Global Reach with Local Touchimg2.kbstar.com/obj/eng/Kookmin2000.pdf · 2008. 11. 16. · Global Reach with Local Touch. Profile Kookmin Bank is the largest financial institution

www.kookminbank.com

Global Reach with Local Touch

Profile

Kookmin Bank is the largest financial institution and one of the most

respected business entities in Korea.

Established in 1963, the Bank has maintained its focus on profit-based

growth-an approach that has served the Bank well, particularly during

the recent financial crisis that jolted the Korean financial industry to its

core. Thanks to its prudent business strategy and dedication to

customer satisfaction, the Bank now enjoys a position of dominance in

many areas of the banking business. Leading financial journals,

including Banker and Asiamoney, have endorsed the superiority of the

Bank by awarding it the title of “best Korea bank”. Foreign investors,

who have expressed their confidence by becoming Bank shareholders,

now constitute more than 60% of the Bank’s ownership.

Kookmin Bank has recently taken a momentous step toward its goal of

becoming a world-class financial institution. Looking beyond its

current position as Korea’s leading bank, in December, 2000, Kookmin

signed an memorandum of understanding for a merger with Korea

Housing & Commercial Bank. The merger will create one of the

world’s top 60 banks in 2001

In the fluid world of banking, the ability to adopt new modes of business, be they

technology-based or environment-generated, is the key to survival. Kookmin Bank takes

pride in embracing such changes before its competition and excels in turning them into

growth instruments which serve as benchmarks for the industry.

and turning them into growth instrumentsShaping the changes to come

CONTENTS

Financial Highlights 2

Sharing a New Vision with Shareholders 4

Leading the market in Adopting Changes 6

Championing e-business 8

Risk Management 1 0

Diversifying the Income Base 1 3

Merger 1 5

The Year in Review 1 6

Economic Review and Forecast 1 8

Financial Section 2 1

Organization Chart 1 3 3

Board of Directors and Executive Vice Presidents 1 3 4

International Banking Directory 1 3 6

Corporate Data 1 3 7

KEY FINANCIALDATA

In billions of Korean Won In millions of U.S. Dollars(Except per share and ratio data) (Except per share and ratio data)

2000 1999 2000 1999

Operating ResultsOperating Revenue W 8,852 W 8,190 $ 7,027 $ 6,501Net Interest Income 2,153 1,907 1,709 1,514Net income 720 108 571 86

Profitability RatiosReturn on Assets 0.97% 0.16% 0.97% 0.16%Return on Stockholders’ Equity 17.96% 2.80% 17.96% 2.80%Net Interest Margin 3.12% 3.14% 3.12% 3.14%Cost-Income Ratio 35.24% 35.85% 35.24% 35.85%

Per Share Data (Won / Dollars)Earning per Common Share 2,403 388 1.91 0.31

Balance Sheet Data at Year-EndTotal Assets 96,242 82,405 76,401 65,417Total Credit 54,884 45,267 43,569 35,934Total Deposits 70,702 58,745 56,126 46,634

Capital Ratios at Year-EndTotal Capital Ratio 11.18% 11.38% 11.18% 11.38%Tier 1 Capital 6.82% 7.26% 6.82% 7.26%Tier 2 Capital 4.36% 4.12% 4.36% 4.12%

Note) 1. Conversion from Korean Won to U.S. Dollar has been made at the exchange rate of Won 1,259.7 to

US$ 1.0 on December 31, 2000.

2. Total Assets is the sum of banking and trust accounts, less intra-accounts and discount present value.

3. Total Credit is the sum of Loans in KRW and in F/C, F/C purchase, advance for customers,

privately placed bond and trust loans.

4. Total Deposits is the sum of banking and trust accounts.

ROE ROA

FINANCIALHIGHLIGHTS

In the year 2000, the Bank turned in the best ROE performance in its history with

17.96% from 2.80% in 1999. Net income jumped over 560% from 108 billion Won

to 720 billion Won. ROA also was increased from 0.16% in 1999 to 0.97% last year.

The year 2000 witnessed a breath-taking improvement in the Bank’s earings-per-

share. Reflecting the impressive growth of net income, EPS jumped from 388 Won

to 2,403 Won.

In 2000, the Bank recorded the largest net income in the history of the Korean

banking industry with 720 billion Won. The near seven-fold jump stemmed mainly

from increases in interest earning assets, stable net interest margin, equity method

gains and lower burden for provisions and fee income.

Operating revenue grew 8.1% in 2000. But operating income increased 300% due to

a decrease in operating expenses. As the lion’s share of operating revenue stem from

interest income, falling interest rates hindered the growth of operating revenue.

1998 1999 2 0 0 0

1998 1999 2 0 0 0

1998 1999 2 0 0 0

1998 1999 2 0 0 0

2 . 4 6 2 . 8 0

0 . 1 60 . 1 6

17 . 9 60 . 9 7

ROE / ROA

Earnings Per Share

Net Income

Operating Revenue

In billions of Korean Won



[ 2 www.kookminbank.com ]

Total assets rose 16% in 2000 to W96,242 billion. Among the asset items, loans,

which accounted for 54% of the total, rose most. Securities and other asset items

increased slightly. As the stock market remained depressed throughout the year,

most of the rapid growth of deposits was channeled into loans.

The Bank broke another industry record by passing the W70 trillion mark in total

deposits, which was stemmed from the flight to quality during the financial crisis

and effective marketing strategies. Total credit rose 21% from 1999. Despite the

total credit increase, the NPL ratio fell to 6.98% from 11.27%.

BIS capital ratio and Tier I ratio in 2000 was 11.18% and 6.82%, respectively, which

was a slight decrease compared to 1999. The Bank’s BIS capital ratio in 2000 was

still higher than its competitors.

The Bank has continuously reduced headcount since 1998. Total employees have

dropped from 11,942 in 1998 to 11,010 last year, a decrease of 7.8%. As a result, cost

to income ratio improved from 47.20% in 1998 to 35.24% last year.

1998 1999 2 0 0 0

Total Deposits Total Credit

1998 1999 2 0 0 0

5 5 , 4 3 35 8 , 7 4 57 0 , 7 0 2

1998 1999 2 0 0 0

1998 1999 2 0 0 0

Total Assets

Total Deposits / Total Credit

BIS Capital Ratio

Cost / Income Ratio



[ 2000 K o o k m i n Annual Report 3 ]

SHARING A NEW VISIONWITH SHAREHOLDERS

The fiscal year 2000 will long be remembered as a major

turning point in the history of Kookmin Bank. We

achieved record financial results, gained coveted

endorsements and made a commitment that will change

our shape and worth beyond recognition.

Our year-end net profit of W719.7 billion was the best

net income performance in Korean banking history, and

represented more than a six-fold increase from the 1999

profit of W107.9 billion. Return on shareholders’ equity

soared from 2.80% to 17.96% over the year, while our net

interest income rose 12.9%-even as falling interest rates

reduced net interest margins. What’s more, our non-

performing loan ratio dropped from 11.27% to 6.98%. In

assets, loans, capital and all other important banking

areas, Kookmin Bank also was a top-tier performer.

These outstanding business results were complemented

by public and industry endorsements of our position as

Korea’s leading financial institution. We were selected as

the “most preferred” bank and ranked first in terms of

brand value in recent customer surveys. Kookmin was

chosen as the best Korean bank by both Global Finance

and A s i a m o n e y, and it was the only Korean bank to be

included in the S&P 100 Index.

These stellar achievements were made in the face of an

adverse market environment. The economy, burdened by

an unstable financial industry and a depressed

construction market, began to decline in the second half

of the year. Financial institutions struggled to stay afloat

amid shrinking profit margins and increasing competition.

The year 2001 will be no better as the economy is forecast

to grow half its level from last year. Moreover, the on-

going corporate and financial restructuring process will

surely challenge the banking industry.

Kookmin Bank has achieved its present status by

proactively embracing market challenges and setting

standards of excellence in the rapidly changing

environment. To continue its success, the Bank has

drawn up the following set of action plans for fiscal 2001:

First, we will continue our focus on profitability and

asset quality. Taking full advantage of our two powerful

capabilities--the largest scale of operation and the most

stable business base in the banking industry--we will set a

new industry record in net profit performance as we did

in 2000. By adopting preventive risk-management

systems and improving our asset quality, we will continue

to grow and still maintain a clean balance sheet.

KOOKMIN BANK HAS REACHED ITS STANDING TODAY BY

EMBRACING MARKET CHALLENGES AND

SETTING STANDARDS OF EXCELLENCE IN THE

CHANGING ENVIRONMENT.


OUR YEAR-END NET PROFIT OF W719.7 BILLION WAS

THE BEST NET INCOME PERFORMANCE IN

KOREAN BANKING HISTORY , AND WAS MORE THAN

A SIX -FOLD INCREASE FROM THE 1999 PROFIT OF W107.9 BILLION.

Second, while consolidating our dominant position in

retail banking, we will increase our presence in strategic

areas of strong growth potential. In both project financing

and internet banking we have competitive advantages over

our peers. To this end, we will select areas of advantage

and focus all available resources and energies on them. At

the same time, we will aggressively either outsource low-

value-added areas or spin them off.

Third, for more efficient management of business

resources, the organization and branch network will be

restructured such a way that each unit and each branch

optimizes its core function. The personnel system will be

overhauled and human resources developed in a systematic

manner with a view toward strengthening the elements

essential for knowledge and innovation- based

management. In addition, while installing a stronger sense

of accountability in management through the recently-

adopted business unit system, we will foster a merit-based

culture that rewards outstanding performance.

Finally, by adopting an international-standard accounting

system, we will render bank management completely

transparent and thus earn a higher level of trust from the

market. By earning the domestic industry’s highest credit

ratings from local and overseas credit ratings agencies, we

will further enhance the brand value of Kookmin Bank.

At the time of writing, the merger process with Korea

Housing & Commercial Bank has been under way, with

world-renowned consulting firms guiding the vision and

strategy of the new bank. Combined asset strengths and

market positions will catapult the merged bank into the

world’s top 60 tier.

There can be little doubt that fiscal 2000 was a difficult

test, but by exerting all-out efforts to overcome the

difficulties, we achieved outstanding results. Together

with our merger partner, we have drawn up a viable

blueprint for a great vision. Fiscal 2001 is expected to

present new tests. But it will also be another historic year

as we pass the threshold of world-class banking and lead

the Korean banking industry into the world arena.

It is equally exciting to look forward to the pleasure of

giving our shareholders and customers another report of

groundbreaking business accomplishments.


Sang-Hoon Kim Chairman & CEO

Adopting ChangesLeading the market in

The key to success in banking, as in any business, is to embrace

emerging changes and turn them into growth instruments before

the competitors can do so. This is one great strength of Kookmin

Bank, which was the first to meet the on-rush of new modes of

banking management and business. Moreover, by a d o p t i n gthe changes ahead of the competition, the Bank has been

able to strengthen its positions in the retail, middle-market, and

wholesale banking business-including international business

opportunities, employing a cherry-picking strategy.

When internet banking was still gathering force on the horizon,

Kookmin Bank took the initiative in refining its services to better

address the needs and tastes of local customers. The Bank’s

recently-introduced e-cash system is a case in point. The

Bank also took the industry lead in innovating its risk management

system and faced head-on the delicate issue of a friendly

m e r g e r , setting in motion an industry trend that will

reverberate throughout the financial industry for years to come.

e-BusinessRisk managementDiversifying the Income BaseMerger


Consolidating Market Leadership Position

The Bank is rapidly upgrading its internet banking

services to consolidate its industry-leading position in

cyber banking. At the end of 2000, the number of the

Bank’s internet banking customers stood at 948,133, the

highest in the domestic banking industry. Total

transactions during a six-month period ending in

February, 2001, exceeded 52 million, while applications

for cyber loans numbered 137,574 during 13 months from

February 1, 2000, to February 28, 2001. Of those, 45,890

applications were approved, for a total of W329 billion.

The Bank’s sophisticated Credit Scoring System was

instrumental in processing the large volume of cyber-loan

applications. This automated loan business, as well as

other internet banking services, is sure to grow, as the

number of the Bank’s internet banking customers is

expected to reach 2 million by the end of 2001, an

immense increase over the base of only 67,000

customers two years ago. The Bank’s long-term strategy is

to provide unequalled financial services, both on-line and

through conventional distribution channels.

Internet Portal Service

As the number of internet users quickly multiplied,

domestic financial institutions realized that internet

banking service alone was not enough to meet consumers’

growing demands and the race was on to build the web

site that can best meet banking customers’ needs. The

Bank set up its portal site at www.onkookmin.net,

offering various types of customer-targeted contents,

such as travel and entertainment information. Also

available on the portal site is one-stop financial service,

with links to the web sites of Kookmin Bank’s internet

partners in areas such as securities trading, insurance,

credit cards and auctions, etc.

While giving its customers a comprehensive on-line

portal with an emphasis on financial services, the Bank

intends for the site to function as a co-marketing vehicle.

The Bank’s strategic alliance with www.auction.co.kr, an

internet auction site, is a case in point. The Bank

processes all auction payments on-line and informs the

auction house of all transaction results on a real-time

basis.

In addition to setting up a portal site, the Bank launched

“TOP2000,” a nationwide membership sign-up campaign.

During the 3-month campaign period, about 430,000 new

customers signed up for the Bank’s internet banking

service. As a result of the Bank’s customer-focused

internet banking management, the Bank enjoys the

dominant lead in this strategically important market. In

addition, the Bank was selected as the bank with the best

internet banking service in a recent netizen survey

conducted by the Korea Management Association.

Championinge-business


e-Cash Next-Generation System Project

Despite the fact that Kookmin Bank’s IT system is one

of the most advanced in the Korean banking industry, to

better cope with rapid market and thus maintain its

leading position in IT, the Bank launched a next-

generation system project in July 1999 that is scheduled

to be completed by October 2001.

The project involves developing various operations

support systems, as well as IT systems, and integrating all

of them into one network so the various systems can

exchange data and interact with one another. Some of the

systems under development are for managing customer

relations, administering loans, creating work-related

knowledge databases, developing subsidiary-related

databases, conducting universal banking, and other

aspects of banking business. One notable quality of the

integrated system under development is that it is fully

customer-oriented. To better take advantage of fast-

changing customer needs, the Bank has decided that

customer data should be the basis of all computerized

system development, so that the Bank can use

accumulated customer data to develop products and

services, formulate marketing strategies and better target

other banking activities.

In addition to these benefits, the next-generation project,

once completed, will enable the Bank to provide year-

round, 24-hour non-stop banking service, upgrade risk

management to international standards, and manage

profits in a more comprehensive manner.

Kookmin Mondex e-Cash

Kookmin Bank introduced the industry’s first electronic

cash system, thereby securing a leadership position in this

strategically important market. Kookmin Mondex e-cash

is a plastic card with an IC chip that allows credit to be

transferred electronically through the internet,

telephone, ATM, or other digital-data transfer systems.

Mondex, the world’s first e-cash system, now serves as a

mode of payment in 60 countries. Kookmin Bank

selected the Mondex system because its encryption

technology is among the best in the world; it also offers

relatively low start-up and operating costs, along with

high brand recognition. Unlike credit cards, Mondex e-

cash allows anyone to make purchases--even in small

amounts--at any affiliate merchant. As an increasing

number of banks and merchants join the Kookmin

Mondex e-cash system, the Bank will lead the Korean

electronic cash market, establishing itself as a pacesetter

in defining e-cash transfer policies.

Introducing the industry’s

first electronic cash system,to secure a leadership position.


ManagementRiskRisk Management

Loan Approval system

Corporate Loan

Credit Evaluation System : CSS (Credit Scoring System)

Individual Loan

Integrated Risk Management System

Market Risk Credit Risk Other RiskLiquidity Risk

T-Map System

BranchesCredit

Council

Senior Credit

Manager

Committee

Credit

Manager

Committee

Corporate Finance Group

BLC Committees

Branches General Manager of Household Financing Dept.

ALM System Each DepartmentCRM System

Credit Evaluation System : CCRS (Corporate Credit Rating System)

[ 1 0 www.kookminbank.com ]

Integrated Risk Management System

Ever since the financial crisis of late 1997, risk

management has been a mantra for Korean financial

institutions. Setting up a comprehensive system to

accurately identify, measure and control risk takes years

of effort and a great deal of investment. Kookmin Bank is

one of the few institutions to develop a fully integrated

risk management system, and the system has proven to be

the most comprehensive and effective in the banking

industry. As shown in the diagram left, the Bank’s

Integrated Risk Management (IRM) system consists of

market risk, credit risk, liquidity risk and other risk

management. In credit risk management, the Bank

employs the CRM system to monitor its loan, derivatives

and fixed income securities positions. The T-Map

system is used for managing market risk, including the

volatility of exchange and interest rates. In liquidity risk

management, the ALM system is used to follow its ALM

position including money trust.

The superiority of the Bank’s IRM system results from

the fact that all the various subsystems are fully

connected, seamlessly exchanging data and keeping one

another up to date on risk variables.

Credit Risk Management

In recent years, the Bank has streamlined the

management of credit risk for both household and

corporate customers. Instead of relying on the loan

officer in charge, loan approval is now authorized by the

relevant credit council. Future cash flow, rather than

collateral value, has become the most important criterion.

In evaluating credit risk, we now consider both the credit

standing of the applying company and also its affiliated

business group. Both unexpected loss and expected loss

are considered in assessing credit risk. Bankruptcy ratio,

recovery ratio, and Value-at-Risk (VaR) are some of the

risk management methodologies the Bank has adopted. A

Credit Scoring System has been developed for rating

individual customers’ credit worthiness, while a

Corporate Credit Rating System is applied to the

corporate sector. For example, measuring credit risk the

Bank has adopted a VaR system that measures

unexpected and projected losses arising from the Bank’s

entire assets. This system also is used for performance

measurement and optimum asset allocation in connection

with the total profit management system. Finally, it is

used for setting unexpected-loss-adjusted risk limits.

The Bank’s fully integrated risk managements y s t e m has proven to be the most comprehensive and

e ffective in the industry.

[ 2000 K o o k m i n Annual Report 1 1 ]

decision

Corporate Credit Rating System

As part of credit risk management, the Bank has

developed, in cooperation with Korea Investors Services,

an advanced credit rating system that looks at the future

profitability and growth potential of corporate borrowers.

Comprising a credit scoring model and a default

calculation model, the corporate credit rating system

(CCRS) classifies corporations into 15 categories by total

assets and business type. In scoring borrowers’ credit

worthiness, the new system assigns nine grades based on

13 financial ratios, instead of just one ratio as in the case

of the old system which had resulted in abnormal

distribution. Another noteworthy of the new system is

that its strengthened check & control feature: it has

incorporated audit and review by Credit Review

Department of loan approval and risk level monitoring by

Risk Management Department.

The system’s default calculation model has proven

superior to other banks’ models in predicting corporate

default, because it utilizes three models, compared with

one model used by other banks. To upgrade the CCRS,

the Bank has recently developed a credit rating model,

which was first of its kind in Korea, for financial

institutions. While continuing to refine the CCRS, the

Bank plans to develop credit rating models for small-sized

and start-up businesses.

Credit Scoring System

The Bank adopted a credit scoring system (CSS) for

individual customers in June 2000. It is a decision tool to

determine the lending process and loan amounts based on

each individual’s demographic information, transaction

history, and other relevant credit information. This

system comprises two sub systems: Application Scoring

System (ASS) and Behavior Scoring System (BSS). The

ASS is to decide whether to continue the loan process

and its conditions by using available information which

measures each customer’s credit risk when he/she applies

for credit. The BSS is to check the credit risk of current

borrowers regularly so that the resulting information can

be used for post-control and marketing. Though not the

first of its kind, the Bank’s CSS is superior in ascertaining

a borrower’s ability to pay because it was developed using

the Bank’s carefully-accumulated collection of customer

statistical data. In addition to evaluating the credit

applications of new borrowers, the CSS plays a decisive

role in managing customer relations.

The risk management system has

proven superior to other banks’ inpredicting corporate default.

tool[ 1 2 www.kookminbank.com ]

As the de facto market leader in retail banking,

Kookmin Bank has been diversifying its income base by

leveraging its industry-leading scope of operation and

its business base. The Bank’s market positions in

investment banking, particularly project financing,

and derivatives trading are approaching the level of

dominance it enjoys in retail banking. While maintaining

its strategic focus on retail banking, the Bank continues to

practice its cherry-picking strategy--searching out domestic

and international income opportunities and focusing all

available resources on them.

Investment Banking

Investment banking is emerging as a source of major

income for Korean banks and Kookmin is an unrivaled

market leader. Project Finance International, a leading

industry journal, recently ranked the Bank 50th in the

world and 18th in Asia in terms of underwriting

performance, and 25th and 7th, respectively, in the

financial advisory category. Of course, the Bank has been

the No. 1 in these two areas for the past two years.

During the year 2000, the Bank raised a total income of

W60 billion from seven financing arrangements and 20

advisory projects. Considering the number of its

investment banking specialists, the income figure

represents a per capita income of W2.5 billion. The

income figure, however, does not tell the complete story

of the Bank’s investment banking performance. The Bank

is also active in equity & venture financing and it takes

time before any profit materializes. Last year, the Bank

invested about W30 billion in promising start-ups and

took part in large-scale telecommunications projects

through equity financing. Staffed by first-class

professionals, the Bank’s investment banking group will

continue its industry-leading position and drive the

Bank’s growth into a world-class universal banking

institution.

Income BaseDiversifying the


Since its tie-up with Macquarie Bank ofAustralia, the Bank has combined its

funding power and its part n e r ’s

e x p e rt i s e into a formidable toolfor dominating the market.

Derivatives Trading

Kookmin Bank is a leader in derivative trading.

Since its business tie-up with Macquarie Bank of

Australia, a world leader in derivative trading, two years

ago, the Bank has combined its funding power and its

partner’s expertise into a formidable tool for dominating

the domestic market. In the second half of 1999, the

Bank commenced its derivatives operations and netted

W2 billion out of US$2.76 billion in trading volume. In

2000, the net profit more than doubled to W5.9 billion

while the volume reached US$4.1 billion. The Bank was

able to improve its income performance by adopting the

latest in trading techniques and introducing innovative

products. Overnight index swap enabled the Bank to take

advantage of gaps between the Won’s short-term and

long-term interest rates. Also marketed was an asset swap

that arbitrages the interest rate gaps of Won-and foreign

currency-based securities of comparable credit ratings.

An options-imbedded time deposit, which takes

advantage of exchange rate fluctuations, was well received

by institutions as well as individual customers.

Owing to its leading performance in derivatives trading,

the Bank became the first Korean financial institution to

receive the top prize in the category of business ties from

the Asian Bankers Association. In 2001, the Bank plans

to expand its customer base to SME and individual

customers by developing derivative products that appeal

to their needs, i.e. savings accounts and securities

products that are linked to the KOSPI 200 Stock Index.

Bond Trading

Bond trading is another important source of income for

the Bank. In 2000, gains from bond trading reached

W146.5 billion, representing 10.20% in yield rate, way

above the industry average. The improved performance is

a direct result of the Bank’s efforts taken during the year

to bolster its bond business. The number of bond dealers

was increased from 2 to 7. Moreover, each dealer was

exclusively assigned to one of the five product accounts, a

new bond operation concept adopted for the first time in

the banking industry. This new bond operation method

was effective in improving both yield rates and the asset

quality of the bond portfolio.


The mergerwill create a super bankthat is unrivaled in Korea

The Background

The rapidly evolving Korean financial market is forcing

banks and other institutions to seek means of increasing

their business strengths, including mergers . Although

mergers are popular means of increasing competitiveness

in the West, such alliances have been seen as a means of

last resort in Korean business circles. It was only a few

years ago when many financial institutions disappeared

from the industry landscape under the guise of mergers.

Kookmin Bank broke that mold by announcing the

possibility of merger with one of its peers. When the

MOU was made public in December 2000, the industry

and stock market responded in kind.

The Synergy

It is clear that the merger will create a super bank that is

unrivaled in Korea in terms of assets, capital, and

customer base. More important, the synergy will enable

the merged bank to achieve efficiencies that provide cost

reduction and revenue increases. Cost reductions will be

immediate, as overlapping functions are integrated,

surplus workforce rearranged, and redundant investment

eliminated. In particular, substantial savings can take

place in the IT area. Further cost cuts in costs can be

made by restructuring distribution channels and

reallocation of functions. Reduction of funding cost will

also lead to substantial savings. All these cost savings,

however, are overweighed by the potential revenue gains

that will be brought about by the synergy of the merger.

The biggest portion of the gains will stem from the

pricing power the merged bank will have as Korea’s

largest financial institution. The combined customer base

will be a major source of income as it provides a fertile

ground for cross-sell of financial products.

The Vision

It is clear that the merger will create the benchmark bank

in Korea. But the new bank will aim higher: to become a

world-class financial institution representing Korea in the

world arena. The new Bank will be vying with other

global banks in profitability, asset quality and other key

areas. It will also be providing increasingly diverse

products, transparent management, and consistently

delivering higher shareholder value.

It is also clear that the economies of scale will lead to the

new bank’s superior performance in all banking areas. It

will be the de facto leader in retail banking. And its

wholesale banking will be lean and efficient based on its

cherry-picking strategy. But, it will focus the most on

retail banking, as this area will continue to be the most

important source of income. The combined customer

base and the increased business network together will

provide a sound basis for venturing into other areas.

Through strategic alliances, the bank plans to expand

into securities trading, insurance, and asset management

and also to identify other revenue sources where merger

synergies create a competitive edge. The vision of the

merged bank is more than a slogan. The next few years

will see it translated into a reality.

Merger


3 3

5

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New PresidentInaugurated

Mr. Sang-Hoon Kim becamethe Bank’s 14th President inMarch, 2000. He started hisbanking career at the Bank ofKorea in 1966, moving ontowork at the Office of BankingSupervision. He thenadvanced to FinancialSupervisory Service wherehe was Deputy Governoruntil his appointment atKookmin Bank. The newpresident aims to focus onenhancing managementtransparency andresponsibility as well as on e-banking to create a world-leading bank.

Asian Banking Award

For the first time in Korea,Kookmin Bank received acoveted Asian BankingAward in the businesscooperation category. Theaward was in recognition ofthe Bank’s outstandingperformance in its derivatives

cooperation project. Theproject partner wasMacquarie Bank of Australia.Since the inception of thecooperation project in 1998,the Bank successfully set up astate-of-the-art tradingsystem and effectivelynurtured the development ofthe recently-born domesticderivatives market. Held inMalaysia, this awardceremony was jointlyorganized by Asia BankAssociation and Asia-PacificAssociation of DevelopmentFinancial institutions. Eachyear, the awards are given toAsian banks with outstandingperformance in selectedc a t e g o r i e s .

Marketing Award

The Bank received anOutstand-ing Award at the“2000 Korea MarketingAwards” ceremony. TheBank was the only financialinstitution to receive thecoveted award in themarketing category. Theaward recognized the Bank’sachievement of outstandingmarketing results through thesystematic planning andexecution of marketingstrategies. Organized by aleading state-runmanagement consultingcompany, this annual awardsceremony aims to help setthe right guidelines in buyingproducts and services byidentifying and promoting topublic businesses withsuccessful marketingstrategies. A total of 77businesses, including 10financial institutions, enteredthe contest.

No. 1 Brand Value

The Bank has the highestbrand value in the financialindustry and the fourthhighest in the corporatesector excluding businessconglomerates, according toa recent survey. The findingsare based on the results of asurvey conducted by KoreaEconomic Daily incooperation with BusinessPolicy Research Institute, agovernment think tank.

ReviewThe Year in


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9

12Real Estate AssetInvestment TrustDebuted

The Bank introduced anindustry-first real estate assetinvestment trust product.Much to the Bank’s surprise,the product was sold out in afew minutes, setting anindustry record. The follow-up products were similarlysuccessful. Through theintroduction of theseproducts, the Bank haseffectively opened the era ofindirect real estate assetinvestment through financialinstitutions, thereby securingadvantages in a new growingbusiness.

Best Bank, Again

Two leading financialpublications, GlobalFinance and The Banker,selected Kookmin as thebest bank in Korea. GlobalFinance’s selection of theBank was made two yearsin a row. The selection wasmade based on the resultsof surveys of analysts atbanks, fund managementfirms, brokerage houses,and credit ratings agenciesworldwide.

Deposits Broke W70Trillion

The Bank set a newindustry record byreaching the W70 trillionmark in total deposits inSeptember 2000. The newrecord was set only threemonths after marking arecord level of W65 trillionin June. The rapid rise indeposits can be ascribedto the massive flight toquality following anindustry restructuringprocess which pushedweaker financialinstitutions into mergersor business closures.

Merger with H&CBDeclared

The Bank signed anMemorandum ofUnderstanding (MOU) withKorea Housing &Commercial Bank inDecember 2000, and declaredthe two will merge in thenear future. The purpose ofthe scheduled merger was tobring together two of the bestbanks in Korea and maximizethe synergies of cross-sellingand IT investment. Themerger will create Korea’slargest and strongest bank.

Selected as Korea’s“Best Bank” by

The Banker & Global Finance


and ForecastEconomic Review

1. Economic Review

(1) GDP GrowthIn the year 2000, the Korean economy grew 9% over the

previous year. The first half of the year saw Korea’s GDP

grow to 11% on the back of rising exports and facility

investment. In the second half, however, the figure

dropped to 7% due mainly to shrinking construction

investment following the liquidity crisis of Hyundai

Construction and the downturn of facility investments,

which had grown as high as 38% in 1999. Private

consumption, affected by increasing corporate

bankruptcies, Daewoo Motors’ default, and concerns over

rising unemployment, grew only 8% compared with 10.3%

for the previous year.

(2) Industry PerformanceSigns of depressed business conditions abounded in 2000.

Industrial production grew only 10% due to a sluggish

performance of key industries-including manufacturing,

whose average operation rate fe l l to 70%. The

deterioration of these and other economic indicators was

more pronounced in the second half. The YoY ratio of

the leading composite index dropped as low as the 1%

level, while inventory grew 19%, the highest since 1996.

The BSI, an index based on businesses’ own assessment

of their near-future profitability, continued to drop, from

104 in the first quarter of 2000 to 102 in the second

quarter and 97 in the third. The IT industry was one of

few exceptions, registering about 25% increase in exports.

(3) PricesIn early 2000, consumer prices remained 1.5% lower than

the year before, but later, rose 2.9% compared with the

same period of the year before, due mainly to rising world

oil prices which also caused public service charges to rise.

Among public services, medical insurance costs, doctor’s

fees, and public transportation fares rose most noticeably.

Wages remained stable as businesses underwent

restructuring, which prevented prices from rising further.

Producer prices rose 2.1% as higher oil prices pushed up

utility costs.

(4) International TradeKorea’s 2000 current trade balance is estimated to be a

surplus of around US$12 billion, continuing the surplus

trend since 1998. Exports have soared 21.7% to US$175.5

billion on the back of semiconductors and computers

sold to the U.S. and Asian markets. Meanwhile, imports

have grown 35.6% to US$162.0 billion, reflecting a

shrinking appetite for industrial materials as well as

consumption goods.

(5) Interest RatesInterest rates declined throughout 2000. The 3-year

government bond yield rate fell from 9.3% at the outset

of the year to 7% by year-end, while the corporate bond

rate dropped from 10.3% to 8.1% during the same period.

Market interest rates also tended downward, as

institutional fund managers competed to secure only

high-quality corporate bonds. Moreover, the Bank of

Korea increased the money supply as businesses began to

cut back their facility investment. However, despite

falling interest rates, businesses other than a handful of

high-quality corporates had cash flow problems.

(6) Exchange RatesThe Won-Dollar rate remained relatively stable untill

November 2000, hovering around the W1,110 to W1,140

range. However, in the middle of November, the Won

weakened, reaching W1,220 by December. The rate

increase was fueled by high oil prices, which started to

soar in September. Moreover, falling semiconductor

prices adversely affected exports and the instability of

some Southeast Asian currencies strengthened the

Dollar. Foreign investors also contributed to the strong

Dollar, as they began to pull out of their investment

positions, upon seeing the delay of Korea’s restructuring

process.


2. Economic Forecast

(1) Economic GrowthThe Korean economy is forecast to continue its decline

in 2001, as domestic and overseas conditions worsen. The

GDP growth rate is expected to be around 5.8%, a 3%

point decrease from 2000. Slowing facility investment,

sluggish construction, and reduced consumption is

expected to slow the economy. Exports will continue to

lead the economic growth, and if the U.S. economy

succeeds in making a soft landing, the Korean economy

could recover earlier than expected. Moreover, if the

financial industry restructuring is accelerated, and the

government injects a steady dose of public funds as it did

in 1998, the economy could enter a recovery phase and

close the year at a 6% growth rate.

(2) Industry PerformanceFacility investment growth is expected to cap at 3% in

2001, a far cry from its 2000 performance. Fearing a

liquidity crisis in the shaky financial industry, corporates

held back investment. A similar performance in

construction investments can be expected for this year.

The structural problem of the construction industry, a

growing lack of demand from the private sector and the

default of a state-run real estate trust company are some

of the most daunting problems. A substantial increase in

government’s infrastructure budget and the Inchon

International Airport railroad project, however, could

buttress the construction market. Private consumption,

dispirited by growing economic uncertainties, is expected

to grow only 4.1%.

(3) PricesPrices are forecast to rise 3% in 2001, with the rise driven

by increases in public service charges rooted in last year’s

rise in world oil prices. However, there are downward

pressures on prices. Growing unemployment, a modest

increase in wages, and weak consumption will be some of

the factors that hold down prices.

(4) International TradeKorea’s 2001 exports performance will reflect the overall

decline of the world economy compared with the

previous year. Exports are expected to grow only 9.8% to

US$192.5 billion while imports, reflecting negative market

conditions, are forecast to grow 10.9% to US$ US$180.0

billion, resulting in a trade surplus of US$10.7 billion,

falling from the year before.

(5) Interest RatesThe yield on a AA corporate bond is expected to remain

in the 7.5% range. The interest rate spread is forecast to

grow as the credit risk increases in the face of a growing

liquidity crunch in the corporate sector. However, wild

fluctuation of interest rates, as seen in the aftermath of

the 1997-98 economic crisis, is not forecasted, as

corporates will continue to be cautious about raising

funds and investment, which will drive down demand for

capital. The growing corporate credit risk and the

uncertainties surrounding the reform of the financial

industry are expected to remain unsolved for some time

to come. As a result, while the interest rates of

government bonds and high-grade corporate bonds will

continue to be stable, corporates with ratings below

investment grade will continue to face a liquidity crunch.

(6) Exchange RatesThe Won-Dollar exchange rate is expected to rise slightly

and hover in the W1,200 range in the first half of 2001.

The second half should see the rate drop to the W1,150

range due mainly to the nation’s improving trade balance.

The slowing in flow of foreign investment capital,

compounded by the unstable currencies of Southeast

Asian nations, will be pushing the rate upward in the first

half, while an expected acceleration of the on-going

industry reform in the second half should soften foreign

investors’ critical view of the nation’s restructuring

process. In particular, if oil prices head downward for an

extended period and semiconductors rise in price, the

exchange rate is expected to settle at the desired range of

W1,150.


Management’s Discussion & Analysis 22

Report of Independent Accountants (Banking Accounts) 32

Balance Sheets (Banking Accounts) 33

Statements of Income (Banking Accounts) 34

Statement of Appropriations of Retained Earnings (Banking Accounts) 35

Statements of Cash Flows (Banking Accounts) 36

Notes to Financial Statements (Banking Accounts) 37

Balance Sheets (Trust Accounts) 78

Statements of Income (Trust Accounts) 79

Statements of Cash Flows (Trust Accounts) 80

Notes to Financial Statements of Trust Account 81

Report of Independent Accountants (Consolidated) 89

Consolidated Balance Sheet 90

Consolidated Statement of Income 91

Changes in Consolidated Shareholders’ Equity 92

Consolidated Statement of Cash Flows 94

Notes to Consolidated Financial Statements 95

Financial Section

Management’s Discussion & Analysis

Operating ResultsOperating Revenue W 8,851.9 W 8,189.7 $ 7,027.0 $ 6,501.3Net Interest Income 2 , 1 5 2 . 8 1 , 9 0 6 . 5 1 , 7 0 9 . 0 1 , 5 1 3 . 5Net income 7 1 9 . 7 1 0 7 . 9 5 7 1 . 3 8 5 . 7

Per Share DataEarning per Common Share 2 , 4 0 3 3 8 8 1 . 9 0 . 3

Profitability RatiosReturn on Assets 0 . 9 7 % 0 . 1 6 % 0 . 9 7 % 0 . 1 6 %Return on Stockholders' Equity 1 7 . 9 6 % 2 . 8 0 % 1 7 . 9 6 % 2 . 8 0 %Net Interest Margin 3 . 1 2 % 3 . 1 4 % 3 . 1 2 % 3 . 1 4 %Cost-Income Ratio 3 5 . 2 4 % 3 5 . 8 5 % 3 5 . 2 4 % 3 5 . 8 5 %

Balance Sheet Data at Year-EndTotal Assets 9 6 , 2 4 2 . 4 8 2 , 4 0 5 . 3 7 6 , 4 0 1 . 0 6 5 , 4 1 6 . 6Total Credit 54,883.8 4 5 , 2 6 6 . 6 4 3 , 5 6 8 . 9 3 5 , 9 3 4 , 4Total Deposits 7 0 , 7 0 2 . 3 5 8 , 7 4 5 . 1 5 6 , 1 2 6 . 3 4 6 , 6 3 4 . 2

Capital Ratios at Year-EndTotal Capital Ratio 1 1 . 1 8 % 1 1 . 3 8 % 1 1 . 1 8 % 1 1 . 3 8 %Tier 1 Capital 6 . 8 2 % 7 . 2 6 % 6 . 8 2 % 7 . 2 6 %Tier 2 Capital 4 . 3 6 % 4 . 1 2 % 4 . 3 6 % 4 . 1 2 %

Note) 1. Conversion from Korean Won to U.S. Dollar has been made at the exchange rate of Won 1,259.7 to US$ 1.0 on December 31,2000.2. Total Assets is the sum of banking and trust accounts, less intra-accounts and discount present value.3. Total Credit is the sum of Loans in KRW and in F/C, F/C purchase, advance for customers, privately placed bond and trust loans.4. Total Deposits is the sum of banking and trust accounts.

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9

In billions of Korean Won In millions of U.S.Dollars(Except per share and ratio data) (Except per share and ratio data)

O V E RV I E W

The business environment of the year 2000 can be characterized by flight to quality and downward trend in interest rates. Facing thegrowing uncertainty of the financial markets, including the sluggish stock market, customers increasingly preferred security overprofitability and transferred their funds from the non-banking sector to the banking sector. The slowing economy and uninspiringoutlook combined to dry up corporates' appetite for capital keeping interest rates low throughout the year. These developments hada mixed effect on the banking industry. Low interest rates led to intense competition, while a steady inflow of relatively low-costopen market funds fueled the outstanding performance of those with a solid market position, including Kookmin Bank.

EARNINGS GROWTHNet Income

The Bank's 2000 net income came to W719.7 billion, W611.8 billion more than W107.9 billion for the year1999. Such a huge increase in net income can be ascribed to the following: net interest income increasedsubstantially as the inflow of low-cost funds fueled the growth of the Bank's lending activity; fee incomealso rose, including credit card fees; significant jump in equity method gains; and loss from allowancefor bad debt dropped substantially compared with the year before as the changes in the accountingstandard in 1999 caused loan loss provisions to rise dramatically.

The net income would have been higher had it not been for the declining stock market: stock tradinglosses soared, though falling interest rates led to sizable increases in valuation gains from marketablesecurities and in securities trading gains.

Likewise, pre-provision income rose from W1,396.0 billion in 1999 to W1,786.1 billion, a 27.9% increasefrom last year.

1 9 9 8 1 9 9 9 2 0 0 0(In billions of KRW)

7 2 0

7 31 0 8



[ Net Income ]

Pre-provision Income W 1,786.1 W 1,396.0 $ 1,417,9 $ 1,108.2

P r o v i s i o n s 7 4 6 . 7 1 , 2 4 4 . 9 5 9 2 . 8 9 8 8 . 3Amortization of credit losses 6 4 1 . 0 1 , 1 4 1 . 1 5 0 8 . 9 9 0 5 . 9Provision for Acceptances and

Guaranteed Losses 8 . 9 0 7 . 1 0Provision for Current year Severance

and Retired Benefits 9 6 . 8 1 0 3 . 8 7 6 . 8 8 2 . 4

Transfer from Allowance for Acceptances and Guarantees Losses 0 6 . 8 0 5 . 4

Income Tax Expense 3 1 9 . 7 5 0 . 0 2 5 3 . 8 3 9 . 7

Net Income 7 1 9 . 7 1 0 7 . 9 5 7 1 . 3 8 5 . 7

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9

In billions of Korean Won In millions of U.S.Dollars

Net Interest Income

Net interest income rose 12.9% over the past year to W2,152.8billion. This is due to interest incomerising 4.6% to W6,405.5 billion, while interest expenses inched up 0.9% to W4,252.7 billion.

Compared to 1999, the increase in interest income stemmed from a 7.5% increase in loan interest(W4,405.5 billion) which accounts for 68.8% of total interest income. Interest income from securities, incontrast, decreased 5.8% to W1,577.9 billion.

Interest expenses, on the other hand, changed little from the year before, as a W494.2 billion increase indeposit interest was offset by a W424.8 billion decrease in interest on borrowings and debentures.

1 9 9 8 1 9 9 9 2 0 0 0(In billions of KRW)

1 , 6 6 2

1 , 9 0 6

2 , 1 5 3

Net Interest Income

[ Net Interest Income ]

Net interest income rose because:* Net Interest Margin(NIM) remained unchanged in the face of falling interest rates* Both household and corporate loans rose substantially* Rise in deposits* Borrowings and debentures decreased compared with the year before

Interest Income W 6,405.5 W 6,122.1 $ 5,084.9 $ 4,860.0L o a n s 4 , 4 0 5 . 5 4 , 0 9 7 . 7 3 , 4 9 7 . 3 3 , 2 5 2 . 9S e c u r i t i e s 1 , 5 7 7 . 9 1 , 6 7 5 . 6 1 , 2 5 2 . 6 1 , 3 3 0 . 2Due from Banks 3 4 2 . 3 2 6 6 . 5 2 7 1 . 7 2 1 1 . 6Other Interest Income 7 9 . 8 8 2 . 3 6 3 . 3 6 5 . 3

Interest Expenses 4 , 2 5 2 . 7 4 , 2 1 5 . 6 3 , 3 7 6 . 0 3 , 3 4 6 . 5D e p o s i t s 3 , 0 4 8 . 3 2 , 5 5 4 . 1 2 , 4 1 9 . 9 2 , 0 2 7 . 5B o r r o w i n g s / D e b e n t u r e s 1 , 1 6 3 . 7 1 , 5 8 8 . 5 9 2 3 . 8 1 , 2 6 1 . 0Other interest income 4 0 . 7 7 3 . 0 3 2 . 3 5 8 . 0

Net Interest income 2 , 1 5 2 . 8 1 , 9 0 6 . 5 1 , 7 0 9 . 0 1 , 5 1 3 . 5

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9




Loans in Won W 40,195.8 W 32,547.5 $ 31,909.0 $ 25.837.5Household Loans 1 4 , 0 3 6 . 6 1 0 , 8 5 7 . 4 1 1 , 1 4 2 . 8 8 , 1 6 9 . 0Corporate Loans 2 6 , 1 5 9 . 2 2 1 , 6 9 0 . 1 2 0 , 7 6 6 . 2 1 7 , 2 1 8 . 5(Private Placement Corporate Bonds) ( 1 , 8 7 8 . 2 ) ( 2 , 5 2 5 . 9 ) ( 1 , 4 9 1 . 0 ) ( 2 , 0 0 5 . 2 )

Interest Rate in Loans 9 . 8 5 % 1 1 . 1 4 % 9 . 8 5 % 1 1 . 1 4 %Household Loans 1 0 . 9 8 % 1 2 . 3 2 % 1 0 . 9 8 % 1 2 . 3 2 %Corporate Loans 9 . 2 5 % 1 0 . 5 4 % 9 . 2 5 % 1 0 . 5 4 %( Private Placement Corporate Bonds) ( 9 . 2 1 ) % ( 1 2 . 3 0 ) % ( 9 . 2 1 ) % ( 1 2 . 3 0 ) %

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


In terms of loan interest, the largest portion of interest income, loans in Won rose 23.5% over the past year by W7,648.3 billion. Loansin Won comprise of household loans and corporate loans, the former of which rose 29.3%, or by W3,179.2 billion, and the latter alsoincreased 20.6%, or by W4,469.1 billion. The reason for the increase in Won loans is in conjunction with financing companiesstepping up marketing activities of mortgage loans, corporate purchasing fund loans, purchasing card loans and other products.

Meanwhile, loan interest rates averaged 9.85%, a 1.29% point decrease from the year before. Interest rates on household loandropped by 1.34% points from 12.32% to 10.98%, and those on corporate loans decreased by 1.29% points from 10.54% to 9.25%. Fallin interest rates on loans, however, failed to dampen interest income, due to the aforementioned huge increase in loan volume.

[ Loans in Won-average balance basis ]

As for interest expenses, the average balance of total deposits rose by W11,906.0 billion. All types of deposits except for someinstallment savings rose, notably time deposits which carry relatively high interest rates. Demand deposits rose by W3,826.0 billionto W17,869.3 billion, time deposits by W5,275.1 billion to W23,283.1 billion, mutual installment by W1,056.0 billion to W4,633.0billion, and CD, RP and cover notes combined to increase by W1,362.6 billion to W2,395.1 billion. Meanwhile, debentures decreasedby W2,476.4 billion to W4,700.7 billion, as much of them matured during the first half of the year, while new accounts were mainlyopened in the latter half of the year.

Interest rates on deposits and debentures followed market interest rates and decreased by 0.59% points to 5.89%. Interest rates onCD, RP or cover notes, however, increased by 0.35% points to 6.98%, reflecting the Bank's effort to attract customers willing todeposit their money on a long-term basis. Interest rates on debentures decreased by 1.10% points to 12.09% due mainly to thecontinued maturity of high interest rate debentures.

Overall, interest expenses inched up 0.9% over the past year, as the increase of deposits was considerably offset by the decrease ofdebentures and decline in interest rates.

Interest Income Interest Expenses

1.25 %5.34 %

24.63 %68.78 %

0.96 %27.36 %71.68 %

D e p o s i t sB o r r o w i n g s / D e b e n t u r e sOther interest income

L o a n sS e c u r i t i e sDue from BanksOther Interest Income



[ Deposits and Debentures-average balance basis ]

Non-Interest Income and Non-Interest Expense

Last year, non-interest income rose W378.8 billion to W2,446.4 billion, while non-interest expensedecreased W45.1 billion to W3,705.6 billion, thus registering a net gain of W423.9 billion.

After deducting commission expenses, commission revenues rose by W68.1 billion, thanks mainly tocredit card fees which jumped by W47.6 billion to W115.4 billion. On the non-interest expense side,commissions paid in Won dropped by W34.8 billion.

Securities-related gains inched up W34.7 billion, while securities-related losses soared W67.6 billion.The sluggish stock market left a blow to the securities business of the Bank as well as its peers, wipingoff gains from securities evaluation and sales due to falling interest rates. Over the course of the year,the KOSPI, Korea Stock Price Index, dropped more than 50%, finishing the year at 505 points, a far cryfrom 1,028 points at the outset of the year.

Compared to 1999, general & administrative expenses (including severance pay) rose W61.7 billion toW1,011.0 billion due mainly to wage increases and retroactive increase of wages.

Net Interest Spread

Net interest spread decreased 0.73% to 3.91% over the past year, as total interest rate on deposits and loans decreased 0.56% and1.29%, respectively. Likewise, net interest margin (NIM) fell 0.02% to 3.12%. Interest rate spread decreased more than NIM becauseforeign currency fund margin rose while interest expenses rate of debentures dropped substantially. However, the cost/income ratioremained an industry-low at 35.24%, a big contrast to the 47.20% in 1998.

[ Net Interest Spread ]

Average Deposits W 48,706.7 W 38,163.3 $ 38,665.3 $ 30,295.5(Demand Deposits) 1 7 , 8 6 9 . 3 1 4 , 0 4 3 . 3 1 4 , 1 8 5 . 4 1 1 , 1 4 8 . 1(Time Deposits) 2 3 , 2 8 3 . 1 1 8 , 0 0 8 . 0 1 8 , 4 8 3 . 1 1 4 , 2 9 5 . 5(Mutual Installment) 4 , 6 3 3 . 0 3 , 5 7 7 . 0 3 , 6 7 7 . 9 2 , 8 3 9 . 6

CD, RP, Cover Notes 2 , 3 9 5 . 1 1 , 0 3 2 . 5 1 , 9 0 1 . 3 8 1 9 . 6

Total Deposits Average 5 1 , 1 0 1 . 8 3 9 , 1 9 5 . 8 4 0 , 5 6 6 . 6 3 1 , 1 1 5 . 2

D e b e n t u r e s 4 , 7 0 0 . 7 7 , 1 7 7 . 1 3 , 7 3 1 . 6 5 , 6 9 7 . 5

Deposit Interest Rates 5 . 8 9 % 6 . 4 8 % 5 . 8 9 % 6 . 4 8 %(Interest Rate on Demand Deposits) 2 . 6 2 % 2 . 7 0 % 2 . 6 2 % 2 . 7 0 %(Interest Rate on Time Deposits) 7 . 4 0 % 8 . 4 2 % 7 . 4 0 % 8 . 4 2 %(Interest Rate on Mutual Installment) 8 . 7 2 % 9 . 1 1 % 8 . 7 2 % 9 . 1 1 %

Interest Rates on CD, RP, Cover Notes 6 . 9 8 % 6 . 6 3 % 6 . 9 8 % 6 . 6 3 %

Interest Rate on Total Deposits 5 . 9 4 % 6 . 5 0 % 5 . 9 4 % 6 . 5 0 %

Interest Rate on Debentures 1 2 . 0 9 % 1 3 . 1 9 % 1 2 . 0 9 % 1 3 . 1 9 %

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


Interest Rate Received on Loans 9 . 8 5 % 1 1 . 1 4 %Interest Rate on Deposits 5 . 9 4 % 6 . 5 0 %Net Interest Spread 3 . 9 1 % 4 . 6 4 %Net Interest Margin 3 . 1 2 % 3 . 1 4 %Cost / Income Ratio 3 5 . 2 4 % 3 5 . 8 5 %

2 0 0 0 1 9 9 9

1 , 2 9 2

2 , 0 6 8

2 , 4 4 6

Non-Interest Income

1998 1999 2 0 0 0(In billions of KRW)



Amortization of credit losses amounted to W641.0 billion, W500.1 billion less than the W1,141.1 billionof 1999. This seems to be a great improvement, but the 1999 figure was an exception, as changes inthe accounting standard in 1999 brought about a huge increase in loan loss provisions. As a result,amortization of credit loss fell back to normal levels in 2000.

Non-operating income rose W85.8 billion, due mainly to a W181.1 billion increase in valuation gainsfrom equity investments in Kookmin Credit Card Co., Ltd. a subsidiary, which alone contributed toW223.2 billion in equity method gains. The outstanding profit performance of the subsidiary wasenough to offset a W138.9 decrease in gains on disposition of investment securities.

Non-operating expenses, on the other hand, dropped W125.5 billion from W422.6 billion to W297.1billion. The drop in non-operating expenses resulted from a W136.9 billion decrease in loss fromdisposition of investment securities and a W100.8 decrease in loss from sales of receivables whichwas in turn due to a change in the method of calculation loss from sales of receivables. Before the

change, the loss was defined as the sum of the receivables minus the sum of the sales, whereas after the change, the loss wasdefined as the sum of the receivables minus the sum of the sales plus the provisions made for the receivables.

[ Non-Interest Income ]

[ Non-Interest Expense ]

2 , 4 5 9

3 , 7 5 13 , 7 0 6

Non-Interest Expense

Non-Interest Income W 2,446.4 W 2,067.6 $ 1,942.0 $ 1,641.3Commissions Revenues 3 3 1 . 8 3 0 1 . 9 2 6 3 . 4 2 3 9 . 7Gain on Securities Transactions 1 8 9 . 8 1 5 5 . 1 1 5 0 . 7 1 2 3 . 1Gain on Foreign Exchange Transaction 2 7 8 . 6 2 1 5 . 8 2 2 1 . 2 1 7 1 . 3Trust Fees & Commissions received from

Trust Account 2 5 3 . 9 9 3 . 6 2 0 1 . 6 7 4 . 3Gain on Derivatives Trading 1 , 3 9 2 . 3 1 , 2 9 4 . 4 1 , 1 0 5 . 3 1 , 0 2 7 . 5O t h e r s 0 . 0 6 . 8 0 5 . 4

Non-Operating Income 4 4 2 . 9 3 5 7 . 1 3 5 1 . 6 2 8 3 . 5

Total Non-Interest and Non-Operating Income 2 , 8 8 9 . 3 2 , 4 2 4 . 7 2 , 2 9 3 . 6 1 , 9 2 4 . 8

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


Non-Interest Expense W 3,705.6 W 3,750.7 $ 2,941.7 $ 2,977.5Commission Expense 5 1 . 0 8 9 . 2 4 0 . 5 7 0 . 8Loss on Disposition of Traded Securities 1 5 0 . 4 8 2 . 8 1 1 9 . 4 6 5 . 7Loss on Foreign Exchange Transaction 8 2 . 6 1 5 1 . 0 6 5 . 6 1 1 9 . 9Subsidy for Trust Account 1 5 8 . 3 7 . 5 1 2 5 . 7 6 . 0Loss on Derivatives Trading 1 , 4 9 4 . 3 1 , 2 5 3 . 3 1 , 1 8 6 . 2 9 9 4 . 9General & Administrative Expense 1 , 0 1 1 . 0 9 4 9 . 3 8 0 2 . 6 7 5 3 . 6Amortization of Credit Losses 6 4 1 . 0 1 , 1 4 1 . 1 5 0 8 . 9 9 0 5 . 9O t h e r s 1 1 7 . 0 7 6 . 5 9 2 . 9 6 0 . 7

Non-Operating Expense 2 9 7 . 1 4 2 2 . 6 2 3 5 . 8 3 3 5 . 5

Total Non-interest and Non-operating expense 4 , 0 0 2 . 7 4 , 1 7 3 . 3 3 , 1 7 7 , 5 3 , 3 1 2 . 9

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


1998 1999 2 0 0 0(In billions of KRW)



S e c u r i t i e s

Securities are comprised of stocks, government bonds, debentures, corporate bond, beneficial certificates and traded securities inforeign currency. Securities are divided into marketable and investment securities, depending on the duration of possession.

As of the end of 2000, marketable securities remained nearby unchanged in aggregated value, but stocks and beneficial certificatesdropped over the past year from W158 billion and W426 billion, respectively, to W16 billion and W14 billion. In contrast, governmentbonds jumped from W603 billion to W1,330 billion.

Investment securities, on the other hand, rose W2,381 billion from W14,513 billion to W16,894 billion. Despite the fall in bondstabilization fund by W946 billion, the rise comprises W1,065 billion and W2,318 billion in investment trust management company'sbeneficial certificates and in corporate bonds, respectively.

[ Securities ]

A S S E T S

L o a n s

As of 2000, loans in Won outstanding amounted to W43,436 billion, up W10,163 billion, or 30.5%, from the year before. Householdloans and corporate loans both rose, by W4,025 billion and W4,750 billion, respectively. The increase of corporate loans, asmentioned in the interest income section, stemmed from the Bank's campaign to attract quality SMEs and expanded loans forcorporate purchasing activities. Household loans also increased on the back of new loan products and aggressive marketingactivities.

In case of corporate loans, SME loans outpaced large corporate loans in growth, reflecting the Bank's commitment to the growth ofSMEs. The growth of SME loans also contributed to the Bank's increased market share in SME banking. Over the year, the Bank'sshare increased from 13.6% to 14.6%.

[ Loans in Won - Banking Account ]

Marketable Securities W 2,458 W 2,492 $ 1,951 $ 1,978Traded Securities in Won 2 , 4 4 1 2 , 4 6 7 1 , 9 3 8 1 , 9 5 8Traded Securities in Foreign Currency 1 7 2 5 1 3 2 0

Investment Securities 1 6 , 8 9 4 1 4 , 5 1 3 1 3 , 4 1 1 1 1 , 5 2 1To be sold before maturity 8 , 4 0 1 8 , 9 3 6 6 , 6 6 9 7 , 0 9 4To be held till maturity 8 , 4 9 3 5 , 5 7 7 6 , 7 4 2 4 , 4 2 7

T o t a l 1 9 , 3 5 2 1 7 , 0 0 5 1 5 , 3 6 2 1 3 , 4 9 9

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


A m o u n t % A m o u n t % A m o u n t A m o u n t

Household Loans W 1 6 , 1 2 8 3 7 . 2 W 1 2 , 1 0 3 3 6 . 4 $ 1 2 , 8 0 3 $ 9 , 6 0 8Corporate Loans 2 5 , 2 9 3 5 8 . 2 2 0 , 5 4 3 6 1 . 7 2 0 , 0 7 9 1 6 , 3 0 8

S M E s 1 9 , 4 7 2 4 4 . 8 1 5 , 6 1 2 4 6 . 9 1 5 , 4 5 8 1 2 , 3 9 3Large Corporations 5 , 8 2 1 1 3 . 4 4 , 9 3 1 1 4 . 8 4 , 6 2 1 3 , 9 1 4

Loans to Public Funds 1 , 9 6 4 4 . 5 5 5 8 1 . 7 1 , 5 5 9 4 4 3O t h e r s 5 1 0 . 1 6 9 0 . 2 4 0 5 5Total 4 3 , 4 3 6 1 0 0 . 0 3 3 , 2 7 3 1 0 0 . 0 3 4 , 4 8 1 2 6 , 4 1 3

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


As of December 31

As of December 31



Non-Performing Loans

As of 2000, non-performing loans, those classified as substandard and below, amounted to W3,833 billion, W1,267 billion less than theyear before. The substandard and estimated loss categories saw W1,149 billion and W323 billion decreases, respectively, while doubtfulrose by W205 billion. Again, the W630 billion in write-offs and the sale of W387 billion in bad loans contributed to the reduction of NPLs.

