슬라이드 1 - mscicorpdocs.msci.com/annual/ar_2009_315094.pdfnon-consolidated financial...

02.

19.11.

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PROFILE

NON-CONSOLIDATED FINANCIAL

STATEMENTS

FINANCIAL HIGHLIGHTS

2009 20082007

(Sep. ~ Dec.)

Sales 3,839 3,495 1,003 2,876

Cost of Sales 2,707 2,386 646 1,846

Gross Profit 1,132 1,109 357 1,030

SG&A 870 848 266 770

Operating Profit 262 262 90 260

Operating Profit Margin(%) 6.8 7.6 9.0 9.0

Net income before income taxes 329 43 29 -

Net income 272 25 16 -

Earning per Share(KRW) 20,150 1,969 1,335 -

Total Asset 4,029 3,752 2,197 2,197

Total Liability 2,202 2,163 1,490 1,490

Total Shareholders‟ Equity 1,827 1,589 707 707

[Capital Stock] [68.4] [67.6] [67.6] [67.6]

Debt-to-Equity(%) 120.5 136.1 210.7 210.7

(in billions of KRW)

2007

PROFILE

* Business results for 2007 are the sum of CJ Corp.‟s business results before the demerger

and CJ CheilJedang‟s business result after the split for the convenience of investors.

Sales/Gross Profit Profitability Debt Status

(Unit : In billions of KRW) (Unit : In billions of KRW, %) (Unit : %)

2,876

3,495

3,839

1,030 1,109 1,132

2007 2008 2009

Sales Gross Profit

260 262 262

9.0

7.66.8

2007 2008 2009

Operating Profit

Operating Profit Margin

210.7

120.5136.1

55.3

140.9

84.1

2007 2008 2009

Debt-to-Equity Ratio

Net Gearing Ratio

2009 2008 2007(Sep.~Dec.)

Sales 4,995 4,541 1,290

Cost of Sales 3,473 3,288 878

Gross Profit 1,521 1,253 410

SG&A 1,138 939 311

Operating Profit 384 314 100

Non-Operating Income 409 622 75

Non-Operating Expense 440 896 146

Net income before income taxes 352 40 30

Income tax Expense 75 20 13

Net income 277 21 17

OPERATING RESULTS

2009 2008 2007(Sep.~Dec.)

Current Asset 1,643 1,485 1,023

Short-term financial instrument 1,080 684 519

Inventories 564 801 504

Fixed Asset 3,234 3,222 1,921

Investments 134 139 120

Tangible Asset 2,941 2,912 1,631

Intangible Asset 80 102 98

Other Fixed Assets 80 69 72

Total Assets 4,877 4,707 2,944

Current Liabilities 1,906 2,006 1,698

Short-term Borrowings 923 1,195 643

Trade Accounts & Notes Payable 136 104 136

Non-Current Liabilities 1,133 1,105 530

Debentures 423 286 41

Long-term Debt 417 546 437

Total Liabilities 3,040 3,111 2,229

Capital Stock 68 68 68

Capital Surplus 174 690 690

Other Accumulated Comprehensive Income 822 837 (10)

Retained Earnings 291 37 17

Total Shareholders‟ Equity 1,838 1,596 716

Total Liabilities and Shareholders; Equity 4,877 4,707 2,944

FINANCIAL CONDITION

CONSOLIDATED

FINANCIAL

STATEMENTS `

CJ CheilJedang

Annual Report 2009 4



STOCK

INFORMATIOM 2009 2008 2007

Outstanding Shares 13,681,210 13,515,739 13,515,739

(12,040,644

common shares)

(11,276,668

Common shares)

(11,276,668

Common shares)

Total Market Cap.


2,474 2,019 3,338

Share Price(High) (KRW) 233,000 297,000 309,500

Share Price(Low) (KRW) 120,000 101,000 220,000

Foreign Ownership(%) 25.3 21.1 26.8

PER(H/L) 12/6 151/51 -

EPS (KRW) 20,150 1,969 1,335

EV/EBITDA (X) 25.7 6.9 -

STOCK PRICE TREND

FOREIGN OWNERSHIP TREND

CJ CHEILJEDANG‟S SHARE INFORMATION

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

09.1. 09.3. 09.6. 09.9. 09.12.

(주)

-

50,000

100,000

150,000

200,000

250,000

(원)

거래량(좌) 종가(우)

-

10

20

30

40

09.1. 09.3. 09.6. 09.9. 09.12.

(%)

-

50,000

100,000

150,000

200,000

250,000

(원)

외국인지분율 (좌) 종가(우)

PROFILE

(share) (KRW)

Trading

Volume(L)

Share Price(R)

(KRW)(%)

Share price(L) Foreign Ownership(R)

OWNERSHIP OF

EQUITY METHOD

INVESTMENTS

OWNERSHIP

STRUCTURE

(common stock)

Major Shareholders Shares Onership(%)

CJ Corporation 4,413,707 39.14%

CREDIT RATING

[BOND]

Korea Investors

Service, INC.

National evaluation &

Credit Information, Inc.Korea Ratings

2009 AA - AA

2008 AA- AA- AA-

2007 AA- AA- AA-

Ownership(%)SharesMajor subsidiaries

99.99102,224PT CHEIL JEDANG INDONESIA

100-LIAOCHENG LANTIAN COGENERATIONS PLANT CO., LTD.

100-CJ QINGDAO FOODS CO., LTD.

1007,500,000CJ NUTRACON PTY., LTD

100-CJ LIAOCHENG BIOTECH CO., LTD.

100-CJ EUROPE GMBH.

99.99-CJ DO BRASIL IND. COM. PROD. ALIM. LTDA.

99.66299CJ CHINA LTD.

100-CJ BEIJING BEVERAGE CO., LTD.

100156CJ AMERICA INC.

10040,000CJ MD1 Co., Ltd.

99.992,428,630Super Feed Co., Ltd.

10090,000Hasunjung General Food Co., Ltd

99.722,991,624Shindongbang CP Corp.

46.5116,714,090CJ Sea Food (Foremerly, Samho F&G)

87.051,977CJ OMNI INC..

1002,390,383ANNIE CHUN‟S INC.

49.00-BEIJING ERSHANG CJ FOOD CO., LTD.

CJ CheilJedang


CEO MESSAGE

Chairman & CEO

Kyung Shik Sohn

Chairman & CEO

Jay Hyun Lee

PROFILE

Dear CJ CheilJedang Shareholders,

2009 was CJ CheilJedang‟s most successful year ever. Having bolstered its leading position in the

Korean food industry, CJ CheilJedang has continued to grow into a world-class company in the

food and green bio businesses.

Exceeding KRW 3 trillion in sales in 2008, a first in the Korean food industry, CJ CheilJedang

achieved its largest ever sales of KRW 3,838.7 billion and a net income of KRW 272.1 billion in

2009, up 10% and 971% from the previous year, respectively.

Such phenomenal results are even more meaningful as they were achieved despite difficult

business environments both domestically and globally, including such factors as price increases of

raw materials such as oil and raw sugar, an unstable exchange rate, a slowdown of the domestic

consumption market, and rigorous internal cost reduction efforts and continued R&D investment.

The processed food business is particularly noteworthy as its sales approached almost KRW 1.4

trillion in 2009, having only first exceeded KRW 1 trillion in 2007. As such, the processed food

business has firmly cemented its position as the second largest business sector of CJ CheilJedang

behind the foodstuffs business.

In 2009, overseas bio affiliates, a new growth engine of CJ CheilJedang, played an active role.

With the year-round strong price of nucleic acid and cost improvements following an increase in

the lysine yield ratio, annual equity-method valuation gains from overseas bio affiliates reached

KRW 77.2 billion, an increase of KRW 61.7 billion from 2008.

As a green bio company focused on fermentation technology, the existing overseas lysine and

nucleic acid production affiliates will continue to expand their global market share through the

expansion of production lines. Furthermore, CJ CheilJedang strives to become the world‟s No. 1

environment-friendly bio business securing „methionine‟ fermentation production technology, and

launching „Biotector,‟ an alternative for antibiotics that can resolve the stability problem regarding

antibiotics used in animal feed.

Overseas food companies such as Annie Chun‟s, CJ Omni, Beijing Ershang CJ Food and CJ

Qingdao Foods have continuously expanded their market shares since 2008. Furthermore, in

Harbin, China, CJ CheilJedang plans to launch rice protein and rice oil in cooperation with

Beidahuang, the largest grain company in Asia, while in the Philippines it is planning to produce

Xylose, a major ingredient of Xylitol, through the use of coconut shells, a first in the world.

CEO of CJ CheilJedang

Jay Hyun Lee

CEO of CJ CheilJedang

Kyung Shik Sohn

CJ CheilJedang


Dear Respected Shareholders of CJ CheilJedang,

In 2006, CJ CheilJedang set its visions at:„To Become a Global Food & Bio Company with Talent,

Technology and Speed‟, and „Creating KRW 10 trillion in Sales, KRW 1 trillion in Operating

Income, and Overseas Sales to account for 50% by 2013.‟ To achieve this, the Company has

declared 2010 as „The Year to Establish a Growth Engine to Reach KRW 10 trillion in Sales‟ and

will conduct operations based on the following four principles;

First, CJ CheilJedang will reinforce its core competencies to a global level. The bio sector

aims to become more competitive by expanding the amino acid market for animal feed in order

for it to become the world‟s No.1 company in amino acid additives, while also focusing on the

R&D of new bacterial strains and products. The food business plans to advance into new

Southeast Asian markets, such as the Philippines by developing customer-oriented localized

products as well as expanding markets in China and the U.S.A.

Second, CJ CheilJedang will continue to improve its operating profit margin so as to

create a strong profit structure. In 2010, CJ CheilJedang will strive to reduce costs by KRW

65.0 billion through TMM (Total Margin Management), which was introduced last year, as well as

improve its operating profit margin through reinforced cost competitiveness.

Third, CJ CheilJedang will secure diversified growth opportunities. In 2010, the Company

will actively engage in M&A‟s as well as establish Joint Ventures with global companies. CJ

CheilJedang will actively explore its B2B and online markets while increasing overseas sales

through exports. Furthermore, the Company will further enhance R&D investment to create „Only-

One‟ products that can compete on the world market.

Fourth, CJ CheilJedang will create a strong organization culture. The Company will actively

attract core manpower suitable for new businesses and foster top talent equipped with global

competitiveness. Meanwhile, by introducing an exceptional performance compensation system,

the management team will be encouraged to not only exceed management goals but also

promote a strong performance-centered corporate culture.

Dear Shareholders,

CJ CheilJedang will strive to create more profits for shareholders by actively practicing these

management principles. Thank you for your unwavering encouragement and trust and wish you

and your families all the best for the year.

Thank you.

CJ Cheiljedang has a “BOD-centered” advanced corporate governance system

that encourages accountability in its management practices. In addition, its strict

ethics management standards encourage timely and timely and transparent

disclosure of accurate information on the overall management. Comprised of

three standing directors and four non-standing directors, CJ CheilJedang‟s

board of directors takes full responsibility for all management practices.

BOD‟s Major Activities in 2009

In 2009, the BOD held nine meetings to review and resolve fifteen matters such as the 3th

General shareholder‟s meeting, approval of transactions with related parties and merger of

Samyang oil Co., Ltd.

Audit Committee

CJ CheilJedang has two Committees under the board of directors: the Audit Committee and the

Non-Standing Director Nominating Committee.

CJ CheilJedang‟s Audit Committee is a standing committee of the Board and the Committee

members are nominated at the general shareholders‟ meeting. The Committee audits the

Company‟s accounting practices and overall corporate matters and has the authority to request

reports on overall corporate matters and inspect the financial status of the Company. In

accordance with CJ CheilJedang‟s audit committee regulations, CJ CheilJedang‟s Audit

Committee makes resolutions three major issues: matters regarding general shareholders‟

meetings, directors and the board of directors, and audits.

The Non-Standing Director Nominating Committee, comprised of four non-standing directors, is

responsible for identifying individuals qualified to be CJ CheilJedang BOD members, and

recommends nominees for non-standing directors prior to the general shareholders‟ meeting

BOARD OF DIRECTORS [BOD]

PROFILE

CJ CheilJedang


Standing Director Non-Standing Directors

Kyung Shik Sohn

Incumbent Chairman & CEO of CJ Corp.

Incumbent Chairman & CEO of CJ CheilJedang Corp.

Incumbent Chairman of the Korean Chamber of Commerce & Industry

Former Vice Chairman of Samsung Fire Insurance

Jae Hyun Lee

Incumbent Chairman & CEO of CJ Corp.


Former Director of Samsung Electronics

Citibank

Jin Soo Kim


Former CEO of CJ Home Shopping

Former President of SC Johnson Korea

Sun Hoe Choo

Incumbent Representative of Sun Hoi Choo Law Office

Former Judge of Constitutional Court

Former Director of Legal Research and Training Institute

Former Head of Public Security Dept. at Prosecutors Office

Young Bae Park

Incumbent Head of Internal Medicine Dept., Seoul National University Hospital

Incumbent Professor, College of Medicine, Seoul National University

Former Head of Cardiology Center, Seoul National University Hospital

Dae Dong Park

Incumbent Advisor of law firm “Yulchon”

Former Standing member of Financial Services Commission

Former The 6th Chairman & President of Korea Deposit Insurance Corporation

Chang Jin Moon

Incumbent Dean of Graduate School of Health and Welfare, CHA University

Former Vice Minister of Ministry of Health & Welfare

Former Commissioner Korea Food and Drug Administration

REVIEW OF OPERATION

CJ CHEILJEDANG SALES BREAKDOWN_2009 CONSOLIDATED

Food

Stuffs

Processed

Food

BIO

Animal

Feed

Others

32%

Leading the way in a changing market

by launching customer-oriented products

1,576

0.4%18

26%1,279

31%1,544

12%58

4,995

Expansion of global network

through localized and globalized

feed technology

Leap to the global market

through Bio Pharma technology

Product differentiation

through „ONLY ONE‟ product strategy

CJ CheilJedang


35%

39%

38%

36%

36%

10%

8%

2%

12%

13%

13%41%

11%

2%

3%2007

2008

2009

Foodstuffs Processed food Pharma Bio Animal feed

Sales Proportion of CJ CheilJedang

(Unit: KRW 100 million)

In the foodstuffs business, which includes products such as sugar, flour

and cooking oil, the Company is leading the domestic market based on

its strong market dominance and cost competitiveness and continues to

see steady growth.

Meanwhile, in the processed food sector, an area where a number of hit

products have been launched, including Dashida, Sandeulae, Hatbahn,

Haechandeul, Freshian, and Indeli Curry, CJ CheilJedang is creating

a new food culture in line with the current well-being trend and ever-

changing lifestyle.

Foodstuffs Featuring products such as sugar, flour and cooking oil, the foodstuffs sector continues

its steady growth, leading the domestic market based on its strong market dominance.

Furthermore, it is leading the ever-changing market by launching more functional and

high-end customer-oriented products.

The Company continues to diversify and create high-end products, such as functional

sweeteners like palatinose and oligosaccharides, as well as launch various new baking

premix products designed for home baking. Meanwhile, in the cooking oil sector, CJ

CheilJedang is preparing for an increase in demand in the B2B sector by enhancing its

line of exclusive products for restaurants, such as high-grade and functional cooking oils.

Furthermore, the Company continues to receive favorable responses regarding its TFO

(Trans-Fat Free Oil) and premium cooking oil products, such as grape seed oil, and

canola oil.

Food

REVIEW OF OPERATION

The processed food business has significantly grown by anticipating and meeting

changes in consumer needs, such as the growing interest in well-being products, and

increases in the number of single households and female workers.

The processed food business of CJ CheilJedang has firmly cemented its position as a

growth driver through successful product differentiation based on the Company‟s „Only

One‟ product strategy.

Product Differentiation through „Only One‟ Product Strategy

CJ CheilJedang has created a large loyal customer base by continuously launching

processed food products that effectively reflect social trends and customer needs. The

Company‟s representative steady-selling product, Hatbahn, continues to maintain stable

growth and solidify its market leading position thanks to its excellent taste and quality

combined with strong brand power. In addition, various products based around the

concepts of health and convenience have also been launched such as a curry which

possess a unique taste and superior quality through its use of differentiated ingredients

and the very latest manufacturing techniques.

Leading the Health Food Market

Leading Korea‟s health food market, the health food sector continues its dominance in

areas such as ginseng, diet and general nutrition products. Han Ppoori (a health drink

containing ginseng and yams) has been well received by customers and continues to be

a steady seller since its introduction in 2004. Meanwhile, CJ CheilJedang released a

hyaluronic acid skin hydro comfort material for the first time in Korea, and through this

launched innerb an inner beauty food brand, garnering favorable response from the

market. Furthermore, products such as Jellipso Sawpalmetto (a prostate health

supplement), and Eye Shian( an eye health supplement) are leading their respective

markets and proving to be very popular with customers.

Happy Bean Tofu, Pioneering New Food Culture

The tofu segment continues to enjoy steady high growth in the fresh food sector. With

increasing interest in health and safety, the market for fresh foods distributed in

refrigeration has gradually expanded. Leading the Company‟s growth in the fresh food

sector as well as the premium tofu market is Happy Bean tofu, which in 2009

commanded a 25% market share thanks to its products being made with 100% Korean

beans. With Happy Bean tofu continuing to launch differentiated products that perfectly

reflect the current well-being trend in Korea, such as edible raw tofu and diet tofu, it is

helping to create a new food culture by expanding and developing the concept of tofu

from that of being a health food ingredient to a food that can serve as both a meal

alternative and a diet food.With a family’s health in mind, we make clean tofu without use of antifoaming and emulsifying agents. .

Clean and tasty tofu with delight of cooking, Happy Bean tofu makes a happy table.Neat and tidy packaging using cutting-edge technology further improves the convenience of cooking.

.

Processed Food

CJ CheilJedang


launching Hatbahn

Holds the most hit products in food sector

Since its launch in 1984, the Pharmaceutical sector of CJ CheilJedang has grown to

become a competitive business through continuous R&D investment and the

establishment of an effective marketing network.

CJ CheilJedang achieved economy of scale through the acquisition of Hanil

Pharmaceuticals in 2006, as well as increasing its operation efficiency and enhancing

growth and profitability by focusing its product portfolio on high value-added products.

Furthermore, in order to secure a base for advancement into the global market, the

Company is currently constructing a cGMP plant that meets U.S. pharmaceutical

manufacturing and quality control standards at the Osong Bio Technopolis in

Cheongwon-gun, Choongbuk.

The pharmaceutical sector of CJ CheilJedang possesses a stable product portfolio that

includes high value-added ETC drugs such as those for hypertension, hyperlipidemia,

diabetes, cancer, and chronic renal failure, as well as basic drugs such as infusion

solutions and antibiotics, and OTC drugs such as multi-symptom cold medicines and

drinks for hangovers, etc. Based on such an established product portfolio, the

pharmaceutical sector will continue its profitable growth in the future.

Furthermore, CJ CheilJedang continues to expand in the stem cell treatment business

through continuous tie-ups with and investment in companies possessing core

technologies in the stem cell sector, such as Neuralstem, a U.S.-based stem cell

company.

REVIEW OF OPERATION

BIO

Pharma

Bio Pharma / Animal Feed

Since it first advancement into the Bio Business in 1964 based on the fermentation

technology and experience accumulated through the businesses of sugar and flour, CJ

CheilJedang has produced and supplied food additives such as MSG and nucleic acid.

In particular, nucleic acid, which has shown exceptional capabilities in the global

market, was selected as a world-class product by the Ministry of Industry and

Resources in 2007, and as of the end of 2009 commands the world‟s largest market

share.

In 2010, the Company plans to launch biotect for animals, a substitute for antibiotics

which has been considered harmful to the human body and attracted huge controversy.

Green Growth a substitute for antibiotics,In 2010, CJ CheilJedang successfully developed environment-friendly feed additives that help livestock grow healthily and remove the need for harmful antibiotics. ‘Biotector’ a feed additive developed by CJ, is a safe antibiotic substitute for feed which produces no tolerance problem thanks to its use of microorganisms that selectively eat pathogenetic germs. CJ CheilJedang will continue to grow as an environmental company by focusing on the ‘Environment-friendly Bio’ sector, such as introducing a ‘Bio Plastic’ based on its microorganism fermentation technology and feed additives that reduce green house gas emissions.

