Form 6-K
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


Form 6-K

 


REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2007

 


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

Index

 

1. Summary of Business Report for Fiscal Year 2006    4
2. Exhibit 99.1-Kookmin Bank and Its Subsidiaries Consolidated Audit Report 2006   

 

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Table of Contents

TABLE OF CONTENTS

 

1.

  

Introduction to the Bank

   5

1.1.

   Business Purposes    5

1.2.

   History    5

1.3.

   Capital Structure    7

1.4.

   Dividend    8

2.

   Business    9

2.1.

   Source and Use of Funds    9

2.2.

   Principal Banking Activities    12

2.3.

   Branch Networks    16

2.4.

   Other Information for Investment Decision    17

3.

   Financial Information    19

3.1.

   Non-Consolidated Condensed Financial Statements    19

3.2.

   Other Financial Information    19

4.

   Independent Public Accountant    20

4.1.

   Audit & Audit related Fees    20

4.2.

   Non-Audit Services    20

5.

   Corporate Governance and Affiliated Companies    21

5.1.

   Board of Directors & Committees under the Board    21

5.2.

   Audit Committee    21

5.3.

   Compensation to Directors    22

5.4.

   Affiliated Companies    29

6.

   Directors, Senior Management and Employees    30

6.1.

   Executive Directors    30

6.2.

   Non-Executive Directors    30

6.3.

   Senior Management    31

6.4.

   Employees    31

7.

   Major Stockholders and Related Party Transactions    32

7.1.

   Major Stockholders    32

7.2.

   Investments in Affiliates    33

7.3.

   Related Party Transactions    34

 

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Table of Contents

Summary of 2006 Business Report for Fiscal Year 2006

On March 30, 2007, Kookmin Bank filed its business report for fiscal year 2006 (the “Business Report”) with the Financial Supervisory Commission of Korea and the Korea Exchange. This is a summary of the Business Report translated into English.

Financial information contained in this summary (and in the attached audit report) have been prepared in accordance with generally accepted accounting principles in Korea, which differ in certain important respects from generally accepted accounting principles in the United States.

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” in this document are to the currency of the Republic of Korea.

 

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Table of Contents

1. Introduction to the Bank

1.1. Business Purposes

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

 

  n The banking business as prescribed by the Banking Act,

 

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

 

  n The credit card business as prescribed by the Specialized Credit Financial Business Act, and

 

  n Other businesses permitted by other relevant Korean laws and regulations

1.2. History

 

  n November 1, 2001

Incorporated and listed on the New York Stock Exchange

 

  n November 9, 2001

Listed on the Korea Stock Exchange

 

  n September 23, 2002

Integrated IT platforms of old Kookmin Bank and H&CB

 

  n December 4, 2002

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

 

  n September 30, 2003

Completed the merger with Kookmin Credit Card

 

  n December 16, 2003

Completed a strategic investment in Bank Internasional Indonesia (BII) by investing in a 25% stake in Sorak Financial Holdings, a consortium with other investors

 

  n December 19, 2003

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

 

  n April 29, 2004

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

 

  n July 22, 2004

Entered into an alliance with China Construction Bank in connection with the foreign currency business

 

  n August 31, 2004

ING Bank N.V. Amsterdam entered into a contract with KB for a strategic investment in KB Life Insurance

 

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Table of Contents
  n October 29, 2004

Appointed Mr. Chung Won Kang as the President & CEO in an extraordinary general shareholders’ meeting

 

  n December 31, 2004

The largest shareholder of Kookmin Bank changed from ING Bank N.V. Amsterdam to Euro-Pacific Growth Fund

 

  n January 01, 2005

Integrated three labor unions (former Kookmin Bank, former H&CB, former Kookmin Credit Card) into a single KB labor union

 

  n March 02, 2005

Opened LOGO KB Satellite Broad Casting System LOGO for the first time in Korea

 

  n March 21, 2005

The largest shareholder of Kookmin Bank changed from Euro-Pacific Growth Fund to ING Bank N.V. Amsterdam

 

  n June 16, 2005

Disposed of 27,423,761 shares of treasury stock by means of a combination of domestic over-the-counter-sales and an international issuance of depository receipts

 

  n July 26, 2005

Obtained an approval from FSS to use the Market Risk Internal Model for the first time among domestic financial institutions

 

  n October 14, 2005

The largest shareholder of Kookmin Bank changed from ING Bank N.V. Amsterdam to Euro-Pacific Growth Fund

 

  n February 2, 2006

Established the “Basel II system to calculate credit risk weighted asset and New BIS Capital adequacy ratio” for the first time among domestic financial institutions

 

  n March 24, 2006

Selected as the preferred bidder for the acquisition of Korea Exchange Bank

 

  n April 3, 2006

Established 100% computerization of bank accounts for the first time among domestic financial institutions

 

  n May 19, 2006

Entered into a share purchase agreement with respect to acquiring Korea Exchange Bank stock

 

  n September 8, 2006

Implemented SOD (Segregation of Duties)

 

  n November 23, 2006

Received termination notice with respect to Share Purchase Agreement relating to purchase of shares of Korea Exchange Bank

 

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Table of Contents

1.3. Capital Structure

1.3.1. Common Shares

Kookmin Bank has the 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 Kookmin Bank’s issued and outstanding shares of common stock. Upon completion of the merger between the former Kookmin Bank and H&CB, Kookmin Bank issued 299,697,462 common shares.

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

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 respect to the merger between Kookmin Bank and Kookmin Credit Card on September 30, 2003, Kookmin Bank issued an additional 8,120,431 common shares on October 1, 2003. Accordingly, as of December 31, 2006, a total of 336,379,116 common shares were issued.

 

Number of Shares      

(Unit: shares)

 

      Type
      Common Stock    Total

Share Issued (A)

   336,379,116    336,379,116

Treasury Stock (B)

   —      —  

Share Outstanding (A-B)

   336,379,116    336,379,116

 

Capital Increase               

(Unit: Won, shares)

 

Issue Date

   Type    Number    Face Value    Issue Price   

Remarks

2001.10.31

   Common Stock    299,697,462    5,000    —      M&A into a new entity

2002.3.22

   Common Stock    17,979,954    5,000    5,000    Stock dividend

2002.11.30

   Common Stock    10,581,269    5,000    22,124    CB conversion

2003.10.01

   Common Stock    8,120,431    5,000    38,100    M&A with KCC

1.3.2. Treasury Stock

(Unit: shares)

 

Date

  

Details

   Number of shares

December 31, 2005

   Outstanding Treasury Shares    217,935

January 13, 2006

   Disposition due to exercise of stock option by grantees    217,935

December 31, 2006

   Outstanding Treasury Shares    0

 

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Table of Contents

1.3.3. Employee Stock Ownership Association

(Unit: shares)

 

Type

  

Beginning
Balance

(January 1,

2006)

   Increase    Decrease   

Ending

Balance

(December 31,

2006)

   Remarks

Registered common stock

   2,868,596    —      78,317    2,790,279    —  

Total

   2,868,596    —      78,317    2,790,279    —  

1.4. Dividend

The following table shows our dividend related information for the last three years. The Board of Directors of Kookmin Bank passed a resolution to pay a dividend for fiscal year of 2006, and shareholders of Kookmin Bank approved of the dividend payout for that year at the general shareholders’ meeting held on March 23, 2007

(Unit: in millions of Won unless indicated otherwise)

 

     2006     2005    2004

Net (loss) income for the period

   2,472,111     2,252,218    360,454

Diluted (loss) earnings per share (Won)

   7,349 1   6,977    1,176

Total dividend amount

   1,227,784     184,889    168,574

Dividend payout ratio (%)

   49.67 2   8.21    46.77

Cash dividend per common share (Won)

   3,650     550    550

Stock dividend per common share (%)

   —       —      —  

Dividend per preferred share (Won)

   —       —      —  

Dividend yield ratio (%)

   4.90 3   0.72    1.42

1

Earnings per share = net income (2,472,111,192,678 Won) / weighted average number of shares (336,373,095 shares).

2

Dividend payout ratio = total dividend amount for common shares (1,227,783,773,400 Won) / net income (2,472,111,192,678 Won).

3

Dividend yield ratio = dividend per share (3,650 Won) / average closing price for a week based on business day prior to market closing date of December 31, 2006 (74,525 Won).

 

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Table of Contents

2. Business

2.1. Source and Use of Funds

2. 1. 1. Source of Funds

[Bank Account]

(Unit: in millions of Won)

 

     December 31, 2006    December 31, 2005    December 31, 2004
  

Average

balance

  

Interest

rate (%)

  

Average

balance

  

Interest

rate (%)

  

Average

balance

  

Interest

rate (%)

Won currency

                 

Deposits

   111,324,234    2.91    114,394,983    2.82    118,017,849    3.29

Certificate of deposit

   8,408,753    4.53    5,008,378    3.69    6,108,179    4.06

Borrowings

   2,533,547    3.36    2,674,268    3.02    3,053,890    3.43

Call money

   2,300,768    4.09    931,968    3.24    1,117,576    3.55

Other

   28,332,243    5.13    24,315,388    5.08    23,376,439    5.61
                             
Subtotal    152,899,545    3.43    147,324,985    3.23    151,673,933    3.68
                             

Foreign currency

                 

Deposits

   1,489,895    2.37    1,473,811    1.61    1,777,402    0.61

Borrowings

   3,635,918    3.41    3,231,480    2.06    2,796,300    0.94

Call money

   527,600    4.74    285,573    3.48    145,809    1.43

Finance debentures issued

   1,530,941    4.49    765,723    4.09    824,745    2.28

Other

   59,296    —      52,592    —      40,383    —  
                             
Subtotal    7,243,650    3.50    5,809,179    2.26    5,584,639    1.04
                             
Other                  

Total Shareholders Equity

   14,251,498    —      11,369,246    —      9,284,477    —  

Allowances

   1,004,895    —      677,036    —      459,124    —  

Other

   11,935,765    —      12,041,392    —      12,773,040    —  
                             
Subtotal    27,192,158    —      24,087,674    —      22,516,641    —  
                             

Total

   187,335,353    2.94    177,221,838    2.76    179,775,213    3.14
                             

 

