Form 6-K

 

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 May 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


Kookmin Bank Interim Financial Statements

 

On May 14, 2004, Kookmin Bank disclosed its independent auditors’ review report, including interim financial statements and relevant notes for the three-month periods ended and as of March 31, 2004 and 2003, and as of December 31, 2003 as following Exhibit 99.1.

 

2


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: May 17, 2004

     

By:

 

/s/    Ki Sup Shin        

             
                (Signature)
           

Name:

 

Ki Sup Shin

               
           

Title:

 

Senior Executive Vice President &

Chief Financial Officer


Exhibit 99.1

 

Kookmin Bank

Non-Consolidated Interim Financial Statements

March 31, 2004 and 2003


Kookmin Bank

Index

March 31, 2004 and 2003, and December 31, 2003

 


 

     Page(s)

Report of Independent Accountants

   1–2

Non-Consolidated Interim Financial Statements

    

Balance Sheets

   3

Statements of Income

   4

Statements of Cash Flows

   5–6

Notes to Financial Statements

   7–54


LOGO

 

Report of Independent Accountants

 

To the Board of Directors and Shareholders of

Kookmin Bank

 

We have reviewed the accompanying non-consolidated balance sheet of Kookmin Bank (“the Bank”) as of March 31, 2004, and the related non-consolidated statements of income and cash flows for the three-month periods ended March 31, 2004 and 2003, expressed in Korean Won. These interim financial statements are the responsibility of the Bank’s management. Our responsibility is to issue a report on these interim financial statements based on our review.

 

We conducted our reviews in accordance with the quarterly and semi-annual review standards established by the Securities & Futures Commission of the Republic of Korea. These standards require that we plan and perform our review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of the Bank’s personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

 

Based on our reviews, nothing has come to our attention that causes us to believe that the non-consolidated interim financial statements referred to above are not presented fairly, in all material respects, in accordance with accounting principles generally accepted in the Republic of Korea.

 

We have audited the non-consolidated balance sheet of Kookmin Bank as of December 31, 2003 and the related non-consolidated statements of income, appropriation of retained earnings and cash flows for the year then ended, in accordance with auditing standards generally accepted in the Republic of Korea. We expressed an unqualified opinion on those financial statements in our audit report dated March 3, 2004. These financial statements are not included in this review report. The non-consolidated balance sheet as of December 31, 2003, presented herein for comparative purposes, is consistent, in all material respects, with the above audited balance sheet as of December 31, 2003.

 

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

 

 

 

 

 

 

 

 

 

Samil PricewaterhouseCoopers is the Korean member firm of the PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers international Limited, each of which is a separate and independent legal entity.


LOGO

 

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.

 

As discussed in Note 20 to the financial statements, in accordance with the resolution of the Board of Directors on December 17, 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 of March 31, 2004, the Bank holds 8.92 % of the total common stock issued as treasury stock.

 

As discussed in Note 16 to the financial statements, the Bank’s total exposure (including loans and securities) to LG Card Co., Ltd., which is under the joint control of financial institutions due to currently experiencing its cash crisis, amounts to (Won)731,318 million as of March 31, 2004. In addition, the Bank holds securities issued by credit card companies and capital companies, which are experiencing liquidity problems, amounting to (Won)382,491 million as of March 31, 2004. 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.

 

Accounting principles and review 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 review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those who are knowledgeable about Korean accounting principles or review standards and their application in practice.

 

 

Seoul, Korea

April 16, 2004

 

 

This report is effective as of April 16, 2004, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

2


Kookmin Bank

Non-Consolidated Balance Sheets

March 31, 2004 and 2003, and December 31, 2003

(Unaudited)

 


 

(in millions of Won)    2004

    2003

 

Assets

                

Cash and due from banks (Note 3)

   (Won) 4,913,459     (Won) 6,526,345  

Securities (Note 4)

     26,820,606       26,908,462  

Loans (Notes 5 and 6)

     139,559,426       141,143,674  

Fixed assets (Note 7)

     2,948,580       3,019,556  

Other assets (Note 8)

     10,104,407       6,484,239  
    


 


Total assets

   (Won) 184,346,478     (Won) 184,082,276  
    


 


Liabilities and Shareholders’ Equity

                

Deposits (Note 9)

   (Won) 130,637,739     (Won) 132,180,272  

Borrowings (Note 10)

     13,905,133       10,902,800  

Debentures (Note 11)

     16,456,920       19,192,581  

Other liabilities (Note 13)

     14,608,372       13,392,109  
    


 


Total liabilities

     175,608,164       175,667,762  
    


 


Commitments and contingencies (Notes 14 and 16)

                

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

     1,681,896       1,681,896  

Capital surplus (Note 18)

     6,230,738       6,230,738  

Retained earnings (Note 19)

     1,813,056       1,662,119  

Capital adjustments (Note 20)

     (987,376 )     (1,160,239 )
    


 


Total shareholders’ equity

     8,738,314       8,414,514  
    


 


Total liabilities and shareholders’ equity

   (Won) 184,346,478     (Won) 184,082,276  
    


 


 

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

 

See Report of Independent Accountants

 

3


Kookmin Bank

Non-Consolidated Statements of Income

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

(in millions of Won, except per share amounts)    2004

   2003

 

Interest income

               

Interest on due from banks

   (Won) 1,873    (Won) 3,779  

Interest on trading securities

     39,651      24,522  

Interest on available-for-sale securities

     155,424      167,677  

Interest on held-to-maturity securities

     94,753      188,259  

Interest on loans

     2,685,105      2,377,701  

Other interest income

     24,764      22,766  
    

  


       3,001,570      2,784,704  
    

  


Interest expenses

               

Interest on deposits

     1,042,593      1,103,487  

Interest on borrowings

     80,632      108,530  

Interest on debentures

     265,024      283,251  

Other interest expenses

     22,490      12,706  
    

  


       1,410,739      1,507,974  
    

  


Net interest income

     1,590,831      1,276,730  

Provision for loan losses (Note 6)

     1,100,196      659,066  
    

  


Net interest income after provision for loan losses

     490,635      617,664  
    

  


Non-interest income

               

Fees and commission income

     547,417      336,866  

Dividends on trading securities

     2,716      1,587  

Dividends on available-for-sale securities

     4,070      2,666  

Gain on foreign currency transactions

     50,205      130,716  

Gain on derivative transactions (Note 15)

     550,951      637,812  

Others (Note 22)

     825,870      427,813  
    

  


       1,981,229      1,537,460  
    

  


Non-interest expenses

               

Fees and commission expenses

     133,363      49,235  

General and administrative expenses (Note 23)

     663,077      582,116  

Loss on foreign currency transactions

     46,090      82,803  

Loss on derivative transactions (Note 15)

     586,171      616,975  

Others (Note 22)

     831,703      459,443  
    

  


       2,260,404      1,790,572  
    

  


Operating income

     211,460      364,552  

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

     17,057      (217,437 )
    

  


Net income before income tax expense

     228,517      147,115  

Income tax expense (Note 25)

     77,259      73,182  
    

  


Net income

   (Won) 151,258    (Won) 73,933  
    

  


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

   (Won) 494    (Won) 227  
    

  


 

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

 

See Report of Independent Accountants

 

4


Kookmin Bank

Non-Consolidated Statements of Cash Flows

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

(in millions of Won)    2004

    2003

 

Cash flows from operating activities

                

Net income

   (Won) 151,258     (Won) 73,933  
    


 


Adjustments to reconcile net income to net cash provided by operating activities

                

Realized gain on trading securities, net

     (18,872 )     (14,095 )

Unrealized gain on trading securities, net

     (48,567 )     (30,608 )

Gain on foreign currency transactions, net

     (4,115 )     (47,913 )

Provision for loan losses

     1,100,196       659,066  

Reversal of losses from guarantees and acceptances

     —         (204 )

Loss (gain) on derivative transactions, net

     35,220       (20,837 )

(Gain) loss on valuation of derivatives, net

     (51,399 )     26,111  

Loss on fair value hedged items

     9,699       1,405  

Retirement benefits

     29,317       23,950  

Stock compensation expense

     1,772       —    

Depreciation and amortization

     97,213       101,470  

(Gain) loss on disposal of fixed assets, net

     (273 )     1,365  

Realized gain on available-for-sale securities, net

     (52,582 )     (45,163 )

Impairment loss on available-for-sale securities, net

     10,415       (8,960 )

Realized gain on held-to-maturity securities

     (1,476 )     (793 )

Unrealized (gain) loss on investment in associates, net

     (11,514 )     257,652  

(Gain) loss on sale of loans, net

     (230 )     1,213  

Provision for guarantee allowance

     216       —    

Provision for other allowances

     43,298       —    

Others, net

     (4,771 )     (6,319 )

Changes in assets and liabilities resulting from operations

                

Accrued income

     43,050       85,885  

Prepaid expenses

     202,576       (32,372 )

