, which is usedfor connection of OF-XLPE cable has been almostcompleted, and it will be commercialized at the endof 2004.

In December 2002, we successfully carried out theKEPCO 345kV Pyeongtaek thermoelectric powerplant project for the first time in Korea, thereafterYeongseo-Yongdungpo project and Yeongheungthermoelectric power plant project.

Besides, we are contributing to the developmentand improvement of extra high voltage powertransmission system in the future through everlasting efforts for new technologies such as PartialDischarge Test and Infrared ThermographyMeasurement for the stable maintenance of powerline.

We are on development of low capacity cable(600sqmm) and accessories in the equivalent voltage levelfor Yangyang Pumped Storage Power Plant Project.These will be commercialized in 2005.

Through the successful commercialization anduntiring efforts, reliability of the 345kV XLPE cableand its accessories has been recognized internallyand externally, enabling TAIHAN to actively meet tothe rapidly increasing overseas demand for extrahigh voltage of 300kV class or higher. This hasprovided an opportunity for TAIHAN to accumulatetechnical foundation for the 400kV class and 500kVclass extra high voltage cable and the prefabricatedtype accessories. The market demand on those isexpected to expand in the domestic and overseasmarkets.

TAIHAN has successfully supplied wide range ofextra high voltage cables and accessories on theturn-key project base to the international market,getting world recognition for the high quality andsuperiority of products.

Commercialization of 345kV XLPE extra high-voltage cable and accessories

Commercialization of polymer insulators

The polymer insulators developed by TAIHAN acquired certification from the Korea ElectrotechnologyResearch Institute (KERI), a government authorized certificate authority, and passed finalperformance test conducted prior to delivery, succeeding in commercialization.

The polymer insulators are divided into two types: the suspension insulators used by KEPCO andthe longrod insulators used by the Korean National Railroad. The suspension insulators areused for extra high voltage overhead distribution system, while the long-rod insulators, for thecantilever of the 25kV catenary.

These products have been developed to replace the existing ceramic insulators. These arelighter than the ceramic insulators and made of silicon, carrying out self-cleaning function.

Long-rod insulators passed the development test from 2002 to early 2003 succeeded incommercialization by selling to KNR(Korean National Railroad) at theend of 2003.

In addition, the crimping for the high strength FRP rod and inlet/outletenables the product to maintain high tensile strength, and boast superiorelectric performance because the leakage distance is long. Especially, theproduct maintains excellent mechanical and electric characteristicseven in salty areas or highly contaminated areas, guaranteeinglong life span.

The stainless steel division recorded 370.2 billion won in terms of sales in 2003, a year-on-year increase of 16%,consisting of 233.9 billion won from the domestic market and 136.3 billion won from the exports. The domesticmarket sales was greatly expanded up to 17% compared with the previous year.

Such a favorable performance in stainless steel division was possible owing to the brisk marketsituation and the price hike of hot-coil and its raw materials during the year. The sales volumewas increased to 4% in terms of quantity compared with the previous year.

The sales of the wide width products was largely increased up to 16%, while that of narrow widthproducts increased 7%.

We launched the high strength & ultra thin thickness panel (grade 301 & 304,0.15/0.3/0.4/0.5/0.6mm) used for cellular phone and other high-tech products like LCD in TV,monitor and camcorder. Moreover, we are in the progress of testing for localization of metaldome to be used for cellular phone keypad (grade 301&304, 0.05/0.06mm).

Exports of stainless steel products also increased by 15% in terms of sales amount and by 3% in quantity. It waspossible through diversifying of sales networks, developing potential or new markets such as South Africa,Israel, Russia, and etc., as well as maintaining sales to China, the biggest market and strengthening salesactivities to Japan and Oceania, the advanced markets.

Cold rolled stainless steel sheet was generally used for tableware/hollowware and the construction materials.Recently, however, applications have been expanded to higher value-added products such as the sash andreflectors for LCD as per the development of the ultra thin thickness products, which have significantlycontributed to the improvement of company profits.

Backed up by the experience of producing 0.04mm ultra thin thickness products, TAIHAN provides the highestquality products that satisfy the diversified requirements of customers.

TAIHAN's plant operates the ultra thin thickness product rolling mill, KT-MILL, and it is the only one in thecountry in producing thin sheet to effectively satisfy new demand.

Sales (Billion Won)

Stainless Steel

Sales Ratio (2003)

Wide Width92%

Narrow Width

8%

Sales Portfolio (2003)

Export 37%

Domestic63%pa

ge14

TAIHAN's plant operates the ultra thin thickness product rolling mill,

KT-MILL, and it is the only one in the country in producing thin

sheet to effectively satisfy new demand.

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In export, the sales volume reached 654.4 billion won, of which cable & wire and stainless steel recorded 518.1billion won and 136.3 billion won in sales respectively.

The extra high-voltage cable division has successfully completed 3 separate projects, 230kV O.F. & XLPE cablein Singapore, 275kV O.F. cable project in Malaysia, and 161kV O.F. cable project in Taiwan. TAIHAN also hasexpanded EHV cable markets to the Middle East countries and United States, and taken the greater share inboth regions. We became to secure the bridgehead of opening up a new market in the United States and we aregoing to go ahead with a plan of a full-scale market expansion from the year of 2004.

The medium voltage cable division has been approaching Japanese market strategically for the purpose oflong-term business relationship. Since the year of 1998, TAIHAN has devoted all energies to seek a new marketin Japan aimed at major electric power companies and supplying of medium voltage wires, and now it bearsfruit as sales increase. We settled down as one of the major suppliers to Tokyo Electric Power, which is thelargest power utility company in Japan. In the meanwhile, various business talks are kept going on with otherelectric power companies. We expect sales increase as well as item variation soon.

The communication division expands its export targets to the North America, Central South America, China, andAfrica to create new demands and to diversify markets.

TAIHAN has successfully fulfilled series of telecom projects in Mongolia. After completing the backbonenetwork of the Mongolia Post and Telecom Administration (MPTA), TAIHAN is providing full post-managementservice from the middle of this year to ensure that the communication network operates satisfactorily afteropening. On the lines of telecommunication turnkey project in Mongolia, TAIHAN has completed another opticaltransmission network between Bulgan and Khuvsgel Provinces. Its total length is over 400km.

TAHAN carries out marketing activities for copper communication sector focusing on the Middle East areas. Asfor the optical communication division, TAIHAN succeeded in the international OPGW bidding in Thailand,Vietnam, Indonesia, Taiwan and South Africa, which will be the major field in optical communication division.TAIHAN will much more actively expand its overseas business from 2004 as the world economy will turn thetrend favorably, especially in the IT industry.

Overseas Activities

Exports Ratio (2003)

Domestic 47%

Export 53%

Sales Portfolio (2003)Sales (Billion Won)

Stainless Steel

30%

Cable & Wire70%

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TAIHAN will much more actively expand its overseas business

from 2004 as the world economy will turn the trend favorably,

especially in the IT industry.

Malesela Taihan Electric Cable(Pty) Ltd. (M-TEC), isTAIHAN's local entity in South Africa for the produc-tion and supply of cable products, which wasestablished in 2000 as a foremost base to Africancontinent on the basis of 95 year history localcompany. With an additional investment in the opticalcable production facilities, M-TEC, as South Africa'slargest and fully equipped general cable manu-facturer, has secured long-term tender issued by thesole telecom operator of the country.

