Form 6-K
Table of Contents

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 March 2004

 

 

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


Table of Contents

TABLE OF CONTENTS

 

Summary of 2003 Business Report    4
1.   Introduction to the Bank    5
    1.1.  

Business Purposes

   5
    1.2.  

History

   5
    1.3.  

Capital Structure

   6
    1.4.  

Employee Stock Ownership Plan (ESOP)

   13
    1.5.  

Dividend

   13
    1.6.  

Summary of Merger in Year 2003

   14
2.   Business    15
    2.1.  

Sources and Uses of Fund

   15
    2.2.  

Principal Banking Activities

   17
    2.3.  

Branch Networks

   21
    2.4.  

Other Information for Investment Decision

   22
3.   Financial Information    23
    3.1.  

Condensed Financial Statements

   23
    3.2.  

Other Financial Information

   24
4.   Independent Accountant Fees and Services    25
    4.1.  

Audit & Review Fees

   25
    4.2.  

Services Other than Audit & Review

   25
5.   Corporate Governance and Affiliated Companies    26
    5.1.  

Board of Directors & Committees under the Board

   26
    5.2.  

Audit Committee

   26
    5.3.  

Compensation to Directors

   27
    5.4.  

Voting Rights of Shareholders

   27
    5.5.  

Share Ownership

   27
    5.6.  

Affiliated Companies

   28
6.   Directors, Senior Management and Employees    29
    6.1.  

Executive Directors

   29
    6.2.  

Non-Executive Directors

   29
    6.3.  

Senior Management

   30
    6.4.  

Compensation to Directors and Senior Management

   30
    6.5.  

Employees

   30
7.   Related Party Transaction    31

 

2


Table of Contents
    7.1.  

Transactions with the Largest Shareholders and Affiliates

   31
    7.2.  

Transactions with Other than the Largest Shareholders & Affiliates

   32
8.   Exhibits    34
    8.1.  

Kookmin Bank 2003 Non-Consolidated Audit Report

   34
    8.2.  

Kookmin Bank and Its Subsidiaries 2003 Consolidated Audit Report

   34

 

3


Table of Contents

Summary of 2003 Business Report

 

On March 30, 2004, Kookmin Bank filed its business report for the fiscal year of 2003 (the “Business Report”) with the Financial Supervisory Commission of Korea pursuant to the Securities and Exchange Act of Korea. This is the summary of Business Report translated into English.

 

All references to “Kookmin Bank” mean Kookmin Bank on a non-consolidated basis, and all references to “we”, “us” or “the Bank” mean Kookmin Bank and, as the context may require, its subsidiaries. Kookmin Bank means a new entity established by a business combination with former Kookmin Bank and H&CB dated on 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 with H&CB.

 

We were formed through a business combination between the Former Kookmin Bank and H&CB, which formed 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 consolidation, 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.

 

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 Purposes

 

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

 

  n The banking business as prescribed by the Bank Act,

 

  n The trust business as prescribed by the Banking Trust Act,

 

  n The credit card business as prescribed by the Non-Banking Financing 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

 

  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
       Entered into a merger agreement with Kookmin Credit Card, one of our major subsidiaries, and officially submitted Merger Statement to Financial Supervisory Service

 

  n September 30, 2003
       Completed small-scale merger with Kookmin Credit Card

 

  n December 16, 2003
       Completed strategic investment in Bank Internasional Indonesia (BII) through the Consortium of Sorak Financial Holdings, and acquired 25% stake of BII

 

  n December 19, 2003
       Fully privatized through the entire disposition of Korean government’s stake in Kookmin Bank

 

5


Table of Contents
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, 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, 2002, Kookmin Bank issued 10,581,269 common shares and distributed them to Goldman Sachs Capital Koryo, L.P.

 

With regard to the Merger between Kookmin Bank and Kookmin Credit Card on September 30, 2003, Kookmin Bank issued additional 8,120,431 shares on October 1, 2003. Accordingly, total 336,379,116 shares were issued with total 1,681,896 million Won of paid-in capital.

 

1.3.2. Treasury Stock

 

The following table shows the acquisition and disposition of our treasury stock as of December 31, 2003.

 

(Unit: in thousands of Won unless otherwise indicated)

 

Date


  

Transaction


  

Number of

share


  

Acquisition/

Disposition
amount


   Average
cost per
one share
(Won)


November 15, 2001

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

December 24, 2001

   Disposition due to exercise of stock option by a grantee    10,000    432,003    43,200

April 3, 2002

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

May 14, 2002

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

July 30 ~ October 23, 2002

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

December 24, 2002

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

January 15, 2003

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

September 4 ~ 9, 2003

   Acquisition pursuant to the Securities and Exchange Act of Korea    650,000    29,094,064    44,760

October 16, 2003

   Acquisition of fractional shares due to the Merger with Kookmin Credit Card    5,095    214,254    42,050

October 27, 2003

   Disposition due to exercise of stock option by a grantee    62,961    3,049,075    48,428

November 3, 2003

   Disposition due to exercise of stock option by a grantee    5,000    242,140    48,428

December 1, 2003

   Disposition due to exercise of stock option by a grantee    9,061    438,806    48,428

December 10, 2003

   Disposition due to exercise of stock option by a grantee    1,300    62,956    48,428

December 17, 2003

   Acquisition from the sale of Korean government shares of the Bank    27,423,761    1,198,568,158    43,700

December 26, 2003

   Disposition due to contribution to ESOP account    1,000,000    44,252,000    44,252
         
  
  

Total

      30,016,623    1,328,311,895    —  
         
  
  

 

6


Table of Contents
1.3.3. Stock Option

 

The following table is the breakdown of stock options Kookmin Bank has granted to the directors and employees.

 

(As of February 9. 2004, 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

   Jung Tae Kim    Chairman, President&CEO    01-Nov-01    31-Oct-04    5,000    400,000    390,000    10,000

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

   Bruce G. 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

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

   Sun Jin Kim    Non Executive Director    01-Mar-03    28-Feb-06    27,600    7,000    1,100    5,900

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

   Jeong Yeong Kim    Head of Regional Head Office    01-Mar-03    28-Feb-06    27,600    10,000    5,000    5,000

28-Feb-00

   Jong Whan Byun    Head of Regional Head Office    01-Mar-03    28-Feb-06    27,600    10,000    5,000    5,000

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

   Byung Man Lim    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

 

7


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

           

24-Mar-01

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

24-Mar-01

   Jong In Park    Executive Vice President    25-Mar-04    24-Mar-07    25,100    19,333    0    19,333

24-Mar-01

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

24-Mar-01

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

24-Mar-01

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

24-Mar-01

   Jae Han Kim    Head of Regional Head Office    25-Mar-04    24-Mar-07    25,100    6,608    0    6,608

24-Mar-01

   Jong Ok Na    Head of Regional Head Office    25-Mar-04    24-Mar-07    25,100    6,608    0    6,608

24-Mar-01

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

18-Mar-00

   Sang Hoon Kim    Chairman&CEO    19-Mar-03    18-Mar-05    23,469    41,460    1,300    40,160

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

 

8


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

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

   Young No Lee    General Manager    16-Mar-04    15-Mar-09    28,027   592   0    592

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

16-Nov-01

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

16-Nov-01

   Jung Tae 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 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.

 

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

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

22-Mar-02

   Choul Ju Lee    Auditor&Executive Director    23-Mar-05    22-Mar-10        9,963    0    9,963

22-Mar-02

   Henry Cornell    Non Executive Director    23-Mar-05    22-Mar-10        3,321    0    3,321

22-Mar-02

   Keun Shik Oh    Non Executive Director    23-Mar-05    22-Mar-10        3,321    0    3,321

22-Mar-02

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

22-Mar-02

   Ji Hong Kim    Non Executive Director    23-Mar-05    22-Mar-10    Y1   3,321    0    3,321

22-Mar-02

   Timothy Hartman    Non Executive Director    23-Mar-05    22-Mar-10        3,321    0    3,321

22-Mar-02

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

22-Mar-02

   Moon Soul Chung    Non Executive Director    23-Mar-05    22-Mar-10        3,000    0    3,000

22-Mar-02

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

22-Mar-02

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

22-Mar-02

   Bong Hwan Cho    Executive Vice President    23-Mar-05    22-Mar-10    57,100   9,498    0    9,498

22-Mar-02

   Bum Soo Choi    Executive Vice President    23-Mar-05    22-Mar-10    57,100   13,339    0    13,339

22-Mar-02

   Bock Woan Kim    Executive Vice President    23-Mar-05    22-Mar-10    57,100   13,339    0    13,339

22-Mar-02

   Ki Taek Hong    Executive Vice President    23-Mar-05    22-Mar-10    57,100   19,525    0    19,525

22-Mar-02

   Sung Hyun Chung    Executive Vice President    23-Mar-05    22-Mar-10    57,100   19,525    0    19,525

