www.taihan.com

Taihan Smart Tower, 317, Simin-daero, Dongan-gu, Anyang-si, Gyeonggi-do, Korea

2018 Taihan Annual Report

The cables used as a backbone system delivering energy and information

which moves the world. Taihan supplies the best quality cable system to the

right places for the smooth operation of social infrastructure, for a wide

range of purposes from everyday life to industrial sites. Taihan, through its

accumulated technology and core abilities developed over 60 years,

endeavors to provide the best services to its global customers. We will

create a sustainable growth engine with our innovative spirit and passion

that will never settle for the present. Taihan never stops going towards a

prosperous future where we live together in abundance.

The global cable & solution company, Taihan move forwards to a better future

CONTENTSCompany Profile

Financial Highlights

Performance Highlights

CEO Message

Vision

History

Organizational Chart

Global Network

04

05

06

08

09

10

11

12

REVIEW OF OPERATIONS

EHV Cable

Industrial Cable

Cable Accessories

Communication Cable

Base Metal

Engineering & Construction

R&D

15

17

19

20

21

22

23

SUSTAINABLE MANAGEMENT

Transparent Management

Ethical Management

People

Social Responsibility

Safety & Health Management

Environmental Management

25

26

27

28

30

32

FINANCIAL SECTION

Independent Auditors' Report

Separate Statements of Financial Position

Separate Statements of Comprehensive Income

Separate Statements of Changes in Shareholders' Equity

Separate Statements of Cash Flows

37

40

42

43

44

TAIHAN ANNUAL REPORT 2018

TAIHAN ANNUAL REPORT 2018 4 5

2016 2017 2018

Sales 1,201,174 1,465,409 1,528,860

Gross Profits 113,449 106,287 104,023

Operating Income 43,716 46,353 44,673

EBITDA 67,174 69,947 69,956

Income Before Tax 13,023 (14,106) 5,723

Net Income 10,065 (14,106) 5,657

For the years ended As of the years ended

2016 2017 2018

Current Assets 647,630 585,701 572,478

Property, Plant and Equipments 480,392 464,005 452,618

Total Assets 1,273,712 1,206,813 1,170,831

interest bearing Debts 609,743 582,619 580,200

Net Debts 467,497 489,429 477,777

Total Liablities 894,347 842,519 812,695

Capital Stock 428,237 428,237 428,237

Capital Surplus (49,504) (43,196) (38,367)

Retained Earning (7,808) (33,038) 67,211

Capital Adjustment 8,440 12,291 (98,945)

Total Shareholder's Equity 379,365 364,294 358,136

Company Profile Financial HighlightsAs of December 2018

Taihan Electric Wire Co., Ltd.

1955. 02. 21

500 KRW

896

In review

1968. 12. 27

EY Han Young

December

Hana Bank

Hyoung Kyun Na

856,473,009 Shares

Taihan Smart Tower, 317 Simindae-ro, Anyang-si, Gyeonggi-do, Korea

Company Name

Establishment

Face Value

Employees

Auditors Opinion

IPO date

External Auditor

Fiscal Year End

Main Bank

CEO

No. of Shares

Address

Design, Manufacturing and Installation in Electric and Communication Cable System

Products and Services

Power Cables, Communication Cables, Base Metal, etc.Business Areas

Taihan consistently offers the best values in the wire & cable industry, leads the development of technology for the future of human race, and lights up an abundant future with cutting-edge technology.

TAIHAN AT A GLANCE

TAIHAN ANNUAL REPORT 2018 6 7

2018 PERFORMANCE HIGHLIGHTS

Taihan establishes and announces mid/long-term strategy ‘V2025’ to accelerate sustainable growth

In September 2018, Taihan announced its mid- and long-term management plan, the V2025 (Vision 2025), kicking into gear its plans to attain sustainable growth for generations to come. Specifically, the V2025 is a roadmap featuring mid- and long-term management targets and execution methods. The company developed and reviewed the V2025 for four months to perfect every aspect of the plan. To celebrate, the company hosted an announcement ceremony at its corporate headquarters. More than 200 guests, including IMM PE personnel, executives, and staff, participated in the event. In terms of mid- and long-term core strategies, Taihan set its sights on ‘expanding the range of strategic products, securing new growth engines, and globalization.’ The company announced that it hopes to maximize its performance in the mid- and long-term by making aggressive and timely investments in vital areas on the basis of multi-faceted reviews and verifications of its strategies. To provide some more specific action measures, Taihan revealed its plans to increase its investments in R&D in the extra high voltage sector (e.g. submarine cables, HVDC, etc.), and to diversify its strategic product portfolio to feature optical communication products and special industrial wires/cables. Moreover, the company established measures to increase technical support and facilities investments for global production subsidiaries such as Taihan Vina, Saudi Taihan, etc.

Taihan lands submarine cable contract for the offshore wind power plant test site off the southwestern coast of Korea

Taihan successfully landed a contract to supply underwater power transmission and distribution cables for the offshore wind power plant test site (main project) off the southwestern coast of the country. Specifically, the company will be entrusted to install an internal network that connects 17 offshore wind power turbines and the offshore power plant. For the project, Taihan is expected to manufacture and supply 22.9kV underwater power transmission and distribution hybrid cables. The southwest coast offshore wind power plant development project holds particular significance for the industry in that it is the first major government-led offshore wind power plant project in Korea. Combined with the fact that Taihan successfully carried out the test site R&D project for the power plant in 2017, this latest contract for the offshore wind power plant will help the company secure the track record it needs to bid for subsequent projects and other similar offshore wind power plant projects. In recent years, the new renewable energy market, especially the offshore wind power generation market, has been growing not only in Korea, but also around the world. As such, Taihan is anticipating more opportunities to participate in like projects based on its experience.

Taihan’s Technology Training Center carries out 100th EHV cable connection training

Taihan successfully landed a contract to supply underwater power transmission and distribution cables for the offshore wind power plant test site (main project) off the southwestern coast of the country. Specifically, the company will be entrusted to install an internal network that connects 17 offshore wind power turbines and the offshore power plant. For the project, Taihan is expected to manufacture and supply 22.9kV underwater power transmission and distribution hybrid cables. The southwest coast offshore wind power plant development project holds particular significance for the industry in that it is the first major government-led offshore wind power plant project in Korea. Combined with the fact that Taihan successfully carried out the test site R&D project for the power plant in 2017, this latest contract for the offshore wind power plant will help the company secure the track record it needs to bid for subsequent projects and other similar offshore wind power plant projects. In recent years, the new renewable energy market, especially the offshore wind power generation market, has been growing not only in Korea, but also around the world. As such, Taihan is anticipating more opportunities to participate in like projects based on its experience.

Taihan selected as an exemplary company in consulting for workplace innovation

Recently selected as an ‘exemplary company in consulting for workplace innovation,’ Taihan has become a benchmarking target for other corporations. During the ‘Workplace Innovation Partners Workshop’ in December (hosted at the Human Resource Development Center inside the Dangjin plant), the Korea Labor Foundation introduced how Taihan managed to improve productivity and working environments on the basis of cooperative and collaborative discussions between management and labor representatives. Taihan has been consulting with the Korea Labor Foundation since 2016 to foster labor-management cooperation. The company has successfully improved its working conditions and reformed its wage system over the long term. More importantly, these changes led to new employment opportunities, and 18% of all current employees in the field were hired, thanks to Taihan’s work with the foundation. It is widely acknowledged that, on the basis of the good relations and collaborative system between management and labor, the company prepared a stable management environment conducive to sustained growth by reforming its systems in a rational manner.

Taihan wins contracts for major projects in North America, the Middle East, and Oceania

Once again, Taihan proved its high level of competitiveness, winning contracts for multiple major projects in key overseas markets. In January, the company bid and won a contract for a 500kV EHV subterranean cable section, which requires some of the most advanced technologies in the industry, in the Sunzia project currently in progress in America’s southwest. This latest contract brings the total tally for Taihan in the North American market to two. Taking charge of two 500kV extra-high voltage projects in the region is an indicator that the company has taken pole position in the North American extra high voltage market. Meanwhile, in August, Taihan was awarded contracts for EHV projects worth a total of USD 25.5 million in Dubai and Qatar, showing the world its competitiveness in the region. In October, the company also landed a contract for an EHV turnkey project worth USD 40 million from Australia’s largest power corporation. Not only that, Taihan won its bidding for a project worth USD 18 million in New Zealand during the first half of the year, further helping the company build trust within the Oceania market. Meanwhile, Taihan also successfully bid for projects in new markets around the world. It brought home a contract for EHV cables in Sweden, and a USD 22 million contract for power transmission and distribution medium/low-voltage cables in the US East Coast. Despite market saturation leading to heavy competition in terms of technology and price against competitors across the globe, Taihan continues to leverage its technological advantages to execute aggressive sales activities, which has helped the company expand market penetration in different markets.

Taihan participates in a global power transmission/distribution exhibition, showcases exceptional technology

In April, Taihan participated in ‘IEEE PES T&D,’ the largest exhibition in the US for the power transmission, distribution, and energy industries. IEEE PES T&D is a global exhibition where north of 800 power equipment and materials companies from more than 80 countries gather to showcase a variety of products and marketing strategies. This year, Taihan unveiled an extensive list of next-generation products, including 500kV EHV cables, power devices, polypropylene (PP) insulated wires, high capacity conductor overhead cables (ACCC), and submarine cables. In particular, the company highlighted its technological prowess and high product quality using the fact that it bid - and won - contracts for two 500kV EHV projects in the stringent North American market. After the exhibition, Taihan hosted its ‘Sales Representative Conference,’ inviting authorized dealers across the North American region to share the company’s marketing strategies and market projections moving forward. In addition to IEEE PES T&D, Taihan participates in a number of different power transmission, distribution, and energy exhibitions around the world, for example, the MEE in Dubai, Energy Networks in Australia, CIGRE in France, etc. to showcase its world-leading technology.