Deferred tax assets

     78,953       (171,788 )

Other assets

     1,305       3,419  

Accrued expenses

     (124,208 )     19,969  

Unearned income

     3,807       (933 )

Withholding taxes

     (26,763 )     2,978  

Other liabilities

     (54,431 )     343,305  

Payment of retirement benefits

     (26,143 )     (3,271 )

Retirement pension funds

     13,833       —    

Account for agency business

     (58,462 )     (194,235 )
    


 


Net cash provided by operating activities

     1,338,322       1,024,230  
    


 


 

5


Kookmin Bank

Non-Consolidated Statements of Cash Flows

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

(in millions of Won)    2004

    2003

 

Cash flows from investing activities

                

Decrease (increase) in due from banks

   (Won) 1,301,315     (Won) (1,674,432 )

(Increase) decrease in trading securities

     (1,238,302 )     303,703  

Decrease (increase) in available-for-sale securities

     1,118,572       (3,985,260 )

Decrease in held-to-maturity securities

     488,754       1,029,563  

Acquisition of investment in associates

     (353 )     —    

Decrease (increase) in loans granted, net

     272,763       (3,407,290 )

Proceeds from disposal of fixed assets

     2,663       6,984  

Acquisition of fixed assets

     (28,513 )     (58,600 )

Acquisition of intangible assets

     (231 )     (270 )

Proceeds from disposal of foreclosed assets

     31       30  

Decrease (increase) in guarantee deposits

     35,276       (7,057 )

Decrease (increase) in other accounts receivable

     (3,490,074 )     50,109  

Increase in payments in advance

     (605 )     (14,399 )

Decrease in derivative assets, net

     (33,327 )     84,602  

(Increase) decrease in collection of domestic exchange receivables

     (156,337 )     436,152  

Collection of loans to trust accounts

     —         6,878  
    


 


Net cash used in investing activities

     (1,728,368 )     (7,229,287 )
    


 


Cash flows from financing activities

                

(Decrease) increase in deposits, net

     (1,542,531 )     1,310,908  

Increase in borrowings, net

     3,002,333       3,053,220  

(Decrease) increase in debentures, net

     (2,735,661 )     1,530,799  

(Decrease) increase in borrowings from trust accounts

     (2,470,575 )     541,626  

Decrease in dividend payable

     —         (324,842 )

Increase (decrease) in other accounts payable

     3,200,180       (166,021 )

Increase in advances received from customers

     80,672       686,045  

Decrease in guarantee deposits received

     (12,644 )     (9,390 )

Decrease in domestic exchange payables

     (234,321 )     (431,057 )

Increase in liabilities incurred by agency relationships

     787,706       837,206  

Stock options exercised

     —         15  

Sale of treasury stock

     793       —    
    


 


Net cash provided by financing activities

     75,952       7,028,509  
    


 


Net (decrease) increase in cash and cash equivalents

     (314,094 )     823,452  

Cash and due from banks, beginning of year

     3,771,757       3,100,581  
    


 


Cash and due from banks, end of year (Note 34)

   (Won) 3,457,663     (Won) 3,924,033  
    


 


 

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

 

See Report of Independent Accountants

 

6


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

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 March 31, 2004, the Bank’s paid-in capital amounts to (Won)1,681,896 million and 36,240,979 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 1,132 domestic branches and offices (excluding ATMs) and three overseas branches as of March 31, 2004.

 

2. Summary of Significant Accounting Policies

 

The significant accounting policies followed by the Bank in the preparation of its non-consolidated financial statements are summarized below.

 

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.

 

Application of the Statements of Korean Financial Accounting Standards

 

The Bank has adopted Statements of Korean Financial Accounting Standards (“SKFAS”) No. 1 to No. 13 (SKFAS No. 10 to No. 13 has been applied from January 1, 2004) in the preparation of its financial statements. Except for the adoption of these SKFAS, the same accounting policies are applied for the financial statements as of and for the three-month period ended March 31, 2004 and as of and for the year ended December 31, 2003.

 

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.

 

See Report of Independent Accountants

 

7


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Recognition of Interest Income

 

The Bank recognizes interest income on loans and debt securities on an accrual basis. However, interest income on delinquent and dishonored loans and debt securities, other than those collateralized with security deposits or guaranteed by financial institutions, is recognized on a cash basis. As of March 31, 2004, the Bank has non-accrual loans and securities of (Won)12,168,587 million and (Won)481,883 million, respectively, with related foregone interest of (Won)677,035 million and (Won)146,107 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 of the debt securities 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 of.

 

Investments in Associates

 

Investments in associates, over which the Bank exercises significant control or influence, are accounted for under the equity method. Under the equity method, the Bank records changes in its proportionate ownership of the associate in current operations, as capital adjustments or as adjustments to retained earnings, depending on the nature of the underlying change in the book value of the investment in associate.

 

The Bank discontinues the equity method of accounting for investments in associates when the Bank’s share of accumulated losses 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.

 

See Report of Independent Accountants

 

8


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

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.

 

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 divided 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    0.50 %

Precautionary

   B-~CCC    2.00 %

Sub-standard

   CC    20.00 %

Doubtful

   C    50.00 %

Estimated loss

   D    100.00 %

 

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. The rates used for determining the allowances for losses from corporate loans, consumer loans and credit card loans are as follows:

 

     Allowance Rates

 

Credit Risk Classification


  

Small-sized

corporate


    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 %

 

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

 

See Report of Independent Accountants

 

9


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Troubled Debt Structuring

 

Troubled debt structuring 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, or by recording a provision for loan losses in the current period if additional allowances need to be provided for. The present value discounts are recorded in allowances for loan losses, which is shown as a deduction from the loan nominal value. Allowance for loan losses are amortized using the effective interest method and are recognized as interest income. Allowances for loan losses on the structured loans are provided for based on the loan balances, net of present value discounts.

 

Before the adoption of SKFAS No. 13, Troubled Debt Structuring, the difference between the nominal value and the present value of loan under troubled debt structuring agreements was recorded as present value discounts and was presented separately as a deduction from the loan nominal value. However, in accordance with the bank’s adoption of SKFAS No. 13, unamortized present value discounts as of the beginning of the current period are reclassified to allowances for loan losses.

 

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 the accumulated depreciation is presented as a contra account of tangible assets in the financial statements. In addition, impairment loss is recognized based on the difference between the recoverable amount and the book value and the accumulated impairment loss is presented as 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 when 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

 

See Report of Independent Accountants

 

10


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

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.

 

Stock Issuance Costs and Debenture Issuance Costs

 

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

 

Accrued Retirement Benefits

 

Employees and directors with more than one year of service and temporary employees with at least 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.

 

See Report of Independent Accountants

 

11


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

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.

 

Gains and Losses on Trust Management

 

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

 

Under the Trust Business Act, reserves for future losses are set up in the trust accounts for losses related to those trust funds with a guarantee of the principal or of a certain minimum rate of return. The reserves are used to provide for the losses on such trust funds and, if the losses 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 three-month period ended March 31, 2004.

 

Foreign Currency Translation

 

All assets and liabilities denominated in foreign currencies are translated into Korean Won at the rates in effect as of the balance sheet dates (March 31, 2004 (Won)1,153.6:US$1, December 31, 2003: (Won)1,197.8: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.

 

See Report of Independent Accountants

 

12


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Restatement of Prior Year Financial Statements

 

During the current period, the Bank reclassified the subordinated retained interests earned from securitization transactions from available-for-sale securities to loans. Such reclassification has no effect on prior years’ net income nor the prior years’ net assets. The prior period financial statements presented herein for comparative purposes were also reclassified to conform to the current period financial statement presentation.

 

See Report of Independent Accountants

 

13


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

3. Cash and Due from Banks

 

Cash and due from banks as of March 31, 2004 and December 31, 2003 are summarized as follows:

 

(in millions of Won)        2004

    2003

 
Cash on hand                     

Cash in Won

       (Won) 2,565,004     (Won) 2,945,921  

Cash in foreign currencies

         225,578       228,153  
        


 


           2,790,582       3,174,074  
        


 


Due from banks in Won                     

Bank of Korea

  Reserve deposits in the Bank of Korea      1,283,884       2,612,248  
        


 


Other banks

  Time deposits      810       810  
    Passbook deposits      13,585       8,185  
        


 


           14,395       8,995  
        


 


Other financial institutions

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


 


Others

  Futures margin accounts      5,725       1,560  
    Market participation margin      463       454  
    KOSPI futures margin accounts      —         200  
        


 


           6,188       2,214  
        


 


           1,444,467       2,763,457  
    Present value discounts1*      (10,287 )     (12,810 )
        


 


           1,434,180       2,750,647  
        


 


Due from banks in foreign currencies                     

Bank of Korea

  Demand deposits      35,619       12,415  
        


 


Other banks

  Demand deposits      52,910       71,879  
        


 


Others

  Other deposits      4,334       3,354  
        


 


Off-shore

  Demand deposits      595,834       513,976  
        


 


           688,697       601,624  
        


 


         (Won) 4,913,459     (Won) 6,526,345  
        


 



1* Present value discounts are related to the (Won)140,000 million of time deposits (1% interest, five-year maturity at the point of deposit, uncallable for five years) placed with Hansol Mutual Savings & Finance Co., Ltd. (previously, Bukook Mutual Savings & Finance Co., Ltd.).