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Table of Contents

2. 1. 2. Use of Funds

[Bank Account]

(Unit: in millions of Won)

 

     December 31, 2006    December 31, 2005    December 31, 2004
  

Average

balance

  

Interest

rate (%)

  

Average

balance

  

Interest

rate (%)

  

Average

balance

  

Interest

rate (%)

Won currency

                 

Due from banks

   190,902    3.66    304,662    2.97    184,593    0.83

Securities

   31,437,266    4.25    27,676,964    4.58    23,930,678    5.14

Loans

   120,688,857    6.44    120,539,476    6.24    125,504,672    6.64

Advances for customers

   13,122    2.27    23,947    8.64    71,213    2.01

Call loan

   823,293    4.25    1,473,725    3.43    1,661,772    3.78

Private placement corporate bonds

   5,702,726    5.43    1,887,514    6.95    1,322,470    6.58

Credit card accounts

   7,855,415    24.46    7,321,906    26.93    9,581,330    26.80

Other

   328,681    —      267,061    —      172,783    —  

Allowance for credit losses ( - )

   -2,377,086    —      -3,034,841    —      -3,844,940    —  
                             

Subtotal

   164,663,176    6.96    156,460,414    7.06    158,584,571    7.81
                             

Foreign currency

                 

Due from banks

   486,764    4.31    598,015    2.88    632,526    1.34

Securities

   793,181    6.78    858,565    6.15    1,208,124    3.88

Loans

   6,561,903    4.06    4,745,013    2.97    4,011,351    2.73

Call loan

   261,483    4.77    132,210    3.24    114,606    1.63

Bills bought

   1,326,578    5.51    1,037,144    4.64    568,502    4.07

Other

   1,798    —      2,209    —      4,812    —  

Allowance for credit losses ( - )

   -65,952    —      -64,290    —      -94,501    —  
                             

Subtotal

   9,365,755    4.61    7,308,866    3.68    6,445,420    3.03
                             

Other

                 

Cash

   966,002    —      956,471    —      965,852    —  

Fixed assets held for business

   2,397,111    —      2,508,879    —      3,084,589    —  

Other

   9,943,309    —      9,987,208    —      10,694,781    —  
                             

Subtotal

   13,306,422    —      13,452,558    —      14,745,222    —  
                             

Total

   187,335,353    6.35    177,221,838    6.38    179,775,213    7.00
                             

 

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Table of Contents

2.1.3. Fee Transactions

(Unit: in millions of Won)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Fee Revenue (A)

  
Won currency         

Guarantees

   6,245    5,336    4,957

Commissions received

   950,789    804,933    776,852

Credit card

   129,615    104,930    64,724

National Housing Fund Mgt.

   171,811    179,540    160,874
              
Foreign currency         

Guarantees

   5,662    4,227    2,593

Others

   77,673    78,716    75,016
              
Subtotal    1,341,795    1,177,682    1,085,016
              
Fee Expense (B)   
Won & foreign currency         

Commissions paid in Won

   178,499    119,539    98,392

Credit card

   254,041    210,315    352,194

Others

   31,860    22,692    20,169
              
Subtotal    464,400    352,546    470,755
              
Fee Income (A-B)    877,395    825,136    614,261
              

 

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Table of Contents

2.2. Principal Banking Activities

2.2.1. Deposits

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

(Unit: in millions of Won)

 

     December 31, 2006    December 31, 2005    December 31, 2004
     Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Deposits in Won

                 

Demand deposits

   16,896,730    20,179,569    14,985,812    17,946,067    12,994,946    14,338,784

Time & savings deposits

   89,613,715    91,155,183    92,463,027    91,863,790    96,637,551    94,723,601

Mutual installment deposits

   4,302,015    3,833,573    5,674,807    5,120,668    6,682,928    6,306,923

Mutual installment for housing

   4,221,249    3,842,727    4,942,334    4,582,031    5,453,713    5,295,274

Certificate of deposit

   8,408,753    9,579,701    5,008,378    5,389,543    6,108,179    4,911,891
                             

Subtotal

   123,442,462    128,590,753    123,074,358    124,902,099    127,877,317    125,576,473
                             

Deposits in foreign currency

   1,489,895    1,427,557    1,473,811    1,379,133    1,777,402    1,434,061
                             

Trust deposits

                 

Money trust

   9,047,669    9,627,037    7,114,352    7,405,675    7,701,447    7,028,835

Property trust

   8,491,099    6,631,376    11,032,320    9,854,012    16,297,382    12,534,329
                             

Subtotal

   17,538,768    16,258,413    18,146,672    17,259,687    23,998,829    19,563,164
                             

Total

   142,471,125    146,276,723    142,694,841    143,540,919    153,653,548    146,573,698
                             

2.2.2. Average Deposit per Domestic Branch

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

(Unit: in millions of Won)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Deposits

   124,123    123,532    123,945

Deposits in Won

   122,904    122,358    122,585

 

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Table of Contents

2.2.3. Average Deposit per Employee

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

(Unit: in millions of Won)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Deposits

   7,799    7,725    7,232

Deposits in Won

   7,722    7,652    7,152

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)

 

     December 31, 2006    December 31, 2005    December 31, 2004
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Loans in Won

   120,680,825    125,574,817    120,532,216    118,565,341    125,496,237    122,721,898

Loans in foreign currency

   6,561,903    7,261,811    4,745,013    5,314,883    4,011,351    3,860,828

Advances for customers

   13,122    19,209    23,947    11,321    73,801    32,120
                             

Subtotal

   127,255,850    132,855,837    125,301,176    123,891,545    129,581,389    126,614,846
                             

Trust account loans

   351,880    403,552    334,404    328,127    429,054    361,906
                             

Total

   127,607,730    133,259,389    125,635,580    124,219,672    130,010,443    126,976,752
                             

2.2.5. Loan Balances as of December 31, 2006 by Maturity

(Unit: in millions of Won)

 

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

Loans in Won

   60,010,249    21,902,081    7,246,749    36,415,738    125,574,817

Loans in foreign currency

   4,509,568    1,524,912    848,196    379,135    7,261,811

 

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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)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Loans to enterprise         

Loans for operations

   33,054,421    30,498,328    31,678,117

Loans for facility

   6,103,249    5,073,050    6,286,747
Loans to households    46,509,920    42,771,264    42,790,337
Loans to public sector & others         

Loans for operations

   894,178    643,141    673,456

Loans for facility

   3,687    34,157    40,383
Loans on property formation savings    1,013    6,748    9,719
Loans for housing    39,007,176    39,535,441    41,234,086
Inter-bank loans    —      1,274    6,114
Others    1,173    1,938    2,939
              
Total    125,574,817    118,565,341    122,721,898
              

2.2.7. Loan to Deposit Ratio1

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

(Unit: in millions of Won, %)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Loans (A)

   120,680,825    120,532,216    125,496,237

Deposits (B)

   123,442,462    123,074,358    127,877,317
              

Loan to deposit ratio (A/B)

   97.76    97.93    98.14
              

2.2.8. Guarantees

(Unit: in millions of Won)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Determined

   2,704,307    1,789,560    975,788

Contingent

   2,304,434    1,972,192    1,311,774
              

Total

   5,008,741    3,761,752    2,287,562
              

1

Average balance of loans in Won / (average balance of deposits in Won + average balance of certificate of deposits)

 

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Table of Contents

2.2.9.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)

 

     December 31, 2006    December 31, 2005    December 31, 2004
     Average
balance
   Ending
balance
   Average
balance
   Ending
balance
   Average
balance
   Ending
balance

Securities in Won (Banking account)

                 

Monetary stabilization bonds

   11,803,683    8,534,765    10,667,229    11,570,306    7,150,535    10,524,835

Government and public bonds

   10,035,180    10,117,416    6,950,886    8,933,401    4,753,135    4,675,093

Debentures

   11,847,016    14,140,083    7,334,555    9,184,403    7,013,765    6,152,749

Stocks

   1,575,806    2,515,385    1,243,781    1,707,816    1,003,131    1,282,050

Others

   1,878,308    744,895    3,368,027    2,105,354    5,332,583    5,583,538
                             

Subtotal

   37,139,993    36,052,544    29,564,478    33,501,280    25,253,149    28,218,265
                             

Securities in Won (Trust account)

                 

Monetary stabilization bonds

   1,247,444    1,524,511    999,522    981,949    1,222,004    1,152,621

Government and public bonds

   1,090,228    1,216,613    993,450    1,013,355    922,790    837,080

Debentures

   1,937,309    1,815,093    1,979,588    2,017,298    2,363,630    2,312,459

Stocks

   756,900    769,212    514,568    542,731    564,538    510,650

Others

   3,837,714    2,873,202    2,745,143    3,311,235    2,101,832    2,324,393
                             

Subtotal

   8,869,595    8,198,631    7,232,271    7,866,568    7,174,794    7,137,203
                             

Securities in foreign currency (Trust Account)

   110,472    32,661    289,665    184,115    662,549    449,415
                             

Securities in foreign currency (Banking account)

                 

Foreign securities

   559,343    613,078    579,561    525,892    894,722    745,352

Off-shore foreign securities

   233,838    216,066    279,003    252,994    313,402    205,455
                             

Subtotal

   793,181    829,144    858,565    778,886    1,208,124    950,807
                             

Total

   46,913,241    45,112,980    37,944,979    42,330,849    34,298,616    36,755,690
                             

2.2.10. Trust Account

(Unit: in millions of Won)

 

     December 31, 2006    December 31, 2005    December 31, 2004
     Average
amount trusted
   Trust
fees
   Average
amount trusted
   Trust
fees
   Average
amount trusted
   Trust
fees

Return-guaranteed trust

   325    11,295    335    43,088    369    8,365

Performance trust

   17,538,443    67,209    18,146,337    77,756    23,998,460    93,856
                             

Total

   17,538,768    78,504    18,146,672    120,844    23,998,829    102,221
                             

 

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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
     December 31, 2006    December 31, 2005    December 31, 2004

Number of card holders (Person)

        

Corporate

   173,190    159,047    182,109

Individual

   8,883,738    9,342,552    11,362,173
              

Number of merchants

   1,610,446    1,506,979    1,491,730
              

Sales volume1

   63,929,192    62,475,085    66,918,805

Fee revenue

   2,189,014    2,090,253    2,807,557
              

2.3. Branch Networks

As of December 31, 2006, we have 1,071 branches and 62 sub-branches in Korea, the largest number of branches among Korean commercial banks. 441 of our branches are located in Seoul.