22-Mar-02

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

22-Mar-02

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

22-Mar-02

   Byung Sang Kim    Executive Vice President    23-Mar-05    22-Mar-10    57,100   9,498    0    9,498

22-Mar-02

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

22-Mar-02

   Jae Il Song    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   9,762    0    9,762

22-Mar-02

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

22-Mar-02

   Jung Haeng Lee    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   9,762    0    9,762

22-Mar-02

   Joon Sup Chang    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   9,762    0    9,762

22-Mar-02

   Young No Lee    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   15,000    0    15,000

22-Mar-02

   Dong Soon Park    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   5,000    0    5,000

22-Mar-02

   Sung Bin Kim    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   9,762    0    9,762

22-Mar-02

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

22-Mar-02

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

22-Mar-02

   Mahn Soo Song    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   9,762    0    9,762

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

   Jae Han Kim    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   2,500    0    2,500

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

   Jong Ok Na    Head of Regional Head Office    23-Mar-05    22-Mar-10    57,100   2,500    0    2,500

26-Jul-02

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

   Sun Jin 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

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

21-Mar-03

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

21-Mar-03

   Suk Yong 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

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

   Sung Chul Kim    Executive Vice President    22-Mar-06    21-Mar-11    35,500   9,443    0    9,443

21-Mar-03

   Woo Jung Lee    Executive Vice President    22-Mar-06    21-Mar-11    35,500   9,443    0    9,443

21-Mar-03

   See Young Lee    Executive Vice President    22-Mar-06    21-Mar-11    35,000   7,024    0    7,024

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

27-Aug-03

   Jin Baek Cheong    Executive Vice President    28-Aug-03    27-Aug-11    40,500   5,091    0    5,091
    
                                 

22-Mar-01

   Han Kyoung Lee3    Former KCC Officer    23-Mar-04    22-Mar-11    71,538   6,644    0    6,644

22-Mar-01

   Jun Chae Song    Former KCC Officer    23-Mar-04    22-Mar-11    71,538   6,644    0    6,644

22-Mar-01

   Cheol Ho Kim    Former KCC Officer    23-Mar-04    22-Mar-11    71,538   4,429    0    4,429

22-Mar-01

   Myoung Woo Lee    Former KCC Officer    23-Mar-04    22-Mar-11    71,538   4,429    0    4,429
                        
             

29-Mar-02

   Boung Hak Kim    Former KCC Officer    30-Mar-04    29-Mar-11    Y2   3,330    0    3,330

29-Mar-02

   Sun Lee    Former KCC Officer    30-Mar-04    29-Mar-11        3,330    0    3,330

1 Exercise price = 35,500Won 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.

 

2 Exercise price = 129,100 Won x (1 + the increase rate of Comparative Industry Index x 0.4).

If negative index produced, the factor is not to be considered.

The increase rate of Comparative Industry Index = (B-A)/A

A : KOSPI as of the grant date x 0.5 + KOSPI Banking Industry Index as of the grant date x 0.5

B : KOSPI as of the exercise date x 0.5 + KOSPI Banking Industry Index as of the exercise date x 0.5

 

3 The 7 people in the above stock option table were granted Kookmin Bank stock option retroactively on the indicated dates. Those were originally granted by Kookmin Credit Card(KCC) when they were in office, and due to the Merger between Kookmin Bank and Kookmin Credit Card, those options were converted into stock options of the Bank.

 

11


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

           

29-Mar-02

   Jang Ok Kim    Former KCC Officer    30-Mar-04    29-Mar-11         3,330    0    3,330
    
                 
              

09-Feb-04

   Young Il Kim    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100    10,000    0    10,000

09-Feb-04

   Jeung Lak Lee    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100    10,000    0    10,000

09-Feb-04

   Sang Jin Lee    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100    10,000    0    10,000

09-Feb-04

   Yun Keun Jung    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Kuk Shin Kang    Executive Vice President    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Kyung Soo Kang    Executive Vice President    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Yang Jin Kim    Executive Vice President    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Dong Hwan Cho    Executive Vice President    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Dong Suk Kang    Head of Regional Head Offices    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Dae Ok Shin    Head of Regional Head Offices    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000
5,000

09-Feb-04

   Chang Ho Kim    Head of Regional Head Offices    10-Feb-07    09-Feb-12    46,100    5,000    0     

09-Feb-04

   Dal Soo Lee    Head of Regional Head Offices    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000

09-Feb-04

   Byung Doo Ahn    Head of Regional Head Offices    10-Feb-07    09-Feb-12    46,100    5,000    0    5,000
                             
  
  
Total    2,828,806    654,440    2,174,366
                             
  
  

 

12


Table of Contents
1.4. Employee Stock Ownership Plan (ESOP)

 

     Beginning
balance


   Increase

   Decrease

  

Ending

balance


  

Remarks


Registered common stock

   —      1,000,000    —      1,000,000    Treasury stocks of Kookmin Bank were transferred to ESOP account on December 26, 2003

Total

   —      1,000,000    —      1,000,000    —  

 

1.5. Dividend

 

The following table shows dividend policy and the related information for the last three years. The Board of Directors of Kookmin Bank made a resolution not to pay dividend for the fiscal year of 2003, and shareholders of Kookmin Bank approved of no dividend payout for the year at the general shareholders’ meeting held on March 23, 2004

 

(Units: in millions of Won unless indicated otherwise)

 

     2003

     2002

   2001

Net (loss) income for the period

   (753,348 )    1,310,291    740,565

Basic (loss) earnings per share (Won)

   (2,311 )    4,1231    3,706

Maximum amount available for dividend

   133,369      1,192,6432    604,984

Total dividend amount

   —        325,232    119,866

Dividend payout ratio (%)

   —        24.823    16.19

Cash dividend per common share (Won)

   —        1,000    100

Stock dividend per common share (%)

   —        —      6

Dividend per preferred share (Won)

   —        —      —  

Dividend yield ratio (%)

   —        2.384    0.80

Net asset value per common share (Won)

   25,672      30,6145    29,742

Ordinary income per common share (Won)

   (2,311 )    4,123    3,706

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).

 

13


Table of Contents
1.6. Summary of Merger in Year 2003

 

As of September 30, 2003, Kookmin Bank merged Kookmin Credit Card, its former subsidiary about 74% shares owned. Followings are summarized information with regard to the Merger.

 

1.6.1. Brief Note on Merger Procedures

 

May 30, 2003

   Completed the merger agreement, and officially submitted Merger Statement to FSS.

July 23, 2003

   Approved by the board of directors of Kookmin Bank

September 5, 2003

   Approved by shareholders meeting of Kookmin Credit Card

September 30, 2003

   Completed the merger and integrated into single card business unit.

October 7, 2003

   Submitted Merger Completion Report to FSS

 

1.6.2. Merger Method

 

Entity    Business

     Merger Method

Kookmin Bank (KB)

   Banking      KCC is merged into KB

Kookmin Credit Card (KCC)

   Credit card       

 

1.6.3. Merger Ratio

 

     KB

     KCC

Stock Price

   31,780 Won      14,078 Won

Merger Ratio (Common Stock)

   1      0.442983

 

1.6.4. Changes in Equity-related factors

 

            Before Merger

     After Merger

Number of Stocks Authorized

   Common stocks      1,000,000,000      1,000,000,000
     Preferred stocks      —        —  

Number of Stocks Issued

   Common stocks      328,258,685      336,379,116
     Preferred stocks      —        —  

Paid-in capital (million Won)

          1,641,293      1,681,896

 

14


Table of Contents
2. Business

 

2.1. Sources and Uses of Fund

 

2.1.1. Sources of Fund

 

(Unit: in millions of Won)

 

          December 31, 2003

   December 31, 2002

   December 31, 2001

          Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


Won currency

   Deposits    117,045,837    3.69    113,157,719    4.21    63,743,997    5.53
     Certificate of deposit    4,068,327    4.45    2,119,900    4.82    2,022,414    6.10
     Borrowings    3,625,926    3.89    4,568,873    4.45    3,784,147    4.85
     Call money    1,315,639    3.93    1,039,249    4.02    403,937    4.11
     Other    23,311,299    5.91    14,254,281    6.70    9,112,858    7.57
         
  
  
  
  
  

Subtotal

        149,367,028    4.06    135,140,022    4.49    79,067,353    5.74
         
  
  
  
  
  

Foreign currency

   Deposits    1,276,952    0.84    1,096,544    1.28    952,701    3.08
     Borrowings    3,462,883    1.01    2,269,774    2.45    2,018,537    5.47
     Call money    150,609    1.07    293,151    1.65    223,156    3.67
     Finance debentures issued    773,840    2.11    1,071,848    3.57    1,430,804    5.68
     Other    26,491    —      23,087    —      15,081    —  
         
  
  
  
  
  

Subtotal

        5,690,775    1.12    4,754,404    2.67    4,640,279    5.32
         
  
  
  
  
  

