the way to a global leading company company profile / financial highlights performance highlights...

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THE WAY TO A GLOBAL LEADING

COMPANYTAIHAN Annual Report 2017

Contents

Company Profile / Financial Highlights

Performance Highlights

CEO Message / Vision

History / Organizational Chart

Global Network

04

06

08

10

12

Intro

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

38

40

41

42

Financial Section

EHV Cable

Industrial Cable

Cable Accessory

Communication Cable

Base Metal

Engineering & Construction

R&D

15

17

19

20

21

22

23

Review of Operations

Transparent Management

Ethical Management

People

Social Responsibility

Safety & Health Management

Environmental Management

25

26

27

28

30

32

Sustainable Management

The Way to a Global Leading Company

Taihan Annual Report 2017 01. Intro 03. Sustainable management02. Review of operations 04. Financial section

4 5

TAIHAN, THE POWER LIGHTING UP THE WORLD

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.

Financial Highlights

2015 2016 2017

Sales 1,360,383 1,201,174 1,465,409

Gross Profits 118,929 113,449 107,177

Operating Income 36,883 43,716 47,242

EBITDA 60,553 67,174 69,941

Income Before Tax (53,029) 13,023 (13,072)

Net Income (57,211) 10,065 (13,072)

For the years ended

2015 2016 2017

Current Assets 514,637 647,630 586,008

Property, Plant and Equipments 485,252 480,392 651,429

Total Assets 1,194,839 1,273,712 1,237,437

interest bearing Debts 578,433 609,743 582,619

Net Debts 536,457 467,497 489,429

Total Liablities 852,800 894,347 865,674

Capital Stock 419,545 428,237 428,237

Capital Surplus 404,803 (49,504) (43,196)

Retained Earning (486,515) (7,808) (21,940)

Capital Adjustment 4,206 8,440 8,662

Total Shareholder's Equity 342,039 379,365 371,763

As of the years ended

Company Profile As of December 2017

Taihan Electric Wire Co., Ltd.

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

Hana BankDecember 823

1955. 02. 21

EY Han Young

In review

1968. 12. 27

500 KRW

Jin-yong Choi

Power Cables, Communication Cables, Base Metal, etc.

Design, Manufacturing and Installation in Electric and Communication Cable System

Company Name

Address

Main BankFiscal Year End Employees

Establishment

External Auditor

Auditors Opinion

IPO date

Face Value

CEO

Business Areas

Products and Services

856,473,009 Shares

No. of Shares

4 5


6 7

We Connect the Future Family FriendlyNew CI & New Talent

Declaration of New CI & New Talent, Delivering the Will for Continuous Growth

On September 22, 2017, Taihan made public its new CI and new desired talent as it reaffirmed its resolve to become a 100-year-old corporation. This was the first time that its CI was changed since the establishment of the company in 1955. The new CI continues to use the red and blue colors and delivers the meaning of change and renovation as the upper case letters have been transformed into lower case letters. Particularly, the “i” embodies the tower of the Dangjin Plant, expressing the potential and capability.In addition, Taihan declared “Open mind, Passion, and Professional” as its desired talent, renewing its will and driving force to become a 100-year-old corporation.The declaration ceremony of the new CI was held with all the executives and staff, as well as guests, and at the end of the ceremony, there were several special performances in celebration of the milestone to promote solidarity. Taihan will pursue a better future based on the new CI and new talent.

Continuous Growth of Sales and Operating Profits & Finance Structure Improvement

As of 2017, Taihan accomplished sales of US$14.8 billion and operating profits of US$51.1 million on the consolidated financial statement, witnessing the continuous growth of sales and operating profits. Compared to 2016, sales have increased by 15.5% and operating profits by 12.4%. The operating profits have particularly improved since 2014 despite a worsening market environment, that is, the recession of the consumer goods industries including the construction industry and contraction of the Middle Eastern market, thus further growth is expectable.Unfortunately, the net loss during the term has increased to US$45.2 million, but it is a one-off loss that was incurred during the course of dealing with non-performing subsidiaries and non-operating assets, unrelated to profitability or funds flow. Solving the contingent liabilities that have been caused by selling the non-performing subsidiaries and non-operating assets will form the foundation for Taihan to concentrate its core resources on its key industry, the cable industry.

Establishment of ‘Saudi Taihan’, Localization Starting in Earnest

In February 2017, Taihan established Saudi Taihan , a joint corporation for creating electric power equipment, in the capital city Riyadh, and started its localization in earnest. With the joint investment of the Mohammed Al-Ojaimi Group, an electric power transmission and equipment company, Saudi Taihan , as a HV equipment production corporation, will target the HV equipment market among GCC nations that have been expanding recently. With this, Taihan secured a production corporation at another major export base, along with the domestic Dangjin Plant, M-Tec in the Republic of South Africa, and Taihan Vina in Vietnam, founding a bridgehead for expanding the market beyond the Middle East to Africa and Europe.

Boosting Global Competitiveness by Expanding Facilities of Overseas Production Corporation and Branch Offices

Taihan has expanded the facilities for the production of high-profit products, including HV cable and ACCC (dual capacity transmission), in Taihan Vina in Vietnam, through dedicated investments. Recently, Vietnam is rising as one of the major markets of electric power, as it is seeing a rapid increase of the demand of electric power and communication networks, and is geographically close to major markets of electric power such as Australia, India, and the Middle East. Through the expansion of the production facilities in Taihan Vina, Taihan has taken a step forward toward boosting its competitiveness in the Southeast Asian market and acceleration of its business. In addition, Taihan founded branch offices in the United Kingdom in April and in the eastern part of the United States in September 2017, further strengthening the global sales network. This is part of the strategy for expanding the target market to Europe and North America, beyond its major trading partner, the Middle East, in order to acquire better competence for winning contracts. In 2018, Taihan will implement aggressive marketing initiatives to enter the European market and incessantly expand its competitiveness in the U. S. market.

Contracting More Large-scale Projects and Strategic Products

In early 2017, Taihan successfully contracted a massive project in the overseas market. Despite unrests and a decrease in the budget due to low oil prices, Taihan secured the EHV cable project worth US$62 million with Saudi Arabia and Kuwait, its regular contractors. In June, it won a contract in Singapore for the EHV underground cable network worth US$78 million, and also signed contracts in other Asian markets including India, Indonesia, and Malaysia. Winning another contract in the difficult Singaporean market, following a contract in 2016 for a large-scale project worth US$83 million, proves the high technology and competitiveness of Taihan in the global market.Taihan has won several contracts for high-value-added strategic products such as ACCC (dual capacity transmission) and smooth sheath cable, diversifying its portfolio and expanding new markets abroad. Further, a supply contract for submarine medium voltage power cables related to the offshore wind power industry, the first of its kind in Korea, has raised the possibility for expansion of the submarine cable sector.