 

The maturities of the due from banks as of March 31, 2004 are as follows:

 

(in millions of Won)    Due from Banks
in Won


   Due from Banks in
Foreign Currencies


   Total

Due in 3 months or less

   (Won) 1,304,313    (Won) 583,720    (Won) 1,888,033

Due after 3 months through 6 months

     154      104,977      105,131

Due after 6 months through 1 year

     72,500      —        72,500

Due after 1 year through 2 years

     67,500      —        67,500
    

  

  

     (Won) 1,444,467    (Won) 688,697    (Won) 2,133,164
    

  

  

 

See Report of Independent Accountants

 

14


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Included in cash and due from banks as of March 31, 2004 are the following restricted deposits:

 

(in millions of Won)    Amount

   

Restrictions


Reserve deposits in the Bank of Korea

   (Won) 1,283,884     General Banking Act

Deposits at Hansol Mutual Savings & Finance Co., Ltd.

     140,000     Withdrawal at maturity

Due from banks in foreign currency

     35,619     General Banking Act

Other deposits

     6,580     Futures guarantee deposits
    


   
       1,466,083      

Present value discounts

     (10,287 )    
    


   
     (Won) 1,455,796      
    


   

 

4. Securities

 

Securities as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)    2004

   2003

Trading

   (Won) 5,788,688    (Won) 4,482,948

Available-for-sale

     14,963,808      15,894,974

Held-to-maturity

     5,492,064      5,979,341

Investment in associates

     576,046      551,199
    

  

     (Won) 26,820,606    (Won) 26,908,462
    

  

 

Trading, available-for-sale, and held-to-maturity securities as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)    Unrealized

   Book Value

     Gain

   Loss

   2004

   2003

Trading

                           

Equity securities

   (Won) 10,460    (Won) 3,082    (Won) 244,004    (Won) 113,171

Beneficiary certificates2*

     25,474      30      1,678,129      1,686,754

Government and municipal bonds

     5,494      765      1,378,191      1,076,427

Corporate bonds

     10,502      111      2,282,828      1,365,060

Asset-backed securities

     625      —        205,536      241,536
    

  

  

  

     (Won) 52,555    (Won) 3,988    (Won) 5,788,688    (Won) 4,482,948
    

  

  

  

 

 

(in millions of Won)    Impairment

   Capital Adjustments

   Book Value

     Reversal

   Loss

   Gain

   Loss

   2004

   20031*

Available-for-Sale

                                         

Equity securities

   (Won) —      (Won) 8,416    (Won) 168,126    (Won) 15,270    (Won) 593,758    (Won) 439, 791

Investment in funds

     —        —        3,007      —        4,519      30,872

Beneficiary certificates2*

     —        —        87,746      —        4,731,863      4,375,817

Government and municipal bonds

     —        —        7,034      8,707      1,228,632      2,322,889

Foreign government bonds

     —        —        2,540      —        27,227      28,153

Corporate bonds

     —        1,999      64,286      3,668      7,907,644      8,228,640

Asset-backed securities

     —        —        1,720      —        470,019      468,669

Other debt securities

     —        —        —        —        146      143
    

  

  

  

  

  

     (Won) —      (Won) 10,415    (Won) 334,459    (Won) 27,645    (Won) 14,963,808    (Won) 15,894,974
    

  

  

  

  

  

 

See Report of Independent Accountants

 

15


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

(in millions of Won)    Impairment

   Unrealized Holding

   Book Value

     Reversal of

   Loss

   Gain

   Loss

   2004

   2003

Held-to-Maturity

                                         

Government and municipal bonds

   (Won) —      (Won) —      (Won) 98,234    (Won) 2,297    (Won) 2,412,337    (Won) 2,489,998

Corporate bonds

     —        —        78,687      283      2,816,016      3,163,020

Asset-backed securities

     —        —        3,463      —        263,711      326,323
    

  

  

  

  

  

     (Won) —      (Won) —      (Won) 180,384    (Won) 2,580    (Won) 5,492,064    (Won) 5,979,341
    

  

  

  

  

  


1* Subordinated retained interest received from securitization transaction amounting to (Won)1,193,383 million has been reclassified from beneficiary certificates in securities to credit card receivables in loans. (Note 2)
2* The Bank classified wholly owned beneficiary certificates based on the Bank’s intention for acquiring the certificates and recorded the fair value using the net assets of the funds. The fund assets are composed of deposits, call loan and securities and the fund operating income are composed of interest income, gain/loss on valuation of investments, and gain/loss on disposal of investments.

 

As of March 31, 2004 and December 31, 2003, investments in associates are as follows:

 

(in millions of Won)   

Owner-

ship (%)


  

Acquisition

Cost


  

Beginning

Balance1*


   Equity Method2*

   Book Value

              N/I

    R/E

    C/A

   2004

   2003

Domestic Associates

                                                       

KB Investment Co., Ltd.

   99.89    (Won) 155,311    (Won) 77,273    (Won) 205     (Won) —       (Won) 1,174    (Won) 78,652    (Won) 77,273

KB Data Systems Co., Ltd.4*

   99.98      7,998      14,647      31       —         —        14,678      14,647

KB Futures Co., Ltd.5*

   99.98      19,996      25,521      293       —         —        25,814      25,521

KLB Securities

   36.41      10,316      —        —         —         —        —        —  

KB Asset Management6*

   80.00      39,015      45,051      1,045       —         —        46,096      45,051

Jooeun Industrial

   99.99      23,994      —        —         —         —        —        —  

KB Real Estate Trust

   99.99      76,103      98,129      1,086       (336 )     336      99,215      98,129

KB Credit Information

   66.34      8,444      11,863      357       —         —        12,220      11,863

ING Life Korea

   20.00      21,769      43,845      7,192       —         14      51,051      43,845

Korea Mortgage

   26.67      30,629      35,788      393       —         —        36,181      35,788

KICO No. 2 Venture Investment Partnership3*

   55.56      —        —        204       —         —        204      —  

KICO No. 3 Venture Investment Partnership3*

   69.23      —        —        143       —         —        143      —  

Pacific IT Investment Partnership3*

   50.00      7,000      7,000      (145 )     —         —        6,855      —  

NPC02-4 Kookmin Venture Fund3*

   33.33      10,000      10,000      208       —         —        10,208      —  
         

  

  


 


 

  

  

            410,575      369,117      11,012       (336 )     1,524      381,317      352,117
         

  

  


 


 

  

  

Foreign Associates

                                                       

KB Int’l Ltd. (London)

   100.00      42,135      56,156      (881 )     —         —        55,275      56,755

KB Luxembourg S.A

   100.00      24,584      5,562      (540 )     —         —        5,022      5,950

Kookmin Singapore Ltd.

   100.00      13,737      2,003      —         —         —        2,003      2,080

Kookmin Finance Asia Ltd. (HK)

   100.00      8,075      275      1       —         —        276      286

Kookmin Bank HK Ltd.7*

   100.00      23,072      60,402      1,923       —         —        62,325      62,716

Sorak Financial Holdings

   25.00      69,829      69,829      (1 )     —         —        69,828      71,295
         

  

  


 


 

  

  

            181,432      194,227      502       —         —        194,729      199,082
         

  

  


 


 

  

  

          (Won) 592,007    (Won) 563,344    (Won) 11,514     (Won) (336 )   (Won) 1,524    (Won) 576,046    (Won) 551,199
         

  

  


 


 

  

  


1* The beginning balance is the prior year’s book value adjusted by dividends, changes in foreign exchange rates, and acquisition during current year.
2* The investments in associates are accounted for under the equity method and changes in the net assets of the associates are recognized in net income (N/I), retained earnings (R/E), and/or in capital adjustment (C/A) depending on the nature of the changes in net assets.
3* Investment in funds which had been classified as available-for-sale for the prior years are reclassified as investment in associates as of January 1, 2004.
4* Kookmin Data Systems Corp. will change its name to KB Data Systems Co., Ltd., on April 30, 2004.
5* Kookmin Futures Co., Ltd. will change its name to KB Futures Co., Ltd., on April 30, 2004.
6* KB Investment Trust Management will change its name to KB Asset Management, on April 29, 2004.
7* Kookmin Finance HK Ltd. changed its name to Kookmin Bank HK Ltd., effective as of January 1, 2004.