The reduction also lowered the NPL ratio. As of the year-end, the ratio was 6.98%, a 4.29% point drop from the previous year. The NPLratio for corporate loans dropped by 5.51% points to 9.47%, while that of household loans decreased by 1.7% to 1.42%. In addition to thewrite-off and the sales of bad loans, the increase in total loans contributed to the decrease of the NPL ratio.

Moreover, loan loss provisions outstanding stood at W2,220 billion, W48 billion less than the year before. Owing to the decreased NPLs,provisions for NPLs accounted for 57.9% of total provisions, which represents a 13.4% point increase. This resulted in additionalprovisions amounting to W276 billion, set aside on top of the required amount.

[ NPLs and Loan Loss Provisions ]

* Trust account and guarantees included

ASSET QUALITY

Delinquent Loans

Last year, loans overdue for one month and less stood at W1,773.6 billion, W555.4 billion less than the year before. The reductionstemmed from both household loans and corporate loans, the former by W181.5 billion and the latter by W373.9 billion.

In spite of total loans increasing by W8,728.6 billion, the Bank reduced its delinquent loans outstanding through W630 billion in write-offs and W387 billion sale of bad loans.

Likewise, the delinquency rate dropped 1.98% points to 3.42%. By type, household loans saw a 1.75% point decrease while corporateloans saw a 2.10% point decrease.

[ Delinquent Loans ]

Delinquent Loans W 1 , 7 7 3 . 6 W 2 . 3 2 9 . 0 $ 1 , 4 0 8 . 0 $ 1 , 8 4 8 . 9(Household Loans) ( 4 0 8 . 4 ) ( 5 8 9 . 9 ) ( 3 2 4 . 2 ) ( 4 6 8 . 3 )(Corporate Loans) ( 1 , 3 6 5 . 2 ) ( 1 , 7 3 9 . 1 ) ( 1 , 0 8 3 . 8 ) ( 1 , 3 8 0 . 6 )

Delinquency Rate 3 . 4 2 % 5 . 4 0 % 3 . 4 2 % 5 . 4 0 %(Household Loans) ( 2 . 4 1 ) % ( 4 . 1 6 ) % ( 2 . 4 1 ) % ( 4 . 1 6 ) %(Corporate Loans) ( 3 . 9 1 ) % ( 6 . 0 1 ) % ( 3 . 9 1 ) % ( 6 . 0 1 ) %

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


Total Credit W 54,884 W 45,267 $ 43,569 $ 35,935Non-Performing Loans 3 , 8 3 3 5 , 1 0 0 3 , 0 4 3 4 , 0 4 9S u b s t a n d a r d 2 , 4 5 5 3 , 6 0 4 1 , 9 4 9 2 , 8 6 1D o u b t f u l 1 , 0 6 7 8 6 2 8 4 7 6 8 4Estimated Loss 3 1 1 6 3 4 2 4 7 5 0 3

NPL Ratio 6 . 9 8 % 1 1 . 2 7 % 6 . 9 8 % 1 1 . 2 7 %

Loan Loss Provisions 2 , 2 2 0 2 , 2 6 8 1 , 7 6 2 1 , 8 0 0

Ratio of Provisions to NPLs 5 7 . 9 % 4 4 . 5 % 5 7 . 9 % 4 4 . 5 %

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


As of December 31

As of December 31



TRUST ACCOUNT

Net income from trust operations decreased W40 billion over the past year to W79 billion. As the stock market remained sluggishand investment trust firms went bankrupt, customers lost their trust in the market, which lead to an industry-wide decrease inbusiness activity. Moreover, the introduction of the mark-to-market bond valuation system effectively stopped the sale of bookvalued-based funds. As a result, the Bank's trust business volume as of the year-end stood at W14,198 billion, W1,678 billion lessthan the year before. In addition, the full recording of present value discounts related to restructured loans caused allowances forvaluation of receivables to balloon, while increased losses from stock trading and low yield rates of development money trustsforced the Bank to increase subsidy for trust account to cover the guaranteed yield.

[ Trust Account ]

L I A B I L I T I E S

To review the Bank's sources of funds, deposits in Won as of the year-end accounted for 73.2% of total liabilities, up 4.7% points fromthe year before. Compared to 1999, borrowings and debentures decreased by 4.1% and 2.0%, respectively, in terms of proportion tototal liabilities.

Deposits rose W13,653 billion, or 31.8%, to W56,522 at the year-end. Demand deposits shrank W531 billion, while savings-typedeposits swelled W1,279 billion, as the uncertainties of the non-bank financial industry as well as the sluggish stock market droveopen market funds to the banking industry.

In addition to customers' growing preference for stability, the Bank stepped up marketing of new products including a mortgage loanand a tax-free savings account. As a result, the Bank's market share in total deposits improved 2.38% points from the 16.09% of 1999to 18.47%, the biggest in the banking industry.

Borrowings, on the other hand, shrank by W1,211 billion to W7,066 billion. Despite the fact that bills sold and bonds sold underredemption agreements rose somewhat over the year before, foreign currency borrowings dropped remarkably, by W1,487 billion toW1,811 billion.

[ Liabilities ]

A m o u n t % A m o u n t % A m o u n t % A m o u n t %

D e p o s i t s W 5 6 , 5 2 2 7 3 . 2 W 4 2 , 8 6 9 6 8 . 5 $ 4 4 , 8 6 9 7 3 . 2 $ 3 4 , 0 3 1 6 8 . 5B o r r o w i n g s 7 , 0 6 6 9 . 1 8 , 2 7 7 1 3 . 2 5 , 6 0 9 9 . 1 6 , 5 7 1 1 3 . 2D e b e n t u r e s 6 , 6 7 5 8 . 6 6 , 6 1 2 1 0 . 6 5 , 2 9 9 8 . 6 5 , 2 4 9 1 0 . 6O t h e r s 7 , 0 0 2 9 . 1 4 , 8 5 2 7 . 7 5 , 5 5 8 9 . 1 3 , 8 5 2 7 . 7

T o t a l 7 7 , 2 6 5 1 0 0 . 0 6 2 , 6 1 0 1 0 0 . 0 6 1 , 3 3 6 1 0 0 . 0 4 9 , 7 0 2 1 0 0 . 0

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


Money Trusts Outstanding W 1 4 , 1 9 8 W 15,876 $ 11,271 $ 12,603Money Trusts Averaged 1 5 , 1 2 0 1 7 , 1 5 9 1 2 , 0 0 3 1 3 , 6 2 1

Commission Revenues 3 0 1 4 5 8 2 3 9 3 6 4Trust Fees and Commissions 2 8 4 4 2 5 2 2 5 3 3 7Commissions Received from 1 7 3 3 1 3 2 6Termination of Commodities

E x p e n s e s 2 2 2 3 3 9 1 7 6 2 6 9Subsidy for Trust Account 4 4 5 3 5 4Provision for Special Provision 5 - 5 4 - 4Provision for Allowance for Valuationof Receivables 1 7 3 3 3 9 1 3 7 2 6 9

Net Trust Income 7 9 1 1 9 6 3 9 4

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9


As of December 31



C A P I TAL ADEQUACY

The BIS capital adequacy ratio was 11.18%, 0.2% points lower than the year before. The tier 1 ratio was 6.82%, 0.44% points lower,while the tier 2 ratio was 4.36%, 0.24% points higher. The slight decrease of the BIS ratio was due to an increase in loans which led toa W10,912 billion increase in risk-weighted assets totaling W56,347 billion at the year-end. The tier 1 capital reflects the increase ofretaining earnings following an increased net income, while tier 2 capital rose by W586 billion as a result of a W72 billion increase inloan loss provision and of a W504 increase in subordinated bond.

[ BIS Capital Ratio ]

Tier 1 Capital W 3,843 W 3,301 $ 3,051 $ 2,620

Paid-in Capital 1 , 6 9 8 1 , 6 9 8 1 , 3 4 8 1 , 3 4 8

Capital Reserve 1 , 4 7 0 1 , 4 0 8 1 , 1 6 7 1 , 1 1 8

Retained Earning 7 0 8 2 6 3 5 6 2 2 0 9

O t h e r s - 3 3 - 6 8 - 2 6 - 5 4

Tier 2 Capital 2 , 4 5 8 1 , 8 7 2 1 , 9 5 1 1 , 4 8 6

Revaluation Reserves 1 7 7 1 7 7 1 4 1 1 4 1

Reserve for Possible Loan Losses 3 4 9 2 7 7 2 7 7 2 2 0

Subordinated Debt 1 , 9 2 2 1 , 4 1 8 1 , 5 2 6 1 , 1 2 6

O t h e r s 1 0 0 8 0

A d j u s t m e n t s - 3 - 1 - 2 - 1

Total Core and Supplementary Capital 6 , 2 9 8 5 , 1 7 2 5 , 0 0 0 4 , 1 0 6

Risk-Weighted Assets 5 6 , 3 4 7 4 5 , 4 3 5 4 4 , 7 3 0 3 6 , 0 6 8O n - B a l a n c e 5 2 , 7 0 3 4 3 , 0 8 3 4 1 , 8 3 8 3 4 , 2 0 1O f f - B a l a n c e 3 , 6 4 4 2 , 3 5 2 2 , 8 9 3 1 , 8 6 7

Capital Adequacy Ratio(%) 1 1 . 1 8 % 1 1 . 3 8 % 1 1 . 1 8 % 1 1 . 3 8 %Tier 1 6 . 8 2 % 7 . 2 6 % 6 . 8 2 % 7 . 2 6 %Tier 2 4 . 3 6 % 4 . 1 2 % 4 . 3 6 % 4 . 1 2 %

2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9




S U B S I D I A R I E S

Kookmin bank has been aggressively restructuring its subsidiaries to strive for better performance. As of the end of 1998, the Bankhad 14 local subsidiaries, and during the past two years, they were either sold or merged. Two finance subsidiaries were sold, threefinance subsidiaries were merged, KLB Securities was closed, and KLB Economic Institute was going through bankruptcy at the timeof this report. As a result only seven subsidiaries remained as of the end of 2000.

Most subsidiaries have performed very well last year, such as Kookmin Credit Card and Kookmin Bank Venture Capital. Furthermore,Kookmin Credit Card was listed on the KOSDAQ in July last year to improve transparency. Last year, Kookmin Credit Card's netincome was W 300 billion and equity method gains was W 223billion out of total of W 226 billion.

Once the merger with H&CB is complete, the merged bank plans to expand into insurance, securities and other areas throughstrategic alliances in order to grow into a universal banking group.

[ Domestic Subsidiaries ]

Note 1) The above figures are based on Dec 31, 2000 results, except KITM KF KL(*) who have their fiscal year end at Mar 31, 2000.2) Kookmin Leasing Co., Ltd is currently under a private work-out program with creditor banks.

Kookmin Venture Capital Co., Ltd. 2 0 3 . 9 1 5 0 . 1 5 3 . 8 4 6 . 9 4 . 4

Kookmin Bank Venture Capital Co., Ltd. 7 6 . 9 1 3 . 1 6 3 . 9 2 2 . 9 1 4 . 3

Kookmin Credit Card Co., Ltd. 8 , 1 8 1 . 5 7 , 3 7 8 . 9 8 0 2 . 5 1 , 4 6 0 . 6 3 0 0 . 5

Kookmin Data System Corp. 1 5 . 5 5 . 1 1 0 . 4 2 1 . 0 1 . 9

* Kookmin Bank InvestmentTrust Management Co., Ltd. 3 4 . 6 0 . 9 3 3 . 7 3 . 7 0 . 5

* Kookmin Futures Co., Ltd. 2 9 . 8 9 . 6 2 0 . 3 2 . 8 0 . 2

* Kookmin Leasing Co.,Ltd. 1 , 2 7 5 . 7 1 , 4 4 8 . 7 - 1 7 2 . 9 3 1 3 . 2 - 1 3 2 . 4

Total Asset Total Liabilities Shareholders' Equity S a l e s Net Income



Report of Independent Accountants (Banking Accounts)

To the Shareholders and Board of Directors Kookmin Bank

We have audited the accompanying balance sheet of Kookmin Bank (“the Bank”) as of December 31, 2000 and 1999, and the related statements of income,appropriations of retained earnings, and cash flows for the years then ended, expressed in Korean Won. These financial statements are the responsibility of theBank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kookmin Bank as of December 31, 2000and 1999, and the results of its operations, the changes in its retained earnings and its cash flows for the years then ended in conformity with financialaccounting standards generally accepted in the Republic of Korea.

As discussed in Note 33 to the financial statements, the Bank entered into a Memorandum of Understanding (“the MOU”) for a merger with H&CB on December22, 2000. At the balance sheet date, the Bank is negotiating with H&CB concerning the merger including share exchange rates and merger procedures. As ofDecember 31, 1999, total assets and total shareholders’ equity of H&CB’s banking accounts are W46,651,306 million and W2,197,860 million, respectively.

As discussed in Note 34 to the financial statements, Kookmin Singapore (Merchant Bank) Ltd., a foreign subsidiary of the Bank, was liquidated during 2000 andthe Bank assumed the subsidiary’s asset balances of W186,999 million and guarantees and acceptances of W2,230 million and offset the subsidiary’s liabilitybalances of W188,143 million with the Bank’s loans and other rights against the subsidiary.

In relation to Kookmin Leasing Co., Ltd., a subsidiary of the Bank, the Bank holds W84,103 million of investment securities and W142,468 million of loans as ofDecember 31, 2000. Related to these amounts, W84,103 million of loss on investment in associates and W65,963 million of provision for loan losses wererecorded in the previous years’ financial statements. Kookmin Leasing Co., Ltd. is in the process of implementing a private restructuring plan under agreementswith its creditors including the Bank. Its ability to continue as a going concern is dependent upon the results of the private restructuring plan. No furtheradjustments have been made in the accompanying financial statements related to such uncertainties.

Under the Mutual Savings & Finance Company Act, when mutual savings & finance companies are sold, the deposits (limited to deposit amount at date of sale)of these companies are guaranteed as to payment by the seller for three years in case of bankruptcy within this period. The Bank is under such liability forOrange Mutual Savings & Finance Co., Ltd. (previously ‘Kookmin Mutual Savings & Finance Co., Ltd.’) and Bukook Mutual Savings & Finance Co., Ltd. whichwere sold during 1999. Orange Mutual Savings & Finance Co., Ltd. suspended its operations as of December 31, 2000

Without qualifying our opinion, we draw attention to Note 17 to the financial statements. The operations of the Bank have been significantly affected, and maycontinue to be affected for the foreseeable future, by the general adverse economic conditions in the Republic of Korea and in the Asia Pacific region. Underthese adverse economic conditions, certain customers of the Bank, including Daewoo Group companies, are in the process of corporate restructuring underagreements with their creditor banks. As of December 31, 2000, in relation to the companies under restructuring procedures (workout, court receivership, orcourt mediation, exclusive of Daewoo Group companies) and Daewoo Group companies, the loan amounts outstanding are W2,891,717 million and W540,493million, respectively, present value discounts are W127,184 million and W41,094 million, respectively, and provision for loan losses are W765,627 million andW328,569 million, respectively. Actual losses from these loans may differ from the provision amounts. The ultimate effect of these significant uncertainties onthe financial position of the Bank as of the balance sheet date cannot presently be determined and accordingly, no adjustments have been made in theaccompanying financial statements related to such uncertainties.

The amounts expressed in U.S. dollars are provided solely for the convenience of the reader and have been translated on the basis set forth in Note 3 to thefinancial statements.

The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accountingprinciples and practices generally accepted in countries and jurisdictions other than the Republic of Korea. The procedures and practices utilized to audit such financialstatements may differ from those generally accepted and applied in other countries and jurisdictions. Accordingly, this report and the accompanying financialstatements are not intended for use by those who are not informed about Korean accounting principles or auditing standards and their application in practice.

Seoul, Korea. January 24, 2001


Samil Accounting CorporationHanil Group Building 21st Flr. 191 Hangangro 2 ga,Yongsanku Seoul 140-702, KOREA(C.P.O. Box 2170, 100-621)Telephone +82 2 709-0800 Facsimile +82 2 792-7001

BALANCE SHEETS (Banking Accounts) December 31, 2000 and 1999

In millions of Korean Won In thousands of U.S.Dollars(Note 3)

2000 1999 2000 1999

A S S E T S

Cash and due from banks (Note 4) W 6 , 6 1 8 , 7 5 0 W 5 , 4 9 7 , 8 7 7 $ 5 , 2 5 4 , 2 2 7 $ 4 , 3 6 4 , 4 3 3

Trading securities (Note 5) 2 , 4 5 7 , 7 5 4 2 , 4 9 1 , 9 1 7 1 , 9 5 1 , 0 6 3 1 , 9 7 8 , 1 8 3

Investment securities (Note 6) 1 6 , 8 9 3 , 5 5 1 1 4 , 5 1 3 , 1 6 2 1 3 , 4 1 0 , 7 7 3 1 1 , 5 2 1 , 1 2 5

Loans (Note 7) 5 0 , 5 7 0 , 4 1 1 3 8 , 8 7 2 , 3 3 2 4 0 , 1 4 4 , 8 0 5 3 0 , 8 5 8 , 4 0 5

Fixed assets (Notes 2 and 9) 1 , 2 7 7 , 5 8 8 1 , 2 9 2 , 7 0 2 1 , 0 1 4 , 2 0 0 1 , 0 2 6 , 1 9 8

Other assets (Note 11) 3 , 7 0 3 , 5 1 9 3 , 5 1 3 , 4 9 8 2 , 9 4 0 , 0 0 1 2 , 7 8 9 , 1 5 5

Total assets W 8 1 , 5 2 1 , 5 7 3 W 6 6 , 1 8 1 , 4 8 8 $ 6 4 , 7 1 5 , 0 6 9 $ 5 2 , 5 3 7 , 4 9 9

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits (Note 12) W 5 6 , 5 2 2 , 1 4 5 W 4 2 , 8 6 9 , 2 0 9 $ 4 4 , 8 6 9 , 5 2 9 $ 3 4 , 0 3 1 , 2 8 4

Borrowings (Note 13) 7 , 0 6 6 , 2 7 3 8 , 2 7 6 , 7 4 1 5 , 6 0 9 , 4 8 9 6 , 5 7 0 , 4 0 7

Debentures (Note 14) 6 , 6 7 4 , 9 4 2 6 , 6 1 1 , 4 5 6 5 , 2 9 8 , 8 3 5 5 , 2 4 8 , 4 3 7

Other liabilities (Note 16) 7 , 0 0 1 , 6 9 2 4 , 8 5 2 , 2 0 1 5 , 5 5 8 , 2 2 1 3 , 8 5 1 , 8 7 0

Total liabilities 7 7 , 2 6 5 , 0 5 2 6 2 , 6 0 9 , 6 0 7 6 1 , 3 3 6 , 0 7 4 4 9 , 7 0 1 , 9 9 8

Commitments and contingencies (Note 17)

Common stock, par value : W5,000,

authorized : 1,000 million shares,

issued and outstanding : 299,613,413 shares

(Notes 1 and 18) 1 , 4 9 8 , 0 6 7 1 , 4 9 8 , 0 6 7 1 , 1 8 9 , 2 2 5 1 , 1 8 9 , 2 2 5

Preferred stock, par value : W5,000

non-cumulative, non-participating


(Notes 1 and 18) 2 0 0 , 0 0 0 2 0 0 , 0 0 0 1 5 8 , 7 6 8 1 5 8 , 7 6 8

Capital surplus (Note 19) 1 , 6 0 0 , 5 9 0 1 , 6 0 0 , 9 8 3 1 , 2 7 0 , 6 1 2 1 , 2 7 0 , 9 2 4

Retained earnings (Note 21) 8 7 5 , 0 4 5 3 4 5 , 9 9 3 6 9 4 , 6 4 5 2 7 4 , 6 6 3

Capital adjustment (Note 22) 8 2 , 8 1 9 ( 7 3 , 1 6 2 ) 6 5 , 7 4 5 ( 5 8 , 0 7 9 )

Total shareholders’ equity 4 , 2 5 6 , 5 2 1 3 , 5 7 1 , 8 8 1 3 , 3 7 8 , 9 9 5 2 , 8 3 5 , 5 0 1

Total liabilities and shareholders’ equity W 8 1 , 5 2 1 , 5 7 3 W 6 6 , 1 8 1 , 4 8 8 $ 6 4 , 7 1 5 , 0 6 9 $ 5 2 , 5 3 7 , 4 9 9

The accompanying notes are an integral part of these statements.


Interest income :Interest on due from banks (Note 29) W 3 4 2 , 3 1 3 W 2 6 6 , 4 6 7 $ 2 7 1 , 7 4 2 $ 2 1 1 , 5 3 2Interest on securities (Note 29) 1 , 5 7 7 , 8 3 4 1 , 6 7 5 , 6 3 8 1 , 2 5 2 , 5 4 7 1 , 3 3 0 , 1 8 8Interest on loans (Note 29) 4,405,543 4 , 0 9 7 , 7 1 6 3 , 4 9 7 , 2 9 6 3 , 2 5 2 , 9 3 0Other interest income 7 9 , 7 9 0 8 2 , 2 7 9 6 3 , 3 4 0 6 5 , 3 1 7

6 , 4 0 5 , 4 8 0 6 , 1 2 2 , 1 0 0 5 , 0 8 4 , 9 2 5 4 , 8 5 9 , 9 6 7Interest expenses :

Interest on deposits (Note 29) 3 , 0 4 8 , 3 1 3 2 , 5 5 4 , 1 0 4 2 , 4 1 9 , 8 7 2 2 , 0 2 7 , 5 4 9Interest on borrowings 4 8 9 , 3 4 2 5 6 7 , 6 6 2 3 8 8 , 4 5 9 4 5 0 , 6 3 3Interest on debentures 6 7 4 , 3 9 3 1 , 0 2 0 , 8 8 3 5 3 5 , 3 6 0 8 1 0 , 4 1 7Other interest expenses 4 0 , 6 5 1 7 2 , 9 9 6 3 2 , 2 7 1 5 7 , 9 4 8

4 , 2 5 2 , 6 9 9 4 , 2 1 5 , 6 4 5 3 , 3 7 5 , 9 6 2 3 , 3 4 6 , 5 4 7

Net interest income 2 , 1 5 2 , 7 8 1 1 , 9 0 6 , 4 5 5 1 , 7 0 8 , 9 6 3 1 , 5 1 3 , 4 2 0

Bad debt expense (Note 7) 6 4 0 , 9 8 0 1 , 1 4 1 , 1 4 4 5 0 8 , 8 3 5 9 0 5 , 8 8 6

Net interest income after bad debt expenses 1 , 5 1 1 , 8 0 1 7 6 5 , 3 1 1 1 , 2 0 0 , 1 2 8 6 0 7 , 5 3 4

Non-interest income :Fees and commission income (Note 29) 3 3 1 , 8 0 7 3 0 1 , 8 7 3 2 6 3 , 4 0 2 2 3 9 , 6 3 9Dividends on trading securities 1 , 9 0 8 1 , 8 3 2 1 , 5 1 5 1 , 4 5 4Dividends on investment securities 4 3 , 7 7 3 8 , 6 8 4 3 4 , 7 4 9 6 , 8 9 4Gain on foreign currency transactions 2 7 8 , 6 0 7 2 1 5 , 8 0 4 2 2 1 , 1 6 9 1 7 1 , 3 1 4Gain on derivatives (Note 10) 1 , 3 9 2 , 3 3 0 1 , 2 9 4 , 4 3 4 1 , 1 0 5 , 2 8 7 1 , 0 2 7 , 5 7 3Others (Note 23) 3 9 7 , 9 8 8 2 4 4 , 9 4 3 3 1 5 , 9 3 8 1 9 4 , 4 4 5

2 , 4 4 6 , 4 1 3 2 , 0 6 7 , 5 7 0 1 , 9 4 2 , 0 6 0 1 , 6 4 1 , 3 1 9Non-interest expenses :

Fees and commission expenses W 5 0 , 9 6 7 W 8 9 , 1 6 1 $ 4 0 , 4 6 0 $ 7 0 , 7 8 0General and administrative expenses (Note 24) 1 , 0 1 0 , 9 7 4 9 4 9 , 3 4 1 8 0 2 , 5 5 1 7 5 3 , 6 2 5Loss on foreign currency transactions 8 2 , 6 4 8 1 5 1 , 0 1 1 6 5 , 6 0 9 1 1 9 , 8 7 8Loss on derivatives (Note 10) 1 , 4 9 4 , 2 7 7 1 , 2 5 3 , 3 2 3 1 , 1 8 6 , 2 1 7 9 9 4 , 9 3 7Others (Note 23) 4 2 5 , 7 2 1 1 6 6 , 7 0 9 3 3 7 , 9 5 4 1 3 2 , 3 4 0

3,064,587 2,609,545 2,432,791 2 , 0 7 1 , 5 6 0

Operating income 8 9 3 , 6 2 7 2 2 3 , 3 3 6 7 0 9 , 3 9 7 1 7 7 , 2 9 3

Non-operating income(loss), net (Note 25) 1 4 5 , 7 6 9 ( 6 5 , 4 3 2 ) 1 1 5 , 7 1 7 ( 5 1 , 9 4 3 )

Net income before income tax expense 1 , 0 3 9 , 3 9 6 1 5 7 , 9 0 4 8 2 5 , 1 1 4 1 2 5 , 3 5 0

Income tax expense (Note 26) 3 1 9 , 6 9 6 5 0 , 0 0 3 2 5 3 , 7 8 8 3 9 , 6 9 4

Net income W 7 1 9 , 7 0 0 W 1 0 7 , 9 0 1 $ 5 7 1 , 3 2 6 $ 8 5 , 6 5 6

Earnings per common share (Note 27)(in Korean Won and U.S. Dollars) W 2 , 4 0 3 W 3 8 8 $ 1 . 9 1 $ 0 . 3 1

Diluted earnings per common share (Note 27)(in Korean Won and U.S. Dollars) W 2 , 0 6 1 W 3 4 4 $ 1 . 6 4 $ 0 . 2 7

2000 1999 2000 1999


STATEMENTS OF INCOME (Banking Accounts) for the year ended December 31, 2000 and 1999



STATEMENT OF APPROPRIATIONS OF RETAINED EARNINGS (Banking Accounts) for the years ended December 31, 2000 and 1999

Date of Appropriations : March 15, 2000 and March 18, 1999

2000 1999 2000 1999

Unappropriated retained earnings

before disposition

Unappropriated retained earnings

carried over from prior year W 2 0 W 1 6 , 1 3 7 $ 1 6 $ 1 2 , 8 1 0

Cumulative effect of accounting

changes (Note 21) ( 3 9 , 6 2 1 ) ( 4 8 6 , 1 3 4 ) ( 3 1 , 4 5 2 ) ( 3 8 5 , 9 1 3 )

Prior year error corrections (Note 21) - ( 2 , 8 9 6 ) - ( 2 , 2 9 9 )

Net income 7 1 9 , 7 0 0 1 0 7 , 9 0 1 5 7 1 , 3 2 6 8 5 , 6 5 6

6 8 0 , 0 9 9 ( 3 6 4 , 9 9 2 ) 5 3 9 , 8 9 0 ( 2 8 9 , 7 4 6 )

Transferred in from prior years’ reserves

(Note 21) :

Reserves for overseas investment losses 1 0 , 8 0 0 8 , 4 0 0 8 , 5 7 3 6 , 6 6 8

Reserves for technology developments - 4 , 1 0 0 - 3 , 2 5 5

Reserves for future dividends - 3 5 0 - 2 7 8

Special reserves - 3 8 0 , 9 0 0 - 3 0 2 , 3 7 4

1 0 , 8 0 0 3 9 3 , 7 5 0 8 , 5 7 3 3 1 2 , 5 7 5

Appropriations (Note 21):

Legal reserve 7 2 , 0 0 0 1 0 , 8 0 0 5 7 , 1 5 6 8 , 5 7 3

Reserve for business rationalization 4 , 8 0 0 1 , 0 0 0 3 , 8 1 0 7 9 4

Other reserves 5 3 - 4 2 -

Cash dividends

(10.0% for common stock and

1.0% for preferred stock in 2000 1 5 1 , 0 0 9 1 6 , 9 3 8 1 1 9 , 8 7 7 1 3 , 4 4 6

1.0% for common stock and

1.0% for preferred stock in 1999)

Voluntary reserve 4 6 3 , 0 0 0 - 3 6 7 , 5 4 8 -

6 9 0 , 8 6 2 2 8 , 7 3 8 5 4 8 , 4 3 3 2 2 , 8 1 3

Unappropriated retained earnings to be

carried over to subsequent year W 3 7 W 2 0 $ 3 0 $ 1 6




STATEMENTS OF CASH FLOWS (Banking Accounts)for the years ended December 31, 2000 and 1999

2000 1999 2000 1999

Cash flows from operating activities :

Net income W 7 1 9 , 7 0 0 W 1 0 7 , 9 0 1 $ 5 7 1 , 3 2 6 $ 8 5 , 6 5 6

Adjustments to reconcile net income to netcash provided by operating activities

Realized loss on trading securities, net 3 0 , 0 9 7 ( 1 0 1 , 9 7 5 ) 2 3 , 8 9 2 ( 8 0 , 9 5 2 )Unrealized gain on trading securities, net ( 2 3 , 7 8 7 ) 4 0 , 0 9 8 ( 1 8 , 8 8 3 ) 3 1 , 8 3 1Bad debt expense 6 4 0 , 9 8 0 1 , 0 9 8 , 5 7 1 5 0 8 , 8 3 5 8 7 2 , 0 8 9Gain on foreign currency transactions, net ( 1 9 5 , 9 5 9 ) ( 6 4 , 7 9 3 ) ( 1 5 5 , 5 6 0 ) ( 5 1 , 4 3 5 )Loss on derivative instruments, net 1 0 1 , 9 4 7 ( 4 1 , 1 1 1 ) 8 0 , 9 3 0 ( 3 2 , 6 3 6 )Retirement benefits 9 6 , 7 7 7 1 0 3 , 7 4 3 7 6 , 8 2 5 8 2 , 3 5 5Depreciation and amortization 8 6 , 9 5 0 8 9 , 4 0 4 6 9 , 0 2 4 7 0 , 9 7 2Loss on disposal of fixed assets, net 3 , 7 7 6 6 , 4 0 7 2 , 9 9 8 5 , 0 8 6Realized gain on investment securities, net ( 8 4 , 5 7 9 ) ( 8 6 , 5 2 4 ) ( 6 7 , 1 4 2 ) ( 6 8 , 6 8 6 )Unrealized gain on investment securities, net ( 1 7 9 , 9 0 6 ) 1 , 8 4 3 ( 1 4 2 , 8 1 7 ) 1 , 4 6 3Loss on sale of troubled loans, net 2 9 , 6 9 5 1 2 6 , 2 1 0 2 3 , 5 7 3 1 0 0 , 1 9 1Others, net ( 3 9 , 8 7 3 ) ( 3 3 , 2 8 7 ) ( 3 1 , 6 5 2 ) ( 2 6 , 4 2 4 )Net changes in,

Payments in advance 4 3 9 , 7 2 4 ( 2 2 6 , 2 1 5 ) 3 4 9 , 0 7 0 ( 1 7 9 , 5 7 8 )Accrued income 4 1 , 6 6 3 3 5 4 , 2 6 0 3 3 , 0 7 4 2 8 1 , 2 2 6Accrued expenses 2 2 8 , 0 6 4 ( 6 0 , 6 2 1 ) 1 8 1 , 0 4 6 ( 4 8 , 1 2 3 )Other liabilities, net ( 8 1 , 2 9 5 ) ( 1 4 6 , 0 9 0 ) ( 6 4 , 5 3 5 ) ( 1 1 5 , 9 7 3 )

Net cash provided by operating activities W 1 , 8 1 3 , 9 7 4 W 1 , 1 6 7 , 8 2 1 $ 1 , 4 4 0 , 0 0 4 $ 9 2 7 , 0 6 2

Cash flows from investing activities :

Decrease(increase) in trading securities W 2 7 , 8 5 4 W ( 1 0 , 2 6 3 ) $ 2 2 , 1 1 2 $ ( 8 , 1 4 7 )Proceeds from sale of investment securities 1 3 , 1 9 3 , 6 6 3 2 4 , 5 6 5 , 3 7 1 1 0 , 4 7 3 , 6 5 5 1 9 , 5 0 0 , 9 6 9Increase in loans ( 1 2 , 4 0 1 , 3 5 9 ) ( 5 , 5 9 8 , 2 5 8 ) ( 9 , 8 4 4 , 6 9 2 ) ( 4 , 4 4 4 , 1 2 0 )Proceeds from sale of fixed assets 1 6 , 7 8 3 1 9 7 , 4 0 1 1 3 , 3 2 3 1 5 6 , 7 0 5Acquisition of investment securities ( 1 5 , 0 3 7 , 4 9 8 ) ( 2 0 , 7 5 8 , 4 1 2 ) ( 1 1 , 9 3 7 , 3 6 4 ) ( 1 6 , 4 7 8 , 8 5 4 )Acquisition of fixed assets ( 9 3 , 2 0 5 ) ( 2 8 1 , 7 6 6 ) ( 7 3 , 9 9 0 ) ( 2 2 3 , 6 7 7 )Others, net 3 2 8 , 0 3 7 1 1 2 , 1 0 1 2 6 0 , 4 0 8 8 8 , 9 9 0

Net cash used in investing activities ( 1 3 , 9 6 5 , 7 2 5 ) ( 1 , 7 7 3 , 8 2 6 ) ( 1 1 , 0 8 6 , 5 4 8 ) ( 1 , 4 0 8 , 1 3 4 )

Cash flows from financing activities :Increase in deposits 1 3 , 6 5 2 , 9 3 6 5 , 9 9 7 , 7 4 8 1 0 , 8 3 8 , 2 4 4 4 , 7 6 1 , 2 5 1Increase in borrowings 1 7 8 , 3 7 1 , 3 7 6 3 7 2 , 8 5 7 , 1 2 5 1 4 1 , 5 9 8 , 2 9 8 2 9 5 , 9 8 8 , 8 2 7Increase in debentures 4 , 2 5 0 , 4 9 5 9 7 0 , 8 1 3 3 , 3 7 4 , 2 1 2 7 7 0 , 6 7 0Issuance of stocks - 7 3 5 , 1 8 7 - 5 8 3 , 6 2 1Decrease in borrowings ( 1 7 9 , 5 8 1 , 8 4 4 ) ( 3 7 4 , 6 7 3 , 4 3 1 ) ( 1 4 2 , 5 5 9 , 2 1 6 ) ( 2 9 7 , 4 3 0 , 6 8 3 )Decrease in debentures ( 4 , 1 8 7 , 0 0 8 ) ( 5 , 8 9 2 , 9 3 4 ) ( 3 , 3 2 3 , 8 1 3 ) ( 4 , 6 7 8 , 0 4 6 )Others, net 7 6 6 , 6 6 9 4 9 4 , 5 9 6 6 0 8 , 6 1 3 3 9 2 , 6 3 1

Net cash provided by financing activities 1 3 , 2 7 2 , 6 2 4 4 8 9 , 1 0 4 1 0 , 5 3 6 , 3 3 8 3 8 8 , 2 7 1

Net increase(decrease) in cash and cash equivalents 1 , 1 2 0 , 8 7 3 ( 1 1 6 , 9 0 1 ) 8 8 9 , 7 9 4 ( 9 2 , 8 0 1 )

Cash and cash equivalents,beginning of year (Note 30) 5 , 4 9 7 , 8 7 7 5 , 6 1 4 , 7 7 8 4 , 3 6 4 , 4 3 3 4 , 4 5 7 , 2 3 4

Cash and cash equivalents, end of year (Note 30) W 6 , 6 1 8 , 7 5 0 W 5 , 4 9 7 , 8 7 7 $ 5 , 2 5 4 , 2 2 7 $ 4 , 3 6 4 , 4 3 3




NOTES TO FINANCIAL STATEMENTSDecember 31, 2000 and 1999

1. The Bank :

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

The Bank merged with Korea Long Term Credit Bank (“KLB”) on December 31, 1998 and with Daegu, Busan, Jeonnam KookminMutual Savings & Finance Co. Ltd.s on August 22, 1999 (see Note 34). Also, under the decision of the Financial SupervisoryCommission in accordance with the Act concerning the Structural Improvement of the Financial Industry, the Bank purchased certainassets, including the loans classified as normal or precautionary, and assumed most of the liabilities of Daedong Bank (“the P&A”) asof June 29, 1998 (see Note 35). Also, on December 22, 2000, the Bank entered into a memorandum of understanding (“MOU”) for amerger with H&CB during 2001 (see Note 33).

The Bank is engaged in the banking and trust business according to the provisions of the General Banking Act and the Trust BusinessAct and operates through 591 domestic branches and 4 overseas networks as of December 31, 2000.

The Bank issued W360,000 million of common stock (30,000,000 shares, issue price : W12,000) and US$ 200 million of convertiblebonds (subordinated debenture, coupon rate : 3%, conversion price : W13,802) on June 14, 1999 to Goldman Sachs Capital Koryo,L.P. (see Note 32). As a result of this investment, Goldman Sachs Capital Koryo, L.P. became the largest shareholder owning 11.07%of the issued and outstanding shares as of December 31, 2000. Also, the Bank issued additional 33,314,050 common shares (issueprice : W11,400) on November 18, 1999 and has a total of 299,613,413 common shares issued as of December 31, 2000.

The Bank has listed its shares on the Korean Stock Exchange since September 1994. As of December 31, 2000, as a result of severaladditional issuance of shares, the Bank’s capital stock amounts to W1,698,067 million (see Note 18). Under the General Banking Act,if one single entity, other than the government or a foreign investor, owns more than 4% of total outstanding voting shares, theentity’s voting rights are limited to those of 4% shareholders.

2. Summary of Significant Accounting Policies :

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

Basis of Financial Statement Presentation The official accounting records of the Bank are maintained in Korean Won in accordance with generally accepted accountingprinciples of the Republic of Korea and accounting standards of the banking industry (“financial accounting standards”) and therelevant laws and regulations. Such basis of accounting and presentation is not in conformity with International AccountingStandards, which, if applied, would give rise to material adjustments to the financial statements.

Also, the Bank reflected certain adjustments for purposes of financial statements without adjusting the books.

The accompanying financial statements have been extracted from the Bank’s Korean language financial statements that wereprepared using accounting principles, procedures and reporting practices generally accepted in the Republic of Korea. Thesestandards vary from International Accounting Standards and the accounting principles generally accepted in the country of thereader. The financial statements have been translated from Korean into English, and have been formatted in a manner different fromthe presentation under Korean financial statement practices. Certain supplementary information included in the Korean languagestatutory financial statements, but not required for a fair presentation of the Bank’s financial position or results of operations, is notpresented in the accompanying financial statements. Accordingly, the accompanying financial statements are not intended topresent the financial position, results of operations or cash flows in accordance with accounting principles and practices generallyaccepted in countries and jurisdictions other than Korea.

The Bank operates both a commercial banking business and a trust business in which the Bank, as a fiduciary, holds and managesthe property of others. Under the Trust Business Act, the trust funds are accounted for and reported separately from the Bank’scommercial banking business.

In accordance with the financial accounting standards, the consolidation method for subsidiaries or other controlled companies hasnot been applied in the accompanying financial statements. The consolidated financial statements of the Bank and its subsidiariesare prepared and filed separately.



The preparation of financial statements in conformity with financial accounting standards requires management to make estimatesand assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual resultsreported in future periods may differ from those estimates.

Revision of Accounting Policies In 1999 fiscal year, in accordance with the revised financial accounting standards effective January 1, 1999, the Bank adoptedamended presentation and accounting policies for certain accounts. In connection with these changes, the Bank recorded a W489,030million decrease in its retained earnings as of January 1, 1999 and net income for the year ended December 31, 1999 wasapproximately W66,467 million less than that which would have been recorded under the previous method. In 2000, in accordancewith the addendum to the revised generally accepted accounting principles, the Bank adopted amended presentation and accountingpolicies regarding derivative instruments. In connection with this change, the Bank recorded a W21,625 million decrease in itsretained earnings as of January 1, 2000 and net income for the year ended December 31, 2000 is approximately W8,443 million lessthan that which would have been recorded under the previous method (see “Derivatives Accounting” below and Note 10).

Translation of Foreign Currency Assets and liabilities denominated in foreign currencies are translated into Korean Won at the exchange rates prevailing at thebalance sheet date. The resulting exchange gains or losses are included in non-interest income or expenses.

The exchange rate used to translate foreign currency denominated assets and liabilities at December 31, 2000 and 1999 are W1,259.7: US$1 and W1,145.4/US$1, respectively.

Recognition of Interest Income Interest income on loans is recognized on an accrual basis. However, interest income on overdue or dishonored loans, except forthose secured with deposits or guaranteed by financial institutions, is recognized on a cash basis in accordance with the accountingstandards of the banking industry. As of December 31, 2000 and 1999, accrued but not recognized interest income on loansapproximated W462,214 million and W573,428 million, respectively.

Provision for Loan Losses The Bank applied Forward Looking Criteria (“FLC”) in classifying borrowers’ credit risk and their related loan balances. FLC takes intoconsideration not only current delinquencies and bankruptcies but also future repayability including the borrower’s management,current financial position, and future cash flows. FLC was applied to large-sized corporate loans while consumer loans and small-sized corporate loans were classified by considering current financial status including delinquent number of days and bankruptcies.Provisions amounts are determined by applying at minimum the following percentages to each credit risk classification.

Present Value Discounts Since 1999, loans whose conditions became unfavorable due to work out, court receivership, court mediation, or debt restructuringagreements of parties concerned, are carried at present value in cases where the difference between the book value and the presentvalue of the loans is significant. The present value discount, which is the difference between the book value and the present value, isamortized using the effective interest method. When estimating the present value of the loans, the Bank generally uses the interestrate at the inception of the loans as the discount rate. For floating rate loans and maturity-extended fixed rate loans, the discount rateused is the prime rate at the date of loan restructuring plus the spread applicable to the borrower at loan origination date. Theprovision for loan loss percentages applied to these restructured loans are based on the loan amounts net of related present valuediscounts.

In connection with this change, the Bank recorded a W34,499 million decrease in its retained earnings as of January 1, 1999 and netincome for the year ended December 31, 1999 was approximately W28,163 million less than that which would have been recordedunder the previous method.

Loan classifications Provision percentages

N o r m a l 0 . 5 %P r e c a u t i o n a r y 2 %S u b - s t a n d a r d 2 0 %D o u b t f u l 5 0 %Estimated loss 1 0 0 %



Additionally, the Bank recorded W35,996 million and W42,573 million of present value discounts as of December 31, 2000 and 1999,respectively on long-term deposits placed with Bukook Mutual Savings & Finance Co., Ltd. (see Note 4), which was a subsidiary ofthe Bank before its sale in December 1999. Also, receivables from disposal of foreclosed assets that are to be redeemed in long-terminstallments are recorded in the balance sheet net of the related present value discounts.

Securities Securities are recorded at cost with incidental expenses included and by using moving average or specific identification method. Thevaluation methods used for the securities are summarized as follows :

Since 1999, in accordance with revised financial accounting standards effective January 1, 1999, marketable securities held for ashort-term marginal profits, except for stocks issued by related parties and bonds held to maturity, are classified as trading securities.Other securities are classified as investment securities.

Prior to 1999, in accordance with an additional clause of accounting and reporting guidelines prescribed by the Banking RegulatoryAuthorities in 1998, the Bank had carried debt securities in Won currency bonds such as monetary stabilization bonds, governmentand municipal bonds, bank debentures, and corporate debentures at cost. Also, non-marketable equity investments, marketableequity investments and equity investments of 15% or more ownership were stated at cost, at market value and under the equitymethod, respectively, and the resulting unrealized gains or losses from the valuations were recorded in capital adjustments. As of1999, in accordance with the revised financial accounting standards, the Bank stated bonds classified as trading securities andavailable-for-sale securities at fair value as described above.

In connection with these changes, the Bank recorded a W193,668 million decrease in its retained earnings as of January 1, 1999 andnet income for the year ended December 31, 1999 and unrealized gains on investment securities in capital adjustments as ofDecember 31, 1999 were approximately W10,452 million and W41,605 million, respectively, more than those which would have beenrecorded under the previous method.

In cases where the fair value of the investment securities are significantly below the book value and the impairment is determined tobe other than temporary, the Bank adjusts the investment securities to fair value and recognizes the related impairment losses incurrent year’s non-operating expenses. Impairment losses on investment securities for the years ended December 31, 2000 and 1999are W90,077 million and W57,811 million, respectively.

Also, prior to 1999, the Bank stated the treasury stock funds at fair value of the whole fund which includes the Bank’s treasury stocks.As of December 31, 1999, the fair value of the Bank’s treasury stocks included in the fund fair value was separately reflected in capitaladjustments. In connection with this change, the Bank recorded W5,890 million of treasury stock in capital adjustments as ofDecember 31, 1999.

Fixed Assets and Related Depreciation Property and equipment are recorded at acquisition cost or revaluation cost. Routine maintenance and repairs are recognized asexpenses as incurred. Expenditures that enhance the value or extend the useful life of the assets involved are capitalized as additionsto property and equipment.

Valuation Recognition of UnrealizedMethods Gains and Losses

Trading securities Fair value Included in net income of the period

Investment securities :

Available-for-sale debt securities and Fair value Included in capital adjustmentsmarketable equity securities

Held-to-maturity debt securities and C o s t Included in net income whennon-marketable equity securities the decline in value is other

than temporary

Equity securities with significant Equity method Included in net income, retained i n f l u e n c e earnings, or capital

adjustments according to thesource of the gain or loss



Depreciation is computed using the declining-balance method, except for leasehold improvements, buildings, and structures that aredepreciated using the straight-line method. Depreciation is calculated based on the estimated average useful lives of the assets and ispresented as accumulated depreciation, which is a contra account of property and equipment in the financial statements.

Depreciation on intangible assets are amortized and directly deducted from intangible asset balances over 5 to 50 years using thestraight-line method.

Foreclosed assets acquired through, or in lieu of, loan foreclosure are stated at cost and are not depreciated. Any impairment, due tothe difference between the book value and the final auction price, are recognized as non-interest expenses and recorded as valuationprovisions, which is a contra account of foreclosed assets in the financial statements.

Stock Issuance Costs and Debenture Issuance Costs Since 1999, stock issuance costs are deducted from paid-in capital in excess of par value and debenture issuance costs are recordedas discounts on debentures and amortized over the maturity of the debentures using the effective interest method. In connectionwith these changes, net income for the year ended December 31, 1999 was W11,675 million more than that which would have beenrecorded under the previous method of recognizing the issuance costs as current period expenses in the year of issuance.

Accrued Retirement Benefits Employees, directors, and statutory auditors with more than one year of service as of December 31, 2000 are entitled to receive alump-sum payment upon termination of their employment with the Bank, based on their length of service and rate of payment at thetime of termination. Additionally, the Bank records its mandatory contributions to National Pension Fund as a contra account ofretirement liability.

Guarantees and Acceptances and Other Commitments Since 1999, the Bank applies credit risk classification used for loans to the guarantees and acceptances. As a result, the Bank recordedW37,331 million and W28,430 million as provision for losses on guarantees and acceptances outstanding as of December 31, 2000and 1999, respectively, according to their classification as sub-standard, doubtful, or estimated loss (provision rates are 20%, 50%,100%, respectively).

Also, unsettled spot exchange receivables and payables, that were off-balance sheet items ins prior to 2000, are translated at theexchange rate of the balance sheet date and are included in accounts receivable (W920,994 million) and accounts payable (W920,846million) as of December 31, 2000.

Deferred Income Taxes In accordance with financial accounting standards, since 1999, the Bank records future tax effects of temporary differences betweenthe financial and tax basis of assets and liabilities as deferred tax assets or liabilities. In connection with this change, the Bankrecorded a W44,410 million decrease in its retained earnings as of January 1, 1999 and net income for the year ended December 31,1999 was W24,622 million less than that which would have been recorded under the previous method. The cumulative effect ofaccounting changes and prior year error corrections adjust the beginning retained earnings and thus result in temporary differences.Deferred income tax effects of these temporary differences were directly adjusted in shareholders’ equity.

Derivatives AccountingIn accordance with accounting and reporting guidelines prescribed by the Banking Regulatory Authorities, the Bank had statedtrading derivatives and hedge derivatives with underlying assets that are fair valued at fair value and those hedge derivatives withunderlying assets carried at cost as an off-balance item. From 2000, in accordance with revised financial accounting standards relatedto derivatives accounting, effective January 1, 2000, the Bank records the fair values of the rights and obligations related to thederivatives contracts on the balance sheet as derivative assets and liabilities and recognizes the related gains or losses in the incomestatement. However, the effective portions of the unrealized gains or losses, which arise from the cash flow hedge purposedderivative instruments, are recorded in capital adjustments

Useful Lives

Buildings and structures 40 yearsLeasehold improvements 1 - 5 yearsM a c h i n e r y 4 yearsEquipments and vehicles 4 years



In connection with this change, the Bank recorded a W21,625 million decrease in its retained earnings as of January 1, 2000 and netincome for the year ended December 31, 2000 was W8,443 million less than that which would have been recorded under theprevious method.

Employee Stock Options The Bank calculated the fair value of the stock options as of the grant date and allocated such value over the period to exercise date.The costs allocated to the period were charged to non-interest expenses (see Note 20).

Translation of Financial Statements of Overseas Branches Accounts and records of overseas branches are independently maintained in foreign currencies of the countries located. Intranslating financial statements of overseas branches, the Bank applied the appropriate exchange rate at the balance sheet date.

3. United States Dollar Amounts :The Bank operates primarily in Korean Won and its official accounting records are maintained in Korean Won. The U.S. dollaramounts are provided herein as supplementary information solely for the convenience of the reader. All Won amounts are expressedin U.S. dollars at the rate of W1,259.7 : US$1, the prevailing rate on December 31, 2000. This presentation is not required by or inaccordance with Korean or United States generally accepted accounting principles, and should not be construed as a representationthat the Won amounts shown could be converted to or settled in U.S. dollars at this or any other rate. The 1999 figures, previouslyconverted at the rate in effect on December 31, 1999, have been restated to reflect the 2000 rate.

4. Cash and Due from Banks :Cash and due from banks at December 31, 2000 and 1999 are summarized as follows:

Annual Millions of WonType Interest (%) 2000 1999

Cash on hand - W 1 , 7 6 7 , 7 1 4 W 1 , 6 2 0 , 4 0 2

Cash in foreign currency - 7 3 , 5 7 6 5 9 , 8 6 2

Due from banks in Won currencyThe Bank of Korea Checking accounts - 8 3 2 , 9 1 9 5 8 , 8 8 0B a n k s Certificates of deposits 6.90 - 8.89 7 9 8 , 3 8 8 9 9 0 , 9 6 4

Current accounts 7.10 - 8.10 3 , 9 1 2 2 2 4O t h e r 8 . 5 1 2 1 5

Other financial institutions Cash management accounts(*) 1.0 - 8.7 1 , 0 9 4 , 2 3 5 1 , 1 4 9 , 0 7 1Group retirement deposits 7 . 5 3 9 6 , 0 0 0 3 9 6 , 0 0 0Unit trusts 5.25 - 10.25 3 6 , 9 7 0 1 4 5 , 0 0 0

O t h e r s Futures margin accounts 3 . 0 1 6 3 , 6 2 3 1 , 9 1 2O t h e r s - 5 6 4 8 2 1

3 , 3 2 6 , 6 2 3 2 , 7 4 2 , 8 8 7Present value discounts (**) ( 3 5 , 9 9 6 ) ( 4 2 , 5 7 3 )

3 , 2 9 0 , 6 2 7 2 , 7 0 0 , 3 1 4

Due from banks in foreign currencyThe Bank of Korea Other deposits - 9 2 , 2 0 1 6 3 , 7 6 0Domestic banks Time deposits 7.20 - 7.90 1 , 2 4 3 , 0 1 8 8 8 3 , 7 4 4

Other deposits - 1 0 , 9 8 5 1 3 , 4 0 3Foreign banks Time deposits 6.45 - 7.88 5 6 , 6 8 7 4 8 , 6 0 4

Other deposits 4.00 - 6.25 1 9 , 9 1 1 5 5 , 5 5 2O t h e r s Time deposits - - 4 3 , 2 3 9

Other deposits 6 . 2 5 6 4 , 0 3 1 8 , 9 9 7

1 , 4 8 6 , 8 3 3 1 , 1 1 7 , 2 9 9

W 6 , 6 1 8 , 7 5 0 W 5 , 4 9 7 , 8 7 7



(*) Cash management accounts include covered bills sold by merchant banks which are summarized as follows (in millions of Won):

At December 31, 2000, Korea Merchant Banking Corporation and H&S Investment Bank were consolidated into Hanaro InvestmentBank and Regent Merchant Bank’s operations are currently suspended. Due to the termination of Hanareum Merchant Bank, thedeposits originally placed with the Company were transferred to Hanareum Mutual S&F Company.

(**) Present value discounts are recorded in relation to the W140,000 million of time deposits (1% interest, longer than 5 yearsmaturity) that were placed with Hansol Mutual Savings & Finance Co., Ltd. due to the sale of Bukook Mutual Savings & FinanceCo., Ltd., a subsidiary of the Bank, during 1999 (see Note 34).

Included in cash and due from banks as of December 31, 2000 are the following restricted deposits

The maturities of the due from banks as of December 31, 2000 are summarized as follows (in millions of Won):

5. Trading Securities :Trading securities as of December 31, 2000 and 1999 comprise the following (in millions of Won):

Place of Deposit 2000 1999

Hanaro Investment Bank (previously Korea Merchant Banking Corporation) W 1 9 3 , 2 0 5 W 2 5 0 , 0 0 0Hanaro Investment Bank (previously H&S Investment Bank) 2 9 9 , 9 8 9 1 0 0 , 0 0 0Regent Merchant Bank 2 9 , 2 0 0 -Hanareum Mutual S&F Company(previously Hanareum Merchant Bank) 1 6 8 , 2 1 2 2 4 8 , 7 2 8

T o t a l W 6 9 0 , 6 0 6 W 5 9 8 , 7 2 8

Millions of WonRestrictions2000 1999

Checking accounts in the Bank of Korea W 8 3 2 , 9 1 9 W 5 8 , 8 8 0 General Banking ActGroup retirement deposits 3 9 6 , 0 0 0 3 9 6 , 0 0 0 Group retirement insuranceDeposits in foreign currency 9 2 , 2 0 1 6 3 , 7 6 0 General Banking ActTime deposits 1 4 3 , 5 3 2 1 4 0 , 0 0 0 Withdrawal at maturity

W 1 , 4 6 4 , 6 5 2 W 6 5 8 , 6 4 0

Year ending Due from Banks Due from Banks inDecember 31 in Won Foreign Currency Total

2 0 0 1 W 3 , 1 8 6 , 6 2 3 W 1 , 4 8 6 , 8 3 3 W 4 , 6 7 3 , 4 5 62 0 0 2 - - -

t h e r e a f t e r 1 4 0 , 0 0 0 - 1 4 0 , 0 0 0W 3 , 3 2 6 , 6 2 3 W 1 , 4 8 6 , 8 3 3 W 4 , 8 1 3 , 4 5 6

Annual Acquisition Amortized Carrying ValueInterest(%) Cost Cost 2000 1999

Trading securities in Won currency

Listed equity securities - W 1 9 , 2 1 6 W - W 1 6 , 3 6 1 W 1 5 8 , 5 2 6Government and municipal bonds 5 . 0 - 9 . 8 4 1 , 3 0 4 , 6 6 7 1 , 3 0 6 , 9 8 1 1 , 3 3 0 , 2 6 9 6 0 3 , 3 4 5Finance debentures 6 . 8 1 - 8 . 9 7 5 1 0 , 3 5 8 5 1 0 , 8 8 4 5 1 1 , 4 8 6 7 2 0 , 0 5 5Corporate bonds 2 . 0 - 1 5 . 0 5 6 4 , 6 7 1 5 6 3 , 5 7 7 5 6 8 , 3 7 6 5 5 8 , 7 5 9Beneficial certificates - 1 5 , 5 6 7 - 1 3 , 8 4 5 4 2 5 , 8 5 1

2 , 4 1 4 , 4 7 9 2 , 4 4 0 , 3 3 7 2 , 4 6 6 , 5 3 6

Trading securities denominatedin foreign currencies 0.0 -Libor+1.5 1 8 , 4 0 9 1 7 , 7 4 1 1 7 , 4 1 7 2 5 , 3 8 1

W 2 , 4 3 2 , 8 8 8 W 2 , 4 5 7 , 7 5 4 W 2 , 4 9 1 , 9 1 7



Since 1999, all trading securities are stated at fair value and resulting gains and losses are recognized as incurred. Trading debtsecurities in Won currency, that were stated at cost prior to 1999, are stated at fair value using the base yield of bonds for assessingmarket value provided by the Korea Securities Dealers Association.