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

 


1

Includes lump-sum & installment purchase, cash advances, check card & purchasing card transactions

 

16


Table of Contents

2.4. Other Information for Investment Decision

2.4.1. BIS Risk-adjusted Capital Ratios

(Unit: in millions of Won, %)

 

     December 31,
2006
   December 31,
2005
   December 31,
2004

Risk-adjusted capital (A)

   18,751,151    15,682,535    13,334,531

Risk-weighted assets (B)

   132,373,478    121,072,676    121,081,735

BIS ratios (A/B)

   14.17    12.95    11.01

2.4.2. Non-Performing Loans1

(Unit: in millions of Won unless indicated otherwise)

 

December 31, 2006     December 31, 2005     Change  
Amount  

NPL to

total loans

    Amount  

NPL to

total loans

    Amount  

NPL to

total loans

 
1,295,915   0.85 %   1,946,362   1.42 %   -650,447   -0.57 %p
                           

2.4.3. Loan Loss Allowances

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

(Unit: in millions of Won)

 

    

December 31,

2006

  

December 31,

2005

  

December 31,

2004

Loan losses allowance

        

Domestic

   2,458,306    2,496,655    3,181,433

Foreign

   4,772    4,122    4,662

Total

   2,463,079    2,500,777    3,186,095
              

Write-Off

   1,693,468    1,978,875    3,382,130
              

1

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

 

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Table of Contents

2.4.4. Changes of Loan Loss Allowances for Recent Three Years1

(Unit: in millions of Won)

 

    

December 31,

2006

   

December 31,

2005

   

December 31,

2004

 

Beginning balance

   2,453,275     3,118,775     3,910,044  
                  

Net Write-Off

   (1,034,059 )   (1,726,632 )   (3,859,517 )

Write-Off

   (1,680,331 )   (2,002,336 )   (3,382,130 )

Recovery

   474,278     452,235     286,464  

Other

   171,994     (176,531 )   (763,851 )
                  

Provision for loan losses

   941,651     1,061,132     3,068,248  
                  

Ending balance

   2,360,867     2,453,275     3,118,775  
                  

 


1

Loan loss allowance includes present value discounts and excludes allowance for other assets.

 

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Table of Contents

3. Financial Information

3.1. Non-Consolidated Condensed Financial Statements

(Unit: in millions of Won)

 

    

As of or for the year ended

December 31, 2006

  

As of or for the year ended

December 31, 2005

Cash and due from banks

   6,568,306    5,867,417

Securities

   29,382,480    30,550,299

Loans

   149,867,182    135,738,407

Fixed assets

   2,509,374    2,436,702

Other assets

   6,879,139    5,000,824
         

Total assets

   195,206,481    179,593,649
         

Deposits

   130,019,916    126,281,232

Borrowings

   14,060,178    13,737,336

Debentures

   24,982,506    16,547,987

Other liabilities

   11,088,924    10,653,494
         

Total liabilities

   180,151,524    167,220,049
         

Capital stocks

   1,681,896    1,681,896

Capital surplus

   6,258,297    6,254,786

Retained earnings

   6,215,222    3,929,948

Capital adjustments

   899,542    506,970
         

Total shareholders’ equity

   15,054,957    12,373,600
         

Liabilities and Shareholders’ Equity

   195,206,481    179,593,649
         

Operating revenue

   19,308,604    17,855,258

Operating income

   3,071,715    3,015,822

Continuing (loss) income before

income taxes

   3,424,086    3,228,253

Net (loss) income

   2,472,111    2,252,218
         

3.2. Other Financial Information

See the Exhibit 99.1 Kookmin Bank Audit Report by our independent auditors for our full- financial statements and relevant notes. The Audit Report will also be available at our website www.kbstar.com.

 

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Table of Contents

4. Independent Public Accountant

4.1. Audit & Audit related Fees

Deloitte Anjin LLC has reviewed our financial statements for fiscal year 2006. The aggregate contract fee for the audit and review fees for the year 2006 is 1,350 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.

(Unit: in millions of Won unless indicated otherwise)

 

Year

       

Service description

   Amount of payment
2006   

-

   Issuance of comfort letter   
   -    Confirmation of BIS ratio and confirmation affirming that Kookmin Bank is not a Non-Financial    40
      Operator    10
          
2005    -    LOC (Letter of Comfort)    30
          
2004    -    Tax compliance    230
          
   -    Due Diligence regarding the possible acquisition of DITC/ KITC    300
          
   -    US GAAP calculation of provision for the third quarter of 2004    100
          
   -    US GAAP conversion for 2004    USD 3,600 thousand
          

 

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Table of Contents

5. Corporate Governance and Affiliated Companies

5.1. Board of Directors & Committees under the Board

The board of directors, currently consisting of executive directors and non-executive directors, holds regular meetings quarterly. Additional extraordinary meetings may also be convened at the request of any director or any committee that serves under the board of directors.

The board of directors resolves following matters:

 

  n Matters relating to general meeting of shareholders

 

  n Matters relating to general management

 

  n Matters relating to organization and directors of the company

 

  n Matters relating to funding and capital

 

  n Other related matters

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

 

  n The Board Steering Committee

 

  n The Management Strategy Committee

 

  n The Risk Management Committee

 

  n The Audit Committee

 

  n The Evaluation & Compensation Committee

 

  n The Non Executive Director Nominating Committee

For the 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 meeting of shareholders 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 shareholders. The committee holds regular meetings every quarter and as-needed basis.

 

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Table of Contents

5.3. Compensation to Directors

5.3.1. Compensation to Directors

The following table shows information regarding the remuneration paid to the Directors in 2006.

(Unit: in millions of Won)

 

    

The aggregate
remuneration paid

(From Jan to Dec)

   Limit for the remuneration
resolved by shareholders’
meeting (For the year 2006)
  

Average amount of the
payment per person

(From Jan to Dec)

1) Executive Directors

(Except Chief Audit Executive and Non-executive Directors)

   3,242       1,081

2) Non-executive Directors

(Except members of Audit Committee)

   325    8,000    65

3) Members of Audit Committee

(Including Chief Audit Executive)

   976       221
              

Total

   4,543    8,000    351
              

 

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Table of Contents

5.3.2. Stock Option

The following table is the breakdown of stock options Kookmin Bank has granted to the directors and employees as of December 31, 2006.

(Unit: in Won, shares)

 

Grant date

 

Name of the grantee

  

Position when granted

   Exercise period    Exercise
price
  

Number

of granted

options1

  

Number of

exercised

options

  

Number of

exercisable

options

        From    To            

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

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

28-Feb-00

  Hack Yeon Jeong    Employee    01-Mar-03    28-Feb-06    27,600    10,000    10,000    0

28-Feb-00

  Jong Hwan Byun    Employee    01-Mar-03    28-Feb-06    27,600    10,000    10,000    0

28-Feb-00

  Sam Yung Lee    Employee    01-Mar-03    28-Feb-06    27,600    6,821    6,821    0

28-Feb-00

  Won Gi Kim    Employee    01-Mar-03    28-Feb-06    27,600    6,821    6,821    0

15-Mar-01

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

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

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

15-Mar-01

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

15-Mar-01

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

15-Mar-01

  Jong Min Lee    Chief Audit Executive    16-Mar-04    15-Mar-09    28,027    14,807    2,807    12,000

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

  Duk Hyun Kim    Executive Vice President    16-Mar-04    15-Mar-09    28,027    11,845    2,845    9,000

15-Mar-01

  Byung Sang Kim    Executive Vice President    16-Mar-04    15-Mar-09    28,027    11,845    5,845    6,000

15-Mar-01

  Byung Jin Kim    Executive Vice President    16-Mar-04    15-Mar-09    28,027    11,845    9,845    2,000

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

  Ok Hyun Yoon    Executive Vice President    16-Mar-04    15-Mar-09    28,027    11,845    7,845    4,000

15-Mar-01

  Dong Soon Park    Employee    16-Mar-04    15-Mar-09    28,027    2,961    2,961    0

15-Mar-01

  Hoo Sang Jang    Employee    16-Mar-04    15-Mar-09    28,027    2,961    0    2,961

15-Mar-01

  Sang Hoon Lee    Employee    16-Mar-04    15-Mar-09    28,027    2,961    1,961    1,000

15-Mar-01

  Jae In Suh    Employee    16-Mar-04    15-Mar-09    28,027    2,961    0    2,961

15-Mar-01

  Sung Hyun Chung    Employee    16-Mar-04    15-Mar-09    28,027    2,961    0    2,961

15-Mar-01

  Jong Hwa Lee    Employee    16-Mar-04    15-Mar-09    28,027    2,961    1,461    1,500

15-Mar-01

  Sang Won Lee    Employee    16-Mar-04    15-Mar-09    28,027    2,961    0    2,961

15-Mar-01

  Yun Keun Jung    Employee    16-Mar-04    15-Mar-09    28,027    592    592    0

15-Mar-01

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

15-Mar-01

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

15-Mar-01

  Jeong Haing Lee    Employee    16-Mar-04    15-Mar-09    28,027    592    0    592

15-Mar-01

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

15-Mar-01

  Jang Hwan Bae    Employee    16-Mar-04    15-Mar-09    28,027    592    592    0

15-Mar-01

  Si An Her    Employee    16-Mar-04    15-Mar-09    28,027    370    0    370

15-Mar-01

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

15-Mar-01

  Yong Soo Shin    Employee    16-Mar-04    15-Mar-09    28,027    370    0    370

15-Mar-01

  Jun Bo Cho    Employee    16-Mar-04    15-Mar-09    28,027    592    592    0

15-Mar-01

  Byong Doo Ahn    Employee    16-Mar-04    15-Mar-09    28,027    592    592    0

15-Mar-01

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

15-Mar-01

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

 


1

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

 

23


Table of Contents

Grant date

  