Other

   Total Shareholders Equity    12,053,112    —      14,586,550    —      7,463,687    —  
     Allowances    98,422    —      63,039    —      353,183    —  
     Other    9,509,283    —      3,717,379    —      4,065,899    —  
         
  
  
  
  
  

Subtotal

        21,660,817    —      18,366,968    —      11,882,769    —  
         
  
  
  
  
  

Total

        176,718,620    3.47    158,261,394    3.92    95,590,401    5.00
         
  
  
  
  
  

 

15


Table of Contents
2.1.2. Uses of Fund

 

(Unit: in millions of Won)

 

          December 31, 2003

   December 31, 2002

   December 31, 2001

          Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


Won currency

   Due from banks    165,358    1.37    1,041,865    4.62    1,339,572    5.60
     Securities    30,069,922    7.26    30,180,305    6.32    23,861,424    6.78
     Loans    121,725,298    7.10    105,188,481    7.79    53,575,082    8.87
     Advances for customers    96,547    5.79    91,583    4.35    127,704    3.84
     Call loan    685,953    3.92    736,571    4.36    1,765,067    4.80
     Private placement corporate bonds    1,287,623    10.26    1,631,524    7.32    2,065,179    10.32
     Credit card accounts    6,698,954    10.44    5,719,359    10.25    912,210    17.63
     Other    298,858    —      374,718    —      614,014    —  
     Allowance for credit losses (—)    1,823,976    —      1,437,960    —      1,297,930    —  
         
  
  
  
  
  

Subtotal

        159,204,537    7.41    143,526,446    7.66    82,962,322    8.50
         
  
  
  
  
  

Foreign currency

   Due from banks    612,862    1.33    253,390    1.35    121,994    3.28
     Securities    1,269,538    5.23    1,302,214    7.97    1,079,359    9.13
     Loans    2,785,091    3.11    3,216,042    3.39    3,870,853    5.66
     Call loan    84,803    1.28    188,465    1.98    185,466    4.15
     Bills bought    1,983,368    1.83    835,356    4.71    1,045,331    7.60
     Other    12,391    —      15,739    —      116,454    —  
     Allowance for credit losses (—)    132,105    —      267,194    —      266,613    —  
         
  
  
  
  
  

Subtotal

        6,615,948    3.03    5,544,012    4.95    6,152,844    7.11
         
  
  
  
  
  

Other

   Cash    968,815    —      914,639    —      530,451    —  
     Fixed assets held for business    3,210,463    —      3,126,812    —      1,462,413    —  
     Other    6,718,857    —      5,149,485    —      4,482,371    —  
         
  
  
  
  
  

Subtotal

        10,898,135    —      9,190,936    —      6,475,235    —  
         
  
  
  
  
  

Total

        176,718,620    6.79    158,261,394    7.12    95,590,401    7.83
         
  
  
  
  
  

 

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Table of Contents
2.2. Principal Banking Activities

 

2.2.1. 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)

 

          December 31, 2003

   December 31, 2002

   December 31, 2001

          Average
balance


   Ending
balance


   Average
balance


   Ending
balance


   Average
balance


   Ending
balance


Deposits in Won

   Demand deposits    12,192,971    14,110,288    10,654,651    12,987,742    4,832,281    10,824,005
     Time & savings deposits    96,668,084    97,616,747    93,347,999    93,630,423    53,496,908    89,080,935
     Mutual installment deposits    6,958,043    7,054,752    8,058,664    7,491,115    6,469,772    8,871,193
     Mutual installment for housing    5,161,535    5,423,853    4,463,601    4,872,637    928,398    4,128,489
     Certificates of deposits    4,068,327    6,499,258    2,119,900    3,044,089    2,022,414    1,154,056
         
  
  
  
  
  

Subtotal

        125,048,960    130,704,898    118,644,815    122,026,006    67,749,773    114,058,678
         
  
  
  
  
  

Deposits in foreign currency

   1,276,952    1,475,374    1,096,544    1,083,647    952,701    1,102,626
         
  
  
  
  
  

Trust deposits

   Money trust    13,064,749    10,278,357    17,214,936    15,356,285    20,375,456    19,739,709
     Property trust    24,512,746    21,453,761    16,783,690    26,852,684    5,409,033    12,559,922
         
  
  
  
  
  

Subtotal

        37,577,495    31,732,118    33,998,626    42,208,969    25,784,489    32,299,631
         
  
  
  
  
  

Total

        163,903,407    163,912,390    153,739,985    165,318,622    94,486,963    147,460,935
         
  
  
  
  
  

 

2.2.2. 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)

 

     December 31,
2003


   December 31,
2002


   December 31,
2001


Deposits

   119,593    121,137    133,548

Deposits in Won

   118,756    120,336    132,320

 

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Table of Contents
2.2.3. 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)

 

     December 31,
2003


   December 31,
2002


   December 31,
2001


Deposits

   7,487    7,256    7,243

Deposits in Won

   7,434    7,208    7,176

 

2.2.4. 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)

 

     December 31, 2003

   December 31, 2002

   December 31, 2001

     Average
balance


   Ending
balance


   Average
balance


   Ending
balance


   Average
balance


   Ending
balance


Loans in Won

   121,705,493    123,715,244    105,117,047    116,472,105    53,498,087    94,698,769

Loans in foreign currency

   4,160,185    4,019,929    3,228,857    4,417,176    3,924,562    4,174,237

Advances to customers

   107,091    89,665    106,380    52,430    244,158    199,831
    
  
  
  
  
  

Subtotal

   125,972,769    127,824,838    108,452,284    120,941,711    57,666,807    99,072,837
    
  
  
  
  
  

Trust account loans

   531,500    489,788    789,614    575,412    2,194,851    1,117,817
    
  
  
  
  
  

Total

   126,504,269    128,314,626    109,241,898    121,517,123    59,861,658    100,190,654
    
  
  
  
  
  

 

2.2.5. Loan Balances as of December 31, 2003 by Remaining Years to 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

   62,666,569    45,553,041    5,291,143    10,204,491    123,715,244

Loans in foreign currencies

   2,461,141    510,478    219,769    828,542    4,019,930

 

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Table of Contents
2.2.6. 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)

 

          December 31,
2003


   December 31,
2002


   December 31,
2001


Loans to enterprise

   Loans for operations    35,351,506    35,369,066    29,286,707
     Loans for facility    6,631,703    5,963,631    4,434,447

Loans to households

        42,884,305    40,477,483    34,648,918

Loans to public sector & others

   Loans for operations    526,227    738,632    730,598
     Loans for facility    42,473    39,414    57,211

Loans on property formation savings

   62,963    95,252    154,069

Loans for housing

        38,199,290    33,731,435    25,342,969

Inter-bank loans

        12,815    20,941    36,110

Others

        3,962    5,449    7,740
         
  
  

Total

        123,715,244    116,441,303    94,698,769
         
  
  

 

2.2.7. Loan to Deposit Ratio

 

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

 

(Units: in millions of Won, %)

 

     December 31,
2003


   December 31,
2002


   December 31,
2001


Loans1 (A)

   121,705,493    105,106,146    53,498,087

Deposits2 (B)

   125,048,960    118,644,815    67,749,773

Loan to deposit ratio (A/B)

   97.33    88.59    78.96

 

2.2.8. Acceptances and Guarantees

 

(Unit: in millions of Won)

 

     December 31,
2003


   December 31,
2002


   December 31,
2001


Determined

   800,297    1,031,698    3,521,970

Contingent

   1,281,518    1,306,878    1,369,723
    
  
  

Total

   2,081,815    2,338,576    4,891,693
    
  
  

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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Table of Contents
2.2.9. Breakdown of Securities Investment

 

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

 

(Unit: in millions of Won)

 

          December 31, 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    4,343,978    5,540,598    2,834,534    3,269,269    3,571,137    3,139,925
     Government and public bonds    5,630,422    5,885,595    4,272,946    5,252,321    4,454,446    4,592,251
     Debentures    11,028,217    7,149,089    13,154,258    12,378,717    11,410,904    14,691,304
     Stocks    1,380,254    877,013    2,146,149    1,661,682    1,309,134    2,154,449
     Others    7,687,051    7,299,404    7,809,012    7,162,134    3,115,803    7,547,153
         
  
  
  
  
  
Subtotal         30,069,922    26,751,699    30,216,899    29,724,123    23,861,424    32,125,082
         
  
  
  
  
  
Securities in Won (Trust account)    Monetary stabilization bonds    984,380    878,077    1,309,515    583,379    3,228,021    2,725,071
     Government and public bonds    1,182,165    1,252,419    2,023,503    1,323,195    2,990,549    3,059,777
     Debentures    5,876,064    4,080,362    8,035,960    7,600,794    7,635,765    7,613,829
     Stocks    763,277    592,379    904,921    924,514    672,845    890,151
     Others    3,208,160    2,106,262    3,945,649    3,821,884    4,340,103    3,913,328
         
  
  
  
  
