Form 6-K Amendment
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 6-K/A

 


 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2004

 


 

Kookmin Bank

(Translation of registrant’s name into English)

 


 

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

(Address of principal executive office)

 


 

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

 

Form 20-F      X            Form 40-F              

 

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

 

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

 

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

 

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

 

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

 

Yes                      No      X    

 



Table of Contents

Summary of Semi-Annual Business Report – Amended

 

TABLE OF CONTENTS

 

Summary of Semi-Annual Business Report – Amended    3

1.

        Introduction to the Bank    4
     1.1.    Business Purposes    4
     1.2.    History    4
     1.3.    Capital Structure    5
     1.4.    Employee Stock Ownership Association    10
     1.5.    Dividend    10

2.

        Business    11
     2.1.    Sources and Uses of Fund    11
     2.2.    Principal Banking Activities    13
     2.3.    Branch Networks    17
     2.4.    Other Information for Investment Decision    18

3.

        Financial Information    20
     3.1.    Non-Consolidated Condensed Financial Statements    20
     3.2.    Other Financial Information    20

4.

        Independent Accountant Fees and Services    21
     4.1.    Audit & Review Fees    21
     4.2.    Non-Audit Services    21

5.

        Corporate Governance and Affiliated Companies    22
     5.1.    Board of Directors & Committees under the Board    22
     5.2.    Audit Committee    22
     5.3.    Compensation to Directors    23
     5.4.    Voting Rights of Shareholders    23
     5.5.    Share Ownership    23
     5.6.    Affiliated Companies    24

6.

        Directors, Senior Management and Employees    25
     6.1.    Executive Directors    25
     6.2.    Non-Executive Directors    25
     6.3.    Senior Management    26
     6.4.    Compensation to Directors and Senior Management    26
     6.5.    Employees    26

7.

        Related Party Transaction    27
     7.1.    Transactions with the Largest Shareholders or Affiliates    27
     7.2.    Transactions with Other than the Largest Shareholders or Affiliates    28

 

2


Table of Contents

Summary of Semi-Annual Business Report – Amended

 

On August 13, 2004, Kookmin Bank filed its business report for the first half of 2004 (the “Business Report”) with the Financial Supervisory Commission of Korea pursuant to the Securities and Exchange Act of Korea. This is the summary of the Business Report translated into English.

 

All references to “Kookmin Bank” mean Kookmin Bank on a non-consolidated basis, and all references to “we”, “us” or “the Bank” mean Kookmin Bank and, as the context may require, its subsidiaries. In addition, all references to “Won” or “W” in this document are to the currency of the Republic of Korea.

 

3


Table of Contents

1. Introduction to the Bank

 

1.1. Business Purposes

 

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

 

  The banking business as prescribed by the Bank Act,

 

  The trust business as prescribed by the Banking Trust Act,

 

  The credit card business as prescribed by the Non-Banking Financing Act, and

 

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

 

1.2. History

 

  November 1, 2001

Incorporated and Listed on the New York Stock Exchange

 

  November 9, 2001

Listed on the Korea Stock Exchange

 

  September 23, 2002

Integrated two brand operations onto a single information technology platform

 

  December 4, 2002

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

 

  May 30, 2003

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

 

  September 30, 2003

Completed small-scale merger with Kookmin Credit Card

 

  December 16, 2003

Completed strategic investment in Bank Internasional Indonesia (BII) through the Consortium of Sorak Financial Holdings, of which we hold 25% stake

 

  December 19, 2003

Fully privatized through the entire disposition of Korean government’s stake in Kookmin Bank

 

  April 29, 2004

Established a subsidiary, KB Life Co. Ltd., to engage in insurance business

 

4


Table of Contents

1.3. Capital Structure

 

1.3.1. Common Shares

 

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

 

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

 

On November 25, 2002 Goldman Sachs Capital Koryo, L.P. converted all of its convertible bonds into common shares. According to this conversion on November 30, 2002, Kookmin Bank issued 10,581,269 common shares and distributed them to Goldman Sachs Capital Koryo, L.P.

 

With regard to the merger between Kookmin Bank and Kookmin Credit Card on September 30, 2003, Kookmin Bank issued additional 8,120,431 shares on October 1, 2003. Accordingly, as of June 30, 2004, total 336,379,116 shares were issued with 1,681,896 million Won of paid-in capital.

 

1.3.2. Treasury Stock

 

The following table shows the acquisition and disposition of our treasury stock as of June 30, 2004

 

(Unit: in thousands of Won unless otherwise indicated)

Date


  

Transaction


  

Number of

share


  

Acquisition/

Disposition
amount


  

Average cost

per one share

(Won)


November 15, 2001

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

December 24, 2001

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

April 3, 2002

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

May 14, 2002

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

July 30 ~ October 23, 2002

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

December 24, 2002

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

January 15, 2003

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

September 4 ~ 9, 2003

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

October 16, 2003

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

4th quarter, 2003

   Disposition due to exercise of stock option by grantees    78,322    3,792,977    48,428

December 17, 2003

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

December 26, 2003

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

1st quarter, 2004

   Disposition due to exercise of stock option by grantees    30,855    1,365,396    44,252

2nd quarter, 2004

   Disposition due to exercise of stock option by grantees    55,593    2,460,101    44,252
         
  
  

Total

   —      29,930,175    1,324,486,398    —  
         
  
  

 

5


Table of Contents

1.3.3. Stock Option

 

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

 

(As of June 30, 2004, Units: in Won, shares)

Grant date


 

Name of the grantee


 

Position when granted


  Exercise period

 

Exercise

price


 

Number of

granted

options*


 

Number of

exercised

options


 

Number of

exercisable

options


      From

  To

       

31-Oct-98

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

27-Feb-99

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

  Sung Cheon Hong & 9 others   Employees   01-Mar-03   28-Feb-06   27,600   67,283   24,154   43,129

24-Mar-01

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

24-Mar-01

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

24-Mar-01

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

24-Mar-01

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

24-Mar-01

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

24-Mar-01

  Jae Han Kim & 2 others   Employees   25-Mar-04   24-Mar-07   25,100   16,491   10,216   6,275

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

18-Mar-00

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

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

 

6


Table of Contents

Grant date


 

Name of the grantee


 

Position when granted


  Exercise period

 

Exercise

price


 

Number of

granted

options*


 

Number of

exercised

options


 

Number of

exercisable

options


      From

  To

       

18-Mar-00

  Yoo Hwan Kim   Executive Vice President   19-Mar-03   18-Mar-05   23,469   11,845   5,845   6,000

18-Mar-00

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

  Tai Gon Kim   Executive Vice President   16-Mar-04   15-Mar-09   28,027   11,845   4,845   7,000

15-Mar-01

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

15-Mar-01

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

15-Mar-01

  Ji Han Koo & 46 others   Employees   16-Mar-04   15-Mar-09   28,027   47,381   9,105   38,276
                   
           

16-Nov-01

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

16-Nov-01

  Jung Tae Kim   President&CEO   17-Nov-04   16-Nov-09   X1   200,0002   0   200,000

16-Nov-01

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

  Ji Hong Kim   Non Executive Director   23-Mar-05   22-Mar-10   Y3   3,321   0   3,321

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

1. Exercise price = 51,200 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4) / 100. The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - 207.25) / 207.25 x 100.
2. Conditional options up to 200,000: Additional shares shall be granted if the average closing price of Kookmin Bank's stock from August 17, 2004 to November 16, 2004 (or for the three months prior to his resignation, if he resigns earlier than his original tenure) is higher than the stock prices of any other bank listed on the Korea Stock Exchange. The number of options to be granted shall be based on total score, which calculated by the earned total scores of both ROE and market capitalization on November 17, 2004 (or on the date of his resignation, if he resigns earlier than his original tenure). The additional shares will not be exercisable if the CEO works less than 18 months or the earned total score is less than 80 points.
3. Exercise price = 57,100 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

 

7


Table of Contents

Grant date


 

Name of the grantee


 

Position when granted


  Exercise period

 

Exercise

price


 

Number of

granted

options*


 

Number of

exercised

options


 

Number of

exercisable

options


      From

  To

       

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

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

22-Mar-02

  Jong Young Yoon & 15 others   Employees   23-Mar-05   22-Mar-10   57,100   148,810   0   148,810

26-Jul-02

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

  Eun Joo Park   Non Executive director   22-Mar-06   21-Mar-11       3,351   0   3,351

21-Mar-03

  Cheol Soo Ahn   Non Executive director   22-Mar-06   21-Mar-11       3,351   0   3,351

21-Mar-03

  Kyung Bae Suh   Non Executive director   22-Mar-06   21-Mar-11       3,351   0   3,351
                   
           

21-Mar-03

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

21-Mar-03

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

21-Mar-03

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

21-Mar-03

  Won Suk Oh & 6 others   Employees   22-Mar-06   21-Mar-11   35,500   90,000   0   90,000

27-Aug-03

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

22-Mar-01

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

22-Mar-01

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

22-Mar-01

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

22-Mar-01

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

29-Mar-02

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

29-Mar-02

  Sun Lee   Former KCC Officer   30-Mar-04   29-Mar-11   Y2   3,330   0   3,330

29-Mar-02

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

09-Feb-04

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

09-Feb-04

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

09-Feb-04

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

1 Exercise price = 35,500 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.
2 Exercise price = 129,100 Won x (1 + the increase rate of Comparative Industry Index x 0.4).

