Form 6-K
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 6-K

 


 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2004

 


 

Woori Finance Holdings Co., Ltd.

(Translation of Registrant’s name into English)

 


 

203, Hoehyon-dong, 1-ga, Chung-gu, Seoul, Korea 100-792

(Address of principal executive offices)

 


 

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

 

Form 20-F      X            Form 40-F              

 

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

 

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

 

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

 

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

 

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

 

Yes                      No      X    

 



Table of Contents

Summary of 2004 3Q Business Report

 

Table of Contents

 

I. Company Overview    4
       1.    Purpose of Company    4
            a.    Scope of Business    4
            b.    Scope of Business of Subsidiaries    4
       2.    History of the Company    8
            a.    Company History    8
            b.    Associated Business Group    9
       3.    Capital Structure    11
            a.    Change in Capital    11
            b.    Expected Changes in Capital    11
            c.    Convertible Bonds    13
            d.    Stock Options     
       4.    Total Number of Authorized Shares    14
            a.    Total Number of Authorized Shares    14
            b.    Information of Issued Shares    14
            c.    Stock Options    15
            d.    Status of Employee Stock Option Program    17
       5.    Voting Rights    17
       6.    Dividend Information    18
            a.    Dividend Information for Past Years    18
II. Description of Business    19
       1.    Business Overview    19
            a.    Current Trend of Industry    19
            b.    Company Status    19
       2.    Overview of Operations    23
            a.    Performance of Operations    23
            b.    Financing of Operations    23
            c.    Transactions related to Commission Fees    24
       3.    Other Details Relevant to Investment Decisions    25
            a.    Won-denominated Current Ratio    25
            b.    Foreign Currency-denominated Current Ratio    25
            c.    Debt Ratio    25
            d.    Credit Ratios    26
            e.    Other Important Information    26

 

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III. Financial Information    27
       1.    Condensed Financial Statement (Non-consolidated)    27
IV. Independent Auditor’s Opinion    30
       1.    Independent Auditor’s Opinion    30
            a.    Independent Auditor    30
       2.    Compensation to the Independent Auditor    30
            a.    Auditing Service    30
            b.    Compensation for Services other than the Audit    31
V. Corporate Governance and Affiliated Companies    32
       1.    Overview of Corporate Governance    32
            a.    About the Board of Directors    32
       2.    Related Companies    37
            a.    Invested Shares in Related Companies    37
            b.    Year-end Performance of Affiliated Companies and Subsidiaries    38
       3.    Investments in Other Companies    47
VI. Stock Information    48
       1.    Stock Distribution    48
            a.    Stock Information of Major Shareholders and Related Parties    48
            b.    Share Ownership of more than 5%    48
            c.    Shareholder Distribution    49
            d.    Total Minority Shareholders, Major Shareholders and Other Shareholders    49
       2.    Stock Price and Stock Market Performance for the Past Six Months    50
            a.    Domestic Stock Market    50
            b.    Foreign Stock Market    50
VII. Directors and Employee Information    51
       1.    Directors    51
       2.    Employee Status    51
       3.    Labor Union Membership    51

 

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Table of Contents
VIII. Related Party Transactions    52
       1.    Transactions with Affiliated Parties    52
            a.    Transactions of Provisional Payments and Loans (including secured loans)    52
            b.    Payment Transactions    53
            c.    Real-Estate Transactions (including rent activities)    53

 

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Table of Contents
I. Company Overview

 

1. Purpose of Company

 

a. Scope of Business

 

Acquisition/ownership of shares in companies, which are engaged in financial services or are closely related to financial services and the governance and/or management of such companies

 

  (1) Corporate Management

 

  1. Setting management targets for subsidiaries and approving subsidiary business plans of subsidiaries

 

  2. Evaluation of subsidiary business performance and establishment of compensation levels

 

  3. Formulation of corporate governance structures of subsidiaries

 

  4. Inspection of operational and asset status of subsidiaries

 

  5. Activities complementary to aforementioned business activities from number 1 to 4

 

  (2) Corporate Management Support Activities

 

  1. Funding of Affiliates (in this provision and hereinafter, includes direct and indirect subsidiaries)

 

  2. Capital investment in subsidiaries or procurement of funds for funding of Affiliates

 

  3. Development and sale of products jointly with Affiliates and administrative support for joint use of facilities and computer systems with Affiliates

 

  4. Activities ancillary to the activities in the above items, for which the authorization, permission or approval is not required under the relevant laws and regulations

 

  (3) All businesses or activities directly or indirectly related to the businesses listed above

 

b. Scope of Business of Subsidiaries

 

  (1) Woori Bank

 

  1. Primary Businesses

 

- Banking business activities

 

- Ancillary business activities

 