  
Securities in foreign currency (Trust Account)         868,819    767,675    559,964    747,253    118,147    370,415
         
  
  
  
  
  
Subtotal         12,882,865    9,677,174    77,213,310    74,449,265    18,985,430    18,572,571
         
  
  
  
  
  
Securities in foreign currency (Banking account)    Foreign securities    999,806    1,072,483    945,199    960,749    736,084    909,730
     Off-shore foreign securities    269,732    277,663    320,423    255,878    343,275    382,542
         
  
  
  
  
  
Subtotal         1,269,538    1,350,146    1,265,622    1,216,627    1,079,359    1,292,272
         
  
  
  
  
  
Total         44,222,325    37,779,019    48,262,033    45,941,769    43,926,213    51,989,925
         
  
  
  
  
  

 

2.2.10. Trust Account

 

(Unit: in millions of Won)

 

     December 31, 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

   559    45,682    1,528    59,530    25,551    -17,147

Performance trust

   37,576,936    186,851    33,997,098    241,444    25,758,938    353,890
    
  
  
  
  
  

Total

   37,577,495    232,533    33,998,626    300,974    25,784,489    336,743
    
  
  
  
  
  

 

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Table of Contents
2.2.11. Credit Card

 

2.2.11.1. BC Card

 

(Unit: in millions of Won unless indicated otherwise)

 

          As of or for the years ended of indicated dates

          December 31,
2003


   December 31,
2002


   December 31,
2001


Number of card holders (Person)

   Corporate    68,359    58,090    23,811
     Individual    3,664,505    4,748,427    4,017,950

Number of merchants

        309,699    262,619    295,668

Profit

   Sales1    22,326,200    27,216,500    22,272,700
     Fee revenue    1,044,463    1,039,710    819,399

 

2.2.11.2. KB Card (former Kookmin Card2)

 

(Unit: in millions of Won unless indicated otherwise)

 

          As of or for the years ended of indicated dates

          December 31,
2003


   December 31,
2002


   December 31,
2001


Number of card holders (Person)

   Corporate    151,998    153,425    105,600
     Individual    10,990,703    11,638,968    9,605,946

Number of merchants

        1,528,872    1,675,176    1,569,103

Profit

   Sales1    70,209,300    83,860,180    65,382,300
     Fee revenue    2,967,554    155,545    142,700

 

2.3. Branch Networks

 

As of December 31, 2003, we had 1,085 branches and 51 sub-branches in Korea, the largest number of branches among Korean commercial banks. Approximately 41.9% of our branches and sub-branches are located in Seoul.

 

We also have three overseas branches in Tokyo, New York and Auckland, and 1 overseas office in Guangzhou in China

 


1. Includes credit card receivables and cash advances.

 

2 Figures for 2002 and 2001 are results of former Kookmin Credit Card.

 

21


Table of Contents
2.4. Other Information for Investment Decision

 

2.4.1. BIS Risk-adjusted Capital Ratios

 

(Units: in millions of Won, %)

 

     December 31,
2003


   December 31,
2002


   December 31,
2001


Risk-adjusted capital (A)

   12,739,857    14,439,313    11,750,856

Risk-weighted assets (B)

   127,397,339    138,703,021    114,849,227

BIS ratios (A/B)

   10.00    10.41    10.23

 

2.4.2. Non-Performing Loans1

 

(Units: in millions of Won unless indicated otherwise)

 

December 31, 2003

   December 31, 2002

   Change

Amount    NPL to total loans    Amount    NPL to total loans    Amount    NPL to total loans
4,202,254    2.99%    2,509,073    1.90%    1,693,181    1.09%P

 

2.4.3. Loan Losses Allowances

 

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

 

(Units: in millions of Won)

 

          December 31,
2003


   December 31,
2002


   December 31,
2001


Loan losses allowance

   Loans in Won    2,271,198    1,905,065    1,509,863
     Loans in foreign currencies    68,045    103,838    225,172
     Credit card    1,187,616    284,491    148,349
     Others    163,482    85,302    387,795
         
  
  
     Total    3,690,341    2,378,696    2,271,179
         
  
  

Write-offs for the Period

   4,509,979    1,527,311    1,090,029
         
  
  

1. 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.

 

22


Table of Contents
3. Financial Information

 

3.1. Condensed Financial Statements

 

3.1.1. Non-Consolidated Financial Statement

 

(Units: in millions of Won)

 

     As of or for the year ended of
indicated dates


     December 31,
2003


    December 31,
2002


Cash and due from banks

   6,526,345     4,599,356

Securities

   28,101,845     30,940,750

Loans

   139,920,521     126,730,561

Fixed assets

   3,019,556     3,092,616

Other assets

   6,484,239     6,135,558
    

 

Total assets

   184,052,506     171,498,841
    

 

Deposits

   132,180,272     123,109,653

Borrowings

   10,902,800     10,690,754

Debentures

   19,192,581     17,539,007

Other liabilities

   13,362,339     9,784,798
    

 

Total Liabilities

   175,637,992     161,124,212
    

 

Common stocks

   1,681,896     1,641,293

Capital surplus

   6,230,738     5,864,752

Retained earnings

   1,662,119     2,742,335

Capital adjustments

   (1,160,239 )   126,249
    

 

Total shareholders’ equity

   8,414,514     10,374,629
    

 

Liabilities and Shareholders’ Equity

   184,052,506     171,498,841
    

 

Operating revenue

   15,556,986     15,584,501

Operating income

   76,084     2,265,765

Continuing (loss) income before income taxes

   (1,146,444 )   1,893,618
    

 

Net (loss) income

   (753,348 )   1,310,291
    

 

 

23


Table of Contents
3.1.2. Consolidated Financial Statement1

 

(Units: in millions of Won)

 

     As of or for the year ended of
indicated dates


     December 31,
2003


    December 31,
2002


Cash and due from banks

   6,560,651     4,790,636

Securities

   30,531,067     36,862,306

Loans

   139,926,208     135,143,612

Fixed assets

   3,024,948     3,360,158

Other assets

   6,730,164     6,969,506
    

 

Total assets

   186,773,038     187,126,218
    

 

Deposits

   135,373,286     126,890,960

Borrowings

   10,750,820     15,473,094

Debentures

   19,182,576     23,450,346

Other liabilities

   12,978,312     10,631,483
    

 

Total Liabilities

   178,284,994     176,445,883
    

 

Common stocks

   1,681,896     1,641,293

Capital surplus

   6,237,528     5,968,401

Retained earnings

   1,712,664     2,787,469

Capital adjustments

   (1,160,814 )   30,817

Minority interest

   16,770     252,355
    

 

Total shareholders’ equity

   8,488,044     10,680,335
    

 

Liabilities and Shareholders’ Equity

   186,773,038     187,126,218
    

 

Operating revenue

   18,006,301     18,863,597

Operating income

   537,971     1,956,209

Continuing (loss) income before income taxes

   (1,019,606 )   1,818,432

Minority interest (loss) income

   (76,502 )   65,260
    

 

Net (loss) income

   (741,750 )   1,271,308
    

 

 

3.2. Other Financial Information

 

See Exhibit 99.1 and 99.2 for full financial statements and relevant notes of both Non-Consolidated and Consolidated Audit Reports

 


1 The affiliates subject to consolidation are Kookmin Data System, Kookmin Futures, KB Investment, KB Investment Trust, KB Real Estate Trust, KB Credit Information, Kookmin Finance HK Ltd. and Kookmin Bank International Ltd. (London). Our affiliates subject to equity method of accounting include ING Life Korea, KOMOCO, Jangeun Securities, Jooeun Industrial, Kookmin Bank Luxemburg S.A., Kookmin Finance Asia Ltd. (Hong Kong) and Kookmin Singapore Ltd. We have several other companies or business entities such as Sorak Financial Holdings that are also subject to equity method of accounting. For details, please see Exhibit 99.2 2003 Consolidated Audit Report.

 

24


Table of Contents
4. Independent Accountant Fees and Services

 

4.1. Audit & Review Fees

 

Our financial statements for the years ended 2003 and 2002 have been audited by Samil Accounting Corporation, a Korean member firm of PRICEWATERHOUSECOOPERS. And also, each of our financial statements for the first 3 quarters of 2003 was reviewed by the accounting firm. The aggregate contract amount for the audit and review fees for the year 2003 is 980 million Won.

 

4.2. Services Other than Audit & Review

 

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

2003

   US GAAP conversion for 2002    US$3,800 thousand
     Due Diligence on Kookmin Credit Card    250
     SEC Filing regarding the proposed merger with Kookmin Credit Card    USD30 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

 

25


Table of Contents
5. Corporate Governance and Affiliated Companies

 

5.1. Board of Directors & Committees under the Board

 

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 Nominating 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 6. Directors, Senior Management and Employees / 6.1. Executive Directors and 6.2. 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.