In connection with this change, net income for the year ended December 31, 1999 was approximately W45,515 million less than thatwhich would have been recorded under the previous method.

Trading securities risk concentrations as of December 31, 2000 and 1999 are as follows:

6. Investment Securities :

Investment equity securities at December 31, 2000 and 1999 are as follows (in millions of Won):

Won currency Foreign currency

Millions of Won % Millions of Won %

By GeographyKorea W 2 , 4 4 0 , 3 3 7 1 0 0 . 0 0 W 1 7 , 4 1 7 1 0 0 . 0 0

By IndustryG o v e r n m e n t W 1 , 7 4 4 , 0 2 8 7 1 . 4 7 W - 9 9 . 0 1Financial institutions 6 5 4 , 5 7 9 2 6 . 8 2 1 7 , 2 4 4 0 . 9 9Manufacturing companies 1 6 , 3 8 1 0 . 6 7 1 7 3 -Services related companies - 0 . 0 0 - -O t h e r s 2 5 , 3 4 9 1 . 0 4 - -

W 2 , 4 4 0 , 3 3 7 1 0 0 . 0 0 W 1 7 , 4 1 7 1 0 0 . 0 0

By TypeFixed rate W 1 , 7 1 2 , 5 1 5 7 0 . 1 8 W - -Floating rate 2 5 5 , 6 5 6 1 0 . 4 8 1 1 , 2 7 2 6 4 . 7 2Convertible securities 2 , 0 0 0 0 . 0 8 - 0 . 0 0Equity securities 2 1 , 3 4 5 0 . 8 7 1 6 2 0 . 9 3O t h e r s 4 4 8 , 8 2 1 1 8 . 3 9 5 , 9 8 3 3 4 . 3 5

W 2 , 4 4 0 , 3 3 7 1 0 0 . 0 0 W 1 7 , 4 1 7 1 0 0 . 0 0

Acquisition Carrying ValueCost 2000 1999

Investment Equity Securities

Marketable stocks W 1 9 8 , 3 7 7 W 1 1 2 , 2 4 8 W 1 4 5 , 2 3 8

Non-marketable stocks 2 1 6 , 8 1 3 1 9 3 , 1 4 4 1 7 8 , 3 8 7

Domestic subsidiaries 5 0 7 , 2 3 7 8 2 0 , 3 6 0 5 1 3 , 2 3 3

Foreign subsidiaries 8 3 , 6 8 2 6 0 , 2 6 7 8 0 , 8 5 9

Foreign stocks 2 6 , 4 4 7 2 6 , 4 4 7 2 4 , 9 0 1

1 , 0 3 2 , 5 5 6 1 , 2 1 2 , 4 6 6 9 4 2 , 6 1 8

Investment in funds 2 9 , 4 1 7 2 9 , 0 0 4 9 7 8 , 6 6 3

W 1 , 0 6 1 , 9 7 3 W 1 , 2 4 1 , 4 7 0 W 1 , 9 2 1 , 2 8 1



Annual Face Acquisition Amortized Carrying ValueInterest (%) Value Cost Cost 2000 1999

Available-for-sale-debt securitiesGovernment and municipal bonds 5.00 - 17.04 W 1 , 6 1 0 , 8 8 9 W 1 , 5 6 5 , 8 3 2 W 1 , 5 7 8 , 7 9 8 W 1 , 6 5 7 , 8 8 0 W 2 , 0 9 3 , 3 0 7Finance debentures 5.50 - 16.00 1 , 3 5 0 , 5 2 2 1 , 3 2 4 , 3 7 9 1 , 3 2 4 , 9 6 9 1 , 3 5 4 , 5 3 9 1 , 8 4 1 , 2 8 6Corporate bonds 7.00 - 22.00 2 , 8 5 6 , 2 9 4 2 , 9 1 1 , 0 5 6 2 , 8 6 4 , 8 6 8 2 , 9 6 6 , 5 0 6 2 , 1 9 0 , 2 8 0Beneficial certificates 8.15 - 10.20 1 , 5 1 1 , 2 3 9 1 , 5 0 8 , 5 9 9 1 , 5 0 8 , 7 6 5 1 , 5 4 5 , 4 4 7 1 , 0 5 4 , 8 0 8Foreign debt securities 0.13 - 28.00 1 , 0 2 1 , 2 4 8 7 8 2 , 2 4 2 7 8 2 , 4 0 1 7 4 9 , 2 7 4 6 4 7 , 1 4 4

8 , 3 5 0 , 1 9 2 8 , 0 9 2 , 1 0 8 8 , 0 5 9 , 8 0 1 8 , 2 7 3 , 6 4 6 7 , 8 2 6 , 8 2 5

Held-to-maturity debt securitiesGovernment and municipal bonds 3.00 - 18.40 1 , 6 2 3 , 0 3 7 1 , 5 8 7 , 9 9 3 1 , 6 0 7 , 6 9 1 1 , 6 0 7 , 6 9 1 8 4 0 , 0 9 0Finance debentures 5.50 - 16.00 1 , 2 7 0 , 3 1 9 1 , 1 9 8 , 2 9 6 1 , 2 0 0 , 4 1 6 1 , 2 0 0 , 4 1 6 7 3 1 , 9 5 6Corporate bonds 7.00 - 22.00 4 , 4 8 6 , 7 7 2 4 , 5 2 7 , 2 6 9 4 , 5 2 3 , 6 3 6 4 , 5 2 3 , 6 3 6 2 , 9 8 2 , 0 5 3Foreign debt securities 0.25 - 5.00 4 9 , 2 6 5 4 6 , 6 9 2 4 6 , 6 9 2 4 6 , 6 9 2 2 1 0 , 9 5 7

7 , 4 2 9 , 3 9 3 7 , 3 6 0 , 2 5 0 7 , 3 7 8 , 4 3 5 7 , 3 7 8 , 4 3 5 4 , 7 6 5 , 0 5 6W 1 5 , 7 7 9 , 5 8 5 W1 5 , 4 5 2 , 3 5 8 W 1 5 , 4 3 8 , 2 3 6 W15,652,081 W1 2 , 5 9 1 , 8 8 1

As a part of beneficial certificates in available-for-sale debt securities, the Bank’s treasury stock funds are stated at quoted marketprice of W6,677 million and W4,029 million as of December 31, 2000 and 1999, respectively. The Bank’s treasury stocks included inthese funds as of December 31, 2000 and 1999 are 794,701 and 854,701 shares, respectively.

Available-for-sale debt securities in Won currency are stated at fair value using the base yield of bonds for assessing market valueprovided by the Korea Securities Dealers Association.

Investment securities as of December 31, 2000 and 1999 include the monetary stabilization bonds sold with repurchase agreementsamounting to W232,975 million and W114,155 million, respectively (see Note 13).

Investment equity securities at December 31, 2000 and 1999 are as follows (in millions of Won) :

Investment debt securities at December 31, 2000 and 1999 are as follows (in millions of Won):

Ownership Acquisition Fair Carrying Value(%) Cost Value 2000 1999

Listed stocks (KSE) [Market Price]Kohap Corp. 1 . 4 5 W 2 , 3 5 6 W 5 2 1 W 5 2 1 W 2 , 3 5 6Namkwang Engineering & Construction Co., Ltd. 2 . 1 3 1 , 0 6 7 4 1 3 4 1 3 1 , 0 6 7Inchon Iron & Steel Co., Ltd. 0 . 8 6 5 , 0 7 9 4 , 2 3 9 4 , 2 3 9 - Korea Development Leasing Co. 9 . 8 4 7 , 9 1 1 2 , 0 3 4 2 , 0 3 4 1 , 3 7 3Hanmi Capital Co., Ltd. 5 . 2 4 2 , 3 3 6 1 , 4 5 7 1 , 4 5 7 - Haitai Foods Co. (Preferred 2B) 0 . 3 1 5 , 0 3 2 1 , 2 4 5 1 , 2 4 5 5 , 0 3 2Daewoo Securities Co. 1 . 8 6 4 0 , 2 2 1 1 5 , 9 6 3 1 5 , 9 6 3 4 0 , 2 2 1Korea Zinc 3 . 0 0 1 6 , 2 9 5 6 , 4 3 3 6 , 4 3 3 1 6 , 2 9 5Hankang Restructuring Fund 4 . 2 8 3 3 , 3 3 3 1 4 , 6 0 7 1 4 , 6 0 7 3 3 , 3 3 3Kia Motors Corp. 1 . 2 3 3 2 , 7 9 2 3 2 , 7 9 2 3 2 , 7 9 2 3 4 , 9 2 2Haitai Electronics Co. and others 2 . 7 8 3 2 , 9 3 3 2 6 , 2 2 3 2 6 , 2 2 3 7 , 2 4 7

1 7 9 , 3 5 5 1 0 5 , 9 2 7 1 0 5 , 9 2 7 1 4 1 , 8 4 6

Registered stocks (KOSDAQ) [Market Price]Miju Steel Mfg. Co., Ltd. 3 . 7 0 5 1 0 7 7 2 7 7 2 5 1 0Shinbo Leasing Co. 5 . 3 9 9 1 9 7 3 6 7 3 6 1 7 6Chohung Capital Co., Ltd. 9 . 7 5 8 , 1 3 5 2 , 6 0 7 2 , 6 0 7 -Chung Bu Leasing Co., Ltd. 4 . 4 1 1 , 0 0 7 3 5 6 3 5 6 -Kyongnam Leasing Co., Ltd. and others 7 . 2 0 8 , 4 5 1 1 , 8 5 0 1 , 8 5 0 2 , 7 0 6

W 1 9 , 0 2 2 W 6 , 3 2 1 W 6 , 3 2 1 W 3 , 3 9 2



Ownership Acquisition Fair Carrying Value(%) Cost Value 2000 1999

Other unlisted domestic stocks [ C o s t ]Korea Highway Co. 0 . 1 2 W 6 , 2 4 8 W 1 2 , 1 0 4 W 6 , 2 4 8 W 6 , 2 4 8Korea Securities Finance Corp. 2 . 4 0 8 , 1 6 0 6 , 2 1 9 8 , 1 6 0 8 , 1 6 0National Information & Credit Evaluation Inc. 9 . 2 0 2 , 6 8 4 2 , 8 6 5 2 , 6 8 4 2 , 6 8 4Seoul Debt Restructuring Fund 8 . 1 2 4 8 , 7 0 0 5 1 , 2 8 3 4 8 , 7 0 0 4 8 , 7 0 0Arirang Structure Control Fund 8 . 1 3 2 7 , 1 0 0 2 9 , 3 2 9 2 7 , 1 0 0 2 7 , 1 0 0Mukunghwa Structure Control Fund 8 . 1 3 2 7 , 1 0 0 2 6 , 1 5 9 2 7 , 1 0 0 2 7 , 1 0 0Korea Asset Management Company 3 . 7 9 4 , 5 5 0 5 , 8 8 6 4 , 5 5 0 4 , 5 5 0Mortgage Liquidation Company 1 4 . 9 9 1 5 , 0 0 0 1 6 , 2 1 6 1 5 , 0 0 0 1 5 , 0 0 0Renault Samsung Motors Co., Ltd. 0 . 0 2 3 4 8 - 3 4 8 - Samsung Life Insurance Co., Ltd. and others 0 . 1 1 7 6 , 9 2 3 3 4 , 3 6 5 5 3 , 2 5 4 3 8 , 8 4 5

2 1 6 , 8 1 3 1 8 4 , 4 2 6 1 9 3 , 1 4 4 1 7 8 , 3 8 7

Stocks of domestic subsidiaries [Equity Method]Kookmin Venture Capital Co., Ltd. 9 4 . 1 1 5 1 , 0 0 0 5 1 , 1 3 8 5 1 , 1 3 8 5 1 , 4 4 3Kookmin Credit Card Co., Ltd. 7 4 . 2 7 3 1 8 , 2 1 8 6 3 6 , 5 2 4 6 3 6 , 5 2 4 3 2 0 , 7 7 1Kookmin Bank Venture Capital Co., Ltd. 1 0 0 . 0 0 7 9 , 1 7 0 6 6 , 5 7 0 6 6 , 5 7 0 8 1 , 6 6 9Kookmin Leasing Co., Ltd 8 9 . 6 1 - ( 3 3 , 5 8 5 ) - -Kookmin Bank Investment Trust

Management Co., Ltd. 8 7 . 0 0 2 9 , 3 1 5 3 2 , 9 1 0 3 2 , 9 1 0 2 9 , 5 7 6Kookmin Data System Co., Ltd. 9 9 . 9 8 8 , 7 3 5 1 0 , 8 8 5 1 0 , 8 8 5 8 , 9 7 5Kookmin Futures Co., Ltd. 9 9 . 9 8 2 0 , 1 5 5 2 1 , 6 7 5 2 1 , 6 7 5 2 0 , 1 5 5KLB Securities Co., Ltd. - in liquidation 3 6 . 4 1 - - - -KLB Economic Research Institute

Co., Ltd. - in liquidation 6 9 . 9 8 6 4 4 6 5 8 6 5 8 6 4 45 0 7 , 2 3 7 7 8 6 , 7 7 5 8 2 0 , 3 6 0 5 1 3 , 2 3 3

Stocks of foreign subsidiaries [Equity Method]Kookmin Bank International Ltd. (London) 1 0 0 4 3 , 0 9 8 4 3 , 2 3 1 4 3 , 2 3 1 4 2 , 4 3 4Kookmin Bank Luxembourg S.A. 1 0 0 2 5 , 4 1 6 2 5 , 4 1 6 - 2 4 , 6 3 1Kookmin Singapore (Merchant Bank) Ltd.

- in liquidation 1 0 0 2 , 9 1 1 2 , 1 8 7 2 , 1 8 7 2 , 6 4 9Kookmin Finance Asia Ltd. (Hong Kong) 1 0 0 1 2 , 2 5 7 1 4 , 8 4 9 1 4 , 8 4 9 1 1 , 1 4 5

8 3 , 6 8 2 8 5 , 6 8 3 6 0 , 2 6 7 8 0 , 8 5 9

Foreign stocks [ C o s t ]Asia Credit Services (PTE) Ltd. 6 . 6 7 1 2 , 5 9 7 1 1 , 0 2 3 1 2 , 5 9 7 1 1 , 4 5 4Nanjing Kumho Tire Co., Ltd. 6 . 0 0 2 , 6 8 0 1 , 4 8 3 2 , 6 8 0 2 , 4 3 7Widong Shipping & Airfreight Co., Ltd. 5 . 5 0 4 1 6 2 , 1 3 9 4 1 6 3 7 8Pan Asia Paper (Thailand) Co., Ltd. 2 . 9 4 3 , 4 0 7 1 , 5 4 0 3 , 4 0 7 3 , 5 9 1Asian Finance & Investment Co., Ltd. and others - 7 , 3 4 7 6 , 4 7 8 7 , 3 4 7 7 , 0 4 1

2 6 , 4 4 7 2 2 , 6 6 3 2 6 , 4 4 7 2 4 , 9 0 1W 1 , 0 3 2 , 5 5 6 W 1 , 1 9 1 , 7 9 5 W 1 , 2 1 2 , 4 6 6 W 9 4 2 , 6 1 8



Valuation gains and losses on investment securities for the year ended December 31, 2000 are summarized as follow(in millions of Won):

In accordance with the change of valuation method for investment securities, the unrealized gain on investment securities for theyear ended December 31,1999 was approximately W55,967 million more than that which would have been recorded under theprevious method.

The movements of unrealized gains and losses recorded in capital adjustments for the year ended December 31, 2000 aresummarized as follows (in millions of Won):

Retained Capital Net Income Earnings Adjustments Total

Investment Equity Securities :Marketable stocks W ( 1 6 , 4 6 4 ) W - W ( 6 9 , 6 6 5 ) W ( 8 6 , 1 2 9 )Non-marketable stocks ( 2 3 , 6 6 9 ) - - ( 2 3 , 6 6 9 )S u b s i d i a r i e s 2 1 9 , 1 4 6 ( 2 , 4 2 3 ) 7 2 , 9 8 5 2 8 9 , 7 0 8

1 7 9 , 0 1 3 ( 2 , 4 2 3 ) 3 , 3 2 0 1 7 9 , 9 1 0

Investment in funds ( 4 1 3 ) - - ( 4 1 3 )

Investment debt Securities :A v a i l a b l e - f o r - s a l e

Debt securities in Won ( 3 4 , 5 1 8 ) - 2 4 4 , 8 0 8 2 1 0 , 2 9 0Beneficial certificates 4 8 , 2 3 9 - ( 1 1 , 5 5 7 ) 3 6 , 6 8 2Foreign debt securities ( 1 1 , 1 4 2 ) - ( 2 1 , 9 8 5 ) ( 3 3 , 1 2 7 )

2 , 5 7 9 - 2 1 1 , 2 6 6 2 1 3 , 8 4 5W 1 8 1 , 1 7 9 W ( 2 , 4 2 3 ) W 2 1 4 , 5 8 6 W 3 9 3 , 3 4 2

Millions of WonBeginning Ending Balance Increase Decrease Balance

Investment equity SecuritiesS u b s i d i a r i e s W 2 5 , 3 0 5 W 7 2 , 9 8 5 W - W 9 8 , 2 9 0Marketable equity securities ( 4 3 , 7 8 2 ) ( 6 9 , 6 6 5 ) ( 1 2 , 5 3 3 ) ( 1 0 0 , 9 1 4 )

( 1 8 , 4 7 7 ) 3 , 3 2 0 ( 1 2 , 5 3 3 ) ( 2 , 6 2 4 )Investment debt SecuritiesA v a i l a b l e - f o r - s a l e ( 4 8 , 7 9 5 ) 2 1 1 , 2 6 6 3 6 , 5 0 6 1 2 5 , 9 6 5

W ( 6 7 , 2 7 2 ) W 2 1 4 , 5 8 6 W 2 3 , 9 7 3 W 1 2 3 , 3 4 1



Investment securities risk concentrations as of December 31, 2000 and 1999 are as follows:

Currency concentrations of foreign trading and investment securities as of December 31, 2000 are as follows (in millions of Won):

Won currency Foreign currencyMillions of Won % Millions of Won %

By GeographyKorea W 1 6 , 0 1 0 , 8 7 1 1 0 0 . 0 0 W 4 1 6 , 9 6 1 4 7 . 2 4T h a i l a n d - - 5 3 , 1 0 1 6 . 0 2M a l a y s i a - - 6 9 , 7 7 7 7 . 9 1I n d o n e s i a - - 4 0 , 4 0 4 4 . 5 8P h i l i p p i n e s - - 8 4 , 1 5 6 9 . 5 3I n d i a - - 2 1 , 2 6 1 2 . 4 1South America - - 2 2 , 8 0 9 2 . 5 8U . S . A . - - 1 , 0 1 3 0 . 1 1J a p a n - - 1 0 , 0 7 8 1 . 1 4Other - - 1 6 3 , 1 2 0 1 8 . 4 8

W 1 6 , 0 1 0 , 8 7 1 1 0 0 . 0 0 W 8 8 2 , 6 8 0 1 0 0 . 0 0

By IndustryG o v e r n m e n t W 8 , 3 6 8 , 7 7 4 5 2 . 2 7 W 1 0 3 , 9 1 4 1 1 . 7 7Financial institutions 3 , 6 2 2 , 6 8 0 2 2 . 6 3 2 6 6 , 0 6 6 3 0 . 1 4Manufacturing companies 5 2 6 , 5 2 7 3 . 2 9 4 6 5 , 3 3 3 5 2 . 7 2Services related companies - 0 . 0 0 - 0 . 0 0O t h e r s 3 , 4 9 2 , 8 9 0 2 1 . 8 1 4 7 , 3 6 7 5 . 3 7

W 1 6 , 0 1 0 , 8 7 1 1 0 0 . 0 0 W 8 8 2 , 6 8 0 1 0 0 . 0 0

By TypeFixed rate W 1 0 , 0 2 2 , 4 3 1 6 2 . 6 0 W 2 4 4 , 3 6 8 2 7 . 6 8Floating rate 9 0 8 , 9 7 5 5 . 6 8 2 0 2 , 1 2 4 2 2 . 9 0S u b o r d i n a t e d 1 2 9 , 4 2 0 0 . 8 1 5 5 , 5 4 9 6 . 2 9C o n v e r t i b l e - 0 . 0 0 1 1 9 , 5 4 4 1 3 . 5 4Subordinated and convertible - 0 . 0 0 1 8 , 9 1 4 2 . 1 4Equity securities 1 , 1 4 6 , 5 2 6 7 . 1 6 9 3 , 9 1 6 1 0 . 6 4O t h e r s 3 , 8 0 3 , 5 1 9 2 3 . 7 5 1 4 8 , 2 6 5 1 6 . 8 1

W 1 6 , 0 1 0 , 8 7 1 1 0 0 . 0 0 W 8 8 2 , 6 8 0 1 0 0 . 0 0

Foreign Trading Securities Foreign Investment Securities Millions of Won % Millions of Won %

U S D W 1 7 , 4 1 7 1 0 0 . 0 0 W 7 7 7 , 0 6 2 8 8 . 0 3J P Y - - 3 2 , 7 7 8 3 . 7 1S F R - - 3 , 0 2 5 0 . 3 4B D T - - 1 , 7 4 0 0 . 2 0D E M - - 1 1 , 7 0 3 1 . 3 3G B P - - 4 3 , 2 3 1 4 . 9 0T H B - - 4 , 1 3 9 0 . 4 7P H P - - 5 0 4 0 . 0 6M Y R - - 7 , 3 1 6 0 . 8 3I D R - - 1 , 1 8 2 0 . 1 3

W 1 7 , 4 1 7 1 0 0 . 0 0 W 8 8 2 , 6 8 0 1 0 0 . 0 0



As of December 31, 2000, the Bank’s securities are pledged at the following institutions (in million of Won):

7. Loans :Loans outstanding as of December 31, 2000 and 1999 are summarized as follows:

Actual interest rates applied may be 0.5~2.0% incremental to the interest rates stated above depending on the maturity of the loans.

Institution Book Value Pledge Value Related Liability / Transactions

Investment securities in WonBank of Korea W 1 , 5 8 3 , 1 0 1 W 1 , 1 5 9 , 2 0 0 BOK borrowingsBank of Korea 7 3 8 , 3 0 0 2 2 6 , 7 0 0 BOK settlementsKorea Asset Management Company 3 9 0 , 4 4 2 1 0 3 , 4 6 7 Sale of non-performing loansIndustrial Bank of Korea 4 , 7 7 2 3 , 5 7 2 Foreign currency transactionsKookmin Futures and others 4 1 , 4 9 7 2 8 , 0 0 0 Derivatives transactionsBank One NA (Seoul) 1 0 8 , 6 6 8 1 0 5 , 1 1 4 Foreign currency RP

2 , 8 6 6 , 7 8 0 1 , 6 2 6 , 0 5 3Investment securities in foreign currencies

UBS (London) 5 8 , 8 8 3 3 6 , 2 9 4 Foreign currency RPMerrill Lynch (New York) 1 4 , 6 2 0 1 4 , 6 2 0 Swap transactions

7 3 , 5 0 3 5 0 , 9 1 4W 2 , 9 4 0 , 2 8 3 W 1 , 6 7 6 , 9 6 7

Annual Interest Millions of WonRate (%) 2000 1999

Loans in Won currencyCorporate loans ;

Operation loans 6 . 3 7 - 1 5 . 7 9 W 2 0 , 8 9 9 , 2 7 7 W 1 6 , 4 0 5 , 5 1 2Facility loans 9 . 2 5 - 1 5 . 7 9 4 , 3 9 3 , 6 6 4 4 , 1 3 7 , 1 7 3

Consumer loans 9 . 5 0 - 1 4 . 7 9 1 5 , 8 7 9 , 2 0 7 1 2 , 0 1 0 , 6 6 4O t h e r s 9 . 0 0 - 1 5 . 7 9 2 , 2 6 3 , 9 6 3 7 1 9 , 6 3 9

4 3 , 4 3 6 , 1 1 1 3 3 , 2 7 2 , 9 8 8Loans denominated in foreign currencies

Foreign currency loans L i b o r + 3 . 3 5 - 1 2 . 2 1 1 , 8 7 2 , 2 3 5 2 , 3 3 2 , 8 7 0Offshore loans L i b o r + 1 . 5 1 , 0 7 9 , 8 4 7 1 , 0 2 6 , 8 0 4IBRD sub-loans 6 . 4 5 - 1 6 . 2 0 1 5 , 7 6 3 2 6 , 6 8 0Domestic import usance bills 8 . 4 6 - 9 . 5 0 2 , 8 0 8 2 , 1 7 9

2 , 9 7 0 , 6 5 3 3 , 3 8 8 , 5 3 3Bills bought in Won currency 1 0 . 7 5 - 1 3 . 7 5 4 3 , 0 9 2 4 1 , 7 3 4Bills bought in foreign currencies 8 . 4 6 - 9 . 5 0 9 2 4 , 8 0 4 8 2 6 , 6 0 9Payments on guarantees 1 9 . 0 2 4 0 , 9 9 2 3 3 1 , 2 0 5Credit card accounts (Note 29) 1 0 . 5 3 5 3 , 5 1 0 5 7 8 , 7 7 7Bonds purchased with resale agreement(“RP”) 5 . 1 0 - 8 . 1 0 1 , 5 0 0 , 0 0 0 9 7 , 2 0 0Call loans 6 . 5 - 7 . 0 3 9 8 2 , 6 5 8 3 7 5 , 9 8 9Privately placed debentures 9 . 2 5 - 1 5 . 7 9 2 , 0 2 9 , 4 1 9 1 , 9 7 2 , 9 2 4Loans for equity conversion - 8 4 , 1 5 0 -

5 2 , 5 6 5 , 3 8 9 4 0 , 8 8 5 , 9 5 9Provision for loan losses ( 1 , 8 2 6 , 7 0 0 ) ( 1 , 8 8 0 , 1 0 0 )Present value discounts ( 1 6 8 , 2 7 8 ) ( 1 3 3 , 5 2 7 )

W 5 0 , 5 7 0 , 4 1 1 W 3 8 , 8 7 2 , 3 3 2



Loans as of December 31, 2000 are outstanding to entities classified as follows (in millions of Won) :

The maturities of loans as of December 31, 2000 are as follows (in millions of Won) :

Provision for loan losses as of December 31, 2000, based on the estimated collectibility of the loans (except RP, call loans, and inter-bank loans), are summarized as follows (in millions of Won) :

Domestic Foreign Other FinancialBanks Banks Institutions Others Total

Loans in Won currency W 5 3 , 5 4 3 W - W 2 , 3 1 6 , 9 6 1 W 4 1 , 0 6 5 , 6 0 7 W 4 3 , 4 3 6 , 1 1 1Loans in foreign currencies 1 3 9 , 8 3 5 1 5 7 , 4 6 3 7 5 7 , 5 4 1 1 , 9 1 5 , 8 1 4 2 , 9 7 0 , 6 5 3Bills bought in Won currencies - - 3 , 3 4 9 3 9 , 7 4 3 4 3 , 0 9 2Bills bought in foreign currencies - - - 9 2 4 , 8 0 4 9 2 4 , 8 0 4Payments on guarantees - - - 2 4 0 , 9 9 2 2 4 0 , 9 9 2Credit card accounts - - 3 5 3 , 5 1 0 - 3 5 3 , 5 1 0R P 1 , 5 0 0 , 0 0 0 - - - 1 , 5 0 0 , 0 0 0Call loans 6 4 8 , 9 6 0 1 6 8 , 6 9 8 - 1 6 5 , 0 0 0 9 8 2 , 6 5 8Privately placed debentures - - 6 5 , 7 4 3 1 , 9 6 3 , 6 7 6 2 , 0 2 9 , 4 1 9Loans for equity conversion - - 8 , 0 8 2 7 6 , 0 6 8 8 4 , 1 5 0

W 2 , 3 4 2 , 3 3 8 W 3 2 6 , 1 6 1 W 3 , 5 0 5 , 1 8 6 W 4 6 , 3 9 1 , 7 0 4 W 5 2 , 5 6 5 , 3 8 9

2001.12.31 2002.12.31 2003.12.31 2004.12.31 Thereafter Total

Loans in Won currency W 2 7 , 8 7 7 , 9 0 6 W 4 , 6 6 7 , 4 7 9 W 4 , 5 7 9 , 7 7 8 W 1 , 9 2 8 , 7 8 2 W 4 , 3 8 2 , 1 6 6 W 4 3 , 4 3 6 , 1 1 1Loans in foreign currencies 7 6 3 , 6 5 1 3 6 6 , 4 1 0 4 0 7 , 9 3 2 4 1 3 , 4 4 7 1 , 0 1 9 , 2 1 3 2 , 9 7 0 , 6 5 3Bills bought in Won currency 4 3 , 0 9 2 - - - - 4 3 , 0 9 2Bills bought in foreign

c u r r e n c i e s 9 2 4 , 8 0 4 - - - - 9 2 4 , 8 0 4Payments on guarantees 2 3 1 , 8 3 6 - 8 , 5 2 4 - 6 3 2 2 4 0 , 9 9 2Credit card accounts 3 5 3 , 5 1 0 - - - - 3 5 3 , 5 1 0R P 1 , 5 0 0 , 0 0 0 - - - - 1 , 5 0 0 , 0 0 0Call loans 9 8 2 , 6 5 8 - - - - 9 8 2 , 6 5 8Privately placed debentures 4 8 1 , 4 3 3 7 1 7 , 9 2 1 3 3 4 , 4 3 2 1 7 9 , 2 3 8 3 1 6 , 3 9 5 2 , 0 2 9 , 4 1 9Loans for equity conversion - - - - 8 4 , 1 5 0 8 4 , 1 5 0

W 3 3 , 1 5 8 , 8 9 0 W 5 , 7 5 1 , 8 1 0 W 5 , 3 3 0 , 6 6 6 W 2 , 5 2 1 , 4 6 7 W 5 , 8 0 2 , 5 5 6 W 5 2 , 5 6 5 , 3 8 9

Estimated Normal Precautionary Substandard Doubtful Loss Total Reserves

Loans in Won W 3 9 , 6 5 8 , 3 1 5 W 1 , 8 8 6 , 8 2 5 W 1 , 3 2 6 , 8 4 0 W 2 7 2 , 5 2 5 W 1 3 7 , 4 5 4 W 4 3 , 2 8 1 , 9 5 9 W 1 , 0 9 4 , 6 0 2Loans in foreign

C u r r e n c y 1 , 6 6 2 , 1 9 2 4 1 4 , 8 9 7 6 3 7 , 0 7 3 1 5 3 , 5 3 6 7 3 , 7 8 9 2 , 9 4 1 , 4 8 7 2 9 3 , 2 1 3Bills bought 6 8 4 , 2 9 5 1 7 4 , 9 3 5 8 8 1 0 6 , 6 2 8 1 , 6 0 2 9 6 7 , 5 4 8 6 1 , 8 5 4Payments on

g u a r a n t e e s 8 , 9 0 3 9 , 6 3 0 5 0 , 9 2 3 1 4 4 , 4 7 1 2 5 , 2 9 3 2 3 9 , 2 2 0 1 0 7 , 9 5 0Credit card

a c c o u n t s 3 5 3 , 5 1 0 - - - - 3 5 3 , 5 1 0 1 , 7 6 8Privately placed

d e b e n t u r e s 1 , 3 8 3 , 9 1 9 2 5 3 , 4 8 4 1 4 2 , 3 4 0 1 7 1 , 1 1 1 4 4 , 3 8 2 1 , 9 9 5 , 2 3 6 1 6 3 , 0 8 6Loans for equity

c o n v e r s i o n 6 , 0 3 2 - 4 4 , 4 2 9 3 3 , 6 8 9 - 8 4 , 1 5 0 5 6 , 6 6 14 3 , 7 5 7 , 1 6 6 2 , 7 3 9 , 7 7 1 2 , 2 0 1 , 6 9 3 8 8 1 , 9 6 0 2 8 2 , 5 2 0 4 9 , 8 6 3 , 1 1 0 1 , 7 7 9 , 1 3 4

Other credits o u t s t a n d i n g 1 1 1 0 1 0 , 6 7 9 7 6 , 7 3 0 7 , 0 6 3 9 4 , 5 8 3 4 7 , 5 6 6

W 4 3 , 7 5 7 , 1 6 7 W 2 , 7 3 9 , 8 8 1 W 2 , 2 1 2 , 3 7 2 W 9 5 8 , 6 9 0 W 2 8 9 , 5 8 3 W 4 9 , 9 5 7 , 6 9 3 W 1 , 8 2 6 , 7 0 0



The above amounts are net of present value discounts.

As of December 31, 2000, 1999 and 1998 the ratios of provision for loan losses to total loans are 3.6%, 4.6%, and 4.6%, respectively.

Movements of provision for loan losses for the years ended December 31, 2000 and 1999 are as follows (in millions of Won) :

Loan risk concentrations as of December 31, 2000 and 1999 are as follows:

2000 1999

Beginning balance W 1 , 8 8 0 , 1 0 0 W 1 , 2 9 7 , 2 4 3Offset with present value discounts ( 8 4 , 8 4 8 ) ( 6 0 , 8 9 7 )W r i t t e n - o f f ( 5 5 8 , 4 8 0 ) ( 5 1 5 , 3 8 6 )Debts forgiven ( 1 1 , 9 1 6 ) - Repurchase of loans sold to KAMCO 1 6 , 1 9 0 5 7 , 3 8 1Translation and other adjustments ( 5 5 , 3 2 6 ) 5 9 , 0 6 6Ending balance before additional provision 1 , 1 8 5 , 7 2 0 8 3 7 , 4 0 7Additional provision for the period 6 4 0 , 9 8 0 1 , 0 4 2 , 6 9 3Ending balance W 1 , 8 2 6 , 7 0 0 W 1 , 8 8 0 , 1 0 0

By geographyK o r e a W 5 2 , 0 6 4 , 3 5 5 9 9 . 0 5 W 3 9 , 4 9 7 , 1 2 6 9 6 . 6 0Southeast Asia 1 3 0 , 7 1 1 0 . 2 5 1 2 6 , 6 5 3 0 . 3 1R u s s i a 1 3 8 , 5 6 7 0 . 2 6 1 2 5 , 9 9 4 0 . 3 1J a p a n 3 0 , 8 7 6 0 . 0 6 2 0 4 , 6 2 8 0 . 5 0C h i n a 1 7 , 3 4 3 0 . 0 3 7 5 , 2 9 0 0 . 1 8South America 6 4 , 9 7 8 0 . 1 2 2 8 , 2 3 8 0 . 0 7O t h e r s 1 1 8 , 5 5 9 0 . 2 3 8 2 8 , 0 3 0 2 . 0 3

W 5 2 , 5 6 5 , 3 8 9 1 0 0 . 0 0 W 4 0 , 8 8 5 , 9 5 9 1 0 0 . 0 0

By IndustryGovernmental institutions W 4 1 2 , 3 5 0 0 . 7 8 W 5 6 0 , 9 5 8 1 . 3 7Financial institutions 6 , 1 8 2 , 1 6 8 1 1 . 7 6 2 , 5 4 6 , 1 0 0 6 . 2 3Manufacturing companies 1 3 , 9 5 0 , 6 6 2 2 6 . 5 4 1 4 , 5 9 2 , 5 8 1 3 5 . 6 9Services related companies 2 , 5 6 3 , 3 9 6 4 . 8 8 9 , 9 7 2 , 4 2 2 2 4 . 3 9I n d i v i d u a l s 1 6 , 1 6 0 , 0 6 5 3 0 . 7 4 1 2 , 1 2 6 , 1 8 1 2 9 . 6 6O t h e r s 1 3 , 2 9 6 , 7 4 8 2 5 . 3 0 1 , 0 8 7 , 7 1 7 2 . 6 6

W 5 2 , 5 6 5 , 3 8 9 1 0 0 . 0 0 W 4 0 , 8 8 5 , 9 5 9 1 0 0 . 0 0

By typeGovernmental institutions W 4 1 2 , 3 5 0 0 . 7 8 W 4 9 9 , 8 3 6 1 . 2 2Large enterprises 1 1 , 9 8 6 , 8 4 8 2 2 . 8 0 1 0 , 7 0 9 , 1 5 9 2 6 . 1 9Small to medium enterprises 2 0 , 7 9 5 , 6 2 7 3 9 . 5 6 1 7 , 3 0 7 , 9 5 7 4 2 . 3 3I n d i v i d u a l s 1 6 , 1 6 0 , 0 2 3 3 0 . 7 4 1 2 , 1 2 6 , 1 8 1 2 9 . 6 6O t h e r s 3 , 2 1 0 , 5 4 1 6 . 1 2 2 4 2 , 8 2 6 0 . 6 0

W 5 2 , 5 6 5 , 3 8 9 1 0 0 . 0 0 W 4 0 , 8 8 5 , 9 5 9 1 0 0 . 0 0

2000 1999Millions of Won % Millions of Won %



As of December 31, 2000, total restructured loans outstanding to companies under restructuring procedures are summarized asfollows (in millions of Won):

The Bank records present value discounts for the differences between the present values and the book values of the loans on thedate of loan restructuring. These present value discounts are amortized using effective interest method over the rescheduledmaturities. The present value of the restructured loan is the market value of the loan on the day that the restructuring terms are fixed.For those loans unavailable of such market values, the Bank determines the present value by discounting, using the appropriateinterest rate of the loan origination or loan restructuring date, the estimated future cash flows over the rescheduled maturities.

Loans that are agreed on for conversion into equity are separately classified as loans for equity conversion as of the agreement date.The loans for equity conversion are stated at the lower of principal amount or the fair value of the to-be-converted equity instrument.

Movements in the present value discounts for the year ended December 31, 2000 related to the restructured loans are as follows:

8. Guarantees and acceptances :

Guarantees and acceptances outstanding as of December 31, 2000 and 1999 are summarized as follows:

Court CourtWorkouts Receivership Mediation Total

Pre-restructuring loan balance W 1 , 8 0 5 , 1 2 5 W 3 0 6 , 3 2 6 W 2 9 2 , 2 7 4 W 2 , 4 0 3 , 7 2 5Loans for equity conversion 8 4 , 1 5 0 - - 8 4 , 1 5 0Converted into stocks 1 2 7 , 7 1 1 - - 1 2 7 , 7 1 1Converted into CBs 6 9 , 2 6 7 - - 6 9 , 2 6 7Loan balances for restructuring 1 , 5 2 3 , 9 9 7 3 0 6 , 3 2 6 2 9 2 , 2 7 4 2 , 1 2 2 , 5 9 7Restructured loan present value 1 , 3 8 4 , 3 8 7 2 8 8 , 0 5 2 2 8 1 , 8 8 0 1 , 9 5 4 , 3 1 9Present value discounts W 1 3 9 , 6 1 0 W 1 8 , 2 7 4 W 1 0 , 3 9 4 W 1 6 8 , 2 7 8


Work out W 6 6 , 0 0 0 W 1 2 1 , 6 2 8 W 4 8 , 0 1 8 W 1 3 9 , 6 1 0Court receivership 4 4 , 6 5 6 3 0 , 3 3 8 5 6 , 7 2 0 1 8 , 2 7 4Court mediation 2 2 , 8 7 1 3 , 9 8 2 1 6 , 4 5 9 1 0 , 3 9 4

W 1 3 3 , 5 2 7 W 1 5 5 , 9 4 8 W 1 2 1 , 1 9 7 W 1 6 8 , 2 7 8

Millions of Won

2000 1999

Guarantees and acceptance in WonGuarantees on debentures W 5 , 7 7 2 W 2 5 , 8 7 7Guarantees on loan collateral 4 0 , 4 8 4 5 9 , 3 0 1Guarantees on commercial bills 4 2 1 , 0 4 6O t h e r s 2 3 6 , 8 4 9 1 0 0 , 3 9 2

2 8 3 , 1 4 7 1 8 6 , 6 1 6Guarantees and acceptance in foreign currencies

Acceptances of letters of credit 1 , 8 4 5 , 9 1 6 9 4 0 , 4 6 2Acceptances of letters of guarantee 5 8 , 6 4 2 5 4 , 9 6 5O t h e r s 8 4 8 , 2 6 3 9 6 5 , 2 3 0

2 , 7 5 2 , 8 2 1 1 , 9 6 0 , 6 5 7W 3 , 0 3 5 , 9 6 8 W 2 , 1 4 7 , 2 7 3



The credit risk classification and provision for fixed guarantees and acceptances outstanding as of December 31, 2000 and 1999 areas follows:

Since 1999, the Bank applied credit risk classification used for loans to the guarantees and acceptances and classified these as sub-standard, doubtful, or estimated loss (provision rates are 20%, 50%, 100%, respectively). As a result, the Bank recorded a W34,764million decrease in its retained earnings as of January 1, 1999 and net income for the year ended December 31, 1999 was W6,764million more than that which would have been recorded under the previous method.

Risk concentrations of guarantees and acceptances outstanding as of December 31, 2000 and 1999 are as follows:

Millions of Won

2000 1999

N o r m a l W 2 , 8 7 2 , 3 5 6 W 1 , 9 8 3 , 5 0 5P r e c a u t i o n a r y 9 8 , 9 7 2 3 0 , 8 4 8S u b s t a n d a r d 2 6 , 8 2 5 1 3 1 , 2 5 5D o u b t f u l 3 7 , 7 1 4 1 , 1 8 5Estimated loss 1 0 1 4 8 0

3 , 0 3 5 , 9 6 8 2 , 1 4 7 , 2 7 3P r o v i s i o n ( 3 7 , 3 3 1 ) ( 2 8 , 4 3 0 )

W 2 , 9 9 8 , 6 3 7 W 2 , 1 1 8 , 8 4 3

By geography

Korea W 2 , 6 7 0 , 4 7 3 8 7 . 9 6 W 1 , 8 1 3 , 8 8 0 8 4 . 4 7

Southeast Asia 1 3 - 1 1 , 4 5 4 0 . 5 3

O t h e r 3 6 5 , 4 8 2 1 2 . 0 4 3 2 1 , 9 3 9 1 5 . 0 0

W 3 , 0 3 5 , 9 6 8 1 0 0 . 0 0 W 2 , 1 4 7 , 2 7 3 1 0 0 . 0 0By industry

G o v e r n m e n t W 9 1 , 9 5 9 3 . 0 3 W 4 1 , 0 7 4 1 . 9 1

Financial institutions 5 , 5 7 2 0 . 1 8 4 3 7 , 2 6 5 2 0 . 3 6

Manufacturing companies 1 , 7 7 2 , 0 1 9 5 8 . 3 7 1 , 1 8 3 , 2 7 5 5 5 . 1 1

Services related companies 3 0 , 5 6 9 1 . 0 1 1 6 7 , 5 3 3 7 . 8 0

O t h e r s 1 , 1 3 5 , 8 4 9 3 7 . 4 1 3 1 8 , 1 2 6 1 4 . 8 2

W 3 , 0 3 5 , 9 6 8 1 0 0 . 0 0 W 2 , 1 4 7 , 2 7 3 1 0 0 . 0 0By type of customers

G o v e r n m e n t W 9 1 , 9 5 9 3 . 0 3 W 4 1 , 0 7 4 1 . 9 1

Large enterprises 7 2 9 , 8 2 1 2 4 . 0 4 1 , 3 8 0 , 6 9 4 6 4 . 3 0

Small to medium enterprises 1 , 7 2 3 , 9 4 7 5 6 . 7 8 6 3 4 , 3 2 8 2 9 . 5 4

O t h e r s 4 9 0 , 2 4 1 1 6 . 1 5 9 1 , 1 7 7 4 . 2 5

W 3 , 0 3 5 , 9 6 8 1 0 0 . 0 0 W 2 , 1 4 7 , 2 7 3 1 0 0 . 0 0




Credit related derivatives included in the other foreign currency guarantees are as follows (in thousands of US Dollars):

(*) classified as normal by applying FLC

9. Fixed Assets :Property and equipment at December 31, 2000 and 1999 comprise the following (in millions of Won):

Intangible assets and foreclosed assets at December 31, 2000 and 1999 comprise the following (in millions of Won):

In accordance with the General Banking Act, the Bank may only own business-purpose real property within its own equity capitalamount. At December 31, 2000 and 1999, the total quoted market value of the land, determined by the tax authorities for property taxassessment, amounts to W609,750 million and W592,956 million, respectively.

In accordance with the Bank’s regulations, all Bank’s fixed assets, other than those personal properties valued under W1,000thousand (main office : W5,000 thousand), are covered by insurance policies of W536,222 million (book value W1,005,927 million)and W556,954 million (book value W980,605 million) as of December 31, 2000 and 1999, respectively. All vehicles are covered bylegal and general insurance policies.

Intangible assets include trademark rights, communication related utility rights, lease premiums, and software copyrights.

Guarantee Net AssetType Counter-party Guaranteeing Asset Amounts (USD) Value %

T R S Morgan Guarantee Trust Asia Synthetic Fund FRN U S D 1 0 , 5 0 0 1 1 8 . 9 4 %T R S Morgan Guarantee Trust Daehan High Yield Fund FRN U S D 7 0 , 0 0 0 2 1 0 . 6 7 %T R S Morgan Guarantee Trust Pacific Growth Fund shares U S D 5 2 , 0 0 0 1 1 2 . 7 2 %T R S Morgan Guarantee Trust Pan Asian Strategic Fund FRN U S D 2 1 , 0 0 0 1 2 7 . 9 3 %T R S Morgan Guarantee Trust Daehan Global Bond I FRN U S D 7 0 , 0 0 0 1 4 4 . 8 3 %T R S Morgan Guarantee Trust Daehan Global Bond II FRN U S D 5 6 , 0 0 0 1 3 1 . 8 6 %C D S Chase Manhattan Bank Korea Green Cross Co. CB U S D 3 , 5 0 0 ( * )C D S Industrial Bank of Korea - U S D 1 5 , 0 0 0 ( * )C D S Chohung Bank - U S D 3 5 , 0 0 0 ( * )C D S Korea EXIM Bank - U S D 1 5 , 0 0 0 ( * )

U S D 3 4 8 , 0 0 0

Acquisition Accumulated Net Carrying ValueCost Depreciation

L a n d W 7 3 6 , 3 4 8 W - W 7 3 6 , 3 4 8 W 7 4 5 , 8 1 8Buildings and structures 5 1 0 , 4 9 9 7 6 , 8 1 9 4 3 3 , 6 8 0 4 3 7 , 0 1 2Leasehold improvements 2 9 , 8 4 6 2 3 , 6 2 3 6 , 2 2 3 5 , 7 9 0Equipment and vehicles 4 6 6 , 4 0 9 3 8 3 , 2 4 4 8 3 , 1 6 5 7 9 , 5 8 9Constructions in progress 5 , 4 4 0 - 5 , 4 4 0 7 , 4 7 7

W 1 , 7 4 8 , 5 4 2 W 4 8 3 , 6 8 6 W 1 , 2 6 4 , 8 5 6 W 1 , 2 7 5 , 6 8 6

2000 1999

Intangible Assets Foreclosed Assets2000 1999 2000 1999

Acquisition cost W 6 , 3 5 9 W 6,857 W 8 , 5 6 1 W 12,609 Valuation provisions - - ( 2 , 1 8 8 ) ( 2 , 4 5 0 )Net Carrying value W 6 , 3 5 9 W 6,857 6 , 3 7 3 1 0 , 1 5 9



10. Derivatives :Derivatives at December 31, 2000 comprise the following:

The trading and hedge classifications above are strictly based on accounting methods applied and the Bank’s actual derivativestransactions are mostly hedged. In accordance with the addendum to the revised generally accepted accounting principles, effectiveJanuary 1, 2000, the Bank reclassified most of its currency swaps and interest rate swaps, which were previously classified as hedgederivatives, as trading derivatives and recorded them at fair value. In connection with this change, the Bank recorded a W21,625million decrease in its retained earnings as of January 1, 2000 and net income for the year ended December 31, 2000 isapproximately W8,443 million less than that which would have been recorded under the previous method.

At December 31, 2000, the following Bank assets are guaranteed through credit related derivatives (thousands of US Dollars):

Derivatives related gains and losses for the years ended December 31, 2000 and 1999 comprise the following (in millions of Won):

Fair value hedged asset valuation gains and losses are the changes in value of the hedged assets/liabilities resulting from the specificrisk being hedged. The Bank assumes 100% hedge effectiveness for all hedge relationships.

Notional Amounts Valuation Gains / Losses (P/L) Valuations (B/S)

Trading Hedge Subtotal Trading Hedge Subtotal Asset Liability

Currency relatedF o r w a r d W 8 , 9 0 7 , 2 7 4 W - W 8 , 9 0 7 , 2 7 4 W ( 2 4 8 , 5 2 3 ) W - W ( 2 4 8 , 5 2 3 ) W 4 0 2 , 9 8 6 W 6 0 2 , 6 8 8F u t u r e 1 , 1 3 0 , 2 0 3 - 1 , 1 3 0 , 2 0 3 - - - - -Currency swap 1 , 0 2 7 , 7 9 0 4 1 , 1 8 0 1 , 0 6 8 , 9 7 0 1 , 1 2 0 1 1 2 1 , 2 3 2 4 0 , 4 9 1 4 9 , 4 4 1Options bought 1 3 , 1 4 7 - 1 3 , 1 4 7 6 9 4 - 6 9 4 1 , 2 8 4 -Options sold 5 6 , 6 0 1 - 5 6 , 6 0 1 ( 2 0 2 ) - ( 2 0 2 ) - 7 6 1

1 1 , 1 3 5 , 0 1 5 4 1 , 1 8 0 1 1 , 1 7 6 , 1 9 5 ( 2 4 6 , 9 1 1 ) 1 1 2 ( 2 4 6 , 7 9 9 ) 4 4 4 , 7 6 1 6 5 2 , 8 9 0Interest related

F o r w a r d 4 0 , 0 0 0 - 4 0 , 0 0 0 ( 7 1 ) - ( 7 1 ) - 7 1F u t u r e 6 9 , 2 8 4 - 6 9 , 2 8 4 - - - - -S w a p 4 , 0 0 4 , 6 0 0 5 6 5 , 6 1 0 4 , 5 7 0 , 2 1 0 ( 7 , 5 3 8 ) ( 1 4 , 9 6 7 ) ( 2 2 , 5 0 5 ) 5 5 , 0 9 3 9 1 , 7 2 6

4 , 1 1 3 , 8 8 4 5 6 5 , 6 1 0 4 , 6 7 9 , 4 9 4 ( 7 , 6 0 9 ) ( 1 4 , 9 6 7 ) ( 2 2 , 5 7 6 ) 5 5 , 0 9 3 9 1 , 7 9 7

O t h e r 1 , 8 9 0 - 1 , 8 9 0 - - - 2 2 4 -W1 5 , 2 5 0 , 7 8 9 W 6 0 6 , 7 9 0 W1 5 , 8 5 7 , 5 7 9 W ( 2 5 4 , 5 2 0 ) W( 1 4 , 8 5 5 ) W ( 2 6 9 , 3 7 5 ) W 5 0 0 , 0 7 8 W 7 4 4 , 6 8 7

Guaranteed Net AssetGuaranteed Asset Amounts Value (%)

Asia Synthetic Fund FRN U S D 1 0 , 5 0 0 1 1 8 . 9 4 %Daehan High Yield Fund FRN U S D 7 0 , 0 0 0 2 1 0 . 6 7 %Pacific Growth Fund shares U S D 5 2 , 0 0 0 1 1 2 . 7 2 %Pan Asian Strategic Fund FRN U S D 2 1 , 0 0 0 1 2 7 . 9 3 %Lucre Investment Fund FRN U S D 1 1 , 0 0 0 1 4 4 . 8 3 %

U S D 1 6 4 , 5 0 0

Derivatives valuations W 9 6 9 , 1 2 6 W 6 9 9 , 7 5 1 W 8 6 4 , 4 3 0 W 8 4 5 , 3 7 3Derivatives transactions 5 2 3 , 7 8 8 6 7 6 , 3 6 0 3 8 8 , 8 9 3 4 4 9 , 0 6 1Fair value hedged asset valuations 1 , 3 6 3 1 6 , 2 1 9 - -

W 1 , 4 9 4 , 2 7 7 W 1 , 3 9 2 , 3 3 0 W 1 , 2 5 3 , 3 2 3 W 1 , 2 9 4 , 4 3 4

2000 1999Losses Gains Losses Gains



11. Other Assets :Other assets at December 31, 2000 and 1999 comprise the following:

Investments in funds for troubled debt reorganization are amounts contributed to Korea Asset Management Company (“KAMCO”)for the purchase of troubled debts that are to be settled in 2002. The related balances were written off during the year endedDecember 31, 2000 and recognized as impairment loss on investment debt securities.

12. Deposits :Deposits at December 31, 2000 and 1999 comprise the following:

Millions of Won2000 1999

2000 1999

Guarantee deposits paid W 6 2 1 , 5 5 2 W 6 4 2 , 1 1 2Accounts receivable (Note 2) 1 , 0 9 9 , 6 9 7 1 3 4 , 4 6 0Accrued income 1 , 0 1 5 , 8 3 2 1 , 0 5 7 , 4 9 4Payments in advance 6 7 , 9 0 7 5 0 7 , 6 3 1Deferred tax assets (Note 26) 1 9 0 , 3 0 3 - Derivative assets (Note 10) 5 0 0 , 0 7 8 5 2 7 , 2 0 9Unsettled domestic inter-bank receivables 1 6 9 , 3 0 0 5 6 8 , 9 4 3Prepaid expenses 2 3 , 5 0 1 3 9 , 2 6 7Investments in funds for troubled debt reorganization - 2 3 , 6 5 0O t h e r s 1 5 , 3 4 9 1 2 , 7 3 2

W 3 , 7 0 3 , 5 1 9 W 3 , 5 1 3 , 4 9 8

Annual Millions of WonInterest(%)

Deposits in Won currency :Demand deposits

Checking deposits 1 . 0 W 457,730 W 437,844Passbook deposits 1 . 0 1 , 8 5 9 , 4 4 5 1 , 6 9 9 , 1 7 8Temporary deposits - 1 , 8 1 9 , 2 9 8 2 , 4 8 9 , 0 7 6Public fund deposits 1 . 0 3 7 , 4 8 8 7 8 , 3 6 0O t h e r s - 5 7

4 , 1 7 3 , 9 6 6 4 , 7 0 4 , 4 6 5Time deposits and savings deposits

Time deposits 5 . 0 - 7 . 9 2 6 , 7 5 1 , 0 4 0 1 8 , 0 2 7 , 3 4 4Installment savings deposits 7 . 2 - 8 . 5 6 2 9 , 2 2 3 6 1 0 , 0 0 7Saving deposits 1 . 0 - 5 . 0 7 , 6 5 0 , 3 6 1 6 , 4 0 3 , 9 3 6Unrestricted saving deposits 2 . 0 - 4 . 0 2 , 6 7 1 , 1 2 5 2 , 4 3 2 , 7 2 1Unrestricted corporate savings deposits 1 . 0 - 5 . 0 3 , 1 6 7 , 3 9 0 3 , 1 7 0 , 5 5 1Long term savings for employees 8 . 2 - 8 . 5 4 4 1 , 9 1 4 4 8 2 , 9 9 7Long term savings for consumers 8 . 5 1 , 5 7 1 , 0 9 4 2 1 , 3 6 1Employee preferential savings deposits 8 . 5 5 8 1 , 8 7 6 1 6 9 , 8 0 0Mutual installment deposits 7 . 2 - 8 . 5 5 , 5 2 1 , 1 6 1 3 , 9 4 9 , 8 7 1O t h e r s 8 . 5 2 3 5 , 5 6 8 1 , 1 5 8 , 0 9 3

4 9 , 2 2 0 , 7 5 2 3 6 , 4 2 6 , 6 8 1Deposits in foreign currencies :

Demand deposits 0 . 0 - 6 . 2 2 3 2 5 , 0 2 4 1 9 6 , 2 6 0Time deposits and savings deposits 0 . 0 - 8 . 4 9 3 7 7 , 4 5 6 3 0 4 , 1 3 8

7 0 2 , 4 8 0 5 0 0 , 3 9 8Certificates of deposit 5 . 3 - 6 . 6 2 , 4 2 4 , 9 4 7 1 , 2 3 7 , 6 6 5

W 56,522,145 W 42,869,209



Deposits are placed with the following entities as of December 31, 2000 :

Deposits in Won currencyDemand deposits W 3 8 9 , 5 2 1 W 1 7 9 , 0 6 2 W 3 , 6 0 5 , 3 8 3 W 4 , 1 7 3 , 9 6 6Time/savings deposits 2 0 0 , 3 8 3 1 , 9 1 2 , 2 1 2 4 7 , 1 0 8 , 1 5 7 4 9 , 2 2 0 , 7 5 2

Deposits in foreign currencyDemand deposits - - 3 2 5 , 0 2 4 3 2 5 , 0 2 4Time/savings deposits - - 3 7 7 , 4 5 6 3 7 7 , 4 5 6

Certificates of deposit 9 , 6 5 3 1 , 8 1 1 , 9 9 8 6 0 3 , 2 9 6 2 , 4 2 4 , 9 4 7W 5 9 9 , 5 5 7 W 3 , 9 0 3 , 2 7 2 W 5 2 , 0 1 9 , 3 1 6 W 5 6 , 5 2 2 , 1 4 5

Millions of WonOther Financial

Banks Institutions Others Total

The maturities of deposits as of December 31, 2000 are as follows:

13. Borrowings :Borrowings as of December 31, 2000 and 1999 comprise the following:

2 0 0 1 W 4 8 , 3 4 7 , 6 5 8 W 6 8 5 , 4 6 5 W 2 , 4 2 4 , 9 4 7 W 5 1 , 4 5 8 , 0 7 02 0 0 2 2 , 5 1 1 , 3 1 5 - - 2 , 5 1 1 , 3 1 52 0 0 3 1 , 5 5 4 , 8 6 3 4 , 9 7 6 - 1 , 5 5 9 , 8 3 92 0 0 4 3 8 3 , 7 2 0 - - 3 8 3 , 7 2 0

t h e r e a f t e r 5 9 7 , 1 6 2 1 2 , 0 3 9 - 6 0 9 , 2 0 1W 5 3 , 3 9 4 , 7 1 8 W 7 0 2 , 4 8 0 W 2 , 4 2 4 , 9 4 7 W 5 6 , 5 2 2 , 1 4 5

Millions of WonYear ending Deposits in Foreign Certificates ofDecember 31 Deposits in Won C u r r e n c i e s D e p o s i t T o t a l


Borrowings in Won Borrowings from the Bank of Korea ;

Security collateralized borrowings 3 . 0 0 W 5 8 9 , 9 8 6 W 6 3 2 , 8 4 7Borrowings from National Investment Fund 8 . 5 0 2 2 2O t h e r 5 . 0 0 4 , 4 6 4 1 1 , 2 0 2

5 9 4 , 4 5 2 6 4 4 , 0 7 1Borrowings from the government ;

Borrowings from public finance 5 . 0 - 6 . 5 8 9 , 1 6 5 8 0 , 6 4 9O t h e r s 2 . 0 - 8 . 3 4 5 1 , 1 5 2 4 1 2 , 1 9 7

5 4 0 , 3 1 7 4 9 2 , 8 4 6Borrowings from banking institutions ;

Debenture funds for development of smallto medium industries 8 . 5 5 - 9 . 5 5 2 2 0 , 2 4 3 3 4 0 , 9 5 1

Other borrowings from domestic banks 5 . 0 - 6 . 7 1 8 5 , 9 8 7 1 9 9 , 4 4 84 0 6 , 2 3 0 5 4 0 , 3 9 9

Borrowings from non-banking financial Institutions;Borrowings from the government 4 . 0 0 4 7 3 9 0 3Subordinated borrowings 8 . 0 - 1 1 . 8 4 4 2 5 , 0 0 0 4 2 5 , 0 0 0Other finance borrowings 2 . 0 0 - L i b o r + 3 . 0 1 2 3 , 3 3 3 2 1 3 , 3 4 9

5 4 8 , 8 0 6 639,252



The details of subordinated borrowings as of December 31, 2000 are as follows (in millions of Won):

Samsung Life Insurance Co., Ltd. 1996. 12. 31 1 0 . 0 0 W 1 3 0 , 0 0 0 2008. 12. 31 Annual interestKorea Life Insurance Co., Ltd. 1996. 12. 31 8 . 5 0 7 0 , 0 0 0 2008. 12. 31 Annual interestHyundai Life Insurance Co., Ltd. 1996. 12. 31 9 . 0 0 1 0 , 0 0 0 2006. 12. 31 Monthly interestHyundai Life Insurance Co., Ltd. 1996. 12. 31 1 1 . 8 4 1 0 , 0 0 0 2006. 12. 31 Monthly interest in advanceKorea Life Insurance Co., Ltd. 1996. 12. 31 1 0 . 0 0 5 , 0 0 0 2006. 12. 31 Annual interestSamsung Life Insurance Co., Ltd. 1997. 12. 29 9 . 3 0 1 0 0 , 0 0 0 2007. 12. 31 Interest on 5th year endKyobo Life Insurance Co., Ltd. 1997. 12. 31 9 . 3 0 6 0 , 0 0 0 2007. 12. 31 Interest on 5th year endHungguk Life Insurance Co., Ltd. 1997. 12. 29 8 . 0 0 4 0 , 0 0 0 2007. 12. 31 Annual interest

W 4 2 5 , 0 0 0

Date of Annual Contract Interest(%) Amount Maturity Conditions

The maturities of the borrowings as of December 31, 2000 are as follows (in millions of Won):

Borrowings from the Bank of Korea mature within one year. Borrowings from public finance and National Investment Funds andother borrowings from the government are payable in quarterly installment payments within 10 years with 7.5 years of grace periodand within 15 years with 5 years of grace period, respectively.

