Form 6-K
Table of Contents

This Report on Form 6-K is incorporated by reference into the prospectus included in the Registration Statement on Form F-4 of Kookmin Bank (File No. 333-106262)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2003

 

 

Kookmin Bank

 

(Translation of registrant’s name into English)

 

9-1, 2-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea 100-703

 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F        X        Form 40-F         

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):         

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):         

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes                 No         X

 

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Table of Contents

TABLE OF CONTENTS

 

Summary of Semi-Annual Business Report

   4

1.    Introduction to the Bank

   5

1.1.        Business Purpose

   5

1.2.        History

   5

1.3.        Capital Structure

   5

1.4.        Dividend

   12

2.    Business

   13

2.1.        Business Overview

   13

2.2.        Market Shares

   13

2.3.        Source and Use of Funds

   15

2.4.        Principal Banking Activities

   17

2.5.        Property, Plants and Equipment

   21

2.6.        Other Details Relevant to Investment Decision

   22

3.    Financial Information

   24

4.    Independent Auditor

   25

4.1.        Compensation to the Independent Auditor

   25

5.    Corporate Governance and Affiliated Companies

   26

5.1.        Board of Directors

   26

5.2.        Audit Committee

   26

5.3.        Voting Rights of Shareholders

   27

5.4.        Compensation to the Directors

   27

5.5.        Affiliated Companies

   27

6.    Equity Securities

   29

6.1.        Major Shareholders

   29

6.2.        Market Price Information for the Previous Six Months

   29

7.    Directors, Senior Management and Employees

   30

7.1.        Executive Directors

   30

7.2.        Non-Executive Directors

   30

7.3.        Senior Management

   31

7.4.        Employees

   31

7.5.        Labor Union

   31

8.    Related Party Transaction

   32

8.1.        Transactions with the Largest Shareholders and Etc.

   32

 

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8.2.        Transactions with Shareholders (Other than the Largest Shareholders and Etc.), Directors and Employees

   34

9.    Exhibits

   36

9.1.        List of Financial Statements

   36

 

3


Table of Contents

Summary of Semi-Annual Business Report

 

On August 14, 2003, Kookmin Bank filed a semi-annual business report (the “Business Report”) with the Financial Supervisory Commission of Korea pursuant to the Securities and Exchange Act of Korea. This is a summary of the Business Report translated into English.

 

All references to “Kookmin Bank” mean Kookmin Bank on a non-consolidated basis, and all references to “we” or “us” “the Bank” mean Kookmin Bank and, as the context may require, its subsidiaries. Kookmin Bank means a new entity established by a merger with former Kookmin Bank and H&CB on the merger date of October 31, 2001. Sometimes we refer it to New Kookmin Bank. On the other hand, we use the “Former Kookmin Bank” for the name of the former Kookmin Bank, which had been another entity before it merged H&CB.

 

We were formed through a merger between the Former Kookmin Bank and H&CB, which merged into a new corporation named “Kookmin Bank” effective November 1, 2001. Accordingly, financial information in this Business Report since the merger date reflects the impact of the merger. Under generally accepted accounting principles in Korea, the Former Kookmin Bank is deemed the accounting acquirer of H&CB in the merger, and we have accounted for the acquisition using the purchase method of accounting. However, trust accounts are not accounted by the purchase method accounting according to the Korean Financial Supervisory Service’s guidelines.

 

Therefore, unless indicated otherwise, any comparative description or table of year 2000 or before 1) for bank accounts is based on the Former Kookmin Bank’s results and 2) for trust accounts is based on simple consolidated numbers of Former Kookmin Bank’s and H&CB’s results.

 

All references to “Won” or “W” in this document are to the currency of the Republic of Korea.

 

4


Table of Contents

1.    Introduction to the Bank

 

1.1.    Business Purpose

 

The business purpose of the Bank is to engage in the following business activities:

 

  n   The banking business as prescribed by the Bank Act; and

 

  n   The other businesses permitted by the Bank Act or other relevant Korea laws and regulations

 

1.2.    History

 

  n   November 1, 2001  Incorporated and Listed on the New York Stock Exchange

 

  n   November 9, 2001 Listed on the Korea Stock Exchange

 

  n   September 23, 2002 Integrated two brand operations onto a single information technology platform in connection with the merger

 

  n   December 4, 2002 Entered into a strategic alliance agreement with ING Bank N.V., which replaced the prior investment agreement with H&CB

 

  n   May 30, 2003 Merger agreement with Kookmin Credit Card was made and merger statement was officially submitted to FSS

 

1.3.    Capital Structure

 

1.3.1.    Common Shares

 

Kookmin Bank has authority to issue a total of 1,000,000,000 shares of capital stock according to its articles of incorporation. Kookmin Bank’s articles of incorporation also provide that it is authorized to issue shares of preferred stock up to one-half of all of the issued and outstanding shares of common stock. On completion of the merger between Former Kookmin Bank and H&CB, New Kookmin Bank issued 299,697,462 common shares.

 

Upon the resolution of shareholders’ meeting held on March 22, 2002, Kookmin Bank issued additional 17,979,954 common shares in connection with stock dividend of 6 percent.

 

On November 25, 2002 Goldman Sachs Capital Koryo, L.P. converted all of its convertible bonds into common shares. According to this conversion, on November 30, Kookmin Bank

 

5


Table of Contents

issued 10,581,269 common shares and distributed them to Goldman Sachs Capital Koryo, L.P.

 

As of June 30, 2003, 328,258,685 shares of common stock were issued and outstanding with paid-in capital of 1,641.2 billion Won.

 

Regarding the contemplated merger between Kookmin Bank and Kookmin Credit Card, once the proposed merger with Kookmin Credit Card is completed (scheduled on September 30, 2003), the total paid-in capital will amount to 1,681.9 billion Won, increased by 40.6 billion Won.

 

1.3.2. Treasury Stock

 

The following table shows the purchase and disposition of our treasury stock.

 

(Unit: in thousands of Won unless otherwise indicated)


Date    Transaction    Number of shares    Cost    Average cost per
one share

November 15, 2001

   Acquisition of fractional shares in the course of the merger    41,548 shares    1,794,885    43,200 Won

December 24, 2001

   Disposition due to exercise of stock option by a grantee    10,000 shares    432,003    48,900 Won

April 3, 2002

   Acquisition of fractional shares due to stock dividend    36,089 shares    2,071,557    57,400 Won

May 14, 2002

   Disposition pursuant to the Bank Act of Korea    31,548 shares    1,601,944    50,788 Won

July 30 ~ October 23, 2002

   Acquisition pursuant to the Securities and Exchange Act of Korea    3,000,000 shares    147,632,489    49,210 Won

December 24, 2002

   Disposition due to exercise of stock option by a grantee    10,000 shares    492,294    49,229 Won

January 15, 2003

   Disposition due to exercise of stock option by a grantee    10,000 shares    492,294    49,229 Won

Total

      Outstanding balance:
3,016,089 shares
   148,480,396   

 

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1.3.3. Stock Option

 

The following table is the breakdown of stock options Kookmin Bank has granted to the directors and employees. It describes grant date, position, exercise period, price and the number of options.

 

(As of June 30, 2003, Units: in Won, shares)


Grant date   Name of the
grantee
  Position when
granted
  Exercise period   Exercise price   Number of
granted
options*
  Number of
exercised
options
  Number of
exercisable
options
      From   To        

31-Oct-98

  Jungtae Kim   Chairman, President & CEO   01-Nov-01   31-Oct-04   5,000   400,000   330,000   70,000

27-Feb-99

  Choulju Lee   Auditor & Executive Director   28-Feb-02   27-Feb-05   13,900   30,000   30,000   0

27-Feb-99

  Seungdong Kim   Executive Vice President   28-Feb-02   27-Feb-05   13,900   20,054   20,054   0

27-Feb-99

  Youngjo Joo   Executive Vice President   28-Feb-02   27-Feb-05   13,900   30,000   30,000   0

27-Feb-99

  Seokil Cho   Executive Vice President   28-Feb-02   27-Feb-05   13,900   20,054   20,054   0

27-Feb-99

  Hongshik Chung   Executive Vice President   28-Feb-02   27-Feb-05   13,900   20,000   20,000   0

27-Feb-99

  Bonghwan Cho   Executive Vice President   28-Feb-02   27-Feb-05   13,900   30,000   30,000   0

27-Feb-99

  Sunjoo Kim   Executive Vice President   28-Feb-02   27-Feb-05   13,900   10,000   10,000   0

27-Feb-99

  Jehyung Jo   Executive Vice President   28-Feb-02   27-Feb-05   13,900   30,000   30,000   0

27-Feb-99

  Hogi Baek   Executive Vice President   28-Feb-02   27-Feb-05   13,900   20,000   20,000   0

27-Feb-99

  Bruce Willison   Non Executive Director   28-Feb-02   27-Feb-05   13,900   10,000   10,000   0

28-Feb-00

  Jan Op de Beeck   Director & Executive Vice President   01-Mar-03   28-Feb-06   27,600   22,490   0   22,490

28-Feb-00

  Sungchul Kim   Executive Vice President   01-Mar-03   28-Feb-06   27,600   30,000   0   30,000

28-Feb-00

  Woojung Lee   Executive Vice President   01-Mar-03   28-Feb-06   27,600   30,000   0   30,000

28-Feb-00

  Kukju Kwon   Non Executive Director   01-Mar-03   28-Feb-06   27,600   4,800   0   4,800

28-Feb-00

  Sunjin Kim   Non Executive Director   01-Mar-03   28-Feb-06   27,600   7,000   0   7,000

28-Feb-00

  Joon Park   Non Executive Director   01-Mar-03   28-Feb-06   27,600   4,800   0   4,800

28-Feb-00

  Moonsoul Chung   Non Executive Director   01-Mar-03   28-Feb-06   27,600   7,000   0   7,000

28-Feb-00

  Juhyun Yoon   Non Executive Director   01-Mar-03   28-Feb-06   27,600   4,800   0   4,800

28-Feb-00

  Heungsoon Chang   Non Executive Director   01-Mar-03   28-Feb-06   27,600   2,486   0   2,486

28-Feb-00

  Injoon Kang   Non Executive Director   01-Mar-03   28-Feb-06   27,600   2,486   0   2,486

28-Feb-00

  Sunghee Jwa   Non Executive Director   01-Mar-03   28-Feb-06   27,600   4,800   0   4,800

28-Feb-00

  Seungwoo Nam   Non Executive Director   01-Mar-03   28-Feb-06   27,600   1,928   0   1,928

28-Feb-00

  Woonyoul Choi   Non Executive Director   01-Mar-03   28-Feb-06   27,600   4,909   0   4,909

28-Feb-00

  Kyunghee Yoon   Non Executive Director   01-Mar-03   28-Feb-06   27,600   7,000   0   7,000

28-Feb-00

  Sungcheon Hong   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   6,821   0   6,821

28-Feb-00

  Miro Yoon   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   3,333   0   3,333

28-Feb-00

  Hakdong Shin   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   6,821   0   6,821

28-Feb-00

  Hakyeon Jeong   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   10,000   0   10,000

28-Feb-00

  Jeongyeon Kim   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   10,000   0   10,000

28-Feb-00

  Jongwhan Byun   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   10,000   0   10,000

28-Feb-00

  Samyoung Lee   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   6,821   0   6,821

28-Feb-00

  Wonki Kim   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   6,821   0   6,821