Name of the grantee

  

Position when granted

  

Exercise period

  

Exercise

price

  

Number

of granted

options1

  

Number of

exercised

options

  

Number of

exercisable

options

        

From

   To            

15-Mar-01

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

15-Mar-01

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

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

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

22-Mar-01

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

22-Mar-01

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

24-Mar-01

   Jae Kyu Lee    Non Executive Director    25-Mar-04    24-Mar-07    25,100    2,318    1,518    800

24-Mar-01

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

24-Mar-01

   Jong In Park    Executive Vice President    25-Mar-04    24-Mar-07    25,100    19,333    11,500    7,833

24-Mar-01

   Gyu Ho Lee    Employee    25-Mar-04    24-Mar-07    25,100    3,275    3,275    0

16-Nov-01

   Sang Hoon Kim    Chairman    17-Nov-04    16-Nov-09    51,200    150,000    0    150,000

16-Nov-01

   Jung Tae Kim    President & CEO    17-Nov-04    16-Nov-09    51,200    500,000    500,000    0

22-Mar-02

   Sun Jin Kim    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,000    0    3,000

22-Mar-02

   Ji Hong Kim    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,321    0    3,321

22-Mar-02

   Keun Shik Oh    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,321    421    2,900

22-Mar-02

   Kyung Hee Yoon    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,000    0    3,000

22-Mar-02

   Choul Ju Lee    Chief Audit Executive    23-Mar-05    22-Mar-10    57,100    9,963    9,963    0

22-Mar-02

   Dong Soo Chung    Non Executive Director    23-Mar-05    22-Mar-10    57,100    10,000    0    10,000

22-Mar-02

   Moon Soul Chung    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,000    3,000    0

22-Mar-02

   Henry Cornell    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,321    0    3,321

22-Mar-02

   Timothy Hartman    Non Executive Director    23-Mar-05    22-Mar-10    57,100    3,321    0    3,321

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

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

22-Mar-02

   Ki Sup Shin    Executive Vice President    23-Mar-05    22-Mar-10    57,100    26,405    2,405    24,000

22-Mar-02

   Jong Kyoo Yoon    Executive Vice President    23-Mar-05    22-Mar-10    57,100    20,522    0    20,522

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

   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    3,339    10,000

22-Mar-02

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

22-Mar-02

   Jong Young Yoon    Employee    23-Mar-05    22-Mar-10    57,100    14,712    5,000    9,712

22-Mar-02

   Jae Il Song    Employee    23-Mar-05    22-Mar-10    57,100    9,762    0    9,762

22-Mar-02

   Hyung Goo Sim    Employee    23-Mar-05    22-Mar-10    57,100    14,712    0    14,712

22-Mar-02

   Jeong Haing Lee    Employee    23-Mar-05    22-Mar-10    57,100    9,762    0    9,762

22-Mar-02

   Joon Sup Chang    Employee    23-Mar-05    22-Mar-10    57,100    9,762    0    9,762

22-Mar-02

   Young No Lee    Employee    23-Mar-05    22-Mar-10    57,100    14,712    0    14,712

22-Mar-02

   Dong Soon Park    Employee    23-Mar-05    22-Mar-10    57,100    5,000    5,000    0

22-Mar-02

   Sung Bin Kim    Employee    23-Mar-05    22-Mar-10    57,100    9,762    0    9,762

22-Mar-02

   Sung Bok Park    Employee    23-Mar-05    22-Mar-10    57,100    14,712    0    14,712

22-Mar-02

   Yun Keun Jung    Employee    23-Mar-05    22-Mar-10    57,100    15,000    0    15,000

22-Mar-02

   Man Soo Song    Employee    23-Mar-05    22-Mar-10    57,100    9,762    0    9,762

22-Mar-02

   Jeong Young Kim    Employee    23-Mar-05    22-Mar-10    57,100    5,000    0    5,000

22-Mar-02

   Hack Yeon Jeong    Employee    23-Mar-05    22-Mar-10    57,100    5,000    0    5,000

22-Mar-02

   Jong Hwan Byun    Employee    23-Mar-05    22-Mar-10    57,100    5,000    0    5,000

22-Mar-02

   Jae Han Kim    Employee    23-Mar-05    22-Mar-10    57,100    2,500    0    2,500

22-Mar-02

   Jong Ok Na    Employee    23-Mar-05    22-Mar-10    57,100    2,500    0    2,500

29-Mar-02

   Boung Hak Kim    Former KCC Officer    30-Mar-04    29-Mar-11    129,100    3,330    0    3,330

29-Mar-02

   Jang Ok Kim    Former KCC Officer    30-Mar-04    29-Mar-11    129,100    3,330    0    3,330

29-Mar-02

   Sun Lee    Former KCC Officer    30-Mar-04    29-Mar-11    129,100    3,330    0    3,330

26-Jul-02

   Donald H. MacKenzie    Executive Vice President    27-Jul-05    26-Jul-10    58,800    23,899    0    23,899

21-Mar-03

   Ki Hong Kim    Non Executive director    22-Mar-06    21-Mar-11    58,600    10,000    0    10,000

21-Mar-03

   Sun Jin Kim    Non Executive director    22-Mar-06    21-Mar-11    43,800    6,678    0    6,678

21-Mar-03

   Eun Joo Park    Non Executive director    22-Mar-06    21-Mar-11    42,200    3,351    0    3,351

21-Mar-03

   Kyung Bae Suh    Non Executive director    22-Mar-06    21-Mar-11    42,200    3,351    0    3,351

 

24


Table of Contents

Grant date

  

Name of the grantee

  

Position when granted

   Exercise period   

Exercise

price

   

Number

of granted

options1

  

Number of

exercised

options

  

Number of

exercisable

options

         From    To           

21-Mar-03

   Cheol Soo Ahn    Non Executive director    22-Mar-06    21-Mar-11    42,200     3,351    3,351    0

21-Mar-03

   Kyung Hee Yoon    Non Executive director    22-Mar-06    21-Mar-11    43,800     6,678    0    6,678

21-Mar-03

   Moon Soul Chung    Non Executive director    22-Mar-06    21-Mar-11    43,800     6,678    6,678    0

21-Mar-03

   Suk Yong Cha    Non Executive director    22-Mar-06    21-Mar-11    58,600     10,000    10,000    0

21-Mar-03

   Bernard S. Black    Non Executive director    22-Mar-06    21-Mar-11    43,800     6,678    0    6,678

21-Mar-03

   Richard Elliott Lint    Non Executive director    22-Mar-06    21-Mar-11    43,800     6,678    0    6,678

21-Mar-03

   Sung Chul Kim    Executive Vice President    22-Mar-06    21-Mar-11    35,500     9,443    4,443    5,000

21-Mar-03

   See Young Lee    Executive Vice President    22-Mar-06    21-Mar-11    35,500     7,024    4,024    3,000

21-Mar-03

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

21-Mar-03

   Won Suk Oh    Employee    22-Mar-06    21-Mar-11    35,500     9,730    0    9,730

21-Mar-03

   Sung Dae Min    Employee    22-Mar-06    21-Mar-11    35,500     9,730    0    9,730

21-Mar-03

   Kyong Jae Jeong    Employee    22-Mar-06    21-Mar-11    35,500     9,730    0    9,730

21-Mar-03

   Chul Hee Kim    Employee    22-Mar-06    21-Mar-11    35,500     14,343    0    14,343

21-Mar-03

   In Do Lee    Employee    22-Mar-06    21-Mar-11    35,500     9,730    0    9,730

21-Mar-03

   Maeng Soo Ryang    Employee    22-Mar-06    21-Mar-11    35,500     9,730    0    9,730

27-Aug-03

   Jin Baek Cheong    Executive Vice President    28-Aug-06    27-Aug-11    40,500     5,091    0    5,091

09-Feb-04

   Young Il Kim    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100     7,125    0    7,125

09-Feb-04

   Sang Jin Lee    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100     7,125    0    7,125

09-Feb-04

   Jeung Lak Lee    Senior Executive Vice President    10-Feb-07    09-Feb-12    46,100     7,452    0    7,452

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    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Kyung Soo Kang    Employee    10-Feb-07    09-Feb-12    46,100     3,837    0    3,837

09-Feb-04

   Yang Jin Kim    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Dong Hwan Cho    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Dong Sook Kang    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Young Han Kim    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   De Oak Shin    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Chang Ho Kim    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Dal Soo Lee    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

09-Feb-04

   Byong Doo Ahn    Employee    10-Feb-07    09-Feb-12    46,100     5,000    0    5,000

23-Mar-04

   Young Soon Cheon    Non Executive Director    24-Mar-07    23-Mar-12    48,500     5,000    0    5,000

23-Mar-04

   Dong Soo Chung    Non Executive Director    24-Mar-07    23-Mar-12    48,500     5,000    0    5,000

23-Mar-04

   Wang Ha Cho    Non Executive Director    24-Mar-07    23-Mar-12    48,800     5,000    0    5,000

23-Mar-04

   Woon Youl Choi    Non Executive Director    24-Mar-07    23-Mar-12    48,800     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

01-Nov-04

   Chung Won Kang    President & CEO    02-Nov-07    01-Nov-12    X 1   700,000    0    700,000

18-Mar-05

   Hyung Duk Chang    Chief Audit Executive    19-Mar-08    18-Mar-13    X 2   30,000    0    30,000

1

Exercise price = 37,600 Won × (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 = 46,800 Won × (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.