2 0 0 1 W 1 , 1 1 0 , 6 1 7 W 9 4 9 , 9 4 4 W 2 , 0 2 0 , 0 6 3 W 4 , 0 8 0 , 6 2 42 0 0 2 4 9 5 , 2 6 2 1 5 8 , 3 9 3 - 6 5 3 , 6 5 52 0 0 3 3 8 7 , 1 5 8 2 1 6 , 7 1 6 - 6 0 3 , 8 7 42 0 0 4 3 2 9 , 9 0 1 1 0 2 , 8 3 3 - 4 3 2 , 7 3 4

t h e r e a f t e r 9 1 1 , 8 3 8 3 8 3 , 5 4 8 - 1 , 2 9 5 , 3 8 6W 3 , 2 3 4 , 7 7 6 W 1 , 8 1 1 , 4 3 4 W 2 , 0 2 0 , 0 6 3 W 7 , 0 6 6 , 2 7 3

Year ending Borrowings in Borrowings in December 31 Won Currency Foreign Currencies Others T o t a l


Other borrowings ;Development funds for regional small

to medium industries 2 . 2 - 8 . 0 W 3 9 5 , 7 8 8 W 3 8 6 , 6 8 3Promotion funds for small to medium industries 6 . 0 - 7 . 0 5 8 4 , 0 5 8 5 0 7 , 3 5 6O t h e r s 0 . 5 - 8 . 7 1 6 5 , 1 2 5 1 9 8 , 3 8 1

1 , 1 4 4 , 9 7 1 1 , 0 9 2 , 4 2 03 , 2 3 4 , 7 7 6 3 , 4 0 8 , 9 8 8

Borrowings in foreign currencyBorrowings from domestic banks 6 . 6 2 - L i b o r + 1 . 4 6 2 0 , 0 7 9 4 1 7 , 8 6 3Borrowings from foreign banks L i b o r + 0 . 2 8 - 7 . 5 3 1 , 0 1 5 , 4 6 6 2 , 8 3 8 , 0 6 2Borrowings from non-banking financial institutions 1 . 1 6 - 7 . 5 2 1 7 5 , 8 8 9 4 2 , 4 6 5

1 , 8 1 1 , 4 3 4 3 , 2 9 8 , 3 9 0Bonds sold with repurchase agreement 5 . 4 5 - 7 . 4 2 3 2 , 9 7 5 1 1 4 , 1 5 5Bills sold 5 . 4 - 6 . 9 1 , 1 6 1 , 5 4 6 7 8 , 2 0 9Due to the Bank of Korea in foreign currencies 6 . 2 6 - 7 . 0 1 2 6 5 , 6 7 7 5 5 2 , 3 6 2Call money in Won currency - - 6 7 0 , 0 0 0Call money in foreign currencies 6 . 8 5 1 7 8 , 7 4 3 1 5 4 , 6 3 7Inter-bank reconciliation funds - 1 8 1 , 1 2 2 -

W 7 , 0 6 6 , 2 7 3 W 8 , 2 7 6 , 7 4 1



14. Debentures :Debentures as of December 31, 2000 and 1999 comprise the following :

Prior to 1999, the Bank recognized debenture issue costs as current period expense as incurred. In accordance with the revisedfinancial accounting standards effective January 1, 1999, the Bank classifies and records debenture issue costs as discounts ondebentures and amortizes the discounts using effective interest method. In connection with this change, net income for the yearended December 31,1999 was approximately W7,082 million more than that which would have been recorded under the previousm e t h o d .

As of December 31, 2000, debentures in Won currency comprise the following :

(*) Subordinated debentures(**) Sold over-the-counter

The fixed rate debentures are Kookmin Bank debentures issued under the authorization by the banking supervisory regulation andare to be fully redeemed at the end of their three-year maturity.


Debentures in Won currency :Subordinated debentures 8 . 7 1 - 1 6 . 0 W 1 , 4 9 8 , 7 0 2 W 7 9 8 , 7 0 0Discounted debentures 5 . 3 5 - 1 5 . 1 8 1 , 5 7 2 , 0 0 0 2 , 5 0 0 , 0 0 0Compound interest debentures 6 . 3 5 - 1 7 . 6 9 1 , 8 1 7 , 9 3 7 1 , 7 4 4 , 1 6 4Coupon debentures 5 . 8 7 - 1 7 . 6 9 2 2 2 , 4 0 1 1 7 6 , 2 0 0

5 , 1 1 1 , 0 4 0 5 , 2 1 9 , 0 6 4Debentures in foreign currencies 3 . 0 - L i b o r + 2 . 0 1 , 6 6 3 , 6 4 8 1 , 5 4 2 , 8 5 4

6 , 7 7 4 , 6 8 8 6 , 7 6 1 , 9 1 8Discounts on debentures ( 9 9 , 7 4 6 ) ( 1 5 0 , 4 6 2 )

W 6 , 6 7 4 , 9 4 2 W 6 , 6 1 1 , 4 5 6

AnnualBillions Interest

Series Issue Date of Won Rate(%) Due Date

1s t ( * ) 1 9 9 7 . 1 2 . 2 4 W 2 4 0 . 0 F l o a t i n g 2 0 0 3 . 0 3 . 3 1K L B ( * ) 1 9 9 7 . 1 2 . 2 4 8 0 . 0 F l o a t i n g 2 0 0 3 . 0 3 . 3 1Daedong Bank(*) 1 9 9 7 . 1 2 . 2 4 2 5 . 3 F l o a t i n g 2 0 0 3 . 0 3 . 3 1K L B ( * ) 1 9 9 7 . 1 2 . 2 9 1 0 0 . 0 1 6 . 0 2 0 0 4 . 0 1 . 0 5K L B ( * ) ( * * ) 1 9 9 8 . 1 ~ 7 5 3 . 6 1 1 . 0 3 - 1 5 . 6 6 2 0 0 5 . 0 3 . 2 7K L B ( * ) 1 9 9 8 . 0 6 . 1 8 3 4 . 7 1 5 . 6 6 2 0 0 3 . 0 7 . 1 83rd ( * ) 1 9 9 8 . 1 2 . 2 9 1 0 0 . 0 F l o a t i n g 2 0 0 4 . 0 3 . 3 14t h ( * ) 1 9 9 8 . 1 2 . 2 9 6 0 . 0 F l o a t i n g 2 0 0 4 . 0 3 . 3 1K L B ( * ) 1 9 9 8 . 1 2 . 2 9 1 0 5 . 1 F l o a t i n g 2 0 0 4 . 0 3 . 3 16t h ( * ) ( * * ) 2 0 0 0 . 0 3 . 2 7 2 0 0 . 0 9 . 6 5 2 0 0 5 . 0 3 . 2 77t h ( * ) ( * * ) 2 0 0 0 . 0 9 . 2 7 3 0 0 . 0 8 . 9 9 2 0 0 6 . 0 1 . 2 78t h ( * ) ( * * ) 2 0 0 0 . 1 2 . 2 7 2 0 0 . 0 8 . 7 1 2 0 0 6 . 0 1 . 2 7Fixed rate debentures(**) - 3 , 6 1 2 . 3 5 . 3 4 - 1 7 . 6 9 -

W 5 , 1 1 1 . 0



As of December 31, 2000, debentures in foreign currencies comprise the following :

4 t h 1 9 9 6 . 0 7 . 0 8 U S D 5 0 . 0 6 M L i b o r + 0 . 3 5 2 0 0 1 . 0 7 . 0 8 Hong KongKLB 5th 1 9 9 6 . 1 0 . 0 1 U S D 1 0 0 . 0 3 M L i b o r + 0 . 3 1 2 0 0 1 . 1 0 . 0 1 U n l i s t e dDaedong (*) 1 9 9 6 . 1 1 . 2 1 U S D 5 0 . 0 6 M L i b o r + 0 . 8 5 2 0 0 6 . 1 1 . 2 1 L u x e m b o u r g7th (*) 1 9 9 6 . 1 2 . 3 0 U S D 1 9 0 . 0 6 M L i b o r + 0 . 6 0 2 0 0 6 . 1 2 . 3 0 L u x e m b o u r g1 0 t h 1 9 9 7 . 0 9 . 1 9 U S D 1 0 0 . 0 6 M L i b o r + 0 . 7 9 2 0 0 2 . 0 9 . 1 9 L o n d o nKLB 9th 1 9 9 7 . 1 0 . 3 0 U S D 6 6 . 7 6 M L i b o r + 1 . 2 2 0 0 2 . 1 0 . 3 0 U n l i s t e dKLB 11th (**) 1 9 9 8 . 0 6 . 2 9 U S D 2 5 . 0 6MLibor Flat 2 0 0 4 . 0 6 . 1 5 U n l i s t e d1 4 t h 1 9 9 9 . 0 1 . 2 9 U S D 5 0 . 0 6 M L i b o r + 0 . 8 5 2 0 0 1 . 0 1 . 2 9 U n l i s t e d1 5 t h 1 9 9 9 . 0 2 . 2 2 USD 2 5 . 0 6 M L i b o r + 0 . 5 0 2 0 0 1 . 0 2 . 2 2 U n l i s t e d1 6 t h 1 9 9 9 . 0 3 . 1 5 U S D 5 0 . 0 6 M L i b o r + 0 . 2 5 2 0 0 1 . 0 3 . 1 5 u n l i s t e d1 7 t h 1 9 9 9 . 0 4 . 0 8 USD 4 0 . 0 6 M L i b o r + 0 . 2 5 2 0 0 1 . 0 4 . 0 8 u n l i s t e d1 8 t h 1 9 9 9 . 0 4 . 1 5 U S D 2 0 . 0 6 M L i b o r + 2 2 0 0 1 . 0 4 . 0 6 u n l i s t e d1 9 t h 1 9 9 9 . 0 4 . 1 9 USD 2 5 . 0 6 M L i b o r + 0 . 2 2 0 0 1 . 0 4 . 1 9 u n l i s t e d20th (**) 1 9 9 9 . 0 6 . 1 4 U S D 2 0 0 . 0 3 . 0 2 0 0 5 . 0 6 . 1 4 u n l i s t e d2 1 s t 1 9 9 9 . 1 0 . 2 2 U S D 5 0 . 0 6 M L i b o r + 1 . 6 2 0 0 1 . 1 0 . 2 2 u n l i s t e d2 2 n d 1 9 9 9 . 1 1 . 1 5 U S D 2 0 . 0 6 M L i b o r + 1 . 3 2 0 0 1 . 1 1 . 1 5 u n l i s t e d2 3 r d 2 0 0 0 . 0 3 . 2 2 U S D 2 0 0 . 0 6 M L i b o r + 1 . 0 2 0 0 2 . 0 3 . 1 1 u n l i s t e d2 4 t h 2 0 0 0 . 0 3 . 2 2 USD 2 0 . 0 6 M L i b o r + 1 . 0 2 0 0 2 . 0 3 . 2 2 u n l i s t e d2 5 t h 2 0 0 0 . 0 6 . 0 2 U S D 1 0 . 0 6 M L i b o r + 1 . 3 2 0 0 3 . 0 6 . 0 2 u n l i s t e d2 6 t h 2 0 0 0 . 0 8 . 1 0 U S D 1 6 . 5 6 M L i b o r + 0 . 7 5 2 0 0 2 . 0 8 . 1 0 u n l i s t e d2 7 t h 2 0 0 0 . 0 8 . 1 0 U S D 1 2 . 5 6 M L i b o r + 0 . 9 0 2 0 0 3 . 0 8 . 1 0 u n l i s t e d

U S D 1 , 3 2 0 . 7

Millions of AnnualSeries Issue Date U.S. Dollars Interest Rate(%) Due Date Listing

(*) Subordinated debt securities(**) Subordinated convertible debt securities

The Bank is authorized by the banking supervisory regulation to issue debentures amounting up to 300% of its equity.

The KLB debentures are those succeeded from Korea Long Term Credit Bank by merger, which occurred on December 31, 1998, andthe issuance of new debt securities for the repayment of these KLB debentures are excluded from the 300% of equity restrictionsapplied to other debenture issuances.

The 4t h series debentures in foreign currencies were issued pursuant to a US$ 700 million Euro Medium Term Note Program, and the1 0t h , 14t h ~ 1 9t h, 21s t ~ 27t h series debentures in foreign currencies were issued pursuant to a US$ 1,500 million Global Medium TermNote Program. The US$1,500 million Global Medium Term Note Program is an update of the US$700 million Program with newlyadded clauses enabling issuance of subordinated notes and sales in the U.S.

Among the debentures in foreign currencies, the Daedong Bank series and the 7t h series subordinated floating rate debentures havecall redemption options that can be exercised on or after 5 years from the issuance date.

US$ 10 million of the Bank’s own debentures in foreign currencies acquired by the Bank are deducted from the 7t h s e r i e ssubordinated floating rate debentures.



Debentures in foreign currencies comprise the following :

Face value US$ 200 million US$ 25 millionIssue price US$ 200 million US$ 25 millionBook value W 251,940 million W 31,493 millionConversion price W 13,802 per share W 8,822 per shareConversion stock Common stock Common stockConvertible period July 14,1999 ~ May 14, 2005 September 30,1998 ~ June 14, 2004Conversion exchange rate US$ 1 : W 1,170.50 US$ 1 : W 1,402.00Method of redemption Fully redeemed at maturity Fully redeemed at maturity

20th KLB-11th

The maturities of debentures at December 31, 2000 are as follows (in million of Won) :

15. Accrued Retirement Benefits :The movements in accrued retirement benefits for the year ended December 31, 2000 are as follows (in millions of Won) :

For the years ended December 31, 2000 and 1999, the Bank paid out a total of W131,408 million and W129,392 million, respectively,as retirement benefits including W28,102 million and W11,275 million, respectively, of special retirement payments(included in non-operating expenses) to its early retiring employees under an early retirement program.

As of December 31, 2000, approximately 70.8% of total accrued retirement benefits are deposited in group retirement benefitinsurance programs at four insurance companies including Samsung Life Insurance Co. These insurance companies hold W425,000million of the Bank’s subordinated debentures (see Note 13) and the Bank has contracted to maintain a total of W396,000 million asthe group retirement benefit insurance program balances at these companies.

2 0 0 1 W 3 , 0 9 3 , 3 0 6 W 5 8 3 , 6 5 7 W 3 , 6 7 6 , 9 6 32 0 0 2 2 7 9 , 9 2 7 4 7 3 , 4 4 6 7 5 3 , 3 7 32 0 0 3 5 6 2 , 0 7 3 2 0 , 7 8 5 5 8 2 , 8 5 82 0 0 4 2 9 6 , 2 8 9 3 1 , 4 9 3 3 2 7 , 7 8 2

t h e r e a f t e r 8 7 9 , 4 4 5 5 5 4 , 2 6 7 1 , 4 3 3 , 7 1 2W 5 , 1 1 1 , 0 4 0 W 1 , 6 6 3 , 6 4 8 W 6 , 7 7 4 , 6 8 8

Year ending ForeignDecember 31 Won Currency Currencies Total

Beginning Ending Balance Increase Decrease Reclassified Balance

Retained retirement benefit accruals W 1 6 9 , 8 7 0 W 2 6 W 5 , 0 5 7 W ( 1 , 4 9 8 ) W 1 6 3 , 3 4 1Deposited retirement benefit accruals 3 9 6 , 0 0 0 9 6 , 7 5 1 9 8 , 2 4 9 1 , 4 9 8 3 9 6 , 0 0 0Accrued retirement benefits 5 6 5 , 8 7 0 9 6 , 7 7 7 1 0 3 , 3 0 6 - 5 5 9 , 3 4 1Retained by National Pension Fund ( 2 8 , 3 3 5 ) - ( 3 , 3 8 5 ) - ( 2 4 , 9 5 0 )

W 5 3 7 , 5 3 5 W 9 6 , 7 7 7 W 9 9 , 9 2 1 W - W 5 3 4 , 3 9 1



16. Other Liabilities :Other liabilities at December 31, 2000 and 1999 comprise the following:

17. Commitments and Contingencies :The Bank, in addition to the guarantees and acceptances that are of fixed amounts, has contingent guarantees and acceptancesoutstanding, that are guarantees and acceptances with floating amounts of related credit, amounting to W 1,183,433 million and W1,208,708 million as of December 31, 2000 and 1999, respectively.

As of December 31, 2000, there are 88 pending legal actions against the Bank amounting to W 256,333 million. Management believesthat these actions are without merit and that the ultimate liability, if any, will not materially affect the Bank’s financial position.

The Bank has credit line commitments with 22 asset securitization companies, including KAMCO Mirae-1 Liquidation Company.Under these commitments, the Bank provides money, in case of fund shortage, for the interest and principal repayment of thesecompanies’ bonds within the contracted term and amounts. The total committed credit line amount totals W 2,667,209 million ofwhich none are used as of December 31, 2000. The Bank has arranged various methods to provide for losses on these credit linecommitments including payment guarantees, resale contracts, surety certificate guarantees, and cash retention.

During the year ended December 31, 2000, the Bank established the Kookmin-2 ABS Specialty Co., Ltd. (“KAS-2”) and Kookmin-3ABS Specialty Co., Ltd. (“KAS-3”) in accordance with the regulations for asset liquidation and sold to these companies the Bank’stroubled loans amounting to W361,084 million, and recorded W13,693 million of loss on sale of troubled loans in non-operatingexpenses. Also, the Bank recognized in the current year an additional W13,580 million of loss on sale of troubled loans due toindemnification settlements with Kookmin-1 ABS Specialty Co., Ltd. (“KAS-1”). The Bank additionally recognized W3,103 million andW682 million of loss and gain on sale of troubled loans, respectively, due to indemnification settlements with KAMCO and sale ofoverseas assets. There are no balances of troubled loans sold to KAMCO that are subject to indemnification at December 31, 2000. Asof December 31, 2000, loans sold to KAMCO that are subject to repurchase agreement amount to W20,052 million.

During 1999, the Bank sold Orange (previously Kookmin) Mutual Savings & Finance Co., Ltd. to Dong-a Mutual Savings & FinanceCo., Ltd. Due to abrupt changes in economic conditions including drop of interest rates, the Bank paid an additional W47,900 millionunder a supporting agreement and recognized this amount in other non-operating expenses during the current year. RegardingOrange and Bukook Mutual Savings & Finance Co., Ltd., under the Mutual Savings & Finance Company Act, the Bank, in case ofbankruptcy within three years after the sale of the Mutual Savings & Finance Companies, has the obligation to provide for thepayment of the customers’ deposits (limited to those deposits at date of sale). At December 31, 2000, Orange Mutual Savings &Finance Co., Ltd. and its majority shareholder Dong-a Mutual Savings & Finance Co., Ltd. are both under suspended operations.


Accrued retirement benefits (Note 15) W 5 3 4 , 3 9 1 W 5 3 7 , 5 3 5Provision for loss on acceptances and guarantees (Note 8) 3 7 , 3 3 1 2 8 , 4 3 0Due to trust accounts 1 , 0 4 4 , 6 7 8 5 1 9 , 2 8 0Accounts payable (Note 2) 1 , 2 2 7 , 0 6 9 4 7 , 9 1 4Accrued expenses 2 , 3 5 9 , 6 7 9 2 , 1 3 1 , 6 1 6Unearned income 1 3 1 , 8 5 1 1 4 2 , 1 8 4Tax withholdings 1 9 1 , 6 0 0 1 6 2 , 6 4 1Guarantee deposits received 8 8 , 6 7 9 6 7 , 6 9 0Deferred tax liabilities (Note 26) - 6 9 , 0 3 2Receipts in advance 7 0 , 7 7 7 1 5 7 , 9 6 9Derivative liabilities (Note 10) 7 4 4 , 6 8 7 4 8 6 , 5 3 9Unsettled domestic inter-bank payables 1 8 8 , 1 7 3 2 8 3 , 4 5 4Due to agencies 3 2 0 , 5 7 4 1 2 0 , 1 8 4Giro payments received 3 5 , 2 8 9 5 6 , 1 5 7O t h e r s 2 6 , 9 1 4 4 1 , 5 7 6

W 7 , 0 0 1 , 6 9 2 W 4 , 8 5 2 , 2 0 1



In addition to the above mentioned items, the Bank has the following commitments and contingencies as of december 31, 2000 and 1999:

Due to economic instability mentioned below, some of the Bank’s loans outstanding are to those entities that went into proceduresfor reorganizations such as workouts including Daewoo Group companies. As of December 31, 2000, loans outstanding to entitiesunder restructuring procedures (exclusive of Daewoo Group companies) amount to W2,891,717 million (provision for loan losses ofW765,627 million and present value discounts of W127,184 million) and the total amount of loans and securities outstanding toDaewoo Group companies is W540,493 million (provision for loan losses of W328,569 million and present value discounts ofW41,094 million) and W84,957 million (unrealized losses of W27,549 million), respectively. Additionally, as of December 31, 2000, thetotal amount of loans and securities outstanding to Hyundai Group companies (exclusive of Hyundai Motors Group) is W1,129,717million (provision for loan losses of W50,248 million) and W68,849 million (unrealized losses of W7,592 million), respectively. Theactual outcome of the losses as regards to these companies may differ from the estimated provision for loan losses amounts and thecurrent financial statements of the Bank do not reflect any adjustments that may arise due to such uncertainty.

Beginning in 1997, Korea and other countries in the Asia Pacific region experienced a severe contraction in substantially all aspects oftheir economies. This situation is commonly referred to as the 1997 Asian financial crisis. In response to this situation, the Koreangovernment and the private sector began implementing structural reforms to historical business practices.

The Korean economy is currently experiencing additional difficulties, particularly in the areas of restructuring private enterprises andreforming the banking industry. The Korean government continues to apply pressure to Korean companies to restructure into moreefficient and profitable firms. The banking industry is currently undergoing consolidations and significant uncertainty exists withregards to the availability of short-term financing during the coming year. The Bank may be either directly or indirectly affected bythe situation described above.

The accompanying financial statements reflect management’s current assessment of the impact to date of the economic situation onthe financial position of the Bank. Actual results may differ materially from management’s current assessment.

18. Capital Stock :

As of December 31, 2000, the Bank has 1,000,000,000 shares (par value : W5,000) authorized and 339,613,413 shares issued(299,613,413 common shares and 40,000,000 preferred shares). Goldman Sachs Capital Koryo, L.P. and the Korean government own11.07% and 6.48%, respectively, of the total issued shares. Among the issued shares, 13,717,896 common shares (4.8%) were issuedas Global Depositary Shares and are listed on the London Stock Exchange.

On June 14, 1999, under the Investment Agreement (“the Agreement”) with Goldman Sachs Capital Koryo, L.P., the Bank issued30,000,000 common shares for cash at W12,000 per share. W206,376 million, which is W210,000 million of cash received in excess ofpar value less W3,624 million of issuance costs, was recorded in capital surplus (see Note 32).

On November 18, 1999, the Bank issued 33,314,050 common shares for cash at W11,400 per share. W212,241 million, which isW213,210 million of cash received in excess of par value less W969 million of issuance costs, was recorded in capital surplus.

The preferred stocks were issued exclusively to Korea Deposit Insurance Corporation (“KDIC”) (dividend rate: 1%) on December 28,1999 and are non-participating and non-cumulative. The Bank holds the preemptive right to purchase from KDIC 28,000,000 and12,000,000 shares of the preferred stock within 3.25 years and 5.25 years, respectively, from the date of issuance. The Bankrepurchased and plans to repurchase W40,000 million of the preferred stocks during January, 2000 and 2001(see Note 37),respectively. The repurchased shares are accounted as treasury stocks in capital adjustments.

Government and municipal bonds sold over the counter W 486 W 2 , 8 3 9Sale of loans under repurchase agreements 1 5 , 0 5 6 8 5 , 1 0 3Bills endorsed 1 9 , 1 4 9 2 4 , 9 3 4Loans written off 1 , 1 4 1 , 5 5 1 4 1 7 , 9 7 8




The bank is authorized to issue to non-shareholders convertible bonds and bonds with stock purchase warrants up to total par valueamounts of W2,500 billion and W500 billion, respectively. With regards to these instruments, at December 31, 2000, the Bank hassubordinated foreign currency convertible bonds outstanding of W31,493 million (equivalent of US$ 25 million, 3,973,022 shares atDecember 31, 2000) issued to International Finance Corporation by KLB before the merger and of W251,940 million (equivalent ofUS$ 200 million, 16,961,310 shares at December 31, 2000) issued to Goldman Sachs Capital Koryo, L.P. (see Note 14).

19. Capital Surplus :

The movements in capital surplus for the year ended December 31, 2000, are as follows:

Gain on business combination is due to the merger with Korea Long Term Credit Bank (“KLB”) on December 31, 1998 and representsthe difference between acquisition cost and net asset value of KLB. The decrease in other capital surplus is the loss on current year’ssale of treasury shares.

20. Employee stock options :

On March 18, 2000, the Bank granted stock options to its executives and as of December 31, 2000, the details of the stock optionsgranted are as follows:

1) Grant date : 2 0 0 0 . 3 . 1 8 .2) Shares granted : 375,000 shares3) Shares expired to date : 165,000 shares4) Shares outstanding : 210,000 shares5) Exercise method : issue of new shares or net settlement (the Bank’s choice)6) Exercise Price : W 1 3 , 9 0 07) Exercise period : within 2 years from 3 years after the grant date

The Bank calculated the compensation costs using the fair value method and the calculation details are as follows:

1) Market price on grant date : W 1 2 , 7 0 02) Risk-free interest rate Note 1 : 9 . 3 2 5 %3) Expected exercise period Note 2 : 4 years4) Expected share price volatility Note 3 : 7 . 1 1 %5) Expected dividend rate Note 4 : 2 . 2 5 %6) Adjusted expected expiration rate Note 5 : 1 3 . 4 9 %7) Compensation cost per share : W 9 , 3 0 0

Note 1 : Average of 3 year and 5 year maturity government bond yield rate at grant dateNote 2 : Average of mandatory service period(3 years) and option expiration period(5 years)Note 3 : Share price volatility based on share prices of 2000Note 4 : Average dividend rate for prior 4 years (period equal to expected exercise period)Note 5 : Original assumption of 0% expected expiration rate was adjusted to reflect those Options expired.


Paid-in capital in excess of par value W 1 , 0 2 4 , 3 2 7 W - W - W 1 , 0 2 4 , 3 2 7Gain on business combination 3 9 7 , 6 6 9 - - 3 9 7 , 6 6 9Revaluation increment 1 7 7 , 2 2 9 - - 1 7 7 , 2 2 9Other capital surplus 1 , 7 5 8 - 3 9 3 1 , 3 6 5

W 1 , 6 0 0 , 9 8 3 W - W 393 W 1 , 6 0 0 , 5 9 0



The Bank recognizes the compensation cost as salaries and wages by amortizing the total compensation cost over the expectedexercise period. As of December 31, 2000, the Bank recorded W514 million as employee stock options in capital adjustments (seeNote 22).

The compensation costs to be recognized in the future are as follows:

The General Banking Act requires the Bank to appropriate as legal reserves a minimum of 10% of annual net income until the legalreserve equals paid in capital. This reserve is not available for payment of cash dividends but may be transferred to capital stock byan appropriate resolution by the Bank’s board of directors or used to reduce accumulated deficit, if any, by appropriate resolution ofthe Bank’s stockholders.

Pursuant to the Tax Exemption and Reduction Control Law, the Bank is required to appropriate, as reserves for businessrationalization, amounts equal to tax reductions arising from tax exemptions and tax credits. This reserve is not available forpayment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit, if any.

Until 1994, in cases where the rate of distributable net income exceeds the interest rate for one year time deposits, the Bankappropriated more than 50% of such excess amounts as special reserves. From 1995, related regulations were deleted and the Bankdoes not have any requirement for such appropriations.

At December 31, 2000 and 1999, other reserves comprise the following :

Pursuant to the Tax Exemption and Reduction Control Law, the Bank appropriates reserves for overseas investment losses. Otherreserves are those appropriated for the operation of overseas branches and include foreign exchange rate effects of W18 million.

The Bank adjusts cumulative effects of accounting changes and prior year error corrections in the balance of unappropriated retainedearnings carried over from prior years. For the years ended December 31, 2000 and 1999, the Bank recorded W39,621 million andW489,030 million of decrease in unappropriated retained earnings carried over from prior years and the details are as follows (inmillions of Won):

21. Retained Earnings :Retained earnings as of December 31, 2000 and 1999 comprise the following:

2001.01.01. - 2001.12.31. W 6 5 12002.01.01. - 2002.12.31. 6 5 12003.01.01. - 2003.03.18. 1 3 7

W 1 , 4 3 9

Millions of Won


Legal reserves W 3 3 9 , 6 4 0 W 2 6 7 , 6 4 0Reserves for business rationalization 3 9 , 7 6 0 3 4 , 9 6 0Special reserves 4 8 0 , 7 0 0 1 7 , 7 0 0Other reserves 1 4 , 9 0 8 2 5 , 6 7 3Unappropriated retained earnings 3 7 2 0

W 8 7 5 , 0 4 5 W 3 4 5 , 9 9 3


Reserves for overseas investment losses 1 3 , 9 0 0 2 4 , 7 0 0O t h e r 1 , 0 0 8 9 7 3

W 1 4 , 9 0 8 W 2 5 , 6 7 3



(*) The cumulative effect in 2000 is the present value discounts arising from applying debt restructuring accounting to trust accountsthat are allocated to prior years.

(**) Sum of W44,410 million of increase in the beginning deferred tax liability due to applying deferred tax accounting and W962million of unrealized loss on installment sale of assets.

The Bank’s income available for dividends is as follows:

Dividends reflected in the statement of appropriations of retained earnings are calculated as follows:

Shares qualified for dividends (W5,000 per share)

D i v i d e n d sCommon stock 298,818,712 shares X W5,000 X 10% = 149,409 millionPreferred stock 32,000,000 shares X W5,000 X 1% = 1,600 million

Assuming the payment of the above dividends, for common shares, the dividend rate (dividends / net income) and dividend earningrate (dividends per share / stock price on balance sheet date (W14,900) are 20.76% and 3.36%, respectively.

Dividend rate

Gross Effect Tax Effects Net Effects Net Effects

(1) Cumulative effect of accounting change(a) Unrealized losses on derivatives W ( 2 1 , 6 2 5 ) W ( 6 , 6 6 0 ) W ( 1 4 , 9 6 5 ) W -(b) Debt restructuring accounting applied

to trust accounts(*) ( 3 3 , 2 0 6 ) ( 1 0 , 2 2 7 ) ( 2 2 , 9 7 9 ) ( 3 4 , 4 9 9 )(c) Losses on investments in associates ( 2 , 4 2 3 ) ( 7 4 6 ) ( 1 , 6 7 7 ) ( 1 7 5 , 8 3 8 )(d) Unrealized loss on Investments in

Stock Market Stabilization Funds - - - ( 1 7 , 8 3 0 )(e) Loss due to merger of 3 Mutual

Savings & Finance Companies - - - ( 1 7 7 , 8 3 1 )(f) Provision for losses on guarantees and

a c c e p t a n c e s - - - ( 3 4 , 7 6 4 )(g) Others(**) - - - ( 4 5 , 3 7 2 )

( 5 7 , 2 5 4 ) ( 1 7 , 6 3 3 ) ( 3 9 , 6 2 1 ) ( 4 8 6 , 1 3 4 )(2) Prior year error corrections - - - ( 2 , 8 9 6 )

W ( 5 7 , 2 5 4 ) W ( 1 7 , 6 3 3 ) W ( 3 9 , 6 2 1 ) W ( 4 8 9 , 0 3 0 )

2000 1999

Millions of Won

Income before dispositions W 6 8 0 , 0 9 9Transferred in from voluntary reserves 1 0 , 8 0 0Appropriations to legal reserve ( 7 6 , 8 5 3 )Income available for dividends W 6 1 4 , 0 4 6Dividends : common share (10% per share) W 1 4 9 , 4 0 9

preferred share (1% per share) 1 , 6 0 0 W 1 5 1 , 0 0 9

Issued Treasury Outstanding

Common stock 2 9 9 , 6 1 3 , 4 1 3 7 9 4 , 7 0 1 2 9 8 , 8 1 8 , 7 1 2Preferred stock 4 0 , 0 0 0 , 0 0 0 8 , 0 0 0 , 0 0 0 3 2 , 0 0 0 , 0 0 0

Dividend rate Won per share

Common stock 1 0 % W 5 0 0Preferred stock 1 % W 5 0



22. Capital Adjustments :The movements in capital adjustments for the year ended December 31, 2000, are as follows:

The treasury stocks comprise W1,036 million (794,701 common shares) in the Bank’s treasury stock funds and W40,000 million fromthe current year’s repurchase of 8 million shares out of the 40 million preferred shares issued to KDIC. These preferred shares wereissued to KDIC to maintain its capital adequacy ratio, which resulted from the P&A contract of Daedong Bank.

23. Other Non-interest Income (Expenses) :Other non-interest income (expenses) for the years ended December 31, 2000 and 1999 comprise the following:


Treasury stocks W ( 5 , 8 9 0 ) W ( 4 0 , 0 0 0 ) W ( 4 , 8 5 4 ) W ( 4 1 , 0 3 6 )Unrealized gain/loss on investment

securities (Note 6) ( 6 7 , 2 7 2 ) 2 1 4 , 5 8 6 2 3 , 9 7 3 1 2 3 , 3 4 1Employee stock options (Note 20) - 5 1 4 - 5 1 4

W ( 7 3 , 1 6 2 ) W 1 7 5 , 1 0 0 W 1 9 , 1 1 9 W 8 2 , 8 1 9


Other non-interest incomeRealized gain on trading securities W 1 1 9 , 9 4 2 W 1 4 3 , 9 9 6Unrealized gain on trading securities 2 4 , 1 1 2 6 3 2Trust management commissions 2 5 3 , 9 3 4 9 3 , 5 5 1Reversal of provision for losses on

acceptances and guarantees - 6 , 7 6 4W 3 9 7 , 9 8 8 W 2 4 4 , 9 4 3

Other non-interest expensesRealized loss on trading securities W 1 5 0 , 0 3 9 W 4 2 , 0 2 1Unrealized loss on trading securities 3 2 4 4 0 , 7 3 0Contributions to government funds 6 7 , 1 6 4 5 2 , 0 1 7Loss from trust management 1 5 8 , 3 2 5 7 , 5 2 9O t h e r s 4 9 , 8 6 9 2 4 , 4 1 2

W 4 2 5 , 7 2 1 W 1 6 6 , 7 0 9

24. General and Administrative Expenses :General and administrative expenses for the years ended December 31, 2000 and 1999 comprise the following:


Salaries and wages W 3 8 8 , 0 3 2 W 3 5 1 , 2 8 9Retirement benefits (Note 15) 9 6 , 7 7 7 1 0 3 , 7 4 3Other employee benefits 1 9 3 , 8 9 8 1 7 0 , 5 4 6Rent expense 1 8 , 3 5 0 1 8 , 0 0 2D e p r e c i a t i o n 8 6 , 9 5 0 8 9 , 4 0 4T a x e s 5 3 , 2 0 1 5 2 , 6 1 1A d v e r t i s i n g 2 4 , 2 7 3 1 8 , 9 7 2Ordinary development expenses 2 3 , 0 3 7 2 5 , 4 3 1Fees and commissions 3 0 , 3 9 5 2 9 , 4 7 9O t h e r s 9 6 , 0 6 1 8 9 , 8 6 4

W 1 , 0 1 0 , 9 7 4 W 9 4 9 , 3 4 1



25. Non-Operating Income (Expenses) :Non-operating income (expenses) for the years ended December 31, 2000 and 1999 comprise the following :


Non-operating incomeGain on disposal of fixed assets W 9 7 4 W 5 0 6Rent income 1 , 8 3 2 1 , 7 5 8Gain on investment in associates (Note 6) 2 1 9 , 1 4 6 3 7 , 9 9 4Realized gain on investment securities 1 0 6 , 7 0 3 2 4 5 , 5 0 5Reversal of impairment loss on investment securities 1 2 , 5 8 9 - Unrealized gain on investment in bond market

stabilization fund 4 8 , 2 3 9 1 8 , 2 8 8Gain on sale of troubled loans 6 8 2 4 , 9 4 6Other income 5 2 , 7 1 5 4 8 , 1 3 1

4 4 2 , 8 8 0 3 5 7 , 1 2 8Non-operating expenses

Loss on disposal of fixed assets 4 , 7 5 0 6 , 9 1 3Realized loss on investment securities 2 2 , 1 2 4 1 5 8 , 9 8 1Impairment loss on equity investment securities 4 0 , 1 3 3 4 4 8Impairment loss on debt investment securities 5 9 , 5 2 2 5 7 , 3 6 2Loss on sale of troubled loans 3 0 , 3 7 6 1 3 1 , 1 5 6Special retirement benefits (Note 15) 2 8 , 1 0 2 1 1 , 2 7 5Other expenses 1 1 2 , 1 0 4 5 6 , 4 2 5

2 9 7 , 1 1 1 4 2 2 , 5 6 0W 1 4 5 , 7 6 9 W ( 6 5 , 4 3 2 )

26. Income Tax Expense :Income tax expense for the years ended December 31, 2000 and 1999 comprises the following:

Millions of Won

Net Income Equity 2000 1999

Income taxes payable W 5 7 1 , 6 2 5 W - W 5 7 1 , 6 2 5 W 2 5 , 3 8 1Deferred income taxes from temporary differences ( 2 5 1 , 9 2 9 ) ( 7 , 4 0 6 ) ( 2 5 9 , 3 3 5 ) 2 4 , 6 2 2Income tax expense - 7 , 4 0 6 7 , 4 0 6 -

W 3 1 9 , 6 9 6 W - W 3 1 9 , 6 9 6 W 5 0 , 0 0 3

Deferred income tax assets (liabilities) at December 31 W 1 9 0 , 3 0 3 W ( 6 9 , 0 3 2 )Deferred income tax liabilities at January 1 ( 6 9 , 0 3 2 ) ( 4 4 , 4 1 0 )Changes in deferred income tax assets (liabilities) W 2 5 9 , 3 3 5 W ( 2 4 , 6 2 2 )



Adjustments of income before income taxes to taxable income for the years ended December 31, 2000 and 1999 comprise the following:

Adjustments to increase taxable income

Permanent differences :Additional income taxes W 2 , 9 4 0 W -O t h e r s 7 , 3 5 9 3 8 , 4 3 0

1 0 , 2 9 9 3 8 , 4 3 0Temporary differences (see below) 1 , 8 0 1 , 7 9 6 1 , 2 9 5 , 6 7 4

W 1 , 8 1 2 , 0 9 5 W 1 , 3 3 4 , 1 0 4

Adjustments to decrease taxable incomePermanent differences :

Dividend income W 8 , 3 1 9 W -Unrealized losses on investment securities and

d e r i v a t i v e s 2 4 , 0 4 8 -Adjustments to subsidy for trust accounts 3 3 , 2 0 6 -O t h e r s 2 , 0 0 8 4 , 4 9 9

6 7 , 5 8 1 4 , 4 9 9Temporary differences (see below) 9 8 3 , 8 4 6 1 , 3 7 5 , 6 1 6

W 1 , 0 5 1 , 4 2 7 W 1 , 3 8 0 , 1 1 5


The significant changes in temporary differences for the year ended December 31, 2000 comprise the following (in millions of Won):

Provision for loan losses W 1 0 1 , 8 7 5 W 4 7 9 , 8 0 2 W 7 9 , 0 2 8 W 5 0 2 , 6 4 9 W 1 5 4 , 8 1 6Accrued interest ( 6 3 0 , 2 7 5 ) ( 5 4 2 , 0 2 1 ) ( 6 3 0 , 1 8 9 ) ( 5 4 2 , 1 0 7 ) ( 1 6 6 , 9 6 9 )Unrealized loss on securities 1 1 4 , 1 5 2 1 3 2 , 7 4 6 1 6 9 , 4 5 4 7 7 , 4 4 4 2 3 , 8 5 3Unrealized loss on derivatives 1 9 , 0 5 7 2 5 4 , 4 5 3 - 2 7 3 , 5 1 0 8 4 , 2 4 1Present value discounts 1 5 2 , 1 8 5 1 4 8 , 5 1 5 1 0 6 , 3 9 3 1 9 4 , 3 0 7 5 9 , 8 4 7Provision for losses on

acceptances and guarantees 2 8 , 4 3 0 8 , 9 0 0 - 3 7 , 3 3 0 1 1 , 4 9 8Retirement benefits 2 6 , 5 9 3 - - 2 6 , 5 9 3 8 , 1 9 1Overseas investment losses ( 2 4 , 7 0 0 ) - ( 1 0 , 7 5 0 ) ( 1 3 , 9 5 0 ) ( 4 , 2 9 7 )Excess depreciation 1 0 , 9 4 9 - - 1 0 , 9 4 9 3 , 3 7 2Stock compensation cost - 5 1 4 - 5 1 4 1 5 8O t h e r s ( 2 2 , 3 9 7 ) 9 , 0 2 7 ( 3 9 , 9 5 0 ) 2 6 , 5 8 0 8 , 1 8 7

W ( 2 2 4 , 1 3 1 ) W 4 9 1 , 9 3 6 W ( 3 2 6 , 0 1 4 ) W 5 9 3 , 8 1 9 W 1 8 2 , 8 9 7

Beginning Balance Increase Decrease Ending Balance Deferred tax

Deferred income tax adjustments in retained earnings are summarized as follows (in millions of Won):

Due to tax adjustments, the Bank’s effective tax rate for the years ended December 31, 2000 and 1999 are 30.76% and 31.7%,respectively, notwithstanding the statutory income tax (including residents’ tax) rate of 30.8% applicable to the Bank.

Decrease in retained earnings due toCumulative effect of accounting changes in:

Unrealized loss on investment securities W 2 , 4 2 3 W - W 7 4 6Unrealized loss on derivatives 2 1 , 6 2 5 - 6 , 6 6 0

W 2 4 , 0 4 8 W - W 7 , 4 0 6

Temporary Permanent Income TaxDifferences Differences Effect



27. Earnings Per Share :Earnings per share (“EPS”) for the years ended December 31, 2000 and 1999 are calculated as follows :


Net income after income taxes W 7 1 9 , 7 0 0 W 1 0 7 , 9 0 1Dividend on preferred stock (1%) ( 1 , 6 0 0 ) ( 2 , 0 0 0 )

7 1 8 , 1 0 0 1 0 5 , 9 0 1Weighted average number of common shares outstanding 2 9 8 , 8 1 8 , 7 1 2 2 7 3 , 1 0 4 , 8 3 8Earning per share (in Won) W 2 , 4 0 3 W 3 8 8

Diluted earnings per share for the years ended December 31, 2000 and 1999 are calculated as follows:

Net income after income taxes W 7 1 9 , 7 0 0 W 1 0 7 , 9 0 1Interest expenses on convertible bonds 6 , 4 5 8 4 , 1 6 3Employee stock compensation costs 3 5 5 -

7 2 6 , 5 1 3 1 1 2 , 0 6 4Weighted average number of common shares outstanding 3 5 2 , 5 2 1 , 5 9 6 3 2 5 , 4 5 1 , 5 4 0Diluted earning per share (in Won) W 2 , 0 6 1 W 3 4 4


Weighted average number of common shares outstanding as of December 31, 2000 is calculated as follows:

Weighted average common stock 2 9 9 , 6 1 3 , 4 1 3 3 6 6 2 9 9 , 6 1 3 , 4 1 3Treasury stocks 7 9 4 , 7 0 1 3 6 6 ( 7 9 4 , 7 0 1 )

Weighted average before dilution 2 9 8 , 8 1 8 , 7 1 2Convertible bonds issued to IFC 3 , 9 7 3 , 0 2 2 3 6 6 3 , 9 7 3 , 0 2 2Convertible bonds to Goldman Sachs 1 6 , 9 6 1 , 3 1 0 3 6 6 1 6 , 9 6 1 , 3 1 0Preferred shares 4 0 , 0 0 0 , 0 0 0 3 6 6 4 0 , 0 0 0 , 0 0 0Repurchased preferred shares 8 , 0 0 0 , 0 0 0 3 4 0 ( 7 , 4 3 1 , 6 9 4 )Employee stock options 2 1 0 , 0 0 0 3 4 9 2 0 0 , 2 4 6

3 5 2 , 5 2 1 , 5 9 6

Number of Days Weighted average shares outstanding number of shares

Diluted earnings per share are calculated assuming the conversion of convertible bonds, employee stock options, and preferredshares at beginning of year. The interest expense and stock option expense used in the calculation of the diluted EPS are net of30.8% of tax effects. The number of common shares assumed to be converted from convertible bonds is calculated by dividing thetotal convertible bond amounts by conversion price per share.



28. Assets and Liabilities Denominated in Foreign Currencies :Significant assets and liabilities denominated in foreign currencies as of December 31, 2000 comprise the following:

Foreign currencies other than US dollars are converted into US dollar amounts using the exchange rates provided by Korea FinancialTelecommunications & Clearing Institute at the balance sheet date.

29. Related Party Transactions :Significant transactions with related parties for the years ended December 31, 2000 and 1999, and the related account balances atDecember 31, 2000 and 1999 are as follows (in millions of Won) :

Total Balances MajorDenominationCurrencies

Millions of Thousands of Thousands of Thousands of Won US Dollars Dollars Japanese Yen

A s s e t sC a s h W 7 3 , 5 7 6 US$ 5 8 , 4 0 8 U S $ 2 8 , 4 8 8 Y 2 , 6 1 1 , 4 6 8Due from banks 1 , 4 8 6 , 8 3 3 1 , 1 8 0 , 3 0 7 1 , 1 7 2 , 6 2 7 7 8 9 , 4 0 4S e c u r i t i e s 9 0 0 , 0 9 7 7 1 4 , 5 3 3 3 9 8 , 0 0 5 2 , 1 3 5 , 3 6 3L o a n s 2 , 9 7 0 , 6 5 3 2 , 3 5 8 , 2 2 3 1 , 4 5 5 , 6 5 4 4 , 0 4 9 , 4 1 5Call loans 2 1 9 , 2 5 8 1 7 4 , 0 5 6 1 5 0 , 8 8 2 2 , 3 9 9 , 9 9 5Bills bought 9 2 4 , 8 0 4 7 3 4 , 1 4 7 6 5 9 , 0 6 5 1 , 9 0 0 , 6 6 6

L i a b i l i t i e sD e p o s i t s 7 0 2 , 4 8 1 5 5 7 , 6 5 7 4 2 8 , 3 8 3 2 , 2 7 8 , 5 1 3B o r r o w i n g s 1 , 8 1 1 , 4 3 4 1 , 4 3 7 , 9 8 9 1 , 3 5 3 , 9 1 2 9 , 6 1 5 , 0 0 0R P 1 2 5 , 9 7 0 1 0 0 , 0 0 0 1 0 0 , 0 0 0 - Due to BOK 2 6 5 , 6 7 7 2 1 0 , 9 0 5 2 1 0 , 9 0 5 - Call money 1 7 8 , 7 4 3 1 4 1 , 8 9 4 3 , 0 0 0 - D e b e n t u r e s 1 , 6 6 3 , 6 4 8 1 , 3 2 0 , 6 7 0 1 , 3 2 0 , 6 7 0 -

Off balance sheetGuarantees and acceptances 2 , 7 5 2 , 8 2 1 2 , 1 8 5 , 3 1 2 2 , 0 4 2 , 2 4 4 1 0 , 8 9 8 , 0 1 9

Accounting Balances Transactions

Account 2000 1999 Account 2000 1999

Kookmin Credit Card Co., L o a n s 1 , 6 4 7 2 1 , 1 1 1 Interest on loans 9 3 6 2 0 , 7 8 1L t d . Credit card accounts 3 5 3 , 5 1 0 5 7 8 , 7 7 7 Interest on credit card loans 5 9 , 5 6 0 7 2 , 2 1 9

D e p o s i t s 6 , 9 6 7 9 , 8 2 6 Interest on deposits 9 7 1 3 9Guarantee deposits received 4 , 0 1 3 1 , 5 0 5 Fees and commission income 1 1 5 , 3 5 5 6 7 , 7 6 1Rent deposits received 1 , 8 1 7 1 , 8 1 7

Kookmin Leasing Co., Ltd. L o a n s 1 4 2 , 4 6 8 1 3 8 , 5 7 3 Interest on loans 6 , 0 4 6 9 , 8 7 1D e p o s i t s 1 3 1 , 5 3 8 1 1 , 7 5 9 Interest on deposits 7 , 3 1 5 3 1 7

Kookmin Venture Capital L o a n s 1 2 1 , 1 3 4 1 2 5 , 0 0 0 Interest on loans 1 3 , 1 8 8 1 6 , 2 1 6Co., Ltd. D e p o s i t s 1 2 , 6 9 2 2 2 , 6 9 2 Interest on deposits 1 , 0 8 1 1 2 3

Acceptances and guarantees 5 , 5 4 8 5 , 9 6 3

Kookmin Bank Investment Trust D e p o s i t s 1 6 , 6 7 7 1 6 , 9 5 5 Interest on deposits 9 7 0 1 , 3 6 4Management Co., Ltd.

Kookmin Bank Due from banks 1 7 6 , 9 8 8 1 4 7 , 9 0 9 Interest on due from banks 1 0 , 2 4 4 6 , 5 3 0Luxembourg S.A. L o a n s 1 2 , 5 9 7 1 1 , 4 5 4 Interest on loans 8 0 4 7 0 5

Kookmin Finance Asia Due from banks 5 5 , 8 0 2 5 3 , 3 7 7 Interest on due from banks 4 , 7 3 4 3 , 5 9 6L t d . Call Loans 8 , 8 1 8 1 1 3 Interest on call loans 6 2 1 0 4

B o r r o w i n g s 1 2 , 6 1 1 1 2 , 5 2 2 Interest on borrowings 9 9 7 7 9 5





Kookmin Bank Due from banks 1 0 0 , 5 9 7 6 7 , 8 4 3 Interest on due from banks 6 , 3 2 6 4 , 7 3 1International (London) Ltd. L o a n s 1 2 , 5 9 7 1 1 , 4 5 4 Interest on loans 7 4 0 6 8 5

Kookmin Bank Leasing & L o a n s 5 1 , 3 3 3 4 4 , 0 9 8 Interest on loans 2 , 9 4 6 2 , 8 0 5Finance (H.K.) Ltd.

30. Cash Flow Information :Cash and cash equivalents at December 31, 2000 and 1999 as presented in the statement of cash flows comprise the following :

31. Operations of the Trust Accounts :The trust accounts recognizes trust management fees, which are trust account revenues less expenses and dividends tobeneficiaries, as expenses and the banking accounts recognize this amount as income. Under the Trust Business Act, the Bankreceives trust management fees from trust accounts which consist of base fees of 0.2% ~ 2.0% (depending on trust fund types) ofinvested capital and special fees of less than 4.0%. The Bank recognizes these trust management fees as a part of other operatingincome in its financial statements.

Under the Trust Business Act, special reserves are set up in the trust accounts for losses related to those trust funds with guaranteeof the principal or of a certain minimum rate of return. The reserves are used to provide for the losses on such trust funds and, if thelosses are incurred in excess of the special reserves, the excess losses are compensated by the Bank (banking accounts : loss fromtrust management in other non-interest expenses, trust accounts : compensation from banking accounts). Based on the financialstatements of the trust accounts prepared in accordance with the Trust Business Act, the losses compensated by the Bank, for theyears ended December 31, 2000 and 1999, amount to W191,531 million (loss from trust management : W158,325 million, retainedearnings carried over from prior years : W33,206 million) and W7,529 million.

The surplus funds that result from the trust accounts’ fund operations are loaned to the Bank’s banking accounts and are recorded asdue from banking accounts by the trust accounts and as due to trust accounts by the banking accounts.

The key terms and conditions of the trust funds are as follows (in millions of Won) :


Cash on hand W 1 , 7 6 7 , 7 1 4 W 1 , 6 2 0 , 4 0 2Cash in foreign currencies 7 3 , 5 7 6 5 9 , 8 6 2Due from banks in Won currency 3 , 2 9 0 , 6 2 7 2 , 7 0 0 , 3 1 4Due from banks in foreign currencies 1 , 4 8 6 , 8 3 3 1 , 1 1 7 , 2 9 9

W 6 , 6 1 8 , 7 5 0 W 5 , 4 9 7 , 8 7 7

Non-cash transactions that do not affect cash flows for the years ended December 31, 2000 and 1999 are as follows :

Decrease of loans from loan restructuring W 3 1 8 , 4 3 8 W 7 0 , 8 0 4Loans written off 5 5 8 , 4 6 4 5 1 5 , 3 8 6Changes in assets and liabilities due to accounting changes 3 9 , 6 2 1 3 0 8 , 3 0 4Changes in assets, liabilities, and Equity due to subsidiaries restructuring 5 9 , 7 8 2 1 7 7 , 8 3 1Increase of unrealized gains/losses on investment securities 1 9 0 , 6 1 4 -Sale of loans and purchase of investment securities due to P&A settlements - 2 5 3 , 5 7 9




(*) Trust accounts contracted prior to April 30, 1996 are guaranteed of their principal amounts.