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

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

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

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

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

 

8


Table of Contents

Grant date


 

Name of the

grantee


 

Position when

granted


 

Exercise

period


  Exercise
price


  Number of
granted
options*


  Number of
exercised
options


  Number of
exercisable
options


     

From


 

To


       

09-Feb-04

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

09-Feb-04

 

Kuk Shin

Kang & 9 others

  Employees   10-Feb-07   09-Feb-12   46,100   50,000   0   50,000

23-Mar-04

  Dong Soo Chung  

Non Executive

Director

  24-Mar-07   23-Mar-12       5.000   0   5,000

23-Mar-04

  Woon Youl Choi  

Non Executive

Director

  24-Mar-07   23-Mar-12       5.000   0   5,000

23-Mar-04

  Wang Ha Cho  

Non Executive

Director

  24-Mar-07   23-Mar-12   Y1   5.000   0   5,000

23-Mar-04

  Young Soon Cheon  

Non Executive

Director

  24-Mar-07   23-Mar-12       5.000   0   5,000

23-Mar-04

  Jung Young Kang  

Senior Executive

Vice President

  24-Mar-07   23-Mar-12   47,200   10,000   0   10,000
                       
 
 
        Total               2,838,859   717,839   2,121,020
                       
 
 

1 Exercise price = 47,200 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

 

9


Table of Contents

1.4. Employee Stock Ownership Association

 

     Beginning
balance


   Increase

   Decrease

  

Ending

Balance

(June 30, 2004)


  

Remarks


Registered common stock

   1,000,000    —      16,863    983,137    Due to distribution upon ERP
    
  
  
  
    

Total

   1,000,000    —      16,863    983,137    —  
    
  
  
  
    

 

1.5. Dividend

 

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

 

(Units: in millions of Won unless indicated otherwise)

     2003

    2002

  2001

Net (loss) income for the period

   (753,348 )   1,310,291   740,565

Basic (loss) earnings per share (Won)

   (2,311 )   4,1231   3,706

Maximum amount available for dividend

   133,369     1,192,6432   604,984

Total dividend amount

   —       325,232   119,866

Dividend payout ratio (%)

   —       24.823   16.19

Cash dividend per common share (Won)

   —       1,000   100

Stock dividend per common share (%)

   —       —     6

Dividend per preferred share (Won)

   —       —     —  

Dividend yield ratio (%)

   —       2.384   0.80

Net asset value per common share (Won)

   25,672     30,6145   29,742

Ordinary income per common share (Won)

   (2,311 )   4,123   3,706
                

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

 

10


Table of Contents

2. Business

 

2.1. Sources and Uses of Fund

 

2.1.1. Sources of Fund

 

(Unit: in millions of Won)

          June 30, 2004

   December 31, 2003

   December 31, 2002

          Average
balance


  

Interest

rate (%)


   Average
balance


  

Interest

rate (%)


   Average
balance


  

Interest

rate (%)


Won currency

                                  
     Deposits    120,119,634    3.35    117,045,837    3.69    113,157,719    4.21
     Certificate of deposit    5,788,913    4.17    4,068,327    4.45    2,119,900    4.82
     Borrowings    3,189,166    3.55    3,625,926    3.89    4,568,873    4.45
     Call money    1,494,968    3.62    1,315,639    3.93    1,039,249    4.02
     Other    22,089,425    5.81    23,311,299    5.91    14,254,281    6.70
         
  
  
  
  
  

Subtotal

        152,682,106    3.74    149,367,028    4.06    135,140,022    4.49
         
  
  
  
  
  

Foreign currency

                                  
     Deposits    1,531,606    0.61    1,276,952    0.84    1,096,544    1.28
     Borrowings    3,033,233    0.85    3,462,883    1.01    2,269,774    2.45
     Call money    185,702    1.19    150,609    1.07    293,151    1.65
     Finance debentures issued    866,279    2.07    773,840    2.11    1,071,848    3.57
     Other    37,393    0.01    26,491    —      23,087    —  
         
  
  
  
  
  

Subtotal

        5,654,213    0.98    5,690,775    1.12    4,754,404    2.67
         
  
  
  
  
  

Other

                                  
     Total Shareholders Equity    9,361,275    —      12,053,112    —      14,586,550    —  
     Allowances    509,089    —      98,422    —      63,039    —  
     Other    13,261,836    —      9,509,283    —      3,717,379    —  
         
  
  
  
  
  

Subtotal

        23,132,200    —      21,660,817    —      18,366,968    —  
         
  
  
  
  
  

Total

        181,468,519    3.18    176,718,620    3.47    158,261,394    3.92
         
  
  
  
  
  

 

11


Table of Contents

2.1.2. Uses of Fund

 

(Unit: in millions of Won)

         June 30, 2004

   December 31, 2003

   December 31, 2002

         Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


   Average
balance


   Interest
rate (%)


Won currency

                                 
    Due from banks    164,443    0.94    165,358    1.37    1,041,865    4.62
    Securities    23,731,562    5.14    30,069,922    7.26    30,180,305    6.32
    Loans    125,625,510    6.72    121,725,298    7.10    105,188,481    7.79
    Advances for customers    92,197    1.31    96,547    5.79    91,583    4.35
    Call loan    1,516,837    3.90    685,953    3.92    736,571    4.36
    Private placement corporate bonds    1,472,449    6.47    1,287,623    10.26    1,631,524    7.32
    Credit card accounts    10,599,504    10.27    6,698,954    10.44    5,719,359    10.25
    Other    212,731    —      298,858    —      374,718    —  
    Allowance for credit losses (-)    3,559,711    —      1,823,976    —      1,437,960    —  
        
  
  
  
  
  

Subtotal

       159,855,522    6.90    159,204,537    7.41    143,526,446    7.66
        
  
  
  
  
  

Foreign currency

                                 
    Due from banks    587,604    1.14    612,862    1.33    253,390    1.35
    Securities    1,293,818    3.17    1,269,538    5.23    1,302,214    7.97
    Loans    2,679,283    4.51    2,785,091    3.11    3,216,042    3.39
    Call loan    84,063    1.15    84,803    1.28    188,465    1.98
    Bills bought    1,808,563    1.72    1,983,368    1.83    835,356    4.71
    Other    6,904    —      12,391    —      15,739    —  
    Allowance for credit losses (-)    78,989    —      132,105    —      267,194    —  
        
  
  
  
  
  

Subtotal

       6,381,246    3.17    6,615,948    3.03    5,544,012    4.95
        
  
  
  
  
  

Other

                                 
    Cash    982,439    —      968,815    —      914,639    —  
    Fixed assets held for business    3,057,456    —      3,210,463    —      3,126,812    —  
    Other    11,191,856    —      6,718,857    —      5,149,485    —  
        
  
  
  
  
  

Subtotal

       15,231,751    —      10,898,135    —      9,190,936    —  
        
  
  
  
  
  

Total

       181,468,519    6.19    176,718,620    6.79    158,261,394    7.12
        
  
  
  
  
  

 

12


Table of Contents

2.2. Principal Banking Activities

 

2.2.1. Deposits

 

The following table shows the average balances of our deposits for the periods ended and ending balances as of the dates indicated.