Animal Feed

CJ CheilJedang


Since the launch of its first product in 1973, the animal feed sector of CJ

CheilJedang has grown as a partner for customers‟ success through its introduction

of industry-leading products and services, and was the first domestic feed company

to receive the HACCP certification by the Ministry of Agriculture and Forestry as

well as ISO certification. In three domestic plants (Incheon, Gunsan, Wonju), feed

products for pig, cow and chicken as well as specialized feed for fish and pets are

produced, these include the Company‟s representative brands, such as Pig-farming

Perfect Mister, Cow-farming Aminotech, Chicken-farming Biotech, Fish-farming

Marinetech, and Pet food NFresh. In addition to its major feed business, CJ

CheilJedang is leading the market through differentiated business model, which

includes the operation of a pig-farming integration business.

Going forward, CJ CheilJedang will strive to provide „Only-One‟ value to customers

based on „Competitive livestock specialty and differentiated solutions for safe

livestock products.‟

Affiliates

REVIEW OF OPERATION

Domestic Food Affiliates

Domestic food affiliates, including Shindongbang CP, Hasunjung Genernal Food, and

CJ SeaFood(formerly, SamhoF&G) have further elevated their market positions through

synergies with CJ CheilJedang. Shindongbang CP, which is involved in the starch sugar

business, has improved its profitability through cost improvements and a recovery in

demand, while striving to foster future growth through the introduction of new products.

Hasunjung General Food, the nation‟s No. 1 pickled seafood company, has further

enhanced its Kimchi business with its HatKimchi brand, while continuously showing

favorable results in its other existing businesses. CJ SeaFood, which produces

processed seafood products such as fish cakes, has launched differentiated new

products that match the current well-being trend.

Overseas Food Affiliates

The overseas market advancement, initiated full scale in 2006, is significant in that it

aims to globalize Korea‟s food culture beyond that of simply increasing exports. In the

Chinese market, where CJ CheilJedang first began conducting business in 1996, it has

expanded sales of seasoned processed foods such as Chicken Dashida, curries and

traditional sauces, etc. In 2007, CJ CheilJedang further enhanced its local business in

China through the establishment of a joint venture named „Ershang CJ,‟ with the

„Ershang Group,‟ the largest tofu company in Beijing, China, producing and selling tofu

under the brand name „Baiui Tofu‟. The Company also succeeded to mass produce

rice protein for the first time in the world after years of R&D. Based on this success, CJ

CheilJedang plans to produce rice protein and rice oil in cooperation with Beidahuang

Group, Asia‟s largest grain company.

In the U.S. market, CJ CheilJedang established a system for the local production and

sale of various processed products, such as retort rice, sauces, and frozen food after

acquiring Omni, a frozen food company in 2006, and Annie Chun‟s, an Asian ethnic food

company. Through continued market expansion, CJ CheilJedang has further bolstered

its base for market advancement in the U.S.A.

Meanwhile, in the Philippines, CJ CheilJedang plans to produce Xylose, a functional

additive and one which is a major ingredient of Xylitol, from coconut shells, a process

never been conducted anywhere else in the world before.

Overseas Bio Affiliates

Strategically located in areas ideal for sourcing raw materials such as sugar and corn

(Indonesia, China, and Brazil), CJ CheilJedang‟s bio affiliates produce food additives,

nucleic acid and MSG and feed additives such as lysine and threonine.

Based on its exceptional capabilities, such as world-class fermentation technology,

mass production experience, global business know-how and cost competitiveness, CJ

CheilJedang is ranked the world‟s No. 1 in the nucleic acid business and among the top

three in the lysine business.

Securing an annual lysine production capacity of 280,000 tons, bio subsidiaries plan to

leap forward as the No. 1 lysine producer through increased facility and corporate

investment based on cutting-edge technology and cost competitiveness. In 2010, the

Company plans to reinforce profitability and its product portfolio by launching a new

product called Tryptophan, an animal feed additive.

CORE COMPETENCE

R&DBio R&D Center

Sporting the world‟s leading cost-saving technologies in the production of nucleic acid

(IMP, GMP) and lysine, threonine and tryptophan, the Bio R&D Center supports the bio

business of CJ CheilJedang through active R&D activities in food and animal feed

additives.

In particular, the Center possesses cutting-edge technology in the amino and nucleic

acid sectors with its proprietary technologies in high-performance microbes and new

manufacturing processes. Furthermore, it is devoting itself to developing an array of

future-oriented bio products, such as eco-friendly natural materials, by employing its

technologies in areas such as microbial genomics, proteomics, metabolomics, metabolic

engineering, biotransformation, and genome breeding. As a result, the Center has

successfully developed eco-friendly antibiotics that utilize bacteriophages and plans to

release them in the market in 2010.

Furthermore, the Center will continue to use its advanced bio technologies in order to

cut production costs, as well as seek out new manufacturing process technologies so as

to enhance productivity. At the same time, the Center will focus on discovering new

amino acids, natural materials and eco-friendly materials in support of the company‟s

drive to further expand its product portfolio.

Pharmaceutical R&D Center

At the Pharmaceutical R&D Center, more than 100 dedicated researchers work

tirelessly to develop new medicines that improve both health and welfare in society.

Since its foundation in 1984, the Center has achieved a stellar performance in the

development of new medicines, such as Peudovaccin, the smallpox vaccine, as well as

commercialized the anemia drug Epokine and anti-obesity drug Diatramine for the first

time in Korea. Furthermore, it has released a number of new generic products, such as

the antibiotic Cytopsine, the anti-hyperlipidemia medicine Symbasta, the anti-

hypertension drug Amrosta, the dementia drug A-pezil, the ulcer drug Rabeone, and the

anti-depressant Rexler.

In 2010, the Center will further expand its product portfolio with the introduction of more

generic products, as well as applying its drug delivery service (DDS) technology to its

super generic R&D activities.

CJ CheilJedang


R&DAnimal Feed Technology R&D Center

Since its foundation in 1987, the Animal Feed Technology R&D Center has devoted itself to

providing high efficient animal feed and scientific breeding technology to livestock farmers

and safe and healthy livestock goods to consumers. The center has accomplished a variety

of feats, including bolstering the exports of its advanced livestock technologies.

Two new products were launched in 2009; Healthy Sow Line, a product that uses roughage

to relieve sows from the stresses of pregnancy, delivery and feeding, and New AminoTek, a

high-efficient animal feed that features lysine and methionine and which was created in

response to the shrinking mixed animal feed market.

In 2010, the Center plans to expand production of its free-antibiotic feeds, as well as create

innovative feeds that reduce the rate of loose stools and diarrhea in calves by 20%, feeds

that significantly improve the prevalence rate of 1st grade Korean cows, and feeds that

improve egg-laying and survival rates as well as taste and smell.

By developing CJ‟s unique products, the Center is able to capitalize on in-house cooperative

research activities in various areas, such as those of feed additives, bio-technology and

seasoning technologies. Furthermore, it will create a new raw materials library and product

master file in order to enhance its global competence and transfer its advanced livestock

technologies to the Asian market.

Food R&D Center

Established in 1978, the Food R&D Center aggressively develops “Only One” products and

is at the forefront of creating a new food culture through its seamless system that

incorporates everything from basic research to marketing. Boasting advanced technologies

and infrastructure, the Center has a total of over 200 registered patents, and holds the

largest number of legal rights in health foods among Korean companies.

The R&D Center is comprised of numerous subdivisions, including those in charge of new

advanced technologies, CJ‟s “Only One” products, the development and improvement of

products in response to changing markets, the development of new functional foodstuffs and

healthy foods and the development of products that cater to consumer needs and market

trends. As part of its global network, the Center also has R&D locations in the U.S. and

China.

Having launched many hit products, the Center has become the cradle of a number of

popular products, focusing on convenience foods that cater to the modern lifestyle, as well

as health-oriented foods and functional foods. These products include: Han Poori (a ginseng

drink), Fat Down (a diet drink), Saw Palmetto (a prostate medicine), Hatbahn (cooked rice),

Happy Bean Tofu, Defat Garsinia (a diet drink), Hutgae Condition (hangover medicine) and

Indeli (curry).

In 2010, the Center will continue to develop and commercialize new health-oriented,

convenient, and functional foods, while also focusing on developing new products that make

use of new sterilization technology, as well as next-generation freezing and thawing

techniques.

CORE COMPETENCE

Food Safety Center

CJ CheilJedang established the Food Safety Center in 1997, and was the first institute in

the Korean food industry dedicated to organizing the management system of food safety.

Since its foundation, the Center has been operating an effective food safety system in

order to preemptively prevent hazardous factors throughout the entire process, from

production to distribution. Its diverse business scope includes the micro-organic and

physicochemical safety testing of new products and export/import products, technical

exchanges with suppliers through a genetically modified product (GMP) audit system,

and the application of internal requirements regarding hazardous materials that are more

stringent than legally required. The introduction of a CJ Safety Management System was

recently completed, enhancing the company‟s structure and ability to those of a global

standard and completing a chain of safety that runs from the farms all the way to the

consumers‟ tables. Since 2005, the Center has assisted suppliers in establishing a

Hazard Analysis Critical Control Point (HACCP) system, enabling the preemptive

analysis and review of regular monitoring in order to screen new hazardous materials

and ensure product safety for consumers.

Furthermore, these food safety activities extend to overseas foods and foodstuffs,

equipping the Center with a comprehensive imported food checking system. For

example, the company established a Food Safety Center in Qingdao, China in 2006,

helping to ensure the safety of all products and raw materials made there, as well as

introducing stricter requirements for new hazardous additives such as Melamine and

Cyclamate.

CJ CheilJedang


FOOD SAFETY

CENTER

CORE COMPETENCE

New leadership model that upholds the philosophy and value of CJ CheilJedang

CJ‟s human resources management philosophy inspires all CJ employees to pursue

excellence, work happily and realize sustainable growth. Based on these three principles,

CJ CheilJedang creates leadership models and devises and implements personnel

policies.

The leadership models that CJ CheilJedang pursues nurture responsible, flexible

employees who possess an open mindset and whom share “CJ Values” of creativity,

challenge, respect, teamwork and customer focus. CJ CheilJedang‟s leadership model

guidelines clarify the directions of its human resources development and lay the

foundation for creating basic principles of an overall personnel management system that

supports its corporate strategies.

HUMAN

RESOURSEC

MANATEMENT

Pursuing Excellence

All employees are required to realize the best possible results in everything they do. To

that end, the company strives to create a pool of talent, and provides them with the

necessary resources and environments. CJ CheilJedang believes that excellence can be

attained through creating the best possible customer values. Therefore, every employee

is required to realize the best possible results and obtain the top position in each

business area in pursuit of its “Only-One” and “Excellence” aims .

Happy Workplace

Employees are provided with pleasant working conditions, with accomplishments

rewarded fairly and proportionately. The company believes that a happy workplace

induces high passion and engagement, which in turn enables employees to realize their

full potential. The company‟s‟ efforts and the employees‟ passion help create synergies

that contribute to realizing high performances. Providing employees with opportunities

and a happy working environment helps them achieve self-realization and allows the

company to attain its goals .

Growth of Talented People

Dedicated to fostering the best future leaders and experts, CJ CheilJedang makes

consistent investments in human resources development and encourages its employees

to build competences while also rewarding them with fair compensation in the belief that

retaining and fostering talented workers is critical to the sustainable future of a company.

Therefore, companies must support their employees‟ growth and guide them with career

vision so as to build the required competences. Ultimately, the company can command

market leadership in all of its business areas and its employees can grow as future

leaders possessing profound expertise .

CJ CheilJedang


HUMAN

RESOURSEC

MANATEMENT

CORPORATE

CULTURE

A Unique Flexible but Strong Corporate Culture

CJ CheilJedang harnesses “CJ Values” to create and develop a flexible, yet strong

corporate culture in which employees are consistent and professional in everything they

do. The unique corporate culture of CJ CheilJedang clearly differentiates it from its

competitors and plays an important role in retaining and fostering talented people and

ensuring active communication within the organization. CJ CheilJedang is dedicated to

operating an open and flexible corporate culture. While internally developing a flexible

and self-autonomous corporate culture that goes back-to-basics, CJ CheilJedang is also

forming a strong corporate culture by externally reinforcing its competitiveness and

embracing challenges.

CJ CheilJedang‟s strong corporate culture will allow it to continue to prosper and grow as

a global enterprise.

Horizontal Organizational System

Within CJ CheilJedang, all people are equal, regardless of their position. From the CEO

to new recruits, all employees call each other only by their first names plus “Nim” (Mr,

Miss, Ms, or Mrs in Korean). This embodies the flexibility of CJ‟s corporate culture.

Calling each other “Nim”, untying neckties, conducting active discussions and having

flexible working-hour systems are the very embodiment of the Company‟s flexible

corporate culture. Based on its “CJ Values,” the Company‟s corporate culture is a

strategic asset that helps stand it apart from its competitors .

Respecting Individual Personalities

In respect of individual personalities and taste, CJ CheilJedang has allowed its

employees to untie their ties at work. This simple yet effective approach was born from

the notion that a free and casual dress code can inspire active idea-developing and

nurture a future-oriented atmosphere within the workplace. By allowing its employees to

make their own decisions regarding attire according to time, occasion and place, the

Company is helping to cultivate self-autonomy, creativity and entrepreneurship as well as

create a more pleasant workplace .

Diverse Communication Channels

Discussion and chat boards on the corporate intranet enable employees and the CEO to

interact directly, helping to establish a sound and interactive communication channel

between all members of the organization. Other channels include meetings between the

CEO and staff, inter-departmental social meetings away from the workplace, town-hall

meetings, lunch meetings, and “CJ Walk,” which is a gathering between the CEO and

employees who have worked for the company for less than three years.

CORE COMPETENCE

Customer

Satisfaction

Enhancing Customer Satisfaction through Customer Service and Quality

management

CJ CheilJedang has established a customer complaint management system (CCMS).

This system preemptively prevents and promptly deals with customer complaints and

claims. Having considerably reduced the number of customer claims, the CCMS acquired

a certificate from the Fair Trade Commission in 2008.

As part of its customer-oriented management practices, the company also educates its

employees regarding consumer trends as well as sponsoring consumer groups. In order

to address customer complaints as quickly as possible, the company became the first in

the industry to organize a visiting group that takes care of customer claims within three

hours.

Starting in 2009, the process has been reinforced to relay the voice of customers (VOC)

to the relative departments, helping to preemptively prevent customer complaints and

helping to better reflect customer needs regarding future products. By realigning the

process of launching new products, the company reflects customer needs from the initial

planning stage. At the same time, the monthly “Saeng Saeng VOC” program allows top

management to listen to the voices of customers and express their management insights.

Meanwhile, company-wide VOC trouble-shooting activities further allow systematic

improvements in regards to customer satisfaction practices.

CJ CheilJedang plans to introduce a customer security index, a first in the industry, by

identifying and quantifying the food safety and customer security of all its products .

Reinforcing the On-line Customer Relationship

CJ CheilJedang conducts an annual customer satisfaction survey, using the results to

develop improvements in work processes and products that more accurately reflect

customer needs.

At the same time, the company operates a real-time customer communications system

called Service Network System (SNS). This on-line product PR process features product

information and monitors customer responses as well as giving customers the

opportunity to actively express their opinions regarding the company‟s management

practices. Furthermore, from 2009, the company expanded its customer experience

management (CEM) initiatives, allowing customer the opportunity to express their

opinions regarding the company‟s products and external relationships. Building on this,

the company is planning to adopt new channels for real-time communications with

customers, such as Twitter. Meanwhile, as part of its endeavors to maintain market

dominance, the company intends to introduce various new practices, such as the creation

of an OMS (Online Management System) to analyze brand information online and keep

track of customer recognition of the company and its products, as well as better reflecting

customer opinion in its products and management practices.

CJ CheilJedang


ENVIRONMENTAL

MANAGEMENT

Environmental Management to Protect the Planet

CJ CheilJedang pursues the “CJ Way” based on its “Only-One” spirit. The company

was the first Korean food company to publish an environment report and has adopted

stringent environmental management practices at its plant by acquiring eco-friendly

company and ISO14001 certificates. While developing practical guidelines for adopting

and applying effective environmental management practices, it adopted the LOHAS

management policy and environmental declaration of products (EDP), including the

carbon labeling system. In addition, it also developed an environmental performance

index and cooperated with an external expert agency in order to quantify its

environmental performances. Dedicated to environmental management, CJ

CheilJedang is continuing its efforts in various arenas .

Addressing Climate Change

Dedicated to fighting climate change, CJ CheilJedang is actively involved in various

initiatives designed to reduce greenhouse emissions and energy consumption. In

addition to disclosing its CO2 emissions, the company adopted the carbon labeling

system as part of the Ministry of Environment‟s carbon labeling campaign. At the same

time, it also uses eco-friendly packaging, thus significantly reducing waste, while also

reducing energy consumption in its production process, resulting in reduced CO2

emissions. Dedicated to environmental management, the company strives to lead a

clean and green life for its consumers based on its autonomous environmental

management system, and thus is planning further improvements to its products and

processes .

Eco-Friendly Packaging

CJ CheilJedang operates an “eco-friendly research group” within the packaging

development division of its Food R&D Center. This group develops and implements

ideas in regards to eco-friendly packaging. In December 2008, the group proposed

four categories of eco-friendly packaging at its “CJ Environmental Guidelines for

PKG”showcase. Based on these proposals, the company has developed and applied

packaging materials that reduce greenhouse gas emissions as well as bio-degradable

packaging materials to its products. In 2009, the company recycled byproducts from its

manufacturing process, such as rice bran and soybean shells and used them as a raw

material packaging trays, thus reducing the use of plastic, and further increasing their

bio-degradability. In addition, the company also uses soybean oil as ink in all its

publications, while it also restructured its red pepper sauce and soybean paste

containers and changed the molding foam of Ssamjang containers, helping to reduce

packaging by 30% and annual greenhouse gas emissions by 236 tons.

CORE COMPETENCE

Improving the molding foam of Ssamjang(Korea traditional source) containers

Eco-friendly package gift set tray

CO2 Emissions

Brown rice production

Hatbahn manufacturing

Packaging

Transportation

Disposal

Total

79g

168g

72g

20.3

-28.3

329g

SOCIAL

CONTRIBUTION

Sharing for Health, Education and Culture

Dedicated to its corporate social responsibilities, CJ CheilJedang conducts social

contribution activities in partnership with the CJ Sharing Foundation and the CJ Cultural

Foundation. CJ CheilJedang‟s social contribution activities help mobilize the company‟s

business infrastructure and encourage the voluntary participation of its employees. These

activities concentrate its energy on narrowing gaps in three major sectors; health,

education and culture, in order to improve the lives of underprivileged people. The

company‟s social contribution programs use an open model, with its food bank a social

service system operated in cooperation with the government. Moreover, its “Donors

Camp,” an online sharing site, welcomes companies, individuals, and others who give

donations. The company also conducts social volunteer programs that are open to

everyone.

In recognition of these performances, the CJ Sharing Foundation and CJ Cultural

Foundation received awards in 2008. The CJ Sharing Foundation was awarded the

presidential commendation at the “2008 Sharing Love Awards” and the Seoul Mayor‟s

prize at the “2008 Food Bank Award.” Furthermore, CJ Cultural Foundation received the

Ministry of Culture, Sports and Tourism prize at the “Korea Mecenat Awards.”

The Food Bank - Sharing Love by Sharing Food

The Food Bank is a food-sharing foundation that provides food, a basic living necessity,

to people in need. As the first social service project in Korea to be created through a

combination of government and corporate effort, the Food Bank takes care of

undernourished citizens by providing them with food, which also contributes to reducing

residual foods and therefore helping protect the environment.

As the largest food company in Korea, CJ CheilJedang is deeply concerned about

undernourished people. Since starting this project, CJ CheilJedang has pushed forward

with verifying the effects of the Food Bank and has established a support system manual

in addition to donating products.

Talent Donation for those in need

Capitalizing on its “Only One” know-how in manufacturing Hatbahn for years, CJ

CheilJedang developed a “Low-protein rice Hatbahn” for patients with congenital

metabolic disease. Following an investment of more than KRW 800 million, the “Low-

protein rice Hatbahn” was developed exclusively for the approximately 200 patients with

this rare disease. Deficient in protein-metabolic enzymes, sufferers cannot eat a high-

protein diet. Before the introduction of the “Low-protein rice Hatbahn,” sufferers had to

import their meals from abroad. With this new product, CJ CheilJedang is now able to

better serve those of our society in needCongenital Metabolic Disease

This is a rare genetic disease that facilitates the conversion of various

substances into others, resulting in metabolic disorder and the

accumulation of toxic substances or defect of essential compounds.