Assets and liabilities of the trust accounts as of December 31, 2000 are classified as principal or dividends guarantee trusts, partialguarantee trusts, performance trusts, and property trusts as follows (in millions of Won) :

Operations of the trust accounts for the year ended December 31, 2000, with operation costs of the period taken into considerationfrom cost management point of view, are summarized as follows (in millions of Won) :

Period (years) Guarantee

Money Trusts :Unspecified money trust over 1.5 years principal and interestInstallment money trust over 1.5 years - (*)Household money trust 1.5 - 3 years - (*)Development trust 2, 3 years principal and interestEmployee retirement installments in trust over 1 year p r i n c i p a lMoney in trust for old-age living pension over 5 years p r i n c i p a lNew Money in trust for old-age living pension over 1 year p r i n c i p a lCorporate money in trust 1.5 years - (*)National stock in trust over 3 years -Money in trust for individual pension 15 - 35 years p r i n c i p a lNew Money in trust for individual pension over 15 years p r i n c i p a lHousehold long-term money in trust 3 - 5 years -Money in trust for employees 3 - 5 years -New Money in trust for employees 3 - 5 years -Special installment money in trust over 1 year -Retirement money trust - p r i n c i p a lSpecified money in trust 1.5 - 5 year -Unit type money trust 1 year -Real estates investment in trust 1.5 years -Addition type money trust 1 year -

Property Trusts :Securities in trust over 1 year -Monetary receivables in trust - -

Principal orDividends PartialGuarantee Guarantee Performance Property Total

S e c u r i t i e s W 1 , 5 2 3 , 9 4 9 W 1 , 1 1 9 , 9 5 8 W1 0 , 1 0 2 , 6 1 9 W 2 0 , 0 0 1 W1 2 , 7 6 6 , 5 2 7L o a n s 2 7 5 , 8 3 4 2 5 1 , 4 4 2 6 6 3 , 2 9 8 - 1 , 1 9 0 , 5 7 4Due from banking accounts 1 0 4 , 8 1 9 8 1 , 1 3 2 5 5 8 , 9 8 0 - 7 4 4 , 9 3 1Present value discounts ( 2 9 , 7 8 1 ) ( 7 ) ( 3 , 5 5 6 ) - ( 3 3 , 3 4 4 )Provision for loan losses ( 1 7 4 , 3 2 8 ) ( 4 3 , 8 9 5 ) ( 1 3 8 , 2 0 5 ) - ( 3 5 6 , 4 2 8 )Other assets 6 0 , 0 5 2 4 8 , 9 4 0 4 2 0 , 8 1 9 8 8 7 , 0 0 1 1 , 4 1 6 , 8 1 2Total assets W 1 , 7 6 0 , 5 4 5 W 1 , 4 5 7 , 5 7 0 W1 1 , 6 0 3 , 9 5 5 W 9 0 7 , 0 0 2 W1 5 , 7 2 9 , 0 7 2

T r u s t s W 1 , 4 5 1 , 4 9 3 W 1 , 3 6 7 , 4 5 4 W1 1 , 3 7 9 , 2 3 5 W 8 7 5 , 9 8 4 W1 5 , 0 7 4 , 1 6 6Provision for future losses 7 , 1 1 9 6 , 2 8 7 - - 1 3 , 4 0 6Other liabilities 3 0 1 , 9 3 3 8 3 , 8 2 9 2 2 4 , 7 2 0 3 1 , 0 1 8 6 4 1 , 5 0 0Total liabilities W 1 , 7 6 0 , 5 4 5 W 1 , 4 5 7 , 5 7 0 W1 1 , 6 0 3 , 9 5 5 W 9 0 7 , 0 0 2 W1 5 , 7 2 9 , 0 7 2



Trust Accounts Income Trust Accounts Expenses

Fees on money trusts W 244,318 S a l a r i e s W 32,366 Fees on property trusts 1 3 9 Office expenses 1 7 , 5 9 4Fees on security investment trusts 9 , 4 7 7 Education expense 1 , 3 8 0Fees on collateralized debenture trusts 5 9 Other expenses 5 3 6Fees on asset liquidation 4 , 9 3 1 Compensation from banking accounts 1 9 1 , 5 3 1Early withdrawal penalties 1 7 , 0 8 3 Gains from trust management 3 2 , 6 0 0

W 276,007 W 2 7 6 , 0 0 7

32. Investment from Goldman Sachs Capital Koryo, L.P. :The Bank entered into an Investment Agreement (“the Agreement”) with Goldman Sachs Capital Koryo, L.P. on May 27, 1999. Thesignificant provisions of the Agreement are as follows :

1) Common stocksType of stocks & number of shares Common stock, 30,000,000 sharesTotal amount paid for the stocks W360,000 million (W12,000 per share)P u r c h a s e r Goldman Sachs Capital Koryo,L.P.Payment date June 14, 1999Articles of maintenance for limitations During 5 years after payment for the stocks, Goldman Sachs may

against acquisition of additional stocks not purchase more stocks of the Bank than the limitations set forth in the Agreement and may not exercise its voting rights jointly with any other shareholders.

Articles of limitations against the During the one year period after payment for the stocks,disposal of the stocks Goldman Sachs may not dispose of the stocks without the board

of directors’ agreement in advance.From the one year period after the payment for the stocks, the Bank has the right to veto against the sale of the stocks held by Goldman Sachs to the shareholders of 10% or more of other competing banks in Korea or to the shareholders of foreign banks that have retail branches in Korea.

2) Convertible bondsType of bonds Non-guaranteed subordinated convertible bondsIssue price US$ 200 million (100% of the face-value)Coupon rate & interest payment dates 3%, semi-annually on June 30, December 31Maturity & method of redemption June 14, 2005, fully redeemed on maturityPayment date June 14, 1999Conversion price W13,802 per shareConvertible period July 14, 1999 ~ May 14, 2005Conversion exchange rate US$1 : W1,170.5Conversion stock Common stockCalculations for the dividends to the Assume the conversion on the last day of the year before the

converted shares actual conversion



33. MOU for Merger with H&CB :

On December 22, 2000, the Bank entered into an MOU for merger with H&CB and the details of this bank are as follows :

H&CB was founded in 1967 under Korea Housing and Commercial Bank Act. H&CB is engaged in the banking business according tothe provisions of the General Banking Act and operates through 535 domestic branches and 3 overseas networks as of December 31,1999.

H&CB’s shares are listed on the Korean Stock Exchange and resulting from several additional share issuances, H&CB’s capital as ofDecember 31, 2000 is W841,813 million. Due to additional share issuances since 1996 and issuance of overseas depository receipts,the Korean government and foreign investors hold 14.50% and 66.44%, respectively, of common shares outstanding. Also, onOctober 3, 2000, H&CB listed American Depository Receipts of its common shares on New York Stock Exchange with the approval ofthe United States’ Securities and Exchange Commission and New York Stock Exchange under relevant U.S. accounting standards.

The summary of H&CB’s financial statements as of December 31, 1999 are as follows:

- Summary of Balance Sheet (Banking Accounts)

34. Restructuring of Subsidiaries :In relation to Kookmin Leasing Co., Ltd., a subsidiary of the Bank, the Bank holds, as of December 31, 2000, W84,103 million ofinvestment securities and W142,468 million of loans. Related to these amounts, W84,103 million of loss from investment inassociates and W65,963 million of provision for loan losses were recorded in the previous year’s financial statements. There existsignificant uncertainties since the results of the private restructuring by the agreement between its creditors will determine whetherKookmin Leasing Co., Ltd. will continue as a going concern. Actual recovery and actual losses from the above loans to KookminLeasing Co., Ltd. may differ from the Bank’s provision amounts. No adjustments have been made in the accompanying financialstatements related to such uncertainties. The Bank’s loans outstanding to Kookmin Leasing & Finance Co., Ltd. (H.K.) Ltd., asubsidiary of Kookmin Leasing Co., Ltd., amount to W51,333 million (related provision for loan losses W23,767 million).

Account Millions of Won Account Millions of Won

Cash and Due from Banks W 2 , 6 7 5 , 0 8 7 D e p o s i t s W 3 2 , 9 9 8 , 3 4 1

Trading Securities 2 , 2 6 6 , 4 3 2 B o r r o w i n g s 3 , 8 0 3 , 4 7 3

Investment Securities 7 , 4 9 4 , 6 9 6 D e b e n t u r e s 2 , 2 7 1 , 1 9 6

L o a n s 3 0 , 6 3 1 , 4 4 2 Other Liabilities 5 , 3 8 0 , 4 3 6

Fixed Assets 8 7 3 , 8 7 5 Total Liabilities 4 4 , 4 5 3 , 4 4 6

Other Assets 2 , 7 0 9 , 7 7 4 Shareholders’ Equity 2 , 1 9 7 , 8 6 0

Total Liabilities and

Total Assets W 4 6 , 6 5 1 , 3 0 6 Shareholders’ Equity W 4 6 , 6 5 1 , 3 0 6

Account Millions of Won

Operating Income W 5 , 0 6 4 , 3 2 3Operating Expenses 4 , 2 9 7 , 9 7 7Net Operating Income 7 6 6 , 3 4 6Non-operating Revenue 8 3 , 7 6 6Non-operating Expenses 1 8 3 , 0 7 3Ordinary Income 6 6 7 , 0 3 9Income Taxes 2 1 5 , 7 1 7Net Income W 4 5 1 , 3 2 2

- Summary of Income Statement (Banking Accounts)



Additionally, the assets and liabilities of Kookmin Singapore (Merchant Bank) Ltd. that were settled by the Bank during the perioddue to its liquidation comprise the following (In millions of Won) :

After the liquidation of Kookmin Singapore (Merchant Bank) Ltd., the remaining assets of W186,999 million (US$ 167,742 thousand)and guarantees and acceptances of W2,230 million (US$ 2,000 thousand) were integrated into the Bank’s accounts and the remainingliabilities of W188,143 million (US$164,260 thousand, translated at 1999 year-end exchange rate) were offset with the Bank’s loansoutstanding to Kookmin Singapore (Merchant Bank) Ltd.

Under a merger contract with Daegu Kookmin Mutual Savings & Finance Co., Ltd., Busan Kookmin Mutual Savings & Finance Co.,Ltd., and Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. (“the three mutual savings & finance companies”) dated May 27,1999, the three mutual savings & finance companies were merged into the Bank as of August 22, 1999.

Daegu Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. DaeguKookmin Mutual Savings & Finance Co., Ltd. was located in Daegu and operated 5 local branches as of the merger date.

Busan Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. BusanKookmin Mutual Savings & Finance Co., Ltd. was located in Busan and operated 2 local branches as of the merger date.

Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. JeonnamKookmin Mutual Savings & Finance Co., Ltd. was located in Gwangju and operated 1 local branch as of the merger date.

The Bank issued no shares of common stock under the merger agreement due to the negative net asset values of the three mutualsavings & finance companies as of August 22, 1999.

The Bank recorded W177,831 million of losses from merger and adjusted its beginning retained earnings of 1999 for thecorresponding amounts. The W457,094 million of assets and W634,925 million of liabilities from the mergers are included in theassets and liabilities of the Bank.

Accrued Book Value Interest Settled Amount

A s s e t sDue from banks in foreign currencies W 2 , 1 8 7 W 9 9 W 2 , 2 8 6Securities in foreign currencies 9 5 , 6 9 3 1 , 3 3 3 9 7 , 0 2 6Loans in foreign currencies 8 6 , 9 8 7 7 0 0 8 7 , 6 8 7

W 1 8 4 , 8 6 7 W 2 , 1 3 2 W 1 8 6 , 9 9 9L i a b i l i t i e s

Deposits in foreign currencies W 1 0 9 , 7 9 8 W - W 1 0 9 , 7 9 8Borrowings in foreign currencies 7 8 , 3 4 5 - 7 8 , 3 4 5

W 1 8 8 , 1 4 3 W - W 1 8 8 , 1 4 3

Guarantees and acceptances W 2 , 2 3 0 W - W 2 , 2 3 0



Summaries of financial information of the three mutual savings & finance companies for the period ended August 22, 1999 are asfollows (in millions of Won) :

- Summary of Balance Sheets as of August 22, 1999 (unaudited)

- Summary of Income Statements for the period from July 1, 1999 to August 22, 1999 (unaudited)

During 1999, the Bank sold two of its subsidiaries, Orange (previously Kookmin) Mutual Savings & Finance Co. Ltd. and BukookMutual Savings & Finance Co. Ltd. Summary of significant matters related to the sale are as follows :

Daegu Busan Jeonnam Total

A s s e t sL o a n s W 2 1 7 , 1 8 0 W 1 0 5 , 5 8 3 W 3 8 , 7 5 3 W 3 6 1 , 5 1 6S e c u r i t i e s 2 2 6 2 , 6 5 0 1 , 3 6 9 4 , 2 4 5Other assets 3 6 , 0 7 8 3 7 , 3 0 1 1 7 , 9 5 4 9 1 , 3 3 3

Total asset W 2 5 3 , 4 8 4 W 1 4 5 , 5 3 4 W 5 8 , 0 7 6 W 4 5 7 , 0 9 4

L i a b i l i t i e sD e p o s i t W 3 2 2 , 2 6 4 W 1 7 4 , 3 5 1 W 6 9 , 8 6 0 W 5 6 6 , 4 7 5B o r r o w i n g s 1 0 , 0 0 0 1 3 , 9 5 2 1 2 , 0 0 0 3 5 , 9 5 2Other liabilities 1 5 , 7 4 9 1 2 , 4 9 9 4 , 2 5 0 3 2 , 4 9 8

Total liabilities 3 4 8 , 0 1 3 2 0 0 , 8 0 2 8 6 , 1 1 0 6 3 4 , 9 2 5

Shareholders’ EquityCapital stock 1 5 , 8 7 9 1 1 , 5 0 0 1 0 , 3 0 7 3 7 , 6 8 6Retained earnings ( 1 1 0 , 4 0 8 ) ( 6 6 , 7 6 8 ) ( 3 8 , 3 4 1 ) ( 2 1 5 , 5 1 7 )

Total shareholders’e q u i t y ( 9 4 , 5 2 9 ) ( 5 5 , 2 6 8 ) ( 2 8 , 0 3 4 ) ( 1 7 7 , 8 3 1 )

W 2 5 3 , 4 8 4 W 1 4 5 , 5 3 4 W 5 8 , 0 7 6 W 4 5 7 , 0 9 4


Operating income W 2 , 3 4 3 W 1 , 1 8 9 W 4 1 0 W 3 , 9 4 2Operating expenses 4 5 , 7 8 9 1 9 , 8 9 0 1 0 , 4 4 6 7 6 , 1 2 5Net Operating losses 4 3 , 4 4 6 1 8 , 7 0 1 1 0 , 0 3 6 7 2 , 1 8 3N o n - o p e r a t i n g

i n c o m e 4 1 , 5 1 7 1 3 1 , 5 3 4N o n - o p e r a t i n g

e x p e n s e s 1 1 6 5 2 7 1 4 8Extraordinary items - ( 1 , 1 3 1 ) - ( 1 , 1 3 1 )Net loss before taxes 4 3 , 5 5 8 1 8 , 3 2 0 1 0 , 0 5 0 7 1 , 9 2 8Income tax expense - - - - Net losses W 4 3 , 5 5 8 W 1 8 , 3 2 0 W 1 0 , 0 5 0 W 7 1 , 9 2 8

Orange Bukook

P u r c h a s e r Dong-a Mutual Savings & Hansol Mutual Savings &Finance Co., Ltd. Finance Co., Ltd.

Date of sale January 22, 1999 December 17, 1999Book value of the stocks W 1 , 0 0 0 W138,460 millionSales price W6,000 million W1,000 millionCosts incurred W30 million W12 millionGains and losses from the sale Gain of W5,970 million Loss of W137,472 million



The Bank, according to the sales agreement, deposited with Bukook Mutual Savings & Finance Co., Ltd. W50 billion of 1% interestsubordinated deposits with 5-year maturity and W90 billion of 1% interest deposits with 5-year grace period and 6-year maturity. TheBank recorded present value discounts on the deposits by using the weighted average interest rates of deposits with similar termsand conditions (see Note 4).

35. P&A Contract :

Under the decision of the Financial Supervisory Commission in accordance with the Act concerning the Structural Improvement ofthe Financial Industry, the Bank took over certain assets, including the loans classified as normal or precautionary, and most liabilitiesof Daedong Bank as of June 29, 1998, by the method of purchase and assumption. During 1999, the Bank exercised its put-backoptions in three settlements of March 31, June 30, and September 30. The related put-back option is a right to transfer the assumedassets to KAMCO or to be compensated for the losses from KDIC for non-performing assets within a year after the assumption. Thesettlements include the put-back options exercised, realized losses on the securities, guarantees, and syndicated loans, and thesettlements of the related interests and opportunity costs.

The Bank received in total W2,066,143 million in cash and securities from KAMCO and KDIC due to the P&A. As of September 30,1999, after the third and final settlement, the assets of the Daedong Bank that were absorbed into the Bank’s balance sheet were asf o l l o w s .

36. Reclassification of accounts :

Certain accounts of prior year’s financial statements are reclassified for comparative purposes. These reclassifications have no effecton the net asset value and the net income of the Bank as of the balance sheet date.

37. Subsequent Events :

On January 9, 2001, the Bank’s board resolved to purchase 8,000,000 shares of treasury stocks at face value of W40 billion from KDICat the end of January, 2001. These treasury stocks are a part of the preferred stocks outstanding that were issued during 1998 tomaintain its capital adequacy ratio that had declined due to the Daedong Bank P&A.

Millions of Won

1) Securities W 2 6 0 , 7 9 5Banking accounts W 2 0 8 , 1 6 9Guaranteed trust account 3 8 , 8 5 7Performance trust account 1 3 , 7 6 9

2) Loans, net of provisions 8 5 7 , 1 0 0W 1 , 1 1 7 , 8 9 5


BALANCE SHEETS (Trust Accounts) December 31, 2000 and 1999


2000 1999 2000 1999

A S S E T S

Securities (Note 5) W 1 2 , 7 6 6 , 5 2 7 W 1 3 , 4 4 6 , 0 2 5 $ 1 0 , 1 3 4 , 5 7 7 $ 1 0 , 6 7 3 , 9 9 0

Loans (Note 6) 1 , 1 9 0 , 5 7 4 2 , 1 7 0 , 5 4 2 9 4 5 , 1 2 5 1 , 7 2 3 , 0 6 3

Bonds with resale agreement - 3 0 , 0 0 0 - 2 3 , 8 1 5

Monetary receivables 8 5 5 , 9 8 4 - 6 7 9 , 5 1 4 -

Other assets (Note 8) 5 6 0 , 8 2 8 9 3 6 , 6 8 2 4 4 5 , 2 0 8 7 4 3 , 5 7 5

Due from banking accounts 7 4 4 , 9 3 1 3 6 1 , 2 7 8 5 9 1 , 3 5 6 2 8 6 , 7 9 7

Provision for loan losses (Note 2) ( 3 5 6 , 4 2 8 ) ( 3 5 9 , 4 6 4 ) ( 2 8 2 , 9 4 7 ) ( 2 8 5 , 3 5 7 )

Total assets W 1 5 , 7 6 2 , 4 1 6 W 1 6 , 5 8 5 , 0 6 3 $ 1 2 , 5 1 2 , 8 3 3 $ 1 3 , 1 6 5 , 8 8 3

L I A B I L I T I E S

Money trusts (Note 4) W 1 4 , 1 9 8 , 1 8 2 W 1 5 , 8 7 5 , 8 6 3 $ 1 1 , 2 7 1 , 0 8 2 $ 1 2 , 6 0 2 , 8 9 2

Property trusts (Note 4) 8 7 5 , 9 8 4 2 0 , 3 0 1 6 9 5 , 3 9 1 1 6 , 1 1 6

Borrowings (Note 9)) 2 6 3 , 2 8 6 - 2 0 9 , 0 0 7 -

Other liabilities (Note 10) 4 1 1 , 5 5 8 6 8 0 , 7 8 9 3 2 6 , 7 1 1 5 4 0 , 4 3 7

Provision for future losses (Note 2) 1 3 , 4 0 6 8 , 1 1 0 1 0 , 6 4 2 6 , 4 3 8

Total liabilities W 1 5 , 7 6 2 , 4 1 6 W 1 6 , 5 8 5 , 0 6 3 $ 1 2 , 5 1 2 , 8 3 3 $ 1 3 , 1 6 5 , 8 8 3



STATEMENTS OF INCOME (Trust Accounts) for the years ended december 31, 2000 and 1999


2000 1999 2000 1999

Revenue :

Interest and dividend income :

Interest and dividends on securities W 1 , 4 1 1 , 5 3 2 W 1 , 5 9 7 , 9 6 7 $ 1 , 1 2 0 , 5 3 0 $ 1 , 2 6 8 , 5 3 0

Interest on loans 1 8 0 , 9 3 6 3 3 5 , 6 3 1 1 4 3 , 6 3 4 2 6 6 , 4 3 7

Interest on call loans 1 , 5 3 8 5 , 1 5 6 1 , 2 2 1 4 , 0 9 3

Interest on monetary receivables 2 7 , 8 0 2 - 2 2 , 0 7 0 -

Interest on bonds with repurchase agreement 1 , 4 1 3 1 1 , 5 4 5 1 , 1 2 2 9 , 1 6 5

Interest on due from banking accounts 1 3 , 6 2 9 1 1 , 9 0 1 1 0 , 8 1 9 9 , 4 4 7

Other interest income 2 , 1 5 1 1 1 , 7 0 8 1

1 , 6 3 9 , 0 0 1 1 , 9 6 2 , 2 0 1 1 , 3 0 1 , 1 0 4 1 , 5 5 7 , 6 7 3

Gains on securities (Note 5) 2 0 0 , 4 7 4 4 4 2 , 6 0 2 1 5 9 , 1 4 4 3 5 1 , 3 5 5

Reversal of provision for future losses 1 5 4 , 9 1 6 1 2 3 , 9 0 3

Reversal of provision for loan losses 7 , 4 5 0 - 5 , 9 1 4 -

Other income (Note 11) 2 0 8 , 7 8 7 3 5 , 3 2 1 1 6 5 , 7 4 4 2 8 , 0 3 9

2 , 0 5 5 , 7 2 7 2 , 4 4 5 , 0 4 0 1 , 6 3 1 , 9 1 8 1 , 9 4 0 , 9 7 0

Expenses :

Interest expense 1 6 , 3 1 2 1 , 3 7 3 1 2 , 9 4 9 1 , 0 9 0

Fees and commission expenses 1 9 , 3 9 6 3 5 , 4 0 1 1 5 , 3 9 7 2 8 , 1 0 3

Losses on securities (Note 5) 2 5 8 , 5 9 8 1 3 6 , 3 8 8 2 0 5 , 2 8 5 1 0 8 , 2 7 0

Bad debt expense 1 8 0 , 3 0 0 3 3 8 , 9 4 4 1 4 3 , 1 2 9 2 6 9 , 0 6 7

Trust management fees 2 4 4 , 4 5 7 7 9 , 9 0 3 1 9 4 , 0 6 0 6 3 , 4 3 0

Loss on sale of troubled loans 1 , 3 1 5 9 , 9 9 5 1 , 0 4 4 7 , 9 3 4

Other expenses (Note 11) 1 4 , 0 0 1 2 9 , 1 9 2 1 1 , 1 1 5 2 3 , 1 7 4

7 3 4 , 3 7 9 6 3 1 , 1 9 6 5 8 2 , 9 7 9 5 0 1 , 0 6 8

Dividends of trust profits to beneficiaries (Note 4) W 1 , 3 2 1 , 3 4 8 W 1 , 8 1 3 , 8 4 4 $ 1 , 0 4 8 , 9 3 9 $ 1 , 4 3 9 , 9 0 2



STATEMENTS OF CASH FLOWS (Trust Accounts) for the years ended december 31, 2000 and 1999



2000 1999 2000 1999


Adjustment to reconcile net cash providedby operating activities :

Bad debt expense W 1 8 0 , 3 0 0 W 3 3 8 , 9 4 4 $ 1 4 3 , 1 2 9 $ 2 6 9 , 0 6 7Realized loss on security transactions 9 2 , 2 8 5 3 5 , 5 8 4 7 3 , 2 6 0 2 8 , 2 4 7Realized loss on security redemption 7 9 , 6 1 1 1 5 , 5 0 4 6 3 , 1 9 8 1 2 , 3 0 8Unrealized loss on securities 8 6 , 7 0 2 8 5 , 3 0 1 6 8 , 8 2 7 6 7 , 7 1 5Loss on sale of loans 1 , 3 1 5 9 , 9 9 5 1 , 0 4 4 7 , 9 3 4Provision for future losses 5 , 3 1 2 - 4 , 2 1 7 -Reversal of provision for loan losses ( 7 , 4 5 0 ) - ( 5 , 9 1 4 ) -Realized gain on security transactions ( 1 0 7 , 5 5 3 ) ( 2 1 2 , 2 9 6 ) ( 8 5 , 3 8 0 ) ( 1 6 8 , 5 2 9 )Realized gain on security redemption ( 3 3 , 5 1 4 ) ( 6 0 , 6 8 9 ) ( 2 6 , 6 0 5 ) ( 4 8 , 1 7 7 )Unrealized gain on securities ( 5 9 , 4 0 7 ) ( 1 6 9 , 6 1 7 ) ( 4 7 , 1 6 0 ) ( 1 3 4 , 6 4 9 )Gain on sale of loans ( 1 , 7 7 6 ) ( 3 , 6 5 2 ) ( 1 , 4 1 0 ) ( 2 , 8 9 9 )Reversal of provision for future losses ( 1 5 ) ( 4 , 9 1 6 ) ( 1 2 ) ( 3 , 9 0 3 )Amortization of present value discounts ( 2 , 4 4 3 ) - ( 1 , 9 3 9 ) -Net changes in,

Accrued interest 1 7 7 , 5 6 2 2 6 4 , 1 7 8 1 4 0 , 9 5 6 2 0 9 , 7 1 5Accrued income 2 1 5 , 9 1 9 - 1 7 1 , 4 0 5 -Unearned income 1 4 , 8 5 3 ( 5 8 , 1 7 7 ) 1 1 , 7 9 1 ( 4 6 , 1 8 3 )Accrued expenses 3 , 1 6 9 7 2 , 5 1 6 6

Net cash provided by operating activities 6 4 4 , 8 7 0 2 4 0 , 1 6 6 5 1 1 , 9 2 3 1 9 0 , 6 5 2

Cash flows from investing activities

Decrease in trading securities 6 2 1 , 3 7 5 9 1 3 , 3 8 7 4 9 3 , 2 7 2 7 2 5 , 0 8 3Decrease in loans 8 4 0 , 3 2 9 1 , 4 1 5 , 1 3 6 6 6 7 , 0 8 7 1 , 1 2 3 , 3 9 1Decrease in call loans - 1 8 5 , 0 0 0 - 1 4 6 , 8 6 0Decrease in bonds with resale agreement 3 0 , 0 0 0 9 0 1 , 0 0 0 2 3 , 8 1 5 7 1 5 , 2 5 0Increase in monetary receivables ( 8 5 5 , 9 8 4 ) - ( 6 7 9 , 5 1 4 ) -Other assets, net ( 1 7 , 6 2 7 ) 3 3 , 9 5 7 ( 1 3 , 9 9 3 ) 2 6 , 9 5 7

Net cash provided by investing activities 6 1 8 , 0 9 3 3 , 4 4 8 , 4 8 0 4 9 0 , 6 6 7 2 , 7 3 7 , 5 4 1

Cash flows from financing activities

Decrease in money trusts ( 1 , 6 7 7 , 6 8 1 ) ( 3 , 2 5 2 , 3 0 2 ) ( 1 , 3 3 1 , 8 1 0 ) ( 2 , 5 8 1 , 8 0 7 )Increase(decrease) in property trusts 8 5 5 , 6 8 3 ( 6 4 , 6 0 9 ) 6 7 9 , 2 7 5 ( 5 1 , 2 8 9 )Decrease(increase) in borrowings 2 6 3 , 2 8 6 ( 1 4 , 1 1 4 ) 2 0 9 , 0 0 7 ( 1 1 , 2 0 4 )Others, net ( 3 2 0 , 5 9 8 ) ( 3 4 7 , 6 2 9 ) ( 2 5 4 , 5 0 3 ) ( 2 7 5 , 9 6 2 )

Net cash provided by (used in)financing activities ( 8 7 9 , 3 1 0 ) ( 3 , 6 7 8 , 6 5 4 ) ( 6 9 8 , 0 3 1 ) ( 2 , 9 2 0 , 2 6 2 )

Net increase in cash and cash equivalents 3 8 3 , 6 5 3 9 , 9 9 2 3 0 4 , 5 5 9 7 , 9 3 1

Cash and cash equivalents at beginningof year (Note 12) 3 6 1 , 2 7 8 3 5 1 , 2 8 6 2 8 6 , 7 9 7 2 7 8 , 8 6 4

Cash and cash equivalents at end of year (Note 12) W 7 4 4 , 9 3 1 W 3 6 1 , 2 7 8 $ 5 9 1 , 3 5 6 $ 2 8 6 , 7 9 5


NOTES TO FINANCIAL STATEMENTS OF TRUST ACCOUNTDecember 31, 2000 and 1999

1. The Bank :Kookmin Bank (“the Bank”) was established in 1963 under the Citizens National Bank Act to provide and administer funds forfinancing 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 MutualSavings & Finance Co., Ltd.s on August 22, 1999. Also, in accordance with the decision of the Financial Supervisory Commissionunder the Act concerning the Structural Improvement of the Financial Industry, the Bank purchased certain assets, including theloans classified as normal or precautionary, and assumed most of the liabilities of Daedong Bank as of June 29, 1998. Also, onDecember 22, 2000, the Bank entered into a memorandum of understanding for a merger with H&CB in 2001.

The Bank is engaged in trust business according to the provisions of the Trust Business Act with operations in the head office anddomestic branches, and its financial statements are prepared separately from the banking accounts.

The Bank has its shares listed on the Korean Stock Exchange since September 1994. As of December 31, 2000, as a result of severaladditional issuance of shares, the Bank’s capital stock amounts to W 1,698,067 million. As of December 31, 2000, the government andGoldman Sachs Capital Koryo, L.P. own 6.48% and 11.07%, respectively, of total outstanding voting shares.

2. Summary of Significant Accounting Policies :The financial statements of the Bank’s trust accounts are prepared in accordance with the Trust Accounting Principle for the BankManaging Trust Business of the Republic of Korea, except for certain items not specified in the Act which were prepared inaccordance with the Trust Business Act, the relevant laws and regulations, the financial accounting standards generally accepted inthe Republic of Korea, and accounting standards of banking industry. The significant accounting policies applied in the preparation ofthe accompanying trust accounts are summarized below.

Revenues and Expenses of Trust AccountsThe trust accounts record the amount of the trust revenue less all expenses and trust fees as the dividends of trust profits tobeneficiaries (including the guaranteed principal and minimum rate of return). The trust fees are recorded in the Bank’s bankingaccounts as a part of other operating income.

Interest Income RecognitionInterest income on loans and securities from trust accounts’ fund operations is recognized on an accrual basis. However, interestincome on overdue or dishonored loans, except for those secured with deposits or guaranteed by financial institutions, is recognizedon a cash basis in accordance with the accounting standards of the banking industry. As of December 31, 2000 and 1999, accrued butnot recognized interest income on loans approximated W44,361 million and W87,330 million, respectively.

S e c u r i t i e sSecurities are recorded at cost using moving average method or specific identification method with related expenses added to thepurchase costs. The valuation methods used for securities are as follows :

Valuation Methods

Marketable stocks Market valueand beneficial certificates

Non-marketable stocks Cost (adjusted to net asset value if the decline in value is significantly below cost and is determined as other than temporary)

Debt securities Market value Other securities Cost

However, under the transition clause in the accounting and reporting guidelines prescribed by the trust regulatory authorities, thedebt securities managed under the unspecified money trusts that were established before November 15, 1998 are not recorded atmarket value. Instead, the loan classification criteria were applied to these securities and the related unrealized losses were chargedto bad debt expense and recorded as provisions for loan losses. As for these unspecified money trusts, the Bank is prohibited, as ofJuly 1, 2000, from entering into additional contracts and is restricted to operations related to the redemption of these trusts.

Additionally, securities that are managed under specified money trusts or property trusts are recorded at cost.




Provision for Loan Losses The trust accounts applied Forward Looking Criteria (“FLC”) to certain assets of unspecified money trusts, comprising loans, bills,privately placed debentures, and securities not marked-to-market, in assessing the borrowers’ credit risk and accordingly classifiedtheir related balances. FLC takes into consideration not only current delinquencies and bankruptcies but also future repayabilityincluding the borrower’s management, current financial position, and future cash flows. FLC was applied to large-sized corporate loanswhile consumer loans and small-sized corporate loans were classified by considering current financial status including delinquentnumber of days and bankruptcies. Provision amounts are determined by applying at minimum the following percentages to each assetclassification. As a result, as of December 31, 2000 and 1999, provision for loan losses on guaranteed trusts are W174,328 million andW119,565 million, respectively, and on performance trusts are W182,100 million and W239,899 million, respectively.



Present Value Discounts Since January 1, 2000, loans whose conditions became unfavorable due to work out, court receivership, court mediation, or debtrestructuring agreements of parties concerned, are carried at present value in cases where the difference between the book value andthe present value of the loans is significant. The present value discount, which is the difference between the book value and thepresent value, is amortized using the effective interest method. When estimating the present value of the loans, the Bank generallyuses the interest rate at the inception of the loans as the discount rate. For floating rate loans and maturity-extended fixed rate loans,the discount rate used is the prime rate at the date of loan restructuring plus the spread that was applicable to the borrower at loanorigination date. The provision for loan losses on these restructured loans are based on the loan amounts net of related presentvalue discounts. The trust accounts amortized W2,443 million of present value discounts and W35,787 million of additional presentvalue discounts were charge to bed debt expense.

Due from Banking Accounts The surplus funds that result from the trust accounts’ fund operations are loaned to the Bank’s banking accounts and are recorded asdue from banking accounts by the trust accounts and as due to trust accounts by the banking accounts. The interest paymentsbetween the banking accounts and the trust accounts are determined by the trust accounts.

Provision for Future Losses Under the Trust Business Act, provision for future losses are set up in the trust accounts for losses related to those trust funds withguarantee of the principal or minimum rate of return. The provision are used to provide for the losses on such trust funds and, if thelosses are incurred in excess of the provision for future losses, the excess losses are compensated by the Bank (banking accounts :loss from trust management in other non-interest expenses, trust accounts : compensation from banking accounts). Based on thefinancial statements of the trust accounts prepared in accordance with the Trust Business Act, the losses compensated by the Bank,for the year ended December 31, 2000 amount to W191,531 million.

Dividends of Trust Profits to Beneficiaries The dividends of trust profits are calculated by applying the performance yields, which are based on trust revenues less trustmanagement fees and other expenses. However, for dividend-guaranteed trusts, the amounts based on the guaranteed minimum rate ofreturn are recorded as dividends of trust profits. For principal-guaranteed trusts of which the value of related trust assets is less than theguaranteed trust principal, the trust accounts make up for the shortage amounts and record no dividends of trust profits on these trusts.

Trust Fees The Bank’s banking accounts receive trust management fees from trust accounts which consist of basic fees of 0.8% to 2.0% ofinvested capital and special fees of less than 4.0%. The Bank used W12,642 million of trust management fees on performance trustfunds to provide for loan losses of these performance trust funds.

Security Investment Trusts Under the revised accounting and reporting guidelines prescribed by the trust regulatory authorities, the Bank’s trust accounts, as thetrustee, do not record in its accounts the assets and liabilities (trust amounts as of December 31, 2000 : W18,453,768 million,December 31, 1999 : W22,163,863 million) nor the related gains and losses of the security investment trusts. The Bank only records asincome the fixed amounts of commissions received from trustor companies for securities investment trust activities. The Bank has noadditional benefits or risks associated with the results of operations of the securities investment trust activities.

In remuneration for the management of securities investment trusts, the Bank receives 0.05% of the trust amounts.


Performance Yield and Standard Price The performance yield is the standard compound yield rate, based on daily performance of the trust assets, less the provision rate forprovision for loan losses and the trust management fee rate.

The standard compound yield rate is the sum of fund trust assets multiplied by weighted average performance yield of each funddivided by total trust assets. The gains and losses on securities and other fees are reflected in the calculation of the standardcompound yield rate.

Daily gains and losses on securities and other fees are recognized over a one-month period from the date of occurrence. However,weekly gains and losses on redemption of beneficial certificates are reflected in the following one-week’s calculation of standardcompound yield rate.

The provision rate for provision for loan losses is based on the additional required provision for loan losses calculated for 90% of theoutstanding trust amount at end of each month, and is reflected in the standard compound yield rate over the following one-month period.

The standard price is calculated per 1,000 units and is total asset less total liability divided by total number of beneficial certificate units.

3. United States Dollar Amounts :The Bank’s trust accounts operate primarily in Korea Won and their official accounting records are maintained in Korea Won. TheU.S. dollar amounts are provided herein as supplementary information solely for the convenience of the reader. All Won amountsare expressed in U.S. dollars at the rate of W1,259.7 : US$1 the prevailing rate on December 31, 2000. This presentation is notrequired by or in accordance with Korean or United States generally accepted accounting principles, and should not be construed asa representation that the Won amounts shown could be converted to or settled in U.S. dollars at this or any other rate.

Money trusts :Unspecified money trust W 1 , 3 6 2 W 1 , 8 1 9 W 6 1 W 2 0 3Installment money trust 1 , 1 3 1 , 3 3 9 2 , 4 0 6 , 4 4 6 1 4 9 , 0 6 8 2 2 6 , 4 0 9Household money trust 1 9 2 , 6 5 2 5 1 2 , 9 8 2 2 4 , 0 1 8 5 4 , 5 1 6Development trust 5 9 , 2 4 6 7 0 2 , 3 3 8 5 7 , 6 6 3 2 0 2 , 1 1 1Money in trust for old-age living pension 6 6 , 8 0 4 1 0 0 , 1 4 3 6 , 3 8 1 1 1 , 5 2 2New Money in trust for old-age living pension 4 4 4 , 0 9 2 - 6 , 1 4 9 -Corporation money in trust 4 3 , 4 6 2 9 1 , 0 5 6 4 , 5 3 3 6 , 3 5 0National stock in trust 1 1 , 8 4 2 1 5 , 6 8 0 - 1 2 , 6 9 9Employee retirement installments in trust - - - 3 , 0 7 2Money in trust for individual pension 8 4 2 , 5 0 4 7 2 5 , 5 5 9 6 8 , 5 6 0 5 7 , 9 9 5New money in trust for individual pension 4 , 1 7 0 - 4 1 -Household long-term money in trust 1 , 9 3 4 , 7 9 3 1 , 8 7 1 , 7 3 6 1 5 5 , 6 8 4 1 4 7 , 4 2 0Money in trust for employees 5 8 5 , 0 5 2 5 1 2 , 6 8 8 5 0 , 5 8 3 3 5 , 5 0 4New money in trust for employees 3 3 2 - 4 -Special installment money in trust 5 , 9 9 0 , 2 7 3 6 , 1 0 0 , 4 2 7 5 8 8 , 6 6 0 6 3 8 , 2 0 3Retirement money trust 3 3 , 3 1 5 - 1 , 2 7 4 -Specified money in trust 1 , 3 7 1 , 7 6 6 1 , 3 1 7 , 7 3 7 1 2 5 , 5 9 8 3 1 8 , 7 9 7Unit type money trusts 1 6 9 , 9 3 2 1 , 5 1 7 , 2 5 2 6 , 4 7 7 9 6 , 5 5 7Real estate investment in trust 9 3 , 3 9 1 - 3 , 5 8 4 -Addition type money trust 1 , 2 2 1 , 8 5 5 - 4 5 , 1 7 8 -

1 4 , 1 9 8 , 1 8 2 1 5 , 8 7 5 , 8 6 3 1 , 2 9 3 , 5 1 6 1 , 8 1 1 , 3 5 8Property trusts :

Securities in trust 2 0 , 0 0 0 2 0 , 3 0 1 8 3 0 2 , 4 8 6Monetary receivables in trust 8 5 5 , 9 8 4 - 2 7 , 0 0 2 -

8 7 5 , 9 8 4 2 0 , 3 0 1 2 7 , 8 3 2 2 , 4 8 6

W 1 5 , 0 7 4 , 1 6 6 W 1 5 , 8 9 6 , 1 6 4 W 1 , 3 2 1 , 3 4 8 W 1 , 8 1 3 , 8 4 4

Trust Funds Dividends of Trust Profits

2000 1999 2000 1999

4. Summary of Trust Accounts :As of December 31, 2000 and 1999, the trust funds of the Bank’s trust accounts are as follows (in millions of Won) :




(*) Trust accounts contracted prior to April 30, 1996 are guaranteed of their principal amounts.

As of December 31, 2000 and 1999, the trust funds comprise 854,518 units and 1,089,125 units, respectively. The key terms andconditions of the trust funds are as follows (in millions of Won) :

Period (years) Type of Dividends Average G u a r a n t e eDividends Rate (%)

Money Trusts :Unspecified money trust over 1.5 years C o n t r a c t e d 3 . 8 9 principal and interestInstallment money trust over 1.5 years P e r f o r m a n c e 7 . 9 7 - (*)Household money trust 1.5 - 3 years P e r f o r m a n c e 7 . 8 9 - (*)Development trust 2, 3 years C o n t r a c t e d 1 7 . 9 5 principal and interestMoney in trust for old-age living pension over 5 years P e r f o r m a n c e - p r i n c i p a lNew Money in trust for old-age living pension over 1 year P e r f o r m a n c e 7 . 6 2 p r i n c i p a lCorporate money in trust 1.5 years P e r f o r m a n c e 9 . 8 2 - (*)National stock in trust over 3 years P e r f o r m a n c e 8 . 7 1 -Employee retirement installments in trust over 1 year P e r f o r m a n c e - p r i n c i p a lMoney in trust for individual pension 15 - 35 years P e r f o r m a n c e 8 . 9 4 p r i n c i p a lNew Money in trust for individual pension over 15 years P e r f o r m a n c e 8 . 6 9 p r i n c i p a lHousehold long-term money in trust 3 - 5 years P e r f o r m a n c e 8 . 4 2 -Money in trust for employees 3 - 5 years P e r f o r m a n c e 8 . 7 2 -New Money in trust for employees 3 - 5 years P e r f o r m a n c e 8 . 4 0 -Special installment money in trust over 1 year P e r f o r m a n c e 9 . 0 6 -Retirement money trust - P e r f o r m a n c e 1 0 . 4 2 ~ 1 3 . 6 4 p r i n c i p a lSpecified money in trust 1.5 - 5 year P e r f o r m a n c e 9 . 7 2 -Unit type money trust 1 year P e r f o r m a n c e 0 ~ 7 . 4 9 -Real estates investment in trust 1.5 years P e r f o r m a n c e 1 1 . 3 4 -Addition type money trust 1 year P e r f o r m a n c e 0 ~ 1 4 . 1 0 -

Property Trusts :Securities in trust over 1 year P e r f o r m a n c e 4 . 1 1 -Monetary receivables in trust - P e r f o r m a n c e - -

Principal orDividends P a r t i a lGuarantee Guarantee Performance Property T o t a l

S e c u r i t i e s W 1 , 5 2 3 , 9 4 9 W 1 , 1 1 9 , 9 5 8 W 1 0 , 1 0 2 , 6 1 9 W 2 0 , 0 0 1 W 1 2 , 7 6 6 , 5 2 7L o a n s 2 7 5 , 8 3 4 2 5 1 , 4 4 2 6 6 3 , 2 9 8 - 1 , 1 9 0 , 5 7 4Money trusts - - - 8 5 5 , 9 8 4 8 5 5 , 9 8 4Due from banking accounts 1 0 4 , 8 1 9 8 1 , 1 3 2 5 5 8 , 9 8 0 - 7 4 4 , 9 3 1Provision for loan losses ( 1 7 4 , 3 2 8 ) ( 4 3 , 8 9 5 ) ( 1 3 8 , 2 0 5 ) - ( 3 5 6 , 4 2 8 )Other assets 6 0 , 0 5 2 4 8 , 9 4 0 4 2 0 , 8 1 9 3 1 , 0 1 7 5 6 0 , 8 2 8Total assets W 1,790,326 W 1 , 4 5 7 , 5 7 7 W 1 1 , 6 0 7 , 5 1 1 W 9 0 7 , 0 0 2 W 1 5 , 7 6 2 , 4 1 6

T r u s t s W 1 , 4 5 1 , 4 9 3 W 1 , 3 6 7 , 4 5 4 W 1 1 , 3 7 9 , 2 3 5 W 8 7 5 , 9 8 4 W 1 5 , 0 7 4 , 1 6 6Present value discounts 2 9 , 7 8 1 7 3 , 5 5 6 - 3 3 , 3 4 4Provision for future losses 7 , 1 1 9 6 , 2 8 7 - - 1 3 , 4 0 6Other liabilities 3 0 1 , 9 3 3 8 3 , 8 2 9 2 2 4 , 7 2 0 3 1 , 0 1 8 6 4 1 , 5 0 0Total liabilities W 1 , 7 9 0 , 3 2 6 W 1 , 4 5 7 , 5 7 7 W 1 1 , 6 0 7 , 5 1 1 W 9 0 7 , 0 0 2 W 1 5 , 7 6 2 , 4 1 6

Assets and liabilities of the trust accounts as of December 31, 2000 are classified as principal or dividends guarantee trusts, partialguarantee trusts, performance trusts, and property trusts as follows (in millions of Won) :


W 285,7732 , 1 8 8 , 2 5 63 , 9 3 8 , 5 5 5

( 2 , 9 1 3 , 9 3 7 )( 1 , 0 2 4 , 6 1 8 )

2 5 5 , 9 5 04 , 7 9 1 , 8 7 3

- 1 , 0 4 1 , 5 9 0( 6 6 2 , 4 1 6 )( 3 7 9 , 1 7 4 )

2 6 4 , 5 3 0( 1 4 2 , 3 8 5 )

( 1 0 , 0 0 4 )( 1 0 5 , 4 3 5 )

( 6 , 7 0 6 )-

W 12,766,527

Notwithstanding the write-off of trust assets, the trust accounts hold the right of claim to these assets unless invalid by legalextinction of right due to time lapse or post write-off retrieval. As of December 31, 2000 and 1999, the trust accounts holds suchrights of W142,096 million and W125, 886 million, respectively, on trust assets written-off.

5. Securities :Securities held by the trust funds as of December 31, 2000 and 1999 comprise the following:

Millions of Won

Annual Interest(%) 2 0 0 0 1 9 9 9

Equity securities -Government bonds 3 . 0 - 1 8 . 4Finance debentures ;

Monetary stabilization bonds 5 . 6 5 - 9 . 4 5Other finance debentures 3 . 0 - 1 8 . 0

Municipal bonds 6 . 0 - 1 3 . 5Corporate bonds 1 . 0 - 2 5 . 0Foreign securities -Bills bought ;

Commercial papers 4 . 0 - 1 2 . 5Bills issued 5 . 5 - 1 3 . 7 5

Other securities ;Certificates of deposit 5 . 8 5 - 8 . 1 2Beneficial certificates on development trust 7 . 1 5 - 1 4 . 4 2Beneficial certificates on debt securities -Beneficial certificates on stocks -O t h e r s -

Total securities

Gains (losses) on securities for the year ended December 31, 2000 and 1999 are summarized as follows :Millions of Won

2 0 0 0 1 9 9 9

Gains on securitiesGain on sale of securities W 107,553 W 212,296Gain on redemption of securities 3 3 , 5 1 4 6 0 , 6 8 9Unrealized gain on securities 5 9 , 4 0 7 1 6 9 , 6 1 7

W 200,474 W 442,602Losses on securities

Losses on sale of securities W 92,285 W 35,583Losses on redemption of securities 7 9 , 6 1 1 1 5 , 5 0 4Unrealized loss on securities 8 6 , 7 0 2 8 5 , 3 0 1

W 258,598 W 136,388

Unrealized gains (losses) on securities for the year ended December 31, 2000 are summarized as follows :Millions of Won

L o s s e s G a i n s

Equity securities W 4 , 1 2 5 W ( 6 4 4 )Beneficial certificates 4 , 6 1 6 5 , 9 9 4Debt securities 7 7 , 9 6 1 5 4 , 0 5 7

W 8 6 , 7 0 2 W 5 9 , 4 0 7

W 196,2545 0 1 , 5 2 8

2 , 1 2 1 , 8 4 3( 1 , 3 2 8 , 4 4 0 )

( 7 9 3 , 4 0 3 )2 4 0 , 5 4 8

5 , 4 6 3 , 1 5 01 1 7 , 1 2 17 1 0 , 6 0 7

( 5 2 7 , 3 5 1 )( 1 8 3 , 2 5 6 )4 , 0 9 4 , 9 7 4( 2 5 9 , 7 0 3 )

( 1 , 6 7 8 , 6 8 3 )( 1 , 1 3 6 , 9 6 8 )

( 2 1 7 , 4 4 4 )( 8 0 2 , 1 7 7 )

W 13,446,025




For those securities that, under the addendum to the accounting and reporting guidelines prescribed by the trust regulatoryauthorities, are not recorded at market price, the trust accounts recognized provision for loan losses by applying FLC. As a result,W257,517 million (principal or dividend guaranteed trusts : W123,678 million, performance trusts : W133,839 million) and 54,604million were charged to provision for loan losses as of December 31, 2000 and 1999, respectively.

6. Loans :Loans outstanding as of December 31, 2000 and 1999 are summarized as follows:

Millions of Won

2 0 0 0 1 9 9 9

Loan on securities collateral W 4 , 9 7 6 W 6,023Loans on personal property collateral 5 8 9 1 , 7 4 1Loans on real estate collateral 2 7 2 , 6 3 8 6 9 7 , 3 6 0Loans on foundation collateral 1 4 2 1 4Loans on debt securities collateral 9 0 6 9 , 5 3 3Loans on trust benefit collateral 2 0 0 , 4 6 0 2 7 2 , 0 9 1Loans on guarantees 1 1 9 , 2 7 2 2 3 8 , 1 4 2Loans on deeds 5 4 9 , 6 3 6 8 7 6 , 7 4 5Loans on bills 4 2 , 0 8 3 6 8 , 6 9 3

W 1 , 1 9 0 , 5 7 4 W 2 , 1 7 0 , 5 4 2

The maturities and the credit risk classification of loans as of December 31, 2000 are as follows (in millions of Won):

M a t u r i t i e s Credit risk classification

Y e a r Millions of Won C l a s s i f i c a t i o n Millions of Won

2 0 0 1 W 696,256 N o r m a l W 891,5752 0 0 2 2 7 5 , 1 2 8 P r e c a u t i o n a r y 6 0 , 7 9 42 0 0 3 7 3 , 6 1 4 S u b - s t a n d a r d 1 8 8 , 8 4 62 0 0 4 2 1 , 2 2 2 D o u b t f u l 3 1 , 1 9 3

t h e r e a f t e r 1 2 4 , 3 5 4 Estimated loss 1 8 , 1 6 6

W 1,190,574 W 1,190,574

Movements of provision for loan losses for the year ended December 31, 2000 are as follows:Millions of Won

Beginning balance W 3 5 9 , 4 6 4Debt restructuring ( 3 5 , 7 8 7 )W r i t t e n - o f f ( 1 4 2 , 0 9 6 )Reversal of provision for loan losses ( 5 , 4 5 3 )Ending balance before additional provision 1 7 6 , 1 2 8Additional provision for the period 1 8 0 , 3 0 0

Ending balance W 3 5 6 , 4 2 8

7. Present Value Discounts :As of December 31, 2000, the summary of present value discounts on loans related to corporate restructurings is as follows (inmillions of Won) :

W o r k o u t s Court Receivership Court Mediation T o t a l

Pre-restructuring loan balance W 1 5 2 , 9 1 2 W 3 7 , 1 8 8 W 3 , 8 3 1 W 1 9 3 , 9 3 1Loan converted into equity 1 , 3 6 2 - - 1 , 3 6 2Loan balances for restructuring 1 5 1 , 5 5 0 3 7 , 1 8 8 3 , 8 3 1 1 9 2 , 5 6 9Restructured present value 1 2 1 , 9 7 7 3 3 , 6 8 5 3 , 5 6 3 1 5 9 , 2 2 5

Present value discounts W 2 9 , 5 7 3 W 3 , 5 0 3 W 2 6 8 W 3 3 , 3 4 4


The present values of the restructured loans are based on the market values on the day that the restructuring terms were fixed. Forthose cases where the market values are unavailable, the Bank’s trust accounts determined the present values by discounting, usingthe appropriate interest rate at the original inception or restructuring date, the estimated future cash flows over the rescheduledm a t u r i t i e s .

Movements in the present value discounts for the year ended December 31, 2000 related to the restructured loans are as follows :

Millions of Won

Beginning Balance I n c r e a s e D e c r e a s e Ending Balance

Work out W 2 4 , 4 3 1 W 6 , 4 9 7 W 1 , 3 5 5 W 2 9 , 5 7 3Court receivership 3 , 4 7 1 1 , 1 4 6 1 , 1 1 4 3 , 5 0 3Court mediation 1 9 9 4 3 ( 2 6 ) 2 6 8

W 2 8 , 1 0 1 W 7 , 6 8 6 W 2 , 4 4 3 W 3 3 , 3 4 4

8. Other Assets :Other assets as of December 31, 2000 and 1999 are summarized as follows :

Millions of Won

2 0 0 0 1 9 9 9

Payments in advance W 1 , 1 1 7 W 2 , 4 7 3Accrued interest 1 6 5 , 6 5 3 3 4 3 , 2 1 5Accrued income 3 6 8 , 9 8 5 5 8 4 , 9 0 4Accounts receivable 1 9 , 6 5 5 3 , 4 8 0O t h e r 5 , 4 1 8 2 , 6 1 0

W 5 6 0 , 8 2 8 W 9 3 6 , 6 8 2

The trust accounts record interest accrued on securities and loans in the related trust funds as accrued income. Accrued but notrecognized interest income, from applying consistent interest income recognition policy with the banking accounts, amount toW44,361 million and W87,330 million as of December 31, 2000 and 1999, respectively.

9. Borrowings :All borrowings of the trust accounts as of December 31, 2000 and 1999 are from the banking accounts (interest rate : 5.96%).

10. Other Liabilities :Other liabilities as of December 31, 2000 and 1999 are summarized as follows :

Millions of Won

2 0 0 0 1 9 9 9

Receipts in advance W 1 , 0 8 9 W 7 5 6Due to credit guarantee fund 1 0 4 1 6 9Accounts payable 3 2 3 6Unearned income 2 3 , 6 3 5 8 , 7 8 2Trust management fees payable 8 , 0 9 2 1 8 , 3 3 0Trust dividends payable 3 4 2 , 0 8 1 6 5 2 , 7 0 5Interest payables 3 , 1 8 1 1 1Present value discounts 3 3 , 3 4 4 -

W 4 1 1 , 5 5 8 W 6 8 0 , 7 8 9



11. Other Income (Expenses) :Other income (expenses) for the years ended December 31, 2000 and 1999 are summarized as follows :

Millions of Won

2 0 0 0 1 9 9 9

Other incomeFees and commissions W 1 , 1 8 5 W 9Gain on sale of loans 1 , 7 7 6 3 , 6 5 2Compensation from banking accounts 1 9 1 , 5 3 1 7 , 5 2 9Gain on derivatives 4 8 0 - O t h e r s 1 3 , 8 1 5 2 4 , 1 3 1

W 2 0 8 , 7 8 7 W 3 5 , 3 2 1

Other expensesContributions to government funds W 2 , 5 1 7 W 3 , 8 0 0T a x e s 2 , 0 1 3 1 , 6 3 3Loss on derivatives 6 1 7 - Provision for future losses 5 , 3 1 2 - O t h e r 3 , 5 4 2 2 3 , 7 5 9

W 1 4 , 0 0 1 W 2 9 , 1 9 2

12. Cash Flow Information :Cash and cash equivalents as of December 31, 2000 and 1999, as presented in the statement of cash flows of the trust accounts, aredue from banking accounts of W744,931 million and W361,278 million, respectively.

Transactions not affecting cash flows for the years ended December 31, 2000 and 1999 are the amortization of the provision for loanlosses of W142,096 million and W125,886 million, respectively.



Report of Independent Accountants (Consolidated)

Samil Accounting CorporationHanil Group Building 21st Flr. 191 Hangangro 2 ga,Yongsanku Seoul 140-702, KOREA(C.P.O. Box 2170, 100-621)Telephone +82 2 709-0800 Facsimile +82 2 792-7001

To the Shareholders and Board of DirectorsKookmin Bank

We have audited the accompanying consolidated balance sheets of Kookmin Bank ("the Bank") and its subsidiaries as of December 31, 2000 and 1999, and therelated consolidated statements of income, of changes in shareholders' equity, and of cash flows for the years then ended, expressed in Korean Won. Theseconsolidated financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these consolidated financialstatements based on our audits. We did not audit the financial statements of Kookmin Credit Card Co., Ltd., Kookmin Leasing Co., Ltd., Kookmin Venture CapitalCo., Ltd., Kookmin Futures Co., Ltd., Kookmin Bank Venture Capital Co., Ltd., Kookmin Bank Luxembourg S.A., and Kookmin Bank Finance Asia Ltd., whosestatements represent 10.7% of total assets as of December 31, 2000 and 15.8% of total revenues for the year then ended. Also, we did not audit the financialstatements of subsidiaries, Kookmin Leasing Co., Ltd., Kookmin Venture Capital Co., Ltd., Kookmin Bank Venture Capital Co., Ltd., Kookmin Bank Luxembourg S.A.,Kookmin Bank Finance Asia Ltd. and Kookmin Singapore (Merchant Bank) Ltd., whose statements represent 3.4% of total assets as of December 31, 1999 and 4.7%of 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 itrelates to the amounts included for these entities, is based solely on the reports of the 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 theaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and thereports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly in all materialrespects, the financial position of Kookmin Bank and its subsidiaries as of December 31, 2000 and 1999, and the results of their operations, the changes in theirshareholders' equity and their cash flows for the years then ended in conformity with financial accounting standards for consolidated financial statements generallyaccepted in the Republic of Korea.