 

See Report of Independent Accountants

 

16


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

KLB Securities Co., Ltd., Jooeun Industrial Co., Ltd., KICO No. 2 Venture Investment Partnership, KICO No.3 Venture Investment Partnership, Kookmin Singapore (Merchant Bank), Ltd. and Kookmin Finance Asia, Ltd. (HK), KB Luxembourg S.A are in the process of liquidation. Consequently, accounting under the equity method is no longer applied to investments in KLB Securities Co., Ltd. and Jooeun Industrial Co., Ltd. due to accumulated deficits resulting to a decrease of the investment value below zero. Accordingly, the total accumulative estimated loss that has not been recognized by the Bank arising from the securities amounts to (Won) 47,037 million.

 

The Bank applies the equity method accounting to a subsidiary based on its adjusted financial statements that are, in turn, based on most recent available audited or reviewed financial statements adjusted for changes in net assets using the unaudited financial statements as of March 31, 2004. In the case of ING Life Korea Co., Ltd., adjustment for income tax expenses of (Won)15,194 million has been additionally made to the adjusted financial statements.

 

The maturities of the available-for-sale and held-to-maturity debt securities as of March 31, 2004 are summarized as follows:

 

(in millions of Won)    Available-for-sale

   Held-to-maturity

     Book Value

   Fair value

   Book Value

   Fair value

Maturities

                           

Due in 1 year or less

   (Won) 8,706,354    (Won) 8,706,354    (Won) 1,744,426    (Won) 1,765,339

Due after 1 year through 5 years

     5,254,914      5,254,914      3,495,768      3,634,323

Due after 5 years through 10 years

     389,866      389,866      251,870      270,204

Thereafter

     14,397      14,397      —        —  
    

  

  

  

     (Won) 14,365,531    (Won) 14,365,531    (Won) 5,492,064    (Won) 5,669,866
    

  

  

  

 

Investment securities risk concentrations as of March 31, 2004 are as follows:

 

(in millions of Won)          
     Book Value

   Ratio(%)

By Country

           

Korea

   (Won) 26,522,952    98.89

Singapore

     77,546    0.29

USA

     69,970    0.26

Germany

     28,845    0.11

Philippines

     27,684    0.10

Others

     93,609    0.35
    

  
     (Won) 26,820,606    100.00
    

  

 

See Report of Independent Accountants

 

17


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

(in millions of Won)    Book Value

   Ratio(%)

By Type

           

Fixed rate bonds

   (Won) 15,654,133    58.37

Floating rate bonds

     2,254,200    8.40

Subordinated bonds

     754,175    2.81

Convertible bonds

     325,133    1.21

Beneficiary certificates

     6,409,992    23.90

Equity securities

     1,396,398    5.21

Others

     26,575    0.10
    

  
     (Won) 26,820,606    100.00
    

  

 

(in millions of Won)    Book Value

   Ratio(%)

By Industry

           

Government and municipalities

   (Won) 8,585,047    32.01

Financial institutions

     16,839,343    62.79

Manufacturing industries

     571,818    2.13

Others

     824,398    3.07
    

  
     (Won) 26,820,606    100.00
    

  

 

See Report of Independent Accountants

 

18


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Available-for-sale equity securities of which the fair value cannot be reasonably measured as of March 31, 2004 are as follows:

 

(in millions of Won)    Acquisition Cost

   Net Asset Value1*

   Book Value

Daewoo Electronics Co., Ltd.

   (Won) 23,800    (Won) —       (Won) —   

Asia Credit

     11,536      11,771      7,718

Mastercard, Inc. Korea

     10,646      5,961      10,646

Daehan Investment Trust Securities Co., Ltd.

     10,000      —        —  

Korea Asset Management Corp.

     7,827      12,783      7,827

Samsung Life Insurance Co., Ltd.

     7,479      10,119      7,479

Korea Highway Corp.

     6,248      6,572      6,248

Baring Communications Equity

     5,382      2,163      2,163

KOHAP Corporation

     3,440      —        —  

Pan Asia Paper

     3,420      1,788      1,788

Asia Finance and Investment Corp.

     2,884      1,172      1,092

Seoul Smart Card

     2,505      1,025      2,505

Nanjing Kumho Tire Co., Ltd

     2,454      3,491      2,454

Korea Aerospace Industries

     2,179      1,446      1,426

Kyobo Investment Trust Management Co., Ltd.

     2,100      3,417      2,100

Integra Telecom Co., Ltd.

     2,000      —        —  

KOCES Co., Ltd

     1,402      736      631

Harex Info Tech Inc.

     1,365      64      64

Korea Money Broker Corp.

     1,291      2,514      1,291

A-Cash Inc.

     1,275      139      139

MYbi Co., Ltd.

     1,200      192      192

Tianjin Samsung Opto Electronics

     1,127      1,433      1,127

Mondex Korea

     1,250      —        —  

Digital World Corp.

     1,080      147      114

Bo Go Corp.

     1,026      —        —  

Linux One Inc.

     1,000      155      155

Others

     27,468      45,449      18,183
    

  

  

     (Won) 143,384    (Won) 112,537    (Won) 75,342
    

  

  


1* Net asset values are calculated using the unaudited financial statements of the investees as of March 31, 2004 when available, otherwise, the most recent financial information is used.

 

See Report of Independent Accountants

 

19


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

As of March 31, 2004, the following investment securities are pledged at various institutions:

 

Restrictions


  Restricted securities

Related Transactions


  

Placed with


   Amount

  Book Value

   Pledge Value

Bonds sold under REPO agreements

   Customers    (Won) 3,737,933   (Won) 6,069,598    (Won) 4,104,190

Leased securities

   KCFC            10,193      730

Borrowings from the Bank of Korea

   Bank of Korea      962,407     2,136,821      1,170,000

Bank of Korea settlements

   Bank of Korea      (balance limits)     254,705      170,200

Derivative transactions

   Samsung Futures, others      (balance limits)     487,853      144,500

ADB collateral

   KDB            3,095      1,900
               

  

                (Won) 8,962,265    (Won) 5,591,520
               

  

 

See Report of Independent Accountants

 

20


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

5. Loans

 

Loans as of March 31, 2004 and December 31, 2003 are summarized as follows:

 

(in millions of Won)         2004

    2003

 

Loans in Won

                     

Corporate loans

   Operation loans                 
     General operation loans    (Won) 29,526,162     (Won) 28,884,554  
     Notes discounted      1,281,718       1,415,445  
     Overdraft accounts      636,372       447,992  
     Trading notes      840,637       809,921  
     Other operation loans      3,894,315       3,793,594  
         


 


            36,179,204       35,351,506  
         


 


     Facility loans                 
     General facility loans      5,570,774       5,413,333  
     Other facility loans      1,215,751       1,218,370  
         


 


            6,786,525       6,631,703  
         


 


            42,965,729       41,983,209  
         


 


Consumer loans

   General consumer loans      42,512,409       41,951,219  
     Consumer housing loans      39,314,843       38,199,290  
    

Remunerations on mutual installment

    savings

     307,376       297,868  
     Other consumer loans      640,883       635,218  
         


 


            82,775,511       81,083,595  
         


 


Public loans

   Public operation loans      516,957       526,227  
     Public facility loans      42,049       42,473  
         


 


            559,006       568,700  
         


 


Other loans

   Property formation loans      54,503       62,963  
     Inter-bank loans      11,036       12,815  
     Others      3,654       3,962  
         


 


            69,193       79,740  
         


 


            126,369,439       123,715,244  
         


 


Loans in foreign currencies

   Domestic funding loans      1,134,551       1,165,988  
     Overseas funding loans      692,850       887,018  
     Inter-bank loans      716,204       767,884  
     Domestic usance bills      1,230,733       1,197,563  
     Government funding loans      975       1,477  
         


 


            3,775,313       4,019,930  
         


 


Call loans

   In Won      1,055,000       1,640,000  
     In foreign currencies      41,976       5,351  
     Inter-bank reconciliation funds      —         —    
         


 


            1,096,976       1,645,351  
         


 


Privately placed debentures

          1,288,148       1,787,131  
         


 


Other loans

          11,227,251       13,872,793  
         


 


Allowances for loan losses (Note 6)

          (4,214,258 )     (3,905,342 )
         


 


Net deferred loan origination fees and costs

          16,557       8,567  
         


 


          (Won) 139,559,426     (Won) 141,143,674  
         


 


 

See Report of Independent Accountants

 

21


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

As of March 31, 2004, restructured debts due to workout plans or other similar restructuring programs are as follows:

 

(in millions of Won)    Workout

  

Court

Receivership


  

Court

Mediation


   Others1*

   Total

Period (years)

     1~9      5~9      4~9      2~8       

Adjusted interest rate (%)

     6.14~17.00      10.50~12.12      6.10~15.41      9.50~14.33       

Balances Before Restructuring

   (Won) 103,448    (Won) 11,414    (Won) 36,096    (Won) 332,104    (Won) 483,062

Loans swapped to equity

     —        —        —        145,950      145,950

Swapped equity securities

     —        —        —        —        —  

Swapped convertible debt securities

     —        —        —        —        —  

Debts to be restructured

     103,448      11,414      36,096      186,154      337,112

Balances after restructuring

     98,588      8,033      33,899      176,988      317,508

Allowances for loan losses (present value discounts)

     4,860      3,381      2,197      9,166      19,604

1* Loans swapped to equities of LG Card Co., Ltd. amounting to (Won) 145,950 million are included. However, the second portion to be swapped to equity amounting to (Won) 362,250 which is scheduled on July 2004 are not included in the above.