Declaration of New Ethics Charter and Strengthening Encouraging Management

In April 2017, Taihan declared a new ethics charter and showed its willingness for ethical management. Ethical management refers to corporate management which encompasses not only the legal and economic responsibilities related to a business but the charitable responsibilities including donation and voluntary work that are not related to a business. Taihan will keep up with ethical management as a socially responsible corporation that contributes to the nation and the communities.Additionally, Taihan has largely implemented the Encouraging Management that it started in 2016 for adopting a positive culture in the organization. Encouraging Management means assisting employees to work in a lively atmosphere by making the environment more lively and improving the work efficiency. In 2017, several programs including corporate education by department and position and real talk for all employees were actively carried out.

Awarded ‘Family Friendly Certification’, the First as Domestic Major Cable Company

In December 2017, Taihan was awarded with the ‘Family Friendly Certification’ from the Ministry of Gender Equality and Family, for the first time as a major cable company nationwide. Under the policy of Family Friendly Certification, companies which can be a model of running family-friendly programs, such as maternity leave and family-invitation events, are selected and given certification; companies that have received the ‘Family Friendly Certification’ will receive the benefit of added points when bidding for public projects and also exert a positive effect regarding the promotion of their corporate image. Taihan has strived for the improvement of the corporate culture for making the workplace comfortable, and it will continue making the efforts for the well-being of its employees as a family-friendly company.

Performance Highlights


8 9

Choi, Jin-yong CEO of Taihan

Last year, Taihan realized sustained growth leading to become one of the global top 3 cable companies, through financial, operational, and systematic renovation. Against this backdrop, Taihan will accelerate the growth this year by pursuing a rise in sales and profits, human-centered management, and management preparing for the future.

We Connect the FutureTo a Better Future

Target 2020

Dear customers and shareholders, and all stakeholders,

I’m profoundly grateful for your unwavering interest and support for Taihan.

Last year, Taihan set “management for continuous growth” as the working principle and made an incessant effort to boost the growth. Under the banner of “quality as survival,” the management and workers cooperated and realized the “completely perfect quality,” driving forth to win contracts of strategic products. We have established ‘Saudi Taihan ,’ the first production corporation of HV electric power in Saudi Arabia, and founded new branch offices in the United Kingdom and the eastern part of the United States, setting the groundwork for global growth.

Additionally, Taihan has transformed its CI and set new talent for the company in order to establish a positive corporate culture and prepare the foundation to become a 100-year-old corporation. Selling non-performing subsidiaries and non-operating assets allowed us to lower the financial risks and focus on our competence in the cable business, which is altogether a great attainment.

Thanks to these diverse efforts, Taihan accomplished sales of US$14.8 billion and operating profits of US$51.1 million on the consolidated financial statement, witnessing continuous growth last year. Compared to 2016, sales have increased by 15.5% and operating profits by 12.4%. Unfortunately, the net loss during the term has increased to some extent. It is a one-off loss that was incurred during the course of selling non-performing subsidiaries and non-operating assets, unrelated to profitability or funds flow. It is expectable that these actions will have a positive impact on the improvement of the industrial structure of the company.

Dear customers and shareholders, and all stakeholders,

If 2017 was the year for “boosting the growth,” 2018 will be the year for “accelerating the growth.” Taihan will secure the competence for contracts by expanding the target market to Europe and North America, beyond the Middle East, our major trading partner, and strengthen the company’s basic ability by continuing management innovation in terms of product quality and prime costs. On the one hand, we will concentrate our R&D capability on the products of the next generation such as HVDC and submarine cable, and on the other hand, we will diversify our product portfolio by adding new businesses in the electric power industry, making elaborate preparations for future growth.

This year would be another year in which we are faced with an unfriendly environment in the cable market, with the recession of the consumer goods industry including the construction industry, highly protective trade taking place worldwide, and the shift of exchange rates that are difficult to forecast. However, Taihan is confident that it will achieve in the “continuous growth” of sales and profits with its constant strong will. Please keep an eye on us as our executives and employees in unison proceed forward to a “better future.”

Thank you.

PEOPLE

A People-centric CultureA people-centric corporate culture,

focusing on communications and mutual trust SOLUTION

Customer ValueCustomer satisfaction through technology and quality

FUTURE

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

Sales of

Business profits of

EBITDA of

2 trillion

100 billion

120 billion

(Unit: Korean won)

CEO Message

Vision


10 11

1990s~Enhancement of Product line of Cable & Cable Accessory1995 Developed 765kV ACSR. 1996 Obtained the ISO 9001 certification in electric cable accessory field. 1997 Expanded the entrance into overseas markets and won the 500 million

dollar export tower award.

2000s~Establishment of the Global Production Bases2000 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.

2010s~Completion of the Construction of Dangjin Plant & Leaping as a Global Leading Company2010 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 cable for train control signals transmission in

domestic. Developed the first slim-type UTP cable in domestic. 2014 Started to produce the ACCC type dual capacity transmission line. 2015 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'.

1960s~Localization of Products & Establishment of Business Basis 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 cable for the first time in South Korea.

1950sHistory Begins1955 Taihan was founded.1958 Started to produce PVC sheathed cable.

1970s~Modernization of Production Basis & Leading the Wire & Cable Technology1976 Started to produce 154kV OF cable for the first time in South Korea.1977 Developed optical communication cables for the first time in South Korea.

1980s~Full-scale Growth of Electric Wire & Cable Business1984 Completed the construction of optical communication cable factory and

started to produce 154kV XLPE cable.1987 Produced OPGWs and Developed 345kV OF cable & cable accessory.

