Dear customers and shareholders,

I’m glad to see you have survived through the eventful year and greet the New Year with you. First of all, I’d like to thank our customers and shareholders for continued support. My thanks also go to the employees of SK chemicals for making best efforts in achieving the goals.

Looking back on 2005, we were all faced with difficult economic conditions as oil price soared, won depreciated, and material cost rose. Global economic recovery was slow and Koreans had to struggle to survive the stagnant economy. All in all, it has been a very difficult year and businesses had to struggle to survive. It made us think more seriously about the future and try harder to survive.

As a result, we were able to change our business structure. In the field of life science, SK Pharm and In2Gen merged with SK chemicals. We have successfully established SK Pharma Beijing and our products were licensed in China. In the field of specialty chemicals, we have established SK Utis and Suzhou SK chemicals Company.

In Petrochemicals, we have established a basis for responsible management and sustainable growth. As for global strategies, we set up a PET factory in Poland and completed the management rationalization inside SK Keris.

We have also improved labor-management relations by coming to terms with the labor union. Both the labor and management now have a better insight into our current management environment, all of us agreed that preparing for the future is the key to mutual survival. With this, we were able to implement a new personnel management system in which employees are paid according to their performance and productivity.

These positive results may not be enough to ensure sustainable revenues and growth, because management conditions and business competition are becoming harsher. We need your help to overcome management difficulties and realize our goals in 2006. Below are some of our main objectives that we need to achieve together.

First, we need to establish a framework for our 2nd To-be Model.

In 2006, we will start developing our 2nd to-be model. In order to truly become a better company by 2008, we need to work very hard to achieve 2.8 trillion won in sales and 280 billion won in ordinary profits. In order to realize these goals, we will need a ‘challenging but achievable’ business plan for 2006. Our first step is to reach 2 trillion won in sales this year. So please establish a basis for becoming a better, or better yet, great company by achieving 2 trillion won in sales this year.

Second, we need to further improve our business structure particularly in the areas of specialty chemicals and life science.

In the area of specialty chemicals, we need to stabilize all the new businesses that we have invested in, develop new products, and implement new technologies as they are become our future businesses. As for life science, we will need to make a more effective use of our funds and invest more in R&D. R&D in particular is the most important part of our efforts towards ensuring our sustainable growth. The R&D center must contribute to our business growth through shared service and cooperation with other research centers.

Third, we need to establish a responsible management system.

We will establish a responsible management system ran by middle managers and have a seamless cooperative interaction between MPRS in order to ensure the competitiveness and independence of our business divisions. All the members of MPR in each business division must make concerted efforts to develop the best products and strengthen cost competitiveness. Along with improving their performance, they must also make self-development efforts to contribute to maximizing the company’s business competitiveness.

Fourth, we need to exert more effort in globalization.

We must develop a new business model based on our successful business launch in Poland, improved competitiveness in Indonesia, and business growth in China, so that we can expand our business in other countries for continued business growth.

We will be faced with more challenging changes in the future. So we need to prepare ourselves for difficult challenges that lie ahead of us, and adapt to changes earlier than others with the concerted efforts of labor and management. By doing so, I’m sure the future will be brighter for all of us. Let’s build our future with a positive attitude.

Happy New Year to you all!

Thank you.

January 1, 2006

Chang Geun Kim, CEO and Chairman of the Board