 

The loans, or portions thereof, that are approved for debt restructuring by issuance or grant of equity are separately classified as loans due for equity conversion as of the agreement date. The loans due for equity conversion are stated at the lower of nominal amount or the fair value of the to-be-converted equity interest. The difference between the nominal amount and the fair value of the equity interest is adjusted in the related allowance for loan losses.

 

The movements in allowance for loan losses from present value discounts and deferred loan incidental income for the three month period ended March 31, 2004 are as follows :

 

(in millions of Won)   

Beginning

Balance


   Increase

   Decrease

  

Ending

Balance


Allowance for loan losses (present value discounts)

   (Won) 22,780    (Won) 6    (Won) 3,182    (Won) 19,604

Deferred loan incidental income

     8,567      8,641      651      16,557

 

See Report of Independent Accountants

 

22


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

The maturities of loans as of March 31, 2004 are as follows:

 

(in millions of Won)  

Loans in

Won


 

Loans in

Foreign

Currencies


 

Bills

Bought


 

Credit

Card


 

Call

Loans


 

Privately

placed

Debentures


  Others

  Total

Due in 3 months or less

  (Won) 19,373,344   (Won) 886,181   (Won) 629,224   (Won) 6,566,125   (Won) 1,096,976   (Won) 241,343   (Won) 123,084   (Won) 28,916,277

Due after 3 months through 6 months

    13,166,624     940,894     45,739     979,167     —       142,061     632     15,275,117

Due after 6 months through 1 year

    35,371,531     549,771     9,385     1,162,536     —       260,253     211     37,353,687

Due after 1 year through 2 years

    25,274,163     199,459     6,812     721,016     —       581,841     4,423     26,787,714

Due after 2 years through 3 years

    17,362,259     329,061     5,963     364,931     —       61,900     —       18,124,114

Due after 3 years through 4 years

    2,830,081     113,446     —       298,104     —       750     —       3,242,381

Due after 4 years through 5 years

    2,562,915     81,524     —       282,468     —       —       —       2,926,907

Thereafter

    10,428,522     674,977     —       27,431     —       —       —       11,130,930
   

 

 

 

 

 

 

 

    (Won) 126,369,439   (Won) 3,775,313   (Won) 697,123   (Won) 10,401,778   (Won) 1,096,976   (Won) 1,288,148   (Won) 128,350   (Won) 143,757,127
   

 

 

 

 

 

 

 

 

Loan risk concentrations by country as of March 31, 2004 are as follows:

 

(in millions of Won)    Loans in Won

   Loans in Foreign
Currencies


   Others

   Total

   Percentage(%)

Korea

   (Won) 126,369,439    (Won) 2,719,578    (Won) 13,589,609    (Won) 142,678,626    99.25

Southeast Asia

     —        829,453      178      829,631    0.58

Central and South

America

     —        169,961      4,339      174,300    0.12

China

     —        26,577      1      26,578    0.02

Japan

     —        29,618      5      29,623    0.02

Others

     —        126      18,243      18,369    0.01
    

  

  

  

  
     (Won) 126,369,439    (Won) 3,775,313    (Won) 13,612,375    (Won) 143,757,127    100.00
    

  

  

  

  

 

Loan risk concentrations by industry as of March 31, 2004 are as follows:

 

(in millions of Won)    Loans in Won

   Loans in Foreign
Currencies


   Others

   Total

   Percentage(%)

Industrial loans

                                

Financial institutions

   (Won) 1,070,738    (Won) 763,890    (Won) 1,545,743    (Won) 3,380,371    2.35

Manufacturing companies

     14,370,331      1,255,371      1,082,186      16,707,888    11.62

Service companies

     23,158,700      889,458      510,766      24,558,924    17.09

Others

     4,871,492      357,387      1,357,571      6,586,450    4.58
    

  

  

  

  
       43,471,261      3,266,106      4,496,266      51,233,633    35.64
    

  

  

  

  

Household loans

     82,833,669      489,947      9,113,613      92,437,229    64.30
    

  

  

  

  

Public and other loans

     64,509      19,260      2,496      86,265    0.06
    

  

  

  

  
     (Won) 126,369,439    (Won) 3,775,313    (Won) 13,612,375    (Won) 143,757,127    100.00
    

  

  

  

  

 

See Report of Independent Accountants

 

23


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

As of March 31, 2004, the credit card accounts amounting to (Won)1,223,638 million are provided as collateral for asset-backed securities transactions.

 

6. Allowances for Loan Losses

 

As of March 31, 2004, allowances for loan losses are as follows:

 

(in millions of Won)    2004

Loans in Won

   (Won) 2,808,671

Loans in foreign currencies

     58,689

Bills bought in Won and foreign currencies

     80,168

Payments on guarantees

     40,386

Factoring receivable

     7,663

Credit card accounts

     1,174,798

Privately placed debentures

     20,996

Suspense receivables

     16,822

Others

     6,065
    

     (Won) 4,214,258
    

 

See Report of Independent Accountants

 

24


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

As of March 31, 2004, allowances for loan losses by credit risk classification are as follows:

 

(in millions of Won)         Normal

   Pre-cautionary

   Substandard

   Doubtful

   Estimated Loss

   Total

Loans in Won

   Balance    (Won) 116,250,388    (Won) 5,947,242    (Won) 2,531,040    (Won) 1,285,315    (Won) 355,454    (Won) 126,369,439
     Allowances      784,478      426,338      549,107      693,294      355,454      2,808,671
         

  

  

  

  

  

     Ratio (%)      0.67      7.17      21.69      53.94      100.00      2.22
         

  

  

  

  

  

Loans in foreign currencies

   Balance      3,481,783      236,522      34,045      22,144      819      3,775,313
     Allowances      14,802      17,156      13,647      12,265      819      58,689
         

  

  

  

  

  

     Ratio (%)      0.43      7.25      40.09      55.39      100.00      1.55
         

  

  

  

  

  

Bills bought

   Balance      519,279      164,828      5,313      2,888      4,815      697,123
     Allowances      2,596      70,193      1,120      1,444      4,815      80,168
         

  

  

  

  

  

     Ratio (%)      0.50      42.59      21.08      50.00      100.00      11.50
         

  

  

  

  

  

Payments on guarantees

   Balance      24,147      5,162      17,804      15,150      28,565      90,828
     Allowances      121      564      3,561      7,575      28,565      40,386
         

  

  

  

  

  

     Ratio (%)      0.50      10.93      20.00      50.00      100.00      44.46
         

  

  

  

  

  

Credit card accounts

   Balance      7,571,949      1,374,520      240      1,368,851      86,218      10,401,778
     Allowances      75,719      164,942      48      847,871      86,218      1,174,798
         

  

  

  

  

  

     Ratio (%)      1.00      12.00      20.00      61.94      100.00      11.29
         

  

  

  

  

  

Call loans

   Balance      1,096,976      —        —        —        —        1,096,976
     Allowances      —        —        —        —        —        —  
         

  

  

  

  

  

     Ratio (%)      0.00      0.00      0.00      0.00      0.00      0.00
         

  

  

  

  

  

Privately placed debentures

   Balance      1,183,974      93,185      4,010      6,511      468      1,288,148
     Allowances      5,920      9,986      1,355      3,267      468      20,996
         

  

  

  

  

  

     Ratio (%)      0.50      10.72      33.79      50.18      100.00      1.63
         

  

  

  

  

  

Factoring receivables

   Balance      30,802      —        —        238      6,482      37,522
     Allowances      1,062      —        —        119      6,482      7,663
         

  

  

  

  

  

     Ratio (%)      3.45      0.00      0.00      50.00      100.00      20.42
         

  

  

  

  

  

Total

   Balance    (Won) 130,159,298    (Won) 7,821,459    (Won) 2,592,452    (Won) 2,701,097    (Won) 482,821    (Won) 143,757,127
     Allowances1*      884,698      689,179      568,838      1,565,835      482,821      4,191,371
         

  

  

  

  

  

     Ratio (%)      0.68      8.81      21.94      57.97      100.00      2.92
         

  

  

  

  

  


1* The above amounts of allowances for loan losses do not include the allowances for suspense receivables and other allowances

 

See Report of Independent Accountants

 

25


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

For the three-month period ended March 31, 2004, the movements in allowances for loan losses are as follows:

 

(in millions of Won)       

Beginning balance1*

   (Won) 3,905,342  

Provision for loan losses

     1,100,196  

Reclassification from other allowances2*

     87,416  

Collection of written-off loans

     153,765  

Repurchase of loans sold

     13,850  

Sale of loans

     (8,167 )

Write-off of loans

     (1,024,453 )

Conversion of loans into equity securities

     (8,219 )

Exemption of loans

     (116 )

Changes in exchange rates and others

     (5,356 )
    


Ending balance

   (Won) 4,214,258  
    



1* Allowances for loans losses amounting to (Won)192,220 million have been added to the beginning balance due to the effect of the reclassification of the available-for-sale subordinated retained interest into credit card receivables.
2* Other allowances for loans receivable from LG Card Co., Ltd. amounting to (Won)85,269 million that had been recorded as of December 31, 2003 were transferred into allowances for loan losses. Also, other allowances on credit lines to Kookmin Credit Card 16th ABS Specialty Co., Ltd. amounting to (Won)2,147 million that had been recorded as of December 31, 2003 were transferred into allowances for loans loss.