28-Feb-00

  Bangyeoul Kim   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   3,333   0   3,333

*   Some numbers of the granted options have been adjusted due to the merger and the early retirement of the grantees

 

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Table of Contents

Grant date
    
  Name of the
grantee
  Position when
granted
 

Exercise period


 

Exercise

price

  Number of
granted
options*
  Number of
exercised
options
  Number of
exercisable
options
      From   To        

28-Feb-00

  Byungman Lim   Head of Regional Head Office   01-Mar-03   28-Feb-06   27,600   3,333   0   3,333

24-Mar-01

  Youngil Kim   Executive Vice President   25-Mar-04   24-Mar-07   25,100   30,000   0   30,000

24-Mar-01

  Jongin Park   Executive Vice President   25-Mar-04   24-Mar-07   25,100   30,000   0   30,000

24-Mar-01

  Wonbae Yoon   Non Executive Director   25-Mar-04   24-Mar-07   25,100   2,318   0   2,318

24-Mar-01

  Jaekyu Lee   Non Executive Director   25-Mar-04   24-Mar-07   25,100   2,318   0   2,318

24-Mar-01

  Chulsoo Ahn   Non Executive Director   25-Mar-04   24-Mar-07   25,100   1,916   0   1,916

24-Mar-01

  Jaehan Kim   Head of Regional Head Office   25-Mar-04   24-Mar-07   25,100   10,000   0   10,000

24-Mar-01

  Jongok Na   Head of Regional Head Office   25-Mar-04   24-Mar-07   25,100   10,000   0   10,000

24-Mar-01

  Kyuho Lee   Head of Regional Head Office   25-Mar-04   24-Mar-07   25,100   3,275   0   3,275

18-Mar-00

  Sanghoon Kim   Chairman & CEO   19-Mar-03   18-Mar-05   23,469   41,460   0   41,460

18-Mar-00

  Jongmin Lee   Auditor & Executive Director   19-Mar-03   18-Mar-05   23,469   14,807   0   14,807

18-Mar-00

  Sejong Oh   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Inkie Kim   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Jihong Kim   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   2,961   0

18-Mar-00

  Jinho Hwang   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Hyungjin Chang   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Ikrae Kim   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Bongho Paick   Non Executive Director   19-Mar-03   18-Mar-05   23,469   2,961   0   2,961

18-Mar-00

  Bockwoan Kim   Executive Vice President   19-Mar-03   18-Mar-05   23,469   11,845   0   11,845

18-Mar-00

  Yoohwan Kim   Executive Vice President   19-Mar-03   18-Mar-05   23,469   11,845   0   11,845

18-Mar-00

  Dukhyun Kim   Executive Vice President   19-Mar-03   18-Mar-05   23,469   11,845   0   11,845

15-Mar-01

  Sanghoon Kim   Chairman & CEO   16-Mar-04   15-Mar-09   28,027   29,614   0   29,614

15-Mar-01

  Jongmin Lee   Auditor & Executive Director   16-Mar-04   15-Mar-09   28,027   14,807   0   14,807

15-Mar-01

  Inkie Kim   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Hyungjin Chang   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Jihong Kim   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Bongho Paick   Non Executive Director   16-Mar-04   15-Mar-09   28,027   1,870   0   1,870

15-Mar-01

  Ikrae Kim   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Seungheon Han   Non Executive Director   16-Mar-04   15-Mar-09   28,027   1,870   0   1,870

15-Mar-01

  Youngseok Kim   Non Executive Director   16-Mar-04   15-Mar-09   28,027   1,870   0   1,870

15-Mar-01

  Sewoong Lee   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Changki Min   Non Executive Director   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Bockwoan Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Yoohwan Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Dukhyun Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Yoonok Hyun   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Taigon Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Byungsang Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Byungjin Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   0   11,845

15-Mar-01

  Jihan Koo   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Dongsoon Park   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Hoosang Chang   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Sanghoon Lee   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Jaein Suh   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Sunghyun Chung   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

 

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Table of Contents

Grant date
    
  Name of the
grantee
  Position when
granted
 

Exercise period


 

Exercise

price

  Number of
granted
options*
  Number of
exercised
options
  Number of
exercisable
options
      From   To        

15-Mar-01

  Jonghwa Lee   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Sangwon Lee   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Joonsup Chang   Head of Regional Head Office   16-Mar-04   15-Mar-09   28,027   2,961   0   2,961

15-Mar-01

  Dongshin Yang   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Jaekyung Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Yeonkun Chung   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Youngno Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kitaek Hong   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Soondo Park   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Joonho Park   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Yangjin Kim   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kwangdae Park   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Sungwan Choi   General Manager   16-Mar-04   15-Mar-09   28,027   370   0   370

15-Mar-01

  Junghaeng Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Anseok Cho   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Sangcheol Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Taejoo Yoon   General Manager   16-Mar-04   15-Mar-09   28,027   10   0   10

15-Mar-01

  Youngman Lee   General Manager   16-Mar-04   15-Mar-09   28,027   520   0   520

15-Mar-01

  Youngsoo Kim   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Jongyoung Yoon   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Jaehong Yoo   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Changhwan Bae   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Sian Heo   General Manager   16-Mar-04   15-Mar-09   28,027   370   0   370

15-Mar-01

  Seokwon Choi   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Gilho Seo   General Manager   16-Mar-04   15-Mar-09   28,027   370   0   370

15-Mar-01

  Youngsoo Shin   General Manager   16-Mar-04   15-Mar-09   28,027   370   0   370

15-Mar-01

  Joonbo Cho   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kiyoul Seo   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Byungdoo Ahn   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kookshin Kang   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Ingyu Choi   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Hyungyoung Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Youngrok Han   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Hyeyoung Kim   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kihyun Kim   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Sungshin Cho   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Youngmo Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Jongik Kim   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Kwangmook Park   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Yongseung Lee   General Manager   16-Mar-04   15-Mar-09   28,027   592   0   592

15-Mar-01

  Sunggil Lee   General Manager   16-Mar-04   15-Mar-09   28,027   370   0   370
                   
           

16-Nov-01

  Jungtae Kim   President & CEO   17-Nov-04   16-Nov-09   X1   500,000   0   500,000

16-Nov-01

  Jungtae Kim   President & CEO   17-Nov-04   16-Nov-09       200,0002   0   200,000

1.   Exercise price = 51,200 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4) / 100. The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period—207.25) / 207.25 x 100.
2.   Conditional options up to 200,000: Additional shares shall be granted if the average closing price of Kookmin Bank's stock from August 17, 2004 to November 16, 2004 (or for the three months prior to his resignation, if he resigns earlier than his original tenure) is higher than the stock prices of any other bank listed on the Korea Stock Exchange. The number of options to be granted shall be based on total score, which calculated by the earned total scores of both ROE and market capitalization on November 17, 2004 (or on the date of his resignation, if he resigns earlier

 

9


Table of Contents

Grant date

 

Name of the

grantee

 

Position when granted

  Exercise period

  Exercise
price
 

Number of
granted

options*

 

Number of
exercised

options

 

Number of

exercisable

options

      From   To        

16-Nov-01

  Sanghoon Kim   Chairman   17-Nov-04   16-Nov-09       150,000   0   150,000
                 
           

22-Mar-02

  Choulju Lee   Auditor&Executive Director   23-Mar-05   22-Mar-10   Y1   30,000   0   30,000

22-Mar-02

  Henry Cornell   Non Executive Director   23-Mar-05   22-Mar-10     10,000   0   10,000

22-Mar-02

  Keunshik Oh   Non Executive Director   23-Mar-05   22-Mar-10     10,000   0   10,000

22-Mar-02

  Dongsoo Chung   Non Executive Director   23-Mar-05   22-Mar-10     10,000   0   10,000

22-Mar-02

  Jihong Kim   Non Executive Director   23-Mar-05   22-Mar-10     10,000   0   10,000

22-Mar-02

  Timothy Hartman   Non Executive Director   23-Mar-05   22-Mar-10     10,000   0   10,000

22-Mar-02

  Sunjin Kim   Non Executive Director   23-Mar-05   22-Mar-10       3,000   0   3,000

22-Mar-02

  Moonsoul Chung   Non Executive Director   23-Mar-05   22-Mar-10   Y   3,000   0   3,000

22-Mar-02

  Kyunghee Yoon   Non Executive Director   23-Mar-05   22-Mar-10       3,000   0   3,000
                 
           

22-Mar-02

  Jongkyoo Yoon   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Bonghwan Cho   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Jaein Suh   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Bumsoo Choi   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Bockwoan Kim   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Kitaek Hong   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Sunghyun Chung   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Kisup Shin   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Sungkyu Lee   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Byungsang Kim   Executive Vice President   23-Mar-05   22-Mar-10   57,100   30,000   0   30,000

22-Mar-02

  Jongyoung Yoon   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Jaeil Song   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Hyunggoo Shim   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Junghaeng Lee   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Joonsup Chang   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Youngno Lee   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Dongsoon Park   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Sungbin Kim   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Sungbok Park   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Yeonkun Chung   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Mahnsoo Song   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   15,000   0   15,000

22-Mar-02

  Jeongyeon Kim   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   5,000   0   5,000

22-Mar-02

  Hakyeon Jeong   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   5,000   0   5,000

22-Mar-02

  Jongwhan Byun   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   5,000   0   5,000

22-Mar-02

  Jaehan Kim   Head of Regional Head Office   23-Mar-05   22-Mar-10   57,100   5,000   0   5,000

       than his original tenure). The additional shares will not be exercisable if the CEO works less than 18 months or the earned total score is less than 80 points.
1.   Exercise price = 57,100 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period—KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

 

10


Table of Contents

Grant date
    
   Name of the
grantee
   Position when granted
    
   Exercise period

   Exercise
price
  Number of
granted
options*
   Number of
exercised
options
   Number of
exercisable
options
         From    To           

22-Mar-02

   Jongok Na    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   5,000    0    5,000

26-Jul-02

   Donald MacKenzie    Executive Vice President    27-Jul-05    26-Jul-10    58,800   30,000    0    30,000

21-Mar-03

   Sungnam Lee    Auditor & Executive Director    22-Mar-06    21-Mar-11        30,000    0    30,000

21-Mar-03

   Moonsoul Chung    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Sunjin Kim    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Richard Elliott Lint    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Kyunghee Yoon    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Seoungwoo Nam    Non Executive director    22-Mar-06    21-Mar-11    Y1   10,000    0    10,000

21-Mar-03

   Sukyoung Cha    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Bernard S. Black    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Kihong Kim    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Eunjoo Park    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Cheolsoo Ahn    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Kyungbae Suh    Non Executive director    22-Mar-06    21-Mar-11        10,000    0    10,000

21-Mar-03

   Sungchul Kim    Executive Vice President    22-Mar-06    21-Mar-11    35,500   30,000    0    30,000

21-Mar-03

   Woojung Lee    Executive Vice President    22-Mar-06    21-Mar-11    35,500   30,000    0    30,000

21-Mar-03

   Seeyoung Lee    Executive Vice President    22-Mar-06    21-Mar-11    35,000   30,000    0    30,000

21-Mar-03

   Wonsuk Oh    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,500   15,000    0    15,000

21-Mar-03

   Sungdae Min    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,500   15,000    0    15,000

21-Mar-03

   Kyungjae Cheong    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,500   15,000    0    15,000

21-Mar-03

   Choulhee Kim    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,500   15,000    0    15,000

21-Mar-03

   Indo Lee    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,000   15,000    0    15,000

21-Mar-03

   Maengsu Yang    Head of Regional Head Office    22-Mar-06    21-Mar-11    35,500   15,000    0    15,000

          Total                  2,881,131    553,069     


1   Exercise price = 35,500 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

 

11


Table of Contents

1.4.     Dividend

 

The following table shows dividend policy and the related information for the last three years.