 

25


Table of Contents

Grant date

  

Name of the grantee

  

Position when granted

   Exercise period    Exercise
price
   Number
of granted
options1
   Number
of exercised
options
   Number of
exercisable
options
         From    To            

18-Mar-05

   Kap Shin    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Dong Won Kim    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Yun Keun Jung    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    8,759    0    8,759

18-Mar-05

   Nam Sik Yang    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Hyo Sung Won    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Yong Kook Oh    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Sang Jin Lee    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    8,759    0    8,759

18-Mar-05

   Ahn Sook Koo    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    8,759    0    8,759

18-Mar-05

   Jung Young Kang    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Young Han Choi    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Dong Soo Choe    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Seong Kyu Lee    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    8,759    0    8,759

18-Mar-05

   Jun Bo Cho    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    8,759    0    8,759

18-Mar-05

   Jeong Min Kim    Senior Executive Vice President    19-Mar-08    18-Mar-13    46,800    30,000    0    30,000

18-Mar-05

   Sung Soo Jung    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   Hye Young Kim    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   Ki Hyun Kim    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   Jae Sam Jung    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Chang Ho Kim    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   Dong Sook Kang    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   De Oak Shin    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Dal Soo Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Byong Doo Ahn    Employee    19-Mar-08    18-Mar-13    46,800    4,379    0    4,379

18-Mar-05

   Byung Kun Oh    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Won Sik Yeo    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Dong Su Ryo    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Kyoung Ho Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Jeung Ho Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Kwang Suk Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Tae Gon Kim    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Hyeog Kwan Kwon    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Kyu Hyung Jung    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Dong Hwan Cho    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Man Hee Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Il Soo Moon    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Yong Seung Lee    Employee    19-Mar-08    18-Mar-13    46,800    15,000    0    15,000

18-Mar-05

   Suk Yong Cha    Non Executive director    19-Mar-08    18-Mar-13    61,000    5,091    0    5,091

18-Mar-05

   Ki Hong Kim    Non Executive director    19-Mar-08    18-Mar-13    60,300    5,077    0    5,077

 

26


Table of Contents

Grant date

  

Name of the grantee

  

Position when granted

   Exercise period    Exercise
price
    Number
of granted
options1
   Number
of exercised
options
   Number of
exercisable
options
         From    To           

18-Mar-05

   Young Soon Cheon    Non Executive director    19-Mar-08    18-Mar-13      15,000    0    15,000

18-Mar-05

   Dong Soo Chung    Non Executive director    19-Mar-08    18-Mar-13    X 2   15,000    0    15,000

18-Mar-05

   Chang Kyu Lee    Non Executive director    19-Mar-08    18-Mar-13      15,000    0    15,000

18-Mar-05

   Hun Namkoong    Non Executive director    19-Mar-08    18-Mar-13    61,000     5,091    0    5,091

18-Mar-05

   Doo Hwan Song    Non Executive director    19-Mar-08    18-Mar-13      15,000    0    15,000

18-Mar-05

   Dam Cho    Non Executive director    19-Mar-08    18-Mar-13    X 2   15,000    0    15,000

18-Mar-05

   Nobuya Takasugi    Non Executive director    19-Mar-08    18-Mar-13      15,000    0    15,000

27-Apr-05

   Kyung Wook Kang    Employee    28-Apr-08    27-Apr-13    45,700     15,000    0    15,000

22-Jul-05

   Donald H. MacKenzie    Senior Executive Vice President    23-Jul-08    22-Jul-13    49,200     30,000    0    30,000

23-Aug-05

   Youn Soo Kim    Executive Vice President    24-Aug-08    23-Aug-13    53,000     15,000    0    15,000

24-Mar-06

   Dong Soo Chung    Non Executive director    25-Mar-09    24-Mar-14      20,000    0    20,000

24-Mar-06

   Doo Hwan Song    Non Executive director    25-Mar-09    24-Mar-14      10,000    0    10,000

24-Mar-06

   Chang Kyu Lee    Non Executive director    25-Mar-09    24-Mar-14      10,000    0    10,000

24-Mar-06

   Dam Cho    Non Executive director    25-Mar-09    24-Mar-14      10,000    0    10,000

24-Mar-06

   Nobuya Takasugi    Non Executive director    25-Mar-09    24-Mar-14      10,000    0    10,000

24-Mar-06

   Young Soon Cheon    Non Executive director    25-Mar-09    24-Mar-14      5,000    0    5,000

24-Mar-06

   Kee Young Chung    Non Executive director    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Bo Kyung Byun    Non Executive director    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Bae Kin Cha    Non Executive director    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Hyung Duk Chang    Chief Audit Executive    25-Mar-09    24-Mar-14      20,000    0    20,000

24-Mar-06

   Ki Hong Kim    Chief Executive Vice President    25-Mar-09    24-Mar-14      210,000    0    210,000

24-Mar-06

   Kap Joe Song    Senior Executive Vice President    25-Mar-09    24-Mar-14      45,000    0    45,000

24-Mar-06

   Dal Soo Lee    Senior Executive Vice President    25-Mar-09    24-Mar-14      20,000    0    20,000

24-Mar-06

   Won Sik Yeo    Senior Executive Vice President    25-Mar-09    24-Mar-14      20,000    0    20,000

24-Mar-06

   De Oak Shin    Senior Executive Vice President    25-Mar-09    24-Mar-14    X 3   20,000    0    20,000

24-Mar-06

   Choong Won Cho    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Yook Sang Kwon    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Haing Hyun Choi    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   In Gyu Choi    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Kwang Chun Shon    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Han Mok Cho    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Soon Hyun Kim    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Seung Joo Baik    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Kwang Mook Park    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Se Yoon Hong    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Sang Rak Jang    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Jin Sun Paeng    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Shin Og Joo    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Young Hee Jeon    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

24-Mar-06

   Bae Young Lee    Employee    25-Mar-09    24-Mar-14      30,000    0    30,000

3

Exercise price = 75,200 Won x (1 + TRS of the three major competitors x 0.4)

 

27


Table of Contents

Grant date

  

Name of the grantee

  

Position when granted

   Exercise period    Exercise
price
    Number of
granted
options1
   Number
of exercised
options
   Number of
exercisable
options
         From    To           

28-Apr-06

   Young Mo Lee    Employee    29-Apr-09    28-Apr-14    X 4   30,000    0    30,000

27-Oct-06

   Dong Hyun Ji    Employee    28-Oct-09    27-Oct-14    X 5   20,000    0    20,000
Total                  4,047,090    761,522    3,285,568

4

Exercise price = 81,900 Won x (1 + TRS of the three major competitors x 0.4)

5

Exercise price = 76,600 Won x (1 + TRS of the three major competitors x 0.4)

 

28


Table of Contents

5.4. Affiliated Companies

5.4.1. List of Affiliates1

Affiliated companies of Kookmin Bank and its ownership as of December 31, 2006 are as follows.

 

  n KB Investment Co., Ltd. (99.99%)

 

  n KB Asset Management Co., Ltd. (80.00%)

 

  n KB Real Estate Trust Co., Ltd. (99.99%)

 

  n KB Credit Information Co., Ltd. (99.73%)

 

  n KB Data Systems Corporation (99.99%)

 

  n KB Futures Co., Ltd. (99.98%)

 

  n KB Life Insurance Co., Ltd. (51.00%)

 

  n ING Life Korea Ltd. (20.00%)

 

  n Kookmin Bank International (London) Ltd. (100.00%)

 

  n Kookmin Bank Hong Kong Ltd. (100.00%)

 

  n Sorak Financial Holdings Pte. Ltd. (25.00%)

 


1

Excludes Jooeun Industrial and KLB Securities which are under liquidation procedures. Kookmin Singapore Ltd. and Kookmin Finance Asia Limited are also under liquidation procedures.

 

29


Table of Contents

6. Directors, Senior Management and Employees

6.1. Executive Directors

Our four executive directors consist of the President & CEO, Chief Audit Executive, Chief Executive Vice President and Senior Executive Vice President.

The names and positions of our directors, and the number of shares of Kookmin Bank’s common stock they own are set forth below as of December 31, 2006.

 

Name

   Date of Birth   

Position

   Common Stocks Owned

Chung Won Kang

   12/19/1950    President & CEO    —  

Hyung Duk Chang

   08/13/1950    Chief Audit Executive    —  

Ki Hong Kim

   01/10/1957    Chief Executive Vice President    —  

Kap Shin

   09/04/1955    CFO & Senior EVP    —  

6.2. Non-Executive Directors

Our non-executive directors are selected based on the candidates’ talents and skills in diverse areas, such as law, finance, economy, management and accounting. As of December 31, 2006, there were nine non-executive directors.

Our current non-executive directors and number of shares of Kookmin Bank’s common stock they own are as follows.

 

Name

   Date of Birth   

Position

   Common Stocks Owned

Dong Soo Chung

   09/24/1945    Non-Executive Director    2,390

Nobuya Takasugi

   09/03/1942    Non-Executive Director    —  

Kee Young Chung

   09/07/1948    Non-Executive Director    —  

Doo Hwan Song

   05/29/1949    Non-Executive Director    —  

Chang Kyu Lee

   05/20/1950    Non-Executive Director    —  

Dam Cho

   08/01/1952    Non-Executive Director    —  

Bo Kyung Byun

   08/09/1953    Non-Executive Director    —  

Baek In Cha

   07/23/1958    Non-Executive Director    —  

Young Soon Cheon

   02/01/1961    Non-Executive Director    1,970

On March 21, 2007, Doo Hwan Song resigned his office before completing his term.

On March 23, 2007, the date of our Annual General Meeting of Shareholders for fiscal year 2006, Young Soon Cheon was retired and Jacques P.M. Kemp replaced Young Soon Cheon.

 

30


Table of Contents

6.3. Senior Management

In addition to the executive directors who are also our executive officers, we currently have the following 13 executive officers as of December 31, 2006.

 

Name

   Date of Birth   

Position

   Common Shares Owned

Nam Sik Yang

   05/08/1954    Senior Executive Vice President    582

Won Sik Yeo

   01/30/1953    Senior Executive Vice President    —  

Dal Soo Lee

   02/15/1952    Senior Executive Vice President    —  

Yong Kook Oh

   09/30/1949    Senior Executive Vice President    —  

Hyo Sung Won

   07/29/1960    Senior Executive Vice President    —  

De Oak Shin

   01/09/1951    Senior Executive Vice President    8,618

Jung Young Kang

   01/29/1951    Senior Executive Vice President    —  

Young Han Choi

   09/24/1958    Senior Executive Vice President    —  

Dong Soo Choe

   03/10/1955    Senior Executive Vice President    —  

Jeong Min Kim

   05/08/1951    Senior Executive Vice President    94

Donald H. MacKenzie

   12/20/1948    Senior Executive Vice President    —  

Kap Joe Song

   07/20/1947    Senior Executive Vice President    —  

Dong Won Kim

   03/01/1953    Senior Executive Vice President    —  

Since December 31, Nam Sik Yang, Jung Young Kang and Dong Soo Choe have retired and Dong Su Yeo, Hyeog Kwan Kwon, Kyoung Woo Nam and Jeung Ho Lee were newly appointed as senior executive vice presidents.