1 2 3 4 5 6

TAIHAN ANNUAL REPORT 2018 8

Hyoung Kyun Na

CEO of Taihan

In recent years, in an attempt to improve its corporate value, Taihan has been devoting all of its energy and resources into reforming its financial, business, and organizational characteristics. As part of its operational policy, Taihan set out to ‘secure growth engines to power the next leap forward’ in 2019 and invested heavily in key strategies such as ‘management of technology,’ ‘globalization and localization,’ and ‘springboard placement,’ to usher in an era of sustained growth much faster.

To our honorable clients, shareholders, and all other stakeholders of Taihan!

On behalf of the company, I would like to express my sincere gratitude for your unwavering interest and support in Taihan.

Last year, the company did its absolute best to raise its corporate value and attain its goal of ‘growth acceleration.’ Specifically, the company sold off non-operating assets and under-performing subsidiary to improve its fiscal integrity, and entered into new markets, including the East Coast of the US and Europe, to bolster the company’s capacity in terms of sales. Taihan successfully generated sales with strategic products such as submarine cables and long-distance transmission cables, and explored the growth potential of its overseas corporations by adding more competitive features to ‘Taihan Vina’ in Vietnam and by ensuring the soft landing of ‘Saudi Taihan’ in the market. Moreover, Taihan established and announced its mid- and long-term vision (the V2025), laying the groundwork for sustainable growth as a company with aspirations to last several generations.

Thanks to this multi-faceted approach, Taihan recorded KRW 1.6488 trillion in sales and KRW 49.5 billion in operating profit (based on its consolidated financial statements). Due to a down-cycle affecting the domestic economy, operating profit stayed at roughly the same level as the previous year. Otherwise, all other indicators continued their upward trajectories. In particular, ordinary profit and net loss during the term were markedly more positive, recording more than an 80% improvement respectively. On the basis of the unconsolidated statements, net profit during the term was also back in black. The financial results suggested that Taihan was successful in restructuring its business into a model capable of turning a profit from its wire and cable business, that is, its primary business area.

Ever since the takeover of Taihan by a private equity fund (IMM PE) in 2015, the company has worked relentlessly to achieve sustained growth. As a result, its operating-profit-to-sales ratio, which was less than 1% in 2014, has grown to above 3% in 2016. The CAGR of operating profit has grown by 33%, providing ample evidence of the company’s substantial growth.

This upward momentum will carry over to 2019. As per its operational policy, Taihan is looking to make 2019 the year to ‘secure growth engines.’ In line with that policy, it will reinforce the ‘management of technology,’ which is the company’s source of creating customer value, and identify solutions required for future business initiatives. Additionally, Taihan will explore the possibility of expanding its sales network and developing its overseas subsidiaries further by ‘globalizing and localizing.’ The company will use strategic approaches (e.g. proactive management of risk, diversification of its portfolio, etc.) to show the world how it is trying and succeeding in ‘creating a stable springboard’ for future growth.

Due to increasingly protectionist trade policies employed by the top economies around the world and a highly competitive bidding environment, this year’s cable market is expected to be rough for everyone. Taihan, however, clearly understands its goal. It has the culture to do whatever is necessary to achieve its goal. As such, it will continue its success in sales, profits, and growth this year. On behalf of Taihan, I hope you can fully support and encourage the company through whatever challenges it may face moving forward.

Thank you.

CEO MESSAGE BUSINESS PHILOSOPHY

Vision

V2025

People

SolutionFuture

A People-centric cultureA people-centric corporate culture, focusing on communications and mutual trust

Customer valueCustomer satisfaction through technology and quality

Future-orientedA brighter future through creative thinking and taking on challenges

·Realize High Technology·Secure Global Top 3 Technology

·Promote Localization of the Big Market·Strengthen Global Network

·Realize Global Top 10 Sales·Invest in the New Growth Business

Mid/Long-Term Management Plan

We Connect the FutureTo a Better Future

Provide Total Cable Solution Strengthen Global Competitiveness

Realize the Growth of Volume & Value

Strengthen Product Portfolio Localize Global Network Achieve Sustainable Growth

01 02 03

9

TAIHAN ANNUAL REPORT 2018 10 11

1941 Chosun Electric Wire was founded1955 Taihan was founded1958 Started to produce PVC sheathed cables

1984 Completed the construction of optical communication cable factory and started to produce 154kV XLPE cables

1987 Produced OPGWs and Developed 345kV OF cable & cable accessory

2010 Developed the domestic first extra high voltage polymer insulator.2011 Completed the construction of ‘Dangjin Plant’2012 Developed the first express trolley running at 400km/h in domestic Developed the first 500kV EHV cable and passed the PQ Test in domestic 2013 Developed the first express trolley running at 400km/h in domestic Developed the first 500kV EHV cable and passed the PQ Test in domestic2014 Started to produce the ACCC type dual capacity transmission line2015 Started to supply 500kV EHV cables to North America for the first time Acquired by IMM PE Proclaimed the new vision to be the one of Global TOP 3 wire & cable

companies

2016 Merged ‘TEC&CO’ Acquired the whole shares of the Legal Entity in Vietnam and launched

<Taihan Vina>2017 Established of cable accessory corporate <Saudi Taihan> in Saudi Arabia Established of new desired talents of staff members Declared new CI Selected as the company of 'Best Family-Friendly Management'2018 Obtained the offshore wind power distribution submarine cable order in

southwestern sea Declared the mid-to-long term management plan V2025

1964 Obtained the ‘KS’ mark for cable products for the first time in South Korea

Started to export wire & cable products for the first time in South Korea

1969 Developed 33kV XLPE cables for the first time in South Korea

1995 Developed 765kV ACSR1996 Obtained the ISO 9001 certification in

electric cable accessory field1997 Expanded the entrance into overseas markets

and won the 500 million dollar export tower award

2000 Established <M-TEC> as a wire & cable production company in the Republic of South Africa

2005 Established <TSC> as a wire & cable production company in Vietnam

2007 Completed the construction of ‘Dangjin Cable Accessory Plant’ and won the 100 Million Export Tower Award

2008 Entered into the turn-key markets for extra high voltage cable in Australia, USA and Russia

2009 Developed a 400kV enamel coated conductor cable and an extra high voltage polymer insulator

1976 Started to produce 154kV OF cables for the first time in South Korea

1977 Developed optical communication cables for the first time in South Korea

HISTORY ORGANIZATIONAL CHART

1940s

1980s

2010s

1960s

1990s 2000s

1970s

CEO Advisor

EHV Cable Business Division

Communication Business Division

Overseas Sales Dept.

Domestic Sales Dept.

EHV Accessory Production

Dept.

Industrial Cable Business Division

EHV Engineering & Construction Business Division

Base Metal Business Division

Finance & Strategic Planning UnitHistory Begins

Full-scale Growth of Electric Wire & Cable Business

Completion of the Construction of Dangjin Plant & Leaping as a Global Leading Company

Localization of Products & Establishment of Business Basis

Enhancement of Product line of Cable & Cable Accessory

Establishment of the Global Production Bases

Modernization of Production Basis & Leading the Wire & Cable Technology

The Board of Directors

Overseas Sales Team 1 Domestic Sales Team 1

MENA Regional Headquarters

Dubai

Europe Regional Headquarters

UK Russia

Oceania Regional Headquarters

Australia New Zealand

The America Regional Headquarters

USA-West

USA

USA-East

Asia Regional Headquarters

Singapore Indonesia Malaysia

EHV Construction Management Team

Base Metal Sales Team

Domestic Sales Team 1

EHV Cable Production Team

Information & Communications Technologies Team

Communication Cable Production Team

Communication Cable Engineering Team

EHV Accessory Production Team

EHV Accessory Technical Team

Overseas Sales Team 2 Domestic Sales Team 2

EHV Construction Team

Base Metal Production Team

Domestic Sales Team 2

EHV Cable Technical Team

Overseas Sales Team 3

Global Infra Team

Industrial Cable Overseas Sales Team

EHV Engineering Team

Dubai Construction Office

Sales Dept.

Industrial Cable Production Team

Industrial Cable Technical Team

Bus Duct Business Team

Cost Innovation Unit

Human Resources & General Affairs Team

Process Innovation Team

Public Relations Team

Internal Audit Team

Sales Management Team

Production Support Unit

Quality Management Unit

Research & Development Lab

Production Support Team

Quality Assurance Team

Power Solution Research Team

Material Research Team

System Development Team

Production Planning Team

Plant Engineering Team

Business Management Team

Affiliate Support Team

Procurement Team

Finance Team

M-TEC Taihan Vina Saudi Taihan

Business Strategy Team

Legal Team

Trading Support Team

Accounting Team

TAIHAN ANNUAL REPORT 2018 12 13

Dangjin Plant

Dangjin Plant is the world largest wire & cable plant as a single plant which was completed in 2012. The plant is the best level of facility having the up-to-date systems, such as, the comprehensive controlling, risk detections and energy efficiency optimization systems, etc., as well as having enhanced its productivity through the concentration of various kinds of production facilities, such as, electric power, communication and elements production facilities, etc.

