<<

. 6
( 208 .)



>>



1-26
A Framework for Business Valuation Using Financial Statements




EXHIBIT 2
Top 30 Chaebols,a 1996 Financial Data

Owners™ Return on
(amounts in billion won) Assets Equity Debt-to-Equity Equity
.....................................................................................................................................




Korea Stock Exchange 1998
1 Hyundai 52,821 9,842 437% 5.69%
2 Samsung 50,705 13,809 267% 1.71%
3 LG 37,068 8,302 346% 5.64%
4 Daewoo 34,197 7,817 337% 5.90%
5 Sunkyung 22,743 4,703 384% 12.73%
6 Ssangyong 15,802 3,102 409% “1.90%
7 Hanjin 13,907 2,118 557% “10.49%
8 Kia 14,121 2,289 517% “4.70%
9 Hanwha 10,592 1,244 751% “11.01%
10 Lotte 7,753 2,654 192% 5.34%
11 Kumho 7,399 1,281 478% “0.58%
12 Halla 6,627 306 2066% 12.89%
13 Dong-Ah 6,289 1,383 355% 4.64%
14 Doosan 6,369 808 688% “23.33%
15 Daelim 5,849 1,118 423% 6.35%
16 Hansol 4,214 1,075 292% 1.10%
17 Hyosung 4,131 879 370% 7.16%
18 Dongkuk Steel 3,698 1,161 219% 4.75%
19 Jinro 3,826 99 3765% “169.06%
20 Kolon 3,840 919 318% 4.80%
21 Kohap 3,653 529 591% 7.34%
22 Dongbu 3,423 946 262% 3.00%
23 Tongyang 2,631 646 307% 0.05%
24 Haitai 3,398 448 658% 5.89%
25 New Core 2,796 211 1225% 15.99%
26 Anam 2,638 456 479% 10.22%
27 Hanil 2,599 384 577% “40.00%
28 Keopyung 2,296 513 348% “0.04%
29 Miwon 2,233 432 417% “7.42%
30 Shinho 2,139 362 491% “2.93%
Mean 11,325 2,328 617% “5.01%
Median 5,032 1,011 420% 3.82%
.....................................................................................................................................

a. Excluding financial and insurance industries
Source: Korea Fair Trade Commissions.
27
A Framework for Business Analysis and Valuation Using Financial Statements




1-27 Part 1 Framework




EXHIBIT 3
Chronological Highlights of the Korean Economic Crisis

Date Events
...................................................................................................................................................
August 20, 1997 The IMF approves a US$4 billion stand-by credit for Thailand, and releases a
Korea Stock Exchange 1998




disbursement of US$1.6 billion.
October 8, 1997 The IMF announces support for Indonesia™s intention to seek support from the IMF
and other multilateral institutions.
November 21, 1997 The IMF welcomes Korea™s request for IMF assistance.
December 4, 1997 The IMF approves a US$21 billion stand-by credit for Korea, and releases a disburse-
ment of US$5.6 billion.
December 11, 1997 Korean government increases the foreigners™ stock ownership ceiling from 26% to
50% (which later changed to 100%).
December 12, 1997 Korean government allows foreigners to invest in short-term ¬nancial instruments in
domestic market.
December 31, 1997 The Korea Composite Stock Price Index closes the year at 376.31, down 42.2% from
the closing index of 651.22 in 1996. Total market capitalization is reduced to about
71 trillion won.
April 1, 1998 Financial Supervisory Commission (FSC) is established to supervise all ¬nancial insti-
tutions, including banks, securities ¬rms, and insurance companies.
April 9, 1998 The Foreign Exchange Equalization Bonds of US$4 billion are issued successfully and
the Korean government shifts its focus from escaping the currency crisis to ¬nancial
and corporate sector restructuring.
May 25, 1998 The ceiling on foreigners™ stock investment is abolished, fully liberalizing the Korean
stock market to foreign investors.
June 10, 1998 President Kim Dae-Jung delivers address at the U.S. Chamber of Commerce in
Washington, D.C. He promises that Korea will become one of the best countries for
international investors to freely and safely do business. Foreign Investment Promotion
Act is designed to make Korea hospitable to foreign investors by providing ¬nancial
concessions and administrative support.
June 18, 1998 The Financial Supervisory Committee (FSC) classi¬ed 55 corporations as ¬nancially
nonviable and ordered them to liquidate.
June 29, 1998 Financial Supervisory Committee (FSC) orders 5 banks to shut down their operation
and merge with other banks. FSC requests 7 banks, classi¬ed as conditional
approval, to submit restructuring implementation plans.
July 24, 1998 Minority shareholders win, for the ¬rst time in history, against bank management for
their failure to exercise due diligence.
July 31, 1998 Two conditionally approved banks, the Commercial Bank of Korea and the Hanil
Bank, announce one-to-one merger.
...................................................................................................................................................
28 A Framework for Business Analysis and Valuation Using Financial Statements




1-28
A Framework for Business Valuation Using Financial Statements




EXHIBIT 4
Bilateral U.S. Dollar“Korean Won Exchange Rate

110

100




Korea Stock Exchange 1998
90
Won per Dollar




80

70

60

50

40
Apr 97




Apr 98
Aug 97




Aug 98
Jun 97




Oct 97


Dec 97




Jun 98
Feb 97




Feb 98




Source: Bank of Korea.
29
A Framework for Business Analysis and Valuation Using Financial Statements




1-29 Part 1 Framework




EXHIBIT 5
IMF-Supported Program of Economic Reform for South Korea
...............................................................................................................................................
Financial sector Comprehensive ¬nancial sector restructuring that introduced a clear and ¬rm exit
restructuring policy for ¬nancial institutions, strong market and supervisory discipline, and inde-
Korea Stock Exchange 1998




pendence for the central bank.
Abolishment of regulations prohibiting a foreigner from becoming a director of a
commercial bank.
Requirement that all merchant banks meet their capital adequacy ratios.
Transparency and Efforts to dismantle the nontransparent and inef¬cient ties among the government,
corporate sector banks, and businesses, including measures to upgrade accounting, auditing, and
restructuring disclosure standards. Requirement that corporate ¬nancial statements be published
every half year, on a consolidated basis, and certi¬ed by external auditors accord-
ing to the international accounting standards.
Submission of legislation fully liberalizing hostile takeovers of Korean corporations
by domestic companies and foreigners.
Amendment of the Bankruptcy Law to accelerate the corporate bankruptcy
procedure.
Phase-out of the system of cross-guarantees within conglomerates.
Foreign investment Full liberalization measures to open up the Korean money, bond, and equity mar-
kets to capital in¬‚ows, and to liberalize foreign direct investment.
Permission for foreign banks™ securities companies to establish subsidiaries in
Korea.
Labor market Amendment of layoff-related laws which facilitate the redeployment of labor.
reform Increase in the government™s ¬nancial support for the unemployed.
Expansion in the number of companies whose employees are eligible for unem-
ployment insurance, and raising the minimum unemployment subsidy.
Trade policy Trade liberalization measures, including setting a timetable in line with WTO com-
mitments to eliminate trade-related subsidies and the import diversi¬cation pro-
gram, as well as streamlining and improving transparency of import certi¬cation
procedures.
...............................................................................................................................................

Source: Adapted from reports published by Financial Supervisory Commissions.
30 A Framework for Business Analysis and Valuation Using Financial Statements




1-30
A Framework for Business Valuation Using Financial Statements




EXHIBIT 6
Ten-year history of Korea Composite Stock Price Index (KOSPI)

1200

1000




Korea Stock Exchange 1998
800
KOSPI




600

400

200

<<

. 6
( 208 .)



>>