 

(Units: in millions of Won unless indicated otherwise)


       2002    2001      2000

Net income for the period

     1,310,291    740,565      719,700

Earnings per share (Won)

     4,1231    3,706      2,403

Maximum amount available for dividend

     1,192,6432    604,984      614,046

Total dividend amount

     325,232    119,866      151,009

Dividend payout ratio (%)

     24.823    16.19      20.76

Cash dividend per common share (Won)

     1,000    100      500

Stock dividend per common share (%)

     —      6      —  

Dividend per preferred share (Won)

     —      —        50

Dividend yield ratio (%)

     2.384    0.80      3.36

Net asset value per common share (Won)

     30,6145    29,742      12,533

Ordinary income per common share (Won)

     4,123    3,706      2,403


1.   Earnings per share = net income (1,310,291,195,314 Won) / weighted average number of shares (317,786,872 shares)
2.   Maximum amount available for dividend = retained earnings before appropriations (1,319,970 millions of Won) + transferred from prior years’ reserves (5,417 millions of Won) – appropriated amount pursuant to the relevant rules and regulations (132,744 millions of Won)
3.   Dividend payout ratio = total dividend amount for common shares (325,232,596,000 Won) / net income (1,310,291,195,314 Won).
4.   Dividend yield ratio = dividend per share (1,000 Won) / market closing price of December 31, 2002 (42,000 Won)
5.   Net asset value per common share = total shareholders’ equity (10,049,396 millions of Won) / total issued shares as of December 31, 2002 (328,258,685 shares).

 

12


Table of Contents

2.    Business

 

2.1.    Business Overview

 

We are the largest commercial bank in Korea in terms of assets, deposits, branch network and retail customer base. Our primary focus is branch-based lending to and deposit-taking from retail customers and small and medium-sized enterprises. The principal components of our business are general household, mortgage and small and medium-sized enterprise lending, credit card operations and investment trust account management business and capital market activities. We also make loans and provide banking services to large domestic corporate customers.

 

We have developed one of the most extensive domestic branch networks, with 1,216 domestic branches and sub-branches as of June 30, 2003. Our extensive branch network and retail customer base have provided us with a source of stable and low cost funding.

 

2.2.    Market Shares

 

2.2.1.    Market Share of Deposits in Won

 

The following table shows the market share of Kookmin Bank among 9 nationwide commercial banks in terms of deposits in Won (which includes certificate of deposits) as of the dates indicated.

 

For the year 2002 and 2003, Seoul Bank’s figures are included in Hana Bank’s figures due to the merger of Hana Bank and Seoul Bank.

 

(Units: in 100 millions of Won, %)


     June 30, 2003    December 31, 2002    December 31, 2001
    
     Amount    %    Amount    %    Amount    %

Kookmin Bank

   1,264,679    31.6    1,220,260    31.7    1,140,587    33.7

Woori Bank

   655,909    16.4    589,095    15.3    513,903    15.2

Hana Bank

   549,788    13.7    534,570    13.9    322,652    9.5

Chohung Bank

   393,625    9.8    426,902    11.1    355,967    10.5

Shinhan Bank

   358,744    9.0    331,479    8.6    301,285    8.9

Korea Exchange Bank

   306,485    7.6    318,792    8.3    253,284    7.5

Korea First Bank

   249,262    6.2    227,993    5.9    171,800    5.1

KorAm Bank

   228,827    5.7    202,233    5.2    171,834    5.1

Seoul Bank

   —      —      —      —      151,458    4.5

Total

   4,007,319    100.0    3,851,324    100    3,382,770    100

 

13


Table of Contents

2.2.2.    Market Share of Household Loans

 

The following table shows the market share of Kookmin Bank among 9 nationwide commercial banks in terms of household loans as of the dates indicated.

 

For the year 2002 and 2003, Seoul Bank’s figures are included in Hana Bank’s figures due to the merger of Hana Bank and Seoul Bank.

 

(Units: in 100 millions of Won,     %)


     June 30, 2003    December 31, 2002    December 31, 2001
    
     Amount    %    Amount    Amount    %    Amount

Kookmin Bank

   776,094    40.4    743,096    41.1    601,536    47.2

Hana Bank

   248,029    13.0    235,987    13.1    105,143    8.2

Woori Bank

   241,601    12.6    228,530    12.6    132,501    10.4

Shinhan Bank

   166,861    8.7    159,927    8.9    107,729    8.4

Chohung Bank

   160,849    8.3    154,565    8.6    90,723    7.1

Korea First Bank

   131,840    6.9    105,997    5.9    78,874    6.2

Korea Exchange Bank

   110,148    5.7    102,062    5.6    64,053    5.0

KorAm Bank

   85,276    4.4    75,759    4.2    41,807    3.3

Seoul Bank

   —      —      —      —      53,156    4.2

Total

   1,920,698    100.0    1,805,923    100    1,275,522    100

 

2.2.3.    Market Share of Mortgage Loans

 

The following table shows the market share of Kookmin Bank among 9 nationwide commercial banks in terms of mortgage loans as of the dates indicated.

 

For the year 2002 and 2003, Seoul Bank’s figures are included in Hana Bank’s figures due to the merger of Hana Bank and Seoul Bank.

 

(Units: in 100 millions of Won,     %)

 


     June 30, 2003    December 31, 2002    December 31, 2001
    
     Amount    %    Amount    Amount    %    Amount

Kookmin Bank

   359,867    78.3    338,706    79.9    253,495    87.4

Hana Bank

   30,143    6.5    25,014    5.9    7,552    2.6

Woori Bank

   29,376    6.4    23,037    5.4    10,998    3.8

Korea Exchange Bank

   15,172    3.3    15,584    3.7    8,719    3.0

KorAm Bank

   8,568    1.9    8,592    2.0    2,432    0.8

Shinhan Bank

   8,268    1.8    7,709    1.8    2,943    1.0

Chohung Bank

   6,090    1.3    4,126    1.0    2,326    0.8

Korea First Bank

   2,273    0.5    1,308    0.3    658    0.2

Seoul Bank

   —      —      —      —      1,078    0.4

Total

   459,757    100.0    424,076    100    290,201    100

 

14


Table of Contents

2.3.     Source and Use of Funds

 

2.3.1.    Source of Funds

 

(Unit: in millions of Won)


          June 30, 2003    December 31, 2002    December 31, 2001
         
          Average
balance
   Interest
rate (%)
   Average
balance
   Interest
rate (%)
   Average
balance
   Interest
rate (%)

Won currency

   Deposits and Mutual installment    115,218,184    3.84    113,157,719    4.21    63,743,997    5.53
    
     Certificate of deposit    3,268,738    4.78    2,119,900    4.82    2,022,414    6.10
    
     Borrowings    3,424,101    3.99    4,568,873    4.45    3,784,147    4.85
    
     Call money    1,859,556    4.03    1,039,249    4.02    403,937    4.11
    
     Other    22,660,161    5.97    14,254,281    6.70    9,112,858    7.57

Subtotal

        146,430,740    4.20    135,140,022    4.49    79,067,353    5.74

Foreign currency

   Deposits    1,187,443    0.85    1,096,544    1.28    952,701    3.08
    
     Borrowings    3,489,244    1.13    2,269,774    2.45    2,018,537    5.47
    
     Call money    128,343    1.11    293,151    1.65    223,156    3.67
    
     Finance debentures issued    732,687    2.22    1,071,848    3.57    1,430,804    5.68
    
     Other    24,035    —      23,087    —      15,081    —  

Subtotal

        5,561,752    1.21    4,754,404    2.67    4,640,279    5.32

Other

   Total Shareholders’ Equity    11,294,217    —      14,586,550    —      7,463,687    —  
    
     Allowances    90,396    —      63,039    —      353,183    —  
    
     Other    9,349,108    —      3,717,379    —      4,065,899    —  

Subtotal

        20,733,721    —      18,366,968    —      11,882,769    —  

Total

        172,726,213    3.92    158,261,394    3.92    95,590,401    5.00

 

15


Table of Contents

2.3.2.    Use of Funds

 

(Unit: in millions of Won)


          June 30, 2003    December 31, 2002    December 31, 2001
         
          Average
balance
   Interest
rate (%)
   Average
balance
   Interest
rate (%)
   Average
balance
   Interest
rate (%)

Won currency

  

Due from banks

   191,901    1.46    1,041,865    4.62    1,339,572    5.60
    
    

Securities

   30,815,871    5.55    30,180,305    6.32    23,861,424    6.78
    
    

Loans

   119,371,550    7.25    105,188,481    7.79    53,575,082    8.87
    
    

Advances for customers

   62,625    13.00    91,583    4.35    127,704    3.84
    
    

Call loan

   154,128    4.24    736,571    4.36    1,765,067    4.80
    
    

Private placement corporate bonds

   1,245,872    8.43    1,631,524    7.32    2,065,179    10.32
    
    

Credit card accounts

   5,685,500    8.82    5,719,359    10.25    912,210    17.63
    
    

Other

   191,428    —      374,718    —      614,014    —  
    
    

Allowance for credit losses (—)

   2,086,031    —      1,437,960    —      1,297,930    —  

Subtotal

        155,632,844    7.13    143,526,446    7.66    82,962,322    8.50

Foreign currency

  

Due from banks

   514,202    1.47    253,390    1.35    121,994    3.28
    
    

Securities

   1,302,393    4.72    1,302,214    7.97    1,079,359    9.13
    
    

Loans

   2,775,614    3.03    3,216,042    3.39    3,870,853    5.66
    
    

Call loan

   92,938    1.37    188,465    1.98    185,466    4.15
    
    

Bills bought

   2,130,872    1.72    835,356    4.71    1,045,331    7.60
    
    

Other

   10,767    —      15,739    —      116,454    —  
    
    

Allowance for credit losses (—)

   128,636    —      267,194    —      266,613    —  

Subtotal

        6,698,150    2.88    5,544,012    4.95    6,152,844    7.11

Other

  

Cash

   980,850    —      914,639    —      530,451    —  
    
    

Fixed assets held for business

   3,136,851    —      3,126,812    —      1,462,413    —  
    
    

Other

   6,277,518    —      5,149,485    —      4,482,371    —  

Subtotal

        10,395,219    —      9,190,936    —      6,475,235    —  

Total

        172,726,213    6.54    158,261,394    7.12    95,590,401    7.83

 

16


Table of Contents

2.4.    Principal Banking Activities

 

2.4.1. Deposits

 

The following table shows the average balances of our deposits for the past three years and ending balances as of the dates indicated.