Taihan Vina

Taihan Vina that was launched newly through the investment by Taihan solely in 2016 is a comprehensive wire & cable company providing various kinds of cables, such as, electrical and communication cables, etc. Taihan Vina is growing as a global production base with the investments of technology and equipment for highly profitable products such as EHV cables and ACCC, etc.

www.Taihan cable.com.vn

Dangjin Cable Accessory Plant

Dangjin Cable Accessory Plant that was completed in 2007 is producing various kinds of cable accessories, such as EHV cables accessories and terminations, etc., including 500kV XLPE cable accessories. Moreover, this plant has produced link boxes, GIS insulators and composite hollow bushings depending on the requirements of each client.

Taihan USA

Taihan USA was founded in 2000 for expanding the sales of Taihan in the Americas. We have strengthened our business bases for entering into the local markets while having expanded the taken orders for extra high voltage and middle & low voltage products from the electricity board of each region in the east and west regions of the USA since 2003 and are planning to expand the sales of electric power and new information & communication products in the future in the Americas.

M-TEC (Malesela Taihan Electric Cable)M-TEC that is located in the Republic of South Africa was founded as a joint venture company in 2000 as the advanced base for entering into the African continent. Taihan has leaped the best wire & cable company in the African continent as a comprehensive wire & cable company producing optical communication cables and power cables.

www.m-tec.co.za

Saudi Taihan

Saudi Taihan that is the Saudi Arabia’s first HV-class electric power generation company was established for strengthening the competitiveness of Taihan through the localization of the production. Saudi Taihan will expand its markets to Africa and Europe as well as the Middle East as its global electric power generation bases.

Africa

United Kingdom

Russia

Saudi ArabiaSaudi Taihan

Taihan Vina

Taihan USA

Subsidiary

M-TEC

Dubai

Abu Dhabi

Malaysia

Indonesia

Australia

New Zealand

Los AngelesNew Jersey

Overseas Branch Office

Europe Asia

Oceania

North America

South America

Singapore

15TAIHAN ANNUAL REPORT 2018

REVIEW O

F O

PERATION

S

In 2018, the global economy recovered thanks to advanced economies - led by the US - rebounding from previous years, emerging markets taking a few steps forward, and the raw materials trading market showing signs of improvement. Overall, the growth rate reached 3.5%, a marked improvement over the previous year. Despite such positive signs, there were some factors causing uncertainty in various markets, namely over-leveraging of some national economies, the US-China trade war, economic downturn of neighboring countries, and the escalation of protectionist trade policies between countries. Korea’s national economic growth rate came in at 2.8%, a 0.3% year-on-year decline. Given the dwindling volume of investment in the market, the economic forecast moving forward for Korea remain unclear. Nevertheless, the alleviation of geopolitical risks in the region, the Northeast Asian super-grid, etc. has given hope with regards to the mid- and long-term development roadmap for the power cable industry.

Under such global economic trends, Taihan bid and won contracts for a total of KRW 670 billion in 2018. In particular, the company achieved great success in its strategic and new markets. More specifically, Taihan was awarded a contract for a 500kV project in the East Coast of the US (strategic market), and a 220kV project in Sweden (Europe, new market). The company also won a contract to supply underwater power distribution and supply cables for the offshore wind power generation project off the southwestern coast of Korea (main project), and another contract to supply 400kV long-distance transmission cables in Singapore. In the US market, Taihan completed its development of HPFF, producing some tangible results in terms of new product sales. However, in the Middle East, the prolonged period of low oil prices has dried up orders and contracts. The company’s performance in Russia was underwhelming as well.

In Korea, thanks to increased demand stemming from power generation using new renewable energy, Taihan managed to maintain its steady upward trend for HV cables in the private sector. As for industrial cables and wires, the construction market and plant development plans led by major corporations have failed to make progress, leading to poorer results than the previous year. On the other hand, the company has improved its performance and sales in new overseas markets such as the US and Australia. Moving forward, demand for new products, including the Covered Conductor, is expected to rise.

As shown, Taihan has performed exceptionally well since 2015 thanks to initiatives aimed at ensuring sustainable growth. It established its V2025 mid- and long-term management plan along with new goals. The company also proposed its core strategies, for example, reinforcing its portfolio, and localizing global production subsidiaries, that can help it fulfill its objectives. Moreover, Taihan has been reviewing the possibility of investing in developing technology for new strategic products, and in expanding its overall product portfolio. Besides these efforts, the company is looking to establish strategic production bases and sales subsidiaries across the globe by directly investing in overseas markets and/or forming joint ventures with partner companies. With these international endeavors, Taihan will do its best to increase the company in size and capacity as well.

EHV Cable

Industrial Cable

Cable Accessories

Base Metal

Engineering & Construction

Communication Cable

R&D

14

AmericaThanks to the combination of a booming economy, expanding cities, and increasing investment in infrastructure (including new renewable energy), demand in the North American market is expected to rise moving forward. In 2018, Taihan made some significant improvements in the region. It was the only electric wire/cable company to win a 500kV cable project. The company also has confirmed contracts or projects that are in progress. Moreover, Taihan opened a new office on the East Coast area to bolster its sales capacity and expand its market range.

In Central and South America, Taihan is making its best efforts to build up its foundation for entering the market and developing the region by pursuing the establishment of relationships with customers through aggressive marketing based on its technology, such as Customized Technical Presentation. Recently, constant demand has been appearing in Colombia, Peru, Brazil, and Argentina, and Taihan expects practical results from its market entrance efforts such as securing opportunities to receive orders using the local sales networks.

AsiaIn Singapore, Taihan successfully finished section-1 (commissioning of the cable circuit) for the first 400kV tunnel project for the country. The company led the first tunnel project in Singapore, which is home to the most innovative power system in the world. In doing so, Taihan proved its world-leading technology in the extra high voltage sector. Meanwhile, in Malaysia, the company made successful bids for projects to supply and maintain 275kV OF cables in succession. Taihan also won two project contracts for 400kV enamel coated conductor cable, the top available specifications for power cables locally in India.

Europe Europe is expected to increase demand due to diversification of energy sources, increase of inter-country grid connection and replacement of old power grid. Taihan is making continuous efforts to enter the market and strengthen its position. In 2018, it successfully won the first 380kV underground project in the Nordic region. Based on this, we will continue to strengthen our relationship with local companies and expand our market share by providing optimized solutions for our customers' needs.

Overseas Sales

EHV Cable

TAIHAN ANNUAL REPORT 2018 16 17

Middle East & AfricaWith infrastructure investment across the region dwindling due to the prolonged trend of low oil prices, the Middle Eastern market - led by Saudi Arabia - suffered an overall downturn in 2018. Despite some extremely dire circumstances, Taihan successfully executed its major project with the Saudi Electricity Company (SEC), Saudi Arabia’s leading power corporation. The company’s work with the SEC helped Taihan solidify its position as a major supplier in the market. Moreover, the company was awarded contracts for new EHV projects, including 132kV and 220kV projects in the UAE, Qatar, and Kuwait. This helped the company reduce its reliance on the Saudi Arabian market and diversify its market portfolio. In 2019, Taihan is anticipating more contracts to come its way with major EHV projects in Kuwait and the UAE. With high-value-adding products, the company also expects to bolster its efforts in penetrating the African market.

OceaniaContinuing a promising trend from the previous year, Taihan produced some steady results this year in the Oceanic region. In particular, the company solidified its footing as a “total solution provider” in Australia, landing all three 132kV projects commissioned by Ausgrid, the country’s largest power corporation. Taihan successfully bid for the turnkey project, which is expected to require outstanding capabilities in terms of technology and installation. For each project, the company will oversee the entire process from power grid design to cable and connection materials production, connection, engineering works, and testing. Meanwhile, Taihan was selected as a key partner for Ausgrid at its Strategic Partner Summit 2018 event in June. By designating its coveted key partner status to Taihan, Ausgrid acknowledged the contributions and outstanding competency of the company showcased over the past few years carrying out its projects. In New Zealand, Taihan completed the installation of 110kV and OF cables, and is now engaged in construction works for its 220kV project.

Governmental MarketPerformance in the domestic governmental market improved significantly over the past year thanks to sales involving 345kV cables and other high-yield products. In 2019, tighter fiscal policies at KEPCO, Taihan’s main client in the public sector, are expected to lead to a contraction in demand. Nevertheless, the company is looking to respond with some aggressive sales initiatives. Moreover, Taihan will accelerate its development of products for upcoming HVDC projects, including the EP project, the Northeast Asia Super Grid project, etc.

Civilian MarketTaihan is supplying EHV cable products to coal, LNG, and new renewable resources plants, group energy facilities, large-scale housing lot development areas that require the underground power cable business, petrochemical plants, and semiconductor factories. Some difficulties are anticipated due to environmental issues caused by fine dust and destruction of nature and the delay and decrease in investments resulted from the economic recession, but the market size is expected to be similar to that of 2018. Especially in 2018, we supplied 154kV & 345kV EHV cables to Samsung Electronics after 2016, which once again recognized excellent product quality.

Domestic Sales

In 2018, Taihan continued to supply cables to major markets such as North America and Oceania as well as the Southeast Asian and Japanese markets.