 

26


Table of Contents
5.3. Compensation to Directors

 

For the year ended December 31, 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 3,050 million Won, 534 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


1) Executive Directors

   3,050    8,000    762

2) Non Executive Directors

   534         48
    
  
  

Total

   3,584    8,000    —  
    
  
  

 

As part of remuneration, Kookmin Bank also granted stock options to directors. See 1.3.3 Stock Option.

 

5.4. 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.

 

5.5. Share Ownership

 

The following table presents information regarding the selected major ownership of our shares as of December 31, 2003.

 

(Unit: Shares, %)

 

Name


   Number of Shares
of Common Stock


   Percentage of
Total Issued Shares


Bank of New York1

   35,000,566    10.41

Kookmin Bank2

   30,016,623    8.92

ING Bank N.V.

   12,716,691    3.78

Euro-Pacific Growth Fund

   10,682,290    3.18

Emerging Markets Growth

   10,125,055    3.01

National Pension Fund

   7,496,146    2.23

Goldman Sachs Capital SH

   3,831,151    1.14

1 Depositary of ADRs

 

2 Treasury stocks with no voting right

 

27


Table of Contents
5.6. Affiliated Companies

 

5.6.1. List of Affiliates

 

As of December 31, 2003, we have following affiliates.

 

  n KB Investment Co., Ltd.

 

  n KB Investment Trust Management Co., Ltd.

 

  n KB Real Estate Trust Co., Ltd.

 

  n KB Credit Information Co., Ltd.

 

  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.

 

5.6.2. Operating Results of Affiliates1

 

(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, 2003    95,555    18,194    77,361    19,227    5,300

KB Investment Trust Management

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

KB Real Estate Trust

   December 31, 2003    257,724    159,595    98,129    56,613    10,402

KB Credit Information

   December 31, 2003    25,265    7,383    17,882    43,700    3,931

Kookmin Data System

   December 31, 2003    17,894    3,244    14,650    37,389    1,031

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

   December 31, 2003    286,997    281,048    5,949    19,487    19

Kookmin Bank International (London)

   December 31, 2003    225,681    168,925    56,756    12,902    3,264

Kookmin Finance Hong Kong

   December 31, 2003    211,944    149,228    62,716    34,543    682

1 The operating results of each domestic affiliates of which fiscal years were ended as of December 31, 2003 are tentative figures.

 

28


Table of Contents
6. Directors, Senior Management and Employees

 

As of December 31, 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.

 

6.1. 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


Sang Hoon Kim

   03/13/1942      Chairman    1,300

Jung Tae Kim

   08/15/1947      President & CEO    126,581

Sung Nam Lee

   11/11/1947      Auditor & Executive Director    —  

Donald H. MacKenzie

   12/20/1948      Executive Director & EVP    —  

 

6.2. 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 December 31, 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


Moon Soul Chung

   03/07/1938      Non-Executive Director    4,291

Richard Elliott Lint

   01/04/1946      Non-Executive Director    570

Sun Jin Kim

   06/08/1942      Non-Executive Director    3,725

Dong Soo Chung

   09/24/1945      Non-Executive Director    610

Seoung Woo Nam

   05/13/1952      Non-Executive Director    821

Kyung Hee Yoon

   01/05/1947      Non-Executive Director    —  

Suk Yong Cha

   06/09/1953      Non-Executive Director    730

Bernard S. Black

   11/13/1953      Non-Executive Director    570

Ki Hong Kim

   01/10/1957      Non-Executive Director    830

Eun Joo Park

   06/03/1957      Non-Executive Director    740

Cheol Soo Ahn

   01/22/1962      Non-Executive Director    730

Kyung Bae Suh

   01/14/1963      Non-Executive Director    730

 

29


Table of Contents
6.3. Senior Management

 

In addition to the executive directors who are also our executive officers, we currently have the following 11 executive officers as of December 31, 2003:

 

Name


   Date of Birth

    

Position


   Common
Shares Owned


Jong Kyoo Yoon

   10/13/1955      Executive Vice President    3,300

Sung Chul Kim

   09/10/1951      Executive Vice President    3,498

Young Il Kim

   07/06/1953      Executive Vice President    3,327

Ki Taek Hong

   01/16/1948      Executive Vice President    3,931

Sung Hyun Chung

   08/10/1947      Executive Vice President    —  

Ki Sup Shin

   10/29/1955      Executive Vice President    280

Seong Kyu Lee

   10/25/1959      Executive Vice President    —  

See Young Lee

   12/25/1952      Executive Vice President    2

Woo Jung Lee

   07/11/1949      Executive Vice President    —  

Jin Baek Chung

   10/29/1955      Executive Vice President    —  

Bong Hwan Cho

   03/30/1950      Executive Vice President    4,581

 

6.4. Compensation to Directors and Senior Management

 

The total compensation to both directors and senior management for the year 2003, excluding grant of stock options, is 9,103,289,908 Won, and the average compensation amount per person is 338,899,826 Won. During the first 3 months, we had 11 directors and 13 executive vice presidents, and for the rest of the period in 2003, 14 directors and 11 executive vice presidents were presided.

 

6.5. Employees

 

The following table shows the breakdown of our employees as of December 31, 2003.

 

(Unit: in millions of Won)

 

     Number of Employees

   Average Tenure
of the Full-time
Employees


   Total Payment
for Year 2003


   Average Monthly
Payment
per Person


     Full-time

   Contractual

   Total

        

Male

   13,563    1,244    14,787    15.78    823,121    4.6

Female

   5,026    7,697    12,723    12.99    421,191    2.8
    
  
  
  
  
  

Total

   18,589    8,921    27,510    15.05    1,244,312    3.8
    
  
  
  
  
  

 

30


Table of Contents
7. Related Party Transaction

 

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

 

7.1. Transactions with the Largest Shareholders and Affiliates

 

7.1.1. Investments in Affiliates1

 

(Unit: in millions of Won)

 

Name


   Relation
with the
Bank


  

Account


   Par
Value


   Beginning
Balance
(January 1,
2003)


   Increase

   Decrease

  

Ending

Balance
(December 31,
2003)


KB Real Estate Trust

   Affiliate    Equity Securities of Affiliate    79,999    79,999    —      —      79,999

Kookmin Credit Card2

   Affiliate    Equity Securities of Affiliate    271,825    271,825    —      271,825    0

KB Investment

   Affiliate    Equity Securities of Affiliate    44,708    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    3,918    3,918    236    —      4,154

ING Life Korea

   Affiliate    Equity Securities of Affiliate    14,000    14,000    —      —      14,000

KOMOCO

   Affiliate    Equity Securities of Affiliate    30,000    30,000    —      —      30,000
              
  
  
  
  

Total

             503,114    503,114    236    271,825    231,525
              
  
  
  
  

1 Excluding Jooeun Industry and Jangeun Securities which have been under liquidation procedures

 

2 Merged into the Bank as of September 30, 2003.

 

31


Table of Contents
7.1.2. Real Estate Transactions with Affiliates

 

(Unit: in millions of Won)

 

Name


   Relation
with the
Bank


   Type

  

Account


   The Number
of Contracts


   Deposits

   Rent
Fee


KB Credit Information

   Affiliate    Building    Rental Income    19    3,805.74    8.13

KB Real Estate Trust

   Affiliate    Building    Rental Income    2    1,738    —  

Kookmin Data System

   Affiliate    Building    Rental Income    2    2,484.31    —  

Kookmin Futures

   Affiliate    Building    Rental Income    1    1,363.36    —  
                   
  
  

Total

   —      —      —      24    9,391.41    8.13
                   
  
  

 

7.2. Transactions with Other than the Largest Shareholders & Affiliates

 

7.2.1. Loans and Guarantees

 

(Unit: in millions of Won)

 

Name


  

Relation with

the Bank


  

Account


  

Beginning
Balance

(January 1,
2003, or on
the date of
appointment)


   Ending
Balance
(December 31,
2003)


   Increase /
(Decrease)
for the
period


 

Ki Hong Kim

   Non executive director    Housing Loan    18    0    (18 )

Pulmuone Water Co.

   Related party of    General Corporate Loan    2,000    2,000    —    
     Non executive director,    Corporate Overdraft    1,011    2,992    1,981  
     Seoung Woo Nam    Loan for Working Capital    1,800    1,800    —    
          Loan for Purchasing    343    0    (343 )

Pulmuone Co.

   Related party of    General Corporate Loan    4,000    0    (4,000 )
     Non executive director,    Purchase Card Loan    3,778    1,170    (2,608 )
     Seoung Woo Nam    Loan for Facility    —      3,300    3,300  
          Facility Finance Loan    1,600    0    (1,600 )

Pulmuone Tech co.