 

(Unit: in millions of Won)

 


          June 30, 2003    December 31, 2002    December 31, 2001
         
          Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Deposits in Won

   Demand deposits    11,820,615    13,652,113    10,654,651    12,987,742    4,832,281    10,824,005
    
     Time & savings deposits    95,298,954    97,619,182    93,347,999    93,630,423    53,496,908    89,080,935
    
     Mutual installment deposits    7,000,806    6,768,822    8,058,664    7,491,115    6,469,772    8,871,193
    
     Mutual installment for housing    5,035,408    5,148,609    4,463,601    4,872,637    928,398    4,128,489
    
     Certificates of deposits    3,268,738    3,279,148    2,119,900    3,044,089    2,022,414    1,154,056

Subtotal

        122,424,521    126,467,874    118,644,815    122,026,006    67,749,773    114,058,678

Deposits in foreign currency

        1,187,443    1,234,277    1,096,544    1,083,647    952,701    1,102,626

Trust deposits

   Money trust    14,409,216    13,116,617    17,214,936    15,356,285    20,375,456    19,739,709

     Property trust    26,167,631    24,633,389    16,783,690    26,852,684    5,409,033    12,559,922

Subtotal

        40,576,847    37,750,006    33,998,626    42,208,969    25,784,489    32,299,631

Total

        164,188,811    165,452,157    153,739,985    165,318,622    94,486,963    147,460,935

 

2.4.2. Average Deposit per Domestic Branch

 

The following table shows the average balances of our deposits per domestic branch as of the dates indicated.

 

(Unit: in millions of Won)

 


     June 30, 2003    December 31, 2002    December 31, 2001

Deposits

   117,941    121,137    133,548

Deposits in Won

   117,152    120,336    132,320

 

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2.4.3.    Average Deposit per Employee

 

The following table shows the average balances of our deposits per employee as of the dates indicated.

 

(Unit: in millions of Won)


     June 30, 2003    December 31, 2002    December 31, 2001

Deposits

   7,529    7,256    7,243

Deposits in Won

   7,479    7,208    7,176

 

2.4.4.    Loan Balances

 

The following table shows the average balances of our loans for the past three years and ending balances as of the dates indicated.

 

(Unit: in millions of Won)


     June 30, 2003    December 31, 2002    December 31, 2001
 
     Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Loans in Won

   119,354,628    121,649,225    105,117,047    116,472,105    53,498,087    94,698,769

Loans in foreign currency

   4,266,188    4,199,976    3,228,857    4,417,176    3,924,562    4,174,237

Advances to customers

   71,476    86,108    106,380    52,430    244,158    199,831

Subtotal

   123,692,292    125,935,309    108,452,284    120,941,711    57,666,807    99,072,837

Trust account loans

   544,514    500,933    789,614    575,412    2,194,851    1,117,817

Total

   124,236,806    126,436,242    109,241,898    121,517,123    59,861,658    100,190,654

 

2.4.5.    Loan Balances as of June 30, 2003 by Remaining Maturities

 

(Unit: in millions of Won)


     Less than 1
year
   More than 1
year~less than
3 years
   More than 3
years~less
than 5 years
   More than 5
years
   Total

Loans in Won

   58,807,965    46,141,260    5,614,930    11,085,070    121,649,225

Loans in foreign currencies

   2,768,684    452,137    406,804    572,351    4,199,976

 

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2.4.6.    Loan Balances by Uses

 

The following table shows the banking account balances of our loans in Won by uses as of the dates indicated.

 

(Unit: in millions of Won)

 


          June 30, 2003    December 31, 2002    December 31, 2001

Loans to enterprise

   Loans for operations    36,970,358    35,369,066    29,286,707
    
     Loans for facility    6,482,736    5,963,631    4,434,447

Loans to households

        41,666,330    40,477,483    34,648,918

Loans to public sector & others

   Loans for operations    529,201    738,632    730,598
    
     Loans for equipment    40,753    39,414    57,211

Loans on property formation savings

   80,187    95,252    154,069

Loans for housing

   35,858,294    33,731,435    25,342,969

Inter-bank loans

   16,771    20,941    36,110

Others

   4,595    36,251    7,740

Total

   121,649,225    116,472,105    94,698,769

 

2.4.7.    Loan to Deposit Ratio

 

The following table shows loan to deposit ratio as of indicated dates.

 

(Units: in millions of Won,     %)

 


     June 30, 2003

   December 31, 2002

   December 31, 2001

Loans1. (A)

   119,354,626    105,117,047    53,498,087

Deposits2. (B)

   122,424,522    118,644,815    67,749,773

Loan to deposit ratio (A/B)

   97.49    88.60    78.96

 

2.4.8.    Acceptances and Guarantees

 

(Unit: in millions of Won)

 


     June 30, 2003

   December 31, 2002

   December 31, 2001

Determined

   1,099,658    1,031,698    3,521,970

Contingent

   1,306,021    1,306,878    1,369,723

Total

   2,405,679    2,338,576    4,891,693

 

2.4.9.    Breakdown of Securities Investment

 

The following table shows the average balances of our securities for the past three years and ending balances as of indicated dates.


1.   Average balance of loans in each indicated date
2.   Average balance of deposits in each indicated date. The balances include certificate of deposits

 

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(Unit: in millions of Won)


          June 30, 2003    December 31, 2002    December 31, 2001
         
          Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Securities in Won (Banking account)

   Monetary stabilization bonds    3,845,362    4,837,276    2,834,534    3,269,269    3,571,137    3,139,925
    
     Government and public bonds    5,241,972    5,328,964    4,272,946    5,252,321    4,454,446    4,592,251
    
     Debentures    12,484,946    12,739,151    13,154,258    12,378,717    11,410,904    14,691,304
    
     Stocks    1,636,435    1,191,548    2,146,149    1,661,682    1,309,134    2,154,449
    
     Others    7,607,157    7,300,022    7,809,012    7,162,134    3,115,803    7,547,153

Subtotal

        30,815,872    31,396,961    30,216,899    29,724,123    23,861,424    32,125,082

Securities in Won (Trust account)

   Monetary stabilization bonds    767,250    1,213,633    1,309,515    583,379    3,228,021    2,725,071
    
     Government and public bonds    1,080,164    1,061,089    2,023,503    1,323,195    2,990,549    3,059,777
    
     Debentures    6,684,549    5,836,911    8,035,960    7,600,794    7,635,765    7,613,829
    
     Stocks    847,626    766,727    904,921    924,514    672,845    890,151
    
     Others    3,807,119    3,438,851    3,945,649    3,821,884    4,340,103    3,913,328

Securities in foreign currency
(Trust Account)

        915,306    947,193    559,964    747,253    118,147    370,415

Subtotal

        14,102,014    13,264,404    16,779,512    15,001,019    18,985,430    18,572,571

Securities in foreign currency
(Banking account)

   Foreign securities    1,024,294    966,991    945,199    960,749    736,084    909,730
    
     Off-shore foreign securities    278,099    283,834    320,423    255,878    343,275    382,542

Subtotal

        1,302,393    1,250,825    1,265,622    1,216,627    1,079,359    1,292,272

Total

        46,220,279    45,912,190    48,262,033    45,941,769    43,926,213    51,989,925

 

2.4.10.    Trust Account (money trust)

 

(Unit: in millions of Won)


     June 30, 2003    December 31, 2002    December 31, 2001

     Total amount
trusted
   Trust fees    Total amount
trusted
   Trust fees    Total amount
trusted
   Trust fees

Return-guaranteed trust

   686    21,968    1,528    59,530    25,551    -17,147

Performance trust

   40,576,161    97,233    33,997,098    241,444    25,758,938    353,890

Total

   40,576,847    119,201    33,998,626    300,974    25,784,489    336,743

 

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2.4.11.    Credit Card

 

2.4.11.1.    BC Card

 

(Unit: in millions of Won unless indicated otherwise)


          June 30, 2003    2002    2001

Number of card holders (Person)

   Corporate    54,881    58,090    23,811
    
     Individual    4,303,330    4,748,427    4,017,950

Number of merchants

        317,496    262,619    295,668

Profit

   Sales1    11,220,625    27,216,500    22,272,700
    
     Fee revenue    464,723    1,039,710    819,399

 

2.4.11.2.    Kookmin Card2

 

(Unit: in millions of Won unless indicated otherwise)


          June 30, 2003    2002    2001

Number of card holders (Person)

   Corporate    152,645    153,425    105,600
    
     Individual    11,303,757    11,638,968    9,605,946

Number of merchants

        1,580,585    1,675,176    1,569,103

Profit

   Sales1    36,514,883    83,860,180    65,382,300
    
     Fee revenue3    62,846    155,545    142,700

 

2.5.    Property, Plants and Equipment

 

2.5.1.    Branch Network

 

As of June 30, 2003, we had 1,156 branches and 60 sub-branches in Korea, the largest number of branches among Korean commercial banks. We believe that our extensive branch network in Korea and retail customer base provide us with a source of stable and relatively low cost funding. Approximately 43% of our branches and sub-branches are located in Seoul.

 

We also have three subsidiaries in Luxemburg, Hong Kong and London and three branches in Tokyo, New York and Auckland, and 1 overseas office in Guangzhou in China


1.   Includes credit card receivables and cash advances.
2.   Sales include credit card receivables and cash advances. This is the result of Kookmin Credit Card, our KOSDAQ-registered, majority-owned subsidiary.
3.   Kookmin Bank recognizes fee revenues under a fee agreement with Kookmin Credit Card. These amounts are the revenues Kookmin Bank received from Kookmin Credit Card pursuant to the fee agreement. Besides, Kookmin Bank also recognizes non-operating revenue in connection with consolidation of Kookmin Credit Card under equity method.

 

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2.5.2.    Business Property (Land & Buildings)

 

Our registered office and corporate headquarters are located at 9-1, 2-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea. The book value of all the properties owned by us as of June 30, 2003 was 1,544,953 million Won. In addition to the properties owned by us, we also leased 1,039,818 million Won of properties for our branch space.

 

2.5.3.    Automated Banking Machines

 

We have established an extensive network of automated banking machines, which are located in branches and in Autobanks (unmanned outlets). These automated banking machines consist of ATMs, cash dispensers and passbook printers. s of June 30, 2003, we had 7,731 ATMs, 1,631 cash dispensers and 784 passbook printers.

 

2.6.    Other Details Relevant to Investment Decision

 

2.6.1.    BIS Risk-adjusted Capital Ratios

 

(Units: in millions of Won, %)


     June 30, 20031    December 31, 2002    December 31, 2001

Risk-adjusted capital (A)

   13,708,236    14,439,313    11,750,856

Risk-weighted assets (B)

   130,330,970    138,703,021    114,849,227

BIS ratios (A/B)

   10.52    10.41    10.23

 

2.6.2.    Non-performing Loans2

 

(Units: in millions of Won unless indicated otherwise)


June 30, 2003   December 31, 2002   Change

Amount

  NPL to total loans   Amount   NPL to total loans   Amount   NPL to total loans

4,159,369

  3.05   2,509,073   1.90%   1,650,296   1.15%p


1   Tentative figures
2.   Non-performing loans are defined as those loans that are past due more than 90 days or that are placed non-accrual status according to the Financial Supervisory Service’s guidelines.

 

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2.6.3. Loan Loss Allowance

 

The following table shows the balance of our loan loss allowances as of the dates indicated.

 

(Units: in millions of Won)


          June 30, 2003    December 31, 2002    December 31, 2001

Loan loss allowance

   Domestic    3,262,227    2,365,898    2,255,068
    
     Overseas    56,126    12,798    16,111
    
     Total    3,318,353    2,378,696    2,271,179

Write-offs for the Period

   824,754    1,527,311    1,090,029

 

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3.    Financial Information

 

See 9. Exhibits / 9.1. List of Financial Statements.