Notably, the improved performance of Taihan Vina - the company’s subsidiary in Vietnam - in the North American market managed to turn several heads across the region. Previously, Taihan Vina invested more than a year in acquiring its North American AEIC certification (TR-XLPE). This led to its first long-term contract worth KRW 19.6 billion, and another project worth KRW 7 billion for Covered Conductor cables (a new overhead wire product) once development is complete. Additionally, the company successfully completed its Factory Audit, carried out by the new Power Authority in the US, and registration as a vendor. Taihan also made extensive efforts to diversify its project portfolio, continuing to bid for projects in Southeast Asian markets such as Myanmar, Sri Lanka, Indonesia, and Singapore

In 2019, the company’s Dangjin plant is expected to acquire the North American AEIC certification (EPR). Once the certification process is complete, the plant will try to increase its order volume from existing clients and carry out promotional activities aggressively for clients on the East Coast of the US. Moreover, on the basis of its track record of landing and executing contracts in the domestic market, Taihan plans to bid for underwater power distribution cables as well as wind power generator cables and solidify its position as a global cable maker within the North American market.

As for the Oceania market, the company also performed extremely well with sales growing 830% over the previous year. In 2019, Taihan expects to deploy active sales initiatives, primarily focusing on New South Wales in Australia. Then, from its regional base in Australia, the company will try to expand its market to neighboring countries such as New Zealand, Papua New Guinea, and Fiji. Moreover, Taihan will market its products aggressively to achieve its goal to land more contracts, improve sales, and bolster profitability for its power distribution cables.

Overseas SalesIndustrial Cable

TAIHAN ANNUAL REPORT 2018 18 19

Governmental MarketIn 2018, sales from the domestic governmental market remained almost identical to the previous year. Although the emergency management of KEPCO did reduce orders, Taihan was able to add its successful bids for the submarine cables at the offshore wind power plant of the southwest coast of Korea and high-capacity conductor (overhead cables) for KEPCO to its list of results. With regards to the submarine cables for the southwestern coast offshore wind power plant, the company was able to land the contract for the main phase, continuing its success in the R&D phase of the overall project. On the basis of its product and service delivery history, Taihan will reinforce its position in the submarine cable market for offshore wind power generation moving forward. In 2019, the company expects a surge in demand for ACCC products as part of the high-capacity conductor (overhead cable) project commissioned by KEPCO. KEPCO’s decision to use ACCC products appears to be the result of Taihan’s continued efforts to introduce ACCC products in the project. With this first step, the company will seek to increase its market share with vigorous future sales activities.

Domestic Sales

Civilian MarketThe domestic civilian market shrunk in 2018, in terms of both sales and operating profit. Multiple factors caused the downturn. The intensifying trade war between the US and China has increased uncertainty across various industries, and more stringent real estate regulations by the government have intimidated the housing market. Moreover, deteriorating market conditions have forced companies and organizations to delay or scrap their investment in manufacturing facilities and power generation projects. Restrictions posed against redevelopment projects have also played their part in putting a damper on market growth. In 2019, the US and Chinese governments will look to improve their trade relations, and the electrical/electronics sector is expected to resume their investments into various facilities. Moreover, the market is anticipating a spike in investment directed towards large-scale plants thanks to petrochemical corporations replacing or expanding their facilities. Forecasts also indicate that sales and operating profit will also improve over the past year thanks to government policies focusing on balanced development across the nation as well as policies on new renewable energy.

As competition among global players in the cable business intensifies with their aggressive marketing, Taihan started its cable accessories business, aiming at presenting a new growth model, targeting a niche market, and developing more profitable products. The list of main products includes EHV XLPE/OF pre-molded cable accessories and termination cable accessories, and epoxy insulators.

Cable Accessories

Through its efforts for improving technology and product quality, Taihan was certified by KEMA with its new optimized products in the middle of 2013, and succeeded to obtain PQ certification from SEC (Saudi Electricity Company). From that point, it has been supplying cable accessories for large-scale grid projects that have been operated by local EPC companies in the Middle East including Saudi Arabia, generating yearly sales of US$9.29 million. Moreover, through the incessant efforts for making better products, it succeeded in developing bolt-type cable accessories designed for easier construction and obtained KEMA certification and PQ, preparing the foundation for leading the market.

Southwestern Sea Offshore Wind-Farm Project, Submarine Power Cable, Korea

Now, Taihan is speeding up its development of new markets as it is winning contracts not only in the Middle East but also in Southeast Asia, including Indonesia and Singapore, as well as in Europe. In February 2017, it established Saudi Taihan , the first HV power equipment vendor in the nation, through a joint venture with a local company, to boost the localization and secure a bridgehead to enter markets in Africa and Europe, beyond the Middle East.

TAIHAN ANNUAL REPORT 2018 20 21

Taihan is running the ICT (Information and Communications Technologies) Business based on the production and sales of communication cables and, especially, holds the domestically biggest production equipment for producing Communication Copper Cables. As its major products, there are data cables, including U/UTP, F/UTP, SF/UPT, S/FTP, and RF feeder cables, foam skin cables, railway signaling cables, signal cables for machine vision, such as CL, CXP, Analog, etc. we are positioned as the top vendor domestically and internationally. In addition, the business area of Taihan is being expanded into the turn-key based infrastructure construction business based on its communication business.

Despite the economic downturn, we continued to grow with sales of KRW 72.3 billion, an increase of 13% over 2017 by winning turnkey infrastructure contracts and expanding new markets. Taihan has over 100 stable customers, out of which include domestic communication companies like KT, SKT and LGU+, middle-and-large-scaled distribution enterprises, global communication companies, and SCS (Structured Cabling System) companies overseas. We are strengthening our sales capabilities of high-value-added products such as leakage coaxial cable for railway, data cable for ships, photoelectric composite cable, etc. and proactively responding to future changes in the communication environment by discovering a new growth engine in communication solutions.

In 2018, Taihan’s sales in the materials business amounted to MT 100,000, the ratio between domestic and overseas sales being 7:3. The domestic market has declined slightly due to the overall industry recession, including automobile and parts makers, which are major customers. As for the overseas market, Southeast Asia and India have been the major importers for Taihan. Its target markets include the Philippines, India, Australia, Indonesia, and Bangladesh.

Magnet wire has decreased in the equivalent amount and price. This is also because of the decrease in the production of domestic auto parts companies. However, a gradual recovery is anticipated with the growth of electric car businesses.

The materials business, by nature, is largely affected by the global and domestic economy. The growth of China, with 1/3 of the global population, Vietnam, and India is expected to have a positive effect on the expansion of the materials business.

The department of materials business in Taihan will maintain stabilized sales to major domestic buyers based on its high-quality products and extend the sales channel by targeting the niche market, particularly focusing on nations that have concluded FTA with Korea. It will particularly utilize Taihan Vina to obtain an advantage in the global competition despite the spreading protectionism and enhance customer satisfaction.

Communication Cable

Base Metal

TAIHAN ANNUAL REPORT 2018 22 23

The recent needs of customers for EHV systems are varying from design and construction to operation and maintenance, requiring an engineering service and construction capabilities with diverse know-how including high technology, energy efficiency, and stability. Taihan is continuously reinforcing its functions in the engineering field, solidifying the foundation to provide customers with total solutions and expanding its related businesses.

Based on this strategy, Taihan has realized a continual cost renovation and expansion of a high-profit product portfolio, winning a full turnkey project in Singapore, Kuwait, Australia and New Zealand, increasing the awarded orders and operating profits in the E&C business by each 147%, 141% in 2018 compared to those of the previous year. In 2019, we will continue to grow based on the backlog of overseas orders and accelerate growth through market expansion and product diversification.

In 2019, it is expected that the sales volume and operating income will increase based on demands for replacing cables in advanced countries due to the recovery of global economy and the extension of electric power equipment in developing countries. In addition, it is also expected that new markets might be pioneered centered on Europe together with the reorganization of business portfolio owing to the expansion of new project areas, such as, array cables for offshore wind farms and HVDC underground cables, etc.

Engineering & Construction

Low oil prices and global economic fluctuations that have lasted the past years have resulted in the reduction and holding of investments and orders of major buyers of electric wire including nations in the Middle East, and the competition among global cable companies is becoming more and more strenuous. Despite hostile environment, Taihan's E&C business continues to expand its market share in advanced countries such as the United States, Australia, and Singapore based on its accumulated customer trust and technological capabilities. In addition, it is anticipating further growth as its efforts to expand into Europe, Southeast Asia, and Central and South America, where the replacement of electric facilities and new investments are actively taking place, are bringing to fruition.

An Extra High Voltage Cable is an item whose added value is very high among electrical cable products as a product for which the engineering and quality management standards are the strictest. Taihan's E&C division is recognized as leading the technology and construction capabilities in the market, and is continuously expanding the partnership with major customers. In particular, we has gained the trust of customers and set the stage for leading the market by successfully completing the construction of a 400kV tunnel in Singapore and numerous projects in Australia. Continued large-scale orders in these regions are evidence of customer confidence in Taihan's E&C business capabilities.

SCE 500kV Chino Hills, USA

In 2018, the Technology Research Center of Taihan focused all of its capabilities on developing cable-related goods, the main products of the corporation.

The global market for High Voltage Direct Current (HVDC) projects continues to surge due in large part to increased demand for eco-friendly, high-efficiency power transmission systems combined with the need to transport new renewable energy across long distances. In response to this promising trend, Taihan is currently researching and developing an HVDC Voltage Source Converter (VSC) type cable system and Line Commutated Converter (LCC) simultaneously using its technology in 500kV EHV capacity AC cable technology. Once development is complete, the company anticipates that the products will satisfy a wide range of client requirements.