M-TEC has successfully supplied the quality opticalfiber cable from 2002, the optical fiber for which hasbeen procured from OPTOMAGIC by acquisition ofquality certificate from the local authority. M-TECexpects to supply around 300,000 fiber.km for thisproject and its sales volume may much more increaseas 2nd mobile telecom operator in the country plansto build up its own networks in the second half of2004.

M-TEC operates wide range of wire and cableproduction plant including ACSR, XLPE and PVCinsulated power cables and optical fiber cables. Byintroducing high technology from TAIHAN, M-TEC hassound foundation as cable manufacturer and isexpected to get favorable senergy effect in collabora-tion with TAIHAN.

M-TEC has achieved the excellent operatingperformance for past 3 operating years. In 2002/2003,the sales of M-TEC was U$65 millions and itgenerated about U$4.4 millions operating profit. M-TEC's business performance will be much better inthe operating year of 2003/2004.

AS the World Cup Game is scheduled to be held in thecountry in 2010, M-TEC is expected to realize promis-ing future with the expectation of largely expandedinfrastructure investment in the area of powertransmission and telecom sector.

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M-TEC in South Africa

M-TEC Familiar with Society

Skytel Co., Ltd, was established in1999 as second mobile operator in Mongoliain collaboration with SK Telecom and major local partners. Skytel is steadilygrowing in its mobile service users. Skytel's service users have greatlyincreased by over 30% annually. At the end of 2003, the service users reached60,000 and are expected to reach around 75,000 in 2004.

In 2003 operating year, Skytel realized U$2 millions net profit and the businessperformance will be much improved in 2004 as the sales amount is planned toreach around U$10 millions in the year.

In order to meet the increasing market demand for mobile service and anyother IT industry, Skytel has been greatly expanding the investment in up-grading of system and extending service area to nationwide. They designed toextend its optical transmission line to the Northern area in order to securenationwide mobile service coverage.

On the sound business foundation, Skytel succeeded to issue the preferredshares amounting to U$2 millions at good conditions at the end of 2003 to theKorea Development Bank, and it will be a momentum to go further step as 1stclass mobile operator. Skytel also has the plan for public subscription of stocksin the Korean stock market.

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Skytel in Mongolia

OPTOMAGIC "Competitive Optical Fiber Maker"

OPTOMAGIC Co., Ltd. located in the Ansanindustrial complex in Korea was newly launched in2002 to specialize in optical fiber products byspinning off from TAIHAN. This plant has an annualproduction capacity of 4,000,000 fkm of optical fiberand related products.

OPTOMAGIC, equipped with the latest optical fiberproduction facility, adopts the Vapor AxialDeposition (VAD) method, which was proven as thesuperior method in achieving both quality and

productivity, and is used only by OPTOMAGIC inKorea.

Unlike the MCVD method used by other companiesthat import quartz tube and produce optical fiber,the VAD method demonstrates a manufacturingcapability that is more than 3 times than MCVDmethod by self-producing optical fiber preform.

The length of the optical fiber that can be drawnper unit preform rod is over 1,000 km, whichmeans extremely low production cost. In addition,the optical fiber features superior tensile strengthand optical transmission characteristics toproduce the fiber suitable for 10Gbps or higher-level, high-speed broadband communication.

Since the core and cladding can be manufacturedtogether using the All Synthetic Method, it isunnecessary to import the quartz tubes used forcladding.

Looking back upon the previous year, althoughmost optical fiber companies operated at only 20-30% of their equipment capacity due to the severestagnant IT industry, OPTOMAGIC has achieved thebusiness goal with superior technology andpositive marketing activities.

In 2004, world-wide demand is expected to move toLow Water Peak Fiber, which is manufactured onlyby several leading companies around the world.OPTOMAGIC successfully developed the Low

Water Peak Fiber in 2003 to cope with this markettrend. The product named "ANYWAVE" byOPTOMAGIC will contribute to expand ourcompetitive position in the global optical fibermarketplace.

This new optical fiber was adopted in compliancewith a new international communication standardITU-T G652C,D. Furthermore, it will contribute tothe innovation in communication operators'business structures by enabling them to be appliedfor the communication band even in 1,383nm band,which was impossible with the existing type ofoptical fiber products.

We are willing to maximize our corporate value byconcentrating on the manufacture and sales of"ANYWAVE" based on high technology, superiorquality, and well controlled operation standards.

Optomagic

Balance Sheets / 22

Income Statements / 25

Statements of Appropriations of Retained Earnings / 26

Statements of Cash Flows / 27

Notes to Financial Statements / 29

Report of Independent Accountants / 40

Financial Statements

December 31, 2003, 2002 and 2001Balance Sheets

Millions of Korean Won Thousands ofU.S. Dollars

ASSETSCurrent assets :Cash and cash equivalents ＼ 3,162 ＼ 2,506 ＼ 1,237 $ 2,640Short-term financial instruments 34,861 34,412 244,097 29,104Trading securities (Note 4) 12,194 27,714 62,348 10,180Held-to-maturity securities (Note 4) 986 - - 823 Trade accounts and notes receivable, net (Note 2 and 9) 154,520 189,497 187,956 129,003

Other accounts receivable, net (Note 2 and 9) 4,313 10,262 3,336 3,601

Short-term loans, net (Note 2, 3 and 9) 176,246 136,138 2,133 147,141 Inventories (Note 5) 137,471 127,146 101,973 114,770 Accrued income, net (Note 2) 4,205 19,895 9,557 3,511 Advance payments 2,904 2,170 1,803 2,424 Prepaid expenses 3,604 3,063 5,424 3,009 Other current assets 6,118 2,869 7,232 5,108

Total current assets 540,584 555,672 627,096 451,314

Long-term financial instruments 22 7,125 3,402 18 Investment securities (Note 4 and 9) 323,935 312,424 182,582 270,442 Long-term loans, net (Note 9) 185,221 4,630 30,138 154,634 Long-term other receivable, net (Note 9) - 11,348 - -

Deferred tax assets 4,214 - - 3,518 Severance insurance deposits - 12,426 - -Property, Plant and equipment, net (Note 6 and 8) 574,748 505,410 523,309 479,836

Intangible assets (Note 2) 999 1,375 1,907 834 Other assets 1,723 1,932 4,199 1,438 TOTAL ASSETS ＼1,631,446 ＼1,412,342 ＼1,372,633 $ 1,362,035

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

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2003 2002 2001 2003


Liabilities and Shareholders' EquityCurrent liabilitiesTrade accounts and notes payable (Note 9) ＼ 36,834 ＼ 78,643 ＼ 62,716 $ 30,751Short-term borrowings (Note 7) 423,278 357,853 379,828 353,380Other accounts payable 11,333 33,823 29,703 9,462Accrued expenses 5,794 7,616 8,619 4,837Income taxes payable 1,457 16,166 14,406 1,216Current maturities of long-term debt,net (Note 8) 110,230 34,133 122,592 92,027

Other current liabilities 18,316 10,677 13,340 15,291Total current liabilities 607,242 538,911 631,204 506,964

Debentures, net (Note 8) 248,714 157,414 89,196 207,642Loans (Note 8) 112,264 102,448 53,123 93,725Obligations under capital leases (Note 8) - 30 2,959 -Accrued severance benefits, net (Note 2) 633 9,805 14,127 528 Deferred income tax liabilities - 322 1,447 -Total liabilities ＼ 968,853 ＼ 808,930 ＼ 792,056 $ 808,860

