AS OF JUNE AND by jolinmilioncherie

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									HANARO TELECOM, INC.

NON-CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2001
TOGETHER WITH ACCOUNTANTS’ REVIEW REPORT
                          INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

                        English Translation of a Report Originally Issued in Korean



To the Shareholders and Board of Directors of
Hanaro Telecom, Inc.:


We have reviewed the accompanying non-consolidated balance sheet of Hanaro Telecom, Inc. (the
“Company”) as of June 30, 2001, and the related non-consolidated statements of operations for the six
month period then ended, all expressed in Korean won. These non-consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to issue a report on these
financial statements based on our review. The comparative non-consolidated financial statements of the
Company as of and for the six month period ended June 30, 2000 was reviewed by Samil Accounting
Corporation, whose report dated July 27, 2000, stated that they were not aware of any material
modifications that should be made to those statements in order for them to be in conformity with
financial accounting standards in the Republic of Korea.

We conducted our review in accordance with standards for independent accountants’ review of semi-
annual financial statements as established by the Securities and Futures Commission of the Republic of
Korea applicable to review engagements. These standards require that we plan and perform the review
to obtain moderate assurance as to whether the financial statements are free of material misstatement. A
review is limited primarily to inquiries of company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We have not performed an audit and,
accordingly, we do not express an audit opinion.

Based on our review, we are not aware of any material modifications that should be made to the
accompanying non-consolidated financial statements as of and for the six month period ended June 30,
2001, for them to be in conformity with financial accounting standards in the Republic of Korea.

The translated amounts in the accompanying non-consolidated financial statements have been translated
into U.S.dollars, solely for the convenience of the reader, on the basis set forth in Note 2 to the financial
statements.

As discussed in Note 1 to the financial statements, the operations of the Company have been significantly
affected, and may continued to be affected for the foreseeable future, by the general adverse economic
conditions in the Republic of Korea and in the Asia Pacific region. The ultimate effect of these significant
uncertainties on the financial position of the Company as of the balance sheet date cannot presently be
determined and accordingly, no adjustments have been made in the accompanying financial statements
related to such uncertainties.
Accounting principles and review standards and their application in practice vary among countries. The
accompanying financial statements are not intended to present the financial position and results of
operations in accordance with accounting principles and practices generally accepted in countries and
jurisdictions other than the Republic of Korea. In addition, the procedures and practices utilized in the
Republic of Korea to review such financial statements may differ from those generally accepted and
applied in other countries and jurisdictions. Accordingly, this report and the accompanying financial
statements are for use by those knowledgeable about Korean accounting principles or review standards
and their application in practice.




Seoul, Korea,
 August 1, 2001
               English Translation of Non-consolidated Financial Statements Originally Issued in Korean

                                             HANARO TELECOM, INC.


                                                 BALANCE SHEETS

                                           AS OF JUNE 30, 2001 AND 2000



                                                                                               Translation into
                                                                Korean Won                   U.S. Dollars (Note 2)
                        ASSETS                               2001            2000            2001            2000
                                                                 (In millions)                  (In thousands)
CURRENT ASSETS:
 Cash and cash equivalents (Note 3)                      ₩    325,904    ₩    118,974    $    251,178     $     91,695
 Short-term financial instruments (Notes 4 and 5)              35,700         751,100          27,514          578,882
 Marketable securities (Note 6)                                18,567         165,315          14,310          127,411
 Trade receivables, net of allowance for doubtful
   accounts of ₩1,096 million in 2001 and ₩338
   million in 2000                                            105,095          33,438          80,998           25,771
 Short-term loans, net (Note 8)                                   813             588             627              453
 Accounts receivable-other, net of discount on present
   value of ₩19 million in 2001 and ₩19 million in
   2000                                                         1,488              607          1,147              468
 Accrued income                                                 4,861            3,553          3,746            2,738
 Prepaid expenses (Note 9)                                     34,094           26,033         26,277           20,064
 Prepaid income taxes                                           3,239            6,600          2,496            5,087
 Advance payments                                              15,366            4,351         11,843            3,353
 Forward exchange contracts (Note 15)                           2,104                -          1,622                -
 Inventories                                                   18,947           46,715         14,603           36,004
 Other current assets                                           4,036           41,864          3,110           32,265
                                                              570,214        1,199,138        439,471          924,191

NON-CURRENT ASSETS:
 Long-term financial instruments (Note 4)                       2,017           4,309           1,555            3,321
 Investment securities (Note 7)                                49,690          44,644          38,296           34,408
 Long-term accounts receivable-other, net of discount
   on present value of ₩142 million in 2001 and ₩260
   million in 2000                                                862           1,246             665                961
 Long-term loans, net of discount on present value of
   ₩4,770 million in 2001 and ₩5,996 million in 2000
   (Note 8)                                                   22,329         21,277             17,209           16,398
 Key-money deposits                                           60,349         58,383             46,512           44,997
 Long-term prepaid expenses (Note 9)                          19,150         40,349             14,759           31,097
 Property and equipment, net (Notes 10 and 14)             2,541,850      1,740,694          1,959,037        1,341,575
 Intangibles (Note 11)                                        18,089         18,072             13,941           13,928
                                                           2,714,336      1,928,974          2,091,974        1,486,685
         Total Assets                                    ₩ 3,284,550    ₩ 3,128,112      $   2,531,445    $   2,410,876

                                                                                                          (continued)
              English Translation of Non-consolidated Financial Statements Originally Issued in Korean

                                               HANARO TELECOM, INC.


                                           BALANCE SHEETS (CONTINUED)

                                            AS OF JUNE 30, 2001 AND 2000



                                                                                                  Translation into
                                                                  Korean Won                    U.S. Dollars (Note 2)
LIABILITIES AND SHAREHOLDERS’ EQUITY                           2001            2000             2001            2000
                                                                   (In millions)                   (In thousands)
CURRENT LIABILITIES:
 Trade payables                                            ₩     92,382     ₩     78,225        $    71,200       $     60,289
 Other accounts payable                                         349,549          470,346            269,402            362,501
 Short-term borrowings (Note 13)                                 55,000                -             42,389                  -
 Current maturities of long-term debt, net of discount
   on debentures of ₩672 million in 2001 (Notes 12,
   14 and 16)                                                   191,690           18,619            147,738             14,350
 Accrued expenses                                                21,334            9,923             16,442              7,648
 Withholdings                                                     3,390            3,312              2,613              2,553
 Other current liabilities                                        7,579            3,170              5,841              2,443
                                                                720,924          583,595            555,625            449,784