Taihan is also in the process of developing 154kV Polypropylene (PP) power transmission cables as part of a national project. The project is expected to finish in 2020. Compared to previous XLPE cables, PP insulated cables are superior in terms of power transmission capacity and offer the advantage of being reusable. As such, PP insulated cables several advantages - they are eco-friendly and require less when it comes to manufacturing. Not only that, thanks to their relative indifference to space charge, PP insulated cables are expected to be used in DC systems as well as AC systems.

Finally, with requirements pertaining to the prevention of accidents involving power grids both domestically and internationally, Taihan developed an online diagnostics system to detect the partial discharge of cables capable of anticipating malfunctions on the basis of diagnostic results. Since the system can be interfaced with Asset Management Solutions (AMS) available at power substations, it offers the distinct advantage of being able to work with cable transmission lines as well as substations. Moreover, Taihan has signed an MOU with Hyosung, a company that develops and commercializes AMS products for power facilities, to build a strategic partnership. The company is looking forward to expanding into new markets and creating new sales revenue based on its partnership with Hyosung.

R&D

Furthermore, the Technology Research Center of Taihan is carrying out the “170kV eco-friendly dry type plug-in transformer bushing project,” which allows for the reduction of greenhouse gases and efficient maintenance, and the “154kV self-healable nanocomposite insulator project,” which prevents the breakdown of cable connecting devices.

24 25

Strengthening the Independence of Construction and Operation of the Board of DirectorsTaihan is enhancing the transparent management through the independence of the construction and operation of the board of directors. The board of directors is composed of 6 members. Among the members, the outside directors are 2 members taking 33% of the total. The directors of Taihan are supporting the creative management activities aggressively and are contributing to enhancing the corporate values by using their abundant experiences and professional knowledge. Taihan is implementing the responsible management by using the professional managers under the transparent management system while holding the board of directors meeting once per month.

Taihan is realizing the transparent management for protecting the rights of shareholders and enhancing the values based on its advanced corporate governance, such as, establishment of a professional management system and securing the independence of the operation of the board of directors, etc.Transparent

Management Composition of ShareholdersThe Total Number of Outstanding Stocks of Taihan is 856,473,009 shares of common stocks in total and is transacted after being listed on the Korea Stock Exchange. The biggest shareholder of Taihan is currently NI-KE Co., Ltd., which has 67.14% of share ratio as of the end of December 2018. In Taihan, the CEO reports the management status to the shareholders through a shareholders’ meeting and the matters needing a decision-making process shall be decided while the opinions of shareholders are reflected. In addition, Taihan is making efforts for improving the rights of shareholders by affirmatively reflecting the shareholders’ suggestions that are received through the IR-related department onto the corporate policies and operation via the review by the management and the board of directors.

Enhancement of Transparency Through Sharing of Corporate InformationTaihan notifies its domestic and overseas shareholders, creditors and mass media on the Sales Performance and Other Kinds of Current Status of Taihan periodically. Such kinds of promotion activities of Taihan are a part for sharing the corporate information with the domestic and overseas stakeholders. The major management activities and overall information of Taihan can be checked all the time through the homepage (www.taihan.com) and DART (Data Analysis, Retrieval & Transfer System, www.dart.fss.or.kr). Taihan is helping the shareholders to understand the company well by posting major financial matters and the IR data of Taihan continuously on the homepage.

Operation of Audit CommitteeTaihan is making the efforts for securing the fairness and transparency of the operation of the company after having established the Audit Committee in accordance with the paragraph 1, Article 25 of the Articles of Association for implementing the accounting and auditing works and the assessment of the internal control systems. For securing the independence of the Audit Committee, more than majority (2/3) of the Committee are composed of outside directors and they play the roles for the execution and monitoring of the duties of a director, the execution of legal rights including the appointment of outside auditors and the implementation of works entrusted by the board of directors.

Transparent Management

Ethical Management

People

Social Responsibility

Safety and Health Management

Environmental Management

TAIHAN ANNUAL REPORT 2018 24

Taihan is constantly striving to have a positive influence on society based on its social responsibility. We are well aware that our will and practice should lead us to the right path for our customers, shareholders, employees, and local communities to grow together. Taihan will always consider the various perspectives of our stakeholders and be a reliable company that continually generates value and new opportunities.

To open the way for a better future for all-this is what Taihan regards as sustainable management.

SUSTA

INA

BLE

MA

NA

GEM

ENT

TAIHAN ANNUAL REPORT 2018 26 27

While the influential power by a company on countries and societies becomes bigger, the level of corporate ethics required by a society is getting higher, too. The executives and employees of are sympathizing deeply with the importance and responsibilities of the ethical management and are practicing the honest management through the works abiding by the basic principles

Taihan is pursuing the Human-Oriented Management based on its belief, ‘No People, No Company’. The executives and employees are conducting their duties creatively while having their passions and sense of responsibility with one accord based on the New Vision of the Company, so called, ‘We connect the Future, To a Better Future’.

Ethical Management

People

Regular AuditIn 2018, Taihan carried out its regular audit to inspect the appropriateness of the work the company executed throughout the year, and improved unreasonable or inefficient tasks. Moving forward, Taihan plans to execute in-depth audits to prevent risk and raise the company’s value.

Ethical Management EducationTaihan used case studies to inform and train its employees regarding overarching ethical management issues and the Anti-graft Act as part of its ongoing efforts to reinforce ethical conduct across the company. Moreover, Taihan is working diligently to build a consensus on the subject of ethical management. It sent newsletters on ethical management to its employees, and distributed related content for overseas subsidiaries to use during their own sessions on ethical management.

Internal & External Publicity on Ethical ManagementTaihan posted its latest news and examples pertaining to ethical management on its official company website and groupware. It also asked local overseas subsidiaries to amend its ethics charter and ethics regulations to bolster the ethics of overseas employees, which was a relative blind spot for the company in past years. Taihan sent disposition forms on the subject of ethical management to its cooperating companies as well to explain its current status on ethical management. The company distributed consent forms ensuring fair and transparent transactions, reinforcing its determination to instill ethical management across its entire corporate ecosystem. With all of these initiatives across different communication and promotional channels, Taihan is improving the ethics of not only its own staff, but also the staff members at cooperating companies.

Securing and Nurturing Global TalentTaihan will secure the right people who have the ability to perform their duties as required by the company in order to achieve the company’s vision and management objectives. Based on talented individuals with an open mind and professionalism, we will employ the right people following the in-depth recruitment process through several steps. We will also nurture the talents with global competitiveness by offering various education programs, such as Global Biz Skill and English PT, to grow their global mind and ability.

Building Sound Organizational CultureTaihan runs a variety of programs to build a healthy organizational culture. The '3355 meeting' that supports the meeting and communication of the staffs of other departments will create an atmosphere that can break down the walls between departments and work closely together. The company also supports the activities of in-house clubs and mandate regular leave to work, and strive to create a corporate culture for the happiness of our employees. As a result, in 2017, the company was selected as the 'Family-Friendly Company' by the Ministry of Gender Equality and Family for the first time in Korea. Not only that, Taihan's labor and management are harmonious and mutual. The history of labor and management that has been working together for 30 years without a single dispute is the pride of Taihan.

Specified and Codified Action Guidelines for Members

- Ethics Charter- Code of Ethics

Corporate Code of Ethics

Operation of Organization fulling in charge of Ethical Management and Various kinds of Systems

- Ethical Management Office- Online Reporting System- Internal Audit

Operation of Organization/System

Formation of Consensus between members through some systematic education, etc.

- CEO Message- Ethics Pledge by Executives and Employees- Periodic Education on Ethics

Formation of Consensus

Fair Assessment & RewardsTaihan shall design and operate some fair assessment and reward systems. Taihan shall implement all the works by making the MBO Goals for each Employee depending on the goals of an organization and shall assess the implemented annual results based on the objective indexes. Taihan shall motivate the executives and employees and enhance the job satisfaction of them by increasing the salaries, paying the incentives depending on the assessment results and reflecting the assessment results onto the promotion of each position.

TAIHAN ANNUAL REPORT 2018 28 29

Volunteer Activities of Executives and Employees

Motto

Working together to make a happier world

Mission1 contribution per person

Taihan is continuously practicing the sharing activities for isolated neighbors under the slogan for Social Contribution saying, ‘Working Together to Make a Happier World’. Taihan is operating the ‘One Contribution per Person’ system under which every each executive and employee participates voluntarily in volunteer activities not less than once per year. The social contribution programs under which the family members and relatives as well as the executives and employees participate together are implemented while maximizing the value of sharing.

Over 60 years, stakeholders of Taihan, including employees, clients, and local community groups, have poured their passion and efforts into the company. Taihan promises never to forget that the company was built together by everyone involved. Moving forward, Taihan aspires to become a guiding light that shares and delivers hope for a better, more beautiful society together.

Social Responsibility

- Developing art and culture- Expanding the art and culture

community

Art & CultureA company coexisting with society- Volunteer activity of employees - Corporate donations

Welfare- Support for fostering talent- Support for advancing science

& technology

Education

Working together to

make a happier world

Support for the Alienated Class of SocietyTaihan has implemented the social contribution activities on a regular basis while cooperating with the local welfare facilities. The executives and employees visit local residents plagued with safety and hygiene, stemming from poor living conditions, to improve their residential environment. Taihan also provides the children of a low-income family which have lack of opportunities of the cultural experiences and education, etc., with the opportunities to conduct many kinds of experience activities. Moreover, they participate in various activities for the local communities, such as, Filial piety volunteer works and kimchi-making events, etc., for the aged people within the community.