 

(Unit: in millions of Won)

        June 30, 2004

  December 31, 2003

  December 31, 2002

        Average
balance


  Ending
balance


  Average
balance


  Ending
balance


  Average
balance


   Ending
balance


Deposits in Won

                            
    Demand deposits   13,087,353   13,727,133   12,192,971   14,110,288   10,654,651    12,987,742
    Time & savings deposits   98,586,310   95,653,542   96,668,084   97,616,747   93,347,999    93,630,423
    Mutual installment deposits   6,860,103   6,728,736   6,958,043   7,054,752   8,058,664    7,491,115
    Mutual installment for housing   5,513,682   5,537,464   5,161,535   5,423,853   4,463,601    4,872,637
    Certificates of deposits   5,788,913   6,371,087   4,068,327   6,499,258   2,119,900    3,044,089
       
 
 
 
 
  

Subtotal

      129,836,361   128,017,962   125,048,960   130,704,898   118,644,815    122,026,006
       
 
 
 
 
  

Deposits in foreign currency

  1,514,789   1,900,982   1,276,952   1,475,374   1,096,544    1,083,647
       
 
 
 
 
  

Trust deposits

                            
    Money trust   8,136,774   7,567,983   13,064,749   10,278,357   17,214,936    15,356,285
    Property trust   18,836,553   16,024,160   24,512,746   21,453,761   16,783,690    26,852,684
       
 
 
 
 
  

Subtotal

      26,973,327   23,592,143   37,577,495   31,732,118   33,998,626    42,208,969
       
 
 
 
 
  

Total

      158,324,477   153,511,087   163,903,407   163,912,390   153,739,985    165,318,622
       
 
 
 
 
  

 

2.2.2. Average Deposit per Domestic Branch

 

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

 

(Unit: in millions of Won)

     June 30, 2004

   December 31, 2003

   December 31, 2002

Deposits

   126,090    119,593    121,137

Deposits in Won

   124,976    118,756    120,336

 

13


Table of Contents

2.2.3. Average Deposit per Employee

 

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

 

(Unit: in millions of Won)

     June 30, 2004

   December 31, 2003

   December 31, 2002

Deposits

   7,317    7,487    7,256

Deposits in Won

   7,252    7,434    7,208

 

2.2.4. Loan Balances

 

The following table shows the average balances of our loans for the periods ended and ending balances as of the dates indicated.

 

(Unit: in millions of Won)

     June 30, 2004

   December 31, 2003

   December 31, 2002

     Average
balance


   Ending
balance


   Average
balance


   Ending
balance


   Average
balance


   Ending
balance


Loans in Won

   125,616,836    125,823,004    121,705,493    123,715,244    105,117,047    116,441,303

Loans in foreign currency

   3,935,941    3,976,529    4,160,185    4,019,929    3,228,857    4,417,176

Advances to customers

   96,627    61,583    107,091    89,665    106,380    52,430

Subtotal

   129,649,404    129,861,116    125,972,769    127,824,838    108,452,284    120,910,909

Trust account loans

   456,659    435,427    531,500    489,788    789,614    575,412
    
  
  
  
  
  

Total

   130,106,063    130,296,543    126,504,269    128,314,626    109,241,898    121,486,321
    
  
  
  
  
  

 

2.2.5. Loan Balances as of June 30, 2004 by Remaining Years to Maturities

 

(Unit: in millions of Won)

     Less than 1 year

  

More than 1 year~

less than 3 years


  

More than 3 years~

less than 5 years


   More than 5 years

   Total

Loans in Won

   69,230,707    40,287,930    5,464,291    10,840,076    125,823,004

Loans in foreign currencies

   2,769,561    531,536    376,804    298,628    3,976,529

 

14


Table of Contents

2.2.6. Loan Balances by Types

 

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

 

          (Unit: in millions of Won)
          June 30, 2004

   December 31, 2003

   December 31, 2002

Loans to enterprise

                   
     Loans for operations    35,023,952    35,351,506    35,369,066
     Loans for facility    6,522,031    6,631,703    5,963,631

Loans to households

        43,079,968    42,884,305    40,477,483

Loans to public sector & others

                   
     Loans for operations    612,590    526,227    738,632
     Loans for facility    41,872    42,473    39,414

Loans on property formation savings

        12,741    62,963    95,252

Loans for housing

        40,517,033    38,199,290    33,731,435

Inter-bank loans

        9,452    12,815    20,941

Others

        3,365    3,962    5,449
         
  
  

Total

        125,823,004    123,715,244    116,441,303
         
  
  

 

2.2.7. Loan to Deposit Ratio

 

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

 

    

(Units: in millions of Won, %)

     June 30, 2004

   December 31, 2003

   December 31, 2002

Loans1 (A)

   125,616,836    121,705,493    105,106,146

Deposits2 (B)

   129,836,362    125,048,960    118,644,815
    
  
  

Loan to deposit ratio (A/B)

   96.75    97.33    88.59
    
  
  

 

2.2.8. Acceptances and Guarantees

 

     (Unit: in millions of Won)
     June 30, 2004

   December 31, 2003

   December 31, 2002

Determined

   693,864    800,297    1,031,698

Contingent

   1,255,115    1,281,518    1,306,878
    
  
  

Total

   1,948,979    2,081,815    2,338,576
    
  
  

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

 

15


Table of Contents

2.2.9. Breakdown of Securities Investment

 

The following table shows the average balances of our securities for the periods ended and ending balances as of the indicated dates.

 

           

(Unit: in millions of Won)

        June 30, 2004

  December 31, 2003

  December 31, 2002

        Average
balance


  Ending
balance


  Average
balance


  Ending
balance


  Average
balance


   Ending
balance


Securities in Won (Banking account)

                            
    Monetary
stabilization
bonds
  6,268,456   6,929,757   4,343,978   5,540,598   2,834,534    3,269,269
    Government
and public
bonds
  5,013,583   4,572,689   5,630,422   5,885,595   4,272,946    5,252,321
    Debentures   6,100,300   5,740,146   11,028,217   7,149,089   13,154,258    12,378,717
    Stocks   968,806   974,539   1,380,254   877,013   2,146,149    1,661,682
    Others   5,380,418   5,087,489   7,687,051   7,299,404   7,809,012    7,162,134
       
 
 
 
 
  

Subtotal

      23,731,563   23,304,620   30,069,922   26,751,699   30,216,899    29,724,123
       
 
 
 
 
  

Securities in Won (Trust account)

                            
    Monetary
stabilization
bonds
  1,294,271   1,316,630   984,380   878,077   1,309,515    583,379
    Government
and public
bonds
  772,443   1,080,039   1,182,165   1,252,419   2,023,503    1,323,195
    Debentures   2,513,939   2,206,600   5,876,064   4,080,362   8,035,960    7,600,794
    Stocks   599,027   540,768   763,277   592,379   904,921    924,514
    Others   1,938,599   2,067,226   3,208,160   2,106,262   3,945,649    3,821,884
       
 
 
 
 
  

Securities in foreign currency (Trust Account)

  740,683   683,073   868,819   767,675   559,964    747,253
       
 
 
 
 
  

Subtotal

      7,858,962   7,894,336   12,882,865   9,677,174   16,779,512    15,001,019
       
 
 
 
 
  

Securities in foreign currency (Banking account)

                            
    Foreign
securities
  962,949   961,881   1,066,595   992,408   945,199    960,749
    Off-shore
foreign
securities
  327,201   280,310   306,376   355,737   320,423    255,878
       
 
 
 
 
  

Subtotal

      1,290,150   1,242,191   1,372,971   1,350,145   1,265,622    1,216,627
       
 
 
 
 
  

Total

      32,880,675   32,441,147   44,325,758   37,779,018   48,262,033    45,941,769
       
 
 
 
 
  

 

2.2.10. Trust Account

 

         

(Unit: in millions of Won)

     June 30, 2004

   December 31, 2003

   December 31, 2002

     Total amount
trusted


   Trust
fees


   Total amount
trusted


   Trust
fees


   Total amount
trusted


   Trust
fees


Return-guaranteed trust

   368    312    559    45,682    1,528    59,530

Performance trust

   23,591,775    50,960    37,576,936    186,851    33,997,098    241,444
    
  
  
  
  
  

Total

   23,592,143    51,272    37,577,495    232,533    33,998,626    300,974
    
  
  
  
  
  

 

16


Table of Contents

2.2.11. Credit Card

 

(Unit: in millions of Won unless indicated otherwise)

          As of or for the years ended of indicated dates

          June 30, 2004

   December 31, 2003

   December 31, 2002

Number of card holders (Person)

                   
     Corporate    133,867    147,813    153,425
     Individual    10,271,855    10,990,703    11,638,968
         
  
  

Number of merchants

        1,521,364    1,528,872    1,589,015
         
  
  

Profit

   Sales1    33,227,100    92,535,500    111,076,680
     Fee revenue    1,495,830    4,012,017    3,482,289

 

2.3. Branch Networks

 

As of June 30, 2004, we had 1,085 branches and 46 sub-branches in Korea, the largest number of branches among Korean commercial banks. Approximately 41.9% of our branches and sub-branches are located in Seoul.