The Board of Directors

CEO

EHV Cable Business Division

Overseas Branch Office

M-TEC

Taihan VinaLegal Unit

Legal Team

Internal Audit Unit

Internal Audit Team

Saudi Russia

UK Malaysia

Production Support Unit

Production Support Team

Plant Engineering Team

Production Planning Team

Research & Development Lab

Power Solution Research Team

Material Research Team

Human Resources & General Affairs Unit

Human Resources & General Affairs Team

Process Innovation Team

Public Relations Team

Procurement & Material Unit

Procurement Team

Trading Support Team

Finance & Strategic Planning Unit

Strategy & Management Team

Accounting Team

Finance Team

Affiliate Support Team

Sales Planning Unit

Sales Management Team

Global Business Team

Singapore Indonesia

Domestic Sales Team I

Domestic Sales Team II

Dubai

USAUSA-East

New Zealand

AustraliaUSA-West

Industrial Cable

Business Division

Domestic Sales Team I

Industrial Cable Overseas Sales Team

Domestic Sales Team II

Industrial Cable Production Team

Industrial Cable Technical Team

Bus DuctBusiness Team

Overseas Sales Team I

Overseas Sales Team III

Overseas Sales Team II

Global Infra Team

OverseasSales Dept.

Communication Sales Team

Communication Production Team

CommunicationTechnical Team

Infra BizCommunication Business Division

Base Metal Sales Team

Base Metal Production Team

Base Metal Business Division

Quality Management

Unit

EHV Accessory Sales Team

EHV Accessory Production Team

EHV Accessory Technical Team

EHV Accessory

& Construction

Division

Saudi-Taihan

EHV Construction Management Team

EHV Engineering Team

EHV Construction Team

EHV Engineering

& Construction

Division

Dubai Construction Office

EHV Cable Technical Team

EHV CableProduction Team

CableProduction

Dept.

Senior Executive Vice President Cost Innovation Unit

Quality Assurance Team

History Organizational Chart


12 13

Taihan is strengthening its global competitiveness in the Cable Production Area as its major business area based on 4 overseas subsidiaries and 12 overseas branches after having constructed the production bases in some emerging markets, such as, the Republic of South Africa and Vietnam, etc., starting with the world largest single plant for producing wire & cables, ‘Dangjin Plant’

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.taihancable.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

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 Arabian 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.

Global Network LA

New Jersey

Taihan USA

Subsidiary

Branch Office

M-TEC

Taihan Vina

UK

Abu Dhabi

New Zealand

Malaysia

Australia

Singapore

Indonesia

Saudi

Korea

Russia

Saudi Taihan

Dubai

01. Intro 03. Sustainable management02. Review of operations 04. Financial section

15

EHV Cable

AmericaNorth America is making an economic recovery and is anticipated to invest in infrastructure, which leads to the hope of gradually growing demand in the future, and Taihan has obtained remarkable results in the region. It contracted a 500kV Project, the first in North America, that was ordered by SCE, and successfully completed the project. Again, Taihan signed a SunZia 500kV Project, becoming the only domestic company that has contracted a 500kV project with the company in the U.S. It has also established a branch in the eastern part of the U. S., after founding its western branch, so as to enhance sales capacity and expand the market.

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.

AsiaTaihan has achieved remarkable results in Indonesia and Singapore.

In Indonesia, Taihan won a contract for a 500kv underground cable, the first for the nation. For the 500kV project that was ordered by PT. PLN (Indonesian state power corporation), Taihan, as a vendor of domestic EPC company LOTTE E&C, delivered materials for the plants and carried out the electrical work. Taihan has also won an additional contract for a 500kV project from the

Indonesian EPC company PT. Central Multi. This consecutive contract for the 500kV project will be the foothold for future contracts of the Indonesian main 500kV power transmission project.

In Singapore, Taihan was given a contract for a 230kV project. It is a large-scale project ordered by the SP Group (Singaporean state power corporation) that includes tunnel and direct-buried sections. Although the SP Group demanded strict technological specifications and conditions, Taihan went through to win the contract based on long standing customer trust and technical skills. Taihan is consolidating its position in the market in Singapore by securing another large-scale order in 2017, following the 400kV tunnel project in the previous year. With these accomplishments, Taihan is set to maintain its position as a major corporation in 2018, winning more contracts in the future.

Europe Taihan is making efforts for entering and reinforcing its position in the European market, as demand is expected to increase in Europe due to the diversification of energy sources and the replacement of the old electric power network. In 2017, Taihan established a branch office in the United Kingdom and successfully completed the delivery of oil filled cable and completed the first 220kV XLPE cable construction project in Nordic region. It aims to consolidate the relationship with local corporations and to provide the best customized solutions that will lead to the increase of its market share.

Overseas Sales

EHV Cable

Industrial Cable

Communication Cable

Engineering & Construction

Cable Accessory

Base Metal

R&D

01Review of Operations

14

In 2017, the global economy recovered thanks to the economic recovery of advanced countries, growth of rising nations, and improvement of the raw materials market, showing a growth rate of 3.6%, which is 0.4% higher than that of the previous year. However, unstable factors are still looming such as the excessive liabilities of certain nations including

China, the low growth of advanced countries, the expansion of geopolitical risks of several nations, and the hardened protective trade between countries. Domestically, the growth rate stands at 3.1%, which is 0.3% higher than that of the previous year, mainly reflecting stability. With the establishment of the new government,

there were the expectations that led to construction and private investment contracts, but since late 2017, the prospect has turned gloomy, as the number of new building contracts hasrapidly declined and investment has shrunk following the increase of interest rates. Notwithstanding, there are some positive signs for the mid- and long-term road map of the electric cable

industry, such as the easing of geopolitical risks due to the progress of the relationship between South Korea and North Korea and the Super Grid in Northeast Asia.

In the midst of this trend of the global economy, Taihan won contracts amounting upwards of US$837.0 million in 2017. In Singapore, where large-scale SOC investment had taken place, a contract for HV long distance cable worth $186.2 million was made, and contracts worth more than US$121 million were won in Europe and the United States.

In contrast, orders from the Middle East including Saudi Arabia have greatly fallen due to low oil prices, and the result is rather unsatisfactory in Russia, another target market. Domestically, the growth has continued thanks to the demand of civil HV cable, including an order from KEPCO. After the takeover by IMM PE, Taihan has been upgraded its credit rating with

a stable financial structure and restored customer credibility, continually improving the profit ratio in the domestic MV cable market. It is also constantly expanding its size in the materials business.

As such, Taihan has been realizing continuous growth since 2015, and reviewing investments for developing new technologies including HVDC and expanding its product portfolio. In 2018, it is looking forward to positive outcomes in the European, North American and South American markets by exerting its best efforts for expanding existing businesses,

as it settles strategic cooperative relationships with overseas partners through joint ventures and establishes new vendors.