  

Related party of

Non executive director, Seoung Woo Nam

   Note Discount    —      0    1,400
(1400
 
)

Food Merce

  

Related party of

Non executive director, Seoung Woo Nam

   Loan for Purchasing    362    0    (362 )

Pulmuone Healthy Life

   Related party of Non executive director, Seoung Woo Nam    General Corporate Loan    —      991    991  
              
  
  

Total

             14,912    12,253    (2,659 )
              
  
  

 

32


Table of Contents
7.2.2. Real Estate Transaction

 

(Unit: in millions of Won)

 

Name


  

Relation with

Kookmin Bank


   Type

   Account

   Deposits

   Rent
Fee


Haitai

Confectionary & Foods

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

National Pension Corporation

   Shareholder    Building    Rental Income    776    9

Pulmuone Life Co.

   Related party of Non executive director Seoung Woo Nam    Building    Rental Income    10    0.5
                   
  

Total

                  936    9.5
                   
  

 

33


Table of Contents
8. Exhibits

 

8.1. Kookmin Bank 2003 Non-Consolidated Audit Report

 

Kookmin Bank Non-Consolidated Audit Report as of and for the Years Ended 2003 and 2002    Page

n       Non-Consolidated Balance Sheets as of December 31, 2003 and December 31, 2002

   4

n       Non-Consolidated Statements of Operations for the years ended December 31, 2003 and 2002

   5

n       Non-Consolidated Statements of Appropriations of Retained Earnings (Disposition of Accumulated Deficit) for the years ended December 31, 2003, and 2002

   6

n       Non-Consolidated Statements of Cash Flows for the years ended December 31, 2003 and 2002

   7

n       Notes to Non-Consolidated Financial Statements December 31, 2003

   9

 

8.2. Kookmin Bank and Its Subsidiaries 2003 Consolidated Audit Report

 

Kookmin Bank and its subsidiaries Consolidated Audit Report as of and for the Years Ended 2003 and 2002    Page

n       Consolidated Balance Sheets as of December 31, 2003 and December 31, 2002

   4

n       Consolidated Statements of Operations for the years ended December 31, 2003 and 2002

   5

n       Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2003 and 2002

   6

n       Consolidated Statements of Cash Flows for the years ended December 31, 2003 and 2002

   7

n       Notes to Consolidated Financial Statements December 31, 2003

   11

 

34


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: March 30, 2004       By:  

/s/ Ki Sup Shin


                (Signature)
            Name:   Ki Sup Shin
            Title:   Senior Executive Vice President & Chief Financial Officer

 

 

 

 

35


Table of Contents

Exhibit 99.1

 

Kookmin Bank

Non-Consolidated Financial Statements

December 31, 2003 and 2002

 


Table of Contents

Kookmin Bank

Contents

December 31, 2003 and 2002

 

     Page(s)

Report of Independent Auditors

   1–3

Non-Consolidated Financial Statements

    

Balance Sheets

   4

Statements of Operations

   5

Statements of Appropriations of Retained Earnings (Dispositions of Accumulated Deficit)

   6

Statements of Cash Flows

   7–8

Notes to Financial Statements

   9–57

 


Table of Contents

LOGO

 

     Samil PricewaterhouseCoopers
Kukje Center Building
191 Hankangro 2ga, Yongsanku
Seoul 140-702, KOREA
(Yongsan P.O. Box 266, 140-600)

 

Report of Independent Auditors

 

To the Board of Directors and Shareholders of

Kookmin Bank

 

We have audited the accompanying non-consolidated balance sheet of Kookmin Bank (“the Bank”) as of December 31, 2003 and 2002, and the related non-consolidated statements of operations, appropriations of retained earnings (dispositions of accumulated deficit) and cash flows for the year then ended, expressed in Korean Won. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kookmin Bank as of December 31, 2003 and 2002, and the results of its operations, the changes in its retained earnings (accumulated deficit), and its cash flows for the year then ended in conformity with accounting principles generally accepted in the Republic of Korea.

 

Without qualifying our opinion, we draw your attention to the following matters.

 

As discussed in Note 33 to the financial statements, on May 30, 2003, the Bank obtained approval from the Board of Directors to enter into a merger agreement with Kookmin Credit Card Co., Ltd. (the “Subsidiary”), its majority-owned subsidiary. According to the resolution of the Board of Directors, the Bank merged with the Subsidiary on September 30, 2003. The merger was effected through an exchange of shares with the minority shareholders of the Subsidiary as of July 24, 2003, who received 0.442983 share of the Bank’s common stock for each share of the Subsidiary. The total assets and liabilities of the Subsidiary as of September 30, 2003 were (Won)10,595,409 million and (Won)9,391,897 million, respectively.

 


Table of Contents

LOGO

 

As discussed in Note 2 to the financial statements, as of December 2002, the Bank changed the rates for determining the allowances for losses from consumer loans and credit card loans, in anticipation of the increasing risk of loan losses due to the increase in consumer loans and credit card loans, as follows:

 

Credit Risk Classification


  

Allowance Rates

before Changes


    Allowance Rates after
Changes


 
     Consumer

    Credit Cards

 

Normal

   0.50 %   0.75 %   1.00 %

Precautionary

   2.00 %   8.00 %   12.00 %

Sub-standard

   20.00 %   20.00 %   20.00 %

Doubtful

   50.00 %   55.00 %   60.00 %

Estimated loss

   100.00 %   100.00 %   100.00 %

 

As a result of the above change, the Bank’s allowances for loan losses as of December 31, 2003 are greater by (Won)336,265 million for consumer loans and (Won)314,701 million for credit card loans compared to the amounts that which would have been recorded under the previous rates.

 

As discussed in Note 20 to the financial statements, in accordance with the resolution made by the Board of Directors on December 26, 2003, the Bank acquired 27,423,761 of its own shares previously owned by the Korean government at (Won)43,700 per share through public bidding and intends to sell these shares of treasury stock depending on certain market conditions. As a result of the acquisition, the Bank holds 8.92 percent of the total common stock issued as treasury stock.

 

As discussed in Note 16 to the financial statements, the Bank’s total exposure (including debt securities, beneficiary certificates, and loans) related to domestic credit card companies and capital companies amounts to (Won)2,055,663 million as of December 31, 2003. Currently, securities issued by credit card companies and capital companies, which are experiencing liquidity problems, are not widely traded in the bond market. The ultimate effect of these circumstances on the financial position of the Bank as of the balance sheet date cannot be presently determined, and accordingly, no adjustments related to such uncertainties have been recorded in the accompanying financial statements.

 

As discussed in Note 16 to the financial statements, in accordance with the agreement with the creditors’ committee of LG Card Co., Ltd. on November 24, 2003, the Bank provided additional loans of (Won)437.0 billion to LG Card Co., Ltd., which is currently experiencing a liquidity crisis. Also, on January 9, 2004, the Bank has agreed to a debt-equity swap of (Won)312.7 billion, to provide additional loans of (Won)205.9 billion (to be included in the debt-equity swap), and to extend the maturity of loans that will mature in 2004. The ability of LG Card Co., Ltd. to continue as a going concern depends on the effective execution of its restructuring plan and debt restructuring as well as the availability of financial aid from its financial institutional creditors. The ultimate effect of these circumstances on the financial position of the Bank as of the balance sheet date cannot be presently determined, and accordingly, no adjustments related to such uncertainties have been recorded in the accompanying financial statements.

 

2


Table of Contents

LOGO

 

Accounting principles and auditing standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in conformity with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those who are knowledgeable about Korean accounting principles or auditing standards and their application in practice.

 

Seoul, Korea

March 3, 2004

 

This report is effective as of March 3, 2004, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

3


Table of Contents

Kookmin Bank

Non-Consolidated Balance Sheets

December 31, 2003 and December 31, 2002

 

(in millions of Won)           
     2003

    2002

Assets

              

Cash and due from banks (Note 3)

   (Won) 6,526,345     (Won) 4,599,356

Securities (Note 4)

     28,101,845       30,940,750

Loans (Notes 5 and 6)

     139,920,521       126,730,561

Fixed assets (Note 7)

     3,019,556       3,092,616

Other assets (Note 8)

     6,484,239       6,135,558
    


 

Total assets

   (Won) 184,052,506     (Won) 171,498,841
    


 

Liabilities and Shareholders’ Equity

              

Deposits (Note 9)

   (Won) 132,180,272     (Won) 123,109,653

Borrowings (Note 10)

     10,902,800       10,690,754

Debentures (Note 11)

     19,192,581       17,539,007

Other liabilities (Note 13)

     13,362,339       9,784,798
    


 

Total liabilities

     175,637,992       161,124,212
    


 

Commitments and contingencies (Notes 14 and 16)

              

Common stock (5,000 Won par value per share, authorized 1 billion shares and 336,379,116 shares outstanding in 2003) (Notes 1 and 17)

     1,681,896       1,641,293

Capital surplus (Note 18)

     6,230,738       5,864,752

Retained earnings (Note 19)

     1,662,119       2,742,335

Capital adjustments (Note 20)

     (1,160,239 )     126,249
    


 

Total shareholders’ equity

     8,414,514       10,374,629
    


 

Total liabilities and shareholders’ equity

   (Won) 184,052,506     (Won) 171,498,841
    


 

 