Types of congenital metabolic disease include , Penylketonuria,

hypothyroidism, galactosemia, homocystinuria, maple syrup urine

disease, congenital adrenal hyperplasia, Disorders of amino acid,

organic acid, carbohydrate, fat and fatty acid and mineral metabolism.

CJ Cheiljedang employees volunteering at Food Bank

CJ CheilJedang


Donors Camp to Share Hope through Education

Dedicated to educating our future leaders, CJ CheilJedang conducts various

educational programs through its Donors Camp for underprivileged children. After a

teacher from a public study room, community center or regional school uploads a

curricular plan onto the Web site, individual donors can then view them and contribute

towards any project they choose. This program gained a good reputation as an

innovative model of donation that enabled interactive communication between donors

and beneficiaries.

CJ Sharing Foundation then matches the donation and donates the total to those in

need. The Donors camp sponsors 1,900 study rooms and community centers for

children across the nation, with approximately 150,000 donors. In addition to monetary

donations, Donors Camp also helps provide customized education programs that

require expertise in certain fields. Moreover, it helps teachers come up with new and

refreshing programs, and thus enhancing the quality of education for those in the low-

income bracket.

Sharing the joy of art and culture

In cooperation with CJ Cultural Foundation, CJ CheilJedang implements two projects; a

“Cultural Fostering” program and a “Cultural Sharing” program. The “Cultural Fostering”

program sponsors artists, allowing them to dedicate themselves to creative activities. At

the same time, the Foundation also supports aspiring artists in a bid to help them realize

their full potential.

The “Cultural Sharing” program includes a project designed to expand the nation‟s

cultural base by providing opportunities for everyone to participate in arts and cultural

activities and a cultural and artistic education program which provides various cultural

experience opportunities.

Experience Session “Kong Kong Camp”

The “Kong Kong Camp” is a volunteer program that takes advantage of CJ

CheilJedang‟s expertise. The program provides the less fortunate with an opportunity to

explore our production lines, allowing them to taste and experience the process of

manufacturing red pepper paste, soybean paste, tofu and other Korean traditional foods

as well as giving them the opportunity to cook with these ingredients. The cooking

session is particularly important as it helps teach these children how to cook numerous

safe and tasty dishes. This not only helps cultivate independence and cooperation in our

next generation, but also provides them with the joy of creation. Having begun in 2008

at the Nonsan plant of Haechandeul, the Kong Kong Camp will be expanded in 2010

both in size and in frequency, becoming a monthly program.

CORE COMPETENCE

Donors Camp, spreading the practice of sharing

A contestant performing at the CJ Young Festival

Pleasant “Kong Kong Camp”

SOCIAL

CONTRIBUTION

FINANCIAL SECTION

1

The financial information and related discussion is presented on a non-consolidated basis and has

been classified in accordance with accounting principles generally accepted in Korea (Korean GAAP).

The section also contains forward-looking statements with respect to the financial condition, results

of operations, and business of CJ CheilJedang as well as the plans and objectives of the management

of CJ CheilJedang. Statements that are not historical facts, including statements involving known and

unknown risks, uncertainties, and other factors which may affect the actual results or performance of

CJ CheilJedang, may be materially different from any future results or performance expressed or

implied by such forward-looking statements. CJ CheilJedang does not make any representation or

warranty, expressed or implied, as to the accuracy or completeness of the information contained in

this section, and nothing contained herein is, or shall be relied upon, as a promise, whether as to the

past or future. Such forward-looking statements were based on current plans, estimates, and

projections of CJ CheilJedang and the political and economic environment in which CJ CheilJedang

will operate in the future, and therefore undue reliance should not be placed on them. Forward-

looking statements speak only to conditions as of the date they are made, and CJ CheilJedang

undertakes no obligation to update publicly any of them in light of new information or future events.

1. Overview

In early 2009, the world faced a serious economic downturn in the wake of the global financial

crisis. However, due to effective economic measures taken by various major countries and the

economic recovery of Asian countries in particular, including China, the crisis was prevented

from becoming worse. However, various factors continued to be of concern in the global

economy, such as Dubai’s moratorium and the situation of some Eastern European countries.

In regards to the Korean Economy in 2009, facility investment and private consumption weakened

economic instabilities brought about by the unstable foreign exchange market.

Yet despite this business environment, CJ CheilJedang was able to achieve sales of KRW

3,838.7 billion, a 9.8% increase compared with the previous year. This strong performance was

made possible as the Company focused its resources on primary business sectors. Operating

income totaled KRW 261.9 billion, a similar level to the previous year. However, net income

drastically improved to KRW 272.1 billion, due to increases in equity method and foreign

exchange related gains. Such performance came as a result of CJ CheilJedang’s companywide

R&D investment in long-term growth as well as continued cost reductions and tight execution of

SG&A cost despite difficult domestic and international business environments caused by unstable

raw material prices and a slowdown in domestic consumption.

CJ CheilJedang’s Sales Breakdown (2009) CJ CheilJedang’s Sales and Gross Profit

Food

BIO/Pharma

Animal Feed

3,839

1,109 1,132

3,495

2008 2009

Sales Gross Profit


2. Results of Operations

I. Sales and Gross Profit

Food

The food business of CJ CheilJedang

consists of a foodstuffs business,

which includes sugar, flour, and

cooking oil, and a processed food

business which includes sauces,

pastes, convenience foods,

processed meats, and frozen foods.

The food business posted KRW

2,955.7 billion in sales, a 13.1%

increase from the previous year,

with gross profit increasing by 8.9%

to KRW 827.6 billion.

The food business accounts for

77.0% of the total sales of CJ

CheilJedang, the single largest sales

contribution.

Sales and Gross Profit in Food Business

2,612

2,956

760 828

2008 2009

Sales Gross Profit

* Food Stuff

In 2009, sales of the foodstuffs sector recorded KRW 1,579.9 billion, up 17.4% year-on-year,

while gross profit totaled KRW 339.2 billion, an 18.5% rise from the previous year.

This strong growth stemmed from (1) sales contribution from Shindongbang CP and Samyang Oil,

(2) ASP increase of various products on the back of the weakening Korean Won and increases in

grain prices, and (3) an increase in oligosaccarides sales in the sugar sector, in addition to an

expansion in the functional foodstuff market, including premix products in the flour sector and

trans fat free oil (TFO) in the oil sector.

Despite an unstable foreign exchange rate, the gross profit margin improved by 0.2%pt. to 21.5%

through various profitability improving measures, including total margin management (TMM).


* Processed Food

In accordance with overall changes in consumer needs amid rising social interest in well-being

lifestyle and an increase in one-person households and female workers, the processed food

sector recorded nearly KRW 1.4 trillion in sales in 2009, bolstering its position as one of the

largest business sectors of CJ CheilJedang along with the foodstuffs sector.

Amid the economic downturn and fierce business environment in 2009, the processed food

sector achieved sales of KRW 1,375.7 billion, up 8.6% from the previous year. Due to an

increase in costs, gross profit totaled KRW 488.3 billion, a 3.0% increase year-on-year.

In the non-refrigerated food sector, convenience foods such as Hatbahn [microwaveable rice]

have maintained steady growth backed by strong brand power despite an overall decrease in

health food sales and the comparably low growth of paste products such as red pepper, soybean

and Dashida caused by the economic slowdown. Furthermore, following the successful launch of

new brands such as Indeli Curry, the non-refrigerated food sector posted KRW 687.4 billion in

sales, a 1.4% increase from the previous year. However, gross profit decreased by 5.2% to KRW

294.1 billion due to unfavorable the foreign exchange rate and raw material costs.

In the fresh food sector, soybean products such as tofu and bean sprouts maintained high growth

of over 20% compared with the previous year, while flagship products such as processed meats

and frozen dumplings grew continuously, as did sales of eggs and products under the freshian brand. As a result, the fresh food sector posted KRW 688.4 billion in sales, up 16.8% compared

with the previous year, with gross profit totaling KRW 194.3 billion, an 18.6% year-on-year

increase.

Bio Pharma

CJ CheilJedang’s bio pharma business

consists of pharmaceuticals and bio

sectors, accounting for 9.8% of its

total sales.

Sales of the bio pharma business

recorded KRW 375.5 billion, a 10.6%

decrease, while gross profit totaled

KRW 200.3 billion, a 22.4% decrease

from the previous year.

Sales and Gross Profit in BIO Pharma Business

375

258

200

420

2008 2009

Sales Gross Profit

* Pharmaceuticals

In 2009, the pharmaceuticals sector recorded KRW 290.2 billion in sales, down 14.9% from the

previous year due to the restructuring of some product lines as well as the rebalancing of

inventories. Meanwhile, fixed manufacturing expenses increased following a decrease in

production capacity and an increase in costs due to a strong Yen, resulting in a decrease of

gross profit by 30.4% to KRW 148.4 billion.

* Bio

In 2009, the bio business posted KRW 85.2 billion in sales, a 7.9% increase from the previous

year, following international price hikes of MSG and nucleic acid. Furthermore, gross profit

totaled KRW 51.9 billion, up 15.6% year-on-year.

Animal Feed

While maintaining its market-leading

position in Korea through fostering its

core manpower and securing advanced

technology, the animal feed business

actively pushed forward with the

systemization of its stockbreeding

businesses in order to further promote

synergy between its animal feed and

livestock products.

Animal feed sector sales in 2009

increased by 9.8% to KRW 507.6 billion

due to increases in prices and volume,

while gross profit totaled KRW 103.8

billion, up 14.5% from the previous

year.

Sales and Gross Profit in Animal Feed Business

508

91 104

462

2008 2009

Sales Gross Profit



II. Sales, General & Administrative Expenses

Backed by a strong companywide initiative to improve margins through Total Margin

Management (TMM), the sales general & administrative expenses proportion of sales decreased

by 1.6%pt., dropping from 24.3% to 22.7%. Going forward, CJ CheilJedang will continue its cost

reduction efforts through cost improvements as well as avoiding short-term, one-time sales

promotion events.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES

2008 2009 Change (%)

Salary and employee benefits 195.6 209.4 7.1%

Direct selling expenses 246.2 242.5 -1.5%

Advertisement 51.9 43.9 -15.4%

Promotion 70.1 69.0 -1.6%

Transportation 124.2 129.6 4.3%

Expendable expenses 41.1 36.4 -11.4%

Market research/meetings 13.8 12.9 -6.5%

Commissions and service charges 224.3 232.8 3.8%

Research expenses 30.7 24.1 -21.5%

Depreciation 22.9 26.9 17.5%

Rent 13.1 13.5 3.1%

Performance 28.3 29.4 3.9%

Others 31.5 41.8 32.7%

Total 847.5 869.7 2.6%

Percentage of sales 24.3% 22.7% 1.6%pt.

III. Operating Profit

Despite a robust growth in sales, CJ CheilJedang’s operating profit increased by merely KRW

300 million to post KRW 261.9 billion. This was mainly caused by a cost increase following an

unfavorable exchange rate and raw material price hikes. However, this was offset by cost

reduction effects from TMM activities and tight control of sales, general & administrative

expenses. As a result, CJ CheilJedang realized a 6.8% operating profit margin, a 0.7%pt

decrease from the previous year.


IV. Income before Corporate Taxes

CJ CheilJedang’s income before corporate taxes stood at KRW 328.6 billion in 2009, up 285.8

billion from KRW 42.8 billion in 2008 mainly due to increases in equity method gains and foreign

exchange related gains.

NON-OPERATIONG INCOME / EXPENSES

2008 2009

Gain/Loss on disposal of investments (1.7) (0.7)

Gain/Loss on disposal of tangible asset 50.4 3.7

Net interest expenses (55.1) (51.5)

Equity method gain/loss (26.3) 66.7

FX related gain/loss (206.0) 61.7

Gain/Loss on derivatives 24.5 14.8

Donation (25.4) (18.8)

Miscellaneous gain/loss 31.3 3.5

Others (10.7) (12.8)

Total (218.9) 66.7

* Non-Operating Income / Expenses

Non-operating income for 2009 totaled KRW 66.7 billion mainly due to increases in equity-

method valuation gains and foreign exchange related gains. CJ CheilJedang’s equity-method

valuation gains stood at KRW 66.7 billion, up KRW 93.0 billion from the previous year, mainly

due to the sharp performance improvement of overseas bio affiliates and Shindongbang CP.

Equity-method valuation gains from overseas bio affiliates totaled KRW 67.3 billion, up KRW

51.7 billion, and were mainly backed by profit improvements of PT CJI and CJ Liaocheng

Biotech following nucleic acid price increases. PT CJI, CJ Liaocheng and Liaocheng Lantian

realized KRW 42.7 billion, KRW 26.7 billion, and KRW 6.4 billion in equity-method gains,

respectively, while CJ do Brasil incurred KRW 8.6 billion in equity-method losses, a KRW 14.4

billion improvement from the previous year.

In 2008, Shindongbang CP recorded equity-method losses of KRW 35.8 billion due to an increase

in corn prices and an increase in foreign exchange related losses. However, in 2009,

Shindongbang CP was able to record equity-method gains of KRW 100 million, a KRW 35.9

billion improvement due to an increase in sales following a recovery in demand for starch sugar

as well as cost improvements brought about by a decrease in corn prices.

Foreign exchange related gains increased to record KRW 61.7 billion, with the base exchange

rate as of the end of December standing at KRW 1,168/$.

Meanwhile, total interest expenses totaled KRW 59.6 billion.


2. Outlook for 2010 Under the vision ‘To Become a Global Food & Bio Company through Talent, Technology and

Speed’ CJ CheilJedang ceaselessly strives to achieve its goal of ‘KRW 10 trillion in Sales, KRW

1 trillion in Operating Income, and Over 50% of Total Sales from Overseas Sales’. In 2010, CJ

CheilJedang aims to lay groundwork toward reaching KRW 10 trillion in sales.

To this end, the Company will strive to enhance its core capabilities at a global level, while

ceaselessly making efforts to create a profitable structure, and secure diversified growth

opportunities as well as establish a decisive personnel management and strong organization

culture. CJ CheilJedang will realize an “Only-One” spirit by bolstering its R&D capabilities, and

transferring this into performance. Furthermore, the Company will enhance its cost

competitiveness and improve its cost structure and cash flow by expanding its Total Margin

Management (TTM) system. CJ CheilJedang aims to actively expand its global business in 2010

based on its industry-leading capabilities as well as create new growth engines that can promote

sustainable growth.

CJ CheilJedang Corporation

Non-Consolidated Financial Statements

December 31, 2009 and 2008

CJ CheilJedang CorporationIndexDecember 31, 2009 and 2008

Report of Independent Auditors

Non-consolidated Financial Statements

Statements of Financial Position

Statements of Income

Statements of Appropriations of Retained Earnings

Statements of Changes in Shareholders’ Equity

Statements of Cash Flows

Notes to Non-Consolidated Financial Statements

Report of Independent Accountants’ Review of Internal Accounting Control System

Report on the Operations of the Internal Accounting Control System

LS Yongsan Tower, 191, Hangangno 2-ga, Yongsan-gu, Seoul 140-702, Korea (Yongsan P.O Box 266, 140-600) www.samil.com

Samil PricewaterhouseCoopers is the Korean network firm of PricewaterhouseCoopers International Limited (PwCIL). "PricewaterhouseCoopers" and "PwC" refer to thenetwork of member firms of PwCIL. Each member firm is a separate legal entity and does not act as an agent of PwCIL or any other member firm.

Report of Independent Auditors

To the Shareholders and Board of Directors of


We have audited the accompanying non-consolidated statements of financial position of CJ

CheilJedang Corporation (the ‘Company’) as of December 31, 2009 and 2008, and the

related non-consolidated statements of income, appropriations of retained earnings,

changes in shareholders’ equity and the cash flows for the years then ended, expressed in

Korean won. These financial statements are the responsibility of the Company’s

management. Our responsibility is to express an opinion on these financial statements

based on our audits. We did not audit the financial statements of P.T. Cheil Jedang Indonesia

and certain other subsidiaries, the investments in which are reflected in the accompanying

financial statements using the equity method of accounting. The investments in these

subsidiaries represent 11% of the Company’s total assets as of December 31, 2009 (2008:

8%) and the equity in their net gain on valuation of equity-method investments represents

￦74,691 million for the year ended December 31, 2009 (2008: ￦39,587 million). The

financial statements of these subsidiaries were audited by other auditors whose reports have

been furnished to us and our opinion, insofar as it relates to the amounts included for these

subsidiaries, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the

Republic of Korea. Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation. We believe that our audits and the

reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the non-consolidated

financial statements referred to above present fairly, in all material respects, the financial

position of CJ CheilJedang Corporation as of December 31, 2009 and 2008, and the results

of its operations, the changes in its retained earnings, the changes in its shareholders’ equity

and its cash flows for the years then ended in conformity with accounting principles generally

accepted in the Republic of Korea.

Accounting principles and auditing standards and their application in practice vary among

countries. The accompanying non-consolidated financial statements are not intended to

present the financial position, results of operations, changes in shareholders’ equity and

cash flows in conformity with accounting principles and practices generally accepted in

countries and jurisdictions other than the Republic of Korea. In addition, the procedures and

practices used in the Republic of Korea to audit such financial statements may differ from

those generally accepted and applied in other countries. Accordingly, this report and the

accompanying non-consolidated financial statements are for use by those who are informed

about Korean accounting principles or auditing standards and their application in practice.

Seoul, Korea

March 8, 2010

This report is effective as of March 8, 2010, the audit report date. Certain subsequent

events or circumstances, which may occur between the audit report date and the time of

reading this report, could have a material impact on the accompanying non-consolidated

financial statements and notes thereto. Accordingly, the readers of the audit report should

understand that there is a possibility that the above audit report may have to be revised to

reflect the impact of such subsequent events or circumstances, if any.

CJ CheilJedang CorporationNon-Consolidated Statements of Financial PositionDecember 31, 2009 and 2008

(in thousands of Korean won) 2009 2008

Assets

Current assets

Cash and cash equivalents ￦ 151,602,608 ￦ 13,875,545

Short-term investments (Note 3) 248,552,330 7,907,328

Trade accounts and notes receivable,

net of allowance for doubtful accounts (Note 4) 207,569,055 246,761,251

Other accounts and notes receivable,

net of allowance for doubtful accounts 67,030,685 60,984,069

Inventories, net of allowance for inventory

valuation (Note 5) 400,544,506 567,438,015

Short-term deferred income tax assets (Note 21) - 19,444,749

Short-term derivative assets (Note 15) 11,888,224 28,288,856

Guarantee deposit 6,730,268 14,376,376

Prepaid expenses and other current assets 14,988,877 18,767,234

Total current assets 1,108,906,553 977,843,423

Property, plant and equipment, including revalued

portion, net of accumulated depreciation (Note 8) 2,193,067,748 2,097,343,034

Long-term available-for-sale securities (Note 6) 30,822,402 15,195,707

Equity-method investments (Note 7) 570,561,379 524,323,958

Intangible assets, net of accumulated amortization (Note 9) 11,815,679 13,247,394

Long-term derivatives (Note 15) 16,904,251 29,636,675

Long-term guarantee deposits 57,414,939 52,872,297

Long-term loans receivable 29,464,086 32,390,299

Other non-current assets 9,622,487 9,492,581

Total assets ￦ 4,028,579,524 ￦ 3,752,345,368

Liabilities and Shareholders' Equity

Current liabilities

Trade accounts and notes payable ￦ 157,186,390 ￦ 171,285,289

Other accounts and notes payable 231,489,581 267,710,039

Short-term borrowings (Note 10) 433,344,781 640,975,222

Current portion of long-term debts (Notes 11 and 12) 358,036,730 154,440,887

Accrued expenses 86,236,650 75,169,712

Income taxes payable 13,703,285 18,723,303

Short-term derivative liabilities (Note 15) 18,572,335 35,671,479

Short-term deferred income tax liabilities (Note 21) 1,553,816 -

Other current liabilities 39,178,105 26,689,915

Total current liabilities 1,339,301,673 1,390,665,846

Long-term debts, net of current maturities (Notes 11 and 12) 619,120,374 540,845,884

Accrued severance benefits, net (Note 13) 27,046,301 26,854,756

Long-term deferred income tax liabilities (Note 21) 216,099,872 200,274,007

Long-term derivative liabilities - 3,722,759

Long-term accrued expense - 728,107

Total liabilities 2,201,568,220 2,163,091,359

CJ CheilJedang CorporationNon-Consolidated Statements of Financial PositionDecember 31, 2009 and 2008


Commitments and contingencies (Note 14)

Shareholders' equity

Capital stock (Notes 1 and 16)

Common stock ￦ 60,203,220 ￦ 56,383,440

Preferred stock 8,202,830 11,195,255

Capital surplus

Paid-in capital in excess of par value 714,203,776 689,833,576

Capital adjustments

Treasury stock (Note 18) (23,111,085) (2,931,717)

Stock option compensation (Note 19) 6,172,065 15,440,101

Capital adjustments on equity-method investments (59,959,496) (59,959,496)

Loss on disposal of treasury stock (788,932) -

Other cumulative comprehensive income

Gain on valuation of available-for-sale securities (Note 6) 312,462 -

Loss on valuation of available-for-sale securities (Note 6) (469,976) (426,414)

Gain on valuation of equity-method investments 96,567,003 121,515,384

Loss on valuation of equity-method investments (9,669,283) (3,187,294)

Loss on valuation of derivative instruments (5,533,168) (10,244,629)

Gain on revaluation of property, plant and equipment 741,092,962 730,007,908

Retained earnings 299,788,926 41,627,895

Total shareholders' equity 1,827,011,304 1,589,254,009

Total liabilities and shareholders' equity ￦ 4,028,579,524 ￦ 3,752,345,368

The accompanying notes are an integral part of these non-consolidated financial statements.