 

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


1. Includes credit card receivables and cash advances.

 

17


Table of Contents

2.4. Other Information for Investment Decision

 

2.4.1. BIS Risk-adjusted Capital Ratios

 

(Units: in millions of Won, %)

     June 30, 2004

  December 31, 2003

   December 31, 2002

Risk-adjusted capital (A)

   12,951,312   12,739,857    14,439,313

Risk-weighted assets (B)

   124,863,630   127,397,339    138,703,021
    
 
  

BIS ratios (A/B)

   10.371   10.00    10.41
    
 
  

 

2.4.2. Non-Performing Loans2

 

(Units: in millions of Won unless indicated otherwise)

June 30, 2004


 

December 31, 2003


 

Change


Amount


 

NPL to total loans


 

Amount


 

NPL to total loans


 

Amount


 

NPL to total loans


4,320,117

  3.06%   4,202,254   2.99%   117,863   0.07%p

 

2.4.3. Loan Loss Allowances

 

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

 

(Units: in millions of Won)

          June 30, 2004

   December 31, 2003

   December 31, 2002

Loan losses allowance

                   
     Loans in Won    2,668,535    2,271,198    1,905,065
     Loans in foreign currencies    57,279    68,045    103,838
     Credit card    896,135    1,187,616    284,491
     Others    211,549    163,482    85,302
         
  
  
     Total    3,833,498    3,690,341    2,378,696
         
  
  

Write-offs for the Period

   2,414,274    4,509,979    1,527,311
         
  
  

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

 

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Table of Contents

2.4.4. Changes of Loan Loss Allowances for Recent Three Years

 

(Unit: in millions of Won)

     June 30, 20041

    December 31, 2003

   December 31, 2002

 

Beginning balance

   3,905,342     2,378,696    2,271,179  

Net Write-Off(-)

   2,234,379     2,728,891    1,485,962  

Write-Off

   2,414,274     4,509,979    1,527,311  

Recovery

   272,065     767,718    269,533  

Other

   (92,170 )   1,013,370    (228,184 )
    

 
  

Provision for loan losses

   2,162,535     4,040,536    1,593,479  
    

 
  

Ending balance

   3,833,498     3,690,341    2,378,696  
    

 
  


1 Available-for-sale subordinated retained interest is reclassified into credit card receivables and its related allowances for loans losses have been added to the beginning balance.

 

19


Table of Contents

3. Financial Information

 

3.1. Non-Consolidated Condensed Financial Statements

 

(Unit: in millions of Won)

 
     As of or for the years ended of indicated dates

 
     June 30, 2004

    December 31, 2003

 

Cash and due from banks

   7,824,992     6,526,345  

Securities

   24,546,809     26,908,462  

Loans

   139,887,993     141,143,674  

Fixed assets

   2,944,831     3,019,556  

Other assets

   9,549,898     6,484,239  
    

 

Total assets

   184,754,523     184,082,276  
    

 

Deposits

   129,918,944     132,180,272  

Borrowings

   11,375,873     10,902,800  

Debentures

   19,668,297     19,192,581  

Other liabilities

   14,969,653     13,392,109  
    

 

Total Liabilities

   175,932,767     175,667,762  
    

 

Common stocks

   1,681,896     1,681,896  

Capital surplus

   6,230,738     6,230,738  

Retained earnings

   1,971,342     1,662,119  

Capital adjustments

   (1,062,220 )   (1,160,239 )
    

 

Total shareholders’ equity

   8,821,756     8,414,514  
    

 

Liabilities and Shareholders’ Equity

   184,754,523     184,082,276  
    

 

Operating revenue

   9,600,767     15,584,501  

Operating income

   350,550     76,084  

Continuing (loss) income before income taxes

   447,364     (1,146,444 )
    

 

Net (loss) income

   307,561     (753,348 )
    

 

 

3.2. Other Financial Information

 

See Exhibit 99.1, Kookmin Bank Non-Consolidated Interim Report by our independent auditors for our full financial statements and relevant notes. The Report is also available at our website www.kbstar.com.

 

20


Table of Contents

4. Independent Accountant Fees and Services

 

4.1. Audit & Review Fees

 

Our financial statements for the first quarter of 2004 have been reviewed by Samil Accounting Corporation, a Korean member firm of PRICEWATERHOUSECOOPERS. The aggregate contract fee for the audit and review fees for the fiscal year 2004 is 1,200 million Won.

 

4.2. Non-Audit Services

 

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

 

(Units: in millions of Won unless indicated otherwise)

Year


  

Service description


  

Amount of payment


2004

   -    —  

2003

         
     - US GAAP conversion for 2003    US$3,950 thousand
     - US GAAP conversion for 2002    US$3,800 thousand
     - Due Diligence on Kookmin Credit Card    250
     - SEC Filing regarding the proposed merger with Kookmin Credit Card    US$30 thousand

2002

         
     - Project for improving the accounting process    690
     - Advisory service for the conversion process in US GAAP    1,450

 

21


Table of Contents

5. Corporate Governance and Affiliated Companies

 

5.1. Board of Directors & Committees under the Board

 

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

 

  matters relating to business objectives and performance evaluation;

 

  matters relating to amendments of the Articles of Incorporation;

 

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

 

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

 

  matters relating to internal control standards; or

 

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

 

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

 

  the Board Steering Committee;

 

  the Management Strategy Committee;

 

  the Risk Management Committee;

 

  the Audit Committee;

 

  the Compensation Committee; and

 

  the Non Executive Director Nominating Committee.

 

Each committee member is appointed by the board of directors, except for members of the Audit Committee, who are elected at the general meeting of stockholders. For list of our directors, see 6. Directors, Senior Management and Employees / 6.1. Executive Directors and 6.2. Non-Executive Directors.

 

5.2. Audit Committee

 

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

 

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Table of Contents

5.3. Compensation to Directors

 

For the 6 months period ended June 30, 2004, the aggregate of the remuneration paid by us to 1 President & CEO and our other executive directors and 2) our non-executive directors was 2,265 million Won, 325 million Won, respectively. The following table shows the breakdown of the remuneration.

 

(Units: in millions of Won)
     The aggregate
remuneration paid


   Limit for the remuneration
resolved by shareholders’
meeting


   Average amount of the
payment per person


1) Executive Directors

   2,265    8,000    492

2) Non Executive Directors

   325         24
    
  
  

Total

   2,590    8,000    148
    
  
  

 

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

 

5.4. Voting Rights of Shareholders

 

Each outstanding share of our common stock is entitled to one vote per share. If the method of written resolution at the general meeting of shareholders is adopted by resolution of the board of directors, at which the convening of the general meeting of shareholders is determined, the shareholders may exercise their voting rights in writing without participating the meeting in person. In this case, the Bank is required to send the documents and references necessary for exercise of voting rights, together with the convening notice. If a shareholder intends to exercise his/her voting rights in writing, the shareholder is required to fill in a certain form and submit it to the Bank one day before the date set for the general meeting of shareholders.

 

5.5. Share Ownership

 

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

 

(Unit: Shares, %)

Name


   Number of Shares of Common Stock

   Percentage of Total Issued Shares

The Bank of New York1

   35,000,566    10.41

Kookmin Bank2

   30,016,623    8.92

ING Bank N.V.

   12,716,691    3.78

Euro-Pacific Growth Fund

   10,682,290    3.18

Emerging Markets Growth

   10,125,055    3.01

National Pension Fund

   7,496,146    2.23

Goldman Sachs Capital SH

   3,831,151    1.14

1 Depositary of ADRs
2 Treasury stocks with no voting right

 

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Table of Contents

5.6. Affiliated Companies

 

5.6.1. List of Affiliates1

 

As of June 30, 2004, we have following affiliates.

 

  KB Investment Co., Ltd.

 

  KB Asset Management Co., Ltd.