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

 

4


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Operations

Years ended December 31, 2003 and 2002

 

(in millions of Won except per share amounts)             
     2003

    2002

 

Interest income

                

Interest on due from banks

   (Won) 10,433     (Won) 51,580  

Interest on trading securities

     116,142       95,576  

Interest on available-for-sale securities

     958,665       652,423  

Interest on held-to-maturity securities

     626,552       834,895  

Interest on loans

     9,814,835       9,251,849  

Other interest income

     98,923       102,735  
    


 


       11,625,550       10,989,058  
    


 


Interest expenses

                

Interest on deposits

     4,280,290       4,770,967  

Interest on borrowings

     410,746       415,938  

Interest on debentures

     1,143,228       830,219  

Other interest expenses

     68,570       58,068  
    


 


       5,902,834       6,075,192  
    


 


Net interest income

     5,722,716       4,913,866  

Provision for loan losses (Note 6)

     4,040,536       1,593,479  
    


 


Net interest income after provision for loan losses

     1,682,180       3,320,387  
    


 


Non-interest income

                

Fees & commission income

     1,636,171       1,345,669  

Dividends on trading securities

     1,633       1,123  

Dividends on available-for-sale securities

     5,580       12,186  

Gain on foreign currency transactions

     287,501       202,367  

Gain on derivatives transactions (Note 15)

     1,131,711       1,760,743  

Others (Note 22)

     868,840       1,273,355  
    


 


       3,931,436       4,595,443  
    


 


Non-interest expenses

                

Fees and commission expenses

     270,405       330,385  

General and administrative expenses (Note 23)

     2,704,148       2,551,426  

Loss on foreign currency transactions

     200,109       245,232  

Loss on derivatives transactions (Note 15)

     1,053,990       1,594,025  

Others (Note 22)

     1,308,880       928,997  
    


 


       5,537,532       5,650,065  
    


 


Operating income

     76,084       2,265,765  

Non-operating expenses, net (Note 24)

     (1,222,528 )     (372,147 )
    


 


Net (loss) income before income tax expense

     (1,146,444 )     1,893,618  
    


 


Income tax (benefit) expense (Note 25)

     (393,096 )     583,327  
    


 


Net (loss) income

   (Won) (753,348 )   (Won) 1,310,291  
    


 


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

   (Won) (2,311 )   (Won) 4,123  
    


 


 

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

 

5


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Appropriations of Retained Earnings

(Dispositions of Accumulated Deficit)

Years ended December 31, 2003 and 2002

(Date of Disposition : March 23, 2004 for the year ended December 31, 2003

Date of Appropriation : March 21, 2003 for the year ended December 31, 2002)

 

(in millions of Won)       
     2003

    2002

 

Retained earnings (accumulated deficit) before appropriations (dispositions)

                

Unappropriated retained earnings carried over from prior year

   (Won) 410     (Won) 5,117  

Adjustment on investment in associates (Note 19)

     (1,917 )     4,562  

Net income (loss)

     (753,348 )     1,310,291  
    


 


       (754,855 )     1,319,970  
    


 


Transferred from prior years’ reserve (Note 19)

                

Reserves for overseas investment losses

     —         5,417  
    


 


       —         5,417  
    


 


Dispositions (appropriations) (Note 19)

                

Transfer from (appropriations for) voluntary reserves

     754,900       (867,000 )

Other reserves

     —         (744 )

Legal reserves

     —         (132,000 )

Cash dividends (20.0% for common stock in 2002)

     —         (325,233 )
    


 


       754,900       (1,324,977 )
    


 


Unappropriated retained earnings carried over to the subsequent year

   (Won) 45     (Won) 410  
    


 


 

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

 

6


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Cash Flows

Years ended December 31, 2003 and 2002

 

(in millions of Won)       
     2003

    2002

 

Cash flows from operating activities

                

Net (loss) income

   (Won) (753,348 )   (Won) 1,310,291  
    


 


Adjustments to reconcile net (loss) income to net cash provided by operating activities

                

Realized gain on trading securities, net

     (71,899 )     (87,802 )

Unrealized gain on trading securities, net

     (70,976 )     (167,366 )

Provision for loan losses due to merger

     1,652,264       —    

Gain (loss) on foreign currency transactions, net

     (87,392 )     42,865  

Provision for loan losses

     4,040,536       1,593,479  

Reversal of losses from guarantees and acceptances

     (1,209 )     (37,436 )

Gain on derivatives transactions, net

     (77,721 )     (166,718 )

Loss (gain) on valuation of derivatives, net

     18,788       (41,884 )

Gain (loss) on fair value hedged items

     (10,715 )     9,213  

Retirement benefits

     109,766       100,198  

Depreciation and amortization

     466,856       389,931  

Loss on disposal of fixed assets, net

     33,058       6,288  

Impairment loss on fixed assets

     22,228       —    

Realized gain on available-for-sale securities, net

     (493,993 )     (210,112 )

Impairment loss on available-for-sale securities, net

     133,754       272,393  

Realized gain on held-to-maturity securities

     (2,771 )     (733 )

Unrealized gain (loss) on investment in associates, net

     (267,870 )     273,620  

Loss (gain) on sale of loans, net

     31,340       (6,475 )

Stock compensation expense

     12,130       11,333  

Others, net

     22,755       (33,116 )

Changes in assets and liabilities resulting from operations

                

Accrued income

     118,796       3,238  

Prepaid expenses

     (255,957 )     14,037  

Deferred tax assets

     (399,310 )     (51,181 )

Other assets

     (166 )     5,639  

Accrued expenses

     (593,967 )     (90,475 )

Unearned income

     (28,019 )     (1,070 )

Withholding taxes

     36,095       (54,343 )

Other liabilities

     587,179       45,215  

Retirement benefits

     (18,637 )     (19,130 )

Accounts payable

     (66,349 )     (60,268 )

Account for agency business

     —         33  

Deferred tax liabilities

     (35,111 )     141,532  
    


 


Net cash provided by operating activities

     4,050,135       3,191,196  
    


 


 

7


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Cash Flows

Years ended December 31, 2003 and 2002

 

(in millions of Won)       
     2003

    2002

 

Cash flows from investing activities

                

Increase (decrease) in due from banks

   (Won) (1,247,467 )   (Won) 2,839,245  

Decrease in trading securities

     1,336,940       992,343  

Increase (decrease) in available-for-sale securities

     (1,198,423 )     1,606,941  

Decrease in held-to-maturity securities

     5,119,423       —    

Acquisition of investment in associates

     (71,295 )     —    

Dividend from investment in associates

     11,392       —    

Increase in loans granted, net

     (12,580,451 )     (20,439,846 )

Proceeds from disposal of fixed assets

     101,599       14,049  

Acquisition of fixed assets

     (316,890 )     (578,828 )

Acquisition of intangible assets

     (705 )     (502 )

Proceeds from disposal of foreclosed assets

     162       978  

Acquisition of foreclosed assets

     (166 )     —    

Increase in guarantee deposits

     (8,865 )     (56,619 )

Decrease (increase) in other accounts receivable

     166,101       (338,569 )

Increase (decrease) in payments in advance

     (28,328 )     55,723  

Decrease in derivative assets, net

     145,924       67,591  

Collection of domestic exchange receivables

     474,995       403,014  

Collection of loans to trust accounts

     37,882       229,452  
    


 


Net cash used in investing activities

     (8,058,172 )     (15,205,028 )
    


 


Cash flows from financing activities

                

Increase in deposits, net

     9,076,415       7,948,349  

Decrease in borrowings, net

     (2,248,706 )     (2,846,629 )

Decrease (increase) in debentures, net

     (3,278,588 )     8,697,080  

Increase (decrease) in borrowings from trust accounts

     3,248,649       (931,874 )

Decrease in dividend payable

     (325,188 )     (29,967 )

Decrease (increase) in other accounts payable

     (273,080 )     499,769  

Increase (decrease) in advances received from customers

     19,325       (57,825 )

Decrease in guarantee deposits received

     (623 )     (41,516 )

Decrease in domestic exchange payables

     (173,865 )     (901,723 )

Decrease in liabilities incurred by agency relationships

     (171,172 )     (219,313 )

Stock options exercised

     (35 )     (26,741 )

Acquisition of treasury stock

     (1,227,876 )     (149,704 )

Sale of treasury stock

     826       1,928  

Increase in stock issuance cost

     (212 )     (737 )
    


 


Net cash provided by financing activities

     4,645,870       11,941,097  
    


 


Net increase (decrease) in cash and cash equivalents

     637,833       (72,735 )

Increase due to merger

     33,343       —    

Cash and cash equivalents, Beginning of year

     3,100,581       3,173,316  
    


 


End of year (Note 34)

   (Won) 3,771,757     (Won) 3,100,581  
    


 


 

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

 

8


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

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 (Note 32) and merged with Kookmin Credit Card Co., Ltd. (the “Subsidiary”), its majority-owned subsidiary, on September 30, 2003 (Note 33).