 

See Report of Independent Accountants

 

26


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

7. Fixed Assets

 

Fixed assets as of March 31, 2004 and December 31, 2003 are as follows:

 

     2004

   2003

Tangible assets

   (Won) 2,418,718    (Won) 2,469,353

Intangible assets

     529,115      549,427

Foreclosed and other properties

     747      776
    

  

     (Won) 2,948,580    (Won) 3,019,556
    

  

 

Movements in tangible assets for the three-month period ended March 31, 2004 are as follows:

 

(in millions of Won)    Land

    Buildings and
structures


    Leasehold
improvement


    Equipment
and vehicle


    Construction-
in-progress


    Total

 

Acquisition cost

                                                

Beginning balances

   (Won) 1,105,869     (Won) 963,295     (Won) 157,231     (Won) 1,449,062     (Won) 12,325     (Won) 3,687,782  

Acquisition

     —         11       —         11,319       17,183       28,513  

Transfer

     —         3,216       3,282       —         (6,498 )     —    

Disposal

     —         (41 )     (2,658 )     (16,559 )     —         (19,258 )

Other1*

     (15 )     (47 )     (53 )     (83 )     —         (198 )
    


 


 


 


 


 


Ending balances

     1,105,854       966,434       157,802       1,443,739       23,010       3,696,839  
    


 


 


 


 


 


Accumulated depreciation

                                                

Beginning balances

     —         142,103       90,808       963,290       —         1,196,201  

Depreciation expense

     —         5,148       8,804       62,718       —         76,670  

Disposal

     —         —         (1,854 )     (15,010 )     —         (16,864 )

Others1*

     —         (12 )     (38 )     (64 )     —         (114 )
    


 


 


 


 


 


Ending balances

     —         147,239       97,720       1,010,934       —         1,255,893  
    


 


 


 


 


 


Impairment

     12,673       9,555       —         —         —         22,228  
    


 


 


 


 


 


Book Value

   (Won) 1,093,181     (Won) 809,640     (Won) 60,082     (Won) 432,805     (Won) 23,010     (Won) 2,418,718  
    


 


 


 


 


 



1* Other movements in tangible assets comprise foreign exchange translation.

 

Tangible assets covered by insurance policies as of March 31, 2004 are as follows:

 

(in millions of Won)    Amount
Insured


  

Insurance Company


  

Type of Insurance


Buildings and structures

   (Won) 655,867    Samsung Fire & Marine Insurance Co., Ltd    General property insurance

Leasehold improvement

     52,329    Samsung Fire & Marine Insurance Co., Ltd    General property insurance

Equipment and vehicles

     274,733    Samsung Fire & Marine Insurance Co., Ltd    General property insurance

Construction-in-progress

     10,599    Samsung Fire & Marine Insurance Co., Ltd    General property insurance
    

         
     (Won) 993,528          
    

         

 

See Report of Independent Accountants

 

27


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Movements in intangible assets for the three-month period ended March 31, 2004 are as follows:

 

(in millions of Won)    Goodwill

  

Development

Costs


   Rights to
Income on
Donated Asset


  

Store

Possessory

Right


   Trademarks

   Others

   Total

Beginning balances

   (Won) 535,360    (Won) 12,762    (Won) 102    (Won) 139    (Won) 150    (Won) 914    (Won) 549,427

Acquisition

     —        —        —        —        8      223      231

Amortization

     19,586      872      2      5      13      65      20,543
    

  

  

  

  

  

  

Ending balances

   (Won) 515,774    (Won) 11,890    (Won) 100    (Won) 134    (Won) 145    (Won) 1,072    (Won) 529,115
    

  

  

  

  

  

  

 

The Bank recorded (Won)30,068 million of current development costs under general and administrative expenses for the three-month period ended March 31, 2004.

 

The total government-posted prices of land, used for tax imposition and compensation for confiscation, as of March 31, 2004 are as follows:

 

(in millions of Won)    Book Value

   Appraisal
Value


Lands included in tangible assets

   (Won) 1,093,181    (Won) 904,698

Lands included in foreclosed assets

     1,301      580
    

  

     (Won) 1,094,482    (Won) 905,278
    

  

 

8. Other Assets

 

Other assets as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)    2004

   2003

Guarantee deposits paid

   (Won) 1,301,362    (Won) 1,336,639

Accounts receivable

     5,205,175      1,715,100

Accrued income

     1,037,007      1,080,057

Payments in advance

     92,822      92,217

Prepaid expenses

     104,578      307,154

Deferred tax assets (Note 25)

     473,775      552,636

Derivative assets (Note 15)

     1,085,472      751,252

Unsettled domestic exchange assets

     768,929      612,592

Others

     35,287      36,592
    

  

     (Won) 10,104,407    (Won) 6,484,239
    

  

 

See Report of Independent Accountants

 

28


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

9. Deposits

 

Deposits as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)   

Annual Interest (%)

March 31, 2004


   2004

   2003

Deposits in Won

                  

Demand deposits

                  

Checking deposits

   —      (Won) 93,952    (Won) 125,533

Household checking deposits

   0.10      435,162      476,132

Passbook deposits

   0.10      9,109,376      10,001,043

Temporary deposits

   —        3,284,125      3,292,770

Public fund deposits

   0.10      123,022      190,593

Others

   0.10      47,049      24,218
         

  

            13,092,686      14,110,289
         

  

Time deposits and savings deposits

                  

Time deposits

   2.80 ~ 4.40      62,441,075      62,247,870

Installment savings deposits

   3.40 ~ 4.20      1,282,003      1,306,793

Property formation savings

   8.50      1,697      1,870

Time and savings deposits of non residents in Won

   2.80 ~ 4.40      318,231      340,388

General savings deposits

   0.10 ~ 3.10      20,506,926      21,644,066

Corporate savings deposits

   0.10 ~ 3.00      10,085,789      7,800,122

Long-term savings deposits for workers

   11.50 ~ 12.00      59,742      69,031

Long-term housing savings deposits

   4.80      1,112,863      983,684

Long-term savings for households

   11.00      69,500      494,606

Worker’ preferential savings deposits

   5.35      2,612,654      2,728,236

Worker’s savings for housing

   8.50 ~ 11.50      82      81

Mutual installment deposits

   3.00 ~ 4.20      6,791,375      7,054,752

Mutual installment for housing

   2.95 ~ 4.10      5,510,620      5,423,853
         

  

            110,792,557      110,095,352
         

  

            123,885,243      124,205,641
         

  

Deposits in foreign currencies

                  

Demand deposits

                  

Checking deposits

   0.00 ~ 0.93      38,688      40,778

Passbook deposits

   0.09      703,239      787,798

Notice deposits

   0.00 ~ 0.15      375      410

Temporary deposits

   —        1,367      1,049
         

  

            743,669      830,035
         

  

Time deposits and savings deposits

                  

Time deposits

   1.25      691,684      642,039

Others

   0.00 ~ 4.70      2,572      3,299
         

  

            694,256      645,338
         

  

            1,437,925      1,475,373
         

  

Certificates of deposit

   3.45 ~ 4.05      5,314,571      6,499,258
         

  

          (Won) 130,637,739    (Won) 132,180,272
         

  

 

See Report of Independent Accountants

 

29


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

The maturities of deposits as of March 31, 2004 are as follows:

 

(in millions of Won)    Deposits in Won

  

Deposits in

Foreign Currencies


   Certificates of
Deposit


   Total

Due in 3 months or less

   (Won) 67,022,695    (Won) 1,204,362    (Won) 3,905,036    (Won) 72,132,093

Due after 3 months through 6 months

     12,248,420      127,676      927,715      13,303,811

Due after 6 months through 1 year

     33,093,884      59,143      481,820      33,634,847

Due after 1 year through 2 years

     7,502,310      44,261      —        7,546,571

Due after 2 years through 3 years

     2,497,377      2,483      —        2,499,860

Due after 3 years through 4 years

     544,525      —        —        544,525

Due after 4 years through 5 years

     267,104      —        —        267,104

Thereafter

     708,928      —        —        708,928
    

  