As discussed in Note 31 to the consolidated financial statements, the Bank entered into a Memorandum of Understanding ("the MOU") for a merger with H&CB onDecember 22, 2000. At the Balance Sheet date, the Bank is negotiating with H&CB concerning the merger including share exchange rates and merger procedures.As of December 31, 1999, total assets and total shareholders' equity of H&CB's banking accounts are W46,651,306 million and W2,197,860 million, respectively.

As discussed in Note 1 to the consolidated financial statements, Kookmin Singapore (Merchant Bank) Ltd. is in undergoing liquidation process and therefore isexcluded from the scope of consolidation.

As discussed in Note 32 to the consolidated financial statements, according to the report of other auditors as of December 31, 2000, Kookmin Leasing Co., Ltd.recorded a net loss of W260,915 million and negative net worth of W375,507 million. This raises substantial doubt about its ability to continue as a going concern.Kookmin Leasing Co., Ltd. is in the process of implementing a private restructuring plan under agreements with its creditors including the Bank. Its ability tocontinue as a going concern is dependent upon the results of the private restructuring plan. No further adjustments have been made in the accompanyingconsolidated financial statements related to such uncertainties.

Under the Mutual Savings & Finance Company Act, when mutual savings & finance companies are sold, the deposits (limited to deposit amount at date of sale) ofthese companies are guaranteed as to payment by the seller for three years in case of bankruptcy within this period. The Bank is under such liability for OrangeMutual Savings & Finance Co., Ltd.(previously 'Kookmin Mutual Savings & Finance Co., Ltd.) and Bukook Mutual Savings & Finance Co., Ltd. which were soldduring 1999. Orange Mutual Savings & Finance Co., Ltd. suspended its operation as of Dec 31, 2000.

Without qualifying our opinion, we draw attention to Note 17 to the consolidated financial statements. The operations of the Bank and its subsidiaries have beensignificantly affected, and may continue to be affected for the foreseeable future, by the general adverse economic conditions in the Republic of Korea and in theAsia Pacific region. Under these adverse economic conditions, certain customers of the Bank and its subsidiaries, including Daewoo Group companies, are in theprocess of corporate restructuring under agreements with their creditor banks. As of December 31, 2000, in relation to the companies under restructuringprocedures (workout, court receivership, or court mediation, exclusive of Daewoo Group companies) and Daewoo Group companies, the loan amountsoutstanding are W3,163,874 million and W540,493 million, respectively, present value discounts are W157,297 million and W41,094 million, respectively, andprovision for loan losses are W874,438 million and W328,569 million, respectively. Actual losses from these loans may differ from the provision amounts. Theultimate effect of these significant uncertainties on the financial position of the Bank and its subsidiaries as of the balance sheet date cannot presently bedetermined and accordingly, no adjustments have been made in the accompanying consolidated financial statements related to such uncertainties.

The amounts expressed in U.S. Dollars are provided solely for the convenience of the reader and have been translated on the basis set forth in Note 3 to theconsolidated financial statements.

The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance withaccounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. The procedures and practices utilized toaudit such financial statements may differ from those generally accepted and applied in other countries and jurisdictions. Accordingly, this report and theaccompanying consolidated financial statements are not intended for use by those who are not informed about Korean accounting principles or auditingstandards and their application in practice.

Seoul, Korea January 26, 2001


CONSOLIDATED BALANCE SHEETDecember 31, 2000 and 1999


2000 1999 2000 1999

A S S E T S

Cash and due from banks (Note 4) W 6 , 4 0 3 , 0 4 0 W 5 , 3 1 6 , 7 7 9 $ 5 , 0 8 2 , 9 8 8 $ 4 , 2 2 0 , 6 7 1

Trading securities (Note 5) 3 , 8 0 5 , 5 2 0 4 , 2 5 0 , 5 2 9 3 , 0 2 0 , 9 7 3 3 , 3 7 4 , 2 3 9

Investment securities (Note 6) 1 6 , 8 3 9 , 1 4 7 1 4 , 5 2 7 , 5 5 8 1 3 , 3 6 7 , 5 8 5 1 1 , 5 3 2 , 5 5 4

Loans (Note 7) 5 8 , 2 1 2 , 5 1 0 4 3 , 2 2 0 , 0 0 6 4 6 , 2 1 1 , 4 0 8 3 4 , 3 0 9 , 7 6 0

Fixed assets (Note 9) 1 , 4 5 7 , 9 7 5 1 , 4 5 6 , 4 9 4 1 , 1 5 7 , 3 9 9 1 , 1 5 6 , 2 2 4

Other assets (Note 11) 4 , 3 8 0 , 5 7 3 4 , 2 0 8 , 3 0 4 3 , 4 7 7 , 4 7 3 3 , 3 4 0 , 7 1 9

Total assets W 9 1 , 0 9 8 , 7 6 5 W 7 2 , 9 7 9 , 6 7 0 $ 7 2 , 3 1 7 , 8 2 6 $ 5 7 , 9 3 4 , 1 6 7

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits (Note 12) W 5 8 , 2 4 4 , 6 2 7 W 4 4 , 5 3 7 , 8 5 4 $ 4 6 , 2 3 6 , 9 0 3 $ 3 5 , 3 5 5 , 9 2 1

Borrowings (Note 13) 9 , 3 8 3 , 9 8 7 1 0 , 3 1 4 , 7 7 2 7 , 4 4 9 , 3 8 3 8 , 1 8 8 , 2 7 6

Debentures (Note 14) 1 1 , 6 4 7 , 8 7 8 9 , 3 1 2 , 7 5 4 9 , 2 4 6 , 5 4 9 7 , 3 9 2 , 8 3 5

Other liabilities (Note 16) 7 , 5 7 0 , 6 0 7 5 , 3 0 5 , 0 3 3 6 , 0 0 9 , 8 5 0 4 , 2 1 1 , 3 4 6

Total liabilities 8 6 , 8 4 7 , 0 9 9 6 9 , 4 7 0 , 4 1 3 6 8 , 9 4 2 , 6 8 5 5 5 , 1 4 8 , 3 7 8

Commitments and contingencies (Note 17)

Common stock, par value : W5,000,

authorized : 1,000 million shares,


(Notes 1 and 18) 1 , 4 9 8 , 0 6 7 1 , 4 9 8 , 0 6 7 1 , 1 8 9 , 2 2 5 1 , 1 8 9 , 2 2 5

Preferred stock, par value : W5,000,

non-cumulative, non-participating preferred stock


(Notes 1 and 18) 2 0 0 , 0 0 0 2 0 0 , 0 0 0 1 5 8 , 7 6 8 1 5 8 , 7 6 8

Capital surplus (Note 19) 1 , 6 4 7 , 2 9 2 1 , 5 8 7 , 2 4 5 1 , 3 0 7 , 6 8 6 1 , 2 6 0 , 0 1 8

Retained earnings (Note 21) 7 0 8 , 1 5 6 2 6 5 , 2 0 3 5 6 2 , 1 6 2 2 1 0 , 5 2 9

Capital adjustments (Note 22) ( 1 7 , 1 0 0 ) ( 6 2 , 4 5 2 ) ( 1 3 , 5 7 5 ) ( 4 9 , 5 7 7 )

Minority interest in consolidated subsidiaries 2 1 5 , 2 5 1 2 1 , 1 9 4 1 7 0 , 8 7 5 1 6 , 8 2 6

Total shareholders’ equity 4 , 2 5 1 , 6 6 6 3 , 5 0 9 , 2 5 7 3 , 3 7 5 , 1 4 1 2 , 7 8 5 , 7 8 9

Total liabilities and shareholders’ equity W 9 1 , 0 9 8 , 7 6 5 W 7 2 , 9 7 9 , 6 7 0 $ 7 2 , 3 1 7 , 8 2 6 $ 5 7 , 9 3 4 , 1 6 7

The accompanying notes are an integral part of this statements.

Interest income :Interest on due from banks (Note 28) W 3 2 8 , 6 4 8 W 2 6 9 , 1 7 9 $ 2 6 0 , 8 9 4 $ 2 1 3 , 6 8 5Interest on securities (Note 28) 1 , 7 4 7 , 7 5 8 1 , 9 2 1 , 1 6 2 1 , 3 8 7 , 4 4 0 1 , 5 2 5 , 0 9 5Interest on loans (Note 28) 4 , 6 2 6 , 8 2 6 4 , 5 7 4 , 3 7 5 3 , 6 7 2 , 9 5 9 3 , 6 3 1 , 3 2 1Other interest income 8 5 , 3 2 4 8 8 , 3 2 9 6 7 , 7 3 4 7 0 , 1 1 9

6 , 7 8 8 , 5 5 6 6 , 8 5 3 , 0 4 5 5 , 3 8 9 , 0 2 7 5 , 4 4 0 , 2 2 0Interest expenses :

Interest on deposits (Note 28) 3 , 2 2 0 , 9 8 4 2 , 9 1 0 , 2 7 1 2 , 5 5 6 , 9 4 5 2 , 3 1 0 , 2 8 9Interest on borrowings 6 4 0 , 0 8 9 7 1 4 , 0 9 3 5 0 8 , 1 2 8 5 6 6 , 8 7 5Interest on debentures 1 , 0 4 6 , 9 5 8 1 , 3 3 3 , 8 7 0 8 3 1 , 1 1 7 1 , 0 5 8 , 8 7 9Other interest expenses 3 9 , 0 3 9 7 0 , 6 9 0 3 0 , 9 9 1 5 6 , 1 1 6

4 , 9 4 7 , 0 7 0 5 , 0 2 8 , 9 2 4 3 , 9 2 7 , 1 8 1 3 , 9 9 2 , 1 5 9

Net interest income 1 , 8 4 1 , 4 8 6 1 , 8 2 4 , 1 2 1 1 , 4 6 1 , 8 4 6 1 , 4 4 8 , 0 6 1

Bad debt expense (Note 7) 9 1 6 , 6 2 4 1 , 3 8 7 , 1 9 0 7 2 7 , 6 5 3 1 , 1 0 1 , 2 0 7Net interest income after

bad debt expenses 9 2 4 , 8 6 2 4 3 6 , 9 3 1 7 3 4 , 1 9 3 3 4 6 , 8 5 4

Non-interest income :Fees and commission income (Note 28) 1 , 5 1 9 , 1 4 7 8 2 4 , 1 1 5 1 , 2 0 5 , 9 5 9 6 5 4 , 2 1 5Dividends on trading securities 2 , 7 5 0 2 , 7 2 6 2 , 1 8 3 2 , 1 6 4Dividends on investment securities 4 4 , 9 0 2 8 , 8 4 4 3 5 , 6 4 5 7 , 0 2 1Gain on foreign currency transactions 3 3 3 , 4 2 8 2 6 3 , 3 7 9 2 6 4 , 6 8 8 2 0 9 , 0 8 1Gain on derivatives (Note 10) 1 , 4 0 1 , 5 6 3 1 , 3 1 1 , 8 9 4 1 , 1 1 2 , 6 1 7 1 , 0 4 1 , 4 3 3Others (Note 23) 4 5 1 , 8 6 0 4 7 5 , 0 1 6 3 5 8 , 7 0 5 3 7 7 , 0 8 7

3 , 7 5 3 , 6 5 0 2 , 8 8 5 , 9 7 4 2 , 9 7 9 , 7 9 7 2 , 2 9 1 , 0 0 1Non-interest expense

Fees and commission expenses W 1 9 3 , 2 3 4 W 1 7 1 , 0 9 6 $ 1 5 3 , 3 9 7 $ 1 3 5 , 8 2 3General and administrative

expenses (Note 24) 1 , 2 3 1 , 9 9 9 1 , 2 3 5 , 1 6 8 9 7 8 , 0 1 0 9 8 0 , 5 2 6Loss on foreign currency transactions 1 3 6 , 1 2 2 1 6 0 , 6 7 6 1 0 8 , 0 5 9 1 2 7 , 5 5 1Loss on derivatives (Note 10) 1 , 5 1 1 , 5 8 8 1 , 2 7 5 , 2 6 8 1 , 1 9 9 , 9 5 9 1 , 0 1 2 , 3 5 9Others (Note 23) 4 4 1 , 0 5 7 2 8 8 , 8 2 1 3 5 0 , 1 2 8 2 2 9 , 2 7 7

3 , 5 1 4 , 0 0 0 3 , 1 3 1 , 0 2 9 2 , 7 8 9 , 5 5 3 2 , 4 8 5 , 5 3 6

Operating income 1 , 1 6 4 , 5 1 2 1 9 1 , 8 7 6 9 2 4 , 4 3 7 1 5 2 , 3 1 9

Non-operating loss, net (Notes 25) ( 2 9 , 9 9 0 ) ( 9 4 , 2 7 1 ) ( 2 3 , 8 0 8 ) ( 7 4 , 8 3 6 )

Net income before income tax expense 1 , 1 3 4 , 5 2 2 9 7 , 6 0 5 9 0 0 , 6 2 9 7 7 , 4 8 3

Income tax expense (Note 26) ( 4 4 8 , 2 6 9 ) ( 1 2 1 , 4 8 3 ) ( 3 5 5 , 8 5 4 ) ( 9 6 , 4 3 8 )

Net income(loss) before

consolidation adjustment 6 8 6 , 2 5 3 ( 2 3 , 8 7 8 ) 5 4 4 , 7 7 5 ( 1 8 , 9 5 5 )Minority interest in earnings

of consolidated subsidiaries ( 9 3 , 8 3 7 ) ( 3 , 9 2 8 ) ( 7 4 , 4 9 2 ) ( 3 , 1 1 9 )

Net income(loss) W 5 9 2 , 4 1 6 W ( 2 7 , 8 0 6 ) $ 4 7 0 , 2 8 3 $ ( 2 2 , 0 7 4 )

Earnings per common share (Note 27)(in Korean Won and U.S. Dollars) W 1 , 9 7 7 W ( 1 0 9 ) $ 1 . 5 7 $ ( 0 . 1 0 )

Diluted earnings per common share (Note 27)(in Korean Won and U.S. Dollars) W 1 , 7 0 0 W ( 7 3 ) $ 1 . 3 5 $ ( 0 . 0 6 )

2000 1999 2000 1999



CONSOLIDATED STATEMENT OF INCOMEfor the years ended December 31, 2000 and 1999


CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITYfor the years ended December 31, 2000 and 1999


Capital Capital surplus

1999. 1. 1 W 1 , 3 8 1 , 4 9 7 $ 1 , 0 9 6 , 6 8 7 W 1,186,093 $ 941,568

Issuance of shares 3 1 6 , 5 7 0 2 5 1 , 3 0 6 4 1 8 , 6 1 7 3 3 2 , 3 1 5

Net Income - - - -

Cash dividends - - - -

Change in treasury stocks - - 2 0 0 1 5 8

Change in capital adjustments - - - -

Change in minority interest - - - -

Change in reporting entity - - ( 1 9 , 5 2 5 ) ( 1 5 , 4 9 9 )

Cumulative effect of accounting changes - - - -

O t h e r s - - 1 , 8 6 0 1 , 4 7 6

1999. 12. 31 W 1 , 6 9 8 , 0 6 7 $ 1 , 3 4 7 , 9 9 3 W 1 , 5 8 7 , 2 4 5 $ 1 , 2 6 0 , 0 1 8

2000. 1. 1 W 1 , 6 9 8 , 0 6 7 $ 1 , 3 4 7 , 9 9 3 W 1 , 5 8 7 , 2 4 5 $ 1 , 2 6 0 , 0 1

Issuance of shares by subsidiaries - - 9 8 , 9 9 0 7 8 , 5 8 2

Net Income - - - -

Cash dividends - - - -

Change in treasury stocks - - ( 3 9 3 ) ( 3 1 2 )

Change in capital adjustments - - - -

Change in minority interest - - - -

Change in reporting entity - - - -

Cumulative effect of accounting changes - - ( 3 0 , 8 0 8 ) ( 2 4 , 4 5 7 )

O t h e r s - - ( 7 , 7 4 2 ) ( 6 , 1 4 5 )

2000. 12. 31 W 1 , 6 9 8 , 0 6 7 $ 1 , 3 4 7 , 9 9 3 W 1 , 6 4 7 , 2 9 2 $ 1 , 3 0 7 , 6 8 6

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITYfor the years ended December 31, 2000 and 1999


W 4 0 8 , 8 4 0 $ 3 2 4 . 5 5 3 W ( 1 4 , 3 7 0 ) $ ( 1 1 , 4 0 8 ) W 3 1 , 9 7 8 $ 2 5 , 3 8 6 W 2 , 9 9 4 , 0 3 8 $ 2 , 3 7 6 , 7 8 6

- - - - - - 7 3 5 , 1 8 7 5 8 3 , 6 2 1

( 2 7 , 8 0 6 ) ( 2 2 , 0 7 4 ) - - - - ( 2 7 , 8 0 6 ) ( 2 2 , 0 7 4 )

( 1 6 , 9 3 8 ) ( 1 3 , 4 4 6 ) - - - - ( 1 6 , 9 3 8 ) ( 1 3 , 4 4 6 )

- - ( 5 , 8 9 0 ) ( 4 , 6 7 6 ) - - ( 5 , 6 9 0 ) ( 4 , 5 1 8 )

- - ( 4 2 , 1 9 2 ) ( 3 3 , 4 9 3 ) - - ( 4 2 , 1 9 2 ) ( 3 3 , 4 9 3 )

- - - - ( 1 0 , 7 8 4 ) ( 8 , 5 6 0 ) ( 1 0 , 7 8 4 ) ( 8 , 5 6 0 )

1 1 0 , 5 9 9 8 7 , 7 9 9 - - - - 9 1 , 0 7 4 7 2 , 3 0 0

( 2 0 6 , 5 5 6 ) ( 1 6 3 , 9 7 3 ) - - - - ( 2 0 6 , 5 5 6 ) ( 1 6 3 , 9 7 3 )

( 2 , 9 3 6 ) ( 2 , 3 3 0 ) - - - - ( 1 , 0 7 6 ) ( 8 5 4 )

W 2 6 5 , 2 0 3 $ 2 1 0 , 5 2 9 W ( 6 2 , 4 5 2 ) $ ( 4 9 , 5 7 7 ) W 2 1 , 1 9 4 $ 1 6 , 8 2 6 W 3 , 5 0 9 , 2 5 7 $ 2 , 7 8 5 , 7 8 9

W 2 6 5 , 2 0 3 $ 2 1 0 , 5 2 9 W ( 6 2 , 4 5 2 ) $ ( 4 9 , 5 7 7 ) W 2 1 , 1 9 4 $ 1 6 , 8 2 5 W 3 , 5 0 9 , 2 5 7 $ 2 , 7 8 5 , 7 8 8

- - - - - - 9 8 , 9 9 0 7 8 , 5 8 2

5 9 2 , 4 1 6 4 7 0 , 2 8 3 - - - - 5 9 2 , 4 1 6 4 7 0 , 2 8 3

( 1 5 1 , 0 0 9 ) ( 1 1 9 , 8 7 7 ) - - - - ( 1 5 1 , 0 0 9 ) ( 1 1 9 , 8 7 7 )

- - ( 3 5 , 1 4 6 ) ( 2 7 , 9 0 1 ) - - ( 3 5 , 5 3 9 ) ( 2 8 , 2 1 3 )

- - 8 0 , 4 9 8 6 3 , 9 0 3 - - 8 0 , 4 9 8 6 3 , 9 0 3

- - - - 1 9 4 , 0 5 7 1 5 4 , 0 5 0 1 9 4 , 0 5 7 1 5 4 , 0 5 0

3 1 , 7 4 7 2 5 , 2 0 2 - - - - 3 1 , 7 4 7 2 5 , 2 0 2

( 3 4 , 6 1 9 ) ( 2 7 , 4 8 2 ) - - - - ( 6 5 , 4 2 7 ) ( 5 1 , 9 3 9 )

4 , 4 1 8 3 , 5 0 7 - - - - ( 3 , 3 2 4 ) ( 2 , 6 3 8 )

W 7 0 8 , 1 5 6 $ 5 6 2 , 1 6 2 W ( 1 7 , 1 0 0 ) $ ( 1 3 , 5 7 5 ) W 2 1 5 , 2 5 1 $ 1 7 0 , 8 7 5 W 4 , 2 5 1 , 6 6 6 $ 3 , 3 7 5 , 1 4 1

Retained earnings Capital adjustments Minority interest Total

(In millions of Won and thousands of U.S. Dollars)


CONSOLIDATED STATEMENT OF CASH FLOWSfor the years ended December 31, 2000 and 1999


2000 1999 2000 1999


Net income W 5 9 2 , 4 1 6 W ( 2 7 , 8 0 6 ) $ 4 7 0 , 2 8 3 $ ( 2 2 , 0 7 4 )

Adjustments to reconcile net income to netcash provided by operating activities

Realized gain on trading securities, net 4 1 , 3 5 3 ( 2 0 9 , 7 5 5 ) 3 2 , 8 2 8 ( 1 6 6 , 5 1 2 )Unrealized loss on trading securities, net 4 7 , 1 6 9 2 , 0 2 9 3 7 , 4 4 5 1 , 6 1 1Bad debt expense 9 1 6 , 6 2 4 1 , 3 8 7 , 1 9 0 7 2 7 , 6 5 3 1 , 1 0 1 , 2 0 7Gain on foreign currency transactions, net ( 1 9 7 , 3 0 6 ) ( 1 0 2 , 7 0 3 ) ( 1 5 6 , 6 3 0 ) ( 8 1 , 5 3 0 )Loss on derivative instruments, net 1 1 0 , 0 2 5 ( 3 6 , 6 2 6 ) 8 7 , 3 4 3 ( 2 9 , 0 7 5 )Retirement benefits 1 0 5 , 9 6 3 1 1 3 , 1 2 3 8 4 , 1 1 7 8 9 , 8 0 2Depreciation and amortization 1 6 1 , 8 2 6 2 5 6 , 0 8 7 1 2 8 , 4 6 4 2 0 3 , 2 9 2Loss on disposal of fixed assets, net 8 ( 7 5 9 ) 6 ( 6 0 3 )Realized gain on investment securities, net ( 1 2 7 , 7 5 3 ) ( 1 2 5 , 4 7 2 ) ( 1 0 1 , 4 1 5 ) ( 9 9 , 6 0 5 )Unrealized loss on investment securities, net 7 2 , 5 5 5 6 9 , 8 6 3 9 5 , 8 9 1 6 9 , 9 7 8Loss on sale of troubled loans, net 2 9 , 6 9 5 1 2 5 , 9 6 8 2 3 , 5 7 3 9 9 , 9 9 8Minority interest in earnings of

consolidated subsidiaries 9 3 , 8 3 7 3 , 9 2 8 7 4 , 4 9 2 3 , 1 1 8Others, net ( 8 , 7 0 6 ) ( 2 6 , 1 8 5 ) ( 4 5 , 2 0 6 ) ( 3 5 , 3 0 4 )Net changes in,

Payments in advance 4 4 0 , 7 2 7 ( 2 1 0 , 6 4 9 ) 3 4 9 , 8 6 7 ( 1 6 7 , 2 2 2 )Accrued income 1 3 , 8 2 0 2 6 3 , 4 5 3 1 0 , 9 7 1 2 0 9 , 1 3 9Accrued expenses 1 6 8 , 3 1 6 ( 1 4 1 , 2 4 9 ) 1 3 3 , 6 1 6 ( 1 1 2 , 1 2 9 )Other liabilities, net ( 8 4 , 7 1 9 ) ( 1 7 0 , 0 0 0 ) ( 6 7 , 2 5 4 ) ( 1 3 4 , 9 5 2 )

Net cash provided by operating activities 2 , 3 7 5 , 8 5 0 1 , 1 7 0 , 4 3 7 1 , 8 8 6 , 0 4 4 9 2 9 , 1 3 9

Cash flows from investing activities :

Decrease in trading securities W 3 2 8 , 5 7 7 W 6 5 8 , 0 5 0 $ 2 6 0 , 8 3 8 $ 5 2 2 , 3 8 6Proceeds from sale of investment securities 1 3 , 4 6 0 , 7 2 7 2 5 , 1 5 1 , 1 9 0 1 0 , 6 8 5 , 6 6 1 1 9 , 9 6 6 , 0 1 6Increase in loans ( 1 5 , 9 6 3 , 5 8 4 ) ( 6 , 3 3 0 , 2 8 5 ) ( 1 2 , 6 7 2 , 5 2 9 ) ( 5 , 0 2 5 , 2 3 2 )Proceeds from sale of fixed assets 1 4 , 1 7 5 1 , 3 7 3 , 0 8 1 1 1 , 2 5 3 1 , 0 9 0 , 0 0 6Acquisition of investment securities ( 1 5 , 4 5 4 , 9 6 4 ) ( 2 0 , 7 5 8 , 4 1 2 ) ( 1 2 , 2 6 8 , 7 6 6 ) ( 1 6 , 4 7 8 , 8 5 4 )Acquisition of fixed asset ( 1 8 1 , 8 9 2 ) ( 5 9 8 , 2 9 5 ) ( 1 4 4 , 3 9 3 ) ( 4 7 4 , 9 5 0 )Others, net 3 5 9 , 8 7 1 ( 3 8 4 , 8 6 2 ) 2 8 5 , 6 8 0 ( 3 0 5 , 5 1 9 )

Net cash used in investing activities ( 1 7 , 4 3 7 , 0 9 0 ) ( 8 8 9 , 5 3 3 ) ( 1 3 , 8 4 2 , 2 5 6 ) ( 7 0 6 , 1 4 7 )

Cash flows from financing activities :Increase in deposits 1 3 , 7 1 3 , 8 9 4 2 , 4 9 4 , 7 5 7 1 0 , 8 8 6 , 6 3 5 1 , 9 8 0 , 4 3 8Increase in borrowings 1 7 8 , 1 8 5 , 8 0 8 3 7 1 , 9 2 2 , 1 1 1 1 4 1 , 4 5 0 , 9 8 6 2 9 5 , 2 4 6 , 5 7 5Increase in debentures 3 , 7 3 7 , 5 6 4 9 7 0 , 8 1 3 2 , 9 6 7 , 0 2 7 7 7 0 , 6 7 0Issuance of stocks - 7 3 5 , 1 8 7 - 5 8 3 , 6 2 1Decrease in borrowings ( 1 7 8 , 9 3 8 , 9 8 3 ) ( 3 7 4 , 4 0 1 , 1 8 3 ) ( 1 4 2 , 0 4 8 , 8 8 7 ) ( 2 9 7 , 2 1 4 , 5 6 1 )Decrease in debentures ( 1 , 4 0 2 , 4 4 0 ) ( 3 , 7 3 8 , 3 7 4 ) ( 1 , 1 1 3 , 3 1 3 ) ( 2 , 9 6 7 , 6 7 0 )Increase(decrease) in minority interest 7 7 , 2 8 9 ( 1 4 , 7 1 2 ) 6 1 , 3 5 6 ( 1 1 , 6 7 9 )

of consolidated subsidiariesOthers, net 7 7 4 , 3 6 9 5 3 7 , 5 0 7 6 1 4 , 7 2 5 4 2 6 , 6 9 4

Net cash provided by (used in) financing activities 1 6 , 1 4 7 , 5 0 1 ( 1 , 4 9 3 , 8 9 4 ) 1 2 , 8 1 8 , 5 2 9 ( 1 , 1 8 5 , 9 1 2 )

Net increase(decrease) in cash and cash equivalents 1 , 0 8 6 , 2 6 1 ( 1 , 2 1 2 , 9 9 0 ) 8 6 2 , 3 1 7 ( 9 6 2 , 9 2 0 )

Cash and cash equivalents,beginning of year (Note 29) 5 , 3 1 6 , 7 7 9 6 , 5 2 9 , 7 6 9 4 , 2 2 0 , 6 7 1 5 , 1 8 3 , 5 9 1

Cash and cash equivalents,end of year (Note 29) W 6 , 4 0 3 , 0 4 0 W 5 , 3 1 6 , 7 7 9 $ 5 , 0 8 2 , 9 8 8 $ 4 , 2 2 0 , 6 7 1



1. The Consolidated Companies :

The accompanying consolidated financial statements include the banking and trust accounts of Kookmin Bank (“the Bank”) and itscontrolled subsidiaries. General information on the Bank and its controlled subsidiaries is described below.

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

The Bank merged with Korea Long Term Credit Bank (“KLB”) on December 31, 1998 and with Daegu, Busan, Jeonnam KookminMutual Savings & Finance Co. Ltd.s on August 22, 1999 (see Note 32). Also, under the decision of the Financial SupervisoryCommission in accordance with the Act concerning the Structural Improvement of the Financial Industry, the Bank purchased certainassets, including the loans classified as normal or precautionary, and assumed most of the liabilities of Daedong Bank (“the P&A”) asof June 29, 1998 (see Note 33). Also, on December 22, 2000, the Bank entered into a memorandum of understanding (“MOU”) for amerger with H&CB during 2001 (see Note 31).

The Bank is engaged in banking and trust business according to the provisions of the General Banking Act and the Trust Business Actand operates through 591 domestic branches and 4 overseas networks as of December 31, 2000.

The Bank issued W360,000 million of common stock (30,000,000 shares, issue price : W12,000) and US$ 200 million of convertiblebonds (subordinated debenture, coupon rate : 3%, conversion price : W13,802) on June 14, 1999 to Goldman Sachs Capital Koryo,L.P. (see Note 30). As a result of this investment, Goldman Sachs Capital Koryo, L.P. became the largest shareholder owning 11.07%of the issued and outstanding shares as of December 31, 2000. Also, the Bank issued additional 33,314,050 common shares (issueprice : W11,400) on November 18, 1999 and has a total of 299,613,413 common shares issued as of December 31, 2000.

The Bank has listed its shares on the Korean Stock Exchange since September 1994. As of December 31, 2000, as a result of severaladditional issuance of shares, the Bank’s capital stock amounts to W1,698,067 million (see Note 18). Under the General Banking Act,if one single entity, other than the government or a foreign investor, owns more than 4% of total outstanding voting shares, theentity’s voting rights are limited to those of 4% shareholders.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2000 and 1999

Controlled SubsidiariesSummary of the financial data of controlled subsidiaries that are consolidated in the accompanying consolidated financial statementsas of December 31, 2000 is as follows :


Number P e r c e n t a g e Millions of WonI n v e s t e d o f T o t a l O p e r a t i n g S h a r e h o l d e r s ’

S u b s i d i a r i e s S h a r e s O w n e r s h i p A s s e t s R e v e n u e E q u i t y

Trust Accounts - - W 1 , 8 9 1 , 2 7 2 W 3 8 7 , 1 5 7 W 7 , 8 6 9Kookmin Credit CardCo., Ltd. 5 4 , 3 6 5 , 0 2 8 7 4 . 2 7 8 , 1 9 3 , 5 9 4 1 , 4 4 9 , 2 8 8 8 0 2 , 5 2 8

Kookmin Leasing Co., Ltd. 1 2 , 2 7 6 , 5 4 7 8 9 . 6 1 9 1 8 , 7 9 2 2 1 3 , 0 3 1 ( 3 7 4 , 7 9 4 )Kookmin Venture CapitalCo., Ltd. 8 , 8 5 5 , 0 2 4 9 4 . 1 1 2 0 4 , 1 5 4 1 4 , 8 3 7 5 3 , 8 1 1

Kookmin Data System Corp. 7 9 9 , 8 0 0 9 9 . 9 8 1 5 , 5 0 3 2 1 , 7 7 6 1 0 , 3 5 5Kookmin Futures Co., Ltd. 3 , 9 9 9 , 2 0 0 9 9 . 9 8 4 8 , 8 6 8 5 , 5 8 8 2 1 , 6 7 9Kookmin Bank Venture Capital Co., Ltd. (**) 4 , 9 9 9 , 9 4 0 1 0 0 . 0 0 7 7 , 2 8 1 2 , 4 4 8 6 4 , 0 7 1

Kookmin Bank Investment TrustManagement Co., Ltd. (**) 5 , 2 2 0 , 0 0 0 8 7 . 0 0 3 7 , 9 5 6 7 , 1 9 6 3 7 , 8 2 7

Kookmin Bank Luxembourg S.A. 7 0 , 0 0 0 1 0 0 . 0 0 3 5 2 , 6 0 6 3 6 , 8 3 7 1Kookmin Finance Asia Ltd. 2 , 0 0 0 , 0 0 0 1 0 0 . 0 0 1 6 0 , 5 3 8 1 0 , 5 7 7 1 4 , 8 4 9K.B International (London) Ltd. 2 0 , 0 0 0 , 0 0 0 1 0 0 . 0 0 1 9 9 , 3 5 1 1 8 , 6 5 2 4 3 , 2 3 1

Kookmin Leasing & Finance(Hong Kong) Ltd. (*) 2 , 9 9 9 9 9 . 9 7 9 5 , 7 6 7 1 0 , 7 1 5 ( 1 4 0 , 8 9 7 )



(*) Investments in Kookmin Leasing & Finance (Hong Kong) Ltd. are held by Kookmin Leasing Co., Ltd.

(**) In January 1999, KLB Venture Capital Co., Ltd. and KLB Investment Trust Management Co., Ltd., which were the subsidiaries ofKorea Long Term Credit Bank before its merger, changed their company names to Kookmin Bank Venture Capital Co., Ltd., andKookmin Bank Investment Trust Management Co., Ltd., respectively.

The Bank operates a trust business in which the Bank, as a fiduciary, holds and manages the property of beneficiaries. Under theTrust Business Act, the trust accounts are accounted for and reported separately from the Bank’s own commercial banking business.Due to such separate accounting, there are balances due to each other with interests resulting from these balances and transactionsincluding trust management fees.

Kookmin Credit Card Co., Ltd. was established on September 25, 1987 and has conducted credit card operations, including consumerinstallment financing, factoring and payment guarantees under the Law for Financing Business Specialized in Lending. Significantportions of credit card services are provided through the Bank’s national network. Kookmin Credit Card Co., Ltd. merged withKookmin Finance Co., Ltd. on August 22, 1998 and KLB Credit Card Co., Ltd. on December 30 1998, and so additionally engages inproviding installment financing for the purchase of goods and services and in rental of industrial tools and fixtures. As of December31, 2000, its capital stock is W366 billion.

Kookmin Leasing Co., Ltd. was incorporated on October 20, 1984 to engage in leasing industrial equipment. As of December 31,2000, its capital stock is W68.5 billion.

Kookmin Venture Capital Co., Ltd. was established on November 1, 1986 to engage in investing and financing small and medium-sized enterprises under the Start-Up Promotion Act for Small and Medium-Sized Companies. As of December 31, 2000, its capitalstock is W47 billion.

Kookmin Data System Corp. was established on September 1, 1991 to engage in providing software services for the Bank and othercompanies. As of December 31, 2000, its capital stock is W8 billion.

Kookmin Futures Co., Ltd. was established on March 18, 1997 to engage in the dealing and brokerage business for domestic andoverseas futures transactions. As of December 31, 2000, its capital stock is W20 billion.

Kookmin Bank Venture Capital Co., Ltd. was established on March 27, 1990 under the Start-Up Promotion Act for Small and Medium-Sized Companies. As of December 31, 2000, its capital stock is W25 billion.

Kookmin Bank Investment Trust Management Co., Ltd. was established on October 5, 1989 to engage in the securities investmenttrust business. As of December 31, 2000, its capital stock is W30 billion.

Kookmin Bank Luxembourg S.A. was established in Luxembourg in October 1991 to engage in financing activities in the internationalfinancial markets. As of December 31, 2000, its capital stock is LFR 700 million (W20,602 million equivalent).

Kookmin Finance Asia Ltd. was established in Hong Kong in February 2000 to engage in financing activities. Its capital stock atDecember 31, 1999 is US$20 million (W25,194 million equivalent).

Kookmin Bank International (London) Ltd. was established in England on November 1, 1991 to engage in financing activities. As ofDecember 31, 1999, its capital stock is GBP 20 million (W37,617 million equivalent).

Kookmin Leasing & Finance (Hong Kong) Ltd. was established in Hong Kong in May 1991 to invest in and finance foreign subsidiariesof Korean and foreign companies. As of December 31, 2000, its capital stock is US$3 million and is owned by Kookmin Leasing Co.,L t d .


The Bank merged with three of its wholly owned subsidiaries, Daegu Kookmin Mutual Savings & Finance Co., Ltd., Busan KookminMutual Savings & Finance Co., Ltd., and Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. (“the three Mutual Savings &Finance companies”), included in the scope of consolidation in 1998, on August 22, 1999.

Summary of the financial data of controlled subsidiaries that are excluded from the scope of consolidation in the accompanyingconsolidated financial statements as of December 31, 2000 is as follows :

During the current period, the assets and liabilities of Kookmin Singapore (Merchant Bank) Ltd., included in the scope ofconsolidation in 1999, were integrated into the Bank’s accounts (see Note 32).

E q u i t y N o t R e a s o n sM e t h o d C o n s o l i d a t e d F o r

S u b s i d i a r i e s A p p l i c a t i o n S i n c e E x c l u s i o n

Bukook Mutual Savings & Finance Co., Ltd. N o 1 9 9 9 Sold, see Note 32Kookmin Rental Co., Ltd. Y e s 1 9 9 9 Under liquidationKLB Finance Asia Ltd. N o 1 9 9 9 L i q u i d a t e dKLB Economic Research Institute Co., Ltd. Y e s 1 9 9 9 Asset under 7 billion

and under liquidation

2. Summary of Significant Accounting Policies :

The significant accounting policies followed by the Bank and its subsidiaries in the preparation of the accompanying consolidatedfinancial statements are summarized below

Basis of Consolidated Financial Statement PresentationThe official accounting records of the Bank and its subsidiaries, except for foreign subsidiaries, are maintained in Korean Won inaccordance with generally accepted accounting principles of the Republic of Korea and accounting standards of banking industry(“financial accounting standards”) and the relevant laws and regulations. Such basis of accounting and presentation is not inconformity with International Accounting Standards, which, if applied, would give rise to material adjustments to the financials t a t e m e n t s .

The accompanying consolidated financial statements have been extracted from the Bank and its subsidiaries’ Korean languageconsolidated financial statements that were prepared using accounting principles, procedures and reporting practices generallyaccepted in the Republic of Korea. These standards vary from International Accounting Standards and the accounting principlesgenerally accepted in the country of the readers. The consolidated financial statements have been translated from Korean intoEnglish, and have been formatted in a manner different from the presentation under Korean consolidated financial statementpractices. Certain supplementary information included in the Korean language statutory consolidated financial statements, but notrequired for a fair presentation of the Bank and its subsidiaries’ financial position or results of operations, is not presented in theaccompanying consolidated financial statements. Accordingly, the accompanying consolidated financial statements are not intendedto present the financial position, results of operations or cash flows in accordance with accounting principles and practices generallyaccepted in countries and jurisdictions other than Korea.

The preparation of the consolidated financial statements in conformity with financial accounting standards requires management tomake estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates,actual results reported in future periods may differ from those estimates.

Accounting Policies of Consolidated Companies The financial statements of the consolidated companies are prepared in conformity with generally accepted financial accountingstandards in the Republic of Korea and the relevant laws and regulations. The relevant laws and regulations that differ from generallyaccepted financial accounting standards are as follows ;



Revision of Accounting PoliciesIn 1999, in accordance with the revised financial accounting standards effective January 1, 1999, the Bank and its subsidiariesadopted amended presentation and accounting policies for certain accounts. In connection with these changes, the Bank and itssubsidiaries recorded W208,587 million decrease in its consolidated retained earnings as of January 1, 1999 and consolidated netincome for the year ended December 31, 1999 was approximately W107,757 million less than that which would have been recordedunder the previous method. In 2000, in accordance with the addendum to the revised generally accepted accounting principles, theBank adopted the amended presentation and accounting policies regarding derivative instruments. In connection with this change,the Bank recorded W21,625 million decrease in its consolidated retained earnings as of January 1, 2000 and consolidated net incomefor the year ended December 31, 2000 is approximately W8,443 million less than that which would have been recorded under theprevious method (see “Derivatives Accounting” below and Note 10).

Translation of Foreign CurrencyAssets and liabilities denominated in foreign currencies are translated into Korean Won at the exchange rates prevailing at thebalance sheet date. The resulting exchange gains or losses are included in non-interest income or expenses.

The exchange rate used to translate foreign currency denominated assets and liabilities at December 31, 2000 and 1999 are W1,259.7: US$1 and W1,145.4 : US$1, respectively.

Kookmin Leasing Co., Ltd. has foreign debts incurred for acquisition of operating lease assets. The foreign exchange gains and lossesfrom translating these amounts are deferred and accreted or amortized over the future payment term of the related operating leases.For the year ended December 31, 1999, the accretion and amortization of deferred foreign exchange gains and losses are W14,498million and W29,382 million, respectively.

Recognition of Interest IncomeInterest income on loans is recognized on an accrual basis. However, interest income on overdue or dishonored loans, except forthose secured with deposits or guaranteed by financial institutions, is recognized on a cash basis in accordance with the accountingstandards of the banking industry. As of December 31, 2000 and 1999, accrued but not recognized interest income on loansapproximated W508,860 million and W622,972 million, respectively.

Provision for Loan Losses The Bank applied Forward Looking Criteria (“FLC”) in classifying borrowers’ credit risk and their related loan balances. FLC takes intoconsideration not only current delinquencies and bankruptcies but also future repayability including the borrower’s management,current financial position, and future cash flows. FLC was applied to large-sized corporate loans while consumer loans and small-sized corporate loans were classified by considering current financial status including delinquent number of days and bankruptcies.Provisions amounts are determined by applying at minimum the following percentages to each credit risk classification.


Relevant Laws and RegulationsConsolidated Companies

The Bank and Trust Accounts Accounting Standards of Banking IndustryGeneral Baking ActTrust Business Act

Kookmin Credit Card Co., Ltd., Loan Specialization Financial Business Act Kookmin Venture Capital Co., Ltd., andKookmin Bank Venture Capital Co., Ltd.

Kookmin Leasing Co., Ltd. Accounting Standards for Leasing Transactions

Kookmin Bank Investment Trust Securities Investment Trust Business ActManagement Co., Ltd. Accounting Standards for Securities

Investment Trust Business

Kookmin Futures Co., Ltd. Supervisory Guidelines on Futures Trading




Kookmin Credit Card Co., Ltd., Kookmin Leasing Co., Ltd., and Kookmin Bank Investment Trust Management Co., Ltd., subsidiaries ofthe Bank, provide provision for loan losses based on a credit risk classification of loans and receivables in accordance with relevantlaws and regulations (provision percentage for the loans classified as precautionary is 1% for Kookmin Credit Card Co., Ltd. andKookmin Leasing Co., Ltd.).

Present Value Discounts Since 1999, loans whose conditions became unfavorable due to work out, court receivership, court mediation, or debt restructuringagreements of parties concerned, are carried at present value in cases where the difference between the book value and the presentvalue of the loans is significant. The present value discount, which is the difference between the book value and the present value, isamortized using the effective interest method. When estimating the present value of the loans, the Bank generally uses the interestrate at the inception of the loans as the discount rate. For floating rate loans and maturity-extended fixed rate loans, the discount rateused is the prime rate at the date of loan restructuring plus the spread applicable to the borrower at loan origination date. Theprovision for loan loss percentages applied to these restructured loans are based on the loan amounts net of related present valuediscounts.

In connection with this change, the Bank recorded a W34,499 million decrease in its retained earnings as of January 1, 1999 and netincome for the year ended December 31, 1999 was approximately W28,163 million less than that which would have been recordedunder the previous method.

Additionally, the Bank recorded W35,997 million and W42,573 million of present value discounts as of December 31, 2000 and 1999,respectively on long-term deposits placed with Bukook Mutual Savings & Finance Co., Ltd. (see Note 4), which was a subsidiary ofthe Bank before its sale in December 1999. Also, receivables from disposal of foreclosed assets that are to be redeemed in long-terminstallments are recorded in the balance sheet net of the related present value discounts.

As of December 31, 2000, trust accounts, Kookmin Leasing Co., Ltd., and Kookmin Venture Capital Co., Ltd. recorded W 29,781million, W23,411 million, and W9,469 million, respectively, as present value discounts on loans and others. As of December 31, 1999,Kookmin Leasing Co., Ltd. and Kookmin Venture Capital Co., Ltd. recorded W6,446 million and W8,473 million, respectively, aspresent value discounts.

S e c u r i t i e sThe Bank adds incidental expenses to the purchase costs of securities and records acquisition costs using moving average method.The valuation methods used for the securities are summarized as follows :


Valuation Recognition of UnrealizedMethods Gains and Losses

Trading securities Fair value Included in net income of thep e r i o d

Investment securities :Available-for-sale securities Fair value Included in capital adjustmentsHeld-to-maturity securities and C o s t Included in net income only

non-marketable equity securities if the decline in value is other than temporary

Equity securities with significanti n f l u e n c e Equity method Included in net income,

retained earnings, or capitaladjustments according to thenature of the gain or loss


Since 1999, in accordance with revised financial accounting standards effective January 1, 1999, marketable securities held for ashort-term marginal profits, except for stocks issued by related parties and bonds held to maturity, are classified as trading securities.Other securities are classified as investment securities.

Prior to 1999, in accordance with an additional clause of accounting and reporting guidelines prescribed by the BankingRegulatory Authorities in 1998, the Bank had carried debt securities in Won currency bonds such as monetarystabilization bonds, government and municipal bonds, bank debentures, and corporate debentures at cost. Also, non-marketable equity investments, marketable equity investments and equity investments of 15% or more ownership werestated at cost, at market value and under the equity method, respectively, and the resulting unrealized gains or lossesfrom the valuations were recorded in capital adjustments. As of 1999, in accordance with the revised financial accountingstandards, the Bank stated bonds classified as trading securities and available-for-sale securities at fair value as describedabove.

In connection with these changes, the Bank recorded a W193,668 million decrease in its retained earnings as of January1, 1999 and net income for the year ended December 31, 1999 and unrealized gains on investment securities in capitaladjustments as of December 31, 1999 were approximately W10,452 million and W41,605 million, respectively, more thanthose which would have been recorded under the previous method.

In cases where the fair value of the investment securities are significantly below the book value and the impairment isdetermined to be other than temporary, the Bank and its subsidiaries adjusts the investment securities to fair value andrecognizes the related impairment losses in current year’s non-operating expenses. Impairment losses on investmentsecurities for the years ended December 31, 2000 and 1999 are W120,794 million and W88,150 million, respectively.

Also, prior to 1999, the Bank stated the treasury stock funds at fair value of the whole fund, which includes the Bank’streasury stocks. As of December 31, 1999, the fair value of the Bank’s treasury stocks included in the fund fair value wasseparately reflected in capital adjustments. In connection with this change, the Bank recorded W5,890 million of treasurystock in capital adjustments as of December 31, 1999.

Since 1999, Kookmin Credit Card Co., Ltd. applies equity method for equity investment securities of 15% or moreownership instead of stating them at cost. As a result of this change, net income for the year ended December 31, 1999 isapproximately W3,000 million less than that which would have been reported using prior method.

Fixed Assets and Related DepreciationProperty and equipment are recorded at acquisition cost or revaluation cost. Routine maintenance and repairs arerecognized as expenses as incurred. Expenditures that enhance the value or extend the useful life of the assets involvedare capitalized as additions to property and equipment.

Depreciation is generally computed using the declining-balance method. However, straight-line method is used forbuildings and structures and leasehold improvements of the Bank and its subsidiaries and also for the fixed assets ofKookmin Leasing Co., Ltd., Kookmin Bank Investment Trust management Co., Ltd. and certain foreign subsidiaries.Depreciation is calculated based on the estimated average useful lives of the assets and is presented as accumulateddepreciation, which is a contra account of property and equipment in the consolidated financial statements.

Depreciation on intangible assets are amortized and directly deducted from intangible asset balances over 5 to 50 yearsusing the straight-line method.

[ 1 0 0 www.kookminbank.com ]

Useful Lives

Buildings and structures 40-60 yearsLeasehold improvements 1-5 yearsM a c h i n e r y 4-5 yearsEquipment and vehicles 4-5 years


Foreclosed assets acquired through, or in lieu of, loan foreclosure are stated at cost and are not depreciated. Anyimpairment, due to the difference between the book value and the final auction price is recognized as non-interestexpenses and valuation provisions, a contra account of foreclosed assets in the consolidated financial statements.

Stock Issuance Costs and Debenture Issuance Costs In accordance with revised financial accounting standards effective January 1, 1999, the Bank and its subsidiariesdeducted stock issuance costs from paid-in capital in excess of par value and added debenture issuance costs todiscounts on debentures, which would have been recognized as deferred charges in the prior years. In connection withthese changes, consolidated net income for the year ended December 31, 1999 is approximately W11,805 million morethan that which would have been recorded under the previous method.

Accrued Retirement BenefitsEmployees, directors, and statutory auditors with more than one year of service as of December 31, 2000 are entitled toreceive a lump-sum payment upon termination of their employment with the Bank and its subsidiaries, based on theirlength of service and rate of payment at the time of termination. Additionally, the Bank and its subsidiaries record itsmandatory contributions to National Pension Fund as a contra account of retirement liability.

Guarantees and Acceptances Since 1999, the Bank applies credit risk classification used for loans to the guarantees and acceptances. As a result, theBank recorded W37,331 million and W28,430 million as provision for losses on guarantees and acceptances outstandingas of December 31, 2000 and 1999, respectively, according to their classification as sub-standard, doubtful, or estimatedloss (provision rates are 20%, 50%, 100%, respectively).

Also, unsettled spot exchange receivables and payables, that were off-balance sheet items in fiscal years prior to 2000,are translated at the exchange rate of the balance sheet date and are included in accounts receivable (W920,994 million)and accounts payable (W920,864 million) as of December 31, 2000.

Deferred Income Taxes In accordance with financial accounting standards, since 1999, the Bank and its subsidiaries record future tax effects oftemporary differences between the financial and tax basis of assets and liabilities as deferred tax assets or liabilities. Inconnection with this change, the Bank and its subsidiaries recorded a W26,389 million decrease in their retained earningsas of January 1, 1999 and net income for the year ended December 31, 1999 is approximately W27,967 million less thanthat which would have been recorded under the previous method. The cumulative effect of accounting changes and prioryear error corrections adjust the beginning retained earnings and thus result in temporary differences. Deferred incometax effects of these temporary differences were directly adjusted in shareholders’ equity.

Derivatives AccountingIn accordance with accounting and reporting guidelines prescribed by the Banking Regulatory Authorities, the Bank hadstated trading derivatives and hedge derivatives with underlying assets that are fair valued at fair value and those hedgederivatives with underlying assets carried at cost as an off-balance item. From 2000, in accordance with revised financialaccounting standards related to derivatives accounting, effective January 1, 2000, the Bank records the fair values of therights and obligations related to the derivatives contracts on the balance sheet as derivative assets and liabilities andrecognizes the related gains or losses in the income statement. However, the effective portions of the unrealized gains orlosses, which arise from the cash flow hedge purposed derivative instruments, are recorded in capital adjustments.

In connection with this change, the Bank recorded a W21,625 million decrease in its retained earnings as of January 1,2000 and net income for the year ended December 31, 2000 was W8,443 million less than that which would have beenrecorded under the previous method.

[ 2000 K o o k m i n Annual Report 1 0 1 ]


Employee Stock Options The Bank calculated the fair value of the stock options as of the grant date and allocated such value over the period toexercise date. The costs allocated to the period were charged to non-interest expenses (see Note 20).

Translation of Financial Statements of Overseas BranchesAccounts and records of overseas branches are independently maintained in foreign currencies of the countries located.In translating financial statements of overseas branches, the Bank applied the appropriate exchange rate at the balancesheet date.

Principles of Consolidation The Bank records differences between the investment in associates account and the net assets of the associated companies asconsolidation adjustments which are amortized over five years using the straight-line method.

Prior to 2000, the Bank recorded changes of equity interest in subsidiaries due to additional share issuance of these companies asconsolidation adjustments and amortized the balances over 5 years using straight-line method. From the current year, in accordancewith the revised accounting standards of the consolidated financial statements, such changes of equity interest are recorded inconsolidated capital surplus. In connection with this change, the Bank recorded increases of W3,332 million and W68,112 million inconsolidated retained earnings as of January 1, 2000 and December 31, 2000, respectively, and consolidated net income for the yearended December 31, 2000 was W12,084 million less than that which would have been recorded under previous method.

Under the equity method, the original investment is recorded at cost as investment in associates and adjusted by the Bank’s share ofundistributed earnings or losses of these companies. Differences between the investment in associates and the net assets of theassociated companies at the date of acquisition are amortized over five years using the straight-line method.

All significant inter-company transactions and account balances among the consolidated companies have been eliminated inc o n s o l i d a t i o n .

In a consolidation, in case the minority interest’s share of net loss of controlled subsidiaries exceed the minority interest amount, theexcess loss is added to the controlling company’s share of the net loss. Any income or loss thereafter of the subsidiary is reflected onthe controlling company’s share until the excess minority interest loss amount is recovered.

The foreign currency financial statements of foreign subsidiaries are translated into Korean Won at exchange rates prevailing at thebalance sheet date in accordance with the accounting and reporting guidelines prescribed by the Banking Regulatory Authorities.

3. United States dollar Amounts :

The Bank and its subsidiaries operate primarily in Korean Won and its official accounting records are maintained in Korean Won. TheU.S. dollar amounts are provided herein as supplementary information solely for the convenience of the reader. All Won amountsare expressed in U.S. dollars at the rate of W1,259.7 : US$1, the prevailing rate on December 31, 2000. This presentation is notrequired by or in accordance with Korean or United States generally accepted accounting principles, and should not be construed asa representation that the Won amounts shown could be converted to or settled in U.S. dollars at this or any other rate. The 1999figures, previously converted at the rate in effect on December 31, 1999, have been restated to reflect the 2000 rate.



4. Cash and Due from Banks :

Cash and due from banks at December 31, 2000 and 1999 are summarized as follows:

(*) Present value discounts are recorded in relation to the W140,000 million of time deposits (1% interest, longer than 5 years maturity) that were placed with Hansol Mutual Savings & Finance Co., Ltd. due to the sale of Bukook Mutual Savings & Finance Co., Ltd., a subsidiary of the Bank, during 1999 (see Note 32).

Included in cash and due from banks as of December 31, 2000 and 1999 are the following restricted deposits:

The maturities of the due from banks as of December 31, 2000 and 1999 are summarized as follows (in millions of Won):


Annual Interest Millions of WonRate (%)

Cash on hand - W 1 , 7 6 8 , 0 8 1 W 1 , 6 2 8 , 5 9 6

Cash in foreign currency - 7 3 , 5 7 7 5 9 , 8 6 3

Due from banks in Won currencyThe Bank of Korea - 8 3 2 , 9 1 9 5 8 , 8 8 0B a n k s 6 . 9 - 8 . 8 9 9 1 5 , 6 8 3 1 , 0 2 4 , 9 9 9Other financial institutions 1 . 0 - 1 0 . 2 5 1 , 3 6 1 , 9 7 5 1 , 8 5 2 , 5 6 8O t h e r s 1 . 0 - 6 . 0 1 9 7 , 2 1 2 5 , 8 2 4

3 , 3 0 7 , 7 8 9 2 , 9 4 2 , 2 7 1Present Value Discounts (*) ( 3 5 , 9 9 7 ) ( 4 2 , 5 7 3 )

3 , 2 7 1 , 7 9 2 2 , 8 9 9 , 6 9 8

Due from banks in foreign currencyThe Bank of Korea - 9 2 , 2 0 1 6 3 , 7 6 0Domestic banks 7 . 2 - 7 . 9 9 6 4 , 8 8 8 4 8 1 , 7 8 3Foreign banks 4 . 0 - 7 . 8 8 9 5 , 0 0 8 1 5 8 , 1 4 6O t h e r s 6 . 2 5 1 3 7 , 4 9 3 2 4 , 9 3 3

1 , 2 8 9 , 5 9 0 7 2 8 , 6 2 2

W 6 , 4 0 3 , 0 4 0 W 5 , 3 1 6 , 7 7 9

2000 1999

Type 2000 1999 Restrictions

Checking accounts in the Bank of Korea W 8 3 2 , 9 1 9 W 5 8 , 8 8 0 General Banking ActGroup retirement deposits 4 0 8 , 1 9 3 4 0 9 , 3 2 3 Group retirement insuranceDeposits in foreign currency 9 7 , 2 3 9 1 0 3 , 3 4 9 General Banking ActTime deposits 9 5 1 , 4 1 9 9 7 , 4 2 7 Withdrawal at maturity

W 2 , 2 8 9 , 7 7 0 W 6 6 8 , 9 7 9

Year ending Due from Banks Due from Banks inDecember 31 in Won Foreign Currency Total

2 0 0 1 W 3 , 0 7 7 , 3 0 4 W 1 , 2 8 9 , 5 9 0 W 4 , 3 6 6 , 8 9 42 0 0 2 9 7 0 - 9 7 0

T h e r e a f t e r 2 2 9 , 5 1 5 - 2 2 9 , 5 1 5W 3 , 3 0 7 , 7 8 9 W 1 , 2 8 9 , 5 9 0 W 4 , 5 9 7 , 3 7 9


5. Trading Securities :

Trading securities as of December 31, 2000 and 1999 comprise the following (in millions of Won) :

Since 1999, all trading securities are stated at fair value and resulting gains and losses are recognized as incurred. Trading debtsecurities in Won currency, which were stated at cost prior to 1999, are stated at fair value using the base yield of bonds for assessingmarket value provided by the Korea Securities Dealers Association.