6.4. Employees

The following table shows the breakdown of our employees as of December 31, 2006.

 

   (Unit: in millions of Won)

 

     Number of Employees1   

Average Tenure of

the Full-time

Employees (years)2

  

Total Payment

for year of 20063

  

Average Payment

per Person

   Full-time    Contractual    Total         

Male

   12,803    1,402    14,205    17 years and 6 months    1,108,412    78.0

Female

   4,369    6,280    10,649    14 years and 4 months    547,306    51.4
                             

Total

   17,172    7,682    24,854    16 years and 8 months    1,655,718    66.6
                             

1

Numbers of employees are calculated based on an arithmetic mean from January 31, 2006 to December 31, 2006, and do not include executive vice presidents, local employees in overseas branches and persons engaged in outsourced services.

2

Based on only full-time employees as of December 31, 2006

3

Based on personnel expense and welfare cost as of December 31, 2006

 

31


Table of Contents

7. Major Stockholders and Related Party Transactions

7.1. Major Stockholders1

The following table presents information regarding the selected major ownership of our shares.

(Unit: Shares, %)

 

Name

  

Number of

Shares of

Common Stock

  

Percentage

of Total

Issued Shares

Citi Bank, N. A.2

   49,470,643    14.71

Euro-Pacific Growth Fund

   18,377,910    5.46

1

Information based on December 31, 2006

2

Depositary under our ADR and GDR programs

 

32


Table of Contents

7.2. Investments in Affiliates1

(Unit: in millions of Won)

 

Name

  

Relation with

the Bank

   Account   

Beginning

Balance

(Jan 1, 2006)

   Increase    Decrease   

Ending

Balance

(Dec 31, 2006)

KB Real Estate Trust

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

KB Investment

   Affiliate    Equity Securities of Affiliate    44,756    —      —      44,756

KB Asset Management

   Affiliate    Equity Securities of Affiliate    30,670    —      —      30,670

KB Futures

   Affiliate    Equity Securities of Affiliate    19,996    —      —      19,996

KB Data Systems Corp.

   Affiliate    Equity Securities of Affiliate    7,999    —      —      7,999

KB Credit Information

   Affiliate    Equity Securities of Affiliate    6,245    —      —      6,245

KB Life Insurance

   Affiliate    Equity Securities of Affiliate    15,300    —      —      15,300

Jooeun Industrial1

   Affiliate    Equity Securities of Affiliate    9,999    —      —      9,999

KLB Securities1

   Affiliate    Equity Securities of Affiliate    24,274    —      —      24,274

ING Life Korea

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

Kookmin Bank Hong Kong Ltd.

   Affiliate    Equity Securities of Affiliate    20,260    —      1,668    18,592

Kookmin Bank International (London) Ltd.

   Affiliate    Equity Securities of Affiliate    34,935    1,547    —      36,482

LOGO Based on par value


1

Jooeun Industrial and KLB Securities are under liquidation procedures

 

33


Table of Contents

7.3. Related Party Transactions

(Unit: in millions of Won unless indicated otherwise)

 

Name

  

Relation with the Bank

   Transactions  
      Account    Purchase    Disposal    Volume   

Gains

/Losses

 

DSME Co.

  

Related party of Non-executive director,

Dong Soo Chung

   Equity securities    2,707    2,625    5,332    98  

LG International

  

Related party of Non-executive director,

Kee Young Chung

   Equity securities    4,929    4,929    9,858    (391 )
                           
  

Total

      7,636    7,554    15,190    (293 )
                           

 

34


Table of Contents

SIGNATURES

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

 

 

Kookmin Bank

  (Registrant)
Date: March 30, 2007   By:  

/s/ Kap Shin

   

(Signature)

 

  Name:   Kap Shin
  Title:   CFO / Senior EVP
    Executive Director


Table of Contents

Exhibit 99.1

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 AND INDEPENDENT AUDITORS’ REPORT


Table of Contents

Independent Auditors’ Report

English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of Kookmin Bank:

We have audited the accompanying consolidated balance sheet of Kookmin Bank (the “Bank”) and its subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years ended, all expressed in Korean Won. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain trust accounts whose principal or fixed rate of return is guaranteed by the Bank, KB Investment Co., Ltd., KB Data System Co., Ltd., KB Credit Information, and Kookmin Bank Int’l Ltd., which statements reflect total assets constituting 1.98 percent of consolidated total assets as of December 31, 2006 and total revenues constituting 1.67 percent of consolidated total revenues for the year then ended, and the financial statements of certain trust accounts whose principal or fixed rate of return is guaranteed by the Bank, KB Investment Co., Ltd., KB Data System Co., Ltd., KB Credit Information, NPC02-4 Kookmin Venture Fund and Kookmin Bank Int’l Ltd., which statements reflect total assets constituting 2.11 percent of consolidated total assets as of December 31, 2005 and total revenues constituting 1.63 percent of consolidated total revenues for the year then ended. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the reports of such other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the Bank an it’s subsidiaries as of December 31, 2006 and 2005, and the results of their operations, changes in shareholders’ equity and their cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.

Accounting principles and audit 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 accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit 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 knowledgeable about Korean accounting procedures and audit standards and their application in practice.

March 2, 2007

Notice to Readers

This report is effective as of March 2, 2007, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the auditors’ report.


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2006 AND 2005

 

     Korean Won
     2006    2005
     (In millions)

ASSETS

     

Cash and due from banks (Notes 4 and 21)

   (Won) 6,688,977    (Won) 5,942,996

Securities (Notes 5 and 21)

     32,588,135      33,479,132

Loans (Notes 6, 7, 8 and 21)

     150,017,861      135,821,846

Fixed assets (Note 9)

     2,512,885      2,441,612

Other assets (Note 10)

     7,107,020      5,217,136
             
   (Won) 198,914,878    (Won) 182,902,722
             

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

LIABILITIES:

     

Deposits (Notes 11 and 21)

   (Won) 133,296,975    (Won) 129,615,589

Borrowings (Notes 12 and 21)

     13,804,393      13,328,397

Debentures (Notes 13 and 21)

     24,982,506      16,547,987

Other liabilities (Notes 14, 15, 16 and 17)

     11,702,943      10,960,517
             
     183,786,817      170,452,490
             

SHAREHOLDERS’ EQUITY (Notes 18 and 19):

     

Common stock

     1,681,896      1,681,896

Capital surplus

     6,274,831      6,269,599

Retained earnings

     

(Net income of (Won)2,458,260 million for the year ended December 31, 2006 and (Won)2,241,055 million for the year ended December 31, 2005)

     6,241,912      3,967,535

Capital adjustments

     885,141      492,589

Minority interests

     44,281      38,613
             
     15,128,061      12,450,232
             
   (Won) 198,914,878    (Won) 182,902,722
             

See accompanying notes to consolidated financial statements.


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

     Korean Won
     2006    2005
     (In millions except per share
amounts)

OPERATING REVENUE:

     

Interest income:

     

Interest on due from banks

   (Won) 34,036    (Won) 28,977

Interest on securities

     1,505,053      1,260,527

Interest on loans

     10,678,249      10,121,619

Other interest income

     50,065      41,641
             
     12,267,403      11,452,764
             

Commission income

     1,379,420      1,202,141
             

Other operating income:

     

Gain on disposal of trading securities

     60,242      103,953

Gain on valuation of trading securities

     9,076      —  

Dividends on trading securities

     3,135      4,998

Dividends on available-for-sale securities

     4,789      3,431

Foreign exchange trading income

     245,217      253,907

Fees and commissions from trust accounts

     125,786      110,507

Gain on financial derivatives trading

     4,422,217      3,655,079

Gain on valuation of financial derivatives (Note 20)

     935,246      1,153,294

Gain on valuation of fair value hedged items (Notes 11, 13 and 20)

     35,828      56,144

Other operating income

     109,403      46,739
             
     5,950,939      5,388,052
             

Insurance revenue

     386,944      244,001
             

Total operating revenue

     19,984,706      18,286,958
             

OPERATING EXPENSES:

     

Interest expenses:

     

Interest on deposits

     3,543,984      3,281,112

Interest on borrowings

     658,232      384,892

Interest on debentures

     1,139,073      1,034,472

Other interest expenses

     50,757      30,650
             
     5,392,046      4,731,126
             

Commission expense

     484,030      349,379
             

Other operating expenses:

     

Loss on disposal of trading securities

     51,350      99,142

Loss on valuation of trading securities

     —        13,536

Provision for possible loan losses (Note 8)

     1,028,465      1,029,445

Provision for acceptance and guarantee losses

     8,931      9,008

Foreign exchange trading losses

     296,771      237,443

Loss on financial derivatives trading

     4,082,692      3,577462

Loss on valuation of financial derivatives (Note 20)

     1,015,782      1,096,714

Loss on valuation of fair value hedged items (Notes 11, 13 and 20)

     31,517      1,336

Other operating expenses

     802,196      800,340
             
     7,317,704      6,864,426
             

General and administrative expenses (Note 22)

     3,304,474      3,031,958
             

Insurance expense

     385,897      221,483
             

Total operating expenses

     16,884,151      15,198,372
             

(Continued)


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

     Korean Won
     2006    2005
     (In millions except per share
amounts)

OPERATING INCOME

   (Won) 3,100,555    (Won) 3,088,586

NON-OPERATING INCOME (Note 23)

     640,225      697,038

NON-OPERATING EXPENSES (Note 23)

     299,727      526,598
             

ORDINARY INCOME

     3,441,053      3,259,026

EXTRAORDINARY ITEM

     —        —  
             

INCOME BEFORE INCOME TAX

     3,441,053      3,259,026

INCOME TAX EXPENSE (Note 24)

     974,047      1,006,052
             

NET INCOME BEFORE MINORITY INTERESTS

     2,467,006      2,252,974

MINORITY INTERESTS, GAIN

     8,746      11,919
             

NET INCOME

   (Won) 2,458,260    (Won) 2,241,055
             

ORDINARY INCOME PER SHARE (In currency units) (Note 25)

   (Won) 7,308    (Won) 6,943
             

NET INCOME PER SHARE (In currency units) (Note 25)

   (Won) 7,308    (Won) 6,943
             

DILUTED ORDINARY INCOME PER SHARE (In currency units) (Note 25)

   (Won) 7,308    (Won) 6,938
             

DILUTED NET INCOME PER SHARE (In currency units) (Note 25)

   (Won) 7,308    (Won) 6,938
             

See accompanying notes to consolidated financial statements.