LONG-TERM LIABILITIES:
 Long-term debt (Note 14)                                       103,328           79,742             79,636             61,459
 Debentures, net of discount on debentures of
   ₩17,281 million and long-term interest payable of
  ₩1,824 million in 2001 and discount on debentures
  of ₩ 17,234 million in 2000 (Note 14)                         851,793          582,766            656,488            449,145
 Long-term payables (Note 16)                                    21,302                -             16,418                  -
 Long-term obligation under capital lease (Note 12)              28,426           24,581             21,908             18,945
 Accrued severance indemnities, net of payments to
   National Pension of ₩389 million in 2001 and
   ₩526 million in 2000 (Note 2)                                  12,841            7,215           9,897                5,560
                                                               1,017,690          694,304         784,347              535,109
         Total Liabilities                                     1,738,614        1,277,899       1,339,972              984,893

SHAREHOLDERS' EQUITY (Note 17):
  Capital stock                                                1,320,000        1,320,000       1,017,341             1,017,341
  Paid-in capital in excess of par value                         693,205          693,336         534,262               534,363
  Accumulated deficit (net loss of ₩125,528 million in
   2001 and ₩121,157 million in 2000)                          (467,513)        (164,024)       (360,318)             (126,415)
  Capital adjustments:
    Stock compensation (Note 18)                                    2,064             901            1,591              694
    Valuation loss on investments, net (Note 7)                   (1,820)               -          (1,403)                -
         Total Shareholders' Equity                            1,545,936        1,850,213       1,191,473         1,425,983

         Total Liabilities and Shareholders' Equity       ₩ 3,284,550       ₩ 3,128,112     $   2,531,445     $   2,410,876




                             The accompanying notes are an integral part of these statements.
               English Translation of Non-consolidated Financial Statements Originally Issued in Korean

                                             HANARO TELECOM, INC.


                                          STATEMENTS OF OPERATIONS

                         FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2001 AND 2000



                                                                                               Translation into
                                                                Korean Won                   U.S. Dollars (Note 2)
                                                           2001             2000             2001            2000
                                                       (In millions, except per share     (In thousands, except per
                                                                  amount)                       share amount)
OPERATING REVENUE (Note 23)                            ₩     368,775 ₩         94,095   $      284,220 $        72,520

OPERATING EXPENSES (Note 19)                                 460,708         236,557          355,074         182,317

OPERATING LOSS                                               (91,933)       (142,462)         (70,854)       (109,797)

NON-OPERATING INCOME:
 Interest income                                              14,657          16,840           11,297          12,979
 Dividends income                                                 98               -               75               -
 Gain on valuation of marketable securities (Note 6)           3,249           3,973            2,504           3,062
 Gain on disposal of marketable securities                       190           4,549              146           3,506
 Gain on foreign currency transactions and
   translation                                                 4,360           2,059            3,361           1,587
 Reversal of stock compensation expense                            -             195                -             150
 Gain on valuation of forward exchange contract
   (Note 15)                                                   2,104               -            1,622               -
 Other                                                         2,623             321            2,021             247
                                                              27,281          27,937           21,026          21,531
NON-OPERATING EXPENSES:
 Interest expense                                             51,822           4,663           39,940           3,594
 Loss on disposal of marketable securities                         5           1,195                3             921
 Loss on foreign currency transactions and
   translation                                                 7,586              94             5,847              72
 Impairment loss on investment securities (Note 7)               800               -               617               -
 Donations                                                       630             674               485             519
 Other                                                            33               6                26               5
                                                              60,876           6,632            46,918           5,111
ORDINARY LOSS                                               (125,528)      (121,157)          (96,746)        (93,377)
EXTRAORDINARY ITEMS                                                 -               -                -               -
LOSS BEFORE INCOME TAXES                                    (125,528)      (121,157)          (96,746)        (93,377)
INCOME TAX (EXPENSE) BENEFIT (Note 20)                              -               -                -               -
NET LOSS                                               ₩    (125,528) ₩    (121,157)    $     (96,746)   $    (93,377)

NET LOSS PER COMMON SHARE (Note 2)                     ₩        (475) ₩        (482)    $       (0.37)   $      (0.37)


                           The accompanying notes are an integral part of these statements.
       English Translation of Non-consolidated Financial Statements Originally Issued in Korean

                                       HANARO TELECOM, INC.


                                 NOTES TO FINANCIAL STATEMENTS

                                       JUNE 30, 2001 AND 2000
                             (See accompanying accountants’ review report)




1. GENERAL:

Hanaro Telecom, Inc. (the”Company”) was incorporated on September 26, 1997 pursuant to the laws of
the Republic of Korea (“Korea”). The Company was formed following its selection by the Ministry of
Information and Communication (“MIC”) on June 13, 1997 as the second carrier to provide local
telephony services in Korea. The Company commenced providing local call and high- speed data access,
including internet and multimedia access, on April 1, 1999 in the cities of Seoul, Pusan, Ulsan and
Incheon.

On November 11, 1998, the Company was listed on the Korea Securities Dealers Automated Quotation
System (“KOSDAQ”). The Company issued ADRs (American Depository Receipts) on April 4, 2000,
which are traded on the National Association of Securities Dealers Automated Quotation System
(“NASDAQ”).

The Company’s headquarters is located in Seocho-Gu, Seoul. The Company has 10 domestic branches
and also has invested in several companies such as Hanaro Telecom America, Inc., Hanaro Realty
Development & Management Co., Ltd., Hanaro Customer Service, Inc., Hanaro Internetdesk Co., Ltd.,
and Hanaro Technologies, Inc. in order to facilitate and strengthen its services.

Beginning in 1997, Korea and other countries in the Asia Pacific region experienced a severe contraction
in substantially all aspects of their economies. This situation is commonly referred to as the 1997 Asian
Financial Crisis. In response to this situation, the Korean government and the private sector began
implementing structural reforms to historical business practices. Through early 2001, it was widely
accepted that the economic situation had stabilized, but not fully recovered from the 1997 crisis.

The Korean economy is currently experiencing additional difficulties, particularly in the areas of
restructuring private enterprises and reforming the banking industry. The Korean government continues
to apply pressure to Korean companies to restructure into more efficient and profitable firms. The
banking industry is currently undergoing forced consolidations and significant uncertainty exists with
regards to the availability of short-term financing during the coming year. The accompanying financial
statements reflect management’s current assessment of the impact to date of the economic situation on
the financial position of the Company. Actual results may differ materially from management’s current
assessment.

