Team: Anuj Vyas, Seong Hoon Kim, Jae Young Cha, Won Hyeong Kim, Jung Hun Shin, Hanjae Sung

Changes in Corporate Governance Contents KOLON Overview Brief History Business Area Company Structure Changes in Corporate Governance Tunneling Issues

Overview Founded by Won Man Lee in Sep 1904. April 1922, Dong Chan Lee Honorary nominated as Chairman. KOLON Industries Inc. was first nylon production in Korea in 1957 formerly KOLON Corporation. Focusing on the four major business divisions, namely, industrial materials, chemical, films electronic materials, and fashion, the company has become a leader in each industry. Woong Yeul Lee join Kolon in Nov 1977, become the Kolon group chairman in Dec 1995.

Mauna Ocean Development Tragedy Mauna Issue in Feb 2014 Issue: Roof Collapse at South Korean Resort Leaves 10 People dead, Location: Mauna Ocean Resort in the southeastern city of Gyeongju. Injuries: 10 dead and 103 Injuries Source: http://www.bloomberg.com/news/2014-02-18/roof-collapse-at-south-korea-resort-kills-at-least-10-people.html

Brief History 1988 : Established as Donghae Resort Development 1997 : Acquired by KOLON group and named “KOLON Dp” 2005 : Merged by “KOLON Glotech” 2006 : Split as “MAUNA Ocean Development” (100% owned by KOLON Corp) 2007 : Lee Family became controlling shareholders (bought 47% of shares from KOLON Corp) 2014 Feb : Gymnasium Collapse (10 died, 124 injured) 2014 May : Change name to “MOD” Source: Company homepage & newspaper/www.mauna.co.kr

Business Areas Condominium Mauna ocean Resort (143rm) Water park Golf Course Mauna CC (18H) Consign mgt. Hotel Mgmt. Kolon Hotel Sea Cloud Hotel Building Mgmt. Kolon Group Source: Company homepage & newspaper/www.mauna.co.kr

KOLON Structure CHAIRMAN Kolon Corporation 52.5% 29.9% 98.7% 21.6% 51.0% 45.4% 58.4% 62.8% 48.1% 36.3% Kolon Industries Neo View Kolon Kolon Life Science Kolon Pharm Tissue Gene Kolon Benit Kolon Environmental Service Kolon Water & Energy Kolon Global Kolon Nanjing 88.9% Kolon Suzhou 90.0% PT Kolon lNA 50.0% 50.0% 78.7% Kolon Gloteck 77.7% Kolon Plastic 70.0% Kolon Fashion Material 66.6% Source: Kolon Industries Q1’14 Performance report

Changes in Corporate Governance Year 2005 : KOLON Gloteck owns 100% shares of MOD Year 2006 : KOLON Gloteck sold 47.3% shares of MOD to the Lee family Year 2012 : KOLON Gloteck sold 50% of its MOD shares to KOLON Corp. to comply with Korean Monopoly Regulation and Fair Trade Act

Tunneling Issue : First Transfer of shares at Non-market price Difference in Transfer Price of MOD Shares WHEN BUYER SHARES HOW MUCH PRICE/SHARE 2006 LEEs 47.35% ₩7.5Bil ₩5,280 65% UP! 2012 KOLON Corp 50.00% ₩13.07Bil ₩8,713 How much KOLON Corp should have paid if it had bought the shares at the fair price? ₩7.5Bil X 50% / 47.35% = ₩8bil The difference between the fair price and the actual price = ₩ 13.07bil – ₩8bil = ₩ 5.1bil KOLON bought at too high price, and it was a massive economic subsidy(₩ 5.1bil) from KOLON to KOLON Glotech, and it could be a serous damage to minority shareholders of KOLON Corp. Source: Reorganized data from YONHOP NEWS

Transfer of shares at Non-market price Tunneling Issue : Transfer of shares at Non-market price How much did the Lee family members earn with these transactions? 1) Indirectly - KOLON Glotech : ₩5.1 Bil - KOLON Industry : 77% X ₩5.1 Bil = ₩ 4 Bil - KOLON Corp : 30% X ₩4 Bil = ₩ 1.2 Bil - Lee family : 53% X ₩1.2 Bil = ₩ 637 Mil 2) Directly - KOLON Glotech : ₩ 5.1 Bil - Lee family : 3.82% X ₩ 5.1 Bil = ₩ 197 Mil 3) In total, ₩ 637 + ₩ 197 = ₩ 834 Mil KRW Chairman & Family KOLON Corporation KOLON Industry KOLON Glotech 53% 30% 77% 3.82%

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