CJ CheilJedang CorporationNon-Consolidated Statements of IncomeYears ended December 31, 2009 and 2008

(in thousands of Korean won, except per share amounts) 2009 2008

Sales (Note 23)Domestic ￦ 3,590,482,371 ￦ 3,296,062,819

Export 248,249,933 198,815,514

3,838,732,304 3,494,878,333

Cost of sales (Note 23) 2,707,103,741 2,385,713,573

Gross profit 1,131,628,563 1,109,164,760

Selling, general and administrative expenses (Note 24) 869,725,493 847,516,131

Operating income 261,903,070 261,648,629

Non-operating income

Interest and dividend income 10,148,584 9,409,289

Foreign exchange gain 61,223,628 30,665,142

Gain on foreign currency translation (Note 20) 63,588,449 36,782,018

Gain on valuation of equity-method investments (Note 7) 101,361,622 51,785,222

Gain on disposal of property, plant and equipment (Note 8) 6,201,948 50,994,301

Gain on settlement of derivative instruments 150,100,703 301,549,467

Gain on valuation of derivative instruments (Note 15) 13,086,833 73,037,542

Reversal of allowance for doubtful accounts - 1,332,957

Others 11,872,947 44,371,506

417,584,714 599,927,444

Non-operating expenses

Interest expenses 59,643,100 62,151,095

Foreign exchange loss 56,368,057 173,366,388

Loss on foreign currency translation (Note 20) 6,750,264 100,043,205

Loss on valuation of equity-method investments (Note 6) 34,628,024 78,065,247

Loss on disposal of equity-method investments - 2,642,506

Loss on settlement of derivative instruments 121,866,601 300,071,775

Loss on valuation of derivative instruments (Note 15) 26,480,151 50,032,077

Loss on disposal of trade accounts receivable (Note 4) 14,398,503 14,202,888

Donations 18,828,769 25,395,719

Others 11,948,693 12,824,618

350,912,162 818,795,518

Income before income taxes 328,575,622 42,780,555

Income tax expense (Note 21) 56,436,510 17,414,483

Net income ￦ 272,139,112 ￦ 25,366,072

Basic earnings per share (Note 22) ￦ 20,150 ￦ 1,969

Diluted earnings per share (Note 22) ￦ 20,063 ￦ 1,961


CJ CheilJedang CorporationNon-Consolidated Statements of Appropriations of Retained EarningsYears ended December 31, 2009 and 2008(Dates of Appropriations: March 26, 2010 and February 27, 2009for the years ended December 31, 2009 and 2008, respectively)


Retained earnings before appropriations

Unappropriated retained earnings carried over

from the prior year ￦ 500,000 ￦ 500,000

Net income 272,139,112 25,366,072

272,639,112 25,866,072

Transfer from discretionary reserve

Reserve for research and human resource development 4,333,333 2,333,333

Appropriation of retained earnings

Legal reserve 4,743,457 1,397,808

Cash dividends 47,434,566 13,978,081

Reserve for research and human resource development 224,294,422 12,323,516

276,472,445 27,699,405

Unappropriated retained earnings carried forward

to subsequent year ￦ 500,000 ￦ 500,000


CJ CheilJedang CorporationNon-Consolidated Statements of Changes in Shareholders’ EquityYears ended December 31, 2009 and 2008

(in thousands of Korean won)

Capital

stock

Capital

surplus

Capital

adjustments

Other

cumulative

comprehensive

income

Retained

earnings Total

Shareholders’ equity at January 1, 2008 ￦67,578,695 ￦689,833,576 ￦(55,503,875) ￦ (10,946,948) ￦16,261,823 ￦ 707,223,271

Stock compensation - - 8,150,941 - - 8,150,941

Loss on valuation of available-for-sale securities, net - - - (413,749) - (413,749)

Capital adjustments on equity-method investments - - (98,178) - - (98,178)

Gain on valuation of equity-method investments, net - - - 133,302,930 - 133,302,930

Loss on valuation of derivative instruments, net - - - (14,285,186) - (14,285,186)

Revaluation of property, plant and equipment - - - 730,007,908 - 730,007,908

Net income - - - - 25,366,072 25,366,072

Shareholders' equity at December 31, 2008 ￦67,578,695 ￦689,833,576 ￦(47,451,112) ￦ 837,664,955 ￦41,627,895 ￦1,589,254,009

Shareholders’ equity at January 1, 2009 ￦67,578,695 ￦689,833,576 ￦(47,451,112) ￦ 837,664,955 ￦ 41,627,895 ￦1,589,254,009

Cash dividends - - - - (13,978,081) (13,978,081)

Retained earnings after appropriations 67,578,695 689,833,576 (47,451,112) 837,664,955 27,649,814 1,575,275,928

Changes due to merger 824,855 24,296,541 (25,067,537) (56,167) - (2,308)

Exercise of stock options 2,500 73,659 3,230,160 - - 3,306,319

Acquisition of treasury stock - - (3,082) - - (3,082)

Stock compensation - - 2,270,393 - - 2,270,393

Payment of long-term incentives - - (10,724,071) - - (10,724,071)

Loss on valuation of available-for sale securities, net - - - (118,304) - (118,304)

Loss on valuation of equity-method investments, net - - - (16,222,643) - (16,222,643)

Gain on valuation of derivative instruments, net - - - 4,711,461 - 4,711,461

Change on revaluation of assets - - - (3,679,302) - (3,679,302)

Others - - 57,801 - - 57,801

Net income - - - - 272,139,112 272,139,112

Shareholders' equity at December 31, 2009 ￦68,406,050 ￦714,203,776 ￦(77,687,448) ￦822,300,000 ￦299,788,926 ￦1,827,011,304


CJ CheilJedang CorporationNon-Consolidated Statements of Cash FlowsYears ended December 31, 2009 and 2008


Cash flows from operating activities

Net income ￦ 272,139,112 ￦ 25,366,072

Adjustments to reconcile net income to net cash

provided by (used in) operating activities

Depreciation and amortization 97,337,245 89,194,372

Provision for severance benefits 22,719,558 25,397,958

Bad debts expense 10,485,673 1,545,772

Stock based compensation 2,270,393 8,744,588

Loss (gain) on valuation of inventories (556,510) 1,354,386

Loss from inventory obsolescence 21,014,692 23,680,524

Loss (gain) on foreign currency translation, net (56,838,185) 63,261,187

Loss on disposal of equity-method investments - 2,642,506

Loss (gain) on valuation of equity-method investments, net (66,733,598) 26,280,025

Gain on disposal of property, plant and equipment, net (3,678,873) (50,394,628)

Gain on settlement of derivative instruments, net (28,234,102) (1,477,692)

Loss (gain) on valuation of derivative instruments, net 13,393,318 (23,005,465)

Deferred income taxes 32,293,159 (6,074,150)

Others, net 2,077,817 (1,745,702)

Changes in operating assets and liabilities

Decrease (increase) in trade accounts and notes receivable 41,809,386 (89,272,858)

Decrease (increase) in other accounts and notes receivable (11,462,744) 7,651,226

Decrease (increase) in guarantee deposits 7,006,123 (11,035,116)

Decrease (increase) in inventories 148,927,720 (249,023,044)

Increase (decrease) in trade accounts and notes payable (34,249,776) 42,657,026

Increase (decrease) in other accounts and notes payable (38,201,053) 110,520,681

Increase (decrease) in withholdings 10,313,185 (11,696,637)

Increase (decrease) in accrued expenses 10,762,363 (4,315,726)

Increase (decrease) in income taxes payable (4,168,817) 4,566,809

Payment of severance benefits (21,147,074) (18,330,069)

Others, net (7,907,920) (7,100,566)

Net cash provided by (used in) operating activities 419,371,092 (40,608,521)

CJ CheilJedang CorporationNon-Consolidated Statements of Cash FlowsYears ended December 31, 2009 and 2008


Cash flows from investing activities

Acquisition of available-for-sale securities ￦ (5,503,051) ￦ (3,405,918)

Increase in financial instruments (241,113,249) (3,654,332)

Decrease in long-term loans receivable 2,926,213 7,823,407

Proceeds from disposal of equity-method investments - 1,746,215

Proceeds from disposal of property, plant and equipment 17,199,030 70,692,548

Acquisition of property, plant and equipment (180,724,126) (239,779,202)

Acquisition of intangible assets (3,225,063) (1,916,167)

Acquisition of equity-method investments (21,400,018) (18,868,366)

Settlement of derivative instruments 29,191,044 (12,860,185)

Others (3,045,342) (10,301,877)

Net cash used in investing activities (405,694,562) (210,523,877)

Cash flows from financing activities

Increase (decrease) in short-term borrowings (192,884,403) 291,390,747

Proceeds from long-term debts 482,117,535 363,426,148

Repayment of current maturities of long-term debts (154,440,887) (402,191,856)

Acquisition of treasury stock (3,082) -

Exercise of stock options 3,054,146 -

Payment of dividends (13,978,081) -

Net cash provided by financing activities 123,865,228 252,625,039

Net cash increase due to merger 185,305 -

Net increase in cash and cash equivalents 137,727,063 1,492,641

Cash and cash equivalents

Beginning of the year 13,875,545 12,382,904

End of the year ￦ 151,602,608 ￦ 13,875,545


CJ CheilJedang CorporationNotes to Non-Consolidated Financial StatementsDecember 31, 2009 and 2008

1. The Company

CJ CheilJedang Corporation (the “Company”) was incorporated on September 1, 2007,

through the split-off of the manufacturing business segment of CJ Corporation. The

Company's stocks are publicly traded, and all issued and outstanding shares are listed

on the Korean Stock Exchange. The Company has 18 plants and is engaged in

manufacturing and selling refined sugar, wheat flour, animal feeds, food seasonings,

medicines and processed meat. The Company has 19 overseas subsidiaries in Asia,

South America, Europe and in the United States as of December 31, 2009.

Under its Articles of Incorporation, the Company is authorized to issue 50 million shares

of capital stock with a par value per share of ￦5,000. As of December 31, 2009,

13,681,210 shares are issued and outstanding.

As of December 31, 2009, the Company's major shareholder is CJ Corporation, which

owns 32.26% of the outstanding shares, including preferred shares.

2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its

non-consolidated financial statements are summarized below.

Basis of Financial Statement Presentation

The Company maintains its accounting records in Korean won and prepares statutory

financial statements in the Korean language (Hangul) in conformity with accounting

principles generally accepted in the Republic of Korea. Certain accompanying principles

applied by the Company that confirm with financial accounting standards and accounting

principles in the Republic of Korea may not confirm with generally accepted accounting

principles in other countries. Accordingly, these financial statements are intended for use

by those who are informed about Korean accounting principles and practices. The

accompanying financial statements have been condensed, restructured and translated

into English from the Korean language financial statements.

The following is a summary of significant accounting policies followed by the Company in

the preparation of its non-consolidated financial statements.

Revenue Recognition

Revenue is the gross inflow of economic benefits arising in the ordinary course of the

Company’s activities and is measured as the fair value of the consideration received or

receivable for the sale of goods and services in the said ordinary course of the

Company’s activities. Revenue is shown as net of value-added tax, sales discounts and

sales returns. The Company recognizes revenue when the amount of revenue can be

reliably measured, and it is probable that future economic benefits will flow into the

Company.


Revenue from the sale of goods is recognized when the significant risks and rewards of

ownership of goods are transferred to the buyer.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in banks, and financial

instruments with original maturity of three months or less. These financial instruments

are readily convertible into cash without significant transaction costs and bear low risks

from changes in value due to interest rate fluctuations.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts and notes receivable.

Allowances are calculated based on the estimates made through a reasonable and

objective method.

Inventories

The quantities of inventories are determined using the perpetual method and periodic

inventory count, while the costs of inventories are determined using the

moving-weighted average method, except for materials in transit which are stated at

actual cost as determined by the specific identification method. Inventories are stated at

the lower of cost or net realizable value. Net realizable value is the estimated selling

price in the ordinary course of business, less applicable variable selling expense.

Replacement cost is used for the estimate of net realizable value of raw materials. If,

however, the circumstances which caused the valuation loss cease to exist, the

valuation loss is reversed up to the original carrying amount before valuation. The said

reversal is deducted from cost of sales.

Investments in Securities

Costs of securities are determined using the moving-weighted average method.

Investments in equity securities or debt securities are classified into trading securities,

available-for-sale securities and held-to-maturity securities, depending on the acquisition

and holding purpose. Investments in equity securities of companies, over which the

Company exercises a significant control or influence, are recorded using the equity

method of accounting. Trading securities are classified as current assets while

available-for-sale securities and held-to-maturity securities are classified as long-term

investments, excluding those securities that mature or are certain to be disposed of

within one year, which are then classified as current assets.

Held-to-maturity securities are measured at amortized cost while available-for-sale and

trading securities are measured at fair value. However, non-marketable securities,

classified as available-for-sale securities, are carried at cost when the fair values are not

readily determinable.

Gains and losses related to trading securities are recognized in the income statement,

while unrealized gains and losses of available-for-sale securities are recognized under

other comprehensive income and expense. Realized gains and losses of

available-for-sale securities are recognized in the income statement.


Equity-method Investments

Investees over which the Company can exercise significant influence should reflect any

changes in equity after the initial purchase date. Under the equity method, the Company

records changes in its proportionate ownership in the book value of the investee in

current operations, as capital adjustments or as adjustments to retained earnings,

depending on the nature of the underlying change in the book value of the investee. All

other changes in equity should be accounted for under other comprehensive income and

expense.

Property and Equipment, and Related Depreciation

Land is measured at fair value and property, plant and equipment, except land, are

stated at cost, which includes acquisition cost, production cost and other costs required

to prepare the asset for its intended use.

An increase as a result of a revaluation is credited directly to equity under other

accumulated comprehensive income and expense. However, the decrease as a result of

a revaluation is deducted directly from equity under other accumulated other

comprehensive income and expense to the extent of any balance existing in the

revaluation surplus in respect of that asset and the residual is recognized as profit or

loss.

Property, plant and equipment are stated net of accumulated depreciation calculated

using straight-line method based on the following estimated useful lives:

Estimated Useful Lives

Buildings and structures 4 - 30 years

Machinery and equipment 3 - 8 years

Gardens 4 - 30 years

Expenditures incurred after the acquisition or completion of assets is capitalized if they

enhance the value of the related assets over their recently appraised value or extend the

useful life of the related assets. Routine maintenance and repairs are charged to

expense as incurred.

Intangible Assets

Intangible assets are stated at cost, which includes acquisition cost, production cost and

other costs required to prepare the asset for its intended use. Intangible assets are

stated net of accumulated amortization calculated using straight-line method based on

the following estimated useful lives:

Estimated Useful Lives

Goodwill 5 - 10 years

Industrial property rights 5 - 10 years

Goodwill represents the excess of the cost of an acquisition over the fair value of the

Company’s share in the net identifiable assets of the acquired subsidiary or associate at

the date of acquisition.


Impairment of Assets

When the book value of an asset is significantly greater than its recoverable value due to

obsolescence, physical damage or an abrupt decline in the market value of the asset,

the said decline in value is deducted from the book value to agree with recoverable

amount and is recognized as an asset impairment loss for the period. When the

recoverable value subsequently exceeds the book value, the impairment amount is

recognized as gain for the period to the extent that the revised book value does not

exceed the book value that would have been recorded without the impairment. Reversal

of impairment of goodwill is not allowed.

Stock and Bond Issuance Costs

Stock issuance costs are charged directly to paid-in capital in excess of par value. Bond

issuance costs are charged directly to bond issuance price and accounted for as

increase in discount on bonds or decrease in premium on bonds.

Discounts on Bonds

Discounts on bonds are amortized using the effective interest method over the maturity

of the bonds and the amortized current portion is recorded as bond interest expense.

Income Tax and Deferred Income Tax

Income tax expense includes the current income tax under the relevant income tax law

and the changes in deferred tax assets or liabilities. Deferred tax assets and liabilities

represent temporary differences between financial reporting and the tax bases of assets

and liabilities. Deferred tax assets are recognized for temporary differences which will

decrease future taxable income or operating loss to the extent that it is probable that

future taxable income will be available against which the temporary differences can be

utilized. Deferred tax effects applicable to items in the shareholders’ equity are directly

reflected in the shareholders’ equity

Translation of Assets and Liabilities Denominated in Foreign Currencies

Monetary assets and liabilities denominated in foreign currencies are translated into

Korean won at the rates of exchange in effect at the date of statement of financial

position, and the resulting translation gains and losses are recognized in current

operations.

Accrued Severance Benefits

Employees and directors with at least one year of service are entitled to receive a

lump-sum payment upon termination of their employment with the Company based on

their length of service and rate of pay at the time of termination. Accrued severance

benefits represent the amount which would be payable assuming all eligible employees

and directors were to terminate their employment as of the date of statement of financial

position.

The Company has partially funded the accrued severance benefits through severance

insurance deposits with an insurance Company. Deposits made by the Company are

recorded as deductions from accrued severance benefits.


The Company deposits certain portion severance benefits to National Pension Service

according to National Pension Law. The deposit amount is recorded as deduction from

accrued severance benefits.

Derivatives

All derivative instruments are accounted for at their fair value according to the rights and

obligations associated with the derivative contracts. The resulting changes in fair value

of derivative instruments are recognized either under the income statement or

shareholders’ equity, depending on whether the derivative instruments qualify as a cash

flow hedge. Fair value hedge accounting is applied to a derivative instrument purchased

with the purpose of hedging the exposure to changes in the fair value of an asset or a

liability or a firm commitment that is attributable to a particular risk. The resulting

changes in the fair value of derivatives that are designated and qualify as cash flow

hedges are recognized under the shareholders’ equity under accumulated other

comprehensive income and expense.

Share-based Payments

In case of equity-settled share-based payment, the fair value of the goods or employee

services received in exchange for the grant of the options is recognized as an expense

and a capital adjustment. If the fair value of goods or employee services cannot be

estimated reliably, the fair value is estimated based on the fair value of the equity

granted.

For cash-settled share-based payment, the fair value of the obligation the Company will

assume is determined by the fair value of the goods or employee services received in

exchange for the grant of the options. Until the liability is settled, the Company is

required to measure the fair value at date of statement of financial position and at

settlement date. The change in fair value is recognized as an expense.

Provisions and Contingent Liabilities

When there is a probability that an outflow of economic benefits will occur due to a

present obligation resulting from a past event, and whose amount is reasonably

estimable, a corresponding amount of provision is recognized in the financial statements.

However, when such outflow is dependent upon a future event, is not certain to occur, or

cannot be reliably estimated, a disclosure regarding the contingent liability is made in the

notes to the financial statements.

Government Grants

Government grants received, which are to be repaid, are recorded as liability, while

grants without obligation to be repaid are offset against cost of assets purchased with

such grants. Grants received for a specific purpose are offset against the specific

expense for which it was granted, and other grants are recorded as a gain for the period.