Environmental Protection ActivitiesTaihan carries out environmental protection activities on a regular basis in areas near its corporate headquarters and production plants. In Dangjin, where its plants are located, the company collects waste discarded near Janggohang Harbor, the breakwater, and the wharf area where the local festival gets underway, to improve the local community and its environment. In Anyang, where its corporate headquarters is located, Taihan also continues to carry out environmental protection activities to ensure it faithfully fulfills its social responsibility and duties as a corporation.

Junior Electricity ClassTaihan hosts a ‘Junior electricity class’ for elementary school students in Dangjin, where its plants are located. This class is a Talent donation initiative, where Taihan employees participate and hold classes as one day teachers.

The program offers a new learning opportunity for children who suffer from a somewhat lacking academic infrastructure in the region and explains difficult scientific principles in easy-to-understand terms to help children grow as talented scientific minds capable of leading our future.

Donation of BooksTaihan hosted the “Books of love sharing event” and donated more than 600 books offered by Taihan employees to the social welfare center in Anyang. The company planned this event as part of its sustained corporate social responsibility efforts directed toward local communities to promote the culture of donation throughout the company and to find ways of living together with local communities. The collection donated to the social welfare center featured books from a variety of fields, including pure literary works such as children’s stories, novels, and essays, as well as politics, economics, and history.

Social Contributions in 2018

Employee Volunteer ActivitiesFilial piety-sharing volunteer work (3 times), Volunteer work for children (2 times), Volunteer local environmental remediation work (3 times), Donation of books (1 time), Sharing marketplace (1 time) and Volunteer education at junior electricity class (6 times)

Donation of Books Support for the Alienated Class of Society

Volunteer Local Environmental Remediation Work

TAIHAN ANNUAL REPORT 2018 30 31

Environment and Safety Inspection

Emergency Evacuation Dril

Safety & Health Management

Taihan has established and operated the safety & health management system based on the business ideology respecting human beings and the safety & health management policy. Each member of the executives and employees is making efforts for realizing accident-free workplace and happy home by implementing the safety & health activities autonomously and aggressively.

Vision & Goal

Operation of EHS SystemTaihan has introduced and operated the EHS (Environment, Health & Safety) Management Systems, such as, ISO 14001 & OHSAS 18001, etc., as well as PSM (Process Safety Management) System for reflecting the Safety & Health-related matters, such as, risk assessment, education & training, safety inspection and responding to emergent cases, etc., onto the whole course of management and for improving, operating and managing such matters continuously.

Activities

Holding a Meeting of the Industrial Safety & Health CommitteeWe pursue the eco-friendly and human respecting corporate activities through the resource management as well as achieving the customer satisfaction by providing flawless products and service in order for the customers to use them without fear.

Implementation of the Accident-Free CampaignWe have conducted an Accident-Free Campaign for enhancing the sense of safety of the executives and employees. We have enhanced the sense of safety level of the executives and employees continuously by having induced all the executives and employees to participate in the Accident-free Activities through chanting the safety slogans, posting the safety regulations and publicity, etc.

Implementation of the Joint Inspection between the Labor and the ManagementWe will create the Accident-Free Workplace by implementing the periodic environment and safety inspection jointly between the labor and the management for finding out all the risk factors and improving the working environment. We will prevent an accident and make the best efforts in order for the employees to work under the safe environment by inspecting the completed contents of the safety & health activities within the workplace and improving any insufficient matters as safety measures.

Win-win Collaboration ProgramTaihan established a ‘Win-win collaboration program for health and safety’ in consort with in-house cooperating companies. It also extended its support, in both human and physical resources - for risk assessments and technical assistance at cooperating companies to improve their health and safety conditions. Moreover, Taihan is working extremely hard to create a win-win environment by helping cooperating companies prevent industrial accidents, and improve their management of health and safety issues.

Improvement of Health of EmployeesWe conduct comprehensive health screenings and regular survey of the harmful factors for the continued health care of our employees. Employees whose findings are abnormal receive regular examinations and treatment in order to prevent the aggravation of the disease. In addition, the health of our employees is protected by the regular inspections of their working environment, as well as through health care, health promotion, and industrial hygiene management.

We pursue the eco-friendly and human respecting corporate activities through the resource management as well as achieving the customer satisfaction by providing flawless products and service in order for the customers to use them without fear.

We drive for safety and health activities for happy life.

- Promotion of Improvement Activities for Developing and Producing Safe Products- Setting and Operating Quantified Goals- Observing the Relevant Laws and Regulations and Other Requirements- Continuous Improvement and Promotion of Contamination Preventive Activities- Recycling and Weight-Reducing of Resources

Vision

Goal

Promotional Direction

OHSAS 18001 Certificates

Risk Control and Prevention

·Regulation control·Risk evalution and control·Capability management·Information and communication·Process management

·Evalution and improvement·Achievement management·Follow-up management·Partners management

Planning Practice Evaluation

ESH Integrated Management System

Risk Reducing Activities

Improvement

Removing and Improving Risk Factors

200 cases

210 cases

105%

Removal and Improvement of Factors

of Safety Accidents caused by unsafe

actions or conditions

Reference

Target to Control

Results in 2018

Achievement Rate (%)

Remarks

Enhancement of Emergency Response AbilityAll employees receive regular training in order to prevent emergencies, such as accidents due to natural disasters, fire, and explosion, and to minimize damages in the case of their occurrence as well as to eliminate the cause as soon as possible. Taking proactive action safeguards the safety of the employees and their workplace.

TAIHAN ANNUAL REPORT 2018 32 33

Environmental Management

To ensure the sustainable growth of both humankind and nature, Taihan has established a mid- and long-term roadmap for environmental preservation and an action plan for eco-friendly management of the company. Specifically, it has set an in-house threshold for its emission of environmental pollutants, and has improved its capacity to recycle resources and manage hazardous chemicals to minimize the load it imposes on the environment. Additionally, Taihan has been operating a well-organized certified Environment Management System (ISO-14001), and has formed a TFT to respond actively to climate change issues - energy saving, production of eco-friendly products, responding to climate policies, etc.

Eco-friendly ManagementOperating an Environment Management SystemTo attain the sustainable management of its businesses and legal management of the overall environment, Taihan has established its own environment, health, and safety policies, which it uses to govern its environmental policies in a well-organized and systematic manner. Each department is required to establish and execute environment, health, and safety goals, carry out environmental impact assessments, and improve environment-related facilities. The company also has an environment manager who inspects and confirms the execution of initiatives involving the environment. During the first half of 2018, Taihan renewed its ISO 14001 (Environment Management System) certification. It continues to operate and manage its Environment Management System by reviewing the company’s quarterly performance in environment, health, and safety issues, and by carrying out internal evaluations.

Improving Transparency for Corporate Environment InformationTaihan submits various reports regarding its performance in environmental management to competent authorities each year, and it also discloses relevant information on government websites in compliance with domestic/international requirements from the Ministry of Environment, NGOs, local residents as well as relevant legislations. More specifically, data on environmental management performance includes statistics on chemical substances, emission levels, waste product processing and handling results, water usage and wastewater treatment results, air pollutant emissions results, greenhouse gas emissions, etc. In particular, Taihan discloses environment-related information under the ‘Environmental Technology and Industry Support Act,’ to make information on its overall environmental management activities available for the public.

Recycling Waste as ResourcesTo make sure it disposes of all waste products lawfully, Taihan selects and evaluates authorized treatment companies for each item on an annual basis. On the basis of its evaluations, it enters into outsourcing contracts and carries out the entire waste treatment and disposal process transparently using the Allbaro waste product processing system governed by the Ministry of Environment. Moreover, it prepares reports on the hazardousness of designated waste product items that are classified as toxic waste to ensure safe storage, transportation, and disposal of those items.

In line with a variety of resource recycling policies set forth by the government, Taihan recycled more than 80% of all waste products generated at its Dangjin plant in 2018. To dispose the remaining non-recyclable waste, the company used safe measures available under the law (incineration, landfill). Given the increase in production volume, the volume of waste continues to increase. However, Taihan continues to maintain a keen cooperative relationship with the government in terms of its waste product reduction policies as evidenced by the ‘MOU for the pilot project to reduce waste products’ the company signed with the Ministry of Environment.

IS0 14001 Certificates

Used Water Volume, Outsourced Wastewater Treatment Volume

Sort 2016 2017 2018

Used Water Volume (m3) 115,674 132,781 139,271

352 487 366Outsourced Wastewater Treatment Volume (m3)

Wastewater Zero Discharge Treatment Facility Eco Marsh Management

Automated Sewage Processing System

Minimizing Water PollutantsTaihan operates a high-efficiency wastewater treatment system that prevents it from wasting any water resources, and helps it minimize water pollutants. In fact, more than 90% of the water used at production sites is used as coolant. The company treats wastewater through a treatment facility and then recycles it 100%. For wastewater that can no longer be recycled, Taihan commissions an external service provider that specializes in wastewater treatment. In 2018, the company reduced the volume of outsourced wastewater treatment by 25% thanks to improvements made to production processes and working conditions.

With regards to sewage produced at its Dangjin plant, the company uses an automated system for its sewage treatment facility to minimize the impact on the water quality of Seokmunho Lake near the plant. At the point of discharge into the lake, all sewage fall within legally permissible emission concentration levels. Meanwhile, rainwater is treated through five runoff treatment facilities and two water retention basins. The surface sections of the water retention basins are used as green spaces. Taihan has turned specific sections into an “eco marsh,” which the company manages in an eco-friendly way.