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2003 2002 2001 2003


Shareholers' equity :Capital stock, ＼ 2,500 par value; authorized 120,000,000 shares

Common Stock, issued and outstanding, 40,000,000 shares (Note 1) ＼ 100,000 ＼ 80,000 ＼ 80,000 $ 83,486

Capital surplus Paid-in capital in excess of par value 77,927 61,874 61,874 65,058 Asset revaluation surplus 353,418 353,418 353,418 295,056 Other capital surplus 4,512 4,512 4,512 3,767

435,857 419,804 419,804 363,881

Retained earnings (Note 10)Legal reserve 5,519 3,999 2,400 4,608 Other reserves 101,143 55,258 23,503 84,441 Unappropriated retained earnings (Net income : ＼ 43,268 million, 63,269 million, ＼ 50,531 million in 2003, 2002 and 2001, respectively) 43,264 62,628 49,588 36,120

149,926 121,885 5,491 125,168

Capital adjustment Treasury stock (Note 11) (10,789) (10,789) (61) (9,007) Gain(Loss) on valuation of investmentsecurities (12,029) (6,464) 5,654 (10,043)

Loss on valuation of financial derivatives (372) (1,024) (311) (311)(23,190) (18,277) 5,282 (19,360)

Total shareholders' equity 662,593 603,412 580,577 553,175 TOTAL LIABILITIES AND

SHAREHOLDERS' EQUITY ＼1,631,446 ＼1,412,342 ＼1,372,633 $1,362,035

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2003 2002 2001 2003




Sales (Notes 9) ＼1,246,135 ＼1,252,151 ＼1,270,213 $1,040,353 Cost of sales (Notes 9) 1,133,155 1,117,750 1,111,737 946,030 Gross profit 112,980 134,401 158,476 94,323 Selling and administrative expenses 37,135 41,038 55,997 31,003 Operating income 75,845 93,363 102,479 63,320 Non-operating income (expeses) :Interest expense, net (9,538) (6,043) (25,836) (7,963) Foreign exchange gain, net (2,541) 488 794 (2,121) Gain on disposal of trading securities, net 30 1,897 2,766 25 Gain (loss) on disposal of investment, net 11,785 1,294 (2,806) 9,839 Dividend income 1,153 861 196 963 Gain(loss) on futures transactions, net (1,442) 3,614 (4,656) (1,204) Gain on disposal of property, plant and equipment 58 7,618 271 48

Loss on valuation of inventory - (1,339) - -Impairment losses on available-for-sale securities (1,218) (505) - (1,017)

Additional income taxes for prior periods (5,581) (346) (8) (4,659)Loss on valuation of investment under the equity method of accounting, net (4,323) (3,296) (10,562) (3,609)

Others, net (1,969) (9,355) 7,636 (1,644) (13,586) (5,112) (32,205) (11,342)

Ordinary income 62,259 88,251 70,379 51,978 Extraordinary gain (loss) - - - -Income before income taxes 62,259 88,251 70,379 51,978 Income tax expense 18,991 24,982 19,848 15,855 Net income ＼ 43,268 ＼ 63,269 ＼ 50,531 $ 36,123 Basic and diluted ordinary income Korean Won U.S. Dollarsand earnings per share (Note 12) ＼ 1,342 ＼ 1,990 ＼ 1,579 $ 1.120

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2003 2002 2001 2003

December 31, 2003, 2002 and 2001Income Statements


Statements of Appropriations of Retained Earnings

Unappropriated retained earningsat the end of the year :Unappropriated retained earnings carried-forward from prior year ＼ 26 ＼ 237 ＼ 352 $ 22

Change of retained earnings of the investees using the equitymethod accounting (30) (878) (1,295) (25)

Net income 43,268 63,269 50,531 36,123 43,264 62,628 49,588 36,120

Transfer from voluntary reserve : - 1,833 2,345 -43,264 64,461 51,933 36,120

Appropriation :Transfer to legal reserve (Note 10) 1,919 1,520 1,599 1,602 Transfer to other reserves (Note 10) 22,000 47,718 34,100 18,367 Cash dividends (Note 13) 19,197 15,197 15,997 16,027 (dividend ratio of 20% in 2003, 2002 and 2001, respectively)

43,116 64,435 51,696 35,996

Unappropriated retained earningscarried forward to the subsequent year ＼ 148 ＼ 26 ＼ 237 $ 124

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December 31, 2003, 2002 and 2001


2003 2002 2001 2003

Statements of Cash Flows

Cash flows from operating activities :Net income ＼ 43,268 ＼ 63,269 ＼ 50,531 $ 36,123

Adjustments to reconcile net income to net cash provided by operating activities :

Depreciation and amortization 22,202 21,691 24,146 18,536 Amortization of discount on debentures 1,662 1,710 4,293 1,388 Loss (gain) on disposal of trading securities, net 2,477 (1,897) (2,766) 2,068

Loss (gain) on disposal of investment, net (11,785) (1,294) 2,806 (9,839) Loss on valuation of investments using the equity method of accounting 4,323 3,296 10,562 3,609

Provision for severance benefits 6,689 12,892 10,547 5,584 Provision for doubtful accounts 718 6,677 8,624 599 Loss on foreign currency translation, net 1,802 5,467 1,923 1,504 Others, net 3,938 1,118 (5,755) 3,288

32,026 49,660 54,380 26,737

Changes in operating assets and liabilities :Trade accounts and notes receivable 34,977 (4,475) 22,030 29,201Other accounts receivable 5,949 (6,772) (668) 4,967Accrued income 15,690 (10,667) (1,535) 13,099 Inventories (10,325) (26,511) 670 (8,620) Long-term other receivables 16,965 - - 14,163 Deferred tax assets (4,202) - - (3,508) Advance payments (734) (367) 4 (613)Prepaid expenses (541) 2,361 (901) (452)Other current assets (3,239) 1,590 (4,054) (2,704) Trade accounts and notes payable (41,810) 17,130 (35,025) (34,906) Other accounts payable (22,490) 4,137 19,929 (18,776)Accrued expenses (1,822) (1,003) (5,402) (1,521) Income taxes payable (14,709) 1,759 7,660 (12,280) Payment of severance benefits (24,075) (36,097) (22,643) (20,099)National pension fund 1,688 1,054 681 1,409Deferred tax liabilities (322) (1,125) 463 (269)Other current liabilities, net 7,277 (3,526) (576) 6,075

(41,723) (62,512) (19,367) (34,833)Net cash provided by operating activities ＼ 33,571 ＼ 50,417 ＼ 85,544 $ 28,027


page

27


2003 2002 2001 2003

December 31, 2003, 2002 and 2001

Cash flows from investing activities :Decrease (Increase) in short-termfinancial instruments, net ＼ - ＼ 208,305 ＼ (130,723) $ -

Decease in long-term financial instruments 19,529 3,377 - 16,304Decrease in long-term loans 2,511 25,261 461 2,096 Disposal of trading securities 12,237 95,422 120,437 10,216 Disposal of investment securities 37,832 21,826 5,366 31,585