  

  

     (Won) 123,885,243    (Won) 1,437,925    (Won) 5,314,571    (Won) 130,637,739
    

  

  

  

 

10. Borrowings

 

Borrowings as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)   

Annual Interest (%)

March 31, 2004


   2004

   2003

Borrowings in Won

                  

Borrowings from the Bank of Korea

   2.50    (Won) 962,407    (Won) 992,433

Borrowings from the government

   0.00 ~ 8.00      868,890      920,589

Borrowings from banking institutions

   3.90 ~ 8.55      232,751      253,822

Borrowings from National Housing Fund

   8.00      8,360      8,553

Borrowings from other financial institutions

   2.00 ~ 5.00      6,546      5,688

Other borrowings

   2.00 ~ 7.00      1,104,080      1,173,284
         

  

            3,183,034      3,354,369
         

  

Borrowings in foreign currencies

                  

Due to banks

   —        100,229      189,976

Borrowings from domestic banks

   0.11 ~ 7.40      2,071,026      2,360,652

Borrowings from other financial institutions

   5.13      17,055      19,486

Borrowings from foreign banks

   —        717,247      752,803
         

  

            2,905,557      3,322,917
         

  

Bonds sold under repurchase agreements

                  

In Won

   2.50 ~ 4.15      3,737,933      3,613,505

In foreign currencies

   —        —        9,651
         

  

            3,737,933      3,623,156
         

  

Bills sold

   3.40 ~ 3.90      52,715      44,239
         

  

Due to the Bank of Korea in foreign currencies

   —        8,366      12,608
         

  

Call money

                  

In Won

   3.25 ~ 3.65      3,581,400      55,800

In foreign currencies

   0.75 ~ 5.35      191,194      193,700

Inter-bank borrowings

   3.40 ~ 3.90      244,934      296,011
         

  

            4,017,528      545,511
         

  

          (Won) 13,905,133    (Won) 10,902,800
         

  

 

See Report of Independent Accountants

 

30


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

The maturities of borrowings as of March 31, 2004 are as follows:

 

(in millions of Won)    Borrowings in
Won


  

Borrowings in

Foreign
Currencies


   Others

   Total

Due in 3 months or less

   (Won) 1,099,505    (Won) 571,215    (Won) 5,582,299    (Won) 7,253,019

Due after 3 months through 6 months

     87,103      842,204      1,702,284      2,631,591

Due after 6 months through 1 year

     187,939      737,700      531,959      1,457,598

Due after 1 year through 2 years

     391,850      504,473      —        896,323

Due after 2 years through 3 years

     376,688      161,742      —        538,430

Due after 3 years through 4 years

     314,905      —        —        314,905

Due after 3 years through 4 years

     257,700      49,368      —        307,068

Thereafter

     467,344      38,855      —        506,199
    

  

  

  

     (Won) 3,183,034    (Won) 2,905,557    (Won) 7,816,542    (Won) 13,905,133
    

  

  

  

 

11. Debentures

 

Debentures as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)        

Annual Interest
(%)

March 31, 2004


   2004

    2003

 

In Won

  

Hybrid debentures1*

   6.00 ~ 7.00    (Won) 903,668     (Won) 903,668  
    

Subordinated fixed rate debentures

   5.18 ~ 15.66      5,289,941       4,896,072  
    

KCC2* subordinated fixed rate debentures

   7.10 ~ 8.00      205,000       205,000  
    

KCC2* fixed rate debentures

   4.58 ~ 8.00      2,290,000       2,895,000  
    

KCC2* floating rate debentures

   1.97 ~ 8.00      820,000       870,000  
    

Floating rates debentures

   3.92 ~ 8.71      6,156,704       8,609,663  
              


 


                 15,665,313       18,379,403  
    

Discounts on debentures

          (81,152 )     (83,443 )
              


 


                 15,584,161       18,295,960  
              


 


In foreign currencies

  

Floating rates debentures

   0.60 ~ 1.99      188,717       196,211  
    

Fixed rates debentures

   1.08 ~ 4.63      600,793       613,549  
          1.82 ~ 1.92      75,792       78,695  
              


 


                 865,302       888,455  
    

Premiums on debentures

          8,720       9,639  
    

Discounts on debentures

          (1,263 )     (1,473 )
              


 


                 872,759       896,621  
              


 


               (Won) 16,456,920     (Won) 19,192,581  
              


 



1* The hybrid debenture are perpetual type debts in which the Bank retains the early redemption option after 5 years from issuance date and the term extending option on maturity date. Hybrid debentures are senior to common stock but subordinate to other subordinated debentures.
2* Kookmin Credit Card Co., Ltd.

 

See Report of Independent Accountants

 

31


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

As of March 31, 2004, subordinated debentures and hybrid debentures comprise the following:

 

(in millions of Won)    Issue Date

   Amount

   Annual Interest (%)

   Maturity

Type

                     

Subordinated fixed rate debentures

   97.12.29 ~ 98.11.25    (Won) 164,107    12.87 ~ 15.66    03.01.27 ~ 09.11.15
     2000.03.27      200,000    9.65    2005.03.27
     2000.06.28      253,975    9.00 ~ 9.10    2006.01.28
     2000.09.27      300,000    8.99    2006.01.27
     2000.09.28      150,000    8.00 ~ 8.85    2006.01.28
     2000.11.28      100,000    8.00 ~ 8.71    2006.02.28
     2000.11.28      150,951    9.57 ~ 9.65    2010.11.28
     2000.11.28      11,100    9.00    2010.12.28
     2000.12.27      200,000    8.71    2006.01.27
     2001.05.28      200,000    7.00 ~ 7.65    2007.02.28
     2001.06.27      160,000    7.68    2008.03.27
     2001.06.27      217,529    7.86    2009.03.27
     2001.08.28      100,000    6.00 ~ 6.73    2007.08.28
     2001.09.28      150,000    6.00 ~ 6.73    2008.03.28
     2002.03.27      241,684    7.06 ~ 7.10    2008.01.27
     2002.07.27      302,399    6.96 ~ 7.00    2008.01.27
     2002.09.27      257,363    6.27 ~ 6.30    2008.03.27
     2002.09.27      150,000    6.51 ~ 6.55    2010.03.27
     2002.09.27      92,637    6.66 ~ 6.70    2013.03.27
     2002.11.27      400,673    6.07 ~ 6.10    2008.05.27
     2002.11.27      57,846    6.27 ~ 6.30    2010.05.27
     2002.11.27      100,256    6.51 ~ 6.55    2013.05.27
     2002.12.18      110,000    8.00    2008.01.18
     2002.12.27      10,000    6.20    2008.06.27
     2002.12.27      90,000    6.40    2010.06.27
     2002.12.27      50,000    6.65    2013.06.27
     2002.12.27      30,370    6.55    2014.12.27
     2003.01.21      50,000    7.65    2008.02.21
     2003.03.10      45,000    7.10    2008.04.10
     2003.10.27      356,561    5.18 ~ 5.20    2009.01.27
     2003.10.27      88,769    5.33 ~ 5.35    2011.01.27
     2003.10.27      3,721    5.58 ~ 5.60    2014.01.27
     2004.02.27      636,798    5.65 ~ 5.68    2009.08.27
     2004.02.27      22,895    5.84 ~ 5.87    2011.08.27
     2004.02.27      40,307    6.13 ~ 6.16    2014.08.27
         

         
            5,494,941          
         

         

Hybrid debentures

   2003.06.27      105,145    6.00    2033.06.27
     2003.08.27      533,355    7.00    2033.08.27
     2003.10.27      265,168    6.80    2033.10.27
         

         
            903,668          
         

         
          (Won) 6,398,609          
         

         

 

See Report of Independent Accountants

 

32


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

The maturities of debentures as of March 31, 2004 are as follows:

 

(in millions of Won)    In Won

   In Foreign
Currencies


   Total

Due in 3 months or less

   (Won) 1,852,649    (Won) 81,906    (Won) 1,934,555

Due after 3 months through 6 months

     2,093,138      68,427      2,161,565

Due after 6 months through 1 year

     3,699,193      26,985      3,726,178

Due after 1 year through 2 years

     2,408,838      66,563      2,475,401

Due after 2 years through 3 years

     369,200      —        369,200

Due after 3 years through 4 years

     1,639,843      585,032      2,224,875

Due after 4 years through 5 years

     1,152,040      36,389      1,188,429

Thereafter

     2,450,412      —        2,450,412
    

  

  

     (Won) 15,665,313    (Won) 865,302    (Won) 16,530,615
    

  

  

 

12. Accrued Retirement Benefits

 

The movements in accrued retirement benefits for the three-month period ended March 31, 2004 are as follows:

 

(in millions of Won)    Beginning
Balance


   

Amounts

Provided


   Amounts
Paid Out


   

Ending

Balance


 

Accrued retirement benefits

   (Won) 71,083     (Won) 29,317    (Won) 12,310     (Won) 88,090  

Contributed retirement benefits

     163,349       —        13,833       149,516  
    


 

  


 


Total accrued retirement benefits

     234,432       29,317      26,143       237,606  

Contribution to pension funds

     (163,349 )     —        (13,833 )     (149,516 )
    


 

  


 


     (Won) 71,083     (Won) 29,317    (Won) 12,310     (Won) 88,090  
    


 

  


 


 

As of March 31, 2004, approximately 62.93% of total accrued retirement benefits are contributed to pension funds, of which the Bank’s employees hold the right of payment, placed at two insurance companies, including Korea Life Insurance Co., Ltd. The total retirement benefits paid for the three-month period ended March 31, 2004 amounts to (Won)76,172, including the additional early retirement benefits paid in February 2004 to 459 employees amounting to (Won)50,029.