 

  KB Real Estate Trust Co., Ltd.

 

  KB Credit Information Co., Ltd.

 

  KB Data Systems Corporation

 

  KB Futures Co., Ltd.

 

  KB Life Co., Ltd.

 

  ING Life Korea Ltd.

 

  Kookmin Bank Luxemburg. S.A.

 

  Kookmin Bank International (London) Ltd.

 

  Kookmin Finance Hong Kong Ltd.

 

  Sorak Financial Holdings

 

5.6.2. Operating Results of Affiliates

 

          (Unit: in millions of Won)  
          Operating results of the latest fiscal year

 

Company name


   Closing date

   Total
Assets


   Total
Liabilities


   Total
Equities


   Sales

  

Net

Income


 

KB Investment

   December 31, 2003    95,555    18,194    77,361    19,227    5,300  

KB Asset Management

   March 31, 2004    61,432    4,113    57,319    24,401    9,711  

KB Real Estate Trust

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

KB Credit Information

   December 31, 2003    25,177    7,385    17,792    43,717    3,841  

KB Data Systems Corp.

   December 31, 2003    17,898    3,244    14,654    37,389    1,035  

KB Futures

   March 31, 2004    35,791    9,973    25,818    8,691    1,056  

KB Life2

   June 30, 2004    127,177    9,329    29,671    5,615    (329 )

ING Life Korea

   March 31, 2004    3,461,826    3,228,415    233,411    1,865,503    103,088  

Kookmin Bank Luxemburg

   June 30, 2004    7,592    3,057    4,535    1,026    6  

Kookmin Bank International (London)

   June 30, 2004    310,655    255,546    310,655    4,909    1,090  

Kookmin Finance HK

   June 30, 2004    443,679    376,692    66,987    6,206    3,814  

Sorak Financial Holdings

   June 30, 2004    319,538    45,923    273,615    —      (14 )

1 Excluding Jooeun Industry and Jangeun Securities which have been under liquidation procedures.
2 Since its establishment (i.e. April 29 ~ June 30, 2004)

 

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Table of Contents

6. Directors, Senior Management and Employees

 

As of August 13, 2004, our board of directors, which consists of 3 executive directors and 11 non-executive directors, has the ultimate responsibility for the management of our affairs.

 

6.1. Executive Directors

 

Our 3 executive directors consist of President & CEO and two executive vice presidents.

 

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

 

Name


   Date of Birth

  

Position


   Common Stocks Owned

Jung Tae Kim

   08/15/1947    President & CEO    126,581

Seong Kyu Lee

   10/25/1059    Executive Director & EVP    —  

Donald H. MacKenzie

   12/20/1948    Executive Director & EVP    —  

 

6.2. Non-Executive Directors

 

Our non-executive directors are selected based on the candidates’ talents and skills in diverse areas, such as law, finance, economy, management and accounting. As of August 13, 2004, 11 non-executive directors are in office.

 

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

 

Name


   Date of Birth

  

Position


   Common Stocks Owned

Moon Soul Chung

   03/07/1938    Non-Executive Director    4,851

Richard Elliott Lint

   01/04/1946    Non-Executive Director    910

Sun Jin Kim

   06/08/1942    Non-Executive Director    3,935

Dong Soo Chung

   09/24/1945    Non-Executive Director    860

Kyung Hee Yoon

   01/05/1947    Non-Executive Director    —  

Suk Yong Cha

   06/09/1953    Non-Executive Director    1,240

Bernard S. Black

   11/13/1953    Non-Executive Director    900

Ki Hong Kim

   01/10/1957    Non-Executive Director    1,360

Woon Youl Choi

   04/02/1950    Non-Executive Director    9,049

Wang Ha Cho

   09/18/1953    Non-Executive Director    361

Young Soon Cheon

   02/01/1961    Non-Executive Director    290

 

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Table of Contents

6.3. Senior Management

 

In addition to the executive directors who are also our executive officers, we currently have the following 7 executive officers as of August 13, 2004.

 

Name


   Date of Birth

  

Position


   Common Shares Owned

Jong Kyoo Yoon

   10/13/1955    Senior Executive Vice President    3,300

Jeung Lak Lee

   06/13/1958    Senior Executive Vice President    —  

Sang Jin Lee

   05/21/1955    Senior Executive Vice President    1,078

Yun Keun Jung

   07/01/1951    Senior Executive Vice President    2,416

Jung Young Kang

   01/29/1951    Senior Executive Vice President    —  

Young Il Kim

   07/06/1953    Senior Executive Vice President    3,327

Ki Sup Shin

   10/29/1955    Senior Executive Vice President    280

 

6.4. Compensation to Directors and Senior Management

 

The total compensation to both directors and senior management for the first half of 2004, excluding grant of stock options, is 5,121,164,583 Won, and the average compensation amount per person is 150,622,483 Won. During the 6 months, we had 20 directors and 14 executive vice presidents.

 

6.5. Employees

 

The following table shows the breakdown of our employees as of June 30, 2004.

 

(Unit: in millions of Won)

     Number of Employees

   Average Tenure
of the Full-time
Employees


   Total Payment for
the 1st half of 2004


  

Average Monthly
Payment

per Person


     Full-time

   Contractual

   Total

        

Male

   14,108    1,232    15,340    16.13    414,204    4.5

Female

   4,945    7,880    12,825    13.41    216,175    2.8

Total

   19,053    9,112    28,165    15.43    630,379    3.7

 

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Table of Contents

7. Related Party Transaction

 

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

 

7.1. Transactions with the Largest Shareholders or Affiliates

 

7.1.1. Investments in Affiliates1

 

(Unit: in millions of Won)

Name


  

Relation

with the

Bank


  

Account


  

Par

Value


  

Beginning

Balance

(January 1, 2004)


   Increase

   Decrease

  

Ending

Balance

(June 30, 2004)


KB Real Estate Trust    Affiliate    Equity Securities of Affiliate    79,999    79,999    —      —      79,999
KB Investment    Affiliate    Equity Securities of Affiliate    44,708    44,708    —      —      44,708
KB Asset Management    Affiliate    Equity Securities of Affiliate    30,670    30,670    —      —      30,670
KB Futures    Affiliate    Equity Securities of Affiliate    19,996    19,996    —      —      19,996
KB Data Systems Corp.    Affiliate    Equity Securities of Affiliate    7,998    7,998    —      —      7,998
KB Credit Information    Affiliate    Equity Securities of Affiliate    4,154    4,154    —      —      4,154
KB Life    Affiliate    Equity Securities of Affiliate    30,000    0    30,000    —      30,000
ING Life Korea    Affiliate    Equity Securities of Affiliate    14,000    14,000    —      —      14,000
KOMOCO    Affiliate    Equity Securities of Affiliate    30,000    30,000    —      30,000    0
              
  
  
  
  

Total

             261,525    231,525    30,000    30,000    231,525
              
  
  
  
  

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

 

27


Table of Contents

7.1.2. Real Estate Transactions with Affiliates

 

 

(Unit: in millions of Won)

Name


  

Relation with

the Bank


  

Type


  

Account


  

The Number

of Contracts


   Deposits

   Rent Fee

KB Credit Information

   Affiliate    Building    Rental Income    20    4,610.96    11.73

KB Real Estate Trust

   Affiliate    Building    Rental Income    2    1,738.00    3.56

KB Data Systems Corp.

   Affiliate    Building    Rental Income    1    2,484.31    —  

KB Futures

   Affiliate    Building    Rental Income    1    1,363.36    —  

KB Life

   Affiliate    Building    Rental Income    1    1,839.20    —  
              
  
  
  

Total

   —      —      —      25    12,035.83    15.29
              
  
  
  

 

7.2. Transactions with Other than the Largest Shareholders or Affiliates

 

7.2.1. Loans and Guarantees

 

(Unit: in millions of Won)  

Name


  

Relation with

the Bank


  

Account


  

Beginning Balance

(January 1, 2004, or

on the date of

appointment)


  

Ending Balance

(June 30, 2004)


  

Increase /

(Decrease) for the

period


 

DSME Co.

  

Related party of

Non executive director,

Dong Soo Chung

   Payment guarantee    625    656    31  
                            

Kolon Co.