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

     Capital stock   

Capital

surplus

   

Retained

earnings

   

Capital

adjustments

   

Minority

interests

    Total  

January 1, 2005

   (Won) 1,681,896    (Won) 6,238,284     (Won) 1,897,164     (Won) (583,783 )   (Won) 27,640     (Won) 9,261,201  

Net income

     —        —         2,241,055       —         —         2,241,055  

Dividends

     —        —         (168,574 )     —         (1,872 )     (170,446 )

Change in treasury stock

     —        25,075       —         1,314,119       —         1,339,194  

Loss on valuation of available-for-sale securities

     —        —         —         (201,484 )     —         (201,484 )

Gain on valuation of held-to-maturity securities

     —        —         —         426       —         426  

Change due to the equity method

     —        —         —         (10,964 )     —         (10,964 )

Stock options

     —        —         —         (25,725 )     —         (25,725 )

Minority interests, gain

     —        —         —         —         11,919       11,919  

Sales of subsidiaries’ equity securities

     —        10,966       —         —         4,200       15,166  

Change in retained earnings of subsidiaries

     —        —         (88 )     —         —         (88 )

Change in retained earnings of the trust account

     —        —         (2,024 )     —         —         (2,024 )

Change in subsidiaries

     —        10       —         —         (3,296 )     (3,286 )

Others

     —        (4,736 )     2       —         22       (4,712 )
                                               

December 31, 2005

   (Won) 1,681,896    (Won) 6,269,599     (Won) 3,967,535     (Won) 492,589     (Won) 38,613     (Won) 12,450,232  
                                               

January 1, 2006

   (Won) 1,681,896    (Won) 6,269,599     (Won) 3,967,535     (Won) 492,589     (Won) 38,613     (Won) 12,450,232  

Net income

     —        —         2,458,260       —         —         2,458,260  

Dividends

     —        —         (184,889 )     —         (4,729 )     (189,618 )

Change in treasury stock

     —        —         —         9,660       —         9,660  

Gain on sales of treasury stock

     —        3,511       —         —         —         3,511  

Gain on valuation of available-for-sale securities

     —        —         —         373,255       1,434       374,689  

Loss on valuation of held-to-maturity securities

     —        —         —         (328 )     —         (328 )

Change due to the equity method

     —        —         —         13,853       —         13,853  

Stock options

     —        —         —         (3,888 )     —         (3,888 )

Minority interests, gain

     —        —         —         —         8,746       8,746  

Change in retained earnings of the trust account

     —        —         2,794       —         —         2,794  

Return of capital

     —        —         —         —         (4,500 )     (4,500 )

Others

     —        1,721       (1,788 )     —         4,717       4,650  
                                               

December 31, 2006

   (Won) 1,681,896    (Won) 6,274,831     (Won) 6,241,912     (Won) 885,141     (Won) 44,281     (Won) 15,128,061  
                                               

See accompanying notes to consolidated financial statements.


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

     Korean Won  
     2006     2005  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   (Won) 2,458,260     (Won) 2,241,055  
                

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

    

Loss on disposal of trading securities

     51,350       99,142  

Provision for possible loan losses

     1,028,465       1,029,445  

Loss on financial derivatives trading

     4,082,692       3,577,462  

Loss on valuation of financial derivatives

     1,015,782       1,096,714  

Loss on valuation of fair value hedged items

     31,517       1,336  

Loss on valuation of securities accounted for using the equity method

     4,236       2,674  

Provision for severance benefits

     169,288       133,325  

Depreciation and amortization

     326,423       351,641  

Loss on disposal of available-for-sale securities

     15,416       20,240  

Loss on impairment of available-for-sale securities

     127,571       103,305  

Loss on disposal of tangible assets

     2,737       4,293  

Loss on sale of loans

     17,222       16,397  

Minority interests, gain

     8,746       11,919  

Gain on disposal of trading securities

     (60,242 )     (103,953 )

Gain on valuation of trading securities

     (9,076 )     —    

Gain on financial derivatives trading

     (4,422,217 )     (3,655,079 )

Gain on valuation of financial derivatives

     (935,246 )     (1,153,294 )

Gain on valuation of fair value hedged items

     (35,828 )     (56,144 )

Gain on valuation of securities accounted for using the equity method

     (33,975 )     (28,858 )

Gain on disposal of available-for-sale securities

     (201,319 )     (342,549 )

Gain on disposal of tangible assets

     (10,931 )     (11,433 )

Gain on sale of loans

     (37,311 )     (81,866 )

Others, net

     460,557       615,233  
                
     1,595,857       1,629,950  
                

(Continued)


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

     Korean Won  
     2006     2005  

Changes in assets and liabilities resulting from operations:

    

Net decrease in trading securities

   (Won) 932,188     (Won) 51,676  

Net decrease (increase) in accounts receivable

     (1,710,289 )     1,884,330  

Net increase in accrued income

     (160,775 )     (32,607 )

Net increase in prepaid expenses

     (39,307 )     (3,058 )

Net decrease (increase) in deferred income tax assets

     337,051       (2,637 )

Net increase (decrease) in accounts payable

     1,509,988       (1,883,649 )

Net increase (decrease) in accrued expenses

     (770,768 )     669,744  

Net increase (decrease) in advances from customers

     (170,429 )     167,836  

Payment of severance benefits

     (18,209 )     (65,002 )

Increase in severance insurance deposits

     (99,557 )     (43,250 )

Others, net

     110,337       167,640  
                
     (79,770 )     911,023  
                

Net cash provided by operating activities

     3,974,347       4,782,028  
                

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Net increase in restricted due from banks

     (1,060,524 )     (429,288 )

Net decrease in available-for-sale securities

     1,428,564       1,314,010  

Net increase in held-to-maturity securities

     (713,092 )     (3,939,145 )

Net increase in securities accounted for using the equity method

     (54,106 )     (6,709 )

Net increase in loans

     (15,459,889 )     (1,176,240 )

Disposal of fixed assets

     24,286       28,525  

Purchase of fixed assets

     (364,870 )     (172,000 )

Others, net

     (329,756 )     9,261  
                

Net cash used in investing activities

     (16,529,387 )     (4,371,586 )
                

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Net increase (decrease) in deposits

     3,677,600       (515,019 )

Net increase (decrease) in debentures

     8,388,146       (5,304,797 )

Net increase in borrowings

     574,944       4,079,434  

Net increase (decrease) in other liabilities

     (216,690 )     1,789,360  

Others, net

     (183,503 )     (161,954 )
                

Net cash provided by (used in) financing activities

     12,240,497       (112,976 )
                

DECREASE IN CASH DUE TO CHANGE IN SCOPE OF CONSOLIDATION

     —         (572 )

NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS

     (314,543 )     296,894  

CASH AND DUE FROM BANKS, BEGINNING OF YEAR

     3,683,815       3,386,921  
                

CASH AND DUE FROM BANKS, END OF YEAR (Note 28)

   (Won) 3,369,272     (Won) 3,683,815  
                

See accompanying notes to consolidated financial statements.


Table of Contents

KOOKMIN BANK AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

 

1. GENERAL:

Kookmin Bank (the “Bank”) was established in 1963 under the Citizens National Bank Act to provide and administer funds for financing to 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 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 on June 29, 1998. Also, the Bank completed the legal consolidation with Housing and Commercial Bank (“H&CB”) on October 31, 2001 and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003.

The Bank’s shares have been 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 listed on the Korea Stock Exchange on November 9, 2001. In addition, the Bank listed its American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”) as of November 1, 2001 following the consolidation with H&CB. H&CB listed its ADS on the NYSE as of October 3, 2000 prior to the business combination. As of December 31, 2006, the Bank’s paid-in capital amounts to (Won)1,681,896 million.

The Bank is engaged in the banking, trust, credit card and other relevant businesses according to the provisions of the General Banking Act and the Trust Business Act, and Specialized Credit Financial Business Act, respectively. The Bank operates through 1,132 domestic branches and offices (excluding 216 automated teller machine stations) and three overseas branches (excluding two subsidiaries and one office) as of December 31, 2006.

 

2. SCOPE OF CONSOLIDATION AND EQUITY METHOD ACCOUNTING:

The consolidated financial statements include the Bank and trust accounts whose principal or fixed of return is guaranteed by the Bank and its wholly or partially owned subsidiaries.

Subsidiaries included in the consolidation and accounted for using the equity method as of December 31, 2006 were as follows:

 

Subsidiaries

   Closing date    No. of shares   

Percentage

of

ownership

(%)

  

Business

Consolidated:

           

KB Investment Co., Ltd.

   December 31    8,951,293    99.99    Investing and financing to small and medium-sized enterprises

KB Futures Co., Ltd.

   March 31    3,999,200    99.98    Deals with and brokerage services for futures transactions

KB Data System Co., Ltd.

   December 31    799,960    99.99    Software services for the Bank and other companies

KB Real Estate Trust Co., Ltd.

   December 31    15,999,930    99.99    Development, management and brokerage services with regards to real estate and trust


Table of Contents

Subsidiaries

   Closing date    No. of shares    Percentage
of
ownership
(%)
  

Business

KB Asset Management Co., Ltd.

   March 31    6,134,040    80.00    Providing security investment trust services and investment consulting services

KB Credit Information Co., Ltd.

   December 31    1,249,040    99.73    Delinquent loan collection service and credit checking services

KB Life Insurance Co., Ltd.

   March 31    3,060,000    51.00    Insurance service

Kookmin Bank Int’l Ltd. (London)

   December 31    20,000,000    100.00    Commercial banking business and foreign exchange operation

Kookmin Bank Hong Kong Ltd.