The Company has experienced significant net losses and negative cash flows from operations since the
inception of its businesses. The Company’s near and long-term operating strategies focus on the
continued expansion of its customer base. Such expansion will need to be funded from external sources
which may include bank borrowings, vendor financing, the issuance of bonds, and other. If such
financing is not available, the Company may be required to make significant changes to its operating
plans.
                                                      -2-




2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Significant accounting policies followed by the Company in preparing the accompanying non-
consolidated financial statements are summarized as follows:

Basis of Presentation

The Company maintains its official accounting records in Korean won and prepares its statutory non-
consolidated financial statements in the Korean language (Hangul) in conformity with the accounting
principles generally accepted in the Republic of Korea. Certain accounting principles applied by the
Company that conform with financial accounting standards and accounting principles in the Republic of
Korea may not conform with accounting principles generally accepted in other countries. Accordingly,
these financial statements are not intended for use by those who are not informed about Korean
accounting principles and practices.

The US dollar amounts presented in these non-consolidated financial statements were computed by
translating the Korean won into US dollars based on the Korea Exchange Bank Basic Rate of ₩1,297.5 to
US $1.00 at June 30, 2001, solely for the convenience of the reader. These convenience translations into US
dollars should not be construed as representations that the Korean won amounts have been, could have
been, or could in the future be, converted at this or any other rate of exchange.

The accompanying non-consolidated financial statements have been condensed, restructured and
translated into English (with certain expanded descriptions) from the statutory Korean language non-
consolidated financial statements. Some supplementary information included in the statutory Korean
language non-consolidated financial statements, but not required for a fair presentation of the Company’s
financial position or results of operations, is not presented in the accompanying non-consolidated
financial statements.

Revenue Recognition

Revenue related to installation of service and sale of customer premises equipment is recognized when
equipment is delivered and installation is completed. Revenue from monthly recurring service is
recognized in the month the service is provided.

Cash and Cash Equivalents

Cash and cash equivalents are bank deposits, securities and short-term money market instruments that ca
n be easily converted into cash and whose risk of value fluctuation arising from changes of interest rates i
s not material. Only investments with maturities of three months or less at the acquisition date are includ
ed in cash equivalents. Restricted deposits and current portion of long-term deposits are classified as sho
rt-term financial instruments.

Short-term financial instruments

Short-term financial instruments primarily consist of time deposits with original maturities of less than o
ne year and commercial paper funds that invest in short-term highly liquid debt securities. Short-term fi
nancial instruments are recorded at cost. Interest income on short-term financial instruments is accrued a
s earned.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is provided based on the estimated collectibility of individual accou
nts and historical bad debt experience.
                                                      -3-




Inventories

Inventories consist primarily of personal computers, modems and local area network (“LAN”) equipment
 to be leased to customers. Inventories are stated at the lower of cost, determined using the average cost
method or net realizable value. If the net realizable value of inventories is lower than cost, inventories are
 adjusted to net realizable value and the difference between cost and revalued amount is charged to curre
nt operations.

Marketable Securities

Marketable securities are stated at acquisition cost plus incidental expenses. If the fair value of
marketable securities differs from the book value determined by the individual moving average method,
marketable securities are stated at fair value and the unrealized gain or loss is reflected in current operati
ons.

Investment Securities

(1) Equity Securities

Equity securities held for investment (excluding those of affiliates and subsidiaries discussed in the next p
aragraph) that are not actively quoted (e.g., an unlisted security) are stated at acquisition cost. Actively q
uoted (e.g., a listed security) securities, including those traded over-the-counter, are stated at fair value wi
th a valuation gain or loss recorded as a capital adjustment. If the fair value of a listed equity security or t
he net equity value of an unlisted equity security held for investment declines compared to acquisition co
st and is not expected to recover (an impaired investment security), the value of the equity security is adj
usted to fair value or net equity value, with the valuation loss charged to current operations.

Equity securities held for investment that are in companies in which the Company is able to exercise signi
ficant influence over the investees are accounted for using the equity method. The Company’s share in n
et income or net loss of investees is reflected in current operations. Changes in the retained earnings, capi
tal surplus or other capital accounts of investees are accounted for as an adjustment to retained earnings o
r to capital adjustment.

(2) Debt Securities

Debt securities held for investment are classified as either held-to-maturity investment debt securities or a
vailable-for-sale investment debt securities at the time of purchase. Investments in debt securities of the t
ypes indicated below are classified as available-for-sale investment debt securities.

   All held-to-maturity investment debt securities if some portion was sold during the current period
   Securities obliged to be sold before maturity by legal regulations
   Securities accounted for as investment securities impairment loss

Held-to-maturity investment debt securities are stated at acquisition cost, as determined by the individua
l moving average method. When the face value of a held-to-maturity investment debt security differs fro
m its acquisition cost, the effective interest method is applied to amortize the difference over the remainin
g term of the security. Available-for-sale investment debt securities are stated at fair value, with resulting
 valuation gains or losses recorded as a capital adjustment. If the fair value of a held-to-maturity or a ava
ilable-for-sale investment debt security declines compared to the acquisition cost and is not expected to re
cover (an impaired investment security), the carrying value of the debt security is adjusted to fair value w
ith the resulting valuation loss charged to current operations.
                                                       -4-




(3) Gain or Loss on Valuation of Investment Securities

The net unrealized gain or loss is presented as gain or loss on valuation of investment securities in capital
adjustments. An unrealized valuation gain or loss of investment securities incurred in subsequent period
s is deducted from or added to the previous balance of unrealized valuation gain or loss of investment sec
urities. When investment securities are sold, the unrealized valuation gain or loss of investment securitie
s included in the capital adjustment account is added to or deducted from the gain or loss on disposal. W
ith respect to an impaired investment security, any unrealized valuation gain or loss on the security previ
ously included in the capital adjustment account is reversed.

(4) Recovery of Impaired Investment Securities

If the value of any investment equity security or investment debt security previously recognized as impai
red subsequently recovers, in the case of marketable equity securities and available-for-sale debt securitie
s, the increase in value is recorded as a capital adjustment. In the case of unlisted equity securities and hel
d-to-maturity debt securities, the increase in value is recorded in current operations, up to the amount of t
he previously recognized impairment loss.

(5) Reclassification of Securities

If the company’s objectives change, a trading security can be reclassified to investment securities, but onl
y as of a balance sheet date. The difference between the fair value of the security as of the balance sheet d
ate and the book value is recognized as gain or loss on valuation of trading securities and credited or char
ged to current operations. Investment securities cannot be reclassified to trading securities.