Minimizing the Impact on the EnvironmentMinimizing Air PollutantsAir pollutants produced during production processes at Taihan include six different types of substances, including dust, sulfur oxides, nitrogen oxides, etc. To mitigate the impact of air pollutants and the odor they produce, the company uses filter dust collectors, absorbents, and other preventive facilities. Overall, it manages to maintain air pollutant emissions within 20% of the permissible emissions threshold. In addition, Taihan carries out quarterly in-depth inspections on facilities that emit air pollutants. During these inspections, the company engages in a variety of activities to reduce emissions - it replaces activated carbon filters/dust collection filters, and improves facilities that help prevent the deterioration of equipment. Meanwhile, in terms of fuel for two of its boilers used to supply steam and for the heat source used during the production of copper wire, Taihan uses LNG, a clean fuel, to minimize its emission of air pollutants.

TAIHAN ANNUAL REPORT 2018 34 35

Current Waste Product Handling Status

Sort 2015 2016 2017 2018

Landfill (ton) 22 25 - -

604

2,789

2,162

15,645

623

2,794

2,146

14,668

979

2,928

1,949

21,654

1,167

3,554

2,387

22,829

Incineration (ton)

Total (ton)

Recycling (ton)

Production Volume (ton)

*Production volume: Based on extra high voltage cables, that is, the main product for Taihan

(Unit: ton)

Development of Chemical Management Programs

In particular, Taihan has been a staunch advocate of fulfilling its responsibilities as a producer. Based on its ‘Agreement on the voluntary recovery and recycling of plastic waste products’ signed in 2008 with the Ministry of Environment, the company tries to recycle as much cable materials it supplies to the domestic market. As per the ‘Agreement on the voluntary recovery and recycling of plastic waste products,’ the Ministry of Environment sets recycling targets for discarded power and telecommunication cables, which Taihan works towards achieving. More specifically, the company works together with the Korea Electric Wire Industry Cooperative as well as other wire/cable companies to provide financial and technical support to recycling companies or to find new recycling companies.

Recovery and Recycling Performance for Plastic Contained in Discarded Power/Telecommunication Cables in Korea

Sort 2016 2017 2018

Used volume of plastic in power and telecommunication cables 15,390 16,642 13,852

2,662 (17.3%) 2,742 (16.48%) 2,534(E) (18.3%)Recycled volume of plastics (recycling rate, %)

Managing Hazardous ChemicalsTaihan continues to maintain its management policy for hazardous materials to ensure the safety of its places of business and the surrounding region. New materials are tested in advance with experts in the environment, health, and safety fields to make sure they are safe to use on-site. All materials are handled lawfully in compliance with the Act on Registration, Evaluation, etc. of Chemicals, the Chemical Control Act, and the Occupational Safety and Health Act. Taihan also develops in-house chemical management programs to help manage its inventory of chemicals systematically and accurately. The company even has a TFT to help minimize the amount of hazardous chemicals it has to handle.

In 2017, the Korea Gas Safety Corporation carried out an inspection of Taihan’s facilities dedicated to handling hazardous chemicals. Results indicated that all the company satisfied all legal requirements. In 2018, Taihan carried out an ‘External Impact Assessment,’ which involves evaluating the impact on the area near the place of business if a chemical accident occurs, to establish safety countermeasures in the event of an accident. On the basis of national policies on chemicals formulated around the ‘Act on Registration, Evaluation, etc. of Chemicals,’ and the ‘Chemical Control Act,’ Taihan surveys its chemical emissions on an annual basis, carries out statistical surveys, reports imported chemicals and its handling of hazardous chemicals to the Ministry of Environment. As for methylethylketone (MEK), the company acquired a business license from the Ministry of Environment in 2018 that allows it to handle MEK legally.

Managing Greenhouse Gas InventoryTo help manage its greenhouse gas emissions, Taihan been using a greenhouse gas inventory system since 2007. Each year, it prepares an overall plan and emissions statement to monitor its greenhouse gas emissions. Moreover, it attempts to improve transparency and expert handling of issues involving greenhouse gas emissions by commissioning inspections to a third-party inspection organization.

Managing Risks Associated with the Emissions Trading SchemeTaihan has been participating in the greenhouse gas emissions scheme since 2015. Throughout the first leg of the initiative (2015~2017), its emissions fell within the allocated greenhouse gas quota for each of the three years. For the second leg of the initiative (2018~2020), Taihan has been allocated 90% of the greenhouse gas volume allocated for the first leg. In 2017, the government acknowledged the company’s outstanding past performance in reducing greenhouse gas emissions, handing out an additional 23,139t-CO2. This helped Taihan mitigate the risk of having an insufficient greenhouse gas emission quota over the course of the second leg of the trading scheme. Each year, Taihan engages in managerial activities to establish strategies aimed at purchasing emission trading rights, and decide whether or not to invest in equipment that can help reduce energy consumption in order to prepare mid- and long-term against the risk of emitting more greenhouse gas than its allotted quota.

Activities of Saving Energy & Reducing GHG EmissionsCentral Power Control System using an IFSAn IFS (Intelligent Factory System) was completely constructed in 2012 as an intelligent factory system providing with pleasant work and business environments as well as energy saving. Taihan minimizes the consumption of necessary cooling & heating energies and electrical power by using a high efficiency energy system, that is, an IFS including automated equipment and power monitoring telemetry, etc.

- Automatic Office Light On/Off System: 12:00 ~13:00 and 18:00 ~ 19:00- Central Cooling & Heating Control: Summer: - 26˚C, Winter: - 20˚C

Replacement with Clean FuelTaihan is making the efforts to minimize the generated green gas and air pollutants by replacing the existing B/C Boilers (Efficiency 87%) with Fire-tube LNG Boilers (Efficiency: 92%).

Introduction of High Efficiency Facilities Each Plant replaced the Piston-type compressors (850HP x3) with Turbo-type & Screw-type ones.

Installation of High Efficiency LED LampsTaihan reduced the power consumption by 4,226,096kWh per year by replacing 1,848EA of Metal Lamps and 4,827EA of Fluorescent Lamps with High Efficiency LED Lamps in 2016.

Climate Change Response To respond actively against climate change issues and create new opportunities, Taihan created its Climate Change Response TFT in March 2009, which still exists today. In compliance with the national roadmap for the reduction of greenhouse gases, the company’s goal by 2030 is to reduce greenhouse gases produced under ‘Business As Usual (BAU)’ conditions by 37%. To ensure the company can meet its target, Taihan sets carbon reduction targets and action plans each year. Moreover, the company continues to work diligently with energy diagnosis initiatives, use of eco-friendly products, and installation of smart factory systems to produce tangible results pertaining to climate change.

·�Establish plans to reduce energy consumption

·�Diagnose and monitor energy usage·�Increase the use of new renewable

energy

·�Develop low-carbon products·�Create “Green Factories”·�Recognize the seriousness of

climate change

·�Respond to national climate change policies

·�Manage the emission trading scheme

·�Improve greenhouse gas inventory

Climate Change Response Organization

Climate Change

Climate Change Response Secretariat

Energy Reduction Team Low-Carbon Product Production Team

Climate Change Policy Response Team

57,90

0

50,14

042

,280

38,71

037

,529

38,17

736

,851

3976

1

60,58

140

,491

2015 20162014 2017 2018

Allocation of Greenhouse Gas Emission

Greenhouse Gas Emission

37

Independent Auditors' Report

Separate Statements of Financial Position

Separate Statements of Comprehensive Income

Separate Statements of Changes in Shareholders' Equity

Separate Statements of Cash Flows

TAIHAN ANNUAL REPORT 2018 36

FINA

NCIA

L SECTIO

N

Independent Auditors' Report

The Shareholders and Board of DirectorsTaihan Electric Wire Co., Ltd.

OpinionWe have audited the accompanying separate financial statements of Taihan Electric Wire Co., Ltd. (the “Company”), which comprise the separate statement of financial position as of December 31, 2018, and the separate statements of comprehensive income, separate statements of changes in equity and separate statements of cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying separate financial statements present fairly, in all material respects the financial position of the Company as of December 31, 2018 and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“KIFRS”)

Basis of opinionWe conducted our audit in accordance with Korean Auditing Standards (“KGAAS”). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion

Emphasis of matterIt’s discussed in Note 2.3 to the financial statement, the company has applied early adoption of the KIFRS 1116. The company shall continue to apply that standard for annual periods beginning on after 1 January 2019. Our opinion is not modified with respect to that matter.

Other MatterThe financial statements as of December 31, 2017 were audited by the other auditor, and this auditor's audit report of 22 March 2018 present fairy. On the other hand, the financial statements in which the auditor presented fairly are before reflecting the adjustments described in Note 5 to the financial statements, and the financial statements in which the comparative financial statements as of 31 December 2017 reflect those adjustments.

We also conducted an audit of the adjustments applied to amend the 2017 financial statements, as described in Note 5 on the financial statements. In our opinion, those adjustments have been properly and correctly applied.

Except for the above adjustments, we do not express an opinion or any other form of assurance for the 2017 financial statements.

TAIHAN ANNUAL REPORT 2018 38 39

Auditor’s responsibilities for the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KGAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with KGAAS, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

·�Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

·�Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

·��Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

·��Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

·�Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The partner in charge of the audit resulting in this independent auditor’s report is Hee Kyun Shin

March 21, 2019

This audit report is effective as of March 21, 2019, the independent auditors' report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying financial statements and may result in modifications to this report.