In connection with this change, the Bank’s net income for the year ended December 31, 1999 was approximately W45,515 million lessthan that which would have been recorded under the previous method.

6. Investment Securities:

Investment equity securities at December 31, 2000 and 1999 are as follows:


Annual Acquisition Amortized Carrying ValueInterest(%) Cost Cost 2000 1999

Trading securities in Won currency

Listed equity securities - W 3 4 , 1 7 4 W - W 2 2 , 0 7 2 W 2 3 6 , 6 7 6Government and municipal bonds 5 . 0 - 9 . 3 4 1 , 5 9 5 , 4 4 1 1 , 6 3 4 , 8 5 5 1 , 6 2 1 , 2 9 7 7 1 0 , 0 5 8Finance debentures 6 . 3 7 - 9 . 4 8 6 9 , 8 8 3 9 0 6 , 8 5 2 8 7 1 , 2 9 4 9 1 5 , 8 7 1Corporate bonds 2 . 0 - 1 0 . 0 1 , 1 4 8 , 9 9 2 1 , 2 3 9 , 6 8 0 1 , 1 5 3 , 5 9 4 1 , 1 2 4 , 3 4 2Beneficial certificates 6 . 5 - 1 0 . 1 1 8 4 , 9 1 6 1 9 , 3 8 6 1 1 9 , 8 4 6 1 , 2 3 4 , 1 8 2

3 , 8 3 3 , 4 0 6 3 , 7 8 8 , 1 0 3 4 , 2 2 1 , 1 2 9

Trading securities denominatedin foreign currencies 0 . 0 - L i b o r + 1 . 5 1 8 , 4 0 9 1 7 , 7 4 1 1 7 , 4 1 7 2 9 , 4 0 0

W 3 , 8 5 1 , 8 1 5 W 3 , 8 0 5 , 5 2 0 W 4 , 2 5 0 , 5 2 9

Acquisition Carrying ValueCostType 2000 1999

Investment Equity Securities

Marketable stocks W 2 2 1 , 7 2 3 W 1 3 5 , 5 9 4 W 1 4 5 , 2 3 8

Non-marketable stocks 3 3 1 , 3 9 0 3 0 7 , 0 0 8 2 0 7 , 7 3 8

W 5 5 3 , 1 1 3 W 4 4 2 , 6 0 2 W 3 5 2 , 9 7 6

Investment in funds

Investment in SMSF W 1 4 , 9 1 1 W 1 4 , 4 9 8 W 1 8 , 0 7 3

Investment in BMSF - - 9 4 6 , 0 8 8

Other investments 3 7 , 5 6 8 3 8 , 9 9 7 3 1 , 8 5 8

5 2 , 4 7 9 5 3 , 4 9 5 9 9 6 , 0 1 9

W 6 0 5 , 5 9 2 W 4 9 6 , 0 9 7 W 1 , 3 4 8 , 9 9 5


Investment debt securities at December 31, 2000 and 1999 are as follows:

As a part of beneficial certificates in available-for-sale debt securities, the Bank’s treasury stock funds are stated at quoted marketprice of W6,677 million and W4,029 million as of December 31, 2000 and 1999, respectively. The Bank’s treasury stocks included inthese funds as of December 31, 2000 and 1999 are 794,701 shares and 854,701 shares, respectively.

Available-for-sale debt securities in Won currency are stated at fair value using the base yield of bonds for assessing market valueprovided by the Korea Securities Dealers Association.

Investment securities as of December 31, 2000 and 1999 include the monetary stabilization bonds sold with repurchase agreementsamounting to W232,975 million and W119,883 million, respectively (see Note 13).

Valuation gains and losses on investment securities for the year ended December 31, 2000 are summarized as follows (in millions ofW o n ) :


Annual Face Acquisition Amortized Carrying ValueInterest (%) Value Cost Cost 2000 1999

Available-for-sale-debt securitiesGovernment and municipal bonds 5.00 - 17.04 W 1 , 6 1 0 , 8 8 9 W 1 , 5 6 5 , 8 3 2 W 1 , 5 7 8 , 7 9 8 W 1 , 6 5 7 , 8 8 0 W 2 , 0 9 3 , 3 0 7Finance debentures 5.50 - 16.00 1 , 3 5 0 , 5 2 2 1 , 3 2 4 , 3 7 9 1 , 3 2 4 , 9 6 9 1 , 3 5 4 , 5 3 9 1 , 8 4 1 , 2 8 6Corporate bonds 7.00 - 22.00 2 , 8 5 9 , 4 8 9 2 , 9 1 3 , 6 1 8 2 , 8 6 7 , 4 3 0 2 , 9 6 8 , 9 1 9 2 , 1 9 0 , 2 8 0Beneficial certificates 8.15 - 10.20 1 , 5 1 1 , 2 3 9 1 , 5 0 8 , 5 9 9 1 , 5 0 8 , 7 6 5 1 , 5 4 5 , 4 4 7 1 , 0 4 2 , 2 5 8Foreign debt securities 0.13 - 28.00 1 , 1 7 8 , 8 0 7 9 3 9 , 8 0 1 9 3 9 , 9 5 9 8 2 5 , 7 2 3 1 , 1 4 5 , 4 8 6

8 , 5 1 0 , 9 4 6 8 , 2 5 2 , 2 2 9 8 , 2 1 9 , 9 2 1 8 , 3 5 2 , 5 0 8 8 , 3 1 2 , 6 1 6

Held-to-maturity debt securitiesGovernment and municipal bonds 3.00 - 18.40 1 , 6 2 3 , 7 7 6 1 , 5 8 8 , 7 3 3 1 , 6 0 8 , 4 3 1 1 , 6 0 8 , 4 3 1 8 4 2 , 2 4 2Finance debentures 5.50 - 16.00 1 , 2 7 0 , 6 1 9 1 , 1 9 8 , 5 9 6 1 , 2 0 0 , 7 1 5 1 , 2 0 0 , 7 1 5 7 3 1 , 9 5 7Corporate bonds 7.00 - 22.00 4 , 8 9 8 , 0 7 3 4 , 9 3 8 , 5 7 0 4 , 9 3 4 , 9 3 8 4 , 9 3 4 , 9 3 8 2 , 9 7 5 , 0 3 2Foreign debt securities 0.025 - 9.25 3 3 7 , 6 2 6 3 3 2 , 1 4 1 2 4 6 , 4 5 8 2 4 6 , 4 5 8 3 1 6 , 7 1 6

8 , 1 3 0 , 0 9 4 8 , 0 5 8 , 0 4 0 7 , 9 9 0 , 5 4 2 7 , 9 9 0 , 5 4 2 4 , 8 6 5 , 9 4 7W 1 6 , 6 4 1 , 0 4 0 W1 6 , 3 1 0 , 2 6 9 W 1 6 , 2 1 0 , 4 6 3 W16,343,050 W1 3 , 1 7 8 , 5 6 3

Retained Capital Net Income Earnings Adjustments Total

Investment Equity Securities :Marketable stocks W ( 1 6 , 4 6 4 ) W - W ( 6 9 , 6 6 5 ) W ( 8 6 , 1 2 9 )Non-marketable stocks ( 2 3 , 6 5 8 ) - - ( 2 3 , 6 5 8 )S u b s i d i a r i e s ( 7 1 7 ) ( 7 ) - ( 7 2 4 )

( 4 0 , 8 3 9 ) ( 7 ) ( 6 9 , 6 6 5 ) ( 1 1 0 , 5 1 1 )

Investment in funds 1 , 0 1 6 - - 1 , 0 1 6

Investment debt Securities :A v a i l a b l e - f o r - s a l e

Debt securities in Won ( 3 4 , 6 6 7 ) - 2 4 4 , 8 0 8 2 1 0 , 1 4 1Beneficial certificates 4 8 , 2 3 9 - ( 1 1 , 5 5 7 ) 3 6 , 6 8 2Foreign debt securities ( 9 2 , 2 5 1 ) - ( 2 1 , 9 8 5 ) ( 1 1 4 , 2 3 6 )

( 7 8 , 6 7 9 ) - 2 1 1 , 2 6 6 1 3 2 , 5 8 7W ( 1 1 8 , 5 0 2 ) W ( 7 ) W 1 4 1 , 6 0 1 W 2 3 , 0 9 2


The movements of unrealized gains and losses recorded in capital adjustments for the year ended December 31, 2000 aresummarized as follows:

In accordance with the change of valuation method for investment securities, the Bank’s unrealized gain on investment securities forthe year ended December 31,1999 was approximately W55,967 million more than that which would have been recorded under theprevious method.

As of December 31, 2000, the Bank’s securities are pledged at the following institutions (in million of Won):



Investment equity SecuritiesMarketable equity securities W ( 1 9 , 5 9 2 ) W ( 1 9 , 5 9 2 ) W 1 3 , 2 8 6 W ( 1 0 2 , 5 4 3 )

Investment debt SecuritiesA v a i l a b l e - f o r - s a l e ( 3 6 , 7 0 0 ) 2 1 1 , 2 6 6 4 8 , 6 0 1 1 2 5 , 9 6 5

W ( 5 6 , 2 9 2 ) W 1 4 1 , 6 0 1 W 6 1 , 8 8 7 W 2 3 , 4 2 2

Institution Book Value Pledge Value Related Liability / Transactions

Investment securities in WonBank of Korea W 1 , 5 8 3 , 1 0 1 W 1 , 1 5 9 , 2 0 0 BOK borrowingsBank of Korea 7 3 8 , 3 0 0 2 2 6 , 7 0 0 BOK settlementsKorea Asset Management Company 3 9 0 , 4 4 2 1 0 3 , 4 6 7 Sale of non-performing loansIndustrial Bank of Korea 4 , 7 7 2 3 , 5 7 2 Foreign currency transactionsKookmin Futures and others 4 1 , 4 9 7 2 8 , 0 0 0 Derivatives transactionsBank One NA (Seoul) 1 0 8 , 6 6 8 1 0 5 , 1 1 4 Foreign currency RP

2 , 8 6 6 , 7 8 0 1 , 6 2 6 , 0 5 3Investment securities in foreign currencies

UBS (London) 5 8 , 8 8 3 3 6 , 2 9 4 Foreign currency RPMerrill Lynch (New York) 1 4 , 6 2 0 1 4 , 6 2 0 Swap transactions

7 3 , 5 0 3 5 0 , 9 1 4W 2 , 9 4 0 , 2 8 3 W 1 , 6 7 6 , 9 6 7


7. Loans :

Loans outstanding as of December 31, 2000 and 1999 are summarized as follows :



Loans in Won currencyThe BankCorporate loans ; 6 . 3 7 - 1 5 . 7 9 W 2 5 , 1 0 2 , 0 3 3 W 2 0 , 1 4 9 , 7 8 0Consumer loans 9 . 5 0 - 1 4 . 7 9 1 5 , 8 7 9 , 2 0 7 1 2 , 0 1 0 , 6 6 4O t h e r s 9 . 0 - 1 5 . 7 9 2 , 2 6 3 , 9 6 3 7 1 9 , 6 3 8

4 3 , 2 4 5 , 2 0 3 3 2 , 8 8 0 , 0 8 2Trust accountsLoans with realty collateral 1 2 . 2 2 5 3 , 4 3 6 2 4 1 , 8 7 1Loans with trust benefit collateral 9 . 9 4 0 , 7 0 5 5 2 , 7 3 4Loans with promissory notes and other 9 . 7 - 1 4 . 7 2 0 7 , 8 0 1 5 0 7 , 1 2 1

3 0 1 , 9 4 2 8 0 1 , 7 2 6S u b s i d i a r i e sConsumer financing and factoring loans 7 . 0 - 1 9 . 0 9 8 , 0 8 1 1 4 5 , 5 7 4Financing lease receivables 1 . 6 - 3 2 . 0 4 1 0 , 6 0 7 6 1 3 , 7 0 3Loans to start-up venture business 2 . 0 0 - 1 5 . 6 6 1 7 1 , 5 5 7 2 2 5 , 0 6 5Notes discounted - - 7 , 4 0 9Small unsecured loans and other 0 - 1 9 . 0 1 , 0 4 8 , 0 3 6 9 7 8 , 1 5 2

1 , 7 2 8 , 2 8 1 1 , 9 6 9 , 9 0 345,275,426 3 5 , 6 5 1 , 7 1 1

Loans denominated in foreign currenciesForeign currency loans L i b o r + 0 . 6 2 5 - 1 6 . 2 0 2 , 0 8 9 , 9 4 1 2 , 5 2 6 , 8 7 9Offshore loans L i b o r + 1 . 5 1 , 0 7 9 , 8 4 7 1 , 0 2 6 , 8 0 4IBRD sub-loans 6 . 4 5 - 1 6 . 2 0 1 5 , 7 6 3 2 6 , 6 8 2

3 , 1 8 5 , 5 5 1 3 , 5 8 0 , 3 6 5Bills bought in Won currency 1 0 . 7 5 - 1 3 . 7 5 2 4 6 , 8 7 2 2 2 2 , 9 6 5Bills bought in foreign currencies 8 . 4 6 - 9 . 5 0 9 2 5 , 4 6 6 8 2 6 , 6 0 9Payments on guarantees 1 9 . 0 2 4 1 , 4 7 9 3 3 2 , 8 5 4Credit card accounts 1 0 . 5 6 , 2 1 4 , 3 8 5 2 , 6 6 8 , 5 5 5Bonds purchased with resale agreement(“RP”) 5 . 1 0 - 8 . 1 0 1 , 5 0 0 , 0 0 0 1 0 0 , 0 4 5Call loans 6 . 5 - 7 . 0 3 9 9 1 , 2 0 8 3 7 7 , 0 2 0Privately placed debentures 9 . 2 5 - 1 5 . 7 9 2 , 0 2 9 , 4 1 9 1 , 9 7 5 , 7 2 0Loans for equity conversion - 8 4 , 1 5 0 -

6 0 , 6 9 3 , 9 5 6 4 5 , 7 3 5 , 8 4 4Provision for loan losses ( 2 , 2 5 0 , 5 0 7 ) ( 2 , 3 6 7 , 3 9 2 )Present value discounts ( 2 3 0 , 9 3 9 ) ( 1 4 8 , 4 4 6 )

W 5 8 , 2 1 2 , 5 1 0 W 4 3 , 2 2 0 , 0 0 6


The maturities of loans as of December 31, 2000 are as follows (in millions of Won) :

Provision for loan losses as of December 31, 2000, based on the estimated collectibility of the loans (except RP, call loans, and inter-bank loans), are summarized as follows (in millions of Won) :

The above amounts are net of present value discounts.

As of December 31, 2000, 1999 and 1998 the ratios of provision for loan losses to total loans are 3.7%, 5.2%, and 1.4%, respectively.


2001.12.31 2002.12.31 2003.12.31 2004.12.31 Thereafter Total

Loans in Won currency W 2 8 , 4 2 5 , 3 8 6 W 5 , 1 3 8 , 2 2 4 W 4 , 8 4 5 , 2 7 1 W 2 , 0 3 3 , 4 9 3 W 4 , 8 3 3 , 0 5 2 W 4 5 , 2 7 5 , 4 2 6Loans in foreign currencies 8 2 8 , 9 3 6 3 9 3 , 4 9 0 4 4 1 , 0 5 1 4 1 5 , 1 6 6 1 , 1 0 6 , 9 0 8 3 , 1 8 5 , 5 5 1Bills bought in Won currency 1 6 8 , 7 5 3 - - - 7 8 , 1 1 9 2 4 6 , 8 7 2Bills bought in foreign

c u r r e n c i e s 9 2 5 , 4 6 6 - - - - 9 2 5 , 4 6 6Payments on guarantees 2 2 5 , 2 9 6 - 8 , 5 2 4 - 7 , 6 5 9 2 4 1 , 4 7 9Credit card accounts 6 , 2 1 4 , 3 8 5 - - - - 6 , 2 1 4 , 3 8 5R P 1 , 5 0 0 , 0 0 0 - - - - 1 , 5 0 0 , 0 0 0Call loans 9 9 1 , 2 0 8 - - - - 9 9 1 , 2 0 8Privately placed debentures 4 8 1 , 4 3 3 7 1 7 , 9 2 1 3 3 4 , 4 3 2 1 7 9 , 2 3 8 3 1 6 , 3 9 5 2 , 0 2 9 , 4 1 9Loans for equity conversion - - - - 8 4 , 1 5 0 8 4 , 1 5 0

W 3 9 , 7 6 0 , 8 6 3 W 6 , 2 4 9 , 6 3 5 W 5 , 6 2 9 , 2 7 8 W 2 , 6 2 7 , 8 9 7 W 6 , 4 2 6 , 2 8 3 W 6 0 , 6 9 3 , 9 5 6

Estimated Normal Precautionary Substandard Doubtful Loss Total Reserves

Loans in Won W 4 1 , 0 4 0 , 9 0 1 W 1 , 9 7 9 , 2 9 4 W 1 , 5 9 6 , 5 2 5 W 3 9 3 , 5 8 3 W 5 1 , 1 3 1 W 4 5 , 0 6 1 , 4 3 4 W 1 , 4 5 3 , 5 4 6Loans in foreign

C u r r e n c y 1 , 7 3 0 , 8 9 3 4 3 1 , 0 6 0 6 6 8 , 5 1 9 2 0 0 , 2 6 9 1 2 3 , 4 8 5 3 , 1 5 4 , 2 2 6 3 5 7 , 8 2 8Bills bought 8 0 5 , 3 7 2 1 7 4 , 9 3 5 4 2 , 7 8 6 1 4 6 , 6 3 4 1 , 6 0 2 1 , 1 7 1 , 3 2 9 6 1 , 8 5 4Payments on

g u a r a n t e e s 2 , 3 6 2 9 , 6 3 0 5 0 , 9 2 3 1 4 4 , 4 7 1 3 2 , 3 2 0 2 3 9 , 7 0 6 1 0 8 , 1 9 8Credit card

a c c o u n t s 6 , 1 8 1 , 2 7 9 - - - 33,106 6 , 2 1 4 , 3 8 5 1 , 7 6 8Privately placed

d e b e n t u r e s 1 , 3 8 3 , 9 1 9 2 5 3 , 4 8 4 1 4 2 , 3 4 0 1 7 1 , 1 1 1 4 4 , 3 8 2 1 , 9 9 5 , 2 3 6 1 6 3 , 0 8 6Loans for equity

c o n v e r s i o n 6 , 0 3 2 - 4 4 , 4 2 9 3 3 , 6 8 9 - 8 4 , 1 5 0 5 6 , 6 6 15 1 , 1 5 0 , 7 5 8 2 , 8 4 8 , 4 0 3 2 , 5 4 5 , 5 2 2 1 , 0 8 9 , 7 5 7 2 8 6 , 0 2 6 5 7 , 9 2 0 , 4 6 6 2 , 2 0 2 , 9 4 1

Other credits o u t s t a n d i n g 1 1 1 0 1 0 , 6 7 9 7 6 , 7 3 0 7 , 0 6 3 9 4 , 5 8 3 4 7 , 5 6 6

W 5 1 , 1 5 0 , 7 5 9 W 2 , 8 4 8 , 5 1 3 W 2 , 5 5 6 , 2 0 1 W 1 , 1 6 6 , 4 8 7 W 2 9 3 , 0 8 9 W 5 8 , 0 1 5 , 0 4 9 W 2 , 2 5 0 , 5 0 7


Movements of provision for loan losses for the years ended December 31, 2000 and 1999 are as follows (in millions of Won) :

Loan risk concentrations as of December 31, 2000 and 1999 are as follows:


2000 1999

Beginning balance W 2 , 3 6 7 , 3 9 2 W 2 , 2 7 3 , 0 7 5Offset with present value discounts ( 1 1 8 , 1 9 2 ) ( 6 0 , 8 9 7 )W r i t t e n - o f f ( 8 6 4 , 2 6 5 ) ( 1 , 3 4 8 , 4 2 3 )Debts forgiven ( 1 1 , 9 1 6 ) - Repurchase of loans sold to KAMCO 1 6 , 1 9 0 5 7 , 3 8 1Translation and other adjustments ( 5 5 , 3 2 6 ) 5 9 , 0 6 6Ending balance before additional provision 1 , 3 3 3 , 8 8 3 9 8 0 , 2 0 2Additional provision for the period 9 1 6 , 6 2 4 1 , 3 8 7 , 1 9 0Ending balance W 2 , 2 5 0 , 5 0 7 W 2 , 3 6 7 , 3 9 2

By geographyK o r e a W 6 0 , 0 0 9 , 0 8 5 9 8 . 8 7 W 4 4 , 0 4 0 , 2 7 2 9 6 . 2 9Southeast Asia 251,696 0 . 4 1 3 4 0 , 1 6 7 0 . 7 4R u s s i a 1 3 8 , 5 6 7 0 . 2 3 1 2 5 , 9 9 4 0 . 2 8J a p a n 30,876 0 . 0 5 2 0 4 , 6 2 8 0 . 4 5C h i n a 17,343 0 . 0 3 7 5 , 2 9 0 0 . 1 6South America 1 3 , 7 2 8 0 . 0 2 2 8 , 2 3 8 0 . 0 6O t h e r s 2 3 2 , 6 6 1 0 . 3 9 9 2 1 , 2 5 5 2 . 0 2

W 6 0 , 6 9 3 , 9 5 6 1 0 0 . 0 0 W 4 5 , 7 3 5 , 8 4 4 1 0 0 . 0 0

By IndustryGovernmental institutions W 4 1 2 , 3 5 0 0 . 6 8 W 6 1 8 , 4 5 1 1 . 3 5Financial institutions 5 , 8 9 5 , 8 9 7 9 . 7 1 1,890,737 4 . 1 3Manufacturing companies 14,404,925 2 3 . 7 3 1 5 , 5 8 3 , 9 7 6 3 4 . 0 7Services related companies 2,627,127 4 . 3 3 1 0 , 0 1 5 , 8 3 0 2 1 . 9 0I n d i v i d u a l s 2 3 , 7 4 8 , 3 5 3 3 9 . 1 3 1 6 , 1 9 9 , 3 0 5 3 5 . 4 2O t h e r s 1 3 , 6 0 5 , 3 0 4 2 2 . 4 2 1,427,545 3 . 1 3

W 6 0 , 6 9 3 , 9 5 6 1 0 0 . 0 0 W 4 5 , 7 3 5 , 8 4 4 1 0 0 . 0 0

By typeGovernmental institutions W 4 2 9 , 4 0 8 0 . 7 1 W 5 5 7 , 3 2 9 1 . 2 2Large enterprises 11,825,922 1 9 . 4 8 10,937,369 2 3 . 9 1Small to medium enterprises 2 1 , 2 9 5 , 2 7 5 3 5 . 0 9 1 7 , 7 9 6 , 9 7 6 3 8 . 9 1I n d i v i d u a l s 2 3 , 5 5 1 , 1 9 4 3 8 . 8 0 16,199,305 3 5 . 4 2O t h e r s 3,592,157 5 . 9 2 244,865 0 . 5 4

W 6 0 , 6 9 3 , 9 5 6 1 0 0 . 0 0 W 4 5 , 7 3 5 , 8 4 4 1 0 0 . 0 0



As of December 31, 2000, the Bank’s total restructured loans outstanding to companies under restructuring procedures aresummarized as follows (in millions of Won):

The Bank records present value discounts for the differences between the present values and the book values of the loans on thedate of loan restructuring. These present value discounts are amortized using effective interest method over the rescheduledmaturities. The present value of the restructured loan is the market value of the loan on the day that the restructuring terms are fixed.For those loans unavailable of such market values, the Bank determines the present value by discounting, using the appropriateinterest rate of the loan origination or loan restructuring date, the estimated future cash flows over the rescheduled maturities.

Loans that are agreed on for conversion into equity are separately classified as loans for equity conversion as of the agreement date.The loans for equity conversion are stated at the lower of principal amount or the fair value of the to-be-converted equity instrument.

Movements in the present value discounts of the Bank for the year ended December 31, 2000 related to the restructured loans are asf o l l o w s :

8. Guarantees and acceptances :

Guarantees and acceptances outstanding as of December 31, 2000 and 1999 are summarized as follows:


Court CourtWorkouts Receivership Mediation Total

Pre-restructuring loan balance W 1 , 8 0 5 , 1 2 5 W 3 0 6 , 3 2 6 W 2 9 2 , 2 7 4 W 2 , 4 0 3 , 7 2 5Loans for equity conversion 8 4 , 1 5 0 - - 8 4 , 1 5 0Converted into stocks 1 2 7 , 7 1 1 - - 1 2 7 , 7 1 1Converted into CBs 6 9 , 2 6 7 - - 6 9 , 2 6 7Loan balances for restructuring 1 , 5 2 3 , 9 9 7 3 0 6 , 3 2 6 2 9 2 , 2 7 4 2 , 1 2 2 , 5 9 7Restructured loan present value 1 , 3 8 4 , 3 8 7 2 8 8 , 0 5 2 2 8 1 , 8 8 0 1 , 9 5 4 , 3 1 9Present value discounts W 1 3 9 , 6 1 0 W 1 8 , 2 7 4 W 1 0 , 3 9 4 W 1 6 8 , 2 7 8


Work out W 6 6 , 0 0 0 W 1 2 1 , 6 2 8 W 4 8 , 0 1 8 W 1 3 9 , 6 1 0Court receivership 4 4 , 6 5 6 3 0 , 3 3 8 5 6 , 7 2 0 1 8 , 2 7 4Court mediation 2 2 , 8 7 1 3 , 9 8 2 1 6 , 4 5 9 1 0 , 3 9 4

W 1 3 3 , 5 2 7 W 1 5 5 , 9 4 8 W 1 2 1 , 1 9 7 W 1 6 8 , 2 7 8

Millions of Won

2000 1999

Guarantees and acceptance in WonGuarantees on debentures W 5 , 7 7 2 W 2 5 , 8 7 7Guarantees on loan collateral 4 0 , 4 8 4 5 9 , 3 0 1Guarantees on commercial bills 4 2 1 , 0 4 6O t h e r s 2 4 8 , 8 6 9 6 4 , 5 5 6

2 9 5 , 1 6 7 1 5 0 , 7 8 0Guarantees and acceptance in foreign currencies

Acceptances of letters of credit 1 , 8 4 5 , 9 1 6 9 4 0 , 4 6 2Acceptances of letters of guarantee 5 8 , 6 4 2 5 4 , 9 6 5O t h e r s 8 5 9 , 8 1 6 9 6 5 , 2 3 0

2 , 7 6 4 , 3 7 4 1 , 9 6 0 , 6 5 7W 3 , 0 5 9 , 5 4 1 W 2 , 1 1 1 , 4 3 7


The credit risk classification and provision for fixed guarantees and acceptances outstanding as of december 31, 2000 and 1999 are asf o l l o w s :

Since 1999, the Bank applied credit risk classification used for loans to the guarantees and acceptances and classified these as sub-standard, doubtful, or estimated loss (provision rates are 20%, 50%, 100%, respectively). As a result, the Bank recorded a W34,764million decrease in its retained earnings as of January 1, 1999 and net income for the year ended December 31, 1999 was W6,764million more than that which would have been recorded under the previous method.

Risk concentrations of guarantees and acceptances outstanding as of December 31, 2000 and 1999 are as follows:


Millions of Won

2000 1999

N o r m a l W 2 , 8 9 5 , 9 2 9 W 1 , 9 5 3 , 6 3 2P r e c a u t i o n a r y 9 8 , 9 7 2 2 4 , 8 8 5S u b s t a n d a r d 2 6 , 8 2 5 1 3 1 , 2 5 5D o u b t f u l 3 7 , 7 1 4 1 , 1 8 5Estimated loss 1 0 1 4 8 0

3 , 0 5 9 , 5 4 1 2 , 1 1 1 , 4 3 7P r o v i s i o n ( 3 7 , 3 3 1 ) ( 2 8 , 4 3 0 )

W 3 , 0 2 2 , 2 1 0 W 2 , 0 8 3 , 0 0 7

By geography

Korea W 2 , 6 8 2 , 4 9 3 8 7 . 6 8 W 1 , 7 7 8 , 0 4 4 8 4 . 2 1

Southeast Asia 1 3 - 1 1 , 4 5 4 0 . 5 4

O t h e r 377,035 1 2 . 3 2 321,939 1 2 . 2 5

W 3 , 0 5 9 , 5 4 1 1 0 0 . 0 0 W 2 , 1 1 1 , 4 3 7 1 0 0 . 0 0By industry

G o v e r n m e n t W 9 1 , 9 5 9 3 . 0 1 W 4 1 , 0 7 4 1 . 9 5

Financial institutions 5,572 0 . 1 8 401,429 1 9 . 0 1

Manufacturing companies 1,795,592 5 8 . 6 9 1,183,275 5 6 . 0 4

Services related companies 30,569 1 . 0 0 167,533 7 . 9 3

O t h e r s 1,135,849 3 7 . 1 2 318,126 1 5 . 0 7

W 3 , 0 5 9 , 5 4 1 1 0 0 . 0 0 W 2 , 1 1 1 , 4 3 7 1 0 0 . 0 0By type of customers

G o v e r n m e n t W 9 1 , 9 5 9 3 . 0 1 W 4 1 , 0 7 4 1 . 9 5

Large enterprises 7 2 9 , 8 2 1 2 3 . 8 5 1 , 3 4 4 , 8 5 8 6 3 . 6 9

Small to medium enterprises 1,747,520 5 7 . 1 2 634,328 3 0 . 0 4

O t h e r s 4 9 0 , 2 4 1 1 6 . 0 2 9 1 , 1 7 7 4 . 3 2

W 3 , 0 5 9 , 5 4 1 1 0 0 . 0 0 W 2 , 1 1 1 , 4 3 7 1 0 0 . 0 0



Credit related derivatives included in the other foreign currency guarantees are as follows (in thousands of US Dollars):

(*) classified as normal by applying FLC

9. Fixed Assets:

Property and equipment at December 31, 2000 and 1999 comprise the following (in millions of Won) :

Intangible assets and foreclosed assets at December 31, 2000 and 1999 comprise the following (in millions of Won):

In accordance with the General Banking Act, the Bank may only own business-purpose real property within its own equity capitalamount. At December 31, 2000 and 1999, the total quoted market value of the land, determined by the tax authorities for property taxassessment, amounts to W609,750 million and W592,956 million, respectively.

In accordance with the Bank’s regulations, all Bank’s fixed assets, other than those personal properties valued under W1,000thousand (main office : W5,000 thousand), are covered by insurance policies of W536,222 million (book value W1,005,927 million)and W556,954 million (book value W980,605 million) as of December 31, 2000 and 1999, respectively. All vehicles are covered bylegal and general insurance policies.

Intangible assets include trademark rights, communication related utility rights, lease premiums, and software copyrights.


Guarantee Net AssetType Counter-party Guaranteeing Asset Amounts (USD) Value %

T R S Morgan Guarantee Trust Asia Synthetic Fund FRN U S D 1 0 , 5 0 0 1 1 8 . 9 4 %T R S Morgan Guarantee Trust Daehan High Yield Fund FRN U S D 7 0 , 0 0 0 2 1 0 . 6 7 %T R S Morgan Guarantee Trust Pacific Growth Fund shares U S D 5 2 , 0 0 0 1 1 2 . 7 2 %T R S Morgan Guarantee Trust Pan Asian Strategic Fund FRN U S D 2 1 , 0 0 0 1 2 7 . 9 3 %T R S Morgan Guarantee Trust Daehan Global Bond I FRN U S D 7 0 , 0 0 0 1 4 4 . 8 3 %T R S Morgan Guarantee Trust Daehan Global Bond II FRN U S D 5 6 , 0 0 0 1 3 1 . 8 6 %C D S Chase Manhattan Bank Korea Green Cross Co. CB U S D 3 , 5 0 0 ( * )C D S Industrial Bank of Korea - U S D 1 5 , 0 0 0 ( * )C D S Chohung Bank - U S D 3 5 , 0 0 0 ( * )C D S Korea EXIM Bank - U S D 1 5 , 0 0 0 ( * )

U S D 3 4 8 , 0 0 0

Acquisition Accumulated Net Carrying ValueCost Depreciation

L a n d W 7 9 5 , 9 7 2 W - W 7 9 5 , 9 7 2 W 8 0 6 , 0 8 1Buildings and structures 6 0 1 , 7 1 0 8 8 , 2 4 3 5 1 3 , 4 6 7 5 2 0 , 8 5 6Leasehold improvements 3 0 , 2 0 3 2 3 , 8 4 9 6 , 3 5 4 5 , 8 8 5Equipment and vehicles 5 6 0 , 3 0 2 4 4 5 , 1 0 1 1 1 5 , 2 0 1 9 3 , 5 9 2Constructions in progress 5 , 4 4 0 - 5 , 4 4 0 7 , 6 5 7

W 1 , 9 9 3 , 6 2 7 W 5 5 7 , 1 9 3 W 1 , 4 3 6 , 4 3 4 W 1 , 4 3 4 , 0 7 1

2000 1999

Intangible Assets Foreclosed Assets2000 1999 2000 1999

Acquisition cost W 1 0 , 2 8 3 W 7,379 W 1 3 , 4 4 6 W 17,495 Valuation provisions - - ( 2 , 1 8 8 ) ( 2 , 4 5 1 )Net Carrying value W 1 0 , 2 8 3 W 7,379 1 1 , 2 5 8 1 5 , 0 4 4


10. Derivatives :

Derivatives at December 31, 2000 comprise the following (in millions of Won):

The trading and hedge classifications above are strictly based on accounting methods applied and the Bank’s actual derivativestransactions are mostly hedged. In accordance with the addendum to the revised generally accepted accounting principles, effectiveJanuary 1, 2000, the Bank reclassified most of its currency swaps and interest rate swaps, which were previously classified as hedgederivatives, as trading derivatives and recorded them at fair value. In connection with this change, the Bank recorded a W21,625million decrease in its retained earnings as of January 1, 2000 and net income for the year ended December 31, 2000 isapproximately W8,443 million less than that which would have been recorded under the previous method.

At December 31, 2000, the following Bank assets are guaranteed through credit related derivatives (thousands of US Dollars) :

Derivatives related gains and losses for the years ended December 31, 2000 and 1999 comprise the following (in millions of Won):

Fair value hedged asset valuation gains and losses are the changes in value of the hedged assets/liabilities resulting from the specificrisk being hedged. The Bank assumes 100% hedge effectiveness for all hedge relationships.


Notional Amounts Valuation Gains / Losses (P/L) Valuations (B/S)

Trading Hedge Subtotal Trading Hedge Subtotal Asset Liability

Currency relatedF o r w a r d W 8 , 9 4 7 , 8 8 0 W - W 8 , 9 4 7 , 8 8 0 W ( 2 4 8 , 6 7 0 ) W - W ( 2 4 8 , 6 7 0 ) W 4 0 6 , 7 6 2 W 6 0 2 , 3 0 2F u t u r e 1 , 1 3 0 , 2 0 3 - 1 , 1 3 0 , 2 0 3 - - - - -Currency swap 1 , 0 5 1 , 2 9 2 4 1 , 1 8 0 1 , 0 9 2 , 4 7 2 1 , 1 2 0 1 1 2 1 , 2 3 2 4 0 , 4 9 2 4 9 , 4 4 1Options bought 13,147 - 1 3 , 1 4 7 694 - 6 9 4 1 , 2 8 4 -Options sold 56,601 - 5 6 , 6 0 1 (202) - (202) - 7 6 1

1 1 , 1 9 9 , 1 2 3 4 1 , 1 8 0 1 1 , 2 4 0 , 3 0 3 ( 2 4 7 , 0 5 8 ) 1 1 2 ( 2 4 6 , 9 4 6 ) 4 4 8 , 5 3 8 6 5 2 , 5 0 4Interest related

F o r w a r d 4 0 , 0 0 0 - 4 0 , 0 0 0 ( 7 1 ) - ( 7 1 ) - 7 1F u t u r e 6 9 , 2 8 4 - 6 9 , 2 8 4 - - - - -S w a p 4 , 1 1 9 , 3 3 8 5 6 5 , 6 1 2 4 , 6 8 4 , 9 5 0 ( 7 , 5 3 8 ) ( 1 4 , 9 6 7 ) ( 2 2 , 5 0 5 ) 5 5 , 0 9 3 9 1 , 7 2 5

4 , 2 2 8 , 6 2 2 5 6 5 , 6 1 2 4 , 7 9 4 , 2 3 4 7 , 6 0 9 ( 1 4 , 9 6 7 ) ( 2 2 , 5 7 6 ) 5 5 , 0 9 3 9 1 , 7 9 6

O t h e r 1 , 8 9 0 - 1 , 8 9 0 - - - 2 2 4 -W1 5 , 4 2 9 , 6 3 5 W 6 0 6 , 7 9 2 W1 6 , 0 3 6 , 4 2 7 W ( 2 5 4 , 6 6 7 ) W( 1 4 , 8 5 5 ) W ( 2 6 9 , 5 2 2 ) W 5 0 3 , 8 5 5 W 7 4 4 , 3 0 0

Guaranteed Net AssetGuaranteed Asset Amounts Value (%)

Asia Synthetic Fund FRN U S D 1 0 , 5 0 0 1 1 8 . 9 4 %Daehan High Yield Fund FRN U S D 7 0 , 0 0 0 2 1 0 . 6 7 %Pacific Growth Fund shares U S D 5 2 , 0 0 0 1 1 2 . 7 2 %Pan Asian Strategic Fund FRN U S D 2 1 , 0 0 0 1 2 7 . 9 3 %Lucre Investment Fund FRN U S D 1 1 , 0 0 0 1 4 4 . 8 3 %

U S D 1 6 4 , 5 0 0

Derivatives valuations W 9 6 8 , 7 4 2 W 6 9 9 , 2 2 0 W 8 6 4 , 4 3 0 W 8 4 5 , 3 7 3Derivatives transactions 5 4 1 , 4 8 3 6 8 6 , 1 2 5 4 1 0 , 8 3 8 4 6 6 , 5 2 1Fair value hedged asset valuations 1 , 3 6 3 1 6 , 2 1 8 - -

W 1 , 5 1 1 , 5 8 8 W 1 , 4 0 1 , 5 6 3 W 1 , 2 7 5 , 2 6 8 W 1 , 3 1 1 , 8 9 4

2000 1999Losses Gains Losses Gains


11. Other Assets :

Other assets at December 31, 2000 and 1999 comprise the following:

Investments in funds for troubled debt reorganization are amounts contributed to Korea Asset Management Company (“KAMCO”)for the purchase of troubled debts that are to be settled in 2002. The related balances were written off during the year endedDecember 31, 2000 and recognized as impairment loss on investment debt securities.

12. Deposits :

Deposits at December 31, 2000 and 1999 comprise the following:

Deposits are placed with the following entities as of December 31, 2000 :



Guarantee deposits paid W 6 6 1 , 1 7 9 W 6 7 7 , 2 0 5Accounts receivable (Note 2) 1 , 2 7 4 , 1 7 9 3 0 3 , 2 1 4Accrued income 1 , 2 4 9 , 1 1 3 1 , 2 6 9 , 3 8 7Payments in advance 7 7 , 0 2 9 5 1 7 , 7 5 6Deferred tax assets (Note 26) 2 0 7 , 5 0 0 - Derivative assets (Note 10) 5 0 3 , 8 5 5 5 2 7 , 7 3 7Unsettled domestic inter-bank receivables 1 6 9 , 3 0 0 5 6 8 , 9 4 3Lease and rental assets 3 5 9 , 6 4 4 4 6 7 , 3 4 0Less: accumulated depreciation ( 2 3 5 , 6 8 2 ) ( 3 0 3 , 1 4 3 )Prepaid expenses 4 4 , 9 6 7 4 7 , 2 6 0Investments in funds for troubled debt reorganization - 2 3 , 6 5 0O t h e r s 6 9 , 4 8 9 1 0 8 , 9 5 5

W 4 , 3 8 0 , 5 7 3 W 4 , 2 0 8 , 3 0 4

2000 1999Annual Millions of Won

Interest(%)

Deposits in Won currency :The Bank’s demand deposits 1 . 0 W 4,040,316 W 4,689,778The Bank’s savings deposits 1 . 0 - 8 . 5 4 9 , 1 6 3 , 3 1 0 3 6 , 3 8 4 , 8 6 4Trust accounts’ deposits 0 - 1 4 . 3 6 1 , 5 7 4 , 6 8 7 1 , 7 5 9 , 7 9 3Subsidiaries’ deposits 3 . 0 7 , 6 7 6 4 , 8 4 4

5 4 , 7 8 5 , 9 8 9 4 2 , 8 3 9 , 2 7 9Deposits in foreign currencies :

The Bank’s demand deposits 0 . 0 - 6 . 2 2 2 9 2 , 3 9 6 2 4 0 , 6 5 9The Bank’s savings deposits 0 . 0 - 8 . 4 9 6 7 0 , 0 0 4 2 5 3 , 7 3 0Subsidiaries’ deposits 0 . 0 - 7 . 5 7 1 , 2 9 1 3 0 , 7 9 8

1 , 0 3 3 , 6 9 1 5 2 5 , 1 8 7Certificates of deposit 5 . 3 - 6 . 6 2 , 4 2 4 , 9 4 7 1 , 1 7 3 , 3 8 8

W 58,244,627 W 44,537,854

Deposits in Won currency W 5 7 5 , 3 7 3 W 1 , 9 0 5 , 0 1 0 W 5 2 , 3 0 5 , 6 0 6 W 5 4 , 7 8 5 , 9 8 9Deposits in foreign currency 6 4 , 2 8 3 7 , 0 0 6 9 6 2 , 4 0 2 1 , 0 3 3 , 6 9 1Certificates of deposit 9 , 6 5 3 1 , 8 1 1 , 9 9 8 6 0 3 , 2 9 6 2 , 4 2 4 , 9 4 7

W 6 4 9 , 3 0 9 W 3 , 7 2 4 , 0 1 4 W 5 3 , 8 7 1 , 3 0 4 W 5 8 , 2 4 4 , 6 2 7

Millions of WonOther Financial

Banks Institutions Others Total


The maturities of deposits as of December 31, 2000 are as follows:

13. Borrowings :

Borrowings as of December 31, 2000 and 1999 comprise the following :

The details of subordinated borrowings as of December 31, 2000 are as follows (in millions of Won):


2 0 0 1 W 4 9 , 7 3 8 , 9 2 9 W 1 , 0 1 6 , 6 7 6 W 2 , 4 2 4 , 9 4 7 W 5 3 , 1 8 0 , 5 5 22 0 0 2 2 , 5 1 1 , 3 1 5 - - 2 , 5 1 1 , 3 1 52 0 0 3 1 , 5 5 4 , 8 6 3 4 , 9 7 6 - 1 , 5 5 9 , 8 3 92 0 0 4 3 8 3 , 7 2 0 - - 3 8 3 , 7 2 0t h e r e a f t e r 5 9 7 , 1 6 2 1 2 , 0 3 9 - 6 0 9 , 2 0 1

W 5 4 , 7 8 5 , 9 8 9 W 1 , 0 3 3 , 6 9 1 W 2 , 4 2 4 , 9 4 7 W 5 8 , 2 4 4 , 6 2 7

Millions of WonYear ending Deposits in Foreign Certificates ofDecember 31 Deposits in Won C u r r e n c i e s D e p o s i t T o t a l


Borrowings in Won Borrowings from the Bank of Korea ; 3 . 0 - 8 . 5 W 5 9 4 , 4 5 0 W 6 4 4 , 0 7 1Borrowings from the government ; 2 . 0 - 8 . 3 5 4 0 , 3 1 7 4 9 2 , 8 4 6Borrowings from banking institutions ; 5 . 0 - 9 . 5 5 1 , 5 2 0 , 9 6 0 7 2 7 , 3 8 0Borrowings from non-banking financial Institutions 2 . 0 - 1 1 . 8 4 7 5 1 , 0 1 0 1 , 0 1 1 , 4 5 7Other borrowings 0 . 5 - 8 . 7 1 , 5 2 3 , 1 7 6 1 , 6 8 1 , 6 5 4

4,929,913 4 , 5 5 7 , 4 0 8Borrowings in foreign currencies

Foreign currency borrowings for domestic purposes 6.62-7.53 1,743,027 3 , 6 8 7 , 3 9 0Foreign currency borrowings for overseas purposes L i b o r + 0 . 4 5 - 7 . 5 3 5 2 2 , 5 8 0 8 6 5 , 7 8 2IBRD borrowings L i b o r + 0 . 2 3 1 , 7 1 3 2 , 2 4 3

2 , 2 9 7 , 3 1 9 4 , 5 8 5 , 4 1 5Bonds sold with repurchase agreement 5 . 4 5 - 7 . 4 0 2 3 2 , 9 7 5 1 1 9 , 8 8 3Bills sold 5.4-6.9 1,161,546 7 8 , 2 0 9Call money 5.5-6.85 762,234 9 7 3 , 8 5 7

W 9 , 3 8 3 , 9 8 7 W 10,314,772

Samsung Life Insurance Co., Ltd. 1996. 12. 31 1 0 . 0 0 W 1 3 0 , 0 0 0 2008. 12. 31 Annual interestKorea Life Insurance Co., Ltd. 1996. 12. 31 8 . 5 0 7 0 , 0 0 0 2008. 12. 31 Annual interestHyundai Life Insurance Co., Ltd. 1996. 12. 31 9 . 0 0 1 0 , 0 0 0 2006. 12. 31 Monthly interestHyundai Life Insurance Co., Ltd. 1996. 12. 31 1 1 . 8 4 1 0 , 0 0 0 2006. 12. 31 Monthly interest in advanceKorea Life Insurance Co., Ltd. 1996. 12. 31 1 0 . 0 0 5 , 0 0 0 2006. 12. 31 Annual interestSamsung Life Insurance Co., Ltd. 1997. 12. 29 9 . 3 0 1 0 0 , 0 0 0 2007. 12. 31 Interest on 5th year endKyobo Life Insurance Co., Ltd. 1997. 12. 31 9 . 3 0 6 0 , 0 0 0 2007. 12. 31 Interest on 5th year endHungguk Life Insurance Co., Ltd. 1997. 12. 29 8 . 0 0 4 0 , 0 0 0 2007. 12. 31 Annual interest

W 4 2 5 , 0 0 0

Date of Annual Contract Interest(%) Amount Maturity Conditions


The maturities of the borrowings as of December 31, 2000 are as follows (in millions of Won):

Borrowings from the Bank of Korea mature within one year. Borrowings from public finance and National Investment Funds andother borrowings from the government are payable in quarterly installment payments within 10 years with 7.5 years of grace periodand within 15 years with 5 years of grace period, respectively.

14. Debenture s :

Debentures as of December 31, 2000 and 1999 comprise the following :


2 0 0 1 W 2 , 4 8 8 , 7 2 4 W 1 , 2 3 0 , 4 3 1 W 2 , 1 5 6 , 7 5 5 W 5 , 8 7 5 , 9 1 02 0 0 2 5 9 7 , 9 9 1 2 5 7 , 5 4 5 - 8 5 5 , 5 3 62 0 0 3 5 8 0 , 1 0 0 2 6 9 , 2 1 6 - 8 4 9 , 3 1 62 0 0 4 3 4 3 , 6 0 0 1 1 7 , 3 6 2 - 4 6 0 , 9 6 2

t h e r e a f t e r 9 1 9 , 4 9 8 4 2 2 , 7 6 5 - 1 , 3 4 2 , 2 6 3W 4 , 9 2 9 , 9 1 3 W 2 , 2 9 7 , 3 1 9 W 2 , 1 5 6 , 7 5 5 W 9 , 3 8 3 , 9 8 7

Year ending Borrowings in Borrowings in December 31 Won Currency Foreign Currencies Others T o t a l


Debentures in Won currency :Discounted debentures 5 . 3 5 - 1 5 . 1 8 W 1 , 5 7 2 , 0 0 0 W 5 , 2 0 3 , 2 6 1Compound interest debentures 5 . 8 7 - 1 7 . 6 9 3 , 7 1 2 , 2 4 3 1 , 7 4 4 , 1 6 4Coupon debentures 6 . 3 5 - 1 9 . 5 0 3 , 2 9 7 , 1 4 8 1 7 6 , 2 0 0Subordinated debentures 5 . 8 7 - 1 7 . 6 9 1 , 5 0 3 , 7 0 2 7 9 8 , 7 0 0

1 0 , 0 8 5 , 0 9 3 7 , 9 2 2 , 3 2 5Discounts on debentures ( 9 1 , 1 5 7 ) ( 1 3 4 , 0 5 3 )

9 , 9 9 3 , 9 3 6 7 , 7 8 8 , 2 7 2

Debentures in foreign currencies 3 . 0 - L i b o r + 2 . 0 1 , 6 6 3 , 6 4 8 1 , 5 4 2 , 8 5 4Discounts on debentures ( 9 , 7 0 6 ) ( 1 8 , 3 7 2 )

1 , 6 5 3 , 9 4 2 1 , 5 2 4 , 4 8 2W 1 1 , 6 4 7 , 8 7 8 W 9 , 3 1 2 , 7 5 4


Prior to 1999, the Bank recognized debenture issue costs as current period expense as incurred. In accordance with the revisedfinancial accounting standards effective January 1, 1999, the Bank classifies and records debenture issue costs as discounts ondebentures and amortizes the discounts using effective interest method. In connection with this change, the Bank’s net income forthe year ended December 31,1999 was approximately W7,082 million more than that which would have been recorded under theprevious method.

As of December 31, 2000, debentures in Won currency comprise the following :

(*) Subordinated debentures (**) Sold over-the-counter

The fixed rate debentures are Kookmin Bank debentures issued under the authorization by the banking supervisory regulation andare to be fully redeemed at the end of their three-year maturity.


AnnualBillions Interest

Series Issue Date of Won Rate(%) Due Date

The Bank1s t ( * ) 1 9 9 7 . 1 2 . 2 4 W 2 4 0 . 0 F l o a t i n g 2 0 0 3 . 0 3 . 3 1K L B ( * ) 1 9 9 7 . 1 2 . 2 4 8 0 . 0 F l o a t i n g 2 0 0 3 . 0 3 . 3 1Daedong Bank(*) 1 9 9 7 . 1 2 . 2 4 2 5 . 3 F l o a t i n g 2 0 0 3 . 0 3 . 3 1K L B ( * ) 1 9 9 7 . 1 2 . 2 9 1 0 0 . 0 1 6 . 0 2 0 0 4 . 0 1 . 0 5K L B ( * ) ( * * ) 1 9 9 8 . 1 ~ 7 1 0 5 . 1 1 1 . 0 3 - 1 5 . 6 6 2 0 0 5 . 0 3 . 2 7K L B ( * ) 1 9 9 8 . 0 6 . 1 8 6 0 . 0 1 5 . 6 6 2 0 0 3 . 0 7 . 1 83r d ( * ) 1 9 9 8 . 1 2 . 2 9 1 0 0 . 0 F l o a t i n g 2 0 0 4 . 0 3 . 3 14t h ( * ) 1 9 9 8 . 1 2 . 2 9 5 3 . 6 F l o a t i n g 2 0 0 4 . 0 3 . 3 1K L B ( * ) ( * * ) 1 9 9 8 . 1 2 . 2 9 3 4 . 7 F l o a t i n g 2 0 0 4 . 0 3 . 3 16t h ( * ) ( * * ) 2 0 0 0 . 0 3 . 2 7 2 0 0 . 0 9 . 6 5 2 0 0 5 . 0 3 . 2 77t h ( * ) ( * * ) 2 0 0 0 . 0 9 . 2 7 3 0 0 . 0 8 . 9 9 2 0 0 6 . 0 1 . 2 78t h ( * ) ( * * ) 2 0 0 0 . 1 2 . 2 7 2 0 0 . 0 8 . 7 1 2 0 0 6 . 0 1 . 2 7Fixed rate debentures - 3 , 6 1 1 . 4 5 . 3 4 - 1 7 . 6 9 -

W 5 , 1 1 0 . 1S u b s i d i a r i e s

Kookmin Credit Card Co., Ltd. 1 9 9 8 - 2 0 0 0 4 , 5 1 4 . 8 7 . 1 - 1 0 . 5 2 0 0 1 - 2 0 0 2Kookmin Leasing Co., Ltd. 1 9 9 6 - 1 9 9 9 4 5 5 . 1 9 . 5 - 1 9 . 5 2 0 0 1 - 2 0 0 3Kookmin Venture Capital Co., Ltd. 1 9 9 6 5 . 1 1 1 2 0 0 1

W 1 0 , 0 8 5 . 1


As of December 31, 2000, debentures in foreign currencies comprise the following :

(*) Subordinated debt securities(**) Subordinated convertible debt securities

The Bank is authorized by the banking supervisory regulation to issue debentures amounting up to 300% of its equity.

The KLB debentures are those succeeded from Korea Long Term Credit Bank by merger, which occurred on December 31, 1998, andthe issuance of new debt securities for the repayment of these KLB debentures are excluded from the 300% of equity restrictionsapplied to other debenture issuances.

The 4t h series debentures in foreign currencies were issued pursuant to a US$ 700 million Euro Medium Term Note Program, and the1 0t h , 14t h ~ 1 9t h, 21s t ~ 27t h series debentures in foreign currencies were issued pursuant to a US$ 1,500 million Global Medium TermNote Program. The US$1,500 million Global Medium Term Note Program is an update of the US$700 million Program with newlyadded clauses enabling issuance of subordinated notes and sales in the U.S.

Among the debentures in foreign currencies, the Daedong Bank series and the 7t h series subordinated floating rate debentures havecall redemption options that can be exercised on or after 5 years from the issuance date.

US$ 10 million of the Bank’s own debentures in foreign currencies acquired by the Bank are deducted from the 7t h s e r i e ssubordinated floating rate debentures.


4t h 1 9 9 6 . 0 7 . 0 8 U S D 5 0 . 0 6 M L i b o r + 0 . 3 5 2 0 0 1 . 0 7 . 0 8 Hong KongKLB 5t h 1 9 9 6 . 1 0 . 0 1 U S D 1 0 0 . 0 3 M L i b o r + 0 . 3 1 2 0 0 1 . 1 0 . 0 1 U n l i s t e dDaedong (*) 1 9 9 6 . 1 1 . 2 1 U S D 5 0 . 0 6 M L i b o r + 0 . 8 5 2 0 0 6 . 1 1 . 2 1 L u x e m b o u r g7t h (*) 1 9 9 6 . 1 2 . 3 0 U S D 1 9 0 . 0 6 M L i b o r + 0 . 6 0 2 0 0 6 . 1 2 . 3 0 L u x e m b o u r g1 0t h 1 9 9 7 . 0 9 . 1 9 U S D 1 0 0 . 0 6 M L i b o r + 0 . 7 9 2 0 0 2 . 0 9 . 1 9 L o n d o nKLB 9t h 1 9 9 7 . 1 0 . 3 0 U S D 6 6 . 7 6 M L i b o r + 1 . 2 2 0 0 2 . 1 0 . 3 0 U n l i s t e dKLB 11t h ( * * ) 1 9 9 8 . 0 6 . 2 9 U S D 2 5 . 0 6MLibor Flat 2 0 0 4 . 0 6 . 1 5 U n l i s t e d1 4t h 1 9 9 9 . 0 1 . 2 9 U S D 5 0 . 0 6 M L i b o r + 0 . 8 5 2 0 0 1 . 0 1 . 2 9 U n l i s t e d1 5t h 1 9 9 9 . 0 2 . 2 2 USD 2 5 . 0 6 M L i b o r + 0 . 5 0 2 0 0 1 . 0 2 . 2 2 U n l i s t e d1 6t h 1 9 9 9 . 0 3 . 1 5 U S D 5 0 . 0 6 M L i b o r + 0 . 2 5 2 0 0 1 . 0 3 . 1 5 u n l i s t e d1 7t h 1 9 9 9 . 0 4 . 0 8 USD 4 0 . 0 6 M L i b o r + 0 . 2 5 2 0 0 1 . 0 4 . 0 8 u n l i s t e d18t h 1 9 9 9 . 0 4 . 1 5 U S D 2 0 . 0 6 M L i b o r + 2 2 0 0 1 . 0 4 . 0 6 u n l i s t e d1 9t h 1 9 9 9 . 0 4 . 1 9 USD 2 5 . 0 6 M L i b o r + 0 . 2 2 0 0 1 . 0 4 . 1 9 u n l i s t e d2 0t h (**) 1 9 9 9 . 0 6 . 1 4 U S D 2 0 0 . 0 3 . 0 2 0 0 5 . 0 6 . 1 4 u n l i s t e d2 1s t 1 9 9 9 . 1 0 . 2 2 U S D 5 0 . 0 6 M L i b o r + 1 . 6 2 0 0 1 . 1 0 . 2 2 u n l i s t e d2 2n d 1 9 9 9 . 1 1 . 1 5 U S D 2 0 . 0 6 M L i b o r + 1 . 3 2 0 0 1 . 1 1 . 1 5 u n l i s t e d2 3r d 2 0 0 0 . 0 3 . 2 2 U S D 2 0 0 . 0 6 M L i b o r + 1 . 0 2 0 0 2 . 0 3 . 1 1 u n l i s t e d2 4t h 2 0 0 0 . 0 3 . 2 2 USD 2 0 . 0 6 M L i b o r + 1 . 0 2 0 0 2 . 0 3 . 2 2 u n l i s t e d2 5t h 2 0 0 0 . 0 6 . 0 2 U S D 1 0 . 0 6 M L i b o r + 1 . 3 2 0 0 3 . 0 6 . 0 2 u n l i s t e d2 6t h 2 0 0 0 . 0 8 . 1 0 U S D 1 6 . 5 6 M L i b o r + 0 . 7 5 2 0 0 2 . 0 8 . 1 0 u n l i s t e d2 7t h 2 0 0 0 . 0 8 . 1 0 U S D 1 2 . 5 6 M L i b o r + 0 . 9 0 2 0 0 3 . 0 8 . 1 0 u n l i s t e d

U S D 1 , 3 2 0 . 7

Millions of AnnualSeries Issue Date U.S. Dollars Interest Rate(%) Due Date Listing


Debentures in foreign currencies that are convertible debentures are as follows:

The maturities of debentures at December 31, 2000 are as follows (in million of Won) :

15. Accrued Retirement Benefits

The movements in accrued retirement benefits for the year ended December 31, 2000 are as follows (in millions of Won) :

For the years ended December 31, 2000 and 1999, the Bank and its subsidiaries paid out a total of W138,630 million and W144,716million, respectively, as retirement benefits including W28,102 million and W11,275 million, respectively, of special retirementpayments (included in non-operating expenses) to its early retiring employees under an early retirement program.

