KT Corporation and Subsidiaries Consolidated Interim Financial Statements March 31, 2019 and 2018 KT Corporation and Subsidiaries Index March 31, 2019 and 2018 Page(s) Report on Review of Interim Financial Statements …….....…………...……. 1 – 2 Consolidated Interim Financial Statements Consolidated Interim Statements of Financial Position …………………………. 3 – 4 Consolidated Interim Statements of Profit or Loss ………….…………………… 5 Consolidated Interim Statements of Comprehensive Income ...………...……… 6 Consolidated Interim Statements of Changes in Equity ……….……….……….. 7 – 8 Consolidated Interim Statements of Cash Flows ………………………………. 9 – 10 Notes to the Consolidated Interim Financial Statements ……………………… 11 – 66 Report on Review of Interim Financial Statements (English Translation of a Report Originally Issued in Korean) To the Shareholders and Board of Directors of KT Corporation Reviewed Financial Statements We have reviewed the accompanying consolidated interim financial statements of KT Corporation and its subsidiaries (collectively referred to as the “Group”). These financial statements consist of the consolidated interim statement of financial position of the Group as at March 31, 2019, and the related consolidated interim statements of profit or loss, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2019 and 2018, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated interim financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to issue a report on these consolidated interim financial statements based on our review. We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting. Samil PricewaterhouseCoopers, 100, Hangangdaero, Yongsan-gu, Seoul 04386, Korea, www.samil.com Other Matters We have audited the consolidated statement of financial position of the Group as at December 31, 2018, and the related consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 11, 2019. The consolidated statement of financial position as at December 31, 2018, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2018. Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Seoul, Korea May 15, 2019 This report is effective as of May 15, 2019, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 2 KT Corporation and Subsidiaries Consolidated Interim Statements of Financial Position March 31, 2019 and December 31, 2018 March 31, 2019 December 31, 2018 (in millions of Korean won) Notes (Unaudited) Assets Current assets Cash and cash equivalents 4 ₩ 2,764,951 ₩ 2,703,422 Trade and other receivables, net 4, 5 6,225,285 5,807,421 Other financial assets 4, 6 1,003,083 994,781 Current income tax assets 5,845 4,046 Inventories, net 7 646,431 683,998 Current assets held for sale 9 - 13,035 Other current assets 8 1,750,494 1,687,549 Total current assets 12,396,089 11,894,252 Non-current assets Trade and other receivables, net 4, 5 734,415 842,995 Other financial assets 4, 6 745,357 623,176 Property and equipment, net 10 12,811,123 13,068,257 Right-of-use assets 30 989,792 - Investment properties, net 10 1,098,079 1,091,084 Intangible assets, net 10 3,253,137 3,407,123 Investments in associates and joint ventures 11 255,953 272,407 Deferred tax assets 437,656 443,641 Other non-current assets 8 526,244 545,895 Total non-current assets 20,851,756 20,294,578 Total assets ₩ 33,247,845 ₩ 32,188,830 3 KT Corporation and Subsidiaries Consolidated Interim Statements of Financial Position March 31, 2019 and December 31, 2018 March 31, 2019 December 31, 2018 (in millions of Korean won) Notes (Unaudited) Liabilities Current liabilities Trade and other payables 4, 12 ₩ 7,620,526 ₩ 7,007,515 Borrowings 4, 13 1,149,018 1,368,481 Other financial liabilities 4, 6 492 942 Current tax liabilities 363,548 249,837 Other provisions 14 109,218 111,461 Deferred income 50,512 52,878 Other current liabilities 8 633,525 596,590 Total current liabilities 9,926,839 9,387,704 Non-current liabilities Trade and other payables 4, 12 1,644,941 1,513,864 Borrowings 4, 13 5,641,066 5,279,812 Other financial liabilities 4, 6 158,368 163,454 Net defined benefit liabilities 15 625,049 561,269 Other provisions 14 124,532 163,995 Deferred income 106,460 110,702 Deferred tax liabilities 214,208 206,473 Other non-current liabilities 8 67,907 70,277 Total non-current liabilities 8,582,531 8,069,846 Total liabilities 18,509,370 17,457,550 Equity attribute to owners of the Controlling Company Share capital 1,564,499 1,564,499 Share premium 1,440,258 1,440,258 Retained earnings 17 11,269,503 11,328,859 Accumulated other comprehensive income 93,652 50,158 Other components of equity 18 (1,163,948) (1,181,083) 13,203,964 13,202,691 Non-controlling interest 1,534,511 1,528,589 Total equity 14,738,475 14,731,280 Total liabilities and equity ₩ 33,247,845 ₩ 32,188,830 The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes. 4 KT Corporation and Subsidiaries Consolidated Interim Statements of Profit or Loss Three-Month Periods Ended March 31, 2019 and 2018 Three-Month Period Ended March 31 2019 2018 (in millions of Korean won, except per share amounts) Notes (Unaudited) (Unaudited) Operating revenue 19 ₩ 5,834,377 ₩ 5,710,201 Operating expenses 20 5,432,287 5,313,079 Operating profit 402,090 397,122 Other income 21 64,069 53,017 Other expenses 21 63,590 65,164 Finance income 22 117,401 77,025 Finance costs 22 122,908 108,009 Share of net profits (losses) of associates and joint venture 11 659 (1,006) Profit before income tax expense 397,721 352,985 Income tax expense 23 137,951 128,893 Profit for the period ₩ 259,770 ₩ 224,092 Profit for the period attributable to: Owners of the Controlling Company: ₩ 231,090 ₩ 196,957 Non-controlling interest: 28,680 27,135 Earnings per share attributable to the equity holders of the Controlling Company during the period (in Korean won): 24 Basic earnings per share ₩ 943 ₩ 804 Diluted earnings per share 943 804 The above consolidated interim statements of profit or loss should be read in conjunction with the accompanying notes. 5 KT Corporation and Subsidiaries Consolidated Interim Statements of Comprehensive Income Three-Month Periods Ended March 31, 2019 and 2018 Three-Month Period Ended March 31 2019 2018 (in millions of Korean won) Notes (Unaudited) (Unaudited) Profit for the period ₩ 259,770 ₩ 224,092 Other comprehensive income Items that will not be reclassified to profit or loss: Remeasurements of the net defined benefit liability 15 (226) (5,040) Share of remeasurement gain (loss) of associates and joint ventures 661 (72) Gain on valuation of equity instruments at fair value through other comprehensive income 6 51,849 19,612 Items that may be subsequently reclassified to profit or loss: Valuation gain (loss) on cash flow hedge 6 34,936 (19,685) Other comprehensive income from cash flow hedges reclassified to profit or loss (27,260) 5,691 Share of other comprehensive income from associates and joint ventures (932) (1,555) Exchange differences on translation of foreign operations 1,775 (1,575) Other comprehensive income for the period, net of tax 60,803 (2,624) Total comprehensive income for the period ₩ 320,573 ₩ 221,468 Total comprehensive income for the period attributable to: Owners of the Controlling Company ₩ 275,115 ₩ 189,892 Non-controlling interest 45,458 31,576 The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.