Valuation of Assets and Liabilities at Present Value

Long-term accounts receivable and long-term payables are valued at their present value as discounted at
an appropriate discount rate. Discounts are amortized using the effective interest rate method and
recognized as interest expense or interest income over the term of the related accounts.

Property and Equipment

Property and equipment are stated at cost. Expenditures that result in the enhancement of the value or
extension of the useful life of the facilities involved are capitalized as additions to property and
equipment. Interest expense, discount expenses and other financial charges, including certain foreign
exchange translation gains and losses on borrowings associated with the manufacture, purchase, or
construction of property and equipment, incurred prior to the completing the acquisition, are capitalized.
The amount of capitalized interest is ₩3,488 million in 2001 and ₩1,447 million in 2000.

Depreciation is computed using the straight-line method based on the estimated useful lives of the assets
as follows:
                                                                         Years
                  Buildings, building facilities and structures           50
                  Machinery                                                8
                  Vehicles and other                                     5∼8
                                                    -5-




Leases

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

Intangibles

Intangibles are stated at cost, net of amortization. Amortization is computed using the straight-line
method, based on the estimated useful lives of the assets as described below.

                                                   Estimated Useful Lives
                License fee                               5 years
                Property right of industry               5-20 years
                Cable line usage rights                   20 years
                Land rights                               20 years
                Development costs                          1 year

Discounts on Debentures

Discounts on debentures are amortized over the redemption period of the debenture using the effective
interest rate method. Amortization of discounts is recognized as interest expense.

Accrued Severance Indemnities

All employees with more than one year of service are entitled to receive a lump-sum payment upon
termination of their employment with the Company, based on their length of service and rate of pay at
the time of termination. The severance indemnities that would be payable assuming all employees were
to resign as of June 30, 2001 and 2000, amounts to ₩13,230 million and ₩7,741 million, respectively.

Funding for this liability is not required by law, however, the Company has insured a portion of its
obligations for severance indemnities, in order to obtain the related tax benefits, by making deposits with
insurance companies. Withdrawal of these deposits, with a balance of ₩2,012 million and ₩4,304
million as of June 30, 2001 and 2000, is restricted to the payment of severance indemnities. The amounts
funded under this insurance plan are classified as long-term financial instruments.

Before April 1999, the Company and its employees paid 3 percent and 6 percent, respectively, of monthly
pay (as defined) to the National Pension Fund in accordance with the National Pension Law of Korea.
The Company paid half of the employees’ 6 percent portion and is paid back at the termination of service
by offsetting the receivable against the severance payments. Such receivables, with a balance of ₩389
million and ₩526 million as of December 30, 2001 and 2000, are presented as deduction from accrued
severance indemnities. Starting April 1999, the Company and its employees must pay 4.5 percent each of
monthly pay to the National Pension Fund under the revised National Pension Law of Korea.
                                                     -6-




Changes in accrued severance indemnities for the six month periods ended June 30, 2001 and 2000 are as
follows (won in millions):

                                                               Amount
                                                       2001                    2000
                   Beginning of period               ₩     9,842      ₩            5,716
                   Severance payments                      1,837                     929
                                                           8,005                   4,787
                   Provision                              (5,225)                 (2,954)
                   End of period                     ₩   13,230       ₩            7,741


Accounting for Foreign Currency Transactions and Translation

The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded in
Korean won based on the prevailing rates of exchange on the transaction date. Monetary accounts with
balances denominated in foreign currencies are recorded and reported in the accompanying financial
statements at the exchange rates prevailing at the balance sheet date and the translation gains or losses are
reflected in current operations. The balances have been translated using the rate announced by the Korea
Exchange Bank, which was ₩1,297.5 and ₩1,114.9 to US $1.00 at June 30, 2001 and 2000, respectively.

Income Taxes

The provision for income taxes consists of the corporate income tax and resident surtax currently payable
and the change in deferred income taxes for the year. The Company recognizes deferred income taxes
arising from temporary differences between amounts reported for financial accounting and income tax
purposes. Deferred income taxes will be offset against those incurred in the future, if any. Deferred
income taxes will be recalculated based on the actual tax rate in effect at each balance sheet date (see Note
20).

Stock Compensation Expense

The Company records the difference between the present value of the exercise price and the stock price at
the grant date as compensation expense with a corresponding credit to the capital adjustment account
(“the minimum value method”). The computed deferred compensation expenses are allocated over the
contracted vesting period. When the stock options are exercised with the issuance of new shares, the
difference between the exercise price plus the stock option cost recorded in the capital adjustment
account, and the par value of the new shares issued, is recorded as additional paid-in capital. However,
for the stock options granted in 1999, compensation expense was calculated as the difference between the
stock price at year end and the exercise price multiplied by the number of stock options.

Net Loss Per Common Share

Net loss per common share are computed by dividing net loss, by the weighted average number of
common shares (264,000,000 shares as of June 30, 2001 and 251,604,396 shares as of June 30, 2000)
outstanding during the period.
                                                    -7-




Net loss for common stock and ordinary loss for common stock for the six month periods ended June 30,
2001 and 2000 are computed as follows (won in millions):

                                                                        Amount
                                                                 2001               2000
             Net loss                                        ₩    125,528   ₩        121,157
             Dividend for preferred stock                               -                  -
             Net loss for common stock                            125,528            121,157
             Extraordinary items                                        -                  -
             Ordinary loss for common stock                  ₩    125,528   ₩        121,157

Comparative Presentation

Certain amounts of prior year’s financial statements are reclassified to conform to the current year’s
presentation. This reclassification does not affect the net loss and net assets of the prior period.


3. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents as of June 30, 2001 and 2000 are as follows (won in millions):

                                           Interest rate per annum (%)                   Amount
                                                        2001                    2001              2000
 Cash on hand                                             -                 ₩          2    ₩             6
 Checking accounts                                        -                            2                  2
 Passbook accounts in foreign currency                    -                            -                  2
 Passbook accounts                                      1.0                          811                526
 Time deposits in foreign currency                   4.2 ~ 4.7                    46,521             10,334
 Time deposits                                       5.5 ~ 6.1                   109,000                  -
 Money market fund                                   5.1 ~ 7.8                   114,828            108,104
 Repurchase agreements                               5.9 ~ 7.0                    16,740                  -
 Fixed interest instruments                          6.3 ~ 7.3                    38,000                  -
                                                                            ₩    325,904    ₩       118,974


4. SHORT-TERM AND LONG-TERM FINANCIAL INSTRUMENTS:

Short-term financial instruments as of June 30, 2001 and 2000 are as follows (won in millions):

                                    Interest rate per annum(%)                   Amount
                                                2001                       2001                2000
      Time deposits                           5.7 ~ 9.4            ₩          35,700 ₩           721,100
      Commercial paper                            -                                -              30,000
                                                                   ₩          35,700 ₩           751,100

Long-term financial instruments as of June 30, 2001 and 2000 are as follows (won in millions):

                                        Interest rate per annum(%)                  Amount
                                                   2001                      2001                 2000
    Deposits for checking accounts                    -                ₩             5     ₩               5
    Severance indemnity insurance
       deposits                                  5.0 ~ 6.5                       2,012               4,304
                                                                       ₩         2,017     ₩         4,309
                                                               -8-




        5. RESTRICTED DEPOSITS:

        As of June 30, 2001 and 2000, the following deposits are subject to withdrawal restriction for guarantee
        for checking accounts, severance payment and other reasons (won in millions).