 

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Table of Contents

4.    Independent Auditor

 

4.1.    Compensation to the Independent Auditor

 

4.1.1.    Audit Service

 

Our Financial statements have been taken review from Samil Accounting Corporation, the Korean member firm of PricewaterhouseCoopers. The aggregate audit service contract amount as of the end of June 30, 2003 is 980 million Won.

 

4.1.2.    Service Other than Audit

 

The following is a description of non-audit services rendered by our independent auditor for the last three years.

 

(Units: in millions of Won unless indicated otherwise)


Year    Service description    Amount of payment

June 30

2003

  

-   US GAAP conversion for 2002

-   Due Diligence on Kookmin Credit Card

-   SEC Filing regarding the proposed merger with Kookmin Credit Card

  

US$3,800 thousand

250

US$30 thousand


2002

  

-   Project for improving the accounting process

   690
    
    

-   Advisory service for the conversion process in US GAAP

   1,450

2001

  

-   Due diligence on the assets and liabilities in connection with the merger

   2,400
    
    

-   US GAAP conversion for 2000

   US$ 2,700 thousand
    
    

-   US GAAP conversion for New York Stock Exchange listing of New Kookmin Bank

   US$ 7,480 thousand
    
    

-   Advisory service for tax in connection with the merger

   300
    
    

-   US GAAP conversion

   US$ 4,950 thousand

 

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Table of Contents

5.    Corporate Governance and Affiliated Companies

 

5.1.    Board of Directors

 

The board of directors holds regular meetings every quarter. The board of directors consists of directors and resolves each following matter:

 

  n   matters relating to business objectives and performance evaluation;

 

  n   matters relating to amendments of the Articles of Incorporation;

 

  n   matters relating to budget and accounting including salaries of directors and employees;

 

  n   matters relating to major organizational changes such as dissolution, business transfer and merger;

 

  n   matters relating to internal control standards; or

 

  n   other matters determined by law and the board of directors regulations.

 

We currently have six management committees that serve under the board:

 

  n   the Board Steering Committee;

 

  n   the Management Strategy Committee;

 

  n   the Risk Management Committee;

 

  n   the Audit Committee;

 

  n   the Compensation Committee; and

 

  n   the Non Executive Director Nomination Committee.

 

Each committee member is appointed by the board of directors, except for members of the Audit Committee, who are elected at the general meeting of stockholders. For list of our directors, see 7. Directors, Senior Management and Employees / 7.1. Executive Directors and 7.2. Non-Executive Directors.

 

5.2.    Audit Committee

 

Audit Committee oversees our financial reporting and approves the appointment of and interaction with our independent auditors, compliance officers, management personnel and other committee advisors. The committee also reviews our financial information, auditor’s examinations, key financial statement issues and the administration of our financial affairs by the board of directors. In connection with the general meetings of stockholders, the committee examines the agenda for, and financial statements and other reports to be submitted by, the board of directors to each general meeting of stockholders. The committee holds regular meetings every quarter and as-needed basis.

 

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Table of Contents

5.3.    Voting Rights of Shareholders

 

Each outstanding share of our common stock is entitled to one vote per share.

 

If the method of written resolution at the general meeting of shareholders is adopted by resolution of the board of directors, at which the convening of the general meeting of shareholders is determined, the shareholders may exercise their voting rights in writing without participating the meeting in person. In this case, the Bank is required to send the documents and references necessary for exercise of voting rights, together with the convening notice.

 

If a shareholder intends to exercise his/her voting rights in writing, the shareholder is required to fill in a certain form and submit it to the Bank one day before the date set for the general meeting of shareholders.

 

5.4.    Compensation to the Directors

 

For the 6 months ended June 30, 2003, the aggregate of the remuneration paid by us to 1) the Chairman, President & CEO and our other executive directors and 2) our non-executive directors was 1,916 million Won, 243 million Won, respectively. The following table shows the breakdown of the remuneration.

 

(Units: in millions of Won)


     The aggregate
remuneration paid
   Limit for the remuneration
resolved by shareholders’
meeting
   Average amount of the
payment per person

Executive Directors

   1,916    —      591

Non Executive Directors

   243    —      24

Total

   2,159    8,000    615

 

As part of remuneration, Kookmin Bank also granted stock options to directors.

See 1. Introduction to the Bank / 1.3. Capital Structure / 1.3.4. Stock Option.

 

5.5.    Affiliated Companies

 

5.5.1.    List of Affiliates

 

As of June 30, 2003, we have following affiliates.

 

  n   KB Investment Co., Ltd.

 

  n   Kookmin Credit Card Co., Ltd.

 

  n   KB Investment Trust Management Co., Ltd.

 

  n   KB Real Estate Trust Co., Ltd.

 

  n   KB Credit Information Co., Ltd.

 

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  n   Kookmin Data System Corporation

 

  n   Kookmin Futures Co., Ltd.

 

  n   ING Life Korea Ltd.

 

  n   Kookmin Bank Luxemburg. S.A.

 

  n   Kookmin Bank International (London) Ltd.

 

  n   Kookmin Finance Hong Kong Ltd.

 

5.5.2.    Operating Results of Affiliates

 

(Unit: in millions of Won)


Company name
    
    
   Closing date
    
    
   Operating results of the latest fiscal year

 
      Total
Assets
   Total
Liabilities
   Total
Equities
     Sales    Net
Income
 

KB Investment

   December 31, 2002    99,979    26,206    73,773      18,744    33,883  

Kookmin Credit Card

   December 31, 2002    13,381,247    12,463,020    918,227      3,156,230    260,888  

KB Investment Trust Management

   March 31, 2003    65,086    17,447    47,639      31,474    13,966  

KB Real Estate Trust

   December 31, 2002    300,671    212,943    87,728      59,771    8,915  

KB Credit Information

   December 31, 2002    20,772    6,821    13,951      34,179    3,639  

Kookmin Data System Corporation

   December 31, 2002    18,290    4,671    13,619      43,290    2,008  

Kookmin Futures

   March 31, 2003    45,414    20,652    24,762      12,734    2,333  

ING Life Korea

   March 31, 2003    2,068,192    1,937,761    130,431      1,211,847    78,559  

Kookmin Bank Luxemburg

   June 30, 2003    480,131    482,420    (2,289 )    7,919    (9,700 )

Kookmin Bank International (London)

   June 30, 2003    282,551    232,043    50,508      5,921    1,690  

Kookmin Finance Hong Kong

   June 30, 2003    278,380    223,327    55,053      12,445    (6,005 )

 

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Table of Contents

6.     Equity Securities

 

6.1.     Major Shareholders

 

The following table presents information regarding the beneficial ownership of our shares as of June 17, 2003 by each person known by us to own beneficially more than 5% of our outstanding shares.

 


Name    Number of Shares of
Common Stock
   Percentage of Total Outstanding
Shares of Common Stock

The Government of Korea

   30,623,761    9.33%

Goldman Sachs

   16,831,607    5.13%

The Bank of New York1

   30,875,235    9.41%

Total

   78,330,603    23.87%

 

6.2.     Market Price Information for the Previous Six Months

 

6.2.1.    Common Stock Traded in the Korea Stock Exchange

 

(Unit: in Won, thousands of shares)


              January      February      March      April      May      June

Registered Common Shares

     High      44,300      42,200      37,800      35,550      34,200      39,900
      
       Low      39,150      36,500      29,600      29,150      29,950      35,150

Trading Volume

            33,990      27,413      53,312      68,520      48,294      37,642

 

6.2.2.    American Depositary Shares Traded in the New York Stock Exchange

 

(Unit: in US$, thousands of shares)


            January      February      March      April      May      June

American Depositary Shares

   High      37.87      35.38      31.59      29.13      28.79      33.73
    
     Low      33.08      30.50      22.90      23.23      24.71      28.70

Trading Volume

          6,599      3,498      8,570      7,333      7,981      7,083


1.   As depositary bank of American Depositary Shares of Kookmin Bank

 

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Table of Contents

7.    Directors, Senior Management and Employees

 

As of June 30, 2003, our board of directors, which consists of 4 executive directors and 12 non-executive directors, has the ultimate responsibility for the management of our affairs.

 

7.1.    Executive Directors

 

Our 4 executive directors consist of the chairman, president & CEO, auditor & executive director and one executive director seconded from ING.

 

The names and positions of our directors with Kookmin Bank’s common stocks owned are set forth below.

 


Name    Date of Birth    Position    Common Stocks Owned

Sanghoon Kim

   03/13/1942    Chairman    100

Jungtae Kim

   08/15/1947    President & CEO    66,581

Sungnam Lee

   11/11/1947    Auditor & Executive Director    —  

Donald H. MacKenzie

   12/20/1948    Executive Director & EVP    —  

 

7.2.    Non-Executive Directors

 

Our non-executive directors are selected based on the candidates’ talents and skills in diverse areas, such as law, finance, economy, management and accounting. As of June 30, 2003, 12 non-executive directors are in office.

 

Our current non-executive directors with Kookmin Bank’s shares owned are as follows.

 


Name    Date of Birth    Position    Common Stocks Owned

Moonsoul Chung

   03/07/1938    Non-Executive Director    3,771

Richard Elliott Lint

   01/04/1946    Non-Executive Director    200

Sunjin Kim

   06/08/1942    Non-Executive Director    2,405

Dongsoo Chung

   09/24/1945    Non-Executive Director    350

Seoungwoo Nam

   05/13/1952    Non-Executive Director    361

Kyunghee Yoon

   01/05/1947    Non-Executive Director    —  

Sukyoung Cha

   06/09/1953    Non-Executive Director    270

Bernard S. Black

   11/13/1953    Non-Executive Director    220

Kihong Kim

   01/10/1957    Non-Executive Director    310

Eunjoo Park

   06/03/1957    Non-Executive Director    280

Cheolsoo Ahn

   01/22/1962    Non-Executive Director    270

Kyungbae Suh

   01/14/1963    Non-Executive Director    270

 

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Table of Contents

7.3.     Senior Management

 

In addition to the executive directors who are also our executive officers, we currently have the following 12 executive officers as of June 30, 2003:

 


Name    Date of Birth    Position    Common Shares Owned

Jongkyoo Yoon

   10/13/1955    Executive Vice President    3,300

Sungchul Kim

   09/10/1951    Executive Vice President    3,498

Jaein Suh

   08/11/1947    Executive Vice President    3,717

Buhmsoo Choi

   08/08/1956    Executive Vice President    —  

Bockwoan Kim

   11/17/1944    Executive Vice President    3,140

Youngil Kim

   07/06/1953    Executive Vice President    3,327

Kitaek Hong

   01/16/1948    Executive Vice President    3,931

Sunghyun Chung

   08/10/1947    Executive Vice President    —  

Kisup Shin

   10/29/1955    Executive Vice President    280

Seongkyu Lee

   10/25/1959    Executive Vice President    —  

Seeyoung Lee

   12/25/1952    Executive Vice President    2

Woojung Lee

   07/11/1949    Executive Vice President    —  

 

7.4.    Employees

 

The following table shows the breakdown of our employees as of June 30, 2003.

 

(Unit: in millions of Won)


     Number of Employees    Average Tenure
of the full-time
employees
   Total Payment for
the 6 Months
Period
   Average Monthly
Payment per
Person
 
     
     Full-time    Contractual    Total         

Male

   13,296    1,224    14,520    15.56 years    356,006    4.1

Female

   5,015    7,489    12,504    12.26 years    193,827    2.6

Total

   18,311    8,713    27,024    14.66 years    549,833    3.4

 

7.5.    Labor Union

 

Under Korea Financial Industry Union, we currently have two union chapters following the merger. There are 8,378 members in former Kookmin Bank chapter and 6,968 members in former H&CB chapter.

