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

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

3. 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.

4. 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:

5. Brief History 1988 : Established as Donghae Resort Development
: Acquired by KOLON group and named “KOLON Dp”
: Merged by “KOLON Glotech”
: Split as “MAUNA Ocean Development” (100% owned by KOLON Corp)
: 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/

6. 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/

7. 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

8. 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

9. 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

10. 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, ₩ ₩ 197 = ₩ 834 Mil KRW
Chairman & Family
KOLON Corporation
KOLON Industry
KOLON Glotech
53%
30%
77%
3.82%

12. The End
Thanks You