16 17

Middle East & AfricaCentering around Saudi Arabia, the cable market in the Middle East continued to face recession in 2017 due to low oil prices, but Taihan remains the top player of the 380kV project in Saudi Arabia, securing its position in the market. Additionally, it succeed in winning two 220kV projects from ADWEA (Abu Dhabi Water & Electricity Authority), where previously only Western European and Japanese companies have received orders, and obtained 400kV PQ certification of OETC (Oman Electricity Transmission Company) based on the long standing trust in quality.

In 2018, Taihan will lessen its dependency on Saudi Arabia by diversifying its target market, as it expands its entry into the markets of the UAE, Qatar and Oman, as well as advancing into the African market with its high-value-added products.

OceaniaThe privatization of Ausgrid, the largest electricity network in Australia, and the overall economic recession have led to the decrease of new projects, but Taihan has constantly carried out EHV projects through the alliance with EPC companies related to infrastructure development. It is also constantly growing and leading the market with the delivery of MV/LV cables through Taihan Vina, its subsidiary in Vietnam. In Oceania, the government-leading development of infrastructure makes the market prospect positive. Particularly, it has won new 110kV and 220kV projects in New Zealand and will focus on expanding the market for the future.

Governmental MarketAs of 2017, domestic sales in the government market of EHV cable accounted for 16% of the entire EHV cable sales of Taihan, and operating profits have highly improved thanks to the realization of sales for the 345kV project, an order which was placed in 2016. In 2018, there will be a 500kV project, of which Taihan is considering to bid on, and the HVDC submarine cable business in which the company is also considering to participate. The shift in the government policy, including that for the increase of new underground power cables, is expected to augment the demand of EHV cable, thus Taihan is set to solidify its position in the market by expanding the market share through aggressive marketing.

Civilian MarketAs part of the power demand supply program, Taihan 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 relating to PM10 and PM2.5 and the delay and decrease in investments resulted from the economic recession, but the market size is expected to expand to some extent. Notably in 2016, Taihan seamlessly delivered and constructed 345kV EHV cable to and for Samsung Electronics Hwaseong Plant, which led to additional supply contracts for building additional factories in Tangjeong for Samsung Display.

Domestic Sales

Industrial Cable

In 2017, Taihan continued supplying cable to the United States, Japan, Singapore, and Myanmar, its existing markets. Taihan Vina has reinforced the competitiveness within the market in the U.S. by meeting AEIC standards for XLPE and supplying MV cable of US$4.4 million to LADWP (Los Angeles Department of Water and Power). Taihan is attempting to enter new markets and diversify its market using the products of Taihan Vina, its Vietnamese subsidiary, and has continuously participated in the projects of which orders were placed by Myanmar, Sri Lanka, and Singapore, in order to increase the possibility of winning contracts amid heavy competition in Southeast Asia. In addition, it has accomplished the market expansion of ACCC products and their sales augmentation, confirming the potential of the market as it won an additional contract in the United States, one of its main strategic markets, of nearly US$3.7 million. Australia was another market where Taihan opened the opportunity for market expanding of ACCC products.

In 2018, Taihan Vina is planning to meet AEIC standards for EPR, and plans to target the MV cable market in Canada, win more contracts in New South Wales in Australia, and further advance into Oceania markets including New Zealand, Papua New Guinea, and Fiji. In addition, with the aim of expanding the overseas market and increasing sales for ACCC, Taihan will complete the development of AAAC and ACSS, diversifying the products according to the diversification of the customer’s demands. Further, Taihan is undertaking an ongoing promotion in other Asian and African regions for the expansion of the market, anticipating the advance into their markets in 2018.

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

Overseas Sales


18 19

Governmental MarketIn 2017, sales in the governmental market increased by 30% compared to that of the previous year. The sales reflect the expansion of KEPCO’s replacement of non-inflammable cable in the electric tunnel and the winning of a submarine cable contract for the southwest offshore wind power. For the submarine cable for offshore wind power, it is expected to see a market expansion thanks to the government policy of spreading renewable energy. Taihan has settled the mass production system of mv submarine power cables and is set to solidify its position in the offshore-wind submarine cable market. In 2018, the projects that will be ordered by KEPCO is expected to require more of the ACCC products. It seems that Taihan’s continuous suggestion of introducing ACCC has been reflected, and Taihan will keep up its aggressive marketing to expand the market share.

Civilian MarketAs a ripple effect of the past housing supply policy led by the government, sales have slightly increased and operating profits have moderately augmented with the boom in the IT industry leading to an increase in the sales proportion of the plant. In 2018, the demand for cables is expected to grow due to the government-leading renewable energy policy, and the upsweep of new investments in the chemical industry owing to the rise in oil prices will be followed by the increase of sales and operating profits.

Domestic Sales

Cable Accessory

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.

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.

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.


20 21

Communication Cable

Base Metal

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 UTP, FTP and STP Cables), RF Feeder Cables, Local Cables (F/S (Foam Skin) Cables) and Railway Special Cables (Railway Signaling Cables), etc. Taihan is 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.

In 2017, despite the global economic recession, diffusion of uncertainty, and domestic economic stagnation, sales amounted to US$59.3 million, which was an increase of around 26% compared to US$47 million in 2016, thanks to aggressive marketing, and operating profits totaled US$2.6 million, which has been continually increasing thanks to cost reductions and productivity improvement.

Taihan has over 100 stable customers, out of which include domestic communication companies like KT, SKT and LG U+, middle-and-large-scaled distribution enterprises, global communication companies, and SCS (Structured Cabling System) companies overseas. It is enhancing its competence to produce high-value-added products through new facility investment for data and RF cables, and it is proactively responding to future changes in the communication environment by discovering a new growth engine in communication solutions.

In 2017, 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 continually grown since 2014, but it saw a slight downturn as automobile and auto parts companies, its major buyers, have experienced poor profitability. 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.


22 23

Engineering & Construction R&D

The recent needs of customers for EHV systems are varying from design and construction to operation and maintenance, requiring an engineering service with diverse know-how including high technology, energy efficiency, and stability. Taihan reinforced its functions in the engineering field in 2017, 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, and New Zealand, increasing the awarded orders and operating profits in the E&C business by 187% in 2017 compared to those of the previous year. In 2018, as well, it will continue growing by entering new markets and expanding its product portfolio.