As of December 31, 2000, the Bank’s deposited retirement benefit accrual amounts are placed as group retirement benefit insuranceprograms at four insurance companies including Samsung Life Insurance Co. These insurance companies hold W425,000 million ofthe Bank’s subordinated debentures (see Note 13) and the Bank has contracted to maintain a total of W396,000 million as the groupretirement benefit insurance program balances at these companies.


Face value US$ 200 million US$ 25 millionIssue price US$ 200 million US$ 25 millionBook value W 251,940 million W 31,493 millionConversion price W 13,802 per share W 8,822 per shareConversion stock Common stock Common stockConvertible period July 14,1999 ~ May 14, 2005 September 30,1998 ~ June 14, 2004Conversion exchange rate US$ 1 : W 1,170.50 US$ 1 : W 1,402.00Method of redemption Fully redeemed at maturity Fully redeemed at maturity

20th KLB-11th

2 0 0 1 W 5 , 2 4 3 , 8 0 5 W 5 8 3 , 6 5 7 W 5 , 8 2 7 , 4 6 22 0 0 2 1 , 7 7 8 , 5 9 3 4 7 3 , 4 4 6 2 , 2 5 2 , 0 3 92 0 0 3 1 , 8 8 6 , 9 6 1 2 0 , 7 8 5 1 , 9 0 7 , 7 4 62 0 0 4 2 9 6 , 2 8 9 3 1 , 4 9 3 3 2 7 , 7 8 2

t h e r e a f t e r 8 7 9 , 4 4 5 5 5 4 , 2 6 7 1 , 4 3 3 , 7 1 2W 1 0 , 0 8 5 , 0 9 3 W 1 , 6 6 3 , 6 4 8 W 1 1 , 7 4 8 , 7 4 1

Year ending ForeignDecember 31 Won Currency Currencies Total

Beginning Ending Balance Increase Decrease Reclassified Balance

Retained retirement benefit accruals W 1 7 5 , 7 8 3 W 1 7 , 4 9 0 W 7 , 4 9 2 W ( 1 , 4 9 8 ) W 1 8 4 , 2 8 3Deposited retirement benefit accruals 4 0 9 , 1 8 0 88,473 1 0 3 , 0 3 6 1 , 4 9 8 3 9 6 , 1 1 5Accrued retirement benefits 5 8 4 , 9 6 3 105,963 1 1 0 , 5 2 8 - 5 8 0 , 3 9 8Retained by National Pension Fund ( 3 0 , 5 6 2 ) (146) ( 3 , 8 4 2 ) - ( 2 6 , 8 6 6 )

W 5 5 4 , 4 0 1 W 1 0 5 , 8 1 7 W 1 0 6 , 6 8 6 W - W 5 5 3 , 5 3 2


16. Other Liabilities :

Other liabilities at December 31, 2000 and 1999 comprise the following:

17. Commitments and Contingencies :

The Bank, in addition to the guarantees and acceptances that are of fixed amounts, has contingent guarantees and acceptancesoutstanding, that are guarantees and acceptances with floating amounts of related credit, amounting to W1,185,837 million andW1,210,034 million as of December 31, 2000 and 1999, respectively.

The Bank has credit line commitments with 22 asset securitization companies, including KAMCO Mirae-1 Liquidation Company.Under these commitments, the Bank provides money, in case of fund shortage, for the interest and principal repayment of thesecompanies’ bonds within the contracted term and amounts. The total committed credit line amount totals W2,667,209 million ofwhich none are used as of December 31, 2000. The Bank has arranged various methods to provide for losses on these credit linecommitments including payment guarantees, resale contracts, surety certificate guarantees, and cash retention.

Also, Kookmin Credit Card Co., Ltd. contracted with 2 financial institutions for discount of notes amounting to W150 billion haveprovided 2 blank checks and 30 blank notes as collateral to financial institutions in relation to borrowings.

As of December 31, 2000, there are 89 pending legal actions against the Bank and its subsidiaries amounting to W 276,128 million.The Management believes that these actions are without merit and that the ultimate liability, if any, will not materially affect the Bankand its subsidiaries’ financial position.

During the year ended December 31, 2000, the Bank established the Kookmin-2 ABS Specialty Co., Ltd. (“KAS-2”) and Kookmin-3ABS Specialty Co., Ltd. (“KAS-3”) in accordance with the regulations for asset liquidation and sold to these companies the Bank’stroubled loans amounting to W361,084 million, and recorded W13,693 million of loss on sale of troubled loans in non-operatingexpenses. Also, the Bank recognized in the current year an additional W13,580 million of loss on sale of troubled loans due toindemnification settlements with Kookmin-1 ABS Specialty Co., Ltd. (“KAS-1”). The Bank additionally recognized W3,103 million andW682 million of loss and gain on sale of troubled loans, respectively, due to indemnification settlements with KAMCO and sale ofoverseas assets. There are no balances of troubled loans sold to KAMCO that are subject to indemnification at December 31, 2000. Asof December 31, 2000, loans sold to KAMCO that are subject to repurchase agreement amount to W20,052 million.

During 1999, the Bank sold Orange (previously Kookmin) Mutual Savings & Finance Co., Ltd. to Dong-a Mutual Savings & FinanceCo., Ltd. Due to abrupt changes in economic conditions including drop of interest rates, the Bank paid an additional W47,900 millionunder a supporting agreement and recognized this amount in other non-operating expenses during the current year. RegardingOrange and Bukook Mutual Savings & Finance Co., Ltd., under the Mutual Savings & Finance Company Act, the Bank, in case ofbankruptcy within three years after the sale of the Mutual Savings & Finance Companies, has the obligation to provide for thepayment of the customers’ deposits (limited to those deposits at date of sale). At December 31, 2000, Orange Mutual Savings &Finance Co., Ltd. and its majority shareholder Dong-a Mutual Savings & Finance Co., Ltd. are both under suspended operations.



Accrued retirement benefits (Note 15) W 5 5 3 , 5 3 2 W 5 5 4 , 4 0 1Provision for loss on acceptances and guarantees (Note 8) 3 7 , 3 3 1 2 8 , 4 3 0Due to trust accounts 9 3 2 , 1 5 9 4 7 5 , 3 3 9Accounts payable (Note 2) 1 , 5 0 4 , 1 6 4 1 0 6 , 6 6 8Accrued expenses 2 , 6 4 3 , 8 7 9 2 , 4 7 5 , 5 6 3Unearned income 1 4 4 , 3 3 3 1 5 2 , 5 9 7Tax withholdings 1 9 8 , 2 2 6 1 6 7 , 8 4 9Guarantee deposits received 9 4 , 2 6 0 7 7 , 4 9 5Deferred tax liability (Note 26) - 5 4 , 3 5 6Receipts in advance 1 0 9 , 1 4 9 1 8 3 , 2 3 4Derivative liabilities (Note 10) 7 4 4 , 3 0 0 4 8 7 , 1 1 9Unsettled domestic inter-bank payables 1 8 8 , 1 7 3 2 8 3 , 4 5 4Due to agencies 3 2 0 , 5 7 4 1 2 0 , 1 8 4Giro payments received 3 6 , 0 0 4 5 6 , 1 5 7O t h e r s 6 4 , 5 2 3 8 2 , 1 8 7

W 7 , 5 7 0 , 6 0 7 W 5 , 3 0 5 , 0 3 3


In addition to the above mentioned items, the Bank has the following commitments and contingencies as of December 31, 200and 1999 :

The trust accounts recognizes the trust management fees, which is the trust account revenues less expenses and dividends tobeneficiaries, as expenses and the banking accounts recognizes this amount as income. Under the Trust Business Act, the Bankreceives trust management fees from trust accounts which consist of base fees of 0.2% ~ 2.0% (depending on trust fund types) ofinvested capital and special fees of less than 4.0%. The Bank recognizes these trust management fees as a part of other operatingincome in its financial statements.

Under the Trust Business Act, special reserves are set up in the trust accounts for losses related to those trust funds with guaranteeof the principal or of a certain minimum rate of return. The reserves are used to provide for the losses on such trust funds and, if thelosses are incurred in excess of the special reserves, the excess losses are compensated by the Bank (banking accounts : loss fromtrust management in other non-interest expenses, trust accounts : compensation from banking accounts). Based on the financialstatements of the trust accounts prepared in accordance with the Trust Business Act, the losses compensated by the Bank, for theyears ended December 31, 2000 and 1999, amount to W191,531 million (loss from trust management : W158,325 million, retainedearnings carried over from prior years: W33,206 million) and W7,529 million.

Due to economic instability mentioned below, some of the Bank and its subsidiaries’s loans outstanding are to those entities thatwent into procedures for reorganizations such as workouts including Daewoo Group companies. As of December 31, 2000, loansoutstanding to entities under restructuring procedures (exclusive of Daewoo Group companies) amount to W3,163,874 million(provision for loan losses of W874,438 million and present value discounts of W157,297 million) and the total amount of loans andsecurities outstanding to Daewoo Group companies is W540,493 million (provision for loan losses of W328,569 million and presentvalue discounts of W41,094 million) and W195,072 million (unrealized losses of W29,847 million, present value discounts of W730million), respectively. Additionally, as of December 31, 2000, the total amount of loans and securities outstanding to Hyundai Groupcompanies (exclusive of Hyundai Motors Group) is W1,149,936 million (provision for loan losses of W50,349 million) and W68,849million (unrealized losses of W7,592 million), respectively. The actual outcome of the losses as regards to these companies may differfrom the estimated provision for loan losses amounts and the current consolidated financial statements of the Bank and itssubsidiaries do not reflect any adjustments that may arise due to such uncertainty.

Beginning in 1997, Korea and other countries in the Asia Pacific region experienced a severe contraction in substantially all aspects oftheir economies. This situation is commonly referred to as the 1997 Asian financial crisis. In response to this situation, the Koreangovernment and the private sector began implementing structural reforms to historical business practices.

The Korean economy is currently experiencing additional difficulties, particularly in the areas of restructuring private enterprises andreforming the banking industry. The Korean government continues to apply pressure to Korean companies to restructure into moreefficient and profitable firms. The banking industry is currently undergoing consolidations and significant uncertainty exists withregards to the availability of short-term financing during the coming year. The Bank and its subsidiaries may be either directly orindirectly affected by the situation described above.

The accompanying consolidated financial statements reflect management’s current assessment of the impact to date of theeconomic situation on the consolidated financial position of the Bank and its subsidiaries. Actual results may differ materially frommanagement’s current assessment.


Government and municipal bonds sold over the counter W 486 W 2 , 8 3 9Sale of loans under repurchase agreements 1 5 , 0 5 6 8 5 , 1 0 3Bills endorsed 1 9 , 1 4 9 2 4 , 9 3 4Loans written off 1 , 1 4 1 , 5 5 1 4 1 7 , 9 7 8



18. Capital Stock :

As of December 31, 2000, the Bank has 1,000,000,000 shares (par value : W5,000) authorized and 339,613,413 shares issued(299,613,413 common shares and 40,000,000 preferred shares). Goldman Sachs Capital Koryo, L.P. and the Korean government own11.07% and 6.48%, respectively, of the total issued shares. Among the issued shares, 13,717,896 common shares (4.8%) were issuedas Global Depository Shares and are listed on the London Stock Exchange.

On June 14, 1999, under the Investment Agreement (“the Agreement”) with Goldman Sachs Capital Koryo, L.P., the Bank issued30,000,000 common shares for cash at W12,000 per share. W206,376 million, which is W210,000 million of cash received in excess ofpar value less W3,624 million of issuance costs, was recorded in capital surplus (see Note 30).

On November 18, 1999, the Bank issued 33,314,050 common shares for cash at W11,400 per share. W212,241 million, which isW213,210 million of cash received in excess of par value less W969 million of issuance costs, was recorded in capital surplus.

The preferred stocks were issued exclusively to Korea Deposit Insurance Corporation (“KDIC”) (dividend rate: 1%) on December 28,1999 and are non-participating and non-cumulative. The Bank holds the preemptive right to purchase from KDIC 28,000,000 and12,000,000 shares of the preferred stock within 3.25 years and 5.25 years, respectively, from the date of issuance. The Bankrepurchased and plans to repurchase W40,000 million of the preferred stocks during January, 2000 and 2001(see Note 35),respectively. The repurchased shares are accounted as treasury stocks in capital adjustments.

The bank is authorized to issue to non-shareholders convertible bonds and bonds with stock purchase warrants up to total par valueamounts of W2,500 billion and W500 billion, respectively. With regards to these instruments, at December 31, 2000, the Bank hassubordinated foreign currency convertible bonds outstanding of W31,493 million (equivalent of US$ 25 million, 3,973,022 shares atDecember 31, 2000) issued to International Finance Corporation by KLB before the merger and of W251,940 million (equivalent ofUS$ 200 million, 16,961,310 shares at December 31, 2000) issued to Goldman Sachs Capital Koryo, L.P. (see Note 14).

19. Consolidated Capital Surplus :

The movements in consolidated capital surplus for the year ended December 31, 2000, are as follows:

Gain on business combination is due to the merger with Korea Long Term Credit Bank (“KLB”) on December 31, 1998 and representsthe difference between acquisition cost and net asset value of KLB. The increase in consolidated capital surplus is due to sharepercentage change of equity investment in Kookmin Credit Card Co., Ltd. resulting from its additional share issuance, and thedecrease includes cumulative effect of accounting change and loss on current year’s sale of treasury shares.

20. Employee stock options :

On March 18, 2000, the Bank granted stock options to its executives and as of December 31, 2000, the details of the stock optionsgranted are as follows:

1) Grant date : 2000.3.18.2) Shares granted : 375,000 shares3) Shares expired to date : 165,000 shares4) Shares outstanding : 210,000 shares5) Exercise method : issue of new shares or net settlement (the Bank’s choice)6) Exercise Price : W13,9007) Exercise period : within 2 years from 3 years after the grant date



Paid-in capital in excess of par value W 1 , 0 2 4 , 3 2 7 W - W - W 1 , 0 2 4 , 3 2 7Gain on business combination 3 9 7 , 6 6 9 - - 3 9 7 , 6 6 9Revaluation increment 1 7 7 , 2 2 9 - - 1 7 7 , 2 2 9Other capital surplus ( 1 1 , 9 8 0 ) 98,990 3 8 , 9 4 3 4 8 , 0 6 7

W 1 , 5 8 7 , 2 4 5 W 98,990 W 38,943 W 1 , 6 4 7 , 2 9 2


The Bank calculated the compensation costs using the fair value method and the calculation details are as follows:

1) Market price on grant date : W12,7002) Risk-free interest rate Note 1 : 9.325%3) Expected exercise period Note 2 : 4 years4) Expected share price volatility Note 3 : 7.11%5) Expected dividend rate Note 4 : 2.25%6) Adjusted expected expiration rate Note 5 : 13.49%7) Compensation cost per share : W9,300

Note 1 : Average of 3-year and 5-year maturity government bond yield rate at grant dateNote 2 : Average of mandatory service period(3 years) and option expiration period(5 years)Note 3 : Share price volatility based on share prices of 2000Note 4 : Average dividend rate for prior 4 years (period equal to expected exercise period)Note 5 : Original assumption of 0% expected expiration rate was adjusted to reflect those options expired

The Bank recognizes the compensation cost as salaries and wages by amortizing the total compensation cost over the expectedexercise period. As of December 31, 2000, the Bank recorded W514 million as employee stock options in capital adjustments (seeNote 22).

The compensation costs to be recognized in the future are as follows:

21. Consolidated Retained Earn i n g s :

Consolidated retained earnings as of December 31, 2000 and 1999 comprise the following:

The General Banking Act requires the Bank to appropriate as legal reserves a minimum of 10% of annual net income until the legalreserve equals paid in capital. This reserve is not available for payment of cash dividends but may be transferred to capital stock byan appropriate resolution by the Bank’s board of directors or used to reduce accumulated deficit, if any, by appropriate resolution ofthe Bank’s stockholders.

Pursuant to the Tax Exemption and Reduction Control Law, the Bank is required to appropriate, as reserves for businessrationalization, amounts equal to tax reductions arising from tax exemptions and tax credits. This reserve is not available forpayment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit, if any.

Until 1994, in cases where the rate of distributable net income exceeds the interest rate for one year time deposits, the Bankappropriated more than 50% of such excess amounts as special reserves. From 1995, related regulations were deleted and the Bankdoes not have any requirement for such appropriations.


2001.01.01. - 2001.12.31. W 6 5 12002.01.01. - 2002.12.31. 6 5 12003.01.01. - 2003.03.18. 1 3 7

W 1 , 4 3 9

Millions of Won


Legal reserves W 3 3 9 , 6 4 0 W 2 6 7 , 6 4 0Reserves for business rationalization 3 9 , 7 6 0 3 4 , 9 6 0Special reserves 4 8 0 , 7 0 0 1 7 , 7 0 0Other reserves 1 4 , 9 0 8 2 5 , 6 7 3Unappropriated retained earnings ( 1 6 6 , 8 5 2 ) ( 8 0 , 7 7 0 )

W 7 0 8 , 1 5 6 W 2 6 5 , 2 0 3


At December 31, 2000 and 1999, other reserves comprise the following :

Pursuant to the Tax Exemption and Reduction Control Law, the Bank appropriates reserves for overseas investment losses. Otherreserves are those appropriated for the operation of overseas branches and include foreign exchange rate effects of W18 million.

The Bank and its subsidiaries adjust cumulative effects of accounting changes and prior year error corrections in the balance ofunappropriated consolidated retained earnings carried over from prior years. For the years ended December 31, 2000 and 1999, theBank and its subsidiaries recorded W34,619 million and W208,587 million of decrease in unappropriated consolidated retainedearnings carried over from prior years and the details are as follows (in millions of Won):

(*) The cumulative effect in 2000 is the present value discounts arising from applying debtrestructuring accounting to trust

accounts that are to be allocated to prior years.

(**) Sum of W26,389 million of increase in beginning deferred tax liability due to applying deferred tax accounting and W962 million

of unrealized loss on installment sale of assets.

22. Consolidated Capital Adjustments:

The movements in consolidated capital adjustments for the year ended December 31, 2000, are as follows:



Reserves for overseas investment losses 1 3 , 9 0 0 2 4 , 7 0 0O t h e r 1 , 0 0 8 9 7 3

W 1 4 , 9 0 8 W 2 5 , 6 7 3

Gross Effect Tax Effects Net Effects Net Effects

(1) Cumulative effect of accounting change(a) Unrealized losses on derivatives W ( 2 1 , 6 2 5 ) W ( 6 , 6 6 0 ) W ( 1 4 , 9 6 5 ) W -(b) Debt restructurings (*) ( 3 3 , 2 0 6 ) ( 1 0 , 2 2 7 ) ( 2 2 , 9 7 9 ) ( 3 4 , 4 9 9 )(c) Change in consolidation adjustment debit 2 6 , 7 2 7 8 , 2 3 2 1 8 , 4 9 5 - (d) Change in consolidation adjustment credit ( 2 1 , 9 1 2 ) ( 6 , 7 4 9 ) ( 1 5 , 1 6 3 ) - (e) Losses on investments in associates ( 1 0 ) ( 3 ) (7) ( 9 2 , 1 1 2 )(f) Unrealized loss on Investments in

Stock Market Stabilization Funds - - - ( 1 7 , 8 3 0 )(g) Provision for losses on guarantees

and acceptances - - - ( 3 4 , 7 6 4 )(h) Others(**) - - - ( 2 7 , 3 5 1 )

( 5 0 , 0 2 6 ) ( 1 5 , 4 0 7 ) ( 3 4 , 6 1 9 ) ( 2 0 6 , 5 5 6 )

(2) Prior year error corrections - - - ( 2 , 0 3 1 )W ( 5 0 , 0 2 6 ) W ( 1 5 , 4 0 7 ) W ( 3 4 , 6 1 9 ) W ( 2 0 8 , 5 8 7 )

2000 1999


Treasury stocks W ( 5 , 8 9 0 ) W ( 4 0 , 0 0 0 ) W ( 4 , 8 5 4 ) W ( 4 1 , 0 3 6 )Unrealized gain/loss on investment

securities (Note 6) ( 5 6 , 2 9 2 ) 1 4 1 , 6 0 1 6 1 , 8 8 7 2 3 , 4 2 2O t h e r ( 2 7 0 ) 5 1 4 ( 2 7 0 ) 5 1 4

W ( 6 2 , 4 5 2 ) W 1 0 2 , 1 1 5 W 5 6 , 7 6 3 W ( 1 7 , 1 0 0 )


The treasury stocks comprise W1,036 million (794,701 common shares) in the Bank’s treasury stock funds and W40,000 million fromthe current year’s repurchase of 8 million shares out of the 40 million preferred shares issued to KDIC. These preferred shares wereissued to KDIC to maintain its capital adequacy ratio, which resulted from the P&A contract of Daedong Bank. The increase in otherconsolidated capital adjustments is related to employee stock options.

23. Other Non-interest Income (Expenses) :

Other non-interest income (expenses) for the years ended December 31, 2000 and 1999 comprise the following:

24. General and Administrative Expenses :

General and administrative expenses for the years ended December 31, 2000 and 1999 comprise the following:



Other non-interest incomeRealized gain on trading securities W 1 4 4 , 4 0 3 W 2 6 8 , 5 1 9Unrealized gain on trading securities 3 2 , 1 3 9 6 3 , 0 4 7Trust management commissions 2 3 8 , 6 5 8 8 5 , 9 3 3Reversal of provision for losses on

acceptances and guarantees - 6 , 7 6 4O t h e r s 3 6 , 6 6 0 5 0 , 7 5 3

W 4 5 1 , 8 6 0 W 4 7 5 , 0 1 6

Other non-interest expensesRealized loss on trading securities W 1 8 5 , 7 5 6 W 5 8 , 7 6 4Unrealized loss on trading securities 7 9 , 3 0 8 6 5 , 0 7 6Contributions to government funds 6 7 , 8 0 1 5 3 , 8 9 7Provision for losses on acceptances

and guarantees 8 , 9 0 1 - O t h e r s 9 9 , 2 9 1 1 1 1 , 0 8 4

W 4 4 1 , 0 5 7 W 2 8 8 , 8 2 1


Salaries and wages W 4 4 4 , 4 6 5 W 3 9 8 , 0 6 5Retirement benefits (Note 15) 1 0 5 , 9 6 3 1 1 3 , 1 2 3Other employee benefits 2 1 6 , 4 8 7 1 9 2 , 5 9 1Rent expense 2 2 , 1 7 2 2 2 , 1 9 3D e p r e c i a t i o n 1 6 1 , 8 2 6 2 5 6 , 0 8 7T a x e s 5 9 , 8 1 3 5 4 , 7 3 7A d v e r t i s i n g 3 9 , 8 1 3 2 3 , 5 8 6Ordinary development expenses 3 1 , 4 6 3 2 5 , 4 9 1Fees and commissions 3 4 , 5 7 4 3 4 , 2 6 3O t h e r s 1 1 5 , 4 2 3 1 1 5 , 0 3 2

W 1 , 2 3 1 , 9 9 9 W 1 , 2 3 5 , 1 6 8


25. Non-Operating Income (Expenses) :

Non-operating income (expenses) for the years ended December 31, 2000 and 1999 comprise the following :

26. Income Tax Expense :

Income tax expense for the years ended December 31, 2000 and 1999 are summarized as follows:

27. Earnings Per Share :

Earnings per share (“EPS”) for the years ended December 31, 2000 and 1999 are calculated as follows :



Non-operating incomeGain on disposal of fixed assets W 4 , 7 8 5 W 1 0 , 9 6 6Rent income 2 , 7 8 5 2 , 1 2 0Realized gain on investment securities 1 6 5 , 1 5 7 2 9 0 , 2 0 4Reversal of impairment loss on investment securities 1 2 , 5 8 9 -Unrealized gain on investment in bond market

stabilization fund 4 8 , 2 3 9 1 8 , 2 8 8Gain on sale of troubled loans 6 8 2 6 , 4 3 0Other income 1 1 0 , 4 3 0 7 2 , 5 0 5

3 4 4 , 6 6 7 4 0 0 , 5 1 3Non-operating expenses

Loss on disposal of fixed assets 4 , 7 9 3 1 0 , 2 0 7Realized loss on investment securities 3 7 , 4 0 4 1 6 4 , 7 3 2Impairment loss on equity investment securities 4 1 , 5 7 3 1 3 , 3 7 3Impairment loss on debt investment securities 9 1 , 8 1 0 7 4 , 7 7 8Loss on sale of troubled loans 3 0 , 3 7 6 1 3 2 , 3 9 8Special retirement benefits (Note 15) 2 8 , 1 0 2 1 1 , 2 7 5Other expenses 1 4 0 , 5 9 9 8 8 , 0 2 1

3 7 4 , 6 5 7 4 9 4 , 7 8 4W ( 2 9 , 9 9 0 ) W ( 9 4 , 2 7 1 )

Millions of Won

Net Income Equity 2000 1999

Income taxes payable W 7 0 3 , 4 6 5 W - W 7 0 3 , 4 6 5 W 9 3 , 5 1 6Deferred income taxes from temporary differences ( 2 5 5 , 1 9 6 ) ( 6 , 6 6 3 ) ( 2 6 1 , 8 5 9 ) 2 7 , 9 6 7Income tax expense - 6 , 6 6 3 6 , 6 6 3 -

W 4 4 8 , 2 6 9 W - W 4 4 8 , 2 6 9 W 1 2 1 , 4 8 3

Deferred income tax assets (liabilities) at December 31 W 2 0 7 , 5 0 0 W ( 5 4 , 3 5 6 )Deferred income tax liabilities at January 1 ( 5 4 , 3 5 6 ) ( 2 6 , 3 8 9 )Changes in deferred income tax assets (liabilities) W 2 6 1 , 8 5 6 W ( 2 7 , 9 6 7 )


Net income after income taxes W 5 9 2 , 4 1 6 W ( 2 7 , 8 0 6 )Dividend on preferred stock (1%) ( 1 , 6 0 0 ) ( 2 , 0 0 0 )

5 9 0 , 8 1 6 ( 2 9 , 8 0 6 )Weighted average number of common shares outstanding 2 9 8 , 8 1 8 , 7 1 2 2 7 3 , 1 0 4 , 8 3 8Earning per share (in Won) W 1 , 9 7 7 W ( 1 0 9 )


Diluted earnings per share for the years ended December 31, 2000 and 1999 are calculated as follows:

Weighted average number of common shares outstanding as of December 31, 2000 is calculated as follows:

The interest expense used in the calculation of the diluted EPS is net of 30.8% of tax effects. The number of common sharesassumed to be converted from convertible bonds is calculated by dividing the total convertible bond amounts by conversion priceper share.

28. Related Party Transactions :

Significant transactions between the Bank and its subsidiaries for the years ended December 31, 2000 and 1999, and the relatedaccount balances at December 31, 2000 and 1999 are as follows (in millions of Won) :


Net income after income taxes W 5 9 2 , 4 1 6 W ( 2 7 , 8 0 6 )Interest expenses on convertible bonds 6 , 4 5 8 4 , 1 6 3

5 9 8 , 8 7 4 ( 2 3 , 6 4 3 )Weighted average number of common shares outstanding 3 5 2 , 3 2 1 , 3 5 0 3 2 5 , 4 5 1 , 5 4 0Diluted earning per share (in Won) W 1 , 7 0 0 W ( 7 3 )


Weighted average common stock 2 9 9 , 6 1 3 , 4 1 3 3 6 6 2 9 9 , 6 1 3 , 4 1 3Treasury stocks 7 9 4 , 7 0 1 3 6 6 ( 7 9 4 , 7 0 1 )

Weighted average before dilution 2 9 8 , 8 1 8 , 7 1 2Convertible bonds issued to IFC 3 , 9 7 3 , 0 2 2 3 6 6 3 , 9 7 3 , 0 2 2Convertible bonds to Goldman Sachs 1 6 , 9 6 1 , 3 1 0 3 6 6 1 6 , 9 6 1 , 3 1 0Preferred shares 4 0 , 0 0 0 , 0 0 0 3 6 6 4 0 , 0 0 0 , 0 0 0Repurchased preferred shares 8 , 0 0 0 , 0 0 0 3 4 0 ( 7 , 4 3 1 , 6 9 4 )

3 5 2 , 3 2 1 , 3 5 0

Number of Days Weighted average shares outstanding number of shares



Kookmin Credit Card Co., L o a n s 1 , 6 4 7 2 1 , 1 1 1 Interest on loans 9 3 6 2 0 , 7 8 1L t d . Credit card accounts 3 5 3 , 5 1 0 5 7 8 , 7 7 7 Interest on credit card loans 5 9 , 5 6 0 7 2 , 2 1 9

D e p o s i t s 6 , 9 6 7 9 , 8 2 6 Interest on deposits 9 7 1 3 9Guarantee deposits received 4 , 0 1 3 1 , 5 0 5 Fees and commission income 1 1 5 , 3 5 5 6 7 , 7 6 1Rent deposits received 1 , 8 1 7 1 , 8 1 7

Kookmin Leasing Co., Ltd. L o a n s 1 4 2 , 4 6 8 1 3 8 , 5 7 3 Interest on loans 6 , 0 4 6 9 , 8 7 1D e p o s i t s 1 3 1 , 5 3 8 1 1 , 7 5 9 Interest on deposits 7 , 3 1 5 3 1 7

Kookmin Venture Capital L o a n s 1 2 1 , 1 3 4 1 2 5 , 0 0 0 Interest on loans 1 3 , 1 8 8 1 6 , 2 1 6Co., Ltd. D e p o s i t s 1 2 , 6 9 2 2 2 , 6 9 2 Interest on deposits 1 , 0 8 1 1 2 3

Acceptances and guarantees 5 , 5 4 8 5 , 9 6 3

Kookmin Bank Investment Trust D e p o s i t s 1 6 , 6 7 7 1 6 , 9 5 5 Interest on deposits 9 7 0 1 , 3 6 4Management Co., Ltd.

Kookmin Bank Due from banks 1 7 6 , 9 8 8 1 4 7 , 9 0 9 Interest on due from banks 1 0 , 2 4 4 6 , 5 3 0Luxembourg S.A. L o a n s 1 2 , 5 9 7 1 1 , 4 5 4 Interest on loans 8 0 4 7 0 5

Kookmin Finance Asia Due from banks 5 5 , 8 0 2 5 3 , 3 7 7 Interest on due from banks 4 , 7 3 4 3 , 5 9 6L t d . Call Loans 8 , 8 1 8 1 1 3 Interest on call loans 6 2 1 0 4

B o r r o w i n g s 1 2 , 6 1 1 1 2 , 5 2 2 Interest on borrowings 9 9 7 7 9 5





Kookmin Bank Due from banks 1 0 0 , 5 9 7 6 7 , 8 4 3 Interest on due from banks 6 , 3 2 6 4 , 7 3 1International (London) Ltd. L o a n s 1 2 , 5 9 7 1 1 , 4 5 4 Interest on loans 7 4 0 6 8 5

Kookmin Bank Leasing & L o a n s 5 1 , 3 3 3 4 4 , 0 9 8 Interest on loans 2 , 9 4 6 2 , 8 0 5Finance (H.K.) Ltd.

29. Cash Flow Inform a t i o n :

Cash and cash equivalents at December 31, 2000 and 1999 as presented in the statement of cash flows comprise the following :

Non-cash transactions that do not affect cash flows for the years ended December 31, 2000 and 1999 are as follows :

30. Investment from Goldman Sachs Capital Koryo, L.P. :

The Bank entered into an Investment Agreement (“the Agreement”) with Goldman Sachs Capital Koryo, L.P. on May 27, 1999. Thesignificant provisions of the Agreement are as follows :

1) Common stocksType of stocks & number of shares Common stock, 30,000,000 sharesTotal amount paid for the stocks W360,000 million (W12,000 per share)P u r c h a s e r Goldman Sachs Capital Koryo, L.P.Payment date June 14, 1999Articles of maintenance for limitations During 5 years after payment for the stocks, Goldman Sachs mayagainst acquisition of additional stocks not purchase more stocks of the Bank than the limitations set forth in the

Agreement and may not exercise its voting rights jointly with any other s h a r e h o l d e r s .

Articles of limitations against the During the one year period after payment for the stocks,disposal of the stocks Goldman Sachs may not dispose of the stocks without the board

of directors’ agreement in advance.From the one year period after the payment for the stocks, the Bank has the right to veto against the sale of the stocks held by Goldman Sachs to the shareholders of 10% or more of other competing banks in Korea or to the shareholders of foreign banks that have retail branches in Korea.


Cash on hand W 1 , 7 6 8 , 0 8 1 W 1 , 6 2 8 , 5 9 6Cash in foreign currencies 7 3 , 5 7 7 5 9 , 8 6 3Due from banks in Won currency 3 , 2 7 1 , 7 9 2 2 , 8 9 9 , 6 9 8Due from banks in foreign currencies 1 , 2 8 9 , 5 9 0 7 2 8 , 6 2 2

W 6 , 4 0 3 , 0 4 0 W 5 , 3 1 6 , 7 7 9

Decrease of loans from loan restructuring W 3 1 8 , 4 3 8 W 7 0 , 8 0 4Write off loans and others 8 1 7 , 5 5 7 5 1 5 , 3 8 6Changes in assets and liabilities due to accounting changes 3 4 , 6 1 9 2 0 6 , 5 5 6Increase in unrealized gain on investment securities in capital adjustments 7 4 , 7 0 1 - Increase in shareholders’ equity due to consolidation scope change - 1 2 5 , 7 7 2Sale of loans and purchase of investment securities due to P&A settlements - 2 5 3 , 5 7 9



2) Convertible bondsType of bonds Non-guaranteed subordinated convertible bondsIssue price US$ 200 million (100% of the face-value)Coupon rate & interest payment dates 3%, semi-annually on June 30, December 31Maturity & method of redemption June 14, 2005, fully redeemed on maturityPayment date June 14, 1999Conversion price W13,802 per shareConvertible period July 14, 1999 ~ May 14, 2005Conversion exchange rate US$1 : W1,170.5Conversion stock Common stockCalculations for the dividends to the Assume the conversion on the last day of the year beforeconverted shares the actual conversion

31. MOU for Merger with H&CB :

On December 22, 2000, the Bank entered into a MOU for merger with H&CB and the details of this bank are as follows :

H&CB was founded in 1967 under Korea Housing and Commercial Bank Act. H&CB is engaged in the banking business according tothe provisions of the General Banking Act and operates through 535 domestic branches and 3 overseas networks as of December 31,1999.

H&CB’s shares are listed on the Korean Stock Exchange and resulting from several additional share issuances, H&CB’s capital as ofDecember 31, 2000 is W841,813 million. Due to additional share issuances since 1996 and issuance of overseas depository receipts,the Korean government and foreign investors hold 14.50% and 66.44%, respectively, of common shares outstanding. Also, onOctober 3, 2000, H&CB listed American Depository Receipts of its common shares on New York Stock Exchange with the approval ofthe United States’ Securities and Exchange Commission and New York Stock Exchange under relevant U.S. accounting standards.

The summary of H&CB’s financial statements as of December 31, 1999 are as follows:

- Summary of Balance Sheet (Banking Accounts)

- Summary of Income Statement (Banking Accounts)


Account Millions of Won Account Millions of Won

Cash and Due from Banks W 2 , 6 7 5 , 0 8 7 D e p o s i t s W 3 2 , 9 9 8 , 3 4 1

Trading Securities 2 , 2 6 6 , 4 3 2 B o r r o w i n g s 3 , 8 0 3 , 4 7 3

Investment Securities 7 , 4 9 4 , 6 9 6 D e b e n t u r e s 2 , 2 7 1 , 1 9 6

L o a n s 3 0 , 6 3 1 , 4 4 2 Other Liabilities 5 , 3 8 0 , 4 3 6

Fixed Assets 8 7 3 , 8 7 5 Total Liabilities 4 4 , 4 5 3 , 4 4 6

Other Assets 2 , 7 0 9 , 7 7 4 Shareholders’ Equity 2 , 1 9 7 , 8 6 0

Total Liabilities and

Total Assets W 4 6 , 6 5 1 , 3 0 6 Shareholders’ Equity W 4 6 , 6 5 1 , 3 0 6

Account Millions of Won

Operating Income W 5 , 0 6 4 , 3 2 3Operating Expenses 4 , 2 9 7 , 9 7 7Net Operating Income 7 6 6 , 3 4 6Non-operating Revenue 8 3 , 7 6 6Non-operating Expenses 1 8 3 , 0 7 3Ordinary Income 6 6 7 , 0 3 9Income Taxes 2 1 5 , 7 1 7Net Income W 4 5 1 , 3 2 2



32. Restructuring of Subsidiaries ;

According to the audit report of Kookmin Leasing Co., Ltd., a subsidiary of the Bank, the company’s net loss for the year endedDecember 31, 2000 is W260,915 million and negative net asset value is W375,507 million as of December 31, 2000. Due to theseresults, there exists a significant uncertainty about the going concern of the company. The going concern of the company will bedetermined by its creditors under the private restructuring agreement. No adjustments have been made in the accompanyingconsolidated financial statements related to such uncertainties.

Additionally, the assets and liabilities of Kookmin Singapore (Merchant Bank) Ltd. that were settled by the Bank during the perioddue to its liquidation comprise the following (In millions of Won) :

After the liquidation of Kookmin Singapore (Merchant Bank) Ltd., the remaining assets of W186,999 million (US$ 167,742 thousand)and guarantees and acceptances of W2,230 million (US$ 2,000 thousand) were integrated into the Bank’s accounts and the remainingliabilities of W188,143 million (US$164,260 thousand, translated at 1999 year-end exchange rate) were offset with the Bank’s loansoutstanding to Kookmin Singapore (Merchant Bank) Ltd.

Under a merger contract with Daegu Kookmin Mutual Savings & Finance Co., Ltd., Busan Kookmin Mutual Savings & Finance Co.,Ltd., and Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. (“the three mutual savings & finance companies”) dated May 27,1999, the three mutual savings & finance companies were merged into the Bank as of August 22, 1999.

Daegu Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. DaeguKookmin Mutual Savings & Finance Co., Ltd. was located in Daegu and operated 5 local branches as of the merger date.

Busan Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. BusanKookmin Mutual Savings & Finance Co., Ltd. was located in Busan and operated 2 local branches as of the merger date.

Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. was incorporated in 1984 under the laws of the Republic of Korea. JeonnamKookmin Mutual Savings & Finance Co., Ltd. was located in Gwangju and operated 1 local branch as of the merger date.

The Bank issued no shares of common stock under the merger agreement due to the negative net asset values of the three mutualsavings & finance companies as of August 22, 1999.

The Bank recorded W177,831 million of losses from merger and adjusted its beginning retained earnings of 1999 for thecorresponding amounts. The W457,094 million of assets and W634,925 million of liabilities from the mergers are included in theassets and liabilities of the Bank.

Accrued Book Value Interest Settled Amount

A s s e t sDue from banks in foreign currencies W 2 , 1 8 7 W 9 9 W 2 , 2 8 6Securities in foreign currencies 9 5 , 6 9 3 1 , 3 3 3 9 7 , 0 2 6Loans in foreign currencies 8 6 , 9 8 7 7 0 0 8 7 , 6 8 7

W 1 8 4 , 8 6 7 W 2 , 1 3 2 W 1 8 6 , 9 9 9L i a b i l i t i e s

Deposits in foreign currencies W 1 0 9 , 7 9 8 W - W 1 0 9 , 7 9 8Borrowings in foreign currencies 7 8 , 3 4 5 - 7 8 , 3 4 5

W 1 8 8 , 1 4 3 W - W 1 8 8 , 1 4 3

Guarantees and acceptances W 2 , 2 3 0 W - W 2 , 2 3 0


Summaries of financial information of the three mutual savings & finance companies for the period ended August 22, 1999 are asfollows (in millions of Won) :

- Summary of Balance Sheets as of August 22, 1999 (unaudited)

- Summary of Income Statements for the period from July 1, 1999 to August 22, 1999 (unaudited)

During 1999, the Bank sold two of its subsidiaries, Orange (previously Kookmin) Mutual Savings & Finance Co. Ltd. and BukookMutual Savings & Finance Co. Ltd. Summary of significant matters related to the sale is as follows :



A s s e t sL o a n s W 2 1 7 , 1 8 0 W 1 0 5 , 5 8 3 W 3 8 , 7 5 3 W 3 6 1 , 5 1 6S e c u r i t i e s 2 2 6 2 , 6 5 0 1 , 3 6 9 4 , 2 4 5Other assets 3 6 , 0 7 8 3 7 , 3 0 1 1 7 , 9 5 4 9 1 , 3 3 3

Total asset W 2 5 3 , 4 8 4 W 1 4 5 , 5 3 4 W 5 8 , 0 7 6 W 4 5 7 , 0 9 4

L i a b i l i t i e sD e p o s i t W 3 2 2 , 2 6 4 W 1 7 4 , 3 5 1 W 6 9 , 8 6 0 W 5 6 6 , 4 7 5B o r r o w i n g s 1 0 , 0 0 0 1 3 , 9 5 2 1 2 , 0 0 0 3 5 , 9 5 2Other liabilities 1 5 , 7 4 9 1 2 , 4 9 9 4 , 2 5 0 3 2 , 4 9 8

Total liabilities 3 4 8 , 0 1 3 2 0 0 , 8 0 2 8 6 , 1 1 0 6 3 4 , 9 2 5

Shareholders’ EquityCapital stock 1 5 , 8 7 9 1 1 , 5 0 0 1 0 , 3 0 7 3 7 , 6 8 6Retained earnings ( 1 1 0 , 4 0 8 ) ( 6 6 , 7 6 8 ) ( 3 8 , 3 4 1 ) ( 2 1 5 , 5 1 7 )

Total shareholders’e q u i t y ( 9 4 , 5 2 9 ) ( 5 5 , 2 6 8 ) ( 2 8 , 0 3 4 ) ( 1 7 7 , 8 3 1 )

W 2 5 3 , 4 8 4 W 1 4 5 , 5 3 4 W 5 8 , 0 7 6 W 4 5 7 , 0 9 4


Operating income W 2 , 3 4 3 W 1 , 1 8 9 W 4 1 0 W 3 , 9 4 2Operating expenses 4 5 , 7 8 9 1 9 , 8 9 0 1 0 , 4 4 6 7 6 , 1 2 5Net Operating losses 4 3 , 4 4 6 1 8 , 7 0 1 1 0 , 0 3 6 7 2 , 1 8 3N o n - o p e r a t i n g

i n c o m e 4 1 , 5 1 7 1 3 1 , 5 3 4N o n - o p e r a t i n g

e x p e n s e s 1 1 6 5 2 7 1 4 8Extraordinary items - ( 1 , 1 3 1 ) - ( 1 , 1 3 1 )Net loss before taxes 4 3 , 5 5 8 1 8 , 3 2 0 1 0 , 0 5 0 7 1 , 9 2 8Income tax expense - - - - Net losses W 4 3 , 5 5 8 W 1 8 , 3 2 0 W 1 0 , 0 5 0 W 7 1 , 9 2 8

Orange Bukook

P u r c h a s e r Dong-a Mutual Savings & Hansol Mutual Savings &Finance Co., Ltd. Finance Co., Ltd.

Date of sale January 22, 1999 December 17, 1999Book value of the stocks W 1 , 0 0 0 W138,460 millionSales price W6,000 million W1,000 millionCosts incurred W30 million W12 millionGains and losses from the sale Gain of W5,970 million Loss of W137,472 million



The Bank, according to the sales agreement, deposited with Bukook Mutual Savings & Finance Co., Ltd. W50 billion of 1% interestsubordinated deposits with 5-year maturity and W90 billion of 1% interest deposits with 5-year grace period and 6-year maturity. TheBank recorded present value discounts on the deposits by using the weighted average interest rates of deposits with similar termsand conditions (see Note 4).

33. P&A Contract :

Under the decision of the Financial Supervisory Commission in accordance with the Act concerning the Structural Improvement ofthe Financial Industry, the Bank took over certain assets, including the loans classified as normal or precautionary, and most liabilitiesof Daedong Bank as of June 29, 1998, by the method of purchase and assumption. During 1999, the Bank exercised its put-backoptions in three settlements of March 31, June 30, and September 30. The related put-back option is a right to transfer the assumedassets to KAMCO or to be compensated for the losses from KDIC for non-performing assets within a year after the assumption. Thesettlements include the put-back options exercised, realized losses on the securities, guarantees, and syndicated loans, and thesettlements of the related interests and opportunity costs.

The Bank received in total W2,066,143 million in cash and securities from KAMCO and KDIC due to the P&A. As of September 30,1999, after the third and final settlement, the assets of the Daedong Bank that were absorbed into the Bank’s balance sheet were asf o l l o w s .

34. Reclassification of accounts:

Certain accounts of prior year’s consolidated financial statements are reclassified for comparative purposes. These reclassificationshave no effect on the consolidated net asset value and the consolidated net income of the Bank and its subsidiaries as of the balancesheet date.

35. Subsequent Events:

On January 9, 2001, the Bank’s board resolved to purchase 8,000,000 shares of treasury stocks at face value of W40 billion from KDICat the end of January, 2001. These treasury stocks are a part of the preferred stocks outstanding that were issued during 1998 tomaintain its capital adequacy ratio that had declined due to the Daedong Bank P&A.

Millions of Won

1) Securities W 2 6 0 , 7 9 5Banking accounts W 2 0 8 , 1 6 9Guaranteed trust account 3 8 , 8 5 7Performance trust account 1 3 , 7 6 9

2) Loans, net of provisions 8 5 7 , 1 0 0W 1 , 1 1 7 , 8 9 5

Board Governance CommitteeRisk Management CommitteeManagement Development andCompensation Committee

Marketing Dept.Customer Management OfficeCard Promotion Office

Household Financing Dept.

Trust Business Dept.Custody Office

Investment Trust Business Dept.Securities Agency Business Dept.

Internet Banking Dept.

Corporate Financing Dept.Investment Banking Office

Small & Medium Corporates Dept.Credit Analysis & Loan Approval Dept.Foreign Business Dept.

Fund Management & Securities Dept.International Finance Dept.

International Management Office

Management CouncilALM Risk Management CouncilCredit Councile-Business Council

ORGANIZATIONCHART

Retail Banking Group Strategic Planning Dept.Financial Management OfficeStrategic Innovation OfficeEconomic & Business Research Center

Compliance Dept.

Compliance Officer /Strategic Management Group

Risk Management Dept.Credit Review Office

Credit Management Dept.Loan Collection Dept.

Corporate Restructuring Office

Risk Management Group

Personal Dept.Education & Training CenterCorporate Culture & Public Relations Dept.

Public Information OfficeBranch Management Dept.General Affairs Dept.Security Control Dept.

General Administration Group

Information Technology Dept.

SecretariatCorporate Secretary’s Office

Information Technology Group

Corporate Banking Group

Trust Business Group

e-Business Group

Audit & Examination Dept.

Audit Committee

International Banking &Capital Market Group

Board of Directors

Chairman & CEO


General Meeting of Shareholders

Sang-Hoon Kim Born 1942Chairman & CEO

Chong-Min Lee Born 1943Standing Member of Audit Committee and Board of Directors

Bock-Woan Kim Born 1944EVP, Head of Retail Banking Group

Yoo-Hwan Kim Born 1944EVP, Head of Strategic Management Group, Compliance Officer

Duk-Hyun Kim Born 1945EVP, Head of International Banking & Capital Market Group

Ok-Hyun Yoon Born 1945EVP, Head of Information Technology Group & e-Business Group

Tai-Gon Kim Born 1947EVP, Head of Corporate Banking Group

Byung-Sang Kim Born 1947EVP, Head of General Administration Group

Byung-Jin Kim Born 1947EVP, Head of Trust Business Group & Risk Management Group

BOARD OF DIRECTORS ANDEXECUTIVE VICE PRESIDENTS


1

1

2

3

4

5

6

7

8

9

23

456

789

In Kie Kim Born 1940Professor, Chung-Ang University

Hyung Chin Chang Born 1946Chairman, Young Poong Co.

Ji Hong Kim Born 1956Professor, Hanyang University

Henry Cornell Born 1956Managing Director, Goldman Sachs

Bong Ho Paick Born 1935Emeritus Professor, Hanyang University

Ik Rae Kim Born 1950Chairman, Daou Technology Inc.

Seung Hun Hahn Born 1934Lawyer, Park & Partners

Young Suk Kim Born 1935Senior Advisor, A.T.Kearney Korea Ltd.

Se Ung Lee Born 1939Chairman, Shinil Enterprise Co., Ltd.

Chang Ki Min Born 1940C.P.A.

OUTSIDE DRECTORS


1

2

3

4

5

6

7

8

9

10

1 234

6 5

10

78

9

INTERNATIONALBANKING DIRECTORY


Head of International Banking &Capital Market Group

Duk-Hyun Kim Executive Vice President

Tel: (822) 317-2004 Fax: (822) 317-2224

INTERNATIONAL FINANCE DEPT .General Manager

Sung-Wan ChoiTel: (822) 317-2029 Fax: (822) 317-2219

Team Head

Jee-Woo Park (Risk Management)

Tel: (822) 317-2059 Fax: (822) 317-2219

Hong Lee (Planning & Funding)

Tel: (822) 317-2066 Fax: (822) 317-2221

Cho-Hyun Baek (Investment & Underwriting)

Tel: (822) 317-2073 Fax: (822) 317-2277

Dong-Joon Han (Middle & Back Office)

Tel: (822) 317-2094 Fax: (822) 317-2704

Sung-Don Lee (Dealing Marketing)

Tel: (822) 317-2096 Fax: (822) 317-2663

Seung-Sik Lee (Dealing, Short-Term)

Tel: (822) 317-2095 Fax: (822) 317-2658

Kwang-Keun Yoo (Derivatives)

Tel: (822) 317-2718 Fax: (822) 317-2778

INTERNATIONAL MANAGEMENT OFFICE

General Manager

Sungshin ChoTel: (822) 317-2047 Fax: (822) 317-2885

Team Head

Seung-Youn Han (Head of Correspondent Banking)

Tel: (822) 317-2124 Fax: (822) 317-2885

Seung-Hwan Kim (IR, Rating )

Tel: (822) 317-2161 Fax: (822) 317-2885

Hae-Boong Joo (Overseas Network)

Tel: (822) 317-2097 Fax: (822) 317-2885

Regional Head (Correspondent)

America : Jae-Koo NohTel: (822) 317-2890 Fax: (822) 317-2885

Europe, Africa, Asia, Middle East and

Oceania : Dae-Il ParkTel : (822) 317-2886 Fax : (822) 317-2885

FOREIGN BUSINESS DEPT.General Manager

Yang-Jin KimTel: (822) 3779-8030 Fax: (822) 3779-8989

Team Head

Dong-Sool Lim (Foreign Business)

Tel: (822) 3779-8961 Fax: (822) 3779-8989

Hoe-Sik Lee (Business Promotion)

Tel: (822) 3779-8941 Fax: (822) 3779-8989

Bum-Young Choi (International Lawsuit)

Tel: (822) 3779-8951 Fax: (822) 3779-8989

Young-Shick Kim (Planning)

Tel: (822) 3779-8931 Fax: (822) 3779-8989

CHINA

Kookmin Finance Asia Ltd.(H.K.)

Managing Director : Hyo-Nam Choi19/F, Gloucester Tower, 11 Pedder Street, Central,

Hong Kong, China

Tel: (852) 2530-3633/2521-3584

Fax: (852) 2869-6650/2840-0207

SWIFT: CZNBHKHH Telex: 68015 KOFAHX

LUXEMBOURG

Kookmin Bank Luxembourg S.A.

Managing Director : Woo-Shick Lee11A, Boulevard Prince Henri, L-1724 Luxembourg

Tel: (352) 466-555 Fax: (352) 466-566

SWIFT: CZNBLULL Telex: 60130 CNBLU

NEW ZEALAND

Kookmin Bank Auckland Branch

General Manager : Chang-Hoon JeongLevel 19, ASB Bank Centre Cnr. Albert & Wellesley

Streets PO BOX 7506, Auckland, New Zealand

Tel: (64-9) 366-1000 Fax: (64-9) 366-6608

SWIFT: CZNBNZ2A Telex: NZ60214

ARGENTINA

Kookmin Bank Buenos Aires Branch

General Manager : Lark-Jong JungAV, Rivadavia 2690 Capital Federal (1034)

Buenos Aires, Argentina

Tel: (54-11) 4953-3500 Fax: (54-11) 4953-0080

SWIFT: CZNBARBA Telex: AR23053

J APAN

Kookmin Bank Tokyo Branch

General Manager : Kye- Jung KangYurakucho Denki Bldg. -N, 14F, 1-7-1, Yurakucho,

Chiyoda-ku Tokyo 100 Japan

Tel: (81-3) 3201-3411 Fax: (81-3) 3201-3410

SWIFT: CZNBJPJT Telex: 2224334CNBTKY

USAKookmin Bank New York Branch

General Manager: Soo-Jong Choi565 Fifth Avenue, 24th Floor, New York,

NY, 10017 U.S.A.

Tel : (1-212) 697-6100 Fax: (1-212) 697-1456

SWIFT: CZNBUS33 Telex: 49666583

ABA: 0260 1334 3

UNITED K INGDOM

Kookmin Bank International Ltd.

Managing Director : Young-Guk Song6th Floor, Princes Court, 7 Princes Street,

London EC2R 8AQ, U.K.

Tel: (44-207) 710-8300 Fax: (44-207) 726-2808

SWIFT: CZNBGB2L Telex: 8811971KBILDG

HEAD OFFICE

OVERSEAS NETWORK

HE A D OF F I C E

9-1, 2-ga, Namdaemoon-ro Jung-gu, Seoul 100-703, KoreaTel: (822) 317-2890 / 317-2891 Fax: (822) 317-2885Swift Code: CZNBKRSE Telex : K23481, K26109h t t p : / / w w w . k o o k m i n b a n k . c o m

DAT E O F ES TA B L I S H M E N T : Feb 1, 1963

NU M B E R O F EM P L O Y E E S : 1 1 , 0 1 0

NU M B E R O F OF F I C E S : Domestic 591Overseas 7

PA I D-I N CA P I TA L : W 1,698billion

TO TA L SH A R E H O L D E R S’ EQ U I T Y : W 4,257 billion

NU M B E R O F SH A R E S

Authorized : 1,000,000,000Common Stock : 299,613,413Preferred Stock : 40,000,000

MA J O R SH A R E H O L D E R S

Goldman Sachs : 11.07%The Government of Korea : 6.48%Bank of New York : 6.21%(GDR Transfer Agent and Registrar)Daehan Investment Trust Co. : 3.05%Hyundai : 2.46%Korea Investment Trust Co. : 1.99%The Government of Singapore :1.87%GIS-Prudential Assurance : 1.60%Samsung : 1.44%National Pension Corporation : 1.27%

ST O C K LI S T I N G :Korea Stock ExchangeLondon Stock Exchange(GDR)

GE N E R A L ME E T I N G O F SH A R E H O L D E R S : March 15th, 2001

TR A N S F E R AG E N T A N D RE G I S T R A RCommon Stock: Kookmin Bank Securities Agency Business Dept. 15-22 Yoido-dong, Youngdeungpo-gu, Seoul, KoreaTel: (822) 3779-8208

DR: Bank of New York

ADR Division

101 Barclay Street, 22nd Fl., New York, N.Y. 10286, U.S.A.Tel: 212-815-5838

IN T E R D E P E N D E N T AC C O U N TA N T SPrice Waterhouse CoopersSamil Accounting Corporation

IN V E S T O R IN F O R M AT I O N

If residents of the United Kingdom are holders of the Bank’s shares or depository shares representing the Bank’s shares, and wish to know if they are able to obtain relief fromUnited Kingdom taxation to which they areentitled in respect of their holdings of such securities,they should consult their own tax advisers.

CORPORATEDATA

9-1, 2-ga, Namdaemoon-ro Jung-gu,Seoul 100-703, KoreaTel: (822) 317-2890 / 317-2891Fax: (822) 317-2885Swift Code: CZNBKRSETelex : K23481, K26109h t t p : / / w w w . k o o k m i n b a n k . c o m

Documents

Global Reach with Local Touchimg2.kbstar.com/obj/eng/Kookmin2000.pdf · 2008. 11. 16. · Global Reach with Local Touch. Profile Kookmin Bank is the largest financial institution