3. Short-term Investments

Short-term investments as of December 31, 2009 and 2008, consist of the following:

(In thousands of Korean won) 2009 2008

Passbook accounts1 ￦ 682,073 ￦ 1,427,322

Time deposits1 246,545,000 3,000,000

Short-term loans receivable 158,766 3,239,891

Available-for-sale securities 1,166,491 240,115

￦ 248,552,330 ￦ 7,907,328

1 As of December 31, 2009, passbook accounts are subject to withdrawal restrictions in

relation to government-sponsored research, and ￦2,545 million of time deposit is

subject to withdrawal restrictions related to the Company’s agreement with a bank to

promote the Company’s products.

4. Accounts and Notes Receivable

On September 21, 2007, the Company entered into an agreement with Kookmin Bank to

transfer the trade accounts receivable from certain selected 3,448 customers amounting

to ￦367,995 million, and for asset securitization pursuant to the Asset Securitization

Law in Korea. The Company transferred trade accounts receivable and in return,

received ￦240,000 million in cash and subordinated beneficiary certificates amounting

to ￦127,995 million, which are recorded as trade accounts and notes receivable. As a

result of the above asset securitization, the Company recorded ￦14,399 million of loss

on disposal of trade accounts receivable as non-operating expense for the year ended

December 31, 2009.

5. Inventories

Inventories as of December 31, 2009 and 2008, consist of the following:

(In millions of Korean won) 2009 2008

Finished goods and merchandise ￦ 133,612 ￦ 170,154

Semi-finished goods and work-in-process 26,119 44,114

Raw materials and supplies 103,984 214,142

Stored goods 8,797 10,600

Materials-in-transit 130,836 131,788

403,348 570,798

Less: Allowance for inventory valuation (2,804) (3,360)

￦ 400,544 ￦ 567,438


Inventories are insured against fire and other casualty losses for up to ￦454,987million

as of December 31, 2009.

6. Long-Term Available-For-Sale Securities

Long-term available-for-sale securities as of December 31, 2009 and 2008, consist of

the following:

2009 2008

(in thousands of

Korean won) Detail

Acquisition

Cost

Fair Value

or Net Book

Value

Recorded

Book Value

Recorded

Book Value

Marketable investments (1) ￦ 7,073,656 ￦ 6,405,145 ￦ 6,405,145 ￦ 1,278,975

Non-marketable

investments (2) 11,713,215 527,839,508 9,679,820 1,542,345

Other investments (3) 14,737,437 13,690,129 14,737,437 12,374,387

￦ 33,524,308 ￦547,934,782 ￦ 30,822,402 ￦ 15,195,707

(1) Marketable investments

Marketable investments as of December 31, 2009 and 2008, consist of the following:

2009 2008

(in thousands ofKorean won)

Number of

Shares

Owned

Percentage

of Ownership

(%)

Acquisition

Cost Fair Value

Recorded

Book Value

Recorded

Book Value

A-Motion Co., Ltd. 5,137 0.01 ￦ 200,001 ￦ 4,264 ￦ 4,264 ￦ 2,286

Shinhan Financial

Group Co.,Ltd. 147 0.00 6,027 6,350 6,350 -

KT Corporation 130,653 0.05 5,095,467 5,108,532 5,108,532 -

Neuralstem Inc. 615,309 1.91 1,772,161 1,285,999 1,285,999 1,276,689

￦ 7,073,656 ￦6,405,145 ￦6,405,145 ￦ 1,278,975


(2) Non-marketable investments

Non-marketable investments as of December 31, 2009 and 2008, consist of the

following:

2009 2008

(in thousands of Korean

won, except number of

shares and percentage

of ownership)

Number

of Shares

Owned

Percentage

of

Ownership

(%)

Acquisition

Cost

Market

Value or

Net book

Value

Recorded

Book

Value

Recorded

Book

Value

Samsung Life Insurance Co., Ltd. 959,151 4.80 ￦ 776,468 ￦522,995,450 ￦ 776,468 ￦ 776,468

Samsung Lions Co., Ltd. 29,999 15.00 149,995 - - -

Nature & Human Co., Ltd. 31,840 15.86 159,200 175,858 159,200 159,200

Bioholdings Co., Ltd. 9,286 3.57 250,000 - - -

Dream CIS Co., Ltd. 3,120 3.10 100,050 - - -

Ginseng Science Inc. 19,900 0.49 9,950 48,861 9,950 9,950

KPX Biotech Co., Ltd. ¹

(Formerly Ace Biotech Inc.) 5,652 0.62 100,000 39,543 100,000 100,000

Ezmedicom Inc. ¹ 80,000 0.35 200,000 46,659 200,000 200,000

Incheon Development Co., Ltd. 685 2.85 14,800 16,024 14,800 14,800

Pharmtech Holdings Co., Ltd. 68,640 1.99 200,000 - - -

The Korea Economic Daily Co., Ltd. ¹ 2,872 0.02 40,600 18,179 40,600 40,600

Jebun Industry Co., Ltd. 39,792 18.88 227,215 795,782 227,215 227,215

Korea Alcohol Sales Co., Ltd. 2,172 0.60 11,553 43,700 11,553 11,553

Julynet Co., Ltd. 28,014 15.30 1,333,350 - - -

Sang-yeon Tech Co., Ltd. 2 0.00 1,889 1,889 1,889 1,889

Eland Retail. Ltd

(Formerly New Core Co., Ltd.) 133 0.00 670 2,112 670 670

Join Co., Ltd. 86,000 3.26 2,150,000 925,300 2,150,000 -

Haitai Confectionery & Foods Co., Ltd 426,000 3.68 5,987,475 2,730,151 5,987,475 -

Total ￦11,713,215 ￦527,839,508 ￦9,679,820 ￦1,542,345

The fair values of non-marketable equity securities could not be reliably estimated.

Accordingly, these equities are presented at their acquisition cost.

¹As of December 31, 2009, the net asset values of the investments have declined

below their acquisition costs. However, the Company did not adjust their carrying

values to their net asset values, as their net asset values are likely to recover in the

future.


(3) Other investments

Other investments as of December 31, 2009 and 2008, consist of the following:


Acquisition

Cost

Market

Value or

Net book

Value

Recorded

Book Value

Recorded

Book Value

Investments in partnerships ￦ 81,500 ￦ 103,624 ￦ 81,500 ￦ 1,071,500

Investments in private equity fund 14,655,737 13,586,313 14,655,737 11,302,687

Others 200 192 200 200

￦14,737,437 ￦13,690,129 ￦14,737,437 ￦12,374,387

Valuation Loss on Available-For-Sale Securities

For the years ended December 31, 2009 and 2008, the changes in valuation gain (loss)

on long-term available-for-sale securities are as follows:

2009 2008

(in millionsof Korean won)

January1, 2009

Changesdue tomerger

ValuationAmount

December31, 2009

January1, 2008

ValuationAmount

December31, 2008

Short-term available-for-sale securities ￦ (11,074) ￦ - ￦ (52,366) ￦ (63,440) ￦ - ￦ (11,074) ￦ (11,074)

A-Motion Co., Ltd. (28,872) - 1,543 (27,329) (12,665) (16,207) (28,872)

Shinhan Financial

Group Co.,Ltd. - 1,777 (139) 1,638 - - -

KT Corporation - 385,425 (74,601) 310,824 - - -

Neuralstem Inc. (386,468) - 7,261 (379,207) - (386,468) (386,468)

￦(426,414) ￦387,202 ￦(118,302) ￦(157,514) ￦(12,665) ￦(413,749) ￦(426,414)


7. Equity-Method Investments

Equity-method investments as of December 31, 2009, consist of the following:

(in thousands of Korean won, except number of shares and percentage of ownership)

Number of Percentage of Acquisition Net Book Recorded

Investee Shares Ownership(%) Cost Value Book Value

Superfeed Co., Ltd. 2,428,630 99.99 ￦ 12,169,243 ￦ 18,064,014 ￦ 17,366,711

CJ MD1 Co., Ltd. 40,000 100.00 200,000 (646,694) -

Shindongbang CP

Corporation 2,991,624 99.72 79,436,681 41,056,473 70,882,120

Samho F&G Corp. 16,714,090 46.51 19,994,908 11,659,031 19,404,880

Hasunjung General

Food Co., Ltd. 90,000 100.00 33,183,311 23,568,370 33,244,080

CJ Liaocheng

Biotech Co., Ltd. - 100.00 47,225,960 131,182,575 129,765,362

CJ Do Brasil Ind. Com.

Prod. Alim. Ltda. - 99.99 57,707,125 41,141,978 40,768,060

CJ America Inc. 156 100.00 19,732,715 16,474,338 15,581,101

CJ China Ltd. 299 99.66 157,890 7,527,352 8,086,381

P.T. Cheil Jedang Indonesia 102,224 99.99 97,869,072 168,304,301 164,418,416

CJ Qingdao Foods Co., Ltd. - 100.00 16,906,391 (307,611) -

CJ Beijing Beverage Co., Ltd. - 100.00 14,949,363 10,833,664 10,789,500

CJ Europe Gmbh. - 100.00 150,338 3,941,796 3,946,292

Annie Chun's Inc. 2,390,383 100.00 11,164,151 (1,089,113) 505,827

CJ Pacific Corp. 5 100.00 56,620 1,512,040 1,512,040

CJ Nutracon Pty. Ltd. 7,500,000 100.00 5,391,100 4,167,987 4,106,236

Liaocheng Lantian

Cogenerations Plant Co., Ltd. - 100.00 9,708,468 11,774,696 11,217,346

Beijing Ershang

CJ Food Co., Ltd. - 49.00 5,076,782 6,969,339 6,969,339

CJ Omni Inc. 1,977 87.05 6,958,804 5,473,545 6,646,770

CJ International

Trading Co., Ltd. - 100.00 564,180 4,197,514 4,197,514

CJ Pharma Research

India Pvt. Ltd. - 100.00 1,573,390 1,216,168 1,216,168

CJ&Hacl Foodtech Co., Ltd. - 47.39 14,854,113 12,863,348 12,863,348

CJ Toyota Tsusho

Philippines Inc. 3,019,966 52.94 7,632,450 7,073,888 7,073,888

Total ￦ 462,663,055 ￦ 526,958,999 ￦ 570,561,379


Equity-method investments as of December 31, 2008, consisted of the following:

(in thousands of Korean won, except number of shares and percentage of ownership)

Number of Percentage of Acquisition Net Book Recorded

Investee Shares Ownership(%) Cost Value Book Value

Samyang Oil Co., Ltd. 3,778,784 99.99 ￦ 18,981,276 ￦ 27,552,412 ￦ 27,222,889

Superfeed Co., Ltd. 2,428,630 99.99 12,169,243 19,249,135 18,843,846

CJ MD1 Co., Ltd. 40,000 100.00 200,000 824,032 824,451

Shindongbang CP

Corporation 2,991,624 99.72 79,436,681 33,771,306 70,805,801

Samho F&G Corp. 16,714,090 46.51 19,994,908 9,885,099 18,772,632

Hasunjung General

Food Co., Ltd. 90,000 100.00 33,183,311 26,780,301 37,791,193

CJ Liaocheng

Biotech Co., Ltd. - 100.00 47,225,960 104,238,920 104,295,110

CJ Do Brasil Ind. Com.

Prod. Alim. Ltda. - 99.99 57,707,125 40,328,918 40,363,464

CJ America Inc. 289 100.00 19,732,715 11,464,143 9,449,614

CJ China Ltd. 299 99.66 157,890 6,844,581 6,812,774

P.T. Cheil Jedang Indonesia 102,224 99.99 97,869,072 130,394,191 130,205,745

CJ Qingdao Foods Co., Ltd. - 100.00 16,906,391 5,163,167 5,226,761

CJ Beijing Beverage Co., Ltd. - 100.00 14,949,363 16,990,898 16,990,898

CJ Ord River Sugar

Pty., Ltd. 575,369,100 52.53 9,954,132 - -

CJ Europe Gmbh. - 100.00 150,338 2,890,104 2,670,009

Annie Chun's Inc. 2,031,825 84.99 7,767,001 66,795 2,451,605

CJ Pacific Corp. 5 100.00 56,620 1,574,316 1,574,316

CJ Nutracon Pty. Ltd. 7,500,000 100.00 5,391,100 2,781,224 2,781,224

Liaocheng Lantian

Cogenerations Plant Co., Ltd. - 100.00 9,708,468 5,775,308 5,775,308

Beijing Ershang

CJ Food Co., Ltd. - 49.00 5,076,782 7,310,598 7,310,598

CJ Omni Inc. 1,977 87.05 6,958,804 4,645,813 6,405,650

CJ International

Trading Co., Ltd. - 100.00 564,180 2,519,741 2,519,741

CJ Pharma Research

India Pvt. Ltd. - 100.00 1,573,390 1,472,393 1,472,393

CJ&Hacl Foodtech Co., Ltd. - 38.11 4,483,697 3,757,936 3,757,936

Total ￦470,198,447 ￦466,281,331 ￦524,323,958


Changes in goodwill (negative goodwill) for the year ended December 31, 2009, are as

follows:


January 1, Increase Amortization December 31,Investee 2009 (Decrease) (Reversal) 2009

Shindongbang CPCorporation ￦ 37,240,295 ￦ - ￦ 7,093,389 ￦ 30,146,906

Samho F&G Corp. 9,253,733 - 1,276,377 7,977,356Hasunjung General Food Co., Ltd. 11,080,732 - 1,385,092 9,695,640Annie Chun's Inc. 2,384,810 - 789,870 1,594,940CJ Omni Inc. 1,759,837 - 586,612 1,173,225CJ&Hacl Foodtech Co., Ltd. - 106,650 106,650 -

Total ￦ 61,719,407 ￦ 106,650 ￦ 11,237,990 ￦ 50,588,067

Changes in goodwill (negative goodwill) for the year ended December 31, 2008, were as

follows:


January 1, Increase Amortization December 31,Investee 2008 (Decrease) (Reversal) 2008

Shindongbang CPCorporation ￦ 44,333,685 ￦ - ￦ 7,093,390 ￦ 37,240,295

Samho F&G Corp. 10,530,110 - 1,276,377 9,253,733Hasunjung General Food Co., Ltd. 12,465,823 - 1,385,091 11,080,732CJ Qingdao Foods Co., Ltd. (82,973) - (82,973) -CJ Beijing Beverage Co., Ltd. (101,249) - (101,249) -CJ Cambodia Co., Ltd. 9,389 - 9,389 -Annie Chun's Inc. 2,190,356 1,369,955 1,175,501 2,384,810CJ Omni Inc. 2,346,450 75,790 662,403 1,759,837

Total ￦ 71,691,591 ￦ 1,445,745 ￦ 11,417,929 ￦ 61,719,407


Information relating to the elimination of unrealized gains and losses arising from

transactions with equity-method investees as of December 31, 2009 and 2008, are as

follows:


Investee 2009 2008

Samyang Oil Co., Ltd. ￦ - ￦ (329,523)

Superfeed Co., Ltd. (697,303) (405,289)

CJ MD1 Co., Ltd. 56,447 419

Shindongbang CP Corporation (321,259) (205,800)

Samho F&G Corp. (231,507) (366,200)

Hasunjung General Food Co., Ltd. (19,930) (69,840)

CJ Liaocheng Biotech Co., Ltd. (1,417,213) 56,190

CJ Do Brasil Ind. Com.Prod.Alim.Ltda. (373,918) 34,546

CJ America Inc. (893,237) (2,014,529)

CJ China Ltd. 559,029 (31,807)

P.T. Cheil Jedang Indonesia (3,885,885) (188,446)

CJ Qingdao Food Co., Ltd. (1,787,737) 63,594

CJ Europe Gmbh. 4,496 (220,095)

CJ Beijing Beverage Co., Ltd. (44,164) -

CJ Nutracon Pty., Ltd. (61,751) -

Liaocheng Lantian Cogenerations Plant Co., Ltd. (557,350) -

Total ￦ (9,671,282) ￦ (3,676,780)


The changes in the book values of equity-method investments for the year ended

December 31, 2009, are as follows:


Gain (loss) on

valuation of Other

January 1, Equity-method Increase December 31,

Investee 2009 Investments (Decrease) 2009

Samyang Oil Co., Ltd. ￦ 27,222,889 ￦ (1,961,157) ￦ (25,261,732) ￦ -

Superfeed Co., Ltd. 18,843,846 (1,477,135) - 17,366,711

CJ MD1 Co., Ltd. 824,451 (824,451) - -

Shindongbang CP Corporation 70,805,801 76,319 - 70,882,120

Samho F&G Corp. 18,772,632 1,030,455 (398,207) 19,404,880

Hasunjung General Food Co., Ltd. 37,791,193 (4,527,168) (19,945) 33,244,080

CJ Liaocheng Biotech Co., Ltd. 104,295,110 36,672,235 (11,201,983) 129,765,362

CJ Do Brasil Ind. Com. Prod. Alim. Ltda. 40,363,464 (8,560,753) 8,965,349 40,768,060

CJ America Inc. 9,449,614 7,484,807 (1,353,320) 15,581,101

CJ China Ltd. 6,812,774 1,876,880 (603,273) 8,086,381

P.T. Cheil Jedang Indonesia 130,205,745 42,707,717 (8,495,046) 164,418,416

CJ Qingdao Foods Co., Ltd. 5,226,761 (5,332,565) 105,804 -

CJ Beijing Beverage Co., Ltd. 16,990,898 (5,445,937) (755,461) 10,789,500

CJ Europe Gmbh. 2,670,009 1,514,918 (238,635) 3,946,292

Annie Chun's Inc. 2,451,605 (5,447,258) 3,501,480 505,827

CJ Pacific Corp. 1,574,316 55,287 (117,563) 1,512,040

CJ Nutracon Pty. Ltd. 2,781,224 599,242 725,770 4,106,236

Liaocheng Lantian Cogenerations Plant Co., Ltd. 5,775,308 6,442,335 (1,000,297) 11,217,346

Beijing Ershang CJ Food Co., Ltd. 7,310,598 192,430 (533,689) 6,969,339

CJ Omni Inc. 6,405,650 681,333 (440,213) 6,646,770

CJ International Trading Co., Ltd 2,519,741 2,027,664 (349,891) 4,197,514

CJ Pharma Research India Pvt. Ltd. 1,472,393 (329,496) 73,271 1,216,168

CJ&Hacl Foodtech Co., Ltd. 3,757,936 (438,212) 9,543,624 12,863,348

CJ Toyota Tsusho Philippines Inc. - (283,892) 7,357,780 7,073,888

Total ￦524,323,958 ￦ 66,733,598 ￦ (20,496,177) ￦ 570,561,379


The changes in the book values of equity-method investments for the year ended

December 31, 2008, were as follows:


Gain (loss) on

valuation of Other

January 1, Equity-method Increase December 31,

Investee 2008 Investments (Decrease) 2008

Samyang Oil Co., Ltd. ￦ 11,259,212 ￦ 1,013,349 ￦ 14,950,328 ￦ 27,222,889

Superfeed Co., Ltd. 19,815,297 (5,564,653) 4,593,202 18,843,846

CJ MD1 Co., Ltd. 383,900 440,551 - 824,451

Shindongbang CP Corporation 76,074,932 (35,801,489) 30,532,358 70,805,801

Samho F&G Corp. 15,245,950 (1,209,485) 4,736,167 18,772,632

Hasunjung General Food Co., Ltd. 32,725,686 (1,109,941) 6,175,448 37,791,193

CJ Liaocheng Biotech Co., Ltd. 50,044,462 28,147,303 26,103,345 104,295,110

CJ Do Brasil Ind. Com. Prod. Alim. Ltda. 59,951,074 (22,969,726) 3,382,116 40,363,464

CJ America Inc. 4,098,440 2,668,257 2,682,917 9,449,614

CJ China Ltd. 4,469,204 708,259 1,635,311 6,812,774

P.T. Cheil Jedang Indonesia 87,409,862 14,863,736 27,932,147 130,205,745

CJ Qingdao Foods Co., Ltd. 168,290 (1,836,141) 6,894,612 5,226,761

CJ Beijing Beverage Co., Ltd. 10,128,916 35,129 6,826,853 16,990,898

CJ Ord River Sugar Pty., Ltd. - (1,968,736) 1,968,736 -

CJ Europe Gmbh. 1,147,308 1,004,579 518,122 2,670,009

CJ Cambodia Co., Ltd.(Preferred) 4,354,584 - (4,354,584) -

Annie Chun's Inc. 3,222,254 (2,478,608) 1,707,959 2,451,605

CJ Pacific Corp. 1,029,324 178,024 366,968 1,574,316

CJ Nutracon Pty. Ltd. 2,487,442 136,248 157,534 2,781,224

Liaocheng Lantian Cogenerations Plant Co., Ltd. 7,642,088 (4,472,876) 2,606,096 5,775,308