   December 31    2,000,000    100.00    Commercial banking business and foreign exchange operation

NPC 02-4 Kookmin Venture Fund

   December 31    105    50.00    Investing and financing to small and medium-sized enterprises
Accounted for using the equity method:            

ING Life Insurance Korea

   March 31    1,400,000    20.00    Insurance service

Balhae Infrastructure Fund (*2)

   June 30 &
December 31
   4,486,305    12.61    Investment in social overhead capital

Korea Credit Bureau Co., Ltd. (*3)

   December 31    180,000    9.00    Credit reporting and collection agency services

KLB Securities Co., Ltd. (*1)

   December 31    4,854,713    36.41    Securities related business

Jooeun Industrial Co., Ltd. (*1)

   December 31    1,999,910    99.99    House construction

Jeio Co., Ltd. (*6)

   December 31    88,572    20.33    Inspection of materials & manufacturing of measuring instruments

Kookmin Bank Singapore Ltd. (*1)

   December 31    30,000,000    100.00    Commercial banking business and foreign exchange operation

Kookmin Finance Asia Ltd. (HK) (*1)

   December 31    700,000    100.00    Commercial banking business and foreign exchange operation

Sorak Financial Holdings PTE Ltd. (Singapore)

   December 31    1,422,216    25.00    Investment

Pacific IT Investment Partnership (*1)

   December 31    840    60.00    Investing and financing to small and medium-sized enterprises

KB 06-1 Venture Investment Fund (*5)

   December 31    375    75.00    Investment in venture business

Kookmin China Fund No.1 (*4 & *7)

   December 31    300    50.00    Investment in venture business

KTTC Kookmin Venture Fund (*7)

   December 31    200    20.00    Investment in venture business

Kookmin Investment Partnership No.15 (*4 & *7)

   June 30    17    34.00    Investment in venture business

Kookmin Investment Partnership No.16 (*7)

   July 31    184    20.00    Investment in venture business

KB 03-1 Venture Investment Fund (*7)

   December 31    250    16.67    Investment in venture business

KB 03-1 Corporate Restructuring Fund (*7)

   December 31    116    29.00    Investment in venture business

NPC 05-6 Kookmin Venture Fund (*7)

   December 31    500    20.00    Investment in venture business

KB 06-1 Corporate Restructuring Fund (*7)

   December 31    12    5.38    Investment in venture business

NPS 06-5 KB Corporate Restructuring Fund (*7)

   December 31    4,037,500,000    13.57    Investment in venture business

 

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Subsidiaries included in the consolidation and accounted for using the equity method as of December 31, 2005 were as follows:

 

Subsidiaries

   Closing date    No. of shares    Percentage of
ownership(%)
  

Business

Consolidated:

           

KB Investment Co., Ltd.

   December 31    8,951,293    99.99    Investing and financing to small and medium-sized enterprises

KB Futures Co., Ltd.

   March 31    3,999,200    99.98    Deals with and brokerage services for futures transactions

KB Data System Co., Ltd.

   December 31    799,960    99.99    Software services for the Bank and other companies

KB Real Estate Trust Co., Ltd.

   December 31    15,999,930    99.99    Development, management and brokerage services with regards to real estate and trust

KB Asset Management Co., Ltd.

   March 31    6,134,040    80.00    Providing security investment trust services and investment consulting services

KB Credit Information Co., Ltd.

   December 31    1,249,040    99.73    Delinquent loan collection service and credit checking services

KB Life Insurance Co., Ltd.

   March 31    3,060,000    51.00    Insurance service

Kookmin Bank Int’l Ltd. (London)

   December 31    20,000,000    100.00    Commercial banking business and foreign exchange operation

Kookmin Bank Hong Kong Ltd.

   December 31    2,000,000    100.00    Commercial banking business and foreign exchange operation

NPC 02-4 Kookmin Venture Fund

   December 31    150    50.00    Investing and financing to small and medium-sized enterprises

Accounted for using the equity method:

           

ING Life Insurance Korea

   March 31    1,400,000    20.00    Insurance service

KLB Securities Co., Ltd. (*1)

   December 31    4,854,713    36.41    Securities related business

Jooeun Industrial Co., Ltd. (*1)

   December 31    1,999,910    99.99    House construction

Jeio Co., Ltd. (*6)

   December 31    88,572    20.33    Inspection of materials & manufacturing of measuring instruments

Kookmin Bank Singapore Ltd. (*1)

   December 31    30,000,000    100.00    Commercial banking business and foreign exchange operation

Kookmin Finance Asia Ltd. (HK) (*1)

   December 31    700,000    100.00    Commercial banking business and foreign exchange operation

Sorak Financial Holdings PTE Ltd. (Singapore)

   December 31    1,422,216    25.00    Investment

Pacific IT Investment Partnership (*1)

   December 31    840    60.00    Investing and financing to small and medium-sized enterprises

KIKO No.2 Venture Investment Partnership (*1)

   June 30    310    68.89    Investment in venture business

KIKO No.3 Venture Investment Partnership (*1)

   June 30    —      80.38    Investment in venture business

Kookmin China Fund No.1 (*4 & *7)

   December 31    300    50.00    Investment in venture business

KTTC Kookmin Venture Fund (*7)

   December 31    200    20.00    Investment in venture business

Kookmin Investment Partnership No.15 (*7)

   June 30    17    34.00    Investment in venture business

Kookmin Investment Partnership No.16 (*7)

   July 31    184    20.00    Investment in venture business

KB 03-1 Venture Investment Fund (*7)

   December 31    250    16.67    Investment in venture business

KB 03-1 Corporate Restructuring Fund (*7)

   December 31    116    29.00    Investment in venture business

NPC 05-6 Kookmin Venture Fund (*7)

   December 31    125    20.00    Investment in venture business

The Bank disposed of 49 percent shares of KB Life Insurance Co., Ltd. to ING Insurance International B.V. in 2005. In addition, Pacific IT Investment Partnership was excluded from consolidation since it went into the process of liquidation in December 2005.

 

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(*1) Excluded from consolidation since it is in the process of liquidation.
(*2) The Bank may exercise its voting right at the board meeting or at an equivalent decision making body of the investee.
(*3) The Bank has significant influence in electing the board member who may participate in the decision making process relating to the financial and business policy of the investee.
(*4) Excluded from consolidation because total assets were less than (Won) 7 billion as of prior year’s end date.
(*5) Excluded from consolidation because total assets were less than (Won) 7 billion as of organization date in this year.
(*6) Investment held by KB Investment Co., Ltd., a subsidiary of the Bank
(*7) Investment funds held by KB Investment Co., Ltd., a subsidiary of the Bank

Certain trust accounts whose principal or fixed rate of return is guaranteed by the Bank are included in the consolidated financial statements in accordance with the accounting guidelines of the Financial Supervisory Commission in the Republic of Korea. The trust accounts as of December 31, 2006 and 2005 are as follows (Unit: In millions):

 

     2006    2005
     Total assets    Operating
revenue
   Total assets    Operating
revenue

Consolidated

   (Won) 3,485,991    (Won) 172,154    (Won) 3,358,977    (Won) 193,398

Not consolidated

     13,167,897      572,865      14,718,792      1,047,214
                           
   (Won) 16,653,888    (Won) 745,019    (Won) 18,077,769    (Won) 1,240,612
                           

A summary of significant financial data of the Bank’s subsidiaries, included in the consolidated financial statements as of and for the year ended December 31, 2006 is as follows (Unit: In millions):

 

     Total assets    Capital stock    Shareholders’
equity
   Operating
revenue
   Net income

Trust accounts

   (Won) 3,485,991    (Won) —      (Won) 58,623    (Won) 172,154    (Won) —  

KB Investment Co., Ltd.

     96,296      44,759      94,448      20,030      10,974

KB Futures Co., Ltd.

     67,145      20,000      28,083      11,487      1,824

KB Data System Co., Ltd.

     33,471      8,000      17,603      67,588      2,277

KB Real Estate Trust Co., Ltd.

     206,392      80,000      99,539      66,122      18,424

KB Asset Management Co., Ltd.

     92,220      38,338      81,589      44,826      23,636

KB Credit Information Co., Ltd.

     43,938      6,262      35,409      71,532      7,329

KB Life Insurance Co., Ltd.

     700,438      30,000      31,903      409,302      4,187

Kookmin Bank Int’l Ltd. (London)

     315,938      36,482      56,496      20,634      3,736

Kookmin Bank Hong Kong Ltd.

     395,935      18,592      72,130      27,568      7,963

NPC 02-4 Kookmin Venture Fund

     24,852      21,000      24,612      5,459      3,790

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Consolidated Financial Statement Presentation

The Bank and its subsidiaries maintain their official accounting records in Korean Won (only domestic subsidiaries) and prepare statutory consolidated financial statements in the Korean language (Hangul) in conformity with the accounting principles and banking accounting standards generally accepted in the Republic of Korea. Certain accounting principles and banking accounting standards applied by the Bank and its subsidiaries that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles and banking accounting practices in other countries. Accordingly, these consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying consolidated financial statements have been condensed, restructured and translated

 

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into English (with certain expanded descriptions) from the Korean language consolidated financial statements. Certain information included in the Korean language consolidated financial statements, but not required for a fair presentation of the Bank and its subsidiaries’ financial position, results of operations or cash flows, is not presented in the accompanying consolidated financial statements.

The significant accounting policies followed by the Bank and its subsidiaries in preparing the accompanying consolidated financial statements are summarized below:

Basis of Consolidated Financial Statements Preparation

 

(1) Offset of Investments and Equity Accounts of Subsidiaries

Investments in subsidiaries and equity accounts of subsidiaries were eliminated at the date when the Bank obtained control over the subsidiaries. The differences between the amounts of investment and the equity accounts are recorded as goodwill or negative goodwill, which is amortized or reversed using the straight-line method over five years. If additional shares are purchased after acquiring control, the difference between the additional acquisition cost and the portion of net assets acquired is credited or charged to capital surplus. If the acquisition date does not agree with the year-end balance sheet date of the subsidiary, the closest closing date to the acquisition date is regarded as the acquisition date.