 

See Report of Independent Accountants

 

33


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

13. Other Liabilities

 

Other liabilities as of March 31, 2004 and 2003 are as follows:

 

(in millions of Won)    2004

   2003

Account              

Accrued retirement benefits (Note 12)

   (Won) 88,090    (Won) 71,083

Allowance for losses on guarantees and acceptances (Note 14)

     1,258      1,074

Due to trust accounts

     1,512,719      3,983,295

Accounts payable

     5,086,625      1,886,446

Accrued expenses

     4,294,732      4,418,940

Advances from customers

     190,348      109,675

Unearned income

     134,585      130,778

Withholding taxes

     96,692      123,455

Guarantee deposits received

     107,793      120,437

Derivative liabilities (Note 15)

     980,685      686,271

Unsettled domestic exchange liabilities

     166,124      400,445

Accounts for agency business

     279,162      337,624

Other allowances1

     384,167      677,163

Liabilities incurred by agency relationship

     1,102,947      315,241

Others

     182,445      130,182
    

  

     (Won) 14,608,372    (Won) 13,392,109
    

  


1* Other allowances are as follows:

 

(in millions of Won)          

Allowances for


   Amounts

  

Remarks


Suspense receivables

   (Won) 7,300    Allowances for frauds/accidents and litigation fee

Loss on branch closure

     313    Allowances for closure of the Buenos Aires branch

Uncollected leasehold deposits

     8,036    Allowances for uncollected leasehold deposits

Credit card receivables

     62,865    Allowances for unused cash advance credit lines

Mileage rewards

     43,830    Allowances for mileage on credit cards and currency exchange rates

Claimed assets

     28,126    Allowances for credit card claimed assets

Credit commitments to SPC

     187,937    Allowances for the credit line commitment to SPC (Note 16)

Securitization allowances

     3,435    Allowances for repurchase obligations from asset securitization (Note 16)

KAMCO loans sold

     592    Allowances for loans under repurchase agreements to KAMCO (Note 16)

Allowances for tax deficiencies

     40,733    Allowances for tax deficiencies (Note 16)

Others

     1,000   

Allowance for time deposits of Hansol Mutual Savings & Finance Co., Ltd.

amounting to (Won)50 billion

    

    
     (Won) 384,167     
    

    

 

See Report of Independent Accountants

 

34


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

14. Guarantees and Acceptances

 

Guarantees and acceptances as of March 31, 2004 are summarized as follows:

 

(in millions of Won)    Amount

Guarantees and acceptances outstanding in

      

Won

      

Guarantees on debentures

   (Won) 532

Guarantees on loan collateral

     30,469

Others

     237,070
    

       268,071
    

Foreign Currencies

      

Acceptances on letters of credit

     126,453

Acceptances for letters of guarantee for importers

     68,164

Guarantees for performance of contracts

     25,277

Guarantees for bids

     1,099

Guarantees for borrowings

     27,411

Guarantees for repayment of advances

     12,050

Others

     210,533
    

       470,987
    

       739,058
    

Contingent guarantees and acceptances

      

Letters of credit

     1,202,155

Others

     79,785
    

       1,281,940
    

     (Won) 2,020,998
    

 

As of March 31, 2004, the allowances for losses on guarantees and acceptances outstanding according to credit risk classifications are as follows:

 

(in millions of Won)                                   
     Normal

   Precautionary

   Sub-standard

   Doubtful

   Estimated
loss


   Total

Guarantees and Acceptances Outstanding in                                               

Won

  

Balance

   (Won) 252,076    (Won) 13,610    (Won) 510    (Won) 1,875    (Won) —      (Won) 268,071
    

Allowance

     —        —        102      938      —        1,040
         

  

  

  

  

  

    

Ratio (%)

     —        —        20.00      50.03      —        0.39
         

  

  

  

  

  

Foreign currencies

  

Balance

     414,861      55,696      288      123      19      470,987
    

Allowance

     —        —        137      62      19      218
         

  

  

  

  

  

    

Ratio (%)

     —        —        47.57      50.41      100.00      0.05
         

  

  

  

  

  

Total

  

Balance

   (Won) 666,937    (Won) 69,306    (Won) 798    (Won) 1,998    (Won) 19    (Won) 739,058
    

Allowance

     —        —        239      1000      19      1,258
         

  

  

  

  

  

    

Ratio (%)

     —        —        29.95      50.05      100.00      0.17
         

  

  

  

  

  

 

See Report of Independent Accountants

 

35


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

For the three-month period ended March 31, 2004, the changes in allowances for losses on guarantees and acceptances outstanding are as follows:

 

(in millions of Won)       

Beginning balance

   (Won) 1,074  

Reversal of losses from guarantees and acceptances

     216  

Changes in foreign exchange rates

     (32 )
    


Ending balance

   (Won) 1,258  
    


 

The guarantees and acceptances risk concentration by country as of March 31, 2004 are as follows:

 

(in millions of Won)    Guarantees and Acceptances
Outstanding


   Contingent
Guarantees and Acceptances


   Total

     Balance

   Percentage (%)

   Balance

   Percentage (%)

   Balance

   Percentage (%)

Korea

   (Won) 692,914    93.76    (Won) 1,281,940    100.00    (Won) 1,974,854    97.72

USA

     46,144    6.24      —      —        46,144    2.28
    

  
  

  
  

  
     (Won) 739,058    100.00    (Won) 1,281,940    100.00    (Won) 2,020,998    100.00
    

  
  

  
  

  

 

The guarantees and acceptances risk concentration by industry as of March 31, 2004 are as follows:

 

(in millions of Won)    Guarantees and Acceptances
Outstanding


  

Contingent

Guarantees and Acceptances


   Total

     Balance

   Percentage (%)

   Balance

   Percentage (%)

   Balance

   Percentage (%)

Manufacturing

   (Won) 255,749    34.60    (Won) 756,294    59.00    (Won) 1,012,043    50.08

Service

     348,299    47.13      417,024    32.53      765,323    37.87

Finance

     19,772    2.68      28,288    2.21      48,060    2.38

Others

     115,238    15.59      80,334    6.26      195,572    9.67
    

  
  

  
  

  
     (Won) 739,058    100.00    (Won) 1,281,940    100.00    (Won) 2,020,998    100.00
    

  
  

  
  

  

 

15. Derivatives

 

The Bank’s derivative instruments are divided between hedge derivatives and trading derivatives based on the purpose of the transaction. The Bank enters into hedge transactions mainly for purposes of hedging fair value risks related to its assets and liabilities.

 

Trading derivatives include future contracts, forward contracts, swaps, and options entered into by the Bank to meet the financing needs of its customers and to gain profit from arbitrage transactions between customers and other banks. The Bank also uses derivative instruments in managing its own trading and asset-liability management exposures to fluctuations in interest rates and foreign exchange risks.

 

See Report of Independent Accountants

 

36


Kookmin Bank

Notes to Non-Consolidated Financial Statements

March 31, 2004 and 2003, and December 31, 2003 and

Three-month periods ended March 31, 2004 and 2003

(Unaudited)

 


 

Hedge derivatives mainly comprise of interest rate swaps to hedge the fair value changes of debentures arising from the interest rate fluctuations. Some hedging transactions do not qualify for hedge accounting and are thus accounted for as trading derivatives. These transactions include the hedge relationships where the hedged item is an asset or liability that is re-measured with the changes in fair value attributable to the hedged risk reported in current operations or where the hedged item cannot be specifically identified.

 

The notional amounts outstanding for derivative contracts as of March 31, 2004 and December 31, 2003 are as follows:

 

(in millions of Won)    2004

   2003

     Trading

   Hedge

   Total

   Trading

   Hedge

   Total

Interest related

                                         

Future

   (Won) 233,550    (Won) —      (Won) 233,550    (Won) 519,665    (Won) —      (Won) 519,665

Swap

     27,769,187      576,800      28,345,987      26,773,100      598,900      27,372,000

Option

     2,044,000      —        2,044,000      2,340,000      —        2,340,000
    

  

  

  

  

  

       30,046,737