                                                                                Amount
                                                                          2001                 2000
              Short-term financial instruments                       ₩       11,700 ₩                   -
              Long-term financial instruments
                Deposits for checking accounts                                      5                  5
                Severance indemnity insurance deposits                          2,012              4,304
                                                                                2,017              4,309
                                                                     ₩         13,717    ₩         4,309


        6. MARKETABLE SECURITIES:

        Marketable securities as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                         Amount
                                               2001                                                    2000
                                                                Cumulative                                          Cumulative
                                                                  loss on                                             gain on
                           Acquisition cost   Fair value         valuation      Acquisition cost      Fair value     valuation
Beneficiary Certificates   ₩        25,000    ₩ 18,567          ₩      6,433    ₩       153,000       ₩ 155,990     ₩ 2,990
Money Market Fund                        -               -                 -              9,000             9,247          247
Government          and
 municipal bonds                         -                 -              -                  78              78           247
                           ₩        25,000    ₩       18,567    ₩     6,433     ₩       162,078       ₩ 165,315     ₩   3,237
                                                          -9-


 7. INVESTMENT SECURITIES:

 (1) Investment securities as of June 30, 2001 and 2000 consist of the following (won in millions):

                                                                      Ownership
                                                                     percentage (%)                     Amount
                                                                    2001         2000            2001             2000
Investments in affiliates (unlisted equity securities):
      Hanaro Realty Development &
        Management Co., Ltd                                          99.99           99.99   ₩      2,500     ₩     2,500
      Hanaro Customer Service, Inc.                                  99.99           99.99            900             900
      Hanaro Web N TV                                               100.00          100.00         17,309          17,309
      Hanaro Interdesk Co., Ltd.                                     99.99           99.99          1,000           1,000
      Hanaro Technologies, Inc.                                      99.99            -             1,000               -
      M-commerce Co., Ltd.                                           51.00           52.01          5,100           5,201
      Hanaro Telecom America, Inc.                                  100.00          100.00             23              23
      Others                                                          -               -             3,652           1,500
                                                                                                   31,484          28,433
Other non-listed equity securities:
     Korea Information Assurance, Inc.                                0.50            -               100               -
     Media Valley, Inc.                                               5.44            5.44            900             900
     C.C.S. Inc.                                                     10.00           10.00          4,500           4,500
     Gameventure, Inc.                                                9.75            9.75          1,780           1,780
     Dauinternet, Inc.                                                1.09            1.09          1,100           1,100
     Others                                                           -               -             6,472           4,817
                                                                                                   14,852          13,097
Debt securities:
      C.C.S. Inc.                                                     -               -                 240              -

Investments in funds:
      Engineering Benevolent Association                              0.03            0.03             14              14
      KDBC Hanaro Interventure Fund                                  31.00            -             3,100           3,100
                                                                                                    3,114           3,114
                                                                                             ₩     49,690     ₩    44,644

 (2) Investments in affiliates as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                       Amount
                                                      2001                                2000
                                       Acquisition cost   Net asset value  Acquisition cost   Net asset value
  Hanaro Realty Development &
    Management Co., Ltd                ₩          2,500         ₩          2,755      ₩       2,500       ₩         2,851
  Hanaro Customer Service, Inc.                     900                      877                900                   854
  Hanaro Web N TV                                17,309                    4,538             17,309                 2,757
  Hanaro Interdesk Co., Ltd.                      1,000                     (131)             1,000                 1,005
  Hanaro Technologies, Inc.                       1,000                      317                  -                     -
  M-commerce Co., Ltd.                            5,100                      374              5,201                 4,408
  Hanaro Telecom America, Inc.                       23                       75                 23                    23
  Others                                          3,652                    1,944              1,500                   439
                                       ₩         31,484         ₩         10,749      ₩      28,433       ₩        12,337

 In accordance with Interpretation 42-59 of the Financial Accounting Standards, the Company did not apply
 the equity method of accounting for the above investments in affiliates since the total assets of the individual
 invested company were less than₩7,000 million as of the prior year end.
                                                           -10-



   (3) Other non-listed equity securities as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                           Amount
                                                          2001                                 2000
                                          Acquisition cost    Net asset value  Acquisition cost    Net asset value
    Korea Information Assurance Inc.      ₩           100     ₩            92 ₩              -                   -
    Media Valley Inc.                                 900                 497              900                 676
    C. C. S Inc.                                    4,500               1,875            4,500               2,287
    Gameventure, Inc.                               1,780                 346            1,780                 482
    Dauinternet, Inc.                               1,100                 235            1,100                 250
    Others                                          6,472               3,960            4,817                   -
                                          ₩        14,852    ₩          7,005  ₩        13,097    ₩          3,695

   The Company did not recognize an impairment loss on the above non-listed equity securities, even
   though the net asset values declined compared to the acquisition cost, since in the opinion of
   management these companies are viable on-going operations and their net asset values are expected to
   recover.

   (4) Debt securities as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                   Amount
                                                     2001                              2000
                                      Acquisition cost    Book value    Acquisition cost    Book value
    Corporate bonds:
     C. C. S Inc.                     ₩            240        ₩      240     ₩                -     ₩          -
    Collateralized Bond
     Obligations (CBO)                           2,620                 -                      -                -
                                      ₩          2,860        ₩      240     ₩                -     ₩          -

   As the fair value of the CBO was evaluated as nil as of June 30, 2001, the Company reflected ₩1,820
   million of valuation loss as a capital adjustment in 2000 and charged ₩800 million of impairment loss to
   current operations in 2001.