Decrease (increase) in short-term loans, net (39,117) (139,794) 438 (32,657)Disposal of property, plant and equipment 316 15,867 2,548 264 Decrease in deposits for severance benefits 18,951 5,386 1,735 15,822Acquisition of short-term financial instruments (539) - - (450)Acquisition of long-term financial instruments (12,426) (7,100) (2,922) (10,374) Acquisition of trading securities - (61,229) (40,494) - Acquisition of investment securities (56,211) (166,961) (36,268) (46,929)

Increase in long-term loans (184,818) (205) (29,537) (154,298) Increase in long-term receivables - (11,509) - - Acquisition of property, plant and equipment (91,385) (16,126) (30,680) (76,294)Increase in intangible assets (103) - (2,294) (86)Others, net 182 2,264 233 152

Net cash used in investing activities ＼(293,041) ＼ (25,216) ＼ (141,700) $ (244,649)

Cash flows from financing activities :Proceeds from short-term borrowings ＼ 64,254 ＼ - ＼ - $ 53,643 Increase (decrease) in short-term borrowings - (21,895) 18,537 - Issuance of debentures 149,567 127,584 87,722 124,868 Increase in long-term debt 290,000 130,000 50,000 242,111 Payment of current maturities of long-term debt (34,142) (122,896) (74,698) (28,504)

Payment of long-term debt (230,000) (80,000) (470) (192,019) Payment of debentures (409) (30,000) (19,931) (341)Payment of dividend payable (15,197) (15,997) (11,998) (12,687) Decrease in long term accounts payable - - (6) -

Increase in stock issuance 36,053 - 30,099 -Acquistion of treasury stock - (10,728) - -

Net cash provided by (used in) financing activities 260,126 (23,932) 49,156 217,170

Net increase (decrease) in cash and cash equivalents 656 1,269 (7,000) 548

Cash and cash equivalents at thebeginning of the year (Note 14) 2,506 1,237 8,237 2,092

Cash and cash equivalents at theend of the year (Note 14) ＼ 3,162 ＼ 2,506 ＼ 1,237 $ 2,640


page

28Statements of Cash Flows

December 31, 2003, 2002 and 2001


2003 2002 2001 2003

Notes to Financial Statements

Note 1. The Company

Taihan Electric Wire Co., Ltd. (the "Company") was incorporated in 1955 under the laws of theRepublic of Korea to engage in manufacturing, processing and selling electric wires, cables,rolled stainless steel and related products.

In December 1968, the Company offered its shares for public ownership and all shares arelisted on the Korea Stock Exchange.

On April 19, 2002, the Company has splited its common share into two-for-one, therebydecreased the par value per share from ＼5,000 to ＼2,500.

Upon a resolution by the board of directors on July 25, 2003, the Company issued 8,000,000shares of common stock at ＼4,560 per share on October 9, 2003. As a result, the Company'scapital stock and capital surplus increased by ＼20,000 million and ＼16,053 million,respectively.

As of December 31, 2003 and 2002, the Company is authorized to issue 120,000,000 commonshares with a par value of ＼2,500 per share, of which 40,000,000 shares and 32,000,000shares are issued and outstanding, respectively.

Note 2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its financialstatements are summarized below.

a. Basis of Financial Statement Presentation

The Company maintains its accounting records in Korean Won and prepares statutoryfinancial statements in the Korean language (Hangul) in conformity with the accountingprinciples generally accepted in the Republic of Korea. Certain accounting principles appliedby the Company that conform with financial accounting standards and accounting principlesin the Republic of Korea may not conform with generally accepted accounting principles inother countries. Accordingly, these financial statements are intended for use by those whoare informed about Korean accounting principles and practices. The accompanying financialstatements have been condensed, restructured and translated into English from the Koreanlanguage non-consolidated financial statements. Certain information attached to the Koreanlanguage financial statements, but not required for a fair presentation of the Company'sfinancial position and results of operations, is not presented in the accompanying financialstatements.

b. Accounting Estimates

The preparation of the financial statements requires management to make estimates andassumptions that affect amounts reported therein. Although these estimates are based onmanagement's best knowledge of current events and actions that the Company mayundertake in the future, actual results may be different from those estimates.

c. Cash and Cash Equivalents

The Company considers cash on hand, bank deposits and highly liquid marketable securitieswith original maturities of three months or less to be cash and cash equivalents. pa

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December 31, 2003, 2002 and 2001


d. Revenue Recognition

Sales are recognized when products or merchandise are delivered to customers, andrevenues from construction contracts are recognized using the percentage-of-completionmethod of which the progress toward completion is measured by comparing costsincurred to date with the most recent estimate of the total costs to complete the contracts.

e. Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts and notes receivable based onthe aggregate estimated collectibility of the receivables.

f. Securities

The Company accounts for equity and debt securities under the provision of Statement ofKorean Accounting Standards No. 8 (SKFAS 8), Investments. This statement requiresinvestments in equity and debt securities to be divided into one of three categories: trading,available-for-sale and held-to-maturity.

Securities are initially carried at cost, including incidental expenses, with cost beingdetermined using the moving average method. Debt securities, which the Company hasthe intent and ability to hold to maturity, are generally carried at cost, adjusted for theamortization of discounts or premiums. Premiums and discounts on debt securities areamortized over the term of the debt using the effective interest method. Trading andavailable-for-sale securities are carried at fair value, except for non-marketable securities,classified as available-for-sale securities, which are carried at cost. Non-marketable debtsecurities are carried at a value using the present value of future cash flows, discounted ata reasonable interest rate determined considering the credit ratings provided byindependent credit rating agencies.

Unrealized valuation gains or losses on trading securities are charged to operations andthose resulting from available-for-sale securities are charged to capital adjustment, theaccumulated amount of which shall be charged to operations when the related securitiesare sold, or when an impairment loss on the securities is recognized. Impairment lossesare recognized in the statement of income when the recoverable amounts are less thanthe acquisition cost of securities or adjusted cost of debt securities for the amortization ofdiscounts or premiums.

Investments in equity securities of companies, over which the Company exercises asignificant control or influence (controlled investees), are recorded using the equitymethod of accounting. Under the equity method, the Company records changes in itsproportionate ownership of the book value of the investee in current operations, as capitaladjustments or as adjustments to retained earnings, depending on the nature of theunderlying change in book value of the investee. The Company discontinues the equitymethod of accounting for investments in equity method investees when the Company'sshare in the accumulated losses of the investees equals the costs of the investments anduntil the subsequent cumulative changes in its proportionate net income of the investeesequals its cumulative proportionate net losses not recognized during the periods when theequity method was suspended. Differences between the initial purchase price and theCompany's initial proportionate ownership of the net book value of the investee areamortized over a period of not more than twenty years and the amortization is charged tocurrent operations.

page

30

December 31, 2003, 2002 and 2001


In the cases where the investee company applies accounting methods different from theCompany for similar transactions or accounting events, the equity method is applied based onfinancial statements prepared using the same accounting methods as those of the Company.However, the difference

resulting from different accounting methods is not reconciled when the difference amount isimmaterial.

When applying the equity method, the Company eliminates the unrealized gain or lossincluded in the inventory, investments, property, plant & equipment and intangible assetsacquired from transactions with the investee company. However, this unrealized gain or lossis not eliminated when the amount is immaterial.