Beijing Ershang CJ Food Co., Ltd. 5,069,414 39,261 2,201,923 7,310,598

CJ Omni Inc. 5,627,766 (497,011) 1,274,895 6,405,650

CJ International Trading Co., Ltd 564,180 2,550,526 (594,965) 2,519,741

CJ Pharma Research India Pvt. Ltd. - (128,327) 1,600,720 1,472,393

CJ&Hacl Foodtech Co., Ltd. - (28,254) 3,786,190 3,757,936

Total ￦402,919,585 ￦ (26,280,025) ￦147,684,398 ￦524,323,958


Gain or loss on equity-method investments recorded under other cumulative

comprehensive income for the year ended December 31, 2009, consist of the following:

2009

Changes

(in thousands of January 1, Valuation Included in due to December 31,

Korean won) 2009 Amount Earnings merger 2009

Gain on valuation ofequity-method investments ￦ 121,515,384 ￦ (9,740,654) ￦ - ￦ (15,207,727) ￦ 96,567,003

Loss on valuation ofequity-method investments (3,187,294) (6,481,989) - - (9,669,283)

￦ 118,328,090 ￦(16,222,643) ￦ - ￦ (15,207,727) ￦ 86,897,720

Gain or loss on equity-method investments recorded under other cumulative

comprehensive income for the year ended December 31, 2008, consisted of the

following:

2008

(in thousands of January 1, Valuation Included in December 31,

Korean won) 2008 Amount Earnings 2008

Gain on valuation of

equity-method investments ￦ 13,764,813 ￦ 107,750,571 ￦ - ￦ 121,515,384

Loss on valuation of

equity-method investments (28,739,653) 25,518,222 34,137 (3,187,294)

￦ (14,974,840) ￦ 133,268,793 ￦ 34,137 ￦ 118,328,090


Financial information of significant investees as of and for the year ended December 31,

2009, follows:

(in thousands of Korean won) 2009

Net income

Investee Assets Liabilities Sales (loss)

Superfeed Co., Ltd. ￦ 31,701,218 ￦ 13,636,430 ￦ 39,441,492 ￦ (1,185,172)

CJ MD1 Co., Ltd. 16,175,202 16,821,896 88,822,861 (1,470,726)Shindongbang CP Corporation 115,206,734 74,035,310 121,783,845 7,305,565Samho F&G Corp. 54,570,371 29,506,608 100,555,290 4,669,510Hasunjung General Food Co., Ltd. 33,589,658 10,021,288 28,654,798 (3,191,987)CJ Liaocheng Biotech Co., Ltd. 240,552,655 109,370,080 231,466,514 38,145,638CJ Do Brasil Ind. Com. Prod.Alim.Ltda. 199,650,131 158,508,153 120,608,818 (8,152,289)

CJ America Inc. 58,612,964 42,138,626 147,689,262 6,363,515CJ China Ltd. 176,146,068 168,593,793 382,108,657 1,290,302

P.T. Cheil Jedang Indonesia 505,541,669 337,237,207 499,394,194 46,405,201CJ Qingdao Foods Co., Ltd. 26,748,738 27,056,349 53,696,689 (5,576,582)

CJ Beijing Beverage Co., Ltd. 17,154,916 6,321,252 10,020,666 (5,401,774)CJ Europe Gmbh. 82,617,901 78,676,105 262,627,381 1,290,326Annie Chun's Inc. 6,717,977 7,807,090 19,707,382 (1,272,291)CJ Pacific Corp. 1,512,040 - 74,809,530 55,287CJ Nutracon Pty. Ltd. 24,481,337 20,313,350 10,075,104 660,993Liaocheng Lantian

Cogenerations Plant Co., Ltd. 40,387,110 28,612,414 32,654,565 6,999,686Beijing Ershang CJ Food Co., Ltd. 19,259,453 5,036,270 27,519,180 392,716CJ Omni Inc. 8,774,710 2,487,193 15,766,315 1,456,502CJ International Trading Co., Ltd. 4,758,572 561,058 7,254,304 2,027,664CJ Pharma Research India Pvt. Ltd. 1,240,571 24,403 309,570 (329,496)CJ&Hacl Foodtech Co., Ltd. 33,754,541 6,611,063 - (699,661)CJ Toyota Tsusho Philippines Inc. 15,556,841 2,195,052 - (536,241)


Financial information of significant investees as of and for the year ended December 31,

2008, follows:

(in thousands of Korean won) 2008

Net income

Investee Assets Liabilities Sales (loss)

Samyang Oil Co., Ltd. ￦50,364,270 ￦ 22,809,519 ￦54,993,728 ￦ 856,863

Superfeed Co., Ltd. 38,440,431 19,190,472 52,284,684 (5,458,140)

CJ MD1 Co., Ltd. 13,532,685 12,708,653 86,340,995 469,116

Shindongbang CP Corporation 118,008,405 84,142,547 98,831,776 (28,846,306)

Samho F&G Corp. 56,515,484 35,265,193 99,864,966 532,965

Hasunjung General Food Co., Ltd. 44,607,530 17,827,229 43,880,118 344,990

CJ Liaocheng Biotech Co., Ltd. 220,883,655 116,644,735 153,304,852 28,079,015

CJ Do Brasil Ind. Com. Prod.Alim.Ltda. 180,207,667 139,878,749 107,806,846 (22,979,985)

CJ America Inc. 63,170,977 51,706,834 106,052,188 1,847,412

CJ China Ltd. 216,953,699 210,086,456 402,018,918 899,679

P.T. Cheil Jedang Indonesia 568,652,132 438,257,816 446,273,876 17,013,735

CJ Qingdao Foods Co., Ltd. 36,293,669 31,130,502 44,240,995 (2,444,557)

CJ Beijing Beverage Co., Ltd. 25,963,280 8,972,381 9,216,474 (66,119)

CJ Ord River Sugar Pty., Ltd. 737,972 10,555,887 - -

CJ Europe Gmbh. 106,775,366 103,885,262 248,635,501 887,215

Annie Chun's Inc. 5,659,336 5,580,744 15,247,524 (1,467,676)

CJ Pacific Corp. 1,642,135 67,819 35,467,735 220,407

CJ Nutracon Pty. Ltd. 19,981,677 17,200,453 14,820,753 5,645

Liaocheng Lantian

Cogenerations Plant Co., Ltd. 42,550,587 36,775,279 20,410,698 (4,472,876)

Beijing Ershang CJ Food Co., Ltd. 19,832,405 4,912,773 23,958,477 80,125

CJ Omni Inc. 8,698,331 3,361,640 10,021,469 164,079

CJ International Trading Co., Ltd. 2,904,207 384,467 4,776,853 1,520,260

CJ Pharma Research India Pvt. Ltd. 1,480,682 8,290 - (128,327)

CJ&Hacl Foodtech Co., Ltd. 9,885,563 25,090 - (69,453)

Market value information of an investee as of December 31, 2009 and 2008, follows:


2009 2008

Investee

Market

Value

Recorded

Book Value

Market

Value

Recorded

Book Value

Samho F&G Corp. ￦ 17,382,654 ￦ 19,404,880 ￦ 9,025,609 ￦ 18,772,632


8. Property, Plant and Equipment

Property, plant and equipment as of December 31, 2009 and 2008, and the changes in

the accounts for the years ended December 31, 2009 and 2008, consist of the following:

2009

(in millions of

Korean won) Land

Buildings

and structures

Machinery

and equipment

Construction

- in-progress Others Total

Balance at January

1, 2009￦ 1,414,877 ￦ 312,797 ￦ 235,639 ￦ 128,452 ￦ 5,578 ￦ 2,097,343

Acquisition 657 60,160 49,464 69,499 943 180,723

Changes due to

merger19,861 2,423 3,196 670 24 26,174

Transfer 36,976 35,912 15,438 (88,326) - -

Disposal (8,065) (6,014) (4,033) - (125) (18,237)

Depreciation - (23,457) (67,664) - (1,559) (92,680)

Others - (123) (197) 71 (6) (255)

Balance at December

31, 2009 ￦ 1,464,306 ￦ 381,698 ￦ 231,843 ￦ 110,366 ￦ 4,855 ￦ 2,193,068

2008

(in millions of

Korean won) Land

Buildings

and structures

Machinery

and equipment

Construction

- in-progress Others Total

Balance at January

1, 2008 ￦ 477,563 ￦ 269,739 ￦ 193,264 ￦ 80,466 ￦ 5,454 ￦ 1,026,486

Gain on revaluation 935,907 - - - - 935,907

Acquisition 14,712 55,176 96,491 71,849 1,551 239,779

Transfer 856 15,074 7,836 (23,862) 96 -

Disposal (14,161) (5,255) (718) - (164) (20,298)

Depreciation - (21,718) (61,400) - (1,359) (84,477)

Others - (219) 166 - (1) (54)

Balance at December

31, 2008 ￦ 1,414,877 ￦ 312,797 ￦ 235,639 ￦ 128,453 ￦ 5,577 ￦ 2,097,343

As of December 31, 2009, the Company's land amounting to ￦130,000 million ispledged as collateral for long-term debt (Note 12).

In 2008, the Company sold the land and buildings of its SuWon plant to Hwa-sung

Bongdam PFV Corp. for ￦68,332 million, from which a gain on disposal of ￦48,118

million was recorded as non-operating income.


As of December 31, 2009, depreciable assets are insured against fire and other casualty

losses, contingent business interruption losses, director and officer liability losses, and

product liability losses for up to ￦1,633,054 million, ￦682,951 million, ￦50,000 million

and ￦6,658 million, respectively.

As of December 31, 2009, the value of land based on the posted price issued by the

Korean tax authority amounted to ￦877,610 million (2008: ￦842,450 million).

As of December 31, 2009, construction-in-progress consists mainly of costs incurred in

the construction of the Osong plant.

9. Intangible Assets

The details of the changes in intangible assets for the years ended December 31, 2009

and 2008, are as follows:

2009

Industrial

(in thousands of Korean won) GoodwillPropertyRights Total

Balance at January 1, 2009 ￦ 6,895,127 ￦ 6,352,267 ￦ 13,247,394

Acquisition - 3,225,063 3,225,063

Disposal - (127) (127)

Amortization (3,362,054) (1,294,597) (4,656,651)

Balance at December 31, 2009 ￦ 3,533,073 ￦ 8,282,606 ￦ 11,815,679

Accumulated amortization ￦ 14,500,932 ￦ 11,054,594 ￦ 25,555,526

2008

Industrial

(in thousands of Korean won) Goodwill Property Rights Total

Balance at January 1, 2008 ￦ 10,570,678 ￦ 5,478,082 ￦ 16,048,760

Acquisition - 1,916,167 1,916,167

Disposal - (700) (700)

Amortization (3,675,551) (1,041,282) (4,716,833)

Balance at December 31, 2008 ￦ 6,895,127 ￦ 6,352,267 ￦ 13,247,394

Accumulated amortization ￦ 11,138,878 ￦ 9,760,379 ￦ 20,899,257


Amortization of intangible assets is charged to the following accounts:


Production costs ￦ 4,167 ￦ -Selling and administrative expenses 4,652,484 4,716,833

￦ 4,656,651 ￦ 4,716,833

The Company recognized research and development costs of ￦51,985 million (2008:

￦51,684 million) as expense for the year ended December 31, 2009.

10. Short-Term Borrowings

Short-term borrowings as of December 31, 2009 and 2008, consist of the following:

Annual

Interest

Rates (%)

(in thousands of Korean won) 2009 2009 2008

Bank overdraft facilities - ￦ - ￦ 16,482,713

General short-term loan 3.5 - 4.0 14,175,000 173,010,000

Usance financing 1.35 – 6.12 419,169,781 451,482,509

￦ 433,344,781 ￦ 640,975,222

As of December 31, 2009, the Company has bank overdraft agreements of up to a

maximum of ￦91,000 million with five banks, including Woori Bank.

11. Debentures

Debentures outstanding as of December 31, 2009 and 2008, consist of the following:

Annual

Interest

Rates (%)


Non-guaranteed public bonds 4.6 - 5.5 ￦ 250,000,000 ￦ -

Bonds payable in foreign currency1 4.4 - 6.5 268,548,000 289,225,000

518,548,000 289,225,000

Less: Discounts (2,448,404) (2,820,003)

Less: Current maturities (93,255,190) -

￦ 422,844,406 ￦ 286,404,997


1 In order to reduce the impact of changes in exchange rates and interest rates on future

cash flows, the Company enters into foreign currency and interest rate swap contracts.

As of December 31, 2009, an unrealized loss of ￦4,861 million resulting from these

swap contacts was recorded as other cumulative comprehensive income (Note 15).

12. Long-term Borrowings

Long-term borrowings as of as of December 31, 2009 and 2008, consist of the following:

Annual

Interest

Rates (%)


Local currency loans

Korea Exchange Bank 5.02 ￦ 50,000,000 ￦ 150,000,000

Shinhan Bank 5.00 - 5.01 150,000,000 150,000,000

Kookmin Bank 1 5.69 21,379,650 -

Nong Hyup Bank 4.00 5,000,000 -

Foreign currency loans (Won equivalent)

Woori Bank 0.70 - 2.10 119,648,620 94,332,896

Nong Hyup Bank 1.55 - 2.09 9,591,767 8,349,675

Kookmin Bank 0.74 - 2.31 77,280,437 -

The Korea Development Bank 0.70 - 2.12 28,157,034 6,199,203

461,057,508 408,881,774

Less: Current maturities (264,781,540) (154,440,887)

￦ 196,275,968 ￦ 254,440,887

1 A certain portion of the Company’s land as of December 31, 2009, is pledged as

collateral for the above long-term debt (Note 8).

In order to hedge the impact of fluctuations in interest rates of local currency loans

amounting to ￦200,000 million, the Company has entered into interest rate swap

contracts and recorded ￦672 million as loss on valuation of derivative instruments

under other cumulative comprehensive income for the year ended December 31, 2009.


Maturities of long-term loans outstanding as of December 31, 2009, excluding discounts

are as follows:

(in thousands of Korean won)Year of maturity Loans Debentures Total

2011 ￦ 175,140,000 ￦ 185,586,143 ￦ 360,726,1432012 250,000,000 7,126,550 257,126,5502013 - 3,563,275 3,563,275

￦ 425,140,000 ￦ 196,275,968 ￦ 621,415,968

13. Accrued Severance Benefits

Changes in accrued severance benefits for the years ended December 31, 2009 and

2008, consist of the following:

(In thousands of Korean won) 2009 2008

Balance at beginning of the year ￦ 83,579,408 ￦ 74,142,124Provision for severance benefits 24,338,835 27,767,353Changes due to merger 704,912 -Actual severance payments 21,147,074 18,330,069

87,476,081 83,579,408Less : Cumulative deposits to National Pension Fund (437,594) (498,191)

Severance insurance deposits (59,992,186) (56,226,461)

Balance at end of the year ￦ 27,046,301 ￦ 26,854,756

As of December 31, the Company estimates severance payable to all employees to be

￦87,476 million (2008: ￦83,579 million) and records the corresponding amount as

accrued severance benefits.

Also, the Company funded 69% (2008: 67%) of severance payable through severance

insurance deposits with three insurance companies including Samsung Life Insurance

Co., Ltd.

14. Commitments and Contingencies

As of December 31, 2009, the Company has corporate purchase card agreements with

a credit of up to ￦44,000 million with two banks, including Industrial Bank of Korea.

As of December 31, 2009, the Company has trade notes receivable discounting facilities

with two Korean banks, including Shinhan Bank, with a combined limit of up to

￦240,000 million and collateral loan facilities on accounts receivables for up to

￦215,000 million with four Korean banks, including Woori Bank. Also the Company has

general loan agreements for up to ￦245,200 million with five financial institutions,

including Nonghyup.


As of December 31, 2009, the Company is a party to various legal claims and

proceedings amounting to ￦5,938 million as the plaintiff and ￦5,311 million as

defendant. The Company's management believes that, although the outcome of these

cases is uncertain, the ultimate resolution of these cases will not have a material

adverse effect on the operations or financial position of the Company.

As of December 31, 2009, the Company has technical assistance agreements with

certain companies requiring payment for use of the technology or from sales of products

manufactured using such technology. Total royalty fees incurred for the year ended

December 31, 2009, with respect to these agreements amounted to approximately

￦6,220 million.

As of December 31, 2009, the Company has banker's usance borrowing agreements of

up to a maximum of ￦1,333,983 million with 16 banks, including Woori Bank.

As of December 31, 2009, one blank check is held as a collateral by Korea Agricultural

Trade Corporation to guarantee certain contractual obligations.

As of December 31, 2009, in connection with performance guarantees, the Company is

provided with payment guarantees of ￦4,555 million from Seoul Guarantee Insurance

Company. The Company’s export is insured up to ￦49,541 million by Korea Export

Insurance Corporation.

15. Derivative Instruments

Derivative instruments as of December 31, 2009 and 2008, consist of the following:

2009

Trading Hedge

(In thousands

of Korean won)

Valuation

gain

Valuation

loss

Valuation

gain

Valuation

loss

Other

comprehensive

income¹

Commodity futures ￦ 8,145,098 ￦ (57,563) ￦ - ￦ - ￦ -

Commodity option 4,833,276 (1,530,588) - - -

Foreign currency forward 43,772 (2,493,413) - - -

Foreign currency option 64,687 (1,831,727) - - -

Foreign currency swap - - - (20,566,860) 2,956,734

Interest rate swap - - - - 3,082,370

￦13,086,833 ￦ (5,913,291) ￦ - ￦(20,566,860) ￦ 6,039,104

¹The ￦4,711 million, net of tax, was recorded as other cumulative comprehensive

income.


2008

Trading Hedge

(In thousands

of Korean won)

Valuation

gain

Valuation

loss Valuation gain

Valuation

loss

Other

comprehen-

sive income¹

Commodity futures ￦ 890,813 ￦ (7,678,560) ￦ - ￦ -

￦

-

Commodity option 4,418,900 (22,195,416) - - -

Foreign currency forward 14,353,735 (11,215,382) - - -

Foreign currency option 6,878,855 (1,273,438) - - -

Foreign currency swap - - 44,137,959 (5,312,000) (9,189,284)

Interest rate swap 2,357,280 (2,357,281) - (9,516,807)

￦28,899,583 ￦(44,720,077) ￦ 44,137,959 ￦ (5,312,000) ￦(18,706,091)

¹The ￦14,285 million, net of tax, was recorded as other cumulative comprehensive

income.

As of December 31, 2009, the Company is provided with payment guarantees of

US$ 10,000 thousand for futures trading from Bank of America (BOA) in relation to the

above futures contracts.

The Company applies cash flow hedge accounting and is exposed to fluctuations in cash

flows up to July 8, 2011. Total other cumulative comprehensive income recognized under

the cash flow hedge amounts to ￦7,094 million, of which ￦2,697 million is expected to

be recognized as income within 12 months from December 31, 2009.

16. Capital Stock

Under its Articles of Incorporation, the Company is authorized to issue 50 million shares

of capital stock with a par value of ￦5,000 per share. As of December 31, 2009,

12,040,644 shares of common stock and 1,640,566 preferred stock are issued and

outstanding. Also the Company may, among the authorized number of shares, issue 10

million shares of non-voting, cumulative and participating preferred stock. The Board of

Directors of the Company may decide on the dividend rate of preferred shares if the

shares are issued at a dividend rate of greater than 9% of the par value.


The preferred stock the Company has issued as of December 31, 2009, consists of:

Preferred Stock Third-preferred Stock

Number of

shares issued1,327,433 313,133

Voting rights No voting rights No voting rights. However, if

these shares are not paid out

prior to common stock, voting

rights are granted until the next

general shareholders’ meeting

deciding the paying out of

preferred dividends.

Maturity Date No maturity Conversion to common stock on

January 1, 2010. However, if

certain amounts of dividends are

not paid out before the maturity

date, the maturity is extended.

Dividends Non-participating, non-cumulative

and entitled to receive dividends

of more than 1% of par value

than common share

Participating and cumulative

Minimum dividend

rate (annual)- 9%

The Company is authorized to issue to investors, other than current shareholders,

convertible debentures and debentures with warrants with face values of up to ￦250

billion each. The convertible debentures are assigned to common stock and preferred

stock by ￦125 billion each.

The Company may grant option to purchase shares of common stock to key employees

or directors who have contributed or are expected to contribute to the management and

technological innovation of the Company with the approval of shareholders. The grant

limit of the option is 15% of outstanding shares. However, within 10% of outstanding

shares, the option may be granted with the Board of Directors’ approval.