   8. LOANS TO EMPLOYEES:

   Short-term and long-term loans to employees as of June 30, 2001 and 2000 are as follows (won in
   millions):

                                            Interest per                              Amount
                                            annum (%)                   2001                       2000
                                                             Short-term      Long-term   Short-term     Long-term
Loans to employees for share ownership           -           ₩         -     ₩  15,553   ₩         -    ₩ 16,220
Loans to employees for housing                  2.0                 788           4,600         680          4,109
Other                                            -                    47             46           34            44
  Less: discount on present value                                    (22)        (3,180)       (126)        (4,296)
                                                             ₩      813    ₩ 17,019       ₩       588      ₩ 16,077
                                                    -11-




9. PREPAID EXPENSES:

The acquisition cost of personal computers which are related to the Company’s PC-PLUS I and II
program are recorded as prepaid expenses at the time of sales and recognized as expense over the three-
year term of the agreement. In relation to this, ₩19,150 million and ₩40,349 million are recorded as
long-term prepaid expenses as of June 30, 2001 and 2000, respectively, and ₩27,483 million and ₩24,385
million are recorded as prepaid expenses as of June 30, 2001 and 2000, respectively.


10. PROPERTY AND EQUIPMENT:

Property and equipment as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                       Amount
                                                             2001                   2000
        Land                                         ₩            131,412   ₩           115,093
        Buildings                                                 221,155               185,361
        Building facilities                                         2,757                 2,496
        Structures                                                    192                   134
        Machinery                                               2,327,151             1,344,625
        Vehicles                                                      604                   684
        Other                                                      47,072                38,988
        Construction in progress                                  175,954               161,277
        Machinery in transit                                           77                   629
                                                                2,906,374             1,849,287
        Less: Accumulated depreciation
          Buildings                                                (8,210)                (3,689)
          Building facilities                                        (111)                   (60)
          Structures                                                   (6)                    (3)
          Machinery                                              (343,754)               (99,347)
          Vehicles                                                   (173)                  (145)
          Other                                                   (12,270)                (5,349)
                                                                 (364,524)              (108,593)
                                                     ₩          2,541,850 ₩            1,740,694

Depreciable assets are insured for fire and other casualty losses up to ₩1,733,836 million as of June 30,
2001.

The market value of the Company’s land based on the official price of land (published by Ministry of
Construction and Traffic) is ₩111,145 million as of June 30, 2001.
                                                    -12-



11. INTANGIBLES:

(1) Intangibles as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                Amount
                                                    2001. 6                2000. 6
          Goodwill                          ₩                1,320    ₩              1,526
          Intellectual proprietary rights                       27                      34
          Cable line usage rights                           12,527                  13,203
          Development costs                                  4,139                   3,309
          Other                                                 76                       -
                                            ₩               18,089    ₩             18,072

(2) Amortization of intangibles for the six month periods ended June 30, 2001 and 2000 is as follows (won
    in millions):

                                                                Amount
                                                    2001. 6                2000. 6
          Goodwill                          ₩                   213   ₩                191
          Cable line usage rights                               338                    285
          Development costs                                   7,009                  3,623
          Other                                                   6                      3
                                            ₩                 7,566   ₩              4,102

(3) ₩3,602 million and ₩3,710 million of ordinary research and development costs were charged to
    expense as incurred for the six month periods ended June 30, 2001 and 2000 , respectively.

(4) Changes in development costs (intangibles) for the six month periods ended June 30, 2001 and 2000 are
    as follows (won in millions):

                                                                Amount
                                                     2001                    2000
          Beginning of period               ₩                 5,493   ₩               2,396
          Increase                                            5,655                   4,536
          Amortization                                      (7,009)                 (3,623)
          End of period                     ₩                 4,139   ₩               3,309


12. LEASES:

(1) The Company has operating lease agreements for the rights to use various underground facilities to
    house its fiber-optic cable network, leased lines and automobiles with some Metropolitan Subway
    Corp., Dacom Corp., and AVIS RENT A CAR Co, respectively. The payment schedule for the
    operating leases is as follows (won in millions):

                                                                 Amount
                          Underground
          Year              facilities          Leased lines          Automobiles               Total
     2001.7∼2002.6        ₩        5,096        ₩    36,587           ₩    2,968              ₩    44,651
     2002.7∼2003.6                 5,096             24,588                2,110                   31,794
     2003.7∼2004.6                 5,096             11,548                  396                   17,040
     2004.7∼2005.6                 5,096             11,548                     6                  16,650
                          ₩       20,384        ₩    84,271           ₩    5,480              ₩   110,135
                                                     -13-




(2) The Company also has capital lease agreements with Korea Hewlett Packard Co., and Cisco Systems
    Capital Korea Ltd. for certain machinery and equipment. As of June 30, 2001, the acquisition cost of
    machinery and equipment under capital leases was ₩43,022 million and depreciation expenses
    related to the these capital leases for the six month periods ended June 30, 2001 amount to ₩1,219
    million.

   The future annual payments under these capital lease agreements as of June 30, 2001 are as follows
   (won in millions and dollar in thousands):

                                                                                                                Total
                               Principal                                    Interest                       lease payment
                                            Won                           Won
    Year         Korean won US dollars equivalent Korean won US dollars equivalent
2001.7~2002.6    ₩      5,896 $      3,591 ₩ 4,660 ₩    1,707 $   1,026 ₩    1,330                         ₩      13,593
2002.7~2003.6           6,349        3,934    5,105     1,254       682        885                                13,593
2003.7~2004.6           6,943        4,165    5,404       660       306        398                                13,405
2004.7~2005.6           3,561          820    1,064        91        27         34                                 4,750
                 ₩     22,749 $     12,510   16,233 ₩   3,712 $   2,041      2,647                         ₩      45,341
                                             22,749                          3,712
                                             38,982                     ₩    6,359
                 Less: Current portion      (10,556)
                                           ₩ 28,426


13. SHORT-TERM BORROWINGS:

Short-term borrowings as of June 30, 2001 and 2000 are as follows (won in millions):

                                     Interest rate per annum (%)                            Amount
                                                 2001                           2001                     2000
  Issuance of commercial paper                 7.55~8.25                  ₩            55,000       ₩             -


14. LONG-TERM DEBT AND DEBENTURES:

(1) Long-term debt in local currency as of June 30, 2001 and 2000 is as follows (won in millions):

                                            Interest rate per annum(%)                    Amount
                                                         2001                      2001             2000

     Information promotion fund                      6.50~7.25                 ₩  75,849        ₩       39,973
     Information infrastructure fund                    9.94                      10,000                     -
     Less: Current portion                                                       (13,324)                  (42)
                                                                               ₩ 72,525         ₩       39,931