 

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8.    Related Party Transaction

 

A number of banking transactions are entered into with related parties in the normal course of business. Generally, these transactions include loans, deposits, debt securities and other ordinary course activities relating to our banking business. These transactions are carried out on commercial terms and conditions and at market rates.

 

8.1.    Transactions with the Largest Shareholders and Etc.

 

8.1.1.    Loans to Affiliates

 

(Unit: in millions of Won)


Name   Relation with
the Bank
  Beginning Balance
(January 1, 2003)
  Increase   Decrease  

Ending Balance

(June 30, 2003)


Kookmin
Credit Card

  Affiliate   20,783   260,442   —     281,225

 

32


Table of Contents

8.1.2.    Investments in Affiliates

 

(Unit: in millions of Won)


Name   Relation
with the
Bank
  Account   Par
Value
  Beginning
Balance
(January 1, 2003)
  Increase   Decrease   Ending
Balance
(June 30, 2003)

Kookmin
Credit Card
  Affiliate   Equity Securities of Affiliate   271,825   271,825   —     —     271,825

KB Real
Estate Trust
  Affiliate  

Equity Securities

of Affiliate

  79,999   79,999   —     —     79,999

KB
Investment
  Affiliate  

Equity Securities

of Affiliate

  31,999   44,708   —     —     44,708

KB
Investment
Trust
Management
  Affiliate  

Equity Securities

of Affiliate

  30,670   30,670   —     —     30,670

Kookmin
Futures
  Affiliate  

Equity Securities

of Affiliate

  19,996   19,996   —     —     19,996

Kookmin
Data System
  Affiliate  

Equity Securities

of Affiliate

  7,998   7,998   —     —     7,998

KB Credit
Information
  Affiliate  

Equity Securities

of Affiliate

  2,520   3,918   —     —     3,918

ING Life
Korea
  Affiliate  

Equity Securities

of Affiliate

  14,000   14,000   —     —     14,000

Total

          459,010   473,114   —     —     473,114

 

8.1.3.    Real Estate Transactions with Affiliates

 

(Unit: in millions of Won)


Name   Relation with
the Bank
  Type   Account   Increase   Decrease   Lease
Deposits
  Rent Fee

Kookmin Credit

Card

  Affiliate   Building   Rental Income   —     500   3,077   4.00

KB Credit
Information
  Affiliate   Building   Rental Income   287   —     3,124   11.71

KB Real Estate
Trust
  Affiliate   Building   Rental Income   —     —     1,782   —  

Kookmin Data
System
  Affiliate   Building  

Rental

Income

  —     —     880   —  

Kookmin Futures   Affiliate   Building   Rental Income   743   —     1,363   —  

Total                       9,696   16.1

 

33


Table of Contents

8.2.    Transactions with Shareholders (Other than the Largest Shareholders and Etc.), Directors and Employees.

 

8.2.1.    Loans and Guarantees

 

(Unit: in millions of Won)


Name    Relation with
the Bank
   Account    Beginning
Balance
(January 1, 2003)
   Increase    Decrease    Ending Balance
(June 30, 2003)

Kihong Kim

   Non executive director    Housing Loan    18    —      —      18

Pulmuone Water Co.

   Related party of Non executive director, Seungwoo Nam    General Corporate Loan    2,000    —      —      2,000
     
          Corporate Overdraft    1,011    —      911    100
     
          Loan for Working Capital    1,800    —      —      1,800
     
          Loan for Purchasing    —      817    —      817

Pulmuone Co.

   Related party of Non executive director, Seungwoo Nam    General Corporate Loan    —      4,000    —      4,000
     
          Purchase Card Loan    —      3,778    255    3,523
     
          Loan for Facility    —      3,300    —      3,300
     
          Facility Finance Loan    —      1,600    —      1,600

Pulmouwon Tech co.

   Related party of Non executive director, Seungwoo Nam    Note Discount    —      1,234    —      1,234

Food Merce

   Related party of Non executive director, Seungwoo Nam    Loan for Purchasing    —      998    —      998

Total

             4,829    15,927    1,166    19,590

 

34


Table of Contents

8.2.2.    Real Estate Transaction

 

(Unit: in millions of Won)

Name    Relation with
Kookmin Bank
   Type    Account    Deposits    Rent Fee

LG Card

   Related party of Non executive director, Kyunghee Yoon    Building    Rental
Deposit
   1,694    0.2

Haitai Confectionary & Foods

   Related party of Non executive director, Sukyoung Cha    Building    Rental
Deposit
   150    —  

National Pension Corporation

   Shareholder    Building    Rental
Income
   550    —  

Pulmuone Life Co.

   Related party of Non executive director Seoungwoo Nam    Building    Rental
Income
   10    —  

MetLife Securities

   Related party of Executive vice president Bumsoo Choi    Building    Rental
Income
   1,100    —  

Total

                  3,504    0.2

 

35


Table of Contents

9.    Exhibits

 

9.1.    List of Financial Statements

 

    

Page


Kookmin Bank Interim Review Report as of and for the six-months period ended June 30, 2003 and 2002

    

n       Non-Consolidated Balance Sheets June 30, 2003 and December 31, 2002

   F-4

n       Non-Consolidated Statements of Income for the six-month period ended June 30, 2003 and 2002

   F-5

n       Non-Consolidated Statements of Cash Flows for the six-month period ended June 30, 2003

   F-7

n       Notes to Non-Consolidated Financial Statements June 30, 2003

   F-10

 

36


Table of Contents

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 
   

Kookmin Bank  


    (Registrant)

Date: August 14, 2003

   

By:    /s/    Jong-Kyoo Yoon      


    (Signature)
    Name:    Jong-Kyoo Yoon
   

Title:    Executive Vice President &

Chief Financial Officer

 

37


Table of Contents

LOGO

 

Kookmin Bank

 

Interim Review Report 2003

 

As of June 30, 2003 and for the three-month period ended June 30, 2003 and six-month periods ended June 30, 2003 and 2002

 

 

LOGO

 

F-1


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED BALANCE SHEETS

June 30, 2003 and December 31, 2002

(Unaudited—See Independent Accountants’ Report)

 


 

     In Millions of Korean Won

     June 30, 2003

   December 31, 2002

Assets:

             

Cash and due from banks (Note 3)

   (Won) 6,929,948    (Won) 4,599,356

Securities (Note 4)

     32,647,787      30,940,750

Loans (Notes 5 and 6)

     131,823,090      126,730,561

Fixed assets (Note 7)

     2,888,315      3,092,616

Other assets (Note 8)

     7,354,740      6,135,558
    

  

Total Assets

   (Won) 181,643,880    (Won) 171,498,841
    

  

Liabilities and Shareholders’ Equity:

             

Deposits (Note 9)

   (Won) 127,702,151    (Won) 123,109,653

Borrowings (Note 10)

     13,328,217      10,690,754

Debentures (Note 11)

     17,045,248      17,539,007

Other liabilities (Note 14)

     13,371,687      9,784,798
    

  

Total Liabilities

     171,447,303      161,124,212
    

  

Commitments and Contingencies (Notes 15 and 17)

             

Common stock, par: (Won)5,000, authorized: 1,000 million shares

             

issued and outstanding: 328,258,685 shares (Notes 1 and 18)

     1,641,293      1,641,293

Capital surplus (Note 19)

     5,864,701      5,864,752

Retained earnings (Note 20)

     2,374,515      2,742,335

Capital adjustments (Note 21)

     316,068      126,249
    

  

Total Shareholders’ Equity

     10,196,577      10,374,629
    

  

Total Liabilities and Shareholders’ Equity

   (Won) 181,643,880    (Won) 171,498,841
    

  

 

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

 

F-4


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months and six months ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 


 

       In Millions of Korean Won (except per share amounts)

       For the three months ended June 30

     For the six months ended June 30

       2003

     2002

     2003

     2002

Interest income:

                                   

Interest on due from banks

     (Won) 1,388      (Won) 13,940      (Won) 5,167      (Won) 27,658

Interest on trading securities

       27,296        22,386        51,818        49,207

Interest on available-for-sale securities

       176,792        152,413        344,469        305,686

Interest on held-to-maturity securities

       175,238        211,390        363,497        440,252

Interest on loans

       2,413,620        2,251,525        4,791,321        4,483,188

Other interest income

       26,616        36,291        49,382        57,590
      

    

    

    

         2,820,950        2,687,945        5,605,654        5,363,581
      

    

    

    

Interest expenses:

                                   

Interest on deposits

       1,079,533        1,192,855        2,183,020        2,385,791

Interest on borrowings

       105,782        98,874        214,312        210,921

Interest on debentures

       280,770        183,784        564,021        360,876

Other interest expenses

       20,016        20,001        32,722        34,739
      

    

    

    

         1,486,101        1,495,514        2,994,075        2,992,327
      

    

    

    

Net interest income

       1,334,849        1,192,431        2,611,579        2,371,254

Provision for loan losses (Note 6)

       1,026,698        417,197        1,685,764        608,340
      

    

    

    

Net interest income after provision for loan losses

       308,151        775,234        925,815        1,762,914
      

    

    

    

Non-interest income :

                                   

Fees & commission income

       344,963        363,669        681,829        678,232

Dividends on trading securities

       —          822        1,514        1,052

Dividends on available-for-sale securities

       2,622        17,714        5,288        18,454

Gain on foreign currency transactions

       35,210        37,280        165,926        73,476

Gain on derivatives transactions (Note 16)

       498,267        509,278        1,240,561        759,981

Others (Note 22)

       500,401        769,771        546,430        1,043,456
      

    

    

    

       (Won) 1,381,463      (Won) 1,698,534      (Won) 2,641,548      (Won) 2,574,651
      

    

    

    

 

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

 

F-5


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months and six months ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 


 

Continued;

     In Millions of Korean Won (except per share amounts)

     For the three months ended June 30

   For the six months ended June 30

     2003

    2002

   2003

    2002

Non-interest expenses :

                             

Fees & commission expenses

   (Won) 43,143     (Won) 89,097    (Won) 92,378     (Won) 172,183

General and administrative expenses (Note 23)

     628,663       535,277      1,210,779       1,091,600

Loss on foreign currency transactions

     46,213       132,446      129,016       164,381

Loss on derivatives transactions (Note 16)

     465,014       469,610      1,214,154       693,280

Others (Note 22)

     574,745       554,180      624,648       753,817
    


 

  


 

       1,757,778       1,780,610      3,270,975       2,875,261
    


 

  


 

Operating income (loss)

     (68,164 )     693,158      296,388       1,462,304

Non-operating income (expenses), net (Note 24)

     (117,275 )     12,653      (334,712 )     198,946
    


 

  


 

Net income (loss) before income tax expense

     (185,439 )     705,811      (38,324 )     1,661,250
    


 

  


 

Income tax expense (benefit) (Note 25)

     (70,838 )     213,976      2,344       497,226
    


 

  


 

Net income (loss)

   (Won) (114,601 )   (Won) 491,835    (Won) (40,668 )   (Won) 1,164,024
    


 

  


 

Basic earnings (loss) per share (In Korean Won) (Note 26)