  

Related party of

Non executive director, Wang Ha Cho

   Overdraft    30,000    0    378
(30,378
 
)
                            

Kolon

Construction

  

Related party of

Non executive director, Wang Ha Cho

   Overdraft    0    0    77
(77
 
)
                            

Hankyoreh Plus

  

Related party of

Senior executive vice president,

Seong Kyu Lee

   Loans for working capital    6,915    6,394    945
(1,466
 
)
              
  
  

Total

             37,540    7,127    (30,413 )
              
  
  

 

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Table of Contents

7.2.2. Real Estate Transaction

 

(Unit: in millions of Won)

Name


 

Relation with

Kookmin Bank


  

Type


  

Account


   Deposits

   Rent Fee

Haitai

Confectionary &

Foods

 

Related party of

Non executive director, Suk Yong Cha

   Building    Rental Deposit    150    —  

DSME Co.

 

Related party of

Non executive director, Dong Soo Chung

   Building    Rental Deposit    —      11.04
                  
  

Total

                 150    11.04
                  
  

 

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Table of Contents

SIGNATURES

 

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

 

 

   

Kookmin Bank

   

(Registrant)

Date: August 23, 2004

 

By:

 

/s/ Ki Sup Shin


       

(Signature)

   

Name:

 

Ki Sup Shin

   

Title:

 

Senior Executive Vice President &

       

Chief Financial Officer

 

30


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Kookmin Bank

Non-Consolidated Interim Financial Statements

June 30, 2004 and 2003


Table of Contents

Kookmin Bank

Index

June 30, 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 Operations

   4

Statements of Cash Flows

   5–6

Notes to Non-Consolidated Interim Financial Statements

   7–55


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

 

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 June 30, 2004, and the related non-consolidated statements of operations and cash flows for the three-month and six-month periods ended June 30, 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 and 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 operations, 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.

 

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.


Table of Contents

LOGO

 

As discussed in Note 33 to the non-consolidated 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 non-consolidated 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 June 30, 2004, the Bank holds 8.90% of the total common stock issued as treasury stock.

 

As discussed in Note 4 to the non-consolidated financial statements, as a means to venture into the insurance business for diversification of revenues, the Bank invested (Won)30,246 million (including acquisition costs) on April 29, 2004, to acquire a 100% ownership of KB Life Insurance Co., Ltd., which was founded to acquire the assets and the liabilities of Hanil Life Insurance Co., Ltd.

 

As discussed in Note 16 and 34 to the non-consolidated 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 as it is currently experiencing a financial crisis, amounts to (Won)715,249 million as of June 30, 2004. And a second debt-equity swap amounting to (Won)362,250 million was executed in July 28, 2004. In addition, the Bank holds securities issued by credit card companies and capital companies, which are experiencing liquidity problems, amounting to (Won)263,289 million as of June 30, 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

July 15, 2004

 

This report is effective as of July 15, 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


Table of Contents

Kookmin Bank

Non-Consolidated Balance Sheets

June 30, 2004 and December 31, 2003

(Unaudited)


 

(in millions of Korean Won)    2004

    2003

 

Assets

                

Cash and due from banks (Note 3)

   (Won) 7,824,992     (Won) 6,526,345  

Securities (Note 4)

     24,546,809       26,908,462  

Loans (Notes 5 and 6)

     139,887,993       141,143,674  

Fixed assets (Note 7)

     2,944,831       3,019,556  

Other assets (Note 8)

     9,549,898       6,484,239  
    


 


Total assets

   (Won) 184,754,523     (Won) 184,082,276  
    


 


Liabilities and Shareholders’ Equity

                

Deposits (Note 9)

   (Won) 129,918,944     (Won) 132,180,272  

Borrowings (Note 10)

     11,375,873       10,902,800  

Debentures (Note 11)

     19,668,297       19,192,581  

Other liabilities (Note 13)

     14,969,653       13,392,109  
    


 


Total liabilities

     175,932,767       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 2004) (Notes 1 and 17)

     1,681,896       1,681,896  

Capital surplus (Note 18)

     6,230,738       6,230,738  

Retained earnings (Note 19)

     1,971,342       1,662,119  

Capital adjustments (Note 20)

     (1,062,220 )     (1,160,239 )
    


 


Total shareholders’ equity

     8,821,756       8,414,514  
    


 


Total liabilities and shareholders’ equity

   (Won) 184,754,523     (Won) 184,082,276  
    


 


 

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

 

See Report of Independent Accountants

 

3


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Operations

Three-Month and Six-Month Periods Ended June 30, 2004 and 2003

(Unaudited)


 

(in millions of Korean Won, except per share amounts)    Three-month period

    Six-month period

 
     2004

   2003

    2004

   2003

 

Interest income

                              

Interest on due from banks

   (Won) 2,265    (Won) 1,388     (Won) 4,138    (Won) 5,167  

Interest on trading securities

     40,035      27,296       79,686      51,818  

Interest on available-for-sale securities

     107,440      176,792       262,864      344,469  

Interest on held-to-maturity securities

     91,207      175,238       185,960      363,497  

Interest on loans

     2,600,955      2,413,620       5,286,060      4,791,321  

Other interest income

     25,934      26,616       50,698      49,382  
    

  


 

  


       2,867,836      2,820,950       5,869,406      5,605,654  
    

  


 

  


Interest expenses

                              

Interest on deposits

     976,330      1,079,533       2,018,923      2,183,020  

Interest on borrowings

     98,690      105,782       179,322      214,312  

Interest on debentures

     265,476      280,770       530,500      564,021  

Other interest expenses

     15,791      20,016       38,281      32,722  
    

  


 

  


       1,356,287      1,486,101       2,767,026      2,994,075  
    

  


 

  


Net interest income

     1,511,549      1,334,849       3,102,380      2,611,579  

Provision for loan losses (Note 6)

     1,062,339      1,026,698       2,162,535      1,685,764  
    

  


 

  


Net interest income after provision for loan losses

     449,210      308,151       939,845      925,815  
    

  


 

  


Non-interest income

                              

Fees & commission income

     565,053      344,963       1,112,470      681,829  

Dividends on trading securities

     249      —         2,965      1,514  

Dividends on available-for-sale securities

     3,544      2,622       7,614      5,288  

Gain on foreign currency transactions

     71,564      35,210       121,769      165,926  

Gain on derivatives transactions (Note 15)

     642,805      498,267       1,459,391      1,240,561  

Others (Note 22)

     657,050      500,401       1,027,152      546,430  
    

  


 

  


       1,940,265      1,381,463       3,731,361      2,641,548  
    

  


 

  


Non-interest expenses

                              

Fees and commission expenses

     119,005      43,143       252,368      92,378  

General and administrative expenses (Note 23)

     652,549      628,663       1,315,626      1,210,779  

Loss on foreign currency transactions

     33,804      46,213       79,894      129,016  

Loss on derivatives transactions (Note 15)

     606,002      465,014       1,418,054      1,214,154  

Others (Note 22)

     839,025      574,745       1,254,714      624,648  
    

  


 

  


       2,250,385      1,757,778       4,320,656      3,270,975  
    

  


 

  


Operating income (loss)

     139,090      (68,164 )     350,550      296,388  

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

     79,757      (117,275 )     96,814      (334,712 )
    

  


 

  


Net income (loss) before income tax expense

     218,847      (185,439 )     447,364      (38,324 )

Income tax expense (benefit) (Note 25)

     62,544      (70,838 )     139,803      2,344  
    

  


 

  


Net income (loss)

   (Won) 156,303    (Won) (114,601 )   (Won) 307,561    (Won) (40,668 )
    

  


 

  


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

                  (Won) 1,004    (Won) (125 )
                   

  


 

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

 

See Report of Independent Accountants

 

4


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Cash Flows

Three-Month and Six-Month Periods Ended June 30, 2004 and 2003

(Unaudited)


 

(in millions of Korean Won)    Three-month period

    Six-month period

 
     2004

    2003

    2004

    2003

 

Cash flows from operating activities

                                

Net income (loss)

   (Won) 156,303     (Won) (114,601 )   (Won) 307,561     (Won) (40,668 )
    


 


 


 


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

                                

Realized loss (gain) on trading securities, net

     19,733       (15,417 )     (30,451 )     (42,500 )

Unrealized gain on trading securities, net

     (750 )     (39,005 )     (18,005 )     (56,625 )

(Gain) loss on foreign currency transactions, net

     (37,760 )     11,003       (41,875 )     (36,910 )