(2) Long-term debt in foreign currency as of June 30, 2001 and 2000 is as follows (won in millions, dollar
    in thousands):

                                 Interest rate per
                                    annum(%)                          US dollars               Won equivalent
                                       2001                     2001             2000        2001         2000
Facility loans                         9.16                 $     35,709   $      44,000    ₩ 46,332   ₩ 49,055
Less: Current portion                                            (11,969)         (8,291)     (15,529)     (9,244)
                                                            $     23,740   $      35,709    ₩ 30,803   ₩ 39,811
                                                    -14-



(3) Debentures as of June 30, 2001 are as follows (won in millions):

                    Interest rate per annum(%)                Due           Amount
           1st                    9.00                     2000~2003       ₩ 250,000
          2nd                     9.35                     2000~2005           350,000
          3rd                     8.00                     2000~2003           140,000
           4th                    8.82                     2000~2002            30,000
           5th                  10.23                      2000~2002            12,000
           6th                    9.03                     2000~2002             7,000
           7th                  10.08                      2000~2002            20,000
           8th                  10.13                      2000~2002            10,000
           9th                  10.18                      2000~2002            15,000
          10th                    9.67                     2001~2003            10,000
          11th                    9.67                     2001~2003            10,000
          12th                    9.67                     2001~2003            10,000
          13th                    4.50                     2001~2006           129,750
          14th                    9.34                     2001~2003            10,000
                                                                             1,003,750
       Less: Current portion                                                  (136,500)
             Discount on present value                                         (17,281)
       Add: Long-term interest payable                                           1,824
                                                                           ₩ 851,793

(4) On March 6, 2001, the Company issued bonds with stock warrants (“13th debenture”) with a zero
    coupon interest rate and a guaranteed interest rate on maturity of 4.5% if the warrants are exercised
    from June 6, 2001 to February 6, 2006 at the exercise price of ₩5,000. For the bonds which are not
    exercised, the Company will redeem them with a premium calculated by applying the compound
    interest rate method to the difference between the guaranteed interest rate and the coupon interest
    rate.

(5) The schedule of principal payments of debentures and long-term debt (excluding capital lease
    obligations explained in Note 12) as of June 30, 2001 is as follows (won in millions and dollar in
    thousands):

                   Debentures       Long-term debt     Long-term debt in foreign currency
    Year           Korean won        Korean won         US dollar      Won equivalent           Total
2001.7~2002.6      ₩ 136,500          ₩ 13,324          $ 11,969       ₩         15,529       ₩   165,353
2002.7~2003.6          562,500              32,304         13,103                17,002           611,806
2003.7~2004.6           87,500              25,255         10,637                13,801           126,556
2004.7~2005.6           87,500              11,973              -               -                  99,473
2005.7~2006.6          129,750               2,993              -               -                 132,743
                   ₩ 1,003,750        ₩ 85,849          $ 35,709       ₩         46,332       ₩ 1,135,931

(6) A substantial portion of property and equipment is pledged as collateral for various borrowings up
    to ₩202,929 million as of June 30, 2001.
                                                      -15-




  15. FORWARD EXCHANGE CONTRACT:

  On March 7, 2001, the Company entered into a foreign currency forward contract with Dong Yang
  Investment Bank to hedge the exposure to changes in the foreign currency exchange rate, in case of early
  repayment of bonds denominated in foreign currency. The Company recorded ₩2,104 million of
  forward exchange contract as current assets and valuation gain, respectively, as of June 30, 2001. The
  forward exchange contract as of June 30, 2001 is as follows (in U.S. dollar):

                 Contract period              Forward rate(KR₩/US$)                       Amount
               2001.3.7 ∼ 2002.3.4                     1,270                            $ 50,000,000


  16. LONG-TERM PAYABLES:

  The Company entered into an agreement with Samsung Card Co., Ltd. to purchase ADSL modems on
  installment, and recorded the related installment purchase price as long-term payables. The Company’s
  payment schedule according to this agreement is as follows (won in millions):

                                                                   Amount
                      Year                   Principal            Interest               Total
                      2002                  ₩ 16,453            ₩      3,418           ₩   19,871
                      2003                       18,303                1,568               19,871
                      2004                        2,931                  105                3,036
                      2005                           68                    2                   70
                                                 37,755         ₩      5,093           ₩   42,848
              Less: Current portion             (16,453)
                                            ₩ 21,302


  17. SHAREHOLDERS’ EQUITY:

  (1) Capital Stock

  The Company has authorized 480,328,800 shares of ₩5,000 par value, of which 264,000,000 shares have
  been issued as of June 30, 2001.

  (2) The changes in shareholders' equity for the six month period ended June 30, 2001 are as follows (won
      in millions):

                                                                              Amount
                                                           Paid-in capital
                             Number of      Common          in excess of                   Capital
                               shares         stock          par value        Deficits   Adjustments     Total
Beginning of period          264,000,000   ₩ 1,320,000     ₩     693,205     ₩ (341,984) ₩     (18)    ₩ 1,671,203
Net loss                            -               -               -          (125,528)        -         (125,528)
Stock options                       -               -               -               -            262           262
End of period                264,000,000   ₩ 1,320,000     ₩     693,205     ₩ (467,512) ₩       244   ₩ 1,545,937
                                                    -16-


 18. STOCK OPTION PLAN:

 The Company entered into stock option agreements with the Chief Executive Officer, senior managers,
 and employees of the Company. The details of the stock options granted as of June 30, 2001 are as
 follows (won in millions):

                                      Number of         Exercise
Grant Date         Employee            shares          price/share       Methods               Exercise period
 1999. 3. 1    CEO                        50,000           ₩ 5,630    New stock issue       2002. 3. 1~2007. 2.28
1999.10. 1     Senior managers           120,000             19,910   New stock issue       2002.10.10~2007. 9.30
               Senior managers
2000. 3.17                              1,640,642           17,750    New stock issue       2003.3.18~2008. 3.17
                 & Employees

 The Company values stock options granted based on the minimum value method (see Note 2). Total
 compensation expense of ₩8,062 million was allocated over the vesting period, and the compensation
 expense charged to operations for the six month period ended June 30, 2001 is ₩262 million.

 In relation to the stock options granted in 1999, the Company did not recognize compensation expense,
 which was calculated as the difference between the stock price at year-end and the exercise price
 multiplied by the number of stock options, due to downward movement of the stock price.