Low oil prices and global economic fluctuations that have lasted the past years have resulted in the reduction or 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. Notwithstanding the hostile environment and based on the long standing customer trust along with its technical knowhow, the E&C business of Taihan is generating growing sales in advanced countries such as the United States, Australia, and Singapore. 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. The E&C division of Taihan is taking the lead of the relevant technical and quality control capabilities and its abilities are widely acknowledged. It seems that it is not doubtful that the division will grow its sales volume and operating profits in 2017 since it has expanded the partnership with major clients continuously. Especially, its successful completion of projects in the North America region regarding to 500kV cables as a high value-added product and the execution of contract for a large scale of contract related to 400kV cables in Singapore are the evidences that its clients trust Taihan regarding to the business capabilities of this E&C division.

In 2017, it is expected that the sales volume and operating income will increase based on some new domestic demands for 345kV Cables, continuous domestic works for replacing OF Cables, many demands for replacing cables in advanced countries owing 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.

In 2017, the Technology Research Center of Taihan focused all of its capabilities on developing cable-related goods, the main products of the corporation.

First, the type test of 154kV EHV compact power cable using super smooth nano carbon material in semi-conductive layer was completed in 2017, which was the mid- and long-term national project. The nano carbon material in semi-conductive layer has a reduced thickness of more than 15%, making it easier to be installed and constructed, and thus it is expected to be commercialized after the pilot project of KEPCO. In addition, the Technology Research Center has completed the development of MV PP cable that fits the eco-friendly trend of electrical devices. The MV PP cable can carry more current compared to the existing XLPE, and it allows for a reduction of cost and CO2, making it the insulator material for the next generation.

Presently, it is developing 154kV PP cable for power transmission, which is set to be completed in 2020. It will be eco-friendly, have an advantage as for the manufacturing and transfer capability and be less influenced by a space charge, and is anticipated to be used not only for AC systems but also for DC systems.

As the importance of HVDC technology has recently emerged worldwide, the Technology Research Center is developing the HVDC 500kV MI-PPLP insulated cable and planning for completing, in a short period of time, its certification test, based on the company’s OF technology. In addition, it is concentrating the company’s ability toward the development of the HVDC 500kV XLPE insulated

cable, which has merits in terms of environmental protection and costs.

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 oil and efficient maintenance, and the “154kV self-healable nanocomposite insulator project,” which prevents the breakdown of cable connecting devices.

SCE 500kV Chino Hills, USA


25

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.


Ethical Management


Safety and Health Management

People


02Sustainable Management

24


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.

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 70.05% of share ratio as of the end of December 2015. 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.

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.

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.

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 of and overall information on 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.


26 27

Ethical Management People

Ethical Management 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.

Regular AuditTaihan implemented the regular audit in 2017 for checking the appropriateness of the execution of works and improved all the irrational and non-efficient works. Especially, Taihan comprehended the problems of the overseas subsidiary management by conducting the regular audit for the overseas subsidiary and implemented the job improvement works for protecting the corporate assets. Taihan is planning to implement some audits for enhancing the corporate values as well as preventing risks in advance by establishing some audit plants for enhancing the corporate values in the future, too.

Ethical Management EducationOur regular on-line education has instilled ethical awareness among our employees. In addition, our off-line education has informed of the overall aspects of ethical management and the anti-graft law, which was a main social issue, and its cases. Sending newsletters on ethical management is another way to form consensus among employees. We also plan to reinforce ethical management education in overseas subsidiaries.

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, Toward Better Future’.

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.

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.

Internal & External Publicity on Ethical ManagementTaihan has posted the up-to-date news and cases on ethical management on the homepage and the group ware. In addition, Taihan revised the Code of Ethics and Ethics Charter in order for the ethical management policies to be reflected on them. Taihan held the Proclamation Ceremony of the Ethics Charter and issued and disseminated the guide leaflets for ethical management in order that the revised the Code of Ethics and the Ethics Charter could be disseminated more affirmatively and be executed well inside the company. Taihan has encouraged the sense of ethics in the partner companies through various kinds of promotion channels in the ways of explaining the status of the ethical management by sending the cooperation form for ethical management, etc.

Building Sound Organizational CultureTaihan is implementing various kinds of member participation-oriented communication programs for building a sound organizational culture. The CEO of the Company shall make efforts for building the cooperative relationship with the executives and employees through the programs, such as, a ‘3355 Meeting’ seeking for the communication between departments including the ‘Dialogue with the CEO’ that the CEO explains the business status and goals of the company targeting the executives and employees directly. The labor and the management shall unite with each other based on the Win-Win Culture, too. The history that the labor and the management have cooperated without a conflict for the past 30 years is a source of pride of Taihan.

Corporate Code of Ethics

Specified and Codified Action Guidelines for Members

- Ethics Charter - Code of Ethics

Operation of Organization/System

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

- Ethical Management Office- Online Reporting System- Internal Audit

Formation of Consensus

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

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

Encouraging Management

Harmonizing Management Building the One-Mind Organization through the activation of the internal communication

Compensating ManagementSeeking for prides and fruits through the rewards and encouragement for each task

Achieving ManagementEnhancing the owner spirits and sense of responsibility through the endowment of authority necessary for achieving a goal


28 29


Taihan is continuously practicing the sharing activities for alienated neighbors under the slogan for Social Contribution saying, ‘Happy World made Together!’ from 1970s to the present. TAIHAN is operating the ‘One Service per One Person’ System under which every and 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.

Taihan will make efforts to fulfill its duties while considering its social responsibilities important without forgetting the fact that Taihan exists together with the efforts of stakeholders including the clients, partner companies, local communities and all of executives and employees, etc., in the future, too.

Employee volunteer activities: Filial Piety-Sharing Volunteer Work (5 times), Volunteer Work for Children (3 times), Sharing Marketplace (1 time), Kimchi-making Volunteer Work (1 time), Volunteer Local Environmental Remediation Work (2 times) and Volunteer Education at Junior Electricity Class (8 times)

Support for the Alienated Class of SocietyTaihan has implemented the Social Contribution Activities periodically once per month while cooperating with the local welfare facilities. The executives and employees visit a family having some problems in the aspects of safety and cleanness in the housing environment due to some kinds of disabilities and improve the environment pleasantly. And also, they provide the children of a low-income family which have lack of opportunities of the cultural experiences and education, etc., with the opportunities to conduct various kinds of experience activities. Moreover, they participate in various kinds of activities for the local communities, such as, Filial Piety Volunteer Works and Kimchi-making Events, etc., for the aged people within the community.