The 598,485 shares of second preferred stock were converted into common stock on

March 11, 2009. Accordingly, common stock increased by ￦2,992 million, while

preferred stock decreased by ￦2,992 million.

The Company issued 164,971 shares of common stock upon merging with its subsidiary,

Samyang Oil Co., Ltd., and 500 shares of common stock through exercise of stock

options.


17. Dividends

2009 2008

Number of shares

eligible for dividends

Common stock 11,895,072 11,265,567

Preferred stock 1,326,309 1,326,310

Second-preferred stock - 597,863

Third-preferred stock 312,405 312,405

Dividend rate Common stock 70.00% 20.00%

Preferred stock 71.00% 21.00%

Second-preferred stock - 29.00%

Third-preferred stock 70.00% 29.00%

Dividend amount

(in millions of

Korean won)

Common stock ￦ 41,633 ￦ 11,265

Preferred stock ￦ 4,708 ￦ 1,393

Second-preferred stock - ￦ 867

Third-preferred stock ￦ 1,093 ￦ 453

Dividend payout ratro (Dividend / Net income) 17.43% 55.11%

Dividend yield ratio

(Dividend share /

Market price)

Common stock 1.70% 0.56%

Preferred stock 5.85% 2.19%

Second-preferred stock - 0.87%

Third-preferred stock 1.70% 1.01%

18. Treasury Stock

As of December 31, 2009, the Company holds 145,572 common shares and 1,852

preferred shares as treasury stock and intends to dispose of the remaining treasury

shares depending on the market conditions.


19. Stock Option Plan

On September 1, 2007, the Company assumed certain stock options which have been

granted before September 1, 2007 and outstanding as of September 1, 2007. On

February 29, 2008 and March 9, 2009, the Company granted its employees stock

options to purchase its shares at a pre-determined exercise price. Details of stock

options are as follows

Date of the grant

August 14, April 27, March 11, April 8, March 8, March 13, February 29, March 9,2001 2002 2003 2004 2005 2006 2008 2009

Options transferred1

2,516 10,730 19,111 11,507 14,615 46,500 - -Options granted - - - - - - 86,000 16,500Exercised 740 4,516 1,184 2,855 3,345 19,000 - -Forfeited - - - - - - - -Options outstanding

as of December 31, 2009 1,776 6,214 17,927 8,652 11,270 27,500 86,000 16,500Exercise price per share ￦ 40,000 ￦58,000 ￦ 41,000 ￦69,000 ￦71,000 ￦120,000 ￦ 277,000 ￦136,000Exercise period from the

From the date of the grant 2~9 years 2~9 years 2~9 years 2~9 years 2~9 years 2~9 years 4~10 years 4~10 years

1 Options transferred represents number of granted options not yet exercised as of

September 1, 2007.

The exercise price can be adjusted in the case of the issuance of new shares, stock

dividends, stock splits, or stock mergers.

The compensation expense related to stock options was ￦2,270,393 thousand for the

year ended December 31, 2009, while the estimated compensation expense for the

periods thereafter is ￦5,821,942 thousand.

The fair value of each option grant was estimated using the Black-Scholes option-pricing

model based on the following assumptions:

Date of the grant

August 14, April 27, March 11, April 8, March 8, March 13, February 29, March 9,2001 2002 2003 2004 2005 2006 2008 2009

Risk-free interest rates 5.10% 6.37% 4.69% 4.56% 4.12% 4.93% 5.09% 4.57%Expected life 3 years 3 years 3 years 3 years 3 years 3 years 5 years 5 yearsExpected stock price volatility 70.60% 66.18% 54.81% 38.48% 35.73% 36.34% 56.59% 71.66%Expected forfeiture rate 1.00% 1.00% 1.00% 6.00% 6.00% 6.00% 6.00% 6.00%

Additionally, the Company has granted stock incentives based on a three years

performance of the management and officers of the Company from January 1, 2007. The

Company paid the incentives with cash on the maturity date.


20. Assets and Liabilities Denominated in Foreign Currencies

As of December 31, 2009 and 2008, assets and liabilities denominated in foreign

currencies and related gains and losses on foreign currency translation, are as follows:

(only Korean won in thousands)

2009 2008

Account Foreign Currencies

Korean Won

equivalent

Translation

Gain

Translation

Loss

Korean Won

equivalent

Assets

Trade accounts and

notes receivable

AU$ - ￦ - ￦ - ￦ - ￦ 4,785

EUR 70,131 117,419 - 8,638 555,654

JPY 359,106,551 4,534,869 - 148,807 5,135,488

US$ 19,104,284 22,306,162 - 474,351 22,576,389

26,958,450 - 631,796 28,272,316

Other accounts and

notes receivable

CNY 581,038 99,392 - 17 83,646

EUR 146,921 245,987 - 6,457 243,320

INR 293,279 7,355 - 168 5,352

JPY 30,948,367 390,822 - 250 596,645

THB 451,482 15,811 - 45 33,810

US$ 40,836,760 47,681,001 - 4,166,134 43,690,986

48,440,368 - 4,173,071 44,653,759

Short-term loans

receivable

EUR 880 1,473 - 165 10,973

JPY 159,746 2,017 - 848 12,702

US$ 12,656 14,777 - 340 101,200

18,267 - 1,353 124,875

Others CNY 1,502,635 257,041 3,086 14,255 351,638

EUR 1,927 3,227 59 132 14,895

INR 2,715,087 68,094 38 70 76,113

JPY 3,623,372 45,757 2,587 7,243 31,983

SG$ 557,210 463,191 26,167 40,269 100,765

THB 1,065,086 37,299 104 276 67,885

US$ 2,964,377 3,461,206 1,422 658,043 9,386,306

4,335,815 33,463 720,288 10,029,585


(only Korean won in thousands)

2009 2008

Account Foreign CurrenciesKorean Wonequivalent

TranslationGain

TranslationLoss

Korean Wonequivalent

Liabilities

Trade accounts andnotes payable

CHF 55,141 ￦ 62,112 ￦ - ￦ 560 ￦ -

AU$ 1,693,676 1,769,993 19,769 5,027 -

EUR 706,801 1,183,383 24,719 1,858 522,035

JPY 275,683,093 3,481,381 82,253 - 1,255,979

US$ 10,556,791 12,326,109 114,584 10,933 6,881,365

18,822,978 241,325 18,378 8,659,379

Debentures US$ 148,774,860 173,709,527 13,485,000 110,140 286,404,997

173,709,527 13,485,000 110,140 286,404,997

Long-termborrowings

US$ 62,915,033 73,459,593 8,057,850 28,850 54,440,887

73,459,593 8,057,850 28,850 54,440,887

Short-termborrowings

CNY - - - - 48,235

CHF 779,460 878,007 29,070 - -

EUR 13,408,118 22,448,944 1,168,033 - 16,402,965

GBP 243,300 456,852 36,104 - -

JPY 150,553,454 1,901,219 106,748 - 967,694

US$ 337,003,047 393,484,758 14,415,092 1,009,006 434,063,615

419,169,780 15,755,047 1,009,006 451,482,509

Other accounts andnotes payable

CHF 90,987 102,490 103 - -

EUR 749,110 1,254,220 32,793 - 2,852,062

INR 191,260 4,797 - - -

JPY 143,692,086 1,814,572 50,548 - 170,569

US$ 8,330,165 9,726,301 95,357 28,532 13,609,296

12,902,380 178,801 28,532 16,631,927

Accrued expenses CNY 134,993 23,092 1,599 - 22,880

EUR - - - - 257,552

INR - - - - 832

JPY - - - - 652,341

GBP - - - - 121

US$ 928,047 1,083,588 2 - 219,323

1,106,680 1,601 1,153,049

Current portionof long-term debts

US$ 217,945,748 254,473,455 25,835,362 28,850 54,440,887

254,473,455 25,835,362 28,850 54,440,887

Total ￦ 63,588,449 ￦ 6,750,264


21. Income Tax

Income tax expense for the years ended December 31, 2009 and 2008, consists of the

following:


Current income taxes ￦ 24,353,057 ￦ 23,488,633

Deferred income taxes 32,660,124 195,287,913

Deferred income taxes charged directlyto equity

(366,965) (201,362,063)

Others (209,706) -

Income tax expense ￦ 56,436,510 ￦ 17,414,483

Reconciliation between net income before tax and income tax expense for the years

ended December 31, 2009 and 2008, follows:


Net income before tax ￦ 328,575,622 ￦ 42,780,555

Income tax based on statutory rate 79,491,100 11,733,853

Adjustments

Non-taxable income (16,367,023) (170,007)

Non-deductible expense 6,477,432 7,340,442

Tax credit (9,700,945) (4,814,153)

Effect of the change in tax rates (539,716) 3,305,526

Others (2,924,338) 18,822

Income tax expense ￦ 56,436,510 ￦ 17,414,483

Effective tax rate 17.18% 40.71%


Deferred income tax assets and liabilities from tax effect of temporary differences including available tax credit carryforwards as ofDecember 31, 2009, are as follows:

(in thousands of Korean won) Accumulated Temporary DifferencesBeginning Balance Merger Increase (Decrease) Ending Balance

Ⅰ. Deferred tax arising from temporary differencesSpecial reserves appropriated for tax purposes ￦ (10,666,667) ￦ - ￦ (32,666,666) ￦ (43,333,333)Deferred foreign exchange loss 211,973 - - 211,973Losses on investments (54,125,511) - (66,603,760) (120,729,271)Allowance for doubtful accounts 7,925,801 - 9,945,770 17,871,571Loss on valuation of inventories 3,360,330 - (556,510) 2,803,820Severance benefits 4,336,374 - (4,336,374) -Depreciation 3,501,103 - 175,493 3,676,596Gain on valuation of derivative instruments (23,115,134) - (2,317,507) (25,432,641)Interest income (385,310) - (1,236,310) (1,621,620)Loss on impairment of available-for-sale securities 2,694,030 - - 2,694,030Government subsidy 270,000 - 500,000 770,000Goodwill 22,486,774 - (8,432,540) 14,054,234Valuation on foreign currency translation 63,261,187 - (88,115,894) (24,854,707)Others 6,293,775 6,937,935 (8,089,497) 5,142,213

26,048,725 6,937,935 (201,733,795) (168,747,135)Ⅱ. Temporary differences directly related to shareholders’ equity (980,595,344) (19,315,866) 30,149,550 (969,761,660)

￦ (954,546,619) ￦ (12,377,931) ￦ (171,584,245) ￦ (1,138,508,795)

(in thousands of Korean won) Deferred Income Tax Asset (Liability)Beginning Balance Merger Increase (Decrease) Ending Balance Current Non-Current

Ⅰ. Deferred tax arising from temporary differencesSpecial reserves appropriated for tax purposes ￦ (2,346,667) ￦ - ￦ (7,186,666) ￦ (9,533,333) ￦ - ￦ (9,533,333)Deferred foreign exchange loss 51,298 - - 51,298 51,298 -Equity losses on investments 2,920,049 - (2,447,395) 472,654 - 472,654Allowance for doubtful accounts 1,902,568 - 2,406,877 4,309,445 4,154,689 154,756Loss on valuation of inventory 813,200 - (134,676) 678,524 678,524 -Severance benefits 954,002 - (954,002) - - -Depreciation 770,243 - 38,608 808,851 - 808,851Gain on valuation derivative of instruments (5,593,863) - (560,836) (6,154,699) (6,154,699) -Interest income (93,245) - (299,187) (392,432) (392,432) -Gain on disposal of property, plant and equipment - - - - - -Loss on impairment of available-for-sale securities 592,687 - - 592,687 - 592,687Government subsidy 59,400 - 110,000 169,400 - 169,400Goodwill 5,132,606 - (1,855,159) 3,277,447 2,040,675 1,236,772Valuation of foreign currency translation 15,309,207 - (21,324,046) (6,014,839) (6,014,839) -Others 1,589,142 - (86,677) 1,502,465 4,082,968 (2,580,503)

22,060,627 - (32,293,159) (10,232,532) (1,553,816) (8,678,716)Ⅱ. Temporary differences directly related to shareholders’ equity (202,889,885) (4,164,306) (366,965) (207,421,156) - (207,421,156)

￦ (180,829,258) ￦(4,164,306) ￦ (32,660,124) ￦ (217,653,688) ￦(1,553,816) ￦(216,099,872)


Deferred income tax assets and liabilities from tax effect of temporary differences including available tax credit carryforwards as ofDecember 31, 2008, are as follows:

(in thousands of Korean won) Accumulated Temporary DifferencesBeginning Balance Merger Increase (Decrease) Ending Balance

Ⅰ. Deferred tax arising from temporary differencesSpecial reserves appropriated for tax purposes ￦ (13,000,000) ￦ - ￦ 2,333,333 ￦ (10,666,667)Deferred foreign exchange loss 211,973 - - 211,973Losses on investments (80,405,536) - 26,280,025 (54,125,511)Allowance for doubtful accounts 12,765,221 - (4,839,420) 7,925,801Loss on valuation of inventories 2,005,944 - 1,354,386 3,360,330Severance benefits 4,708,864 - (372,490) 4,336,374Depreciation 821,031 - 2,680,072 3,501,103Gain on valuation of derivative instruments (6,224,458) - (16,890,676) (23,115,134)Interest income (515,017) - 129,707 (385,310)Gain on disposal of property, plant and equipment (6,959,340) - 6,959,340 -Loss on impairment of available-for-sale securities 2,837,932 - (143,902) 2,694,030Government subsidy 2,550,049 - (2,280,049) 270,000Goodwill 30,919,315 - (8,432,541) 22,486,774Valuation on foreign currency translation - - 63,261,187 63,261,187Others 18,173,501 - (11,879,726) 6,293,775

(32,110,521) - 58,159,246 26,048,725Ⅱ. Tax credit carryforwards 279,786 - (279,786) -Ⅲ. Temporary differences directly related to shareholders’ equity (5,555,715) - (975,039,629) (980,595,344)

￦ (37,386,450) ￦ - ￦ (917,160,169) ￦ (954,546,619)

(in thousands of Korean won) Deferred Income Tax Asset (Liability)Beginning Balance Merger Increase (Decrease) Ending Balance Current Non-Current

Ⅰ. Deferred tax arising from temporary differencesSpecial reserves appropriated for tax purposes ￦ (3,575,000) ￦ - ￦ 1,228,333 ￦ (2,346,667) ￦ - ￦ (2,346,667)Deferred foreign exchange loss 58,293 - (6,995) 51,298 51,298 -Equity losses on investments 2,453,541 - 466,508 2,920,049 2,920,049 -Allowance for doubtful accounts 3,510,436 - (1,607,868) 1,902,568 1,747,812 154,756Loss on valuation of inventory 551,635 - 261,565 813,200 813,200 -Severance benefits 1,294,937 - (340,935) 954,002 - 954,002Depreciation 225,783 - 544,460 770,243 - 770,243Gain on valuation derivative of instruments (1,711,726) - (3,882,137) (5,593,863) (5,593,863) -Interest income (141,630) - 48,385 (93,245) (93,245) -Gain on disposal of property, plant and equipment (1,913,819) - 1,913,819 - - -Loss on impairment of available-for-sale securities 780,431 - (187,744) 592,687 - 592,687Government subsidy 701,263 - (641,863) 59,400 - 59,400Goodwill 8,502,813 - (3,370,207) 5,132,606 2,040,675 3,091,931Valuation of foreign currency translation - - 15,309,207 15,309,207 15,309,207 -Others 4,997,713 - (3,408,571) 1,589,142 2,249,616 (660,474)

15,734,670 - 6,325,957 22,060,627 19,444,749 2,615,878Ⅱ. Tax credit carryforwards 251,807 - (251,807) - - -Ⅲ. Temporary differences directly related to shareholders’ equity (1,527,822) - (201,362,063) (202,889,885) - (202,889,885)

￦ 14,458,655 ￦ - ￦ (195,287,913) ￦ (180,829,258) ￦ 19,444,749 ￦ (200,274,007)


The Company periodically assesses its ability to recover deferred income tax assets. In

the event of a significant uncertainty regarding the Company’s ultimate ability to recover

such assets, a valuation allowance is recorded to reduce the assets to its estimated net

realizable value.

The Company did not recognize the income tax effect of a ￦122,682 million temporary

difference resulting from earnings arising from equity method investments as the

Company does not expect cash inflows, such as proceeds from the disposal of, or

receipts of dividends from the equity method investments within the foreseeable future.

Deferred income taxes charged directly to the shareholders’ equity are as follows:

2009 2008


TemporaryDifference

Deferred TaxTemporaryDifference

Deferred Tax

Gain on valuation ofavailable-for-sale securities ￦ 13,388 ￦ (88,130) ￦ (530,448) ￦ 116,699

Loss on valuation ofavailable-for-sale securities (54,617) 11,055 (5,573,183) 1,532,625

Loss on valuation ofderivative instruments 6,039,103 (1,327,642) (13,132,908) 2,888,279

Gain on revaluation of land (4,717,054) 1,037,752 935,907,574 (205,899,666)Loss on disposal of

treasury stock (1,040,808) (251,876) - -

￦ 240,012 ￦ (618,841) ￦916,671,035 ￦(201,362,063)

The gross balances of deferred tax assets and liabilities are as follows:

2009 2008

(in thousandsof Korean won)

Deferred taxassets

Deferred taxliabilities

Deferred taxassets

Deferred taxliabilities

Current ￦ 11,008,154 ￦ (12,561,970) ￦ 25,131,857 ￦ (5,687,108)

Non - current 3,435,120 (219,534,992) 5,623,019 (205,897,026)

22. Earnings Per Share

Basic earnings per share is computed by dividing net income allocated to common stock

by the weighted average number of common shares outstanding during the year. Net

income allocated to common stock is computed by subtracting dividend to preferred

stock.

Diluted earnings per share is computed by dividing diluted net income as adjusted by

adding back the after-tax amount of interest expense on any convertible debt and

dividends on any convertible preferred stock, by the weighted average number of

common shares and diluted securities outstanding during the year.


Basic earnings per share and diluted earnings per share for the years ended December

31, 2009 and 2008, are calculated as follows:

Basic earnings per share

(in millions of Korean won,

except earnings per share data) 2009 2008

Net income ￦ 272,139 ￦ 25,366

Adjustments

Dividends for preferred stock (5,802) (2,302)

Undeclared participating preferred stock dividend (27,208) (882)

Net income available for common stock 239,129 22,182

Weighted average number of shares of common stock¹ 11,867,223 11,265,567

Basic earnings per share ￦ 20,150 ￦ 1,969

¹ The calculation of weighed average number of shares of common stock is as follows:

Number of

shares

No. of

days

Weighted

average

Beginning balance 11,276,688 365 4,115,991,120

Treasury stock (11,124) 365 (4,060,260)

Transfer second-preferred stock

to common stock 598,485 365 218,447,025

Treasury stock (624) 365 (227,760)

Issuance due to merger 164,971 122 20,126,462

Treasury stock (164,964) 122 (20,125,608)

Exercise of stock options 500 93 46,500

Exercise of stock options 31,140 43 1,339,020

4,331,536,499

Weighted average number of shares of common stock for 2009

4,331,536,499 ÷ 365 days = 11,867,223 shares


Diluted earnings per share

(in millions of Korean won,

except earnings per share data) 2009 2008

Net income available for common stock ￦ 239,129 ￦ 22,181

Adjustment

Dividends for second-preferred stock

converted to common stock 6,280 -

Net income available for common stock and

common equivalent stock 245,409 22,181

Weighted average number of shares of

common stock and common stock equivalents¹ 12,231,784 11,309,508

Diluted earnings per share ￦ 20,063 ￦ 1,961

¹The calculation of weighed average number of shares of common stock equivalents is

as follows:

Number of

shares

Number

of days

Weighted number

of shares

Third-preferred Stock 313,133 365 114,293,545

Unexercised stock options 39,199 365 14,307,635

Exercised stock options 121 273 33,033

Exercised stock options 13,265 334 4,430,510

133,064,723

Weighted average number of shares of common stock for 2009

133,064,723 ÷ 365 days = 364,561 shares

The numbers of non-dilutive potential common stock as of December 31, 2009, are as

follows:

Shares to

be issued Conditions

Share options granted on

February 29, 200886,000 Exercise price of ￦277,000 per share

Share options granted on

March 9, 200916,500 Exercise price of ￦136,000 per share


23. Related Party Transactions

The parent company of the Company is CJ Corporation, and the subsidiaries and equity

method investees of the Company as of December 31, 2009, are as follows:

Local subsidiaries

CJ MD1 Co., Ltd., Shindongbang CP Corporation, Samho F&G Corp.,

Superfeed Co., Ltd., Dondonfarm Co., Ltd. Hasunjung General Food Co.,Ltd.