Responsibilities of management and those charged with governance for the financial statementsManagement is responsible for the preparation and fair presentation of the financial statements in accordance with KIFRS and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

TAIHAN ANNUAL REPORT 2018 40 41

Thousands of Korean Won

Notes 2018 2017

Liabilities and Shareholders' equity

Current liabilities :

Trade accounts payable 6, 7, 18, 40 135,719,588 136,798,119

Short-term borrowings 6, 7, 19, 40 119,893,835 128,218,427

Current-portion of long-term borrowings 6, 7, 19, 40 9,736,926 8,500,000

Other current financial liabilities 6, 7, 15, 18, 40 46,548,133 41,584,837

Current provision 21 3,905,986 5,048,380

Other current liabilities 22 14,741,900 50,452,869

Total current liabilities 330,546,368 370,602,632

Non-current liabilities :

Long-term borrowings 6, 7, 19, 40 450,716,109 445,900,866

Other financial liabilities 20 26,487,310 357,939

Defined benefit obligations 6, 7, 15, 18, 40 2,521,169 23,206,537

Non-current provision 21 2,423,553 2,451,235

Total non-current liabilities 482,148,141 471,916,577

Total liabilities 812,694,509 842,519,209

Shareholders' equity :

Capital stock 23 428,236,505 428,236,505

Other contributed capital 24 (38,367,248) (43,196,395)

Other components of equity 25 (98,944,478) 12,291,005

Accumulated deficit 26 67,211,314 (33,037,478)

Total shareholders' equity 358,136,093 364,293,637

Total liabilities and shareholders' equity 1,170,830,602 1,206,812,846

Separate Statements of Financial Position

Thousands of Korean Won

Notes 2018 2017

Assets

Current assets :Cash and cash equivalents 6, 7, 8 102,423,109 93,190,488

Short-term financial instruments 6, 7, 10 - -

Current available-for-sale financial assets 6, 7, 10 - 1,737,201

Financial assets at fair value through profit or loss 6, 7, 10 1,549,600

Financial assets at amortized cost 6, 7, 10 1

Trade accounts receivable 6, 7, 9 257,536,623 273,956,713

Short-term loans 6, 7, 9 3,280,597 3,466,443

Other current financial assets 6, 7, 9, 15 5,030,628 14,766,204

Inventories 11 174,139,098 171,571,640

Income tax receivable 34 452,145 955,630

Other current assets 12 28,066,631 26,056,718

Non-current assets held for sale - -

Total current assets 572,478,432 585,701,037

Non-current assets :

Available-for-sale financial assets 6, 7, 10 - 45,402,974

Financial assets at amortized cost 6, 7, 10 2,382,513

Financial assets at fair value through OCI 6, 7, 10 56,358

Financial assets at fair value through profit or loss 6, 7, 10 34,901,908

Long-term loans 6, 7, 9 4,790 5,161,622

Investments in subsidiaries, associates and joint ventures 13 32,997,495 34,875,595

Other financial assets 6, 7, 9, 15 3,341,210 2,598,728

Property, plant and equipment 14, 39 452,618,285 464,005,495

Intangible assets 16, 39 11,472,113 13,735,128

Investment property 17 2,575,958 644,718

Deferred tax assets 34 58,001,540 54,687,549

Total other non-current assets 598,352,170 621,111,809

Total assets 1,170,830,602 1,206,812,846

For the Years Ended December 31, 2018 and 2017

TAIHAN ANNUAL REPORT 2018 42 43

Separate Statements of Changes in Shareholders' Equity

Thousands of Korean Won

Capital stock

Other contributed

capital

Other components of

equity

Accmulated deficit Total

Balance at January 1, 2017 428,236,505 (49,503,639) 8,439,926 (7,807,916) 379,364,876

Prior period error corrections (10,063,100) (10,063,100)

Balance at January 1, 2017 (restated) 428,236,505 (49,503,639) 8,439,926 (17,871,016) 369,301,776

Net income - - - (14,106,432) (14,106,432)

Loss on valuation of AFS - - (72,376) - (72,376)

Acturial losss (Re-measurements gain (loss) on the net defined benefit plans) - - - (1,060,030) (1,060,030)

Gain on valuation of financial derivatives - - 3,923,455 - 3,923,455

Deficit recovery - 0 - - -

Change due to merger 0 0 - - 0

Stock option (Share-based Payment) - 6,307,244 - - 6,307,244

Acquisition(Disposal) of treasury stocks - 0 - - 0

Others - 0 - - 0

Balance at December 31, 2017 428,236,505 (43,196,395) 12,291,005 (33,037,478) 364,293,637

Balance at January 1, 2018 428,236,505 (43,196,395) 12,291,005 (33,037,478) 364,293,637

Effect of adoption of new accounting standards (100,200,820) 95,306,631 (4,894,189)

Net income - - - 5,657,103 5,657,103

Loss on valuation of AFS - - 0 - 0

Acturial losss (Re-measurements gain (loss) on the net defined benefit plans) - - - (714,942) (714,942)

Gain on valuation of financial derivatives - - (11,034,663) - (11,034,663)

Deficit recovery - - - - -

Change due to merger - - - - -

Stock option (Share-based Payment) - 4,829,148 - - 4,829,148

Exercise of Share-based Payment (2,561,916) (2,561,916)

Acquisition(Disposal) of treasury stocks - 275,238 - - 275,238

Gain on disposal of Treasury shares 2,286,677 2,286,677

Others - - - - -

Balance at December 31, 2018 428,236,505 (38,367,248) (98,944,478) 67,211,314 358,136,093

For the Years Ended December 31, 2018 and 2017

Separate Statements of Comprehensive Income

Thousands of Korean Won

Notes 2018 2017

Sales 27, 28, 39 1,528,860,215 1,465,408,989

Cost of sales 27, 28, 33, 39 1,424,837,647 1,359,122,347

Gross profit 104,022,568 106,286,642

Selling and administrative expenses 29, 33 59,349,931 59,934,295

Operating income 44,672,637 46,352,347

Non-operating income and expense:

Financial income 6, 32 15,791,019 22,209,752

Financial expense 6, 32 (52,484,832) (73,984,319)

Other non-operating income 30 16,187,961 24,643,952

Other non-operating expenses 30 (23,324,141) (33,358,164)

Loss on investment of subsidaries, associateds 31 4,880,823 30,000

(38,949,170) (60,458,779)

Net income (loss) before income tax 5,723,467 (14,106,432)

Income tax expense 34 66,364 0

Net income (loss) 5,657,103 (14,106,432)

Other comprehensive income (loss):

Items not to be reclassified subsequently to profit or loss:

Acturial gain (loss) on defined benefit obligations 20 (714,942) (1,060,029)

Gain on valuation of financial derivatives 9, 25 (11,034,663)

Items to be reclassified subsequently to profit or loss:

Gain (loss) on valuation of AFS financial assets 10 0 (72,376)

Gain on valuation of financial derivatives 9, 25 0 3,923,455

Comprehensive income (loss) (6,092,502) (11,315,382)

Thousands of Korean Won

Earnings (loss) per share :Basic earnings (loss) per share 7 (17)

For the Years Ended December 31, 2018 and 2017

TAIHAN ANNUAL REPORT 2018 44 45

Thousands of Korean Won

Notes 2018 2017

Financing activities :

Proceeds from short-term borrowings 560,892,054 503,839,920

Proceeds from long-term borrowings 12,380,000 37,140,000

Increase in other financial liabilities 45,040 -

Repayment of short-term borrowings (568,628,242) (521,189,404)

Repayment of curent portion of long-term borrowings (8,500,000) (45,059,926)

Repayment of long-term borrowings (16,912,448) (15,113,068)

Decrease in other financial liabilities (50,120)

Net cash flows used in financing activities (20,773,716) (40,382,478)

Net increase in cash and cash equivalents 8,019,422 (46,902,800)

Cash and cash equivalents at January 1

Cash and cash equivalents at beginning of the year 34 93,190,488 142,246,646

Effect of exchange rate fluctuations on cash and cash equivalents 1,213,199 (2,153,358)

Cash and cash equivalents at December 31 34 102,423,109 93,190,488

Separate Statements of Cash FlowsFor the Years Ended December 31, 2018 and 2017

Thousands of Korean Won

Notes 2018 2017

Operating activities :

Profit(Loss) for the year 5,657,103 (14,106,432)

Adjustments to reconcile profit before tax to net cash flows 36 70,378,609 97,636,553

Working capital adjustments: 36 (44,183,600) (40,499,284)

Interest received 2,047,174 4,017,563

Interest paid (19,141,083) (15,110,367)

Dividends received 160 245,028

Income taxes refund (paid) 437,120 (479,420)

Net cash provided by (used in) operating activities 15,195,483 31,703,641

Investing activities :

Decrease in short-term financial instruments - 3,246,561

Decrease in short-term loans 1,024,537 626,057

Decrease in long-term loans 6,502,160 3,200

Decrease in available-for-sale financial assets - 1,498,253

Decrease in fair value through profit or loss 11,021,569 -

Decrease in Investments of Subsidary 4,333,156 -

Decrease in other financial assets 500,274 603,441

Proceeds from sale of property, plant and equipment 70,548 588,041

Proceeds from sale of intangible assets 20,000 -

Increase in short-term financial instruments - (2,839,700)

Increase in short-term loans (2,595,688) (468,412)

Increase in long-term loans (4,780) 0

Increase in available-for-sale financial assets - (22,329,216)

Increase in fair value through profit or loss (192,201) 0

Increase in investments of Subsidary - (2,870,820)

Increase of other financial assets (496,223) (571,780)

Acquisition of property, plant and equipment (6,585,697) (15,709,588)

Net cash provided by (used in) operating activities 13,597,655 (38,223,963)