Taihan will practice the really meaningful sharing activities continuously by deeply thinking and practicing the methods for improving the quality of lives of the alienated neighbors in the vicinity of the company even in the future.

Cleaning Up the Local Environment In 2017, Taihan carried out two social contribution activities for the improvement of the local environment. It took the lead of cleaning up the local environment of the head office located in Anyang. Taihan is making a continuous effort to search for areas in the community where its helping hand is needed and to improve the local environment.

Junior Electricity ClassTaihan held the ‘Junior Electricity Class’ 8 times in total in 2017. This Event for teaching the elementary school students in Dangjin on the principles of electricity easily and interestingly is a kind of talent donation event for which many employees of Taihan participate in person and implement as teachers in order to arouse some curiosity and concerns about science for the students who are hard to obtain some scientific experiences compared to the students in a city.

Social Contributions in 2017

Volunteer activities of Executives and Employees

Motto Working together to make a happier world

Mission1 contribution per person

Working together to make a happier world

Art & Culture

·Developing art and culture·�Expanding the art and culture community

Welfare

A company coexisting with society·Volunteer activity of employees ·Corporate donations

Education

·Support for fostering talent· Support for advancing science & technology


30 31

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.

Operation of Safety & Health Management 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.

Holding a Meeting of the Industrial Safety & Health CommitteeTaihan has held the meeting of the Industrial Safety & Health Committee for enhancing the senses of safety & health of the executives and employees, creating the optimum working environment and observing the Industrial Safety & Health Act. The matters determined by the Committee shall be applied to a collective agreement and the Industrial Safety Regulations and the Labor and the Management shall observe those agreement and regulations.

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 Environment and Safety 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.

Type 2015 2016 2017Accident (number) 1 1 3

Our industrial accident rate (%) 0.14 0.13 0.45

Industry-wide accident rate (%) 0.32 0.29 0.21

Reference Removing and Improving Risk Factors

Target to Control 200 cases

Results in 2017 205 cases

Achievement Rate 102%

Remarks

Removal and Improvement of Factors of Safety Accidents caused by unsafe actions or conditions

Voluntary Safety ExaminationTaihan requests for a safety examination by an external agency in order to identify any potential harmful factors and come up with realistic corrective measures. It has been spotting problems by running a system for safety and hygiene and through onsite diagnosis (industrial, mechanical, electric, and chemical safety) and improving upon them. Our employees voluntarily work in creating a safety culture as they are greatly concerned about the safety issues and detecting risk factors.

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.

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.

Safety & Health Management Activities

Vision & Goal for Safety & Goals and Promotional Direction

VisionWe 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.

GoalWe drive for safety and health activities for happy life.

Promotional Direction

Risk Reducing Activities

Promotion of Improvement Activities for Developing and Producing Safe Products

Setting andOperating 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

ESH Integrated Management System

Environment and Safety Inspection

* Industrial accident rate (%) = the number of accidents / total number of people x 100

Emergency Evacuation DrilRisk 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 ImprovementPractice Evaluation


32 33


Taihan has acquired ISO-14001 certification, the international standard for environmental management, and managed its business in an eco-friendly way with its mid- and long-term road map for environmental protection. It will practice environmental management for both nature and people, by pursing a balance between corporate activity and protection of the environment.

Atmosphere QualityAround the place of business, Taihan has secured a buffer zone for planting trees for environmental purification. From 2017, it has built and been operating the prevention facilities with the budget of US$464 million for the reduction of dioxins, sulfur oxides, and nitrogen oxide. As for air pollutants emitted during the manufacturing process, Taihan regulates their amount under the legal limit, minimizing the environmental effect on neighboring housing complexes.

Water QualityIn order to treat rainy water for the establishment, Taihan is operating 5 Initial Rainy Water Treatment Facilities and 2 retention basins. The retention basin in the southern west is designed as an underground type, so the area on the top is used as a green belt and the other one in the southern east is created as an ecological wetland. Since wastewater is reused after being treated physically and chemically and only some part of it is treated by a waste treatment service company entrusted by Taihan, any wastewater is not discharged to the outside of the establishment.

WastesTaihan reused or recycled around 60% of the total waste generated from Dangjin Plant in 2017 and treated the rest safely by incinerating or burying them. It is in the trend that the quantity of waste generated also increases continuously compared to the quantity of products produced. Taihan is actively cooperating with the government in order that the government can prepare for some methods for saving wastes by entering into a contract for ‘Wastes Reduction Demonstration Project MOU’ with the Ministry of Environment.

In addition, wastewater is primarily processed in the sewage disposal facility in order to lessen its influence on the neighboring Seokmunho Lake, and the effluent is first used as water for landscaping in the marsh and discharged as little as possible.

* Maintenance Target Concentration: Taihan is implementing the activities for reducing air pollution continuously by using clean fuels as the heat sources that are fed into the production equipment, the facilities for preventing air pollutants (Installation of High Efficiency Bag Filters and Adsorption Facilities) and bad odor (including VOC) (installation of adsorption facilities), etc., while controlling the levels of SO2, NO2, Dust and Cu within the level of 10ppm, 10ppm, 10mg/Sm3 and 1mg/Sm3 respectively.

Category Dust NOX SOX HCL Pb RemarkAllowed discharge 20mg/m3 200ppm 400ppm 6ppm 10mg/m3 -

Aimed concentration 10mg/m3 10ppm 10ppm 0.6ppm 1mg/m3 -

Discharged level 4.7mg/m3 3.4ppm 2.7ppm 0.2ppm 0.1ppm -

(%) 23.5% 1.7% 0.7% 2.7% 0.6% Discharge to reference level

Green Space

Green Zone

Clean detention(a)

Clean detention(b)Unit : Ton/Year

Dust NOX SOX

100

84

63

75

86

63

118105

8397 95

112

0.21

0 00.57

0.77

1.01

18 21 2119 25 32

20142012 20152013 2016 2017

250.00

200.00

150.00

100.00

50.00

0

200.00

150.00

100.00

50.00

0

20132011

361,220400,000

200,000

300,000

100,000

2014 20162012 2015 2017

128,871 124,601111,371 139,018115,674 135,468

Recycled Quantity(Unit: Won)

Buried Quantity(Unit: Won)

Incinerated Quantity(Unit: Won)

Total Quantity(Unit: Won)