Foreign subsidiaries

CJ America, Inc., CJ Europe Gmbh, PT.CJ. Indonesia, CJ Liaocheng Biotech Co., Ltd.,

CJ China, Ltd., CJ Qingdao Foods Co., Ltd.,

CJ Beijing Beverage Co., Ltd., CJ Do Brasil Ind. Com. Prod. Alim. Ltda., CJ Nutracon Pty., Ltd,

Liaocheng Lantian Cogenerations Plant Co., Ltd., CJ International Asia Pte. Ltd.

Equity method investees

Annie Chun’s Inc., CJ Pacific Corp., CJ Omni Inc., CJ International Trading Co., Ltd.,

CJ Pharma Research India Pvt. Ltd., CJ&Hacl Foodtech Co., Ltd.,

CJ Toyota Tsusho Philippines Inc.

Significant transactions with related parties for the years ended December 31, 2009 and

2008, and the related receivables and payables as of December 31, 2009 and 2008, are

as follows:

Sales Purchases Accounts Receivable Accounts Payable

(in thousands of

Korean won) 2009 2008 2009 2008 2009 2008 2009 2008

Parent companies ￦ 501,168 ￦ 448,174 ￦17,101,319 ￦ 15,277,389 ￦ 55,802 ￦ 179,153 ￦ 1,554,574 ￦ 1,366,083

Subsidiaries 172,570,080 140,621,909 594,135,820 362,878,420 83,704,837 98,649,522 124,292,577 101,892,695

Equity-method

investees 1,888,966 4,088,557 46,034,980 36,806,000 399,692 230,022 60,482 1,298,802

Other associates 243,286,973 269,198,024 321,957,931 317,466,792 77,223,634 67,834,515 88,210,304 44,410,731

Total ￦418,247,187 ￦414,356,664 ￦979,230,050 ￦732,428,601 ￦161,383,965 ￦166,893,212 ￦214,117,937 ￦148,968,311

The Company has recorded allowance for doubtful accounts amounting to ￦1,583

million on the above accounts receivable.

For the year ended December 31, 2009, the Company recorded salaries of ￦40,169

million and stock compensation expenses of ￦2,270 million as key management

compensation.

Key management includes directors and executive officers who have the authority and

responsibility in the planning, directing and control of the Company operations.


The Company provided guarantees to indebtedness of related parties as of December

31, 2009 and 2008, as follows:

(in thousands of Korean won) Financial institutions Loan amounts Guarantee amounts

Guarantee 2009 2009 2008 2009 2008

Annie Chun’s Inc. BOA ￦ 5,254,200 ￦ 3,143,750 ￦ 5,254,200 ￦ 3,143,750

CJ America Inc. BOA and others 10,508,400 12,575,000 26,854,800 26,407,500

CJ Beijing Beverage Co., Ltd. Hana Bank and other 2,544,240 4,625,540 2,544,240 4,625,540

CJ China Ltd. BOA and others 124,333,054 137,977,633 152,789,801 164,190,220

CJ Do Brasil Ind. Com. Prod.

Alim. Ltda

Export-Import Bank

of Korea and others 128,355,436 97,740,750 130,690,636 97,740,750

CJ Europe Gmbh. Korea Exchange Bank

and other 12,866,952 14,104,963 16,742,800 17,762,200

CJ International Asia Pte. Ltd. Bank of Development

and others 19,292,255 3,131,175 58,380,000 12,575,000

CJ Liaocheng Biotech Co., Ltd. Export-Import Bank


CJ Nutracon Pty. Ltd. Korea Exchange Bank

and other 19,918,088 16,061,070 22,483,957 16,773,600

CJ Omni Inc. BOA 1,167,600 2,515,000 2,568,720 2,766,500

CJ Qingdao Food Co., Ltd. BOA 3,502,800 19,876,340 3,502,800 20,612,700

Liaocheng Lantian

Congeneration Plant Co.,Ltd.

Bank of Development

17,514,000 18,862,500 17,514,000 18,862,500

PT Cheil Jedang Indonesia Export-Import Bank

of Korea and other 192,070,200 260,774,100 204,913,800 260,774,100

PT CJ Superfeed Export-Import Bank


CJ Guiyang Feed Co., Ltd. Hana Bank - 628,750 - 628,750

CJ Beijing Bakery Co., Ltd. BOA and other 8,935,598 9,669,875 9,669,875

CJ Tianjin Feed Co., Ltd. Hana Bank - 1,131,750 8,935,598 1,131,750

CJ Shenyang Feed Co., Ltd BOA - 2,713,685 - 2,766,500

CJ Zhengzhou Feed Co., Ltd. Woori Bank - 892,825 - 892,825

CJ Harbin Feed Co., Ltd. Hana Bank - 754,500 - 754,500

CJ Vina Agri Co., Ltd. Citi Bank - 4,847,663 - 7,419,250

CJ Bakery Inc. BOA 5,838,000 6,287,500 5,838,000 6,287,500

CJ Tur Yem Sanayi Ve

Ticaret A. S

Korea Exchange Bank

- 1,776,220 - 1,776,220

Total ￦661,563,323 ￦744,583,089 ￦787,143,352 ￦833,193,680

In addition to the above guarantees, the Company provided performance guarantees to

PT Cheil Jedang Indonesia, PT CJ Superfeed, PT CJ Feed Jombang and CJ Do Brasil

Ind. Co. Prod. Alim. Ltda. amounting to ￦5,838 million, ￦4,087 million, ￦1,751 million

and ￦1,751 million, respectively.


24. Selling, General and Administrative Expenses


Salaries ￦ 166,072,625 ￦ 149,647,773

Provision for severance benefits 16,986,223 18,001,799

Employee benefits 24,082,052 19,485,257

Travel expense 19,858,763 22,782,107

Rent 13,531,392 13,128,703

Depreciation 26,931,961 22,935,008

Taxes and dues 13,000,880 11,783,790

Commission service charges 232,830,343 224,306,072

Advertising expense 43,905,160 51,879,716

Sales promotion expense 68,961,197 70,074,543

Transportation expense 129,588,977 124,170,180

Research expense 24,072,556 30,728,760

Expenses for company events 29,504,271 28,289,250

Stock compensation expense 2,223,319 8,538,235

Others 58,175,774 51,764,938

￦ 869,725,493 ￦ 847,516,131

25. Supplementary Information for Computation of Value Added

(in thousands of

Korean won) Cost of Sales

Selling, general and

administrative expenses Others

2009 2008 2009 2008 2009 2008

Wage and salaries ￦ 64,533,407 ￦ 64,076,208 ￦166,072,625 ￦149,647,773 ￦ 1,262,338 ￦ 1,079,823

Provision for

severances benefits 5,733,335 7,218,066 16,986,223 18,001,799 137,958 178,093

Employee benefits 12,743,350 13,408,843 24,082,052 19,485,257 197,287 144,368

Rent 8,175,253 7,839,706 13,531,392 13,128,703 - -

Depreciation and

amortization 65,752,800 61,542,531 31,584,445 27,651,841 - -

Taxes and dues 5,606,339 5,464,122 13,000,880 11,783,790 50,887 38,964

Total ￦162,544,484 ￦ 159,549,476 ￦265,257,617 ￦239,699,163 ￦ 1,648,470 ￦ 1,441,248


26. Supplemental Cash Flow Information

Significant transactions not affecting cash flows for the years ended December 31, 2009

and 2008, are as follows:


Reclassification of construction in-progress to property, plant and

equipment ￦ 88,393,690 ￦ 23,862,078

Reclassification of current maturities of long-term debts 383,996,054 158,105,858

Increase of other cumulative comprehensive income due to

gain on revaluation 4,717,054 935,907,574

Decrease of other cumulative comprehensive income due to

valuation and disposal of available-for-sale securities (41,229) (530,448)

Increase(decrease)of other cumulative comprehensive income due to

valuation of derivative instruments 6,039,103 (18,706,091)

Increase(decrease)of other cumulative comprehensive income due to

valuation of equity-method investments (16,222,643) 133,302,930

Reclassification of current portion of long-term prepaid expenses 1,201,265 1,200,098

Conversion of preferred stocks to common stock 2,992,425 -

Increase in current assets due to merger 14,955,369 -

Increase in non-current assets due to merger 37,479,872 -

Increase in current liabilities due to merger 22,935,448 -

Increase in non-current liabilities due to merger 4,430,127 -

Increase in capital stock due to merger 824,855 -

Increase in additional paid-in due to merger 24,296,837 -

Increase in treasury stock due to merger 25,067,537 -


27. Segment Information

A summary of information on the Company's operations by business segment as of and

for the years ended December 31, 2009 and 2008, are as follows:

Financial Data by Business Segment

2009

(in millions of Korean won)

Processed

Foods

Food &

Industrial

Ingredients

Bio and

Pharmaceuticals

Animal

Feeds Others Total

Sales

Sales to unassociated

customers ￦1,370,558 ￦1,576,026 ￦ 338,240 ￦ 545,082 ￦ 8,826 ￦3,838,732

Inter-segment sales 88,333 - - - 88,333

￦1,458,891 ￦1,576,026 ￦ 338,240 ￦ 545,082 ￦ 8,826 ￦3,927,065

Operating profit ￦ 136,088 ￦ 107,941 ￦ 204 ￦ 15,751 ￦ 7,945 ￦ 267,929

Property plant and equipment

& intangible assets ￦1,201,476 ￦ 738,147 ￦ 97,590 ￦ 166,106 ￦ 1,565 ￦2,204,884

Depreciation and amortization ￦ 43,320 ￦ 36,071 ￦ 8,683 ￦ 9,197 ￦ 66 ￦ 97,337

2008


Processed

Foods

Food &

Industrial

Ingredients

Bio and

Pharmaceuticals

Animal

Feeds Others Total

Sales

Sales to unassociated

customers ￦1,294,836 ￦1,339,278 ￦ 384,478 ￦ 460,088 ￦ 16,199 ￦3,494,879

Inter-segment sales 90,291 - - - - 90,291

￦1,385,127 ￦1,339,278 ￦ 384,478 ￦ 460,088 ￦ 16,199 ￦3,585,170

Operating profit ￦ 116,474 ￦ 74,231 ￦ 43,280 ￦ 19,216 ￦ 15,208 ￦ 268,409

Property plant and equipment

& intangible assets ￦1,151,047 ￦ 723,448 ￦ 127,327 ￦ 106,503 ￦ 2,266 ￦2,110,591

Depreciation and amortization ￦ 36,575 ￦ 33,899 ￦ 9,990 ￦ 8,602 ￦ 128 ￦ 89,194

Reconciliation of Operating Profit

(in millions of Korean won) 2009 2008

Business segment operating profit ￦ 267,930 ￦ 268,409

Inter-segment revenues 6,027 6,760

Operating profit per statements of income ￦ 261,903 ￦ 261,649


28. Last Quarter Financial Information

A summary of information on the Company's operations for the three-month periods

ended December 31, 2009 and 2008, follows:

(in millions of Korean won, except for per share amounts)

2009 2008

Sales ￦ 882,202 ￦ 873,062

Operating profit 23,032 52,309

Net income(loss) 41,456 (57,068)

Basic earnings (loss) per share 1,560 (5,066)

Diluted earnings (loss) per share 1,553 (5,066)

29. Comprehensive Income

Comprehensive income for the years ended December 31, 2009 and 2008, consists of:


Net income ￦ 272,139,112 ￦ 25,366,072

Other cumulative comprehensive income

Gain on valuation of available-for-sale securities, net of tax

of ￦(-)88,130 thousand (74,742) -

Loss on valuation of available-for-sale securities, net of tax

of ￦11,055 thousand (2008: ￦116,699 thousand) (43,562) (413,749)

Gain on valuation of equity-method investments (9,740,654) 107,750,571

Loss on valuation of equity-method investments (6,481,989) 25,552,359

Gain on valuation of derivative instruments, net of tax

of ￦- (2008: ￦1,532,625 thousand) - (4,040,557)

Loss on valuation of derivative instruments, net of tax

of ￦(-)1,328,603 thousand (2008: ￦2,888,279 thousand) 4,711,461 (10,244,629)

Loss on revaluation of land, net of tax

of ￦1,037,752 thousand (2008: ￦(-)205,899,666 thousand) (3,679,302) 730,007,908

Comprehensive income ￦ 256,830,324 ￦ 873,977,975


30. Merger

On July 20, 2009, the Board of Directors approved the Company’s merger with Samyang

Oil Co., Ltd, a subsidiary. Details of the merger are as follows:

Profile of acquired company

Samyang Oil Co., Ltd. was incorporated in 1978 to manufacture and sell oil food

products. As of the date of merger, par value of capital stock of Samyang Oil Co., Ltd.

was ￦18,896 million, and the Company owned 99.99% of the shares issued and

outstanding.

Merger accounting

The book values of the assets and liabilities of the merged subsidiary as of the merger

date were used in the consolidation into the Company. The difference between the net

asset value and merger consideration was recorded as other capital surplus.

Details of merger

The date of merger contract June 15, 2009The date of approval July 20, 2009Approved by Board of directors 1

1As the merger is classified as small-sized, the approval of the Board of Directors has

the same effect as that of the shareholders.

Condensed financial statements

The statements of financial position of CJ CheilJedang Corporation and Samyang Oil

Co., Ltd. as of December 31, 2008, are as follows:

(in millions of Korean won)CJ CheilJedang

CorporationSamyang Oil

Co., Ltd.

Quick assets ￦ 410,405 ￦ 10,807Inventories 567,438 2,561Investments 606,817 11,699Property, plant and equipment 2,097,343 25,070Intangible assets 13,247 8Other non-current assts 57,095 219

Total Assets ￦ 3,752,345 ￦ 50,364

Current liabilities ￦ 1,390,665 ￦ 18,248Non-current liabilities 772,426 4,562

Total liabilities 2,163,091 22,810Capital stock 67,579 18,895Capital surplus 689,834 2,594Capital adjustments (47,451) -Other cumulative comprehensive income 837,664 8,948Retained earnings 41,628 (2,883)

Total shareholders’ equity 1,589,254 27,554Total liabilities and shareholders’ equity ￦ 3,752,345 ￦ 50,364


The statements of income of CJ CheilJedang Corporation and Samyang Oil Co., Ltd. for

the year ended December 31, 2008, are as follows:


CJ CheilJedang

Corporation

Samyang Oil

Co., Ltd.

Sales ￦ 3,494,878 ￦ 54,994

Cost of sales 2,385,713 50,949

Gross profit 1,109,165 4,045

Selling, general and administrative expenses 847,516 3,391

Operating profit 261,649 654

Non-operating income 599,927 409

Non-operating expenses 818,796 206

Income before income taxes ￦ 42,780 ￦ 857

Net income ￦ 25,366 ￦ 857

The statements of financial position of CJ CheilJedang Corporation and Samyang Oil

Co., Ltd. as of September 1, 2009, the date of merger, are as follows:


CJ CheilJedang

Corporation1

Samyang Oil

Co., Ltd.

Quick assets ￦ 549,028 ￦ 12,463

Inventories 430,429 2,492

Investments 654,543 11,088

Property, plant and equipment 2,112,897 26,173

Intangible assets 11,422 -

Other non-current assts 58,324 219

Total Assets ￦ 3,816,643 ￦ 52,435

Current liabilities ￦ 1,139,997 ￦ 22,935

Non-current liabilities 991,465 4,430

Total liabilities 2,131,462 27,365

Capital stock 67,579 18,896

Capital surplus 689,834 2,594

Capital adjustments (42,831) -

Other cumulative comprehensive income 858,230 15,151

Retained earnings 112,369 (11,571)

Total shareholders’ equity 1,685,181 25,070

Total liabilities and shareholders’ equity ￦ 3,816,643 ￦ 52,435

1The statement of financial position for CJ CheilJedang Corporation is as of June 30,

2009.


The statements of income of CJ CheilJedang Corporation and Samyang Oil Co., Ltd. for

the period from Jauary 1, 2009 to September 1, 2009, the date of merger, are as follows:


CJ CheilJedang

Corporation1

Samyang Oil

Co., Ltd

Sales ￦ 1,903,821 ￦ 35,275

Cost of sales 1,364,642 34,934

Gross profit 539,179 341

Selling, general and administrative expenses 418,524 1,830

Operating profit 120,655 (1,489)

Non-operating income 228,094 170

Non-operating expenses 241,823 7,369

Income before income taxes ￦ 106,926 ￦ (8,688)

Net income ￦ 84,719 ￦ (8,688)

1The statement of income for CJ CheilJedang Corporation is for six-month period ended

June 30, 2009.

31. Preparation for IFRS Adoption

The Company is required to prepare its financial statements in accordance with the

Korean International Financial Reporting Standards (K-IFRS) starting 2011, based on the

roadmap on the adoption of international Reporting Standards announced in March 2007.

In this regard, the Company organized a task force for its K-IFRS adoption and has

appointed external consultants to help in the adoption.

32. Approval of financial statements

The December 31, 2009 financial statements of the Company were approved by the

Board of Directors on March 8, 2010.

32. Subsequent Event

On January 1, 2010, the Company issued 313,133 shares of common stock due to the

third-preferred stock’s conversion into common stock. As a result, common stock

increased, while preferred stock equity decreased by ￦1,566 million each.

Report of Independent Accountants'

Review of Internal Accounting Control System

To the President of


We have reviewed the accompanying management’s report on the operations of the InternalAccounting Control System (“IACS”) of CJ CheilJedang Corporation (the “Company”) as ofDecember 31, 2009. The Company’s management is responsible for designing and operatingIACS and for its assessment of the effectiveness of IACS. Our responsibility is to review themanagement’s report on the operations of the IACS and issue a report based on our review.The management’s report on the operations of the IACS of the Company states that “basedon its assessment of the operations of the IACS as of December 31, 2009, the Company’sIACS has been designed and is operating effectively as of December 31, 2009 in all materialrespects, in accordance with the IACS standards established by the Internal AccountingControl System Operations Committee (IACSOC) of the Korea Listed CompaniesAssociation.”

Our review was conducted in accordance with the IACS review standards established by theKorean Institute of Certified Public Accountants. Those standards require that we plan andperform, in all material respects, the review of management’s report on the operations of theIACS to obtain a lower level of assurance than an audit. A review is to obtain anunderstanding of a company’s IACS and consists principally of inquiries of management and,when deemed necessary, a limited inspection of underlying documents, which is substantiallyless in scope than an audit.

A company’s IACS is a system to monitor and operate those policies and proceduresdesigned to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with accountingprinciples generally accepted in the Republic of Korea. Because of its inherent limitations,IACS may not prevent or detect a material misstatement of the financial statements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

Based on our review, nothing has come to our attention that causes us to believe thatmanagement’s report on the operations of the IACS, referred to above, is not presented fairly,in all material respects, in accordance with the IACS standards established by IACSOC.

Our review is based on the Company’s IACS as of December 31, 2009, and we did notreview management’s assessment of its IACS subsequent to December 31, 2009. Thisreport has been prepared pursuant to the Acts on External Audit for Stock Companies inKorea and may not be appropriate for other purposes or for other users.

Samil PricewaterhouseCoopersMarch 8, 2010

Report of the Operations of the Internal Accounting Control System

To the Board of Directors and Audit Committee ofCJ CheilJedang Corporation

I, as the Internal Accounting Control Officer (“IACO”) of CJ CheilJedang Corporation (“theCompany”), assessed the status of the design and operations of the Company’s internalaccounting control system (“IACS”) for the year ended December 31, 2009.

The Company’s management including the IACO is responsible for designing and operatingthe IACS. I, as the IACO, assessed whether the IACS has been effectively designed and isoperating to prevent and detect any error or fraud which may cause any misstatements of thefinancial statement, for the purpose of establishing the reliability of financial reporting and thepreparation of financial statements for external purpose. I, as the IACO, applied the IACSstandard for the assessment of design and operations of the IACS.

Based on the assessment on the operations of the IACS, the Company’s IACS has beeneffectively designed and is operating as of December 31, 2009, in all material respects, inaccordance with the IACS standards.

February 8, 2010

Chung Seung-WookInternal Accounting Control System Officer

Kim Jin-SooChief Executive Officer

슬라이드 1 - mscicorpdocs.msci.com/annual/ar_2009_315094.pdfnon-consolidated financial...

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