Foreign currency financial statements of equity method investees are translated into KoreanWon using the basic exchange rates in effect as of the balance sheet date for assets andliabilities, and annual average exchange rates for income and expenses. Any resultingtranslation gain or loss is included in the capital adjustment account, a component ofshareholders' equity.

g. Inventories

The quantity of inventory on hand is verified using the perpetual inventory system, whichcontinuously updates the quantity of the inventory during the period, and by physical count asof the balance sheet date. Inventories are stated at the lower of cost or market, with costbeing determined using the weighted-average method, except for materials in-transit whichare stated at cost, as determined using the specific identification method. If the net realizablevalue of inventory is less than its cost, the carrying amount is reduced to the net realizablevalue.

h. Property, Plant and Equipment

Property, plant and equipment are recorded at cost, except for upward revaluations inaccordance with the Korean Asset Revaluation Law. Such revaluations present productionfacilities and other buildings at their depreciated replacement cost and land at the prevailingmarket price as of the effective date of revaluation. The revaluation increment, net of a 3%tax, is first applied to offset accumulated deficit, if any, and the remainder is credited to capitalsurplus or transferred to common stock by issuing additional shares. For revalued assets,previously recorded accumulated depreciation is eliminated and a new basis for depreciationis established.

Depreciation is computed using the straight-line method over the estimated useful lives of theassets, as follows:

Estimated Useful LivesBuildings and structures 20 - 40 yearsMachinery and equipment 8 yearsVehicles 5 yearsTools and furniture 5 years pa

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December 31, 2003, 2002 and 2001

i. Maintenance and Repairs

Routine maintenance and repairs are charged to expense as incurred. Expenditures, whichenhance the value or extend the useful life of the related assets, are capitalized.

j. Leases

The Company accounts for lease transactions as either operating leases or capital leases,depending on the terms of the underlying lease agreement. Machinery and equipment,acquired under capital lease agreements, are recorded at cost as property, plant andequipment, and depreciated using the straight-line method over their estimated useful lives.In addition, the aggregate lease payments are recorded as obligations under capital leases,net of accrued interest. Accrued interest is amortized over the lease period using the effectiveinterest rate method.

Machinery and equipment acquired under operating lease agreements are not included inproperty, plant and equipment. The related lease rentals are charged to expense whenincurred.

k. Discounts on Debentures

Discounts on debentures are amortized over the repayment period using the effective interestrate method. Amortization is included in interest expense.

l. Present value measurement of assets and liabilities

The Company uses present value measurement when the difference between the nominalvalue and current value of assets and liabilities resulting from sales transactions with long-term deferred payment conditions. The difference amount is recorded as present valuediscount and subtracted from the assets and liabilities, amortized (reversed) using theeffective interest method and recorded as interest income (expense).

m. Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated into KoreanWon at ＼1,197.8 : US$1 and ＼1,200.4 : US$1, the rates in effect at the balance sheet date of2003 and 2002, respectively. Resulting translation gains and losses are recognized in currentoperations.

n. Accrued Severance Benefits

Employees and directors with one or more years of service are entitled to receive a lump-sumpayment upon termination of their employment with the Company, based on their length ofservice and rate of pay at the time of termination. Accrued severance benefits represent theamount which would be payable assuming all eligible employees and directors were toterminate their employment with the Company as of the balance sheet date. Actual paymentsof severance benefits amounted to ＼24,075 million and ＼36,097 million for the years endedDecember 31, 2003 and 2002, respectively.

Accrued severance benefits are funded at approximately 90.9 percent and 61.2 percent as ofDecember 31, 2003 and 2002, respectively, through a group severance insurance plan. TheCompany accounts for the amounts of ＼12,547 million and ＼19,072 million funded under theplan as a deduction item to accrued severance benefits as of December 31, 2003 and 2002,respectively.

Notes to Financial StatementsDecember 31, 2003, 2002 and 2001

The contributions to the National Pension Fund in accordance with the National Pension Actin Korea and group severance insurance deposits are deducted from accrued severancebenefit liabilities. Contributed amounts are refunded to employees upon their retirement.

o. Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization. Amortization ofgoodwill and other intangible assets is computed using the straight-line method for 5 years.

Ordinary research and development costs are expensed as incurred. Development costsdirectly relating to a new technology or new products of which the estimated future benefitsare probable are capitalized as intangible assets. Amortization of development costs iscomputed using the straight-line method over five years from the commencement of the

commercial production of the related products or used of the related technology. Such costsare subject to continual analysis of recoverability. In the event that such amounts areestimated to be not recoverable, they are written down.

For the years ended December 31, 2003 and 2002, the Company recorded ＼233 million and＼356 million of development costs as current expenses, respectively.

Note. 3. Long and short-term loans

a. Loans to Jinro Co., Ltd.

The Company acquired ＼469,621 million (the principal and interest) of restructuredreceivables due from Jinro Co., Ltd., which is under the court receivership, for ＼272,835million. As of December 31, 2003, of the acquisition cost, the Company accounted thereceivables up to the Company's ownership, amounting to ＼252,835 million(*). The Companyaccounted the receivables as short-term and long-term loans for ＼69,000 million and＼183,835 million, respectively. Of the receivables of ＼469,621 million, ＼353,177 million areacknowledged by the district court and ＼116,444 million are in process for acknowledge-ment. The purchased receivables are secured by Jinro Co., Ltd.'s and Jinro Mass-Merchandise Inc.'s real estates up to ＼198,177 million and ＼111,000 million, respectively,and also, by 2,200,000 shares of Jinro Ballantines Co., Ltd. On December 12, 2003, theCompany submitted the restructuring plan of the Jinro Co., Ltd. to the district court, whichincludes the plan for debt-to-equity swap and rescheduling of debts. On January 30, 2004, theCompany has collected ＼54,000 million of the receivables, through the proceeds collectedfrom the disposition of Jinro Mass-Merchandise Inc.'s real estate, which was the collateralfor the receivables.

(*) The Company transferred 11.4 percent ownership interest equivalent to ＼20,000 millionout of ＼175,000 million of the receivables acquired from Hana Bank, to Hawk EyesInvestment Co., Ltd.

b. Loans to Le Meilleure Construction Co., Ltd.

On April 25, 2003, the Company has lent ＼20,000 million to Le Meilleure Construction Co.,Ltd. and received a real estate beneficiary certificate as collateral up to ＼24,000 million.


c. Loans to Lessee Association of Sunin Industrial -

In 2002, the Company entered into a specified money trust agreement with KORAM bank forshort-term loans to G. Forum AMC Co., Ltd. amounting to ＼130,000 million. The agreementexpired in 2003, and accordingly, the loans receivable was transferred from KORAM bank tothe Company. Of the loan receivables, ＼49,452 million was collected during 2003. For theremaining loans receivable of ＼80,548 million, the debtor was changed from G. Forum AMCCo., Ltd. to the Lessee Association of Sunin Industrial, by providing the Lessee Association'sreal estates as collateral up to 130 percent of the loans amount.

Note. 4. Securities

Trading securities as of December 31, 2003, 2002 and 2001 comprise the following :

Available-for-sale securities as of December 31, 2003, 2002 and 2001 comprise the following :

Held to maturity securities as of December 31, 2003 and 2002 comprise the following:

(*) Include the convertible bonds issued by Muju Report Inc. amounting to ＼84,968 million,which can be converted into common stock for the periods from three months after the issuedate to three working days before the maturity date, June 30, 2007, at a conversion price of＼5,000 per share.