Status of General Wastes Treatment

Status of Designated Wastes Treatment

Waste Synthetic Resins

Process Sludge

Waste Activated carbon

Others

Waste Timber

Waste Oil

Solid Waste Oil

Lead Ash

Waste drum

Waste water sludge

76.5%

58.5%

23.0%

14.8%

14.8%

7.1%

4.7%

0.1%

0.1%

0.4%

1.7

1.6

1.4

1.6

1.1

0.9

0.9

0.8

0.8

0.9

2.5

2.5

2.0

2.2

1.3

2015

2013

2016

2014

2017


34 35

Greenhouse Gas & Energies Control1) Middle-& Long-Term Goals for Greenhouse Gas and Energy Control:It is planned to save the greenhouse gas emission until 2030 by 37% compared to the base year (Based on BAU, Business As Usual)

2) Climate Change Response Organization

3) Status of Greenhouse Gas Emission

Establishment of Greenhouse Gas Inventory

Taihan has established the greenhouse gas inventory from 2007 for managing the emission of greenhouse gas and has managed the inventory while implementing the verification by a third party from 2010. Taihan has established and managed the greenhouse gas inventories for all of the establishments and the management target establishment, Dangjin Plant of ‘TAIHAN CO., LTD.,’ and has established and achieved the saving goals every year through various kinds of energy saving activities.

Participation in ET (Emission Trading) System

Taihan has participated in the ET System that was commenced from 2015. Taihan establishes and implements its energy saving plans at the corporate level while avoiding the activities for saving the consumption of energies and greenhouse gas by the existing competent departments.

Energy Saving Activities

Central 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 Fuel Taihan 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 Lamps Taihan 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.

Taihan established and has operated the Climate Change Response TFT in March 2009 in order to respond to many climate change issues and to create new opportunities. After having established the carbon emission saving goals and implementation plans, this TFT is implementing those goals and plans step by step. And this TFT will make the consistent efforts in order to create actual outcomes through various kinds of methods related to climate change, such as, eco-friendly products and Using a Smart Grid, etc.

Climate change response TFT

Climate change response secretariat

Production subcommitteeTechnology development subcommittee

Construction of Low-Carbon Energy SystemRealization of GREEN-FACTORY

Development of New Growth ItemDevelopment of Renewable Energy

73,90

6

50,14

0

50,14

0

38,71

0

38,17

7

60,58

1

36,69

3

36,99

3 42,28

0

37,52

9

36,85

1

40,49

1

20142012 20152013 2016 2017

Unit : ton Allocation of Greenhouse Gas Emission

Greenhouse Gas Emission

* Discharged greenhouse gas, Allocated greenhouse gas * 2012 – 2014: Implementation of the greenhouse goal management system * 2015 – 2017: Implementation of the emissions trading system (during the first period) * 2018 – 2020: Implementation of the emissions trading system (during the second period) * 2021 – 2025: Plan for implementation of the emissions trading system (during the third period)


37

March 22, 2018

Seoul, Korea

Based on a report originally issued in Korean

36

Independent Auditors' Report


Separate Statements of Cash Flows


Separate Statements of Changes in Shareholders Equity

03Financial Section

Independent Auditor’s Report

We have audited the accompanying separate financial statements of Taihan Electric Wire Co., Ltd. (the “Company”), which comprise the separate statements of financial position as of December 31, 2017 and 2016, and the separate statements of comprehensive income, separate statements of changes in shareholders’ equity and separate statements of cash flows for the years then ended, and a summary of significant accounting policies and others explanatory information.

Management Responsibility for the Separate Financial StatementsManagement is responsible for the preparation and fair presentation for these separate financial statements in accordance with International Financial Reporting Standards adopted by the Republic of Korea (“K-IFRS”), and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion of these separate financial statements based on our audit. We conducted our audit in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidences about the amounts and disclosures in the separate financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risk of material misstatement

of the separate financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the separate financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimate made by management, as well as evaluating the overall presentation of the separate financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the separate financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with K-IFRS.

This report is effective as of March 22, 2018, the auditors’ report date. Accordingly, certain subsequent events or circumstances may have occurred between the auditors’ report date and the time this audit report is read. Such events and circumstances could significantly affect the accompanying separate financial statements and may result in modifications to this report.

Nexia International is a leading worldwide network of independent accounting and consulting firms, providing comprehensive portfolio of audit, accountancy, tax and advisory services.

A member of Nexia International

To the Board of Directors and Shareholders of Taihan Electric Wire Co., Ltd.


38 39

Thousands of Korean Won

Notes 2017 2016

ASSETS

Current assets :

Cash and cash equivalents 3, 4, 5 93,190,488 142,246,646

Short-term financial instruments 3, 4, 36 - 406,861

Current available-for-sale financial assets 3, 4, 7, 36 1,737,201 3,268,627

Trade accounts receivable 3, 4, 6, 36 273,956,713 256,041,374

Short-term loans 3 ,4 ,6 3,466,443 26,277,323

Other current financial assets 3, 6, 7 14,766,204 28,671,136

Inventories 8, 36 171,571,640 157,882,361

Income tax receivable 955,630 455,797

Other current assets 9, 27 26,363,960 32,380,270

Non-current assets held for sale 15, 36 - -

Total current assets 586,008,279 647,630,395

Non-current assets :

Available-for-sale financial assets 3, 4, 7, 36 45,402,974 32,739,748

Long-term loans 3, 4, 6 23,502,170 5,370

Investments in subsidiaries, associates and joint ventures 10, 36 34,875,595 32,004,775

Other financial assets 3, 6 2,598,728 8,822,252

Property, plant and equipment 12, 14, 36, 37 474,958,481 480,391,941

Intangible assets 13, 36, 37 13,735,128 15,972,397

Investment property 11 644,718 650,298

Deferred tax assets 31 55,710,942 55,495,182

Total other non-current assets 651,428,736 626,081,963

Total assets 1,237,437,015 1,273,712,358


Notes 2017 2016

Liabilities and shareholders' equity

Current liabilities :

Trade accounts payable 3, 4, 16, 38 136,798,119 162,769,110

Short-term borrowings 3, 4, 17, 36, 38 128,218,427 150,164,372

Current-portion of long-term borrowings 3, 4, 17, 36, 38 8,500,000 45,059,926

Other current financial liabilities 3, 4, 6, 18, 38 59,925,385 42,302,018

Current provision 20 5,048,381 18,731,050

Other current liabilities 21, 27 55,267,041 38,365,902

Total current liabilities 393,757,353 457,392,378

Non-current liabilities :