Provision for loan losses

     1,062,339       1,026,698       2,162,535       1,685,764  

Reversal of losses from guarantees and acceptances

     3       122,950       219       122,746  

Gain on derivative transactions, net

     (36,803 )     (33,253 )     (41,337 )     (26,407 )

Loss (gain) on valuation of derivatives, net

     34,069       (11,652 )     22,424       (13,224 )

(Gain) loss on fair value hedged items, net

     (21,962 )     6,671       (12,263 )     8,076  

Retirement benefits

     25,846       22,040       55,163       45,990  

Stock compensation expense

     2,478       —         4,250       —    

Depreciation and amortization

     104,765       109,440       201,978       210,912  

Loss (gain) on disposal of fixed assets, net

     122       32,188       (151 )     33,553  

Realized gain on available-for-sale securities, net

     (24,972 )     (46,843 )     (77,524 )     (86,530 )

Impairment loss on available-for-sale securities, net

     49,374       46,397       59,759       38,627  

Realized gain on held-to-maturity securities

     (33 )     (475 )     (1,509 )     (1,268 )

Unrealized (gain) loss on investment in associates, net

     (5,358 )     91,990       (16,479 )     349,642  

(Gain) loss on sale of loans, net

     (66,425 )     420       (66,655 )     1,633  

Provision for other allowances

     192,445       —         252,136       —    

Others, net

     (142,782 )     (6,454 )     (144,928 )     (12,796 )

Changes in assets and liabilities resulting from operations

                                

Accrued income

     10,056       (61,502 )     53,106       24,382  

Prepaid expenses

     (39,803 )     3,206       162,773       (29,166 )

Deferred tax assets

     (16,347 )     3,771       62,606       (167,223 )

Other assets

     (1,769 )     (251 )     (464 )     3,168  

Accrued expenses

     28,043       (200,965 )     (96,165 )     (174,510 )

Unearned income

     (6,625 )     (8,230 )     (2,818 )     (9,163 )

Withholding taxes

     (16,222 )     9,236       (42,985 )     12,214  

Other liabilities

     (35,626 )     (67,749 )     (106,450 )     275,557  

Payment of retirement benefits

     (4,031 )     (3,953 )     (30,174 )     (7,225 )

Retirement pension funds

     615       183,484       14,448       (10,752 )

Account for agency business

     6,777       —         (51,685 )     —    

Stock compensation expense

     —         3,805       —         (2,683 )
    


 


 


 


Net cash provided by operating activities

     1,235,700       1,062,949       2,577,040       2,094,614  
    


 


 


 


 

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

 

See Report of Independent Accountants

 

5


Table of Contents

Kookmin Bank

Non-Consolidated Statements of Cash Flows

Three-Month and Six-Month Periods Ended June 30, 2004 and 2003

(Unaudited)


 

(in millions of Korean Won)    Three-month period

   

Six-month period


 
     2004

    2003

    2004

    2003

 

Cash flows from investing activities

                                

(Increase) decrease in due from banks

   (Won) (2,922,799 )   (Won) 974,688     (Won) (1,621,484 )   (Won) (699,744 )

Decrease in trading securities

     1,380,423       573,215       246,950       876,918  

Decrease (increase) in available-for-sale securities

     1,006,174       (66,010 )     2,036,918       (4,089,009 )

(Increase) decrease in held-to-maturity securities

     (102,848 )     462,681       385,906       1,492,244  

Acquisition of investment in associates

     15,185       —         2,932       —    

Increase in loans granted, net

     (1,285,573 )     (3,359,993 )     (1,020,915 )     (6,736,889 )

Proceeds from disposal of fixed assets

     1,234       126,525       3,897       133,742  

Acquisition of fixed assets

     (58,029 )     (114,917 )     (86,556 )     (173,845 )

Acquisition of intangible assets

     (528 )     (70 )     (759 )     (340 )

Proceeds from disposal of foreclosed assets

     168       248       199       279  

Decrease (increase) in guarantee deposits

     18,084       (13,989 )     53,360       (21,046 )

Decrease (increase) in other accounts receivable

     37,031       (1,742,280 )     (3,453,043 )     (1,692,171 )

Decrease (increase) in payments in advance

     4,643       (13,284 )     4,038       (27,683 )

Decrease (increase) in derivative assets, net

     101,867       (20,065 )     68,540       64,537  

Decrease in collection of domestic exchange receivables

     355,273       328,534       198,936       764,687  

Collection of loans to trust accounts

     —         29,869       —         36,748  
    


 


 


 


Net cash used in investing activities

     (1,449,695 )     (2,834,848 )     (3,181,081 )     (10,071,572 )
    


 


 


 


Cash flows from financing activities

                                

(Decrease) increase in deposits, net

     (718,795 )     3,281,589       (2,261,326 )     4,592,498  

(Decrease) increase in borrowings, net

     (2,529,260 )     (415,760 )     473,073       2,637,463  

Increase (decrease) in debentures, net

     3,211,377       (2,024,557 )     475,716       (493,759 )

(Decrease) increase in borrowings from trust accounts

     (216,632 )     192,924       (2,687,207 )     734,550  

Increase in other accounts payable

     410,643       1,702,214       3,610,823       1,536,531  

Increase in advances received from customers

     191,665       483,570       272,337       1,169,615  

(Decrease) increase in guarantee deposits received

     (1,022 )     2,161       (13,666 )     (7,229 )

Increase in domestic exchange payables

     409,113       239,705       174,792       (191,352 )

(Decrease) increase in liabilities incurred by agency relationships

     (558,375 )     (887,284 )     229,331       (50,079 )

Stock options exercised

     —         —         —         (35 )

Sale of treasury stock

     1,441       —         2,234       50  

Decrease in dividend payable

     —         (3 )     —         (325,183 )
    


 


 


 


Net cash provided by financing activities

     200,155       2,574,559       276,107       9,603,070  
    


 


 


 


Net (decrease) increase in cash and cash equivalents

     (13,840 )     802,660       (327,934 )     1,626,112  

Cash and due from banks, beginning of period

     3,457,663       3,924,033       3,771,757       3,100,581  
    


 


 


 


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

     3,443,823       4,726,693       3,443,823       4,726,693  
    


 


 


 


 

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

 

See Report of Independent Accountants

 

6


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 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 Housing and Commercial Bank (“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 has 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 on November 9, 2001. As of June 30, 2004, the Bank’s paid-in capital amounts to (Won)1,681,896 million and 39,723,137 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 1,131 domestic branches and offices (excluding ATMs) and three overseas branches as of June 30, 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. 1~10, No.12 and No.13 (SKFAS No.10, No.12 and No.13 have been effective as of 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 six-month period ended June 30, 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 differ from those estimates.

 

See Report of Independent Accountants

 

7


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 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 June 30, 2004, the Bank has non-accrual loans and securities of (Won)9,994,965 million and (Won)583,068 million, respectively, with related foregone interest of (Won)528,671 million and (Won)170,185 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 neither classified as 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. 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. Otherwise, they 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 the current operations when there is evidence of impairment and recoverable amounts of available-for-sale securities or held-to-maturity securities are less than either 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.

 

The wholly owned beneficiary certificates are each classified based on the Bank’s intention for acquiring the certificates. The fund assets of these wholly owned beneficiary certificates are comprised of deposits, call loans and securities, and the fund income is comprised of interest income, realized gains and losses, and valuation gains and losses. The Bank recorded all gains and losses from these wholly owned beneficiary certificates as income from beneficiary certificates. Accounting policies of these funds that are different from those of the Bank include application of the moving average method for determining the cost of debt securities and amortization of discounts/premiums on debt securities using the straight line method.

 

See Report of Independent Accountants

 

8


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

Investments in Associates

 

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

 

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

 

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

 

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

 

Deferred Loan Origination Fees and Costs

 

The Bank defers loan origination fees associated with originating loans and loan origination costs that have future economic benefits. Loan balances are reported net of these loan origination fees and costs. 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. The credit rating criteria are divided into 12 categories (AAA, AA, A, BBB, BB, BB-, B, B-, CCC, CC, C, D) with consideration of the credit risk of corporate borrowers, which is evaluated based on financial and non-financial risks, and 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 %

 

See Report of Independent Accountants

 

9


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

However, the Bank classifies small-sized corporate loans, consumer loans, and credit card loans by considering the recoverable amounts of loans 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:

 

Credit Risk Classification


   Allowance Rates

 
   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.