 19. OPERATING EXPENSES:

 Operating expenses for the six month periods ended June 30, 2001 and 2000 are as follows (won in
 millions):
                                                                  Amount
                                                        2001               2000
            Salaries and wages                     ₩         25,281    ₩         19,922
            Provision for severance indemnities               4,417               2,329
            Employee fringe benefits                          6,484               4,184
            Rent                                                578                 341
            Depreciation                                    151,339              66,931
            Taxes and dues                                    1,834               1,285
            Advertising                                      18,805              16,968
            Ordinary research and development cost            3,602               3,850
            Bad debt expense                                    274                 243
            Communications                                    4,706               2,515
            Telecom facility rent                            49,354              23,017
            Electricity                                       5,890               1,853
            Supplies                                          1,307               6,761
            Maintenance                                      23,388              11,174
            Insurance                                           603                 568
            Goods                                            24,409              10,371
            Sales commissions                                72,305              35,674
            Transportation                                      660                 753
            Printing                                            208               1,941
            Interconnection charges                          26,251               8,021
            Commissions                                      34,895               9,656
            Training                                            697               1,089
            Vehicle maintenance                                 847                 577
            Outsourcing services                              1,817               3,288
            Other                                               757               3,246
                                                   ₩        460,708    ₩        236,557
                                                    -17-


20. INCOME TAXES AND DEFERRED INCOME TAXES:

Income Taxes

The statutory corporate income tax rate (including resident surtax) applicable to the Company is
approximately 30.8 percent in 2001 and 2000. For the six month period ended June 30, 2001, the
Company did not recognize income tax expenses due to net operating loss.

Deferred Income Taxes

Deferred income taxes reflect the tax effects on prior years’ tax losses, tax credits, and temporary
differences between the carrying amount of assets and liabilities for financial accounting purposes and
the amounts used for income tax purposes.

Accumulated temporary differences as of June 30, 2001 and 2000 are as follows (won in millions):

                                                                              Amount
                                                                 2001                  2000
        Unearned income                                     ₩            4,861    ₩           (3,552)
        Stock option expense                                            (2,064)                    -
        Accrued severance indemnities                                   (7,549)                   84
        Valuation gain on marketable securities                              -                (3,973)
        Valuation loss on marketable securities                         (6,433)                    -
        Impairment loss on investment securities                          (800)                    -
        Development cost                                                 4,139                (3,309)
        Bond issue cost                                                    (56)                    -
        Bad debt expense                                                   (34)                    -
        Present value discount                                          (4,954)                6,206
        Long-term interest payables                                     (1,824)                    -
        Group severance insurance                                        2,012                     -
        Valuation gain on forward exchange contracts                     2,104                     -
        Loss on foreign currency translation                               352                     -
                                                                       (10,246)               (4,544)
        Statutory tax rate (%)                                            30.8                  30.8
        Deferred income tax assets                          ₩           (3,156)   ₩           (1,400)

As of June 30, 2001, the Company did not recognize deferred tax assets for temporary differences due to
the uncertainty of future realization of the deferred tax benefits.


21. RELATED PARTY TRANSACTIONS:

(1) Significant transactions with subsidiaries for the six month periods ended June 30, 2001 and 2000 are
    as follows (won in millions):


 2001
                                        Revenue            Expenses     Key-money deposits Accounts payable
 Hanaro Realty Development &
   Management Co., Ltd.        ₩                -     ₩        6,798      ₩            509      ₩         941
 Hanaro Customer Service, Inc.                  7              5,859                     -                918
 Hanaro Interdesk Co., Ltd.                    24              6,019                     -                  2
 Hanaro Technologies, Inc.                      3              6,020                     -                  -
 Hanaro Web N TV                               21              2,310                   199                 12
 M-commerce Co., Ltd.                           -                 12                     -                  2
 Hanaro Telecom America, Inc.                   -              1,498                     -                616
                               ₩               55     ₩       28,516      ₩            708      ₩       2,491
                                                   -18-




 2000
                                        Revenue           Expenses     Key-money deposits Accounts Payable
 Hanaro Realty Development &
   Management Co., Ltd.        ₩               -     ₩        3,602        ₩         344         ₩       1,182
 Hanaro Customer Service, Inc.                 8              4,837                    -                   869
 Hanaro Interdesk Co., Ltd.                    -              2,646                    -                   779
 Hanaro Web N TV                               2                725                  199                   146
 M-commerce Co., Ltd.                         13                  9                    -                     9
                               ₩              23     ₩       11,819        ₩         543         ₩       2,985

(2) Transactions with other related parties

The Company has arrangements with affiliates of its major shareholders including Samsung, and SK to
cooperate on developing marketing and customer service expertise.


22. COMMITMENTS AND CONTINGENCIES:

(1) As of June 30, 2001, the Company has provided 4 blank promissory notes as collateral to KDB Capital
    Corp., Samsung Card Co., Ltd. and LG Capital Corp. in connection with its borrowings, installment
    purchase of ADSL modems and lease agreements.

(2) As of June 30, 2001, the Company has been provided US$ 10,000 thousand of payment guarantees by
    the Korea Exchange Bank in connection with the issuance of letters of credit.

(3) The Company entered into an overdraft agreement with Korea Housing Bank and has a maximum
    line of credit as of June 30, 2001 of ₩20,000 million.

(4) As of June 30, 2001, the Company entered into an agreement with Cisco Systems Capital Korea, Ltd.
    Concerning the purchase of certain machinery and software on an installment basis. Details of the
    transaction are as follows (dollars in thousands):

        Date of contract       Effective through          Line of credit       Installment term
          2000.12.14               2002.12.31               $ 170,000             48 months



23.   SEGMENT INFORMATION:

Segment information for the six month periods ended June 30, 2001 and 2000 is as follows (won in
     millions):
                                                             Amount
                                                            Broadband
              2001                 Voice       Leased Line     Service       Others         Total
 Revenue                         ₩ 26,502      ₩     4,258   ₩ 321,698    ₩ 16,317       ₩ 368,775
 Operating loss                      35,899          2,903       51,119         2,012        91,933
 Tangible and intangible assets     502,739         63,918    1,970,795       22,487      2,559,939
 Depreciation and amortization       28,682          3,647      117,446         1,563       151,338

              2000
 Revenue                            ₩    11,874     ₩       4,939     ₩ 75,666      ₩    1,616       ₩ 94,095
 Operating loss                          17,756            17,146        105,513         2,047          142,462
 Tangible and intangible assets         428,038           111,278      1,202,440        17,010        1,758,766
 Depreciation and amortization           16,289             4,235         45,760           647           66,931

								
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