Long-term borrowings 3, 4, 17, 36, 38 445,900,866 414,519,409

Other financial liabilities 3, 4, 7, 18, 38 357,939 357,939

Defined benefit obligations 19 23,206,537 19,399,388

Non-current provision 20 2,451,235 2,678,368

Total non-current liabilities 471,916,577 436,955,104

Total liabilities 865,673,930 894,347,482

Shareholders' equity :

Capital stock 1, 22, 40 428,236,505 428,236,505

Other contributed capital 23, 36, 40 (43,196,395) (49,503,639)

Other components of equity 24 8,662,610 8,439,926

Accumulated deficit 25, 40 (21,939,635) (7,807,916)

Total shareholders' equity 371,763,085 379,364,876

Total liabilities and shareholders' equity 1,237,437,015 1,273,712,358

As of December 31, 2017 and 2016



40 41


Notes 2017 2016

Sales 26, 27, 37 1,465,408,989 1,201,174,113

Cost of sales 26, 27, 32 1,358,232,461 1,087,724,766

Gross profit 107,176,528 113,449,347

Selling and administrative expenses 28, 32 59,934,295 69,733,517

Operating income 47,242,233 43,715,830

Non-operating income and expense:

Financial income 30 23,146,567 30,410,761

Financial expense 30 (74,891,134) (55,577,526)

Other non-operating income 29 24,171,187 33,767,184

Other non-operating expenses 29 (32,740,542) (39,292,926)

(60,313,922) (30,692,507)

Net income (loss) before income tax (13,071,689) 13,023,323

Income tax expense 31 0 2,958,422

Net income (loss) (13,071,689) 10,064,901

Other comprehensive income (loss):

Items not to be reclassified subsequently to profit or loss: Acturial gain (loss) on defined benefit obligations 19,25 (1,060,030) (1,881,801)

Items to be reclassified subsequently to profit or loss: Gain (loss) on valuation of AFS financial assets 7 (72,376) (115,295)

Gain on valuation of financial derivatives 6 295,060 4,348,989

Comprehensive income (loss) (13,909,035) 12,416,794

Korean Won

Earnings (loss) per share :

Basic earnings (loss) per share 33 (15) 12


Capital stock

Other contributed

capital

Other components of

equity

Accmulated deficit Total

Balance at January 1, 2016 419,544,615 (404,802,904) 4,206,232 (486,515,023) 342,038,728

Net income - - - 10,064,901 10,064,901

Loss on valuation of AFS - - (115,295) - (115,295)

Acturial losss - - - (1,881,801) (1,881,801)

Gain on valuation of financial derivatives - - 4,348,989 - 4,348,989

Deficit recovery - (449,346,389) - 449,346,389 -

Change due to merger 8,691,890 (12,091,826) - 21,177,618 17,777,682

Stock option - 7,291,060 - - 7,291,060

Acquisition of treasury stocks - (80,027) - - (80,027)

Others - (79,361) - - (79,361)

Balance at December 31, 2016 428,236,505 (49,503,639) 8,439,926 (7,807,916) 379,364,876

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

Net income - - - (13,071,689) (13,071,689)

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

Acturial losss - - - (1,060,030) (1,060,030)

Gain on valuation of financial derivatives - - 295,060 - 295,060

Deficit recovery - - - - -

Change due to merger - - - - -

Stock option - 6,307,244 - - 6,307,244

Acquisition of treasury stocks - - - - -

Others - - - - -

Balance at December 31, 2017 428,236,505 (43,196,395) 8,662,610 (21,939,635) 371,763,085

For the Years Ended December 31, 2017 and 2016


Separate Statements of Changes in Shareholders EquityFor the Years Ended December 31, 2017 and 2016


42 43


Notes 2017 2016

Cash Flows from Operating Activities :

Net income (loss) (13,071,689) 10,064,901

Non-cash flows adjustment 34 96,601,810 72,211,070

Changes in operating assets and liabilities 34 (40,499,284) (94,789,228)

Net cash flows from operations 43,030,837 (12,513,257)

Interest received 4,017,563 2,848,012

Interest paid (15,110,367) (15,546,452)

Dividends received 245,028 411,624

Income taxes refund (paid) (479,420) (83,771)

Net cash provided by (used in) operating activities 31,703,641 (24,883,844)

Cash Flows from Investing Activities :

Decrease of short-term financial instruments 3,246,561 201,280,779

Disposition of non-current AFS financial assets 1,498,253 17,798,036

Decrease of short-term loans 626,057 11,023,445

Decrease of long-term loans 3,200 4,630

Disposition of investments in subsidiaries - 4,014,480

Decrease of other financial assets 603,441 2,395,502

Disposition of property, plant and equipment 588,041 309,850

Increase of short-term financial instruments (2,839,700) (99,089,185)

Acquisition of AFS financial assets (22,329,216) (1,235,104)

Increase of short-term loans (468,412) (1,625,233)

Increase of long-term loans - (6,000)

Increase of other financial assets (571,780) (2,149,603)

Acquisition of property, plant and equipment (15,709,588) (10,339,037)

Acquisition of intangible assets - (519,771)

Increase of cash due to merger - 27,408,098

Decrease of other accounts payable - (20,000,000)

Acquisition of assets held for sales - -

Acquisition of investments in subsidiaries (2,870,820) (10,382,786)

Net cash provided by (used in) investing activities (38,223,963) 118,888,101


Notes 2017 2016

Cash Flows from Financing Activities :

Increase of short-term borrowings 503,839,920 353,434,567

Increase of long-term borrowings 37,140,000 49,613,400

Increase of paid-in-capital - -

Increase of leasehold deposits received - 551,655

Repayment of short-term borrowings (521,189,404) (330,004,979)

Repayment of curent portion of long-term borrowings (45,059,926) (11,127,000)

Repayment of long-term borrowings (15,113,068) (56,575,963)

Decrease of leasehold deposits received - (380,000)

Acquisition of treasury stocks - (80,027)

Issuance costs for common stock - (79,361)

Net cash provided by (used in) financing activities (40,382,478) 5,352,292

Increase in cash and cash equivalents (46,902,800) 99,356,549

Cash and cash equivalents at beginning of the year 34 142,246,646 41,976,648

Effect of exchange rate on cash and cash equivalents (2,153,358) 913,449

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

Separate Statements of Cash FlowsFor the Years Ended December 31, 2017 and 2016

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