 

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 December 31, 2003, the Bank’s paid-in capital amounts to (Won)1,681,896 million and 35,000,566 shares of the Bank are listed on the New York Stock Exchange as American Depositary Shares (“ADSs”).

 

The Bank engages in the banking and trust businesses according to the provisions of the General Banking Act and the Trust Business Act, and operates through 1,136 domestic branches and offices (excluding ATMs) and three overseas branches as of December 31, 2003.

 

2. Summary of Significant Accounting Policies

 

The Bank has adopted Statements of Korean Financial Accounting Standards (“SKFAS”) No. 1 as of January 1, 2001 and No. 2 to No. 9 as of January 1, 2002 to present its financial statements. Except for the adoption of these SKFAS, the same accounting policies are applied for the fiscal years 2002 and 2003. The significant accounting policies followed by the Bank in the preparation of its non-consolidated financial statements are summarized below.

 

Basis of Financial Statement Presentation

 

The Bank maintains its accounting records in Korean Won and prepares statutory financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea. 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 accompanying financial statements have been condensed, restructured and translated into English from the Korean language non-consolidated financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, results of operations, or cash flows, is not presented in the accompanying non-consolidated financial statements.

 

Accounting Estimates

 

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 financial statements were prepared in accordance with 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.

 

9


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

Recognition of Interest Income

 

The Bank recognizes interest income on loans and debt securities on an accrual basis. However, interest income on delinquent and dishonoured loans and debt securities, other than those collateralized with security deposits or guaranteed by financial institutions, is recognized on a cash basis. As of December 31, 2003, the Bank has non-accrual loans and securities of (Won)10,677,822 million and (Won)620,929 million, respectively, with related foregone interest of (Won)638,079 million and (Won)150,492 million, respectively.

 

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.

 

Securities are recognized initially at their fair value plus transaction costs that are directly attributable to the acquisition and the Bank uses the moving average method and specific identification method for determining the carrying value of equity securities and debt securities, respectively.

 

Trading and available-for-sale debt securities are carried at fair value using the average of quoted prices provided by bond pricing service institutions. Held-to-maturity debt securities are carried at amortized cost.

 

Marketable equity securities are carried at market prices and beneficiary certificates are carried at quoted prices provided by the beneficiary certificate dealers. However, non-marketable equity securities are carried at fair value only if the fair value is reasonably measurable and if otherwise, are carried at cost.

 

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. 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 there is evidence of impairment and recoverable amounts of available-for-sale securities or held-to-maturity securities are less than the acquisition cost of equity securities or the amortized cost of debt securities. Unrealized holding gains or losses on available-for-sale or held-to-maturity securities that had not been recognized through income are realized when the related securities are disposed.

 

Investments in Associates

 

Investments in associate, 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 of the associates 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.

 

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 an appropriate method and the resulting amortization is charged to current operations.

 

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.

 

Deferred loan origination fees and costs

 

The Bank defers loan origination fees associated with originating loans and loan origination costs that have future economic benefits. Loan balances are reported net of these loan origination fees and costs, and the deferred loan origination fees and costs are amortized using the effective interest method with the amortization recognized as adjustments to other interest income.

 

10


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

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 the allowances for loan losses. According to the credit rating criteria, the allowance is determined according to the credit risk of corporate borrowers, which is evaluated based on financial and non-financial risks. The credit rating criteria is categorized into 12 categories (AAA, AA, A, BBB, BB, BB-, B, B-, CCC, CC, C, D) 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 under each credit risk classification:

 

Credit Risk Classification


   Credit
Ratings


   Allowance
Rates


 

Normal

   AAA~B    0.5 %

Precautionary

   B-~CCC    2 %

Sub-standard

   CC    20 %

Doubtful

   C    50 %

Estimated loss

   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 of borrowers including delinquencies, bankruptcies and collateral value. As of December 2002, the rates used for determining the allowances for losses from corporate loans, consumer loans and credit card loans were changed as follows:

 

Credit Risk Classification


  

Allowance Rates

before Changes


    Allowance
Rates after Changes


 
     Consumer

    Credit Card

 

Normal

   0.50 %   0.75 %   1.00 %

Precautionary

   2.00 %   8.00 %   12.00 %

Sub-standard

   20.00 %   20.00 %   20.00 %

Doubtful

   50.00 %   55.00 %   60.00 %

Estimated loss

   100.00 %   100.00 %   100.00 %

 

As a result of the above change, the Bank’s allowances for loan losses as of December 31, 2003 are greater by (Won)336,265 million for consumer loans and (Won)314,701 million for credit card loans compared to the amounts which would have been recorded under the previous rates.

 

The Bank applies the credit risk classification used for loans to outstanding guarantees and acceptances, and provides allowances for losses of 20 percent, 50 percent and 100 percent of the outstanding guarantees and acceptances classified as sub-standard, doubtful, and estimated loss, respectively. In addition, the Bank provides allowances for losses of 19 percent of certain outstanding guarantees and acceptances classified as precautionary.

 

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 nominal value and the present value of the restructured loan is significant. 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. The difference between the nominal value and the present value is recorded as present value discount, which is shown as a deduction from the loan nominal value. These present value discounts are amortized using the effective interest method and are recognized as interest income. Allowances for loan losses on the restructured loans are provided for based on the loan balances, net of present value discounts.

 

11


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

Receivables and payables arising from long-term installment transactions, long-term cash loans or borrowings and other similar transactions shall be stated at present value, if the difference between nominal value and present value is material. The difference is accounted for as a present value discount and is deducted from the nominal value of the related receivable or payable. Present value discounts are amortized or reversed using the effective interest method, and the amortization is included in interest income or expense.

 

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   4-5 years

Equipment and vehicles

  Declining balance method   4-5 years

 

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


 

Amortization Method


 

Estimated Useful Life


Goodwill

  Straight-line method   9 years

Development costs

  Straight-line method   5 years

Trademarks

  Straight-line method   1-10 years

Others

  Straight-line method   5-30 years

 

The Bank estimated the useful life of endowment assets that are beneficial upon usage, classified under other intangible assets, to be 30 years based on the term of the contract. 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.

 

Development costs directly related to new technology or new products (including costs related to software development) are capitalized as intangible assets to the extent that the estimated future benefits are probable.

 

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 impaired book value is recognized, to the extent of the original book value before impairment, as a reversal of fixed asset impairment losses. For the year ended December 31, 2003, the Bank recognized an impairment loss of (Won)22,228 million for the difference between the book value of (Won)48,388 million and net realizable value of (Won)26,160 million of assets related to the expected closures of certain branch offices.

 

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.

 

12


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

Accrued Retirement Benefits

 

Employees and directors with more than one year of service and temporary employees with a one-year contract, as of December 31, 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, as contra accounts of accrued retirement benefits.

 

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 income 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.

 

Derivative 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.

 

Stock Options

 

Compensation costs for stock options granted to employees and executives are recognized using the fair value method. Under the fair value method, compensation costs for stock option plans are determined using an option-pricing model and are recognized over the vesting period (Note 21).

 

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.

 

13


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

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 percent (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 incurred are 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 years ended December 31, 2003 and 2002.

 

Foreign Currency Translation

 

All assets and liabilities denominated in foreign currencies are translated into Korean Won at the rates in effect at the balance sheet date (2003: (Won)1,197.8:US$1, 2002: (Won)1,200.4:US$1), and resulting translation gains and losses are recognized in the current period.

 

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 the balance sheet dates.

 

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.

 

Application of Korean Financial Accounting Standard No. 6

 

The Bank has adopted Statements of Korean Financial Accounting Standards (“SKFAS”) No. 6 ‘Subsequent Events’, for the fiscal year 2003 and presented retained earnings (accumulated deficit) as before appropriations (disposition) on the balance sheet. Accordingly, retained earnings as of December 31, 2002 were restated to amounts before appropriations, and the restatement resulted in a decrease in liabilities and an increase in net assets of (Won)325,233 million.

 

14


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

December 31, 2003 and 2002

 

3. Cash and Due from Banks

 

Cash and due from banks as of December 31, 2003 and 2002 are summarized as follows:

 

(in millions of Won)         2003

    2002

 

Cash on hand

                     

Cash in Won

        (Won) 2,945,921     (Won) 2,392,346  

Cash in foreign currencies

          228,153       186,780  
         


 


            3,174,074       2,579,126  
         


 


Due from banks in Won

                     

Bank of Korea

   Reserve deposits in the Bank of Korea      2,612,248       1,340,482  
         


 


Other banks

   Time deposits      810       41,192  
     Passbook deposits      8,185       392  
         


 


            8,995       41,584  
         


 


Other financial institutions

   Deposits at Mutual Savings      140,000       140,000  
         


 


Others

   Futures margin accounts      1,560       1,336  
     Market participation margin      454       458  
     KOSPI futures margin accounts      200       —    
     Other deposits      —         8,319