   (Won) (352 )   (Won) 1,548    (Won) (125 )   (Won) 3,665
    


 

  


 

 

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

 

F-6


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF CASHFLOWS

For the three months and six months ended June 30, 2003

(Unaudited—See Independent Accountants’ Report)

 


 

     In Millions of Korean Won

 
     Three-month
period


    Six-month
period


 

Cash Flows from Operating Activities:

                

Net loss

   (Won) (114,601 )   (Won) (40,668 )

Adjustments to reconcile net loss to net cash provided by operating activities:

                

Realized gain on trading securities, net

     (15,417 )     (42,500 )

Unrealized gain on trading securities, net

     (39,005 )     (56,625 )

Loss (gain) on foreign currency transactions, net

     11,003       (36,910 )

Provision for loan losses

     1,026,698       1,685,764  

Provision for losses from guarantees and acceptances

     122,950       122,746  

Gain on derivative transactions, net

     (33,253 )     (26,407 )

Gain on valuation of derivatives, net

     (11,652 )     (13,224 )

Loss on fair value hedged items

     6,671       8,076  

Retirement benefits

     22,040       45,990  

Depreciation and amortization

     109,440       210,912  

Loss on disposal of fixed assets, net

     32,188       33,553  

Realized gain on available-for-sale securities, net

     (46,843 )     (87,798 )

Impairment on available-for-sale securities, net

     46,397       38,627  

Realized gain on held-to-maturity securities

     (475 )     —    

Unrealized loss on investment in associates, net

     91,990       349,642  

Loss on sale of loans, net

     420       1,633  

Others, net

     (6,454 )     (12,796 )

Changes in assets and liabilities resulting from operations

                

Accrued income

     (61,502 )     24,382  

Prepaid expenses

     3,206       (29,166 )

Deferred tax assets

     3,771       (167,223 )

Other assets

     (251 )     3,168  

Accrued expenses

     (200,965 )     (174,510 )

Unearned income

     (8,230 )     (9,163 )

Withholding taxes

     9,236       12,214  

Other liabilities

     (67,749 )     275,557  

Retirement benefits

     (3,953 )     (7,225 )

Account for agency business

     183,484       (10,752 )

Stock compensation expense(reversal)

     3,805       (2,683 )
    


 


Net cash provided by operating activities

     1,062,949       2,094,614  
    


 


 

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

 

Continued;

 

F-7


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF CASHFLOWS

For the three months and six months ended June 30, 2003

(Unaudited—See Independent Accountants’ Report)

 


 

     In Millions of Korean Won

 
     Three-month
period


    Six-month
period


 

Cash Flows from Investing Activities:

                

Decrease (increase) in due from banks

   (Won) 974,688     (Won) (699,744 )

Decrease in trading securities

     573,215       876,918  

Decrease (increase) in available-for-sale securities

     (66,010 )     (4,089,009 )

Decrease in held-to-maturity securities

     462,681       1,492,244  

Increase in loans, granted net

     (3,359,993 )     (6,736,889 )

Proceeds from disposal of fixed assets

     126,525       133,742  

Acquisition of fixed assets

     (114,917 )     (173,845 )

Acquisition of intangible assets

     (70 )     (340 )

Proceeds from disposal of foreclosed assets

     248       279  

Increase in guarantee deposits

     (13,989 )     (21,046 )

Increase in other accounts receivable

     (1,742,280 )     (1,692,171 )

Increase in payment in advance

     (13,284 )     (27,683 )

Decrease (increase) in derivatives assets, net

     (20,065 )     64,537  

Collection of domestic exchange receivables

     328,534       764,687  

Collection of loans to trust accounts

     29,869       36,748  
    


 


Net cash used in investing activities

     (2,834,848 )     (10,071,572 )
    


 


 

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

 

F-8


Table of Contents

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF CASHFLOWS

For the three months and six months ended June 30, 2003

(Unaudited—See Independent Accountants’ Report)

 


 

Continued;

 

     In Millions of Korean Won

 
     Three-month period

    Six-month period

 

Cash Flows from Financing Activities:

                

Increase in deposits, net

   (Won) 3,281,589     (Won) 4,592,498  

Increase (decrease) in borrowings, net

     (415,760 )     2,637,463  

Decrease in debentures, net

     (2,024,557 )     (493,759 )

Increase in borrowings from trust accounts

     192,924       734,550  

Decrease in dividend payable

     (3 )     (325,183 )

Increase in other account payable

     1,702,214       1,536,531  

Increase in advances received from customers

     483,570       1,169,615  

Increase (decrease) in guarantee deposits received

     2,161       (7,229 )

Increase (decrease) in domestic exchange payables

     239,705       (191,352 )

Decrease in liabilities incurred by agency relationships

     (887,284 )     (50,079 )

Stock options exercised

     —         (35 )

Sale of treasury stock

     —         50  
    


 


Net cash provided by financing activities

     2,574,559       9,603,070  
    


 


Net increase in cash and cash equivalents

     802,660       1,626,112  

Cash and cash equivalents, beginning of the period (Note 34)

     3,924,033       3,100,581  
    


 


Cash and cash equivalents, end of the period (Note 34)

   (Won) 4,726,693     (Won) 4,726,693  
    


 


 

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

 

F-9


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

1.    The Bank:

 

Kookmin Bank (“the Bank”) was established in 1963 under the Citizens National Bank Act to provide and administer funds for financing the general public and small businesses. Pursuant to the repeal of the Citizens National Bank Act, effective January 5, 1995, the Bank has conducted its operations in accordance with the provisions of the General Banking Act.

 

The Bank merged with Korea Long Term Credit Bank (“KLB”) on December 31, 1998 and with Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. on August 22, 1999. Also, under the decision of the Financial Supervisory Commission in accordance with the Structural Improvement of the Financial Industry Act, the Bank purchased certain assets, including loans classified as normal or precautionary, and assumed most of the liabilities of Daedong Bank as of June 29, 1998. Also, the Bank completed the legal consolidation with H&CB as of October 31, 2001 (See Note 32).

 

The Bank had its shares listed on the Korea Stock Exchange since September 1994. As a result of the business combination with H&CB, the former shareholders of the Bank and H&CB received new common shares of the Bank on the basis of a pre-determined ratio. The new common shares of the Bank were relisted on the Korea Stock Exchange as of November 9, 2001. As of June 30, 2003, the Bank’s paid-in capital amounts to (Won)1,641,293 million and 30,875,235shares of the Bank are listed on the New York Stock Exchange as American Depositary Shares (“ADSs”).

 

The Bank engages in the banking and trust business according to the provisions of the General Banking Act and the Trust Business Act and operates through 1,255 domestic branches and offices (including ATMs) and 3 overseas branches as of June 30, 2003.

 

2.    Summary of Significant Accounting Policies:

 

The significant accounting policies followed by the Bank in the preparation of its non-consolidated financial statements are summarized below. The Bank maintains its official accounting records in Korean Won and prepares statutory financial statements in the Korean language in conformity with financial accounting standards generally accepted in the Republic of Korea. The accompanying financial statements have been condensed, restructured and translated into English from the Korean language non-consolidated financial statements. Certain accounting principles applied by the Bank that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform 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 preparation of the non-consolidated financial statements requires management to make estimates and assumptions that affect amounts reported therein. Although these estimates are based on management’s best knowledge of current events and actions that the Bank may undertake in the future, actual results may be different from those estimates.

 

Application of the Statements of Korean Financial Accounting Standards

 

The Bank’s non-consolidated interim financial statements were prepared in accordance with the financial accounting standards generally accepted in the Republic of Korea and Statements of Korean Financial Accounting Standards No. 2 through No. 9, in effect for the fiscal periods beginning after December 31, 2002. In addition, the interim financial statements of foreign branches are prepared in accordance with generally accepted accounting principles of the country it operates in, except for cases where the significant differences in accounting principles have a material effect on the financial statements.

 

The Significant accounting policies adopted by the Bank in the preparation of interim financial statements are identical to the accounting policies followed by the Bank in the preparation of its for the annual financial statements for the year ended December 31, 2002, except for the classification of securities. The statements of cash flows for the three months and six months ended June 30, 2003 are not presented pursuant to the transition provision of Statement of Korean Financial Accounting Standards No. 2.

 

The financial statements of prior periods, presented herein for comparative purposes, were reclassified in accordance with Korean Financial Accounting Standards applicable to the Bank as of June 30, 2003. Such reclassification does not affect either prior year net income or net assets.

 

Continued;

 

F-10


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

2.    Summary of Significant Accounting Policies, Continued

 

Recognition of Interest Income

 

The Bank recognizes interest income on loans and debt securities on an accrual basis. However, interest income on delinquent and dishonored loans and debt securities, other than those collateralized with security deposits or guaranteed by financial institutions, is recognized on a cash basis. Interest accrued but not recognized related to such loans and securities amounted to (Won)571,787 million and (Won)247,386 million, respectively, as of June 30, 2003.

 

Translation of Foreign Currency

 

Assets and liabilities denominated in foreign currencies are translated into Korean Won at exchange rates announced by Seoul Money Brokerage Services, Ltd. (June 30, 2003, USD 1:(Won)1,193.1) at balance sheet date. The resulting exchange gains or losses are reflected in other operating income or expenses.

 

Allowances for Loan Losses

 

The Bank applies its internal credit rating system, the Forward Looking Criteria (“FLC”), to corporate loans in order to classify the borrowers and to determine allowances for loan losses. Effective as of January 1, 2002, the classification of corporate borrowers was changed from 10 credit risk categories (AAA, AA, A, BBB, BB, B, CCC, CC, C, D) to 12 credit risk categories (AAA, AA, A, BBB, BB, BB-, B, B-, CCC, CC, C, D). The credit risk classification under the FLC is based on a scaled valuation of financial and non-financial risks with additional consideration of the loan type, collateral and/or guarantees.

 

Allowances are determined by applying at minimum the following rates to the outstanding balances of each credit risk classification.:

 

Credit Risk Classification


   Credit Ratings
before Changes


   Credit Ratings
after Changes


   Allowance
Rates


 

Normal

   AAA ~ B    AAA ~ B    0.5 %

Precautionary

   CCC    B-, CCC    2 %

Sub-standard

   CC    CC    20 %

Doubtful

   C    C    50 %

Estimated loss

   D    D    100 %

 

However, the Bank does not apply the FLC to small-sized corporate loans, consumer loans, and credit card loans. Alternatively, the bank classifies such loans by considering the current financial status including delinquent number of days, bankruptcies and collateral value. As of December 2002, the rates used for determining the allowances for losses from small-sized corporate loans, consumer loans, and credit card loans were changed as follows:

 

Credit Risk Classification

  

Allowance Rates
before Changes


    Allowance Rates after Changes

 
     Small-sized Corporate

    Consumer

    Credit Cards

 

Normal

   0.50 %   0.50 %   0.75 %   1.00 %

Precautionary

   2.00 %   2.00 %   8.00 %   12.00 %

Sub-standard

   20.00 %   20.00 %   20.00 %   20.00 %

Doubtful

   50.00 %   50.00 %   55.00 %   60.00 %

Estimated loss

   100.00 %   100.00 %   100.00 %   100.00 %

 

As a result of the above change, the Bank’s allowances for loan losses as of June 30, 2003 are increased by (Won)309,214 million for consumer loans and (Won)144,554 million for credit card loans compared to the amounts that which would have been recorded under the previous rates.