Overseas debt securities, etc

Millions of Korean Won Thousands of U.S. Dollars

2003 2002 2001 2003 2002 2001 2003 2003

＼12,972 ＼28,098 ＼60,025 ＼12,194 ＼27,714 ＼62,348 $10,830 $10,180

Before Valuation Market Value(Book Value)

Market Value(Book Value)

BeforeValuation

Millions of Korean Won Thousands of U.S. DollarsBook Value

2003 2002 2001 2003

＼ 21,687 ＼ 45,022 ＼ 61,028 $ 18,106

1,809 8,998 6,357 1,510 1,145 2,598 2,119 956

＼ 24,641 ＼ 56,618 ＼ 69,504 $ 20,572

Listed equity securities Unlisted equity securitiesOther equity investments


Annual Acquisition Bookinterest rate(%) Acquisition cost Book value cost value

2003.12.31 2003 2002 2003 2002 2003 2003

12.5 ＼ 986 ＼ - ＼ 986 ＼ - $ 823 $ 823

1.0-30 88,237 89,223 88,237 89,223 73,666 73,6667.5 2,000 2,900 2,000 2,900 1,670 1,670

＼90,237 ＼92,123 ＼90,237 ＼92,123 $75,336 $75,336

Current AssetConvertible bonds

Non-Current AssetConvertible bonds(*)Subordinated bonds

Notes to Non-consolidateda StatementsDecember 31, 2003, 2002 and 2001

Note. 5. Inventories

Inventories as of December 31, 2003, 2002 and 2001 comprise the following :

As of December 31, 2003, 2002 and 2001, inventories are insured against fire and othercasualty losses up to ＼72,800 million, $62,000 million and ＼50,900 million, respectively.

Note. 6. Property, Plant and Equipment

Property, plant and equipment as of December 31, 2003, consist of the following :


2003 2002 2001 2003

＼ 21,806 ＼ 25,795 ＼ 17,418 $ 18,205 53,289 54,707 39,088 44,489

43,316 27,400 31,333 36,163 9,304 9,594 3,883 7,768 9,756 9,650 10,251 8,145

＼ 137,471 ＼ 127,146 ＼ 102,643 $ 114,770

Finished products Work-in-processRaw materials and supplies

MerchandiseMaterials in-transit

2003 (millions of Korean Won)

Machinery and Vehicles andLand Buildings Structuresequipment Others

＼ 357,807 ＼ 75,247 ＼ 6,173 ＼ 59,491 ＼ 5,01873,563 5,794 9 245 256

- (2,381) (312) (16,968) (2,063)(22) (25) - - (145)

- - - 11,744 -

＼ 431,348 ＼ 78,635 ＼ 5,870 ＼ 54,512 ＼ 3,066＼ - ＼ 20,834 ＼ 4,571 ＼ 164,774 ＼ 32,064

Balance as of January 31, 2003

Acquisition during the yearDepreciationDisposalTransferBalance as of December 31, 2003

Accumulated depreciation

Balance as of January 31, 2003

Acquisition during the yearDepreciationDisposalTransferBalance as of December 31, 2003

Accumulated depreciation

Construction in-progress Machinery in-transit Total

＼ 1,113 ＼ 561 ＼ 505,410

6,640 4,746 91,253 - - (21,723)- - (192)

(6,764) (4,980) -

＼ 989 ＼ 327 ＼ 574,748

＼ - ＼ - ＼ 222,242

Notes to Non-consolidateda Statements

December 31, 2003, 2002 and 2001

Note. 7. Short-term Borrowings

Short-term borrowings as of December 31, 2003, 2002 and 2001 comprise the following :

Note. 8. Long-term Debts

Long-term debts as of December 31, 2003, 2002 and 2001 comprises the following:

Annual Millions of Korean Won Thousands of Interest Rate (%) U.S. Dollars

2003.12.31 2003 2002 2001 2003

5.0-6.7 ＼ 30,000 ＼ 23,900 ＼ 44,500 $ 25,046

4.4-5.1 40,000 50,000 50,000 33,395 4.8-6.7 182,507 119,864 109,994 152,369

252,507 193,764 204,494 210,809

0.4-2.8 140,826 139,181 107,622 117,5712.7 29,945 24,008 66,305 25,000

2.5 - 900 1,407 -170,771 164,089 175,334 142,571

(US$ 142,571) (US$ 136,695) (US$ 132,217)

＼423,278 ＼357,853 ＼379,828 $353,380

Won currency borrowings :General term loansCommercial papers discounted

Others

Foreign currency borrowings :UsanceGeneral term loansOthers


2003 2002 2001 2003

＼ 248,714 ＼ 157,414 ＼ 89,196 $ 207,642

112,264 102,448 53,123 93,725

- 30 2,959 -＼ 360,978 ＼ 259,892 ＼ 145,278 $ 301,368

Debentures LoansObligations under capitalleases

Note. 9. Related Party Transactions

Significant transactions which occurred in the ordinary course of business with relatedcompanies for the years ended December 31, 2003, 2002 and 2001 and related account balances as of those dates are summarized as follows:

(*1) Include the convertible bonds of ＼84,968 million (Note 4), which was acquired in the year2002.The Company has guaranteed the repayment of various obligations of subsidiaries andaffiliated companies. The outstanding balance of such guarantees as of December 31, 2003amounted to approximately US$ 11,639 thousand.

Note. 10. Legal Reserve

The Korean Commercial Code requires the Company to appropriate an amount equal to aminimum of 10% of its cash dividends as a legal reserve until such reserve equals 50% of itspaid-in capital. This reserve is not available for the payment of cash dividends. Subject to theapproval of the board of directors, it may be transferred to common stock or may be used todispose of accumulated deficit, if any.

Note. 11. Treasury stock

Upon a resolution by the board of directors on October 14, 2002, the Company purchased1,600,000 shares of its common stock for ＼10,728 million for the purpose of stabilization ofstock price. As of December 31, 2003 and 2002, the Company retained treasury stock of 1,606,524 shares.


2003 2002 2001 2003

＼ 62,651 ＼ 62,380 ＼ 16,382 $ 52,305

65,221 68,506 20,813 54,451 109,096 125,255 13,881 91,0801,147 918 659 958

DescriptionSalesPurchasesReceivables(*1)Payables


Note. 12. Earnings Per Share

Basic ordinary income and earnings per share for the years ended December 31, 2003, 2002and 2001 are as follows:

Note. 13. Dividends

Details of dividends for the years ended December 31, 2003, 2002 and 2001 are as follows :

a. Dividend

b. Dividend payout ratio

Korean Won U.S. Dollars

2003 2002 2001 2003

＼43,268,226,658 ＼63,268,964,897 ＼50,530,882,385 $36,123,081,197

32,234,572 shares 31,798,216 shares 31,993,476 shares 32,234,572 shares

＼ 1,342 ＼ 1,990 ＼ 1,579 $ 1.120

Ordinary income and net income of common stock

Weighted average number of Outstandingcommon stock

Basic ordinary income and earnings per share



2003 2002 2001 2003

38,393,476shares 30,393,476shares 31,993,476shares 38,393,476shares＼ 500 (20%) ＼ 500 (20%) ＼ 500 (20%) $ 0.417 (20%)＼ 19,197 million ＼ 15,197 million ＼15,997 million $16,027 thousand

