Financial Overview

(in millions of won)

-	FY2006	FY2005	Rate of Change
Sales	1,813,794	1,763,124	2.9%
Operating income	80,306	169,255	(52.6%)
Ordinary income	2,101	124,097	(98.3%)
Net income	970	98,199	(99.0%)

Contracts
The Company announced that it will supply original equipment tires to DaimlerChrysler, one of the U.S. Big 3 automakers. The ECSTA KH11 asymmetric UHP (Ultra High-Performance) tires will be 215/55R18 in size and will be mounted on the Sebring sedans. The Company said, "Kumho Tires has been chosen as the original equipment supplier to DaimlerChrysler based on its high market share in the UHP replacement market in the U.S. and due to its highly recognized expertise in terms of technological capability and quality." (From a press release on Nov. 1, 2006)

Overseas business

China
(1) New plants
-In May, 2006, the Company held a ceremony to celebrate the completion of its new plant in Changchun, Jilin Province, China. The new facility will have an annual production capacity to supply approximately 3.15 million OE tires, including Ultra high performance (UHP) tires, to global automakers.

-The Company held a ceremony to celebrate the completion of its new plant in Tianjin, China on Jul. 4, 2006. It launched commercial production at this 306,900-square-meter facility in the Tianjin Economic-Technological Development Area. The plant was built at a total cost of 210 million dollars, and has the capacity to manufacture 5.25 million UHP tires per year for the Chinese and global OE markets.

-The Company signed a memorandum of understanding to build a new facility in Nanjing to manufacture truck and bus radial tires (TBRs). This plant is scheduled to be completed by mid-2008.

>>> See Investment for more details.

The Company plans to set up its production structure in China so as to be able to manufacture 25 million tires in China by 2008.

(2) R&D center
-In Sep., 2006, the Company established an R&D center in Shanghai.

>>> See R&D for more details.

(3) Sales company in China
-The Company established Kumho Tire China Co., Inc. in Dec., 2006 as a step in its strategy to start sales activities in China. The new entity aims to create an efficient system to supply tires made at the Company's local plants in Nanjing and Tianjing, Changchun. (The latter is due to be completed in 2008.)

Vietnam
-The Company held a ground breaking ceremony at its new plant site in Oct., 2006.

>>>See Investment for more details

R&D Structure

Facility	Location
Gwangju Technical Center	Gwangju Korea
Kumho Tire America Technical Center (K.A.T.C)	Ohio USA
Kumho Tire Europe Technical Center (K.E.T.C)	Birmingham U.K
Kumho Tire China Technical Center (K.C.T.C)	Tianjin China

- In Sep., 2006, the Company held a ceremony to complete the construction of Kumho China Technical Center (KCTC) in the Tianjin Economic Technological Development Area in China. This was the third time that the Company established a technical facility outside Korea, following those in the U.S. and the U.K. The Company, which invested a total of some 36 million dollars in the 10,500-square-meter facility, plans to gradually increase the number of researchers. In line with its targets to become one of the five largest tire supplies and one of the three top tire developers in the global market, the Company intends to make KCTC China's most advanced research center dealing with tire technology.

R&D Expenditure

(in millions of won)

-	FY2006	FY2005	FY2004
R&D costs	57,826	51,251	44,437
% of sales	3.19%	2.89%	2.72%

Recent developments (FY2006)
- In Oct., 2006, the Company announced that it had developed the world's first 32-inch tires for sport utility vehicles (SUVs).

- In Nov., 2006, the Company developed the industry's first tires with tire codes made of Lyocell, which is an environmentally friendly material that can reduce carbon dioxide and hydrogen sulfide levels down to zero. Carbon dioxide and hydrogen sulfide are environmentally harmful substances, which are generated in the tire production process. After launching exports of these tires to Europe, the Company plans to gradually increase its production volume of tires using Lyocell.

Other developments
-Products developed in-house:
Tires for various types of vehicles, including passenger vehicles, light trucks, race cars, trucks, and buses.

-Development projects outsourced to other organizations

Area of development	Development period	Research institutes
Development of tire life simulation system	Apr. 2004 - Mar. 2005	-Chonnam National Univ. -Gwangju Techno Park
Development of tire side wall design	Jun. 2004 - May. 2005	-Chosun Univ. -Gwangju Techno Park
Development of treaded tires made of polyurethane casing rubber	Jun. 2004 - May. 2005	-Chonbuk National Univ. -Gwangju Techno Park
Braking distance simulation tool	Sep. 2004 - May. 2005	-Graduate School of Automotive Engineering, Kookmin University
Development of tool to simulate tire wear and tear and braking distance	Sep. 2004 - Aug. 2005	-School of Mechanical Engineering, Pusan National Univ.
Development of side wall character design program	Apr. 2005 - Aug. 2005	-Asiana IDT -CIES e-PLM
Development of rubber enhanced resin	Oct. 2005 - Sep. 2006	-M&B Green Earth
Development of global tire designs for the international market	Jan. 2006 - Dec. 2006	-Chonbuk National Univ. -Gwangju Techno Park
Development of a system to simulate traction on snowy and muddy road driving	Jan. 2006 - Dec. 2006	-School of Mechanical Engineering, Pusan National Univ.
Development of treaded tires made of polyurethane casing rubber	Jan. 2006 - Dec. 2006	-Chonbuk National Univ. -Gwangju Techno Park
Research on code adhesivity, fatigue, and morphology	May. 2006 - Apr. 2007	-Pohan Univ. of Science and Technology -Hongduk Industrial
Development of technology to improve tire noise, vibration, and harshness (NVH)	Aug. 2006 - Jul. 2007	-KAIST
Development of rubber enhanced resin	Oct. 2006 - Sep. 2007	-M&B Green Earth

Overseas Investments

China
The Company has completed construction of its new plant in Tianjin, China, and will embark on a full-scale production. It held a ceremony commemorating an inauguration of a new plant at a 306,900 square meter site in the Tianjin Economic-Technological Development Area on July 4, 2006. The Tianjin plant, which was built at a total cost of 210 million dollars, has an annual production capacity of 5.25 million tires and is equipped with the most up-to-date production facilities. Focusing on Chinese domestic and OEM markets, the Company plans to export more than 50% of products through Tianjin Port. This plant, combined the Nanjing plant with two added factories and the Changchun plant to be completed in the latter half of 2007, will complete construction of the production system of 21 million tires. It is going to accelerate its marketing activities in the Chinese domestic market through a sales agency in Shanghai, which started operation last May. The Company will also step up efforts to improve customer satisfaction by development of products to satisfy market needs at its Chinese research center scheduled to set up at the end of this year.?ｽiFrom a press release on Jul. 12, 2006)

Vietnam
The Company will construct its seventh plant in Vietnam following its three plants in Korea (Gwangju, Gokseong, and Pyeongtaek) and three others in China. A ground-breaking ceremony was held at the My Phuoc Industrial Complex, Binhduong, Vietnam on October 25, 2006 in the presence of Bak Sam Koo, chairman of Kumho Asiana Group, Mai The Trung, secretary of Binhduong, and some 200 officials and guests from both Korea and Vietnam. The Company will invest approximately 150 million dollars to construct the new plant with an annual production capacity of 3.15 million units. The facility, which is scheduled to be completed in the second half of 2008, will be equipped with cutting-edge facilities to produce high performance tires including UHP tires. In addition to being supplied domestically, tires produced at this plant will be exported to the U.S. and other Southeast Asian countries. (From a press release on Oct. 26, 2006)