 

Continued;

 

F-11


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

2.    Summary of Significant Accounting Policies, Continued;

 

Present Value Discounts

 

Troubled debt restructuring loans, which are modified as to outstanding principal, interest rate, and/or maturity under programs such as workout, court receivership, court mediation, or debt restructuring agreements of parties concerned, are carried at present value if the difference between the book value and the present value of the restructured loan is significant. When estimating the present value of the loans, the Bank applies the interest rate as of the inception of the loans, except for the interest rate of variable rate loans and extended maturity loans, which are adjusted to reflect the interest rate as of the restructuring date. The present value discounts are recorded by reclassifying allowances for loan losses and if additional allowances need to be provided for, the additional allowances are provided and recognized as provision for loan losses of the current period. These present value discounts are amortized using the effective interest method and are recognized as other interest income. Allowances for loan losses on the restructured loans are provided for based on the loan balances net of present value discounts.

 

The Bank recorded (Won)16,419 million of present value discounts as of June 30, 2003 on long-term deposits placed with Hansol Mutual Savings & Finance Co., Ltd. (previously, Bukook Mutual Savings & Finance Co., Ltd.), a subsidiary of the Bank sold in December 1999 (See Note 3). The receivables from the disposal of foreclosed assets that are redeemed in long-term installments are recorded in the balance sheet net of the related present value discounts.

 

Securities

 

Securities that are bought and held principally for the purpose of generating profits on short-term differences in price, and which are actively and frequently bought and sold, are classified as trading securities. Debt securities with fixed or determinable payments and fixed maturity, and which the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity securities. Investments classified as neither trading securities nor held-to-maturity securities are classified as available-for-sale securities.

 

Trading and available-for-sale securities are carried at fair value, except for non-marketable equity securities classified as available-for-sale securities, which are carried at cost. The fair value of debt securities, which do not have a quoted market value, are calculated using the present value of future cash flows, discounted at the reasonable interest rate determined based on the credit ratings provided by independent credit rating institutions.

 

Unrealized holding gains or losses on trading securities are charged to current operations and those resulting from available-for-sale securities are recorded as capital adjustments, the accumulated amount of which shall be charged to operations when the related securities are sold or when an impairment loss on the securities is recognized.

 

Held-to-maturity securities are generally carried at amortized cost. Premiums and discounts on debt securities are amortized over the maturity period using the effective interest method.

 

Impairment losses are recognized in current operations when the recoverable amounts are less than the acquisition cost of equity securities or amortized cost of debt securities.

 

Investments in Associates

 

Investments in associates, over which the Bank exercises significant control or influence, are accounted for under the equity method. Under the equity method, the Bank records changes in its proportionate ownership of the associate 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 investment in associate.

 

The Bank discontinues the equity method of accounting for investments in associates when the Bank’s share of accumulated losses equals the costs of the investments and until the subsequent cumulative changes in its proportionate net income of the associate equal its cumulative proportionate net losses not recognized during the periods when the equity method was suspended.

 

Continued;

 

F-12


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

2.    Summary of Significant Accounting Policies, Continued;

 

Investments in Associates—Continue;

 

Differences between the initial purchase price and the Bank’s initial proportionate ownership of the net book value of the associate are amortized or accreted using the reasonable method and are charged to current operations.

 

Continued;

 

Gains and losses recorded by the Bank from inter-company transactions with associates are fully eliminated. Gains and losses recorded by the associates from these transactions are proportionately eliminated, based on the Bank’s percentage of ownership.

 

Fixed Assets and Related Depreciation

 

Tangible assets are recorded at cost, except for upward revaluation of certain assets in accordance with the Korean Asset Revaluation Law. Depreciation is calculated based on the estimated average useful lives of the assets and is presented as accumulated depreciation, which is a contra account of tangible assets in the financial statements.

 

The estimated useful lives and depreciation methods of the tangible assets are as follows:

 

Tangible assets


  

Depreciation Method


   Estimated Useful Life

Buildings and structures

   Straight-line method    40 years

Leasehold improvements

   Declining balance method    4 years

Equipment and vehicles

   Declining balance method    4 years

 

Expenditures that enhance the value or extend the useful life of the assets involved are capitalized as additions to tangible assets. Routine maintenance and repairs are recognized as expenses as incurred.

 

Foreclosed assets acquired through, or in lieu of, loan redemption are stated at cost and are not depreciated. A valuation allowance is recorded where the latest bidding price at a public auction is below the book value, and is presented as a contra account of foreclosed assets in the financial statements.

 

Intangible assets are amortized based on the following estimated average useful lives and are presented in the financial statements net of accumulated amortization.

 

Intangible Asset


  

Amortization Method


   Estimated Useful Life

Goodwill

   Straight-line method    9 years

Trademarks

   Straight-line method    1-10 years

Others

   Straight-line method    7-30 years

 

The Bank recorded goodwill as a result of the merger with H&CB for the cost of the merger exceeding the fair value of the net assets acquired.

 

The Bank adjusts the book value of a fixed asset to its recoverable amount and recognizes the difference as an impairment loss when the recoverable amount is significantly below the book value due to obsolescence or decline in market value. The subsequent increase in recoverable amount in excess of the book value is recognized, to the extent of the pre-impairment book value, as reversal of fixed asset impairment losses.

 

Continued;

 

F-13


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

2.    Summary of Significant Accounting Policies, Continued;

 

Stock Issuance Costs and Debenture Issuance Costs

 

Stock issuance costs are deducted from paid-in capital in excess of par value. Debenture issuance costs are recorded as discounts on debentures and amortized over the maturity period of the debentures using the effective interest method.

 

Accrued Retirement Benefits

 

Employees and directors with more than one year of service as of June 30, 2003 are entitled to receive a lump-sum payment upon termination of their employment with the Bank, based on their length of service and rate of pay at the time of termination. Additionally, the Bank records the contributions to pension funds, which grant the payment rights to its employees, and contributions to the National Pension Fund, as contra accounts of accrued retirement benefits.

 

Guarantees and Acceptances

 

The Bank applies the credit risk classification used for loans to outstanding guarantees and acceptances, and provides allowances for losses of 20%, 50% and 100% of the outstanding guarantees and acceptances classified as sub-standard, doubtful, and estimated loss, respectively.

 

Deferred Income Taxes

 

The Bank records the future tax effects of temporary differences between the financial and tax bases of assets and liabilities as deferred tax assets or liabilities. The tax effects of temporary differences arising from the cumulative effects of accounting changes are adjusted in retained earnings.

 

Bonds under Repurchase/Resale Agreements

 

Securities bought under resale agreements are recorded in loans as bonds purchased under resale agreements. Securities sold under repurchase agreements are recorded in borrowings as bonds sold under repurchase agreements. Interest from bonds purchased under resale agreements and bonds sold under repurchase agreements are recognized as interest income on loans and interest expense on borrowings, respectively.

 

Derivatives Instruments

 

Derivative instruments for trading or hedging purpose are recorded at fair value and resulting unrealized gains and losses are recognized in current operations, except for the effective portion of derivative transactions entered into for the purpose of cash-flow hedges, which is recorded as an adjustment to shareholders’ equity.

 

Fair value hedge accounting is applied to a derivative instrument 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 gain or loss, both on the hedging derivative instrument and on the hedged item attributable to the hedged risk, is reflected in current operations.

 

Cash flow hedge accounting is applied to a derivative instrument with the purpose of hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is recorded as a capital adjustment and the ineffective portion is recognized in current operations. The effective portion of the gain or loss recorded as a capital adjustment is reclassified to current operations in the same period during which the hedged forecasted transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gain or loss recognized as a capital adjustment is added to or deducted from the asset or the liability.

 

Continued;

 

F-14


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

2.     Summary of Significant Accounting Policies, Continued;

 

Stock Options

 

The Bank applies the intrinsic value method, as it expects the settlement of stock options in cash. Accordingly, the Bank recognizes the compensation cost, which is the difference between the exercise price and the stock price as of the balance sheet date, by allocating the amount over the contracted service period (See Note 13).

 

National Housing Fund

 

The Bank, as designated by the Korean Government under the Housing Construction Promotion Law, manages the sources and uses of funds of the National

 

Housing Fund (the “NHF”) and records the related NHF account in other liabilities. In addition, the Bank pays interest, which is computed by multiplying the average balance of the NHF account by the passbook deposit interest rate, to the NHF.

 

Gains and Losses on Trust Management

 

The Bank’s trust accounts (“the Trust Accounts”) recognize as an expense the trust commissions paid to the banking accounts, which is equivalent to the total trust revenue less total trust expenses and trustee benefits (including the guaranteed principal and minimum rate of return). The Bank recognizes these trust commissions as a gain on trust management in other operating income. The trust fees on money trusts consist of base fees of 0.5% ~ 2.0% (depending on trust fund types) and special fees applied to the invested capital.

 

Under the Trust Business Act, reserves for future losses are set up in the trust accounts for losses related to those trust funds with a guarantee of the principal or of a certain minimum rate of return. The reserves are used to provide for the losses on such trust funds and, if the losses are incurred in excess of the reserves for future losses, the excess losses are compensated by the Bank. Accordingly, the banking accounts recognize the compensation paid as a loss on trust management in other operating expenses and the trust accounts recognize the corresponding compensation as compensation from banking accounts. There were no compensations paid for the six-month period ended June 30, 2003.

 

Translation of the Foreign Currency Financial Statements of Foreign Entities

 

Accounting records of the overseas branches are maintained in the foreign currency prevailing in their respective countries. For the purpose of presentation in the accompanying financial statements, the financial statements of the branches have been translated into Korean Won, using exchange rates published by Seoul Money Brokerage Services, Ltd. as of June 30, 2003.

 

Statement of Cash Flows

 

In the preparation of the statement of cash flows, the Bank has presented net amounts of cash inflows and cash outflows for items where the turnover is quick and the amounts are large.

 

F-15


Table of Contents

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2003 and December 31, 2002 and

for the three-month and six-month periods ended June 30, 2003 and 2002

(Unaudited—See Independent Accountants’ Report)

 

3.    Cash and Due from Banks:

 

Cash and due from banks as of June 30, 2003 and December 31, 2002 are summarized as follows (in millions of Won):

 

            2003.06.30

     2002.12.31

 

Cash on hand

                        

Cash in Won

          (Won) 3,814,927      (Won) 2,392,346  

Cash in foreign currencies

            195,563        186,780  
           


  


            (Won) 4,010,490      (Won) 2,579,126  

Due from banks in Won

                        

The Bank of Korea

   Reserve deposits in the Bank of Korea      (Won) 2,038,550      (Won) 1,340,482  
           


  


Other banks

   Time deposits        1,192        41,192  
     Reserve deposits in other banks        70        392  
     Certificates of Deposits        48,930        —    
           


  


              50,192        41,584  
           


  


Other financial institutions

   Deposits at Mutual Savings & Finance Co., Ltd.        140,000        140,000  
           


  


Others

   Futures margin accounts        320        1,336  
     Market participation margin        454        458  
              —          8,319  
           


  


              774        10,113  
           


  


              2,229,516        1,532,179  
     Present value discounts1*        (16,419 )      (21,156 )
           


  


            (Won) 2,213,097      (Won) 1,511,023  
           


  


Due from banks in foreign currencies

                        

The Bank of Korea

   Demand deposits      (Won) 40,364      (Won) 25,677