Common shares issued(par value 2,500 won)

Cash dividend per share (ratio)Dividend amount


2003 2002 2001 2003

＼19,197 million ＼15,197 million ＼15,997 million $16,027thousand 43,268 million 63,269 million 50,531 million 36,123thousand

44.4% 24.0% 31.7% 44.4%

Total dividends (A)Net income (B)Dividend payout ratio(A/B)

c. Dividend yield ratio

Note. 14. Supplementary Cash Flow Information

Major transactions not involving an inflow or outflow of cash and cash equivalents are as follows:


2003 2002 2001 2003

＼ 500 ＼ 500 ＼ 500 $ 0.417

5,840 5,990 6,000 4.98.6% 8.3% 8.3% 8.6%

Dividend per share (A)Market value at the end of the year (B)

Dividend yield ratio(A/B)

Millions of Korean WonThousands of U.S. Dollars

2003 2002 2001 2003

＼ 50,719 ＼ 3,362 ＼ 7,165 $ 42,343

6,764 13,635 24,633 5,647

60,000 30,780 135,427 50,092

1,569 - 25,779 1,310

6,967 9,734 - 5,816- 1,318 4,785 -

Transfer of long-term debts tocurrent maturities

Transfer of construction-in-progress to property, plant and equipment

Transfer of debentures to current maturities

Gain on valuation of investment securities

Loss on valuation of investment securitiesWrite-off of accounts receivable

Report of Independent Auditors

We have audited the accompanying non-consolidatedbalance sheets of Taihan Electric Wire Co., Ltd. (the"Company") as of December 31, 2003 and 2002, and therelated non-consolidated statements of income,appropriations of retained earnings, and cash flows for theyears then ended, expressed in Korean Won. These financialstatements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion onthese financial statements based on our audits.

We conducted our audits in accordance with auditingstandards generally accepted in the Republic of Korea.Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles usedand significant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for ouropinion.

In our opinion, the non-consolidated financial statementsreferred to above present fairly, in all material respects, thefinancial position of Taihan Electric Wire Co., Ltd. as ofDecember 31, 2003 and 2002, and the results of itsoperations, the changes in its retained earnings and its cashflows for the years then ended in conformity with accountingprinciples generally accepted in the Republic of Korea.

Without qualifying our opinion, we draw your attention to thefollowing matters.

As discussed in Note 3 to the non-consolidated financialstatements, from financial institutions, the Companyacquired ＼469,621 million (the principal and interest) ofrestructured receivables due from Jinro Co., Ltd., which isunder the court receivership, for ＼272,835 million. As ofDecember 31, 2003, of the acquisition cost, the Companyaccounted the receivables as the short-term and long-termloans up to the Company's ownership, amounting to＼252,835 million. Of the receivables of ＼469,621 million,＼353,177 million are acknowledged by the district court and＼116,444 million are in process for acknowledgement. Thepurchased receivables are secured by Jinro Co., Ltd.'s andJinro Mass-Merchandise Inc.'s real estates up to ＼198,177million and ＼111,000 million, respectively, and also, by2,200,000 shares of Jinro Ballantines Co., Ltd. On December12, 2003, the Company submitted the restructuring plan ofthe Jinro Co., Ltd. to the district court, which includes theplan for debt-to-equity swap and rescheduling of debts. OnJanuary 30, 2004, the Company has collected ＼54,000million of the receivables, through the proceeds collectedfrom the disposition of Jinro Mass-Merchandise Inc.'s realestate, which was the collateral for the receivables.

In addition, the Company has lent ＼20,000 million to LeMeilleure Construction Co., Ltd. and received a real estatebeneficiary certificate as collateral up to ＼24,000 million.

Furthermore, in 2002, the Company entered into a specified

money trust agreement with KORAM bank for short-termloans to G.Forum AMC Co., Ltd. amounting to ＼130,000million. The agreement expired in 2003, and accordingly, theloans receivable was transferred from KORAM bank to theCompany. Of the loan receivables, ＼49,452 million wascollected during 2003. For the remaining loans receivable of＼80,548 million, the debtor was changed from G.ForumAMC Co., Ltd. to the Lessee Association of Sunin Industrial,by providing the Lessee Association's real estates ascollateral up to 130 percent of the loans amount.

The Company acquired 4,924,040 shares of SsangbangwoolCo., Ltd. for ＼21,606 million (20.53 percent ownership),during the years 2002 and 2003. Additionally, on February 9,2004, the Company acquired 2,875,960 shares of the investeefor ＼12,655 million, thereby became the major shareholderof Ssangbangwool Co., Ltd. with 32.52 percent of ownership.

The Company acquired the land and building (Seoul NambuTerminal) from Jinro Mass-Merchandising Inc. for ＼75,000million. Also, the Company has contracted with GT&E Co.,Ltd. for the sale of the Company's plant located inGeumcheon (book value of ＼ 112,883 million), forconsideration of ＼129,575 million.

As discussed in Note 1 to the non-consolidated financialstatements, pursuant to the resolution by the board ofdirectors on July 25, 2003, the Company issued 8,000,000shares of common stock at ＼4,560 per share on October 9,2003.

As discussed in Note 9 to the non-consolidated financialstatements, the Company sells its products to andpurchases certain materials from its related companies,including KTC Co., Ltd.. During the years ended December31, 2003 and 2002, the Company's total sales to its relatedcompanies amounted to ＼62,651 million and ＼62,380million, respectively, and total purchases from its relatedcompanies amounted to ＼65,221 million and ＼68,506million, respectively. As of December 31, 2003 and 2002,related receivables amounted to ＼109,096 million and＼125,255 million, respectively, and related payablesamounted to ＼1,147 million and ＼918 million, respectively.

Accounting principles and auditing standards and theirapplication in practice vary among countries. Theaccompanying non-consolidated financial statements arenot intended to present the financial position, results ofoperations and cash flows in conformity with accountingprinciples and practices generally accepted in countries andjurisdictions other than the Republic of Korea. In addition,the procedures and practices used in the Republic of Koreato audit such financial statements may differ from thosegenerally accepted and applied in other countries.Accordingly, this report and the accompanying non-consolidated financial statements are for use by those whoare knowledgeable about Korean accounting principles orauditing standards and their application in practice.

Seoul, Korea

February 6, 2004

To the Board of Directors and Shareholders of

Taihan Electric Wire Co., Ltd.

page

40

Directors & Auditors

Board of Directors

Planning & Administration Division

Sales & Business Division

Finance & Accounting Division

E.H.V. Power Cable Factory

Power Cable Factory

Communication Cable Factory

Copper Rod Factory

E.H.V. Power Cable Accessory Factory

Magnet Wire Factory

Stainless Steel Factory

President & CEO Head Office

Anyang Plant

Siheung Plant

Ansan Plant

R&D Center

Auditors

Outside Director Auditor

Won-kwon Choi Jang-kwon BaeDirector Director

Chong-wook Lim Jung-hoon Kim

Organization

Corporate Information

1955 Foundation of Taihan Electric Wire Co., Ltd.1957 Completed Construction of Consolidated Cable Plant.1959 Installed Copper Smelting and Rolling Machines.

1960 Started Production of Lead Sheathed Communication Cables.1964 Our Cables and Wires were Enlisted in KS for the first time in Korea.1965 Started Production of 1.2/ 4.4mm Small Diameter Coaxial Cables.1968 Company Stocks Opened to the Public.1969 Started Production of 33kV XLPE Insulated Cables.