 

Troubled Debt Structuring

 

The equity interest in the debtors, net of real estates and/or other assets received as full or partial satisfaction of the Bank’s loans, collected through reorganization proceedings, court mediation, or debt restructuring agreements of parties concerned, are recorded at their fair value at the time of the restructuring. In cases where the fair value of the assets received are less than the book value of the loan (book value before allowances), the Bank offsets the book value against allowances for loans first and then recognizes provisions for loans. Impairment losses for loans, that were restructured in a troubled debt restructuring involving a modification of terms, are computed by getting the difference between the present value of future cash flows under debt restructuring agreements discounted at effective interest rates at the time when loans are originated, and the book value before allowances for loans. If the amount of allowances already established is less than the impairment losses under the workout plans, the Bank establishes additional allowances for the difference. Otherwise, the Bank reverses the allowances for loan losses.

 

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 classified as 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. The accumulated impairment loss is presented as a contra account of tangible assets in the financial statements.

 

See Report of Independent Accountants

 

10


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

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

 

The Bank estimates the useful life of endowment assets, that are beneficial upon usage and are classified under other intangible assets, to be 30 years based on the term of the contract. The Bank records goodwill as a result of the merger with H&CB as the cost of the merger exceeded 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 June 30, 2004, 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.

 

See Report of Independent Accountants

 

11


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

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 under loans as bonds purchased under resale agreements. Securities sold under repurchase agreements are recorded under 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 the resulting unrealized gains and losses are recognized in the 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 the current operations.

 

Cash flow hedge accounting is applied to a derivative instrument with the purpose of hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is recorded as a capital adjustment and the ineffective portion is recognized in the 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 NHF the interest, which is computed by multiplying the average balance of the NHF account by the passbook deposit interest rate.

 

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 six-month period ended June 30, 2004.

 

See Report of Independent Accountants

 

12


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

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 (June 30, 2004: (Won)1,152.5: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.

 

Restatement of Prior Period 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 periods’ net income nor the prior periods’ 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


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

3. Cash and Due from Banks

 

Cash and due from banks as of June 30, 2004 and December 31, 2003 consist of:

 

(in millions of Korean Won)         2004

    2003

 

Cash on hand

                     

Cash in Won

        (Won) 2,600,621     (Won) 2,945,921  

Cash in foreign currencies

          174,415       228,153  
         


 


            2,775,036       3,174,074  
         


 


Due from banks in Won

                     

Bank of Korea

  

Reserve deposits in the Bank of Korea

     4,181,282       2,612,248  
         


 


Other banks

  

Time deposits

     154       810  
    

Passbook deposits

     5,857       8,185  
         


 


            6,011       8,995  
         


 


Other financial institutions

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


 


Others

   Futures margin accounts      23,091       1,560  
     Market participation margin      463       454  
    

KOSPI futures margin accounts

     —         200  
         


 


            23,554       2,214  
         


 


            4,350,847       2,763,457  
    

Present value discounts 1*

     (7,713 )     (12,810 )
         


 


            4,343,134       2,750,647  
         


 


Due from banks in foreign currencies

                     

Bank of Korea

   Demand deposits      44,677       12,415  
         


 


Other banks

   Demand deposits      53,203       71,879  
         


 


Others

   Other deposits      2,767       3,354  
         


 


Off-shore

   Demand deposits      606,175       513,976  
         


 


            706,822       601,624  
         


 


          (Won) 7,824,992     (Won) 6,526,345  
         


 



1* Present value discounts are related to the (Won)140,000 million of time deposits (1% interest, scheduled in installments by the end of 2005) placed with Hansol Mutual Savings & Finance Co., Ltd.(previously, Bukook Mutual Savings & Finance Co., Ltd.).

 

The maturities of the due from banks as of June 30, 2004 are as follows:

 

(in millions of Korean Won)    Due from Banks
in Won


   Due from Banks in
Foreign Currencies


   Total

Due in 3 months or less

   (Won) 4,210,847    (Won) 571,002    (Won) 4,781,849

Due after 3 months through 6 months

     50,000      119,860      169,860

Due after 6 months through 1 year

     45,000      15,960      60,960

Due after 1 year through 2 years

     45,000      —        45,000
    

  

  

     (Won) 4,350,847    (Won) 706,822    (Won) 5,057,669
    

  

  

 

See Report of Independent Accountants

 

14


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

Included in cash and due from banks as of June 30, 2004 are the following restricted deposits:

 

(in millions of Korean Won)    Amount

    Restrictions

Reserve deposits in the Bank of Korea

   (Won) 4,181,282     General Banking Act

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

     140,000     Withdrawal at maturity

Due from banks in foreign currency

     44,677     General Banking Act

Other deposits

     22,923     Futures guarantee deposits
    


   
       4,388,882      

Present value discounts

     (7,713 )    
    


   
     (Won) 4,381,169      
    


   

 

4. Securities

 

Securities as of June 30, 2004 and December 31, 2003 consist of:

 

(in millions of Korean Won)    2004

   2003

Trading

   (Won) 4,422,054    (Won) 4,482,948

Available-for-sale

     13,962,139      15,894,974

Held-to-maturity

     5,594,944      5,979,341

Investment in associates

     567,672      551,199
    

  

     (Won) 24,546,809    (Won) 26,908,462
    

  

 

Trading, available-for-sale, and held-to-maturity securities as of June 30, 2004 and December 31, 2003 consist of:

 

(in millions of Korean Won)    Unrealized

   Book Value

Trading


   Gain

   Loss

   2004

   2003

Equity securities

   (Won) 5,302    (Won) 1,591    (Won) 125,300    (Won) 113,171

Beneficiary certificates

     36      373      569,458      1,686,754

Government and municipal bonds

     5,767      42      1,319,551      1,076,427

Corporate bonds

     9,002      418      2,308,554      1,365,060

Asset-backed securities

     322      —        99,191      241,536
    

  

  

  

     (Won) 20,429    (Won) 2,424    (Won) 4,422,054    (Won) 4,482,948
    

  

  

  

 

(in millions of Korean Won)    Impairment

   Capital Adjustments

   Book Value

Available-for-Sale


   Reversal

   Loss

   Gain

   Loss

   2004

   20031*

Equity securities

   (Won) —      (Won) 22,230    (Won) 145,616    (Won) 10,068    (Won) 531,443    (Won) 439,791

Investment in funds

     —        2      3,153      —        4,663      30,872

Beneficiary certificates

     —        —        30,255      41      4,476,604      4,375,817

Government and municipal bonds

     —        —        7,616      613      784,294      2,322,889

Foreign government bonds

     —        —        1,719      148      26,122      28,153

Corporate bonds

     —        2,077      53,805      3,482      7,542,268      8,228,640

Asset-backed securities

     —        35,450      1,206      —        596,723      468,669

Other debt securities

     —        —        —        —        22      143
    

  

  

  

  

  

     (Won) —      (Won) 59,759    (Won) 243,370    (Won) 14,352    (Won) 13,962,139    (Won) 15,894,974
    

  

  

  

  

  

 

See Report of Independent Accountants

 

15


Table of Contents

Kookmin Bank

Notes to Non-Consolidated Financial Statements

June 30, 2004 and 2003, and December 31, 2003

(Unaudited)


 

(in millions of Korean Won)    Impairment

   Unrealized Holding

   Book Value

Held-to-Maturity    Reversal of

   Loss

   Gain

   Loss

   2004

   2003

Government and municipal bonds

   (Won) —      (Won) —      (Won) 98,160    (Won) 1,172    (Won) 2,472,319    (Won) 2,489,998

Corporate bonds

     —        —        72,838      537      2,840,269      3,163,020

Asset-backed securities

     —        —        6,928      —        263,199      326,323

Other securities

     —        —        —        7      19,157      —  
    

  

  

  

  

  

     (Won) —      (Won) —      (Won) 177,926    (Won) 1,716    (Won) 5,594,944    (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)

 

As of June 30, 2004 and December 31, 2003, investments in associates include:

 

(in millions of Korean Won)   

Owner-

ship (%)


  

Acquisition
Cost


  

Beginning
Balance1*


   Equity Method2*

    Book Value

Domestic Associates             N/I

    R/E

    C/A

    2004

   2003

KB Investment Co., Ltd. 3*

   99.89    (Won) 155,311    (Won) 75,932    (Won) (1,453 )   (Won) —       (Won) (273 )   (Won) 74,206    (Won) 77,273

KB Data Systems Co., Ltd.4*

   99.98      7,998