1970 Started Production of 345kV A.C.S.R.1974 Our Cables and Wires were Enlisted in UL and CSA.1975 Completed Construction of Anyang Cable Plant.1976 Started Production of 154kV O.F Cable.1977 Developed Optical Fiber Cables.

1980 Started Production of SCR Wire Rod.1981 Started Production of Flame Retardant Plastic Cable for Nuclear

Power Plant.1982 Supplied 154kV P.O.F Cables to KEPCO and Completed 154kV P.O.F

Line Exchange Works along the Line between Hyunjeo and Sungdong for the first time in the World.

1983 Completed Construction of VCV Extra High Voltage Power Cable Plant.1984 Started Production of Long Wavelength Single and Multi Mode Opical

Fiber Cables.Started Production of 154kV XLPE Insulated Cable.

1985 Developed 345kV O.F Cable.Supplied 2,800 Fiber∙km of Optical Fiber Cables for Seoul Olympic Communication Network.

1986 Developed 90Mb/s Optical Transmission System.1987 Developed OPGW.1988 Supplied Submarine Optical Fiber Cable to KT.1989 Developed ISDN Terminal Equipment & 565Mb/s Optical Transmission

Equipment an Cable TV System.Developed Polyprophylene Laminated Paper Insulated 345kV O.F Cable.

1990 Developed Class 1E Power and Control Instrumentation Cables for Nuclear Power Plant.Developed MX13 Digita1 Multiplex Equipment.

1991 Started Supplying 565Mb/s Optical Transmission System to KT.1992 Established Joint Ventures in China.

Developed ‘370kV’ ‘1POLE’ GIS SPACER.1993 Established a Joint Venture in India.

Developed Electronic W.H.M.Acquired the International Standards Certificate ISO 9001 from the SGSYARSLEY(U.K.).

1994 Developed 345kV OPGW.Developed SMOT-1, SMOT-4 Synchronous Transport Module Optical Transmission Equipment.

1995 Developed 345kV, 765kV AWS for Overhead Ground Wire, Developed STACIR.Acquired the International Standards Certificate ISO 9002 for Stainless Steel Sheet & Strip from the KMA- QA.Started Aluminum Business.

1996 Completed Construction of New VCV Tower & Extra High Voltage Power Cable Plant.Developed Fiber Distribution Frame, Fiber Distribution Panel, Mechanical Splicer for Optical Fiber and Optical Fiber Closure.Developed 2.5Gb/s Synchronous Optical Transmission Equipment.Developed 765kV OPGW.Developed the Super Thinnest Guage in the field of Stainless Steel for

the first time in Korea.1997 Presidential Prize Awarded for Achieving the Export Record

Exceeding US $ 500 million on the 34th Annual Trade Day.Completed Construction of Copper Rod Plant in India.Developed Ribbon Type Optical Fiber Cable.

1998 Developed W-CDMA WLL(Wireless Local Loop) System and Qualified as a System Supplier to Hanaro Telecom, Inc.Copper Rod Production exceeds 2 Million tons for the first time in Korea.

1999 Obtaining KT Mark for Anywave Single Mode Optical Fiber.Development of Epoxy Bushing for Terminals to Test Extra High Voltage Cable and Joints.Established a Joint Venture in Mongolia.Established Alcan Taihan Aluminum Limited, a Joint Venture with Alcan Aluminium Limited, Canada.

2000 Acquired the JIS standard for Stainless Steel Sheet and Strip.Established a Joint Venture in South Africa.Acquired UL certification for Category 6 UTP Cable for LAN.

2001 Acquired ISO 14001 Environmental Management System Certificate.Developed 345kV XLPE Insulated Cable.Developed Polymer Insulators.Developed OIP Condenser Bushing for Extra High Voltage Transformer for the first time in Korea.

2002 Malesela-Taihan Secures Large Optical Cable Order in South Africa.A Dedication Ceremony Held for OPTOMAGIC Optical Fiber Plant.Taken over Muju Resort

2003 Supplied 345kV XLPE insulated cable to KEPCO for the first time in Korea

page

42

History

19501960

1970

19801990

20002003

HHeeaadd OOffffiicceeInsong Bldg. 194-15, 1-ga, Hoehyeon-dong,Jung-gu, Seoul, KoreaTel. 82-2-316-9114 Fax. 82-2-754-5240RR&&DD CCeenntteerr 996, Siheung-dong, Geumcheon-gu, Seoul,KoreaTel. 82-2-890-9504 Fax. 82-2-806-0186AAnnyyaanngg PPllaanntt785, Gwanyang-dong, Dongan-gu, Anyang,Gyeonggi-do, KoreaTel. 82-31-420-9114 Fax.82-31-423-2685SShhiihhuunngg PPllaanntt 113-119, Siheung-dong, Geumchon-gu,Seoul, KoreaTel. 82-2-890-9114 Fax. 82-2-808-6320AAnnssaann PPllaanntt 603, Seonggok-dong, Danwon-gu, Ansan,Gyeonggi-do, KoreaTel. 82-31-490-5114 Fax.82-31-491-3721

KKuuaallaa LLuummppuurr OOffffiiccee15th Floor, Kenanga International, JL. SultanIsmail, 50250, Kuala Lumpur, MalaysiaTel. 60-3-2161-8017 Fax. 60-3-2161-3628SSiinnggaappoorree OOffffiiccee629 Aljunied Road #05-19, Cititech IndustrialBuilding, Singapore 389838, SingaporeTel. 65-6842-5069 Fax. 65-6842-5076RRiiyyaaddhh OOffffiicceeAl Akariyah Shopping Center 2, Room No.726, Olaya Road, P.O.Box 201, Riyadh, SaudiArabiaTel. 966-1-419-0227 Fax. 966-1-419-0262SShhaanngghhaaii OOffffiicceeShanghai Hongqiao Hongxu Road 788, mingDu Cheng 43 Black, Room 601, Shanghai,Post Code:201103, ChinaTel. 21-6405-4957 Fax. 21-6405-4957

SSkkyytteell CCoo..,, LLttdd..Skytel Plaza Building, Chinggiskhan Ave-9,Ulaanbaatar, 210613, Mongolia.Tel. 976-1-318488 Fax.976-1-318487MMaalleesseellaa TTaaiihhaann EElleeccttrriicc CCaabbllee ((PPttyy)) LLttdd..Vereeniging 1930, Steel Road, PeacehavenVereeniging 1939,Gauteng, South AfricaTel. 27-16-450-8333 Fax.27-16-450-8266www.m-tec.co.zaTTeelleeccoomm && EEnneerrggyy CCaabblleess CCoorrpp..85 Denton Avenue, New Hyde Park, NY11040, U.S.ATel. 1-718-347-6030 Fax.1-718-347-6045www.tecables.com

PPRRIINNCCIIPPAALL OOFFFFIICCEESS && PPLLAANNTTSS OOVVEERRSSEEAASS BBRRAANNCCHHEESS JOINT VENTURE COMPANIES

Head OfficeInsong Bldg. 194-15, 1-ga, Hoehyeon-dong,Jung-gu, Seoul, KoreaOverseas Sales TeamTel. 82-2-316-9410~8 Fax. 82-2-757-2942

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