  2. Supplementary Businesses

 

- Trust business activities

 

- Credit card business activities

 

- Other authorized business activities

 

  (2) Kyongnam Bank

 

  1. Primary Businesses

 

- Banking business activities

 

- Ancillary business activities

 

  2. Supplementary Businesses

 

- Trust business activities

 

- Credit card business activities

 

- Other authorized business activities

 

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Table of Contents
  (3) Kwangju Bank

 

  1. Primary Businesses

 

- Banking business activities

 

- Ancillary business activities

 

  2. Supplementary Businesses

 

- Trust business activities

 

- Credit card business activities

 

- Other authorized business activities

 

  (4) Woori Securities

 

  1) Securities dealing

 

  2) Consignment sales of securities

 

  3) Brokering of securities transactions and/or proxy transactions

 

  4) Brokering of securities in domestic securities markets and overseas markets

 

  5) Underwriting securities

 

  6) Offering of securities

 

  7) Conscription for securities sales

 

  8) Securities saving services

 

  9) Overseas securities trading

 

  10) Securities secured loans and securities lending

 

  11) Credit services related to securities trading

 

  12) Securities and shareholdings valuation

 

  13) Securities safekeeping

 

  14) Trading and brokering of marketable certificate of deposits

 

  15) Agent services for foreigners

 

  16) Payment guarantee for corporate bond principal and interest

 

  17) Trustee services for bond offerings

 

  18) M&A mediation and brokering

 

  19) Public offering related deposit agent services

 

  20) Foreign exchange services

 

  21) Domestic consignment sales of foreign investment trust securities

 

  22) Bill discounts and trading

 

  23) Bill brokering

 

  24) Corporate management and restructuring, financial advisory

 

  25) Real estate leasing

 

  26) Lending of securities to institutional investors

 

  27) Lottery and ticket sales

 

  28) Training related to securities operations

 

  29) Publishing books and other publications

 

  30) Leasing and sales of IT systems and software related to securities

 

  31) Customer investment funds related to foreign exchange and foreign currency hedging

 

  32) Foreign exchange trading, exchange, brokering of lendings and derivatives

 

  33) Consignment sales of mutual funds

 

  34) Futures under the Futures Trading Act

 

  35) Investment advisory, discretionary investment under the Indirect Investment Assets Management Act

 

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  36) Lending of securities, brokering, arranging and agent service

 

  37) Underwriting, brokering and agent service for securities issued on a private placement basis

 

  38) Trading, brokering and agent service for loans

 

  39) Safeguard deposit of securities

 

  40) Asset management and trustee services for securitization specialty companies under asset securitization regulations

 

  41) Trading, brokering and agent service for OTC derivatives

 

  42) Other businesses and activities related to the businesses listed above

 

  (5) Woori Investment Trust Management

 

  1) Securities investment trust management

 

  2) Investment advisory and investment transactions

 

  3) Futures investment

 

  4) Call transactions

 

  5) Purchasing bills

 

  6) All businesses or activities directly or indirectly related to businesses 1 to 5 mentioned above

 

  (6) Woori Finance Information System

 

  1) Development, distribution and management of computer systems

 

  2) Consulting services in computer implementation and usage

 

  3) Distribution, mediation and lease of computer systems

 

  4) Maintenance of computer related equipment

 

  5) Publish and distribution of IT-related reports and books

 

  6) Educational services related to computer usage

 

  7) Research on information technology and training outsourcing

 

  8) Internet related business

 

  9) Information communication, telecommunications and information distribution services

 

  10) Manufacturing and distribution of audio-visual media

 

  11) Information processing and outsourcing services

 

  12) All businesses or activities directly or indirectly related to the businesses listed above

 

  (7) Woori F&I

 

  1) Undertaking and disposition of ABS, issued primarily to securitize distressed assets through asset securitization, under the Asset Securitization Law

 

  2) Undertaking and disposition of asset management companies that were initially set up to manage distressed assets, under the Asset securitization Law

 

  3) All businesses or activities directly or indirectly related to the businesses listed above

 

  (8) Woori LB Second Asset Securitization Specialty Co., Ltd.

 

  1) Transfer, management and disposition of all rights related to securities and other assets (hereinafter ‘securitized assets’) of Woori Bank (formerly known as Hanvit Bank) and Kwangju Bank under the Asset Securitization Law

 

  2) Issue and redemption of securitized assets

 

  3) Preparing and registering of the asset securitization plan to the Financial Supervisory Service

 

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Table of Contents
  4) Consummation of contracts required to execute the asset securitization plan

 

  5) Provisional borrowing and other similar procedures for ABS redemption

 

  6) Investment of surplus funds

 

  7) Other businesses and activities related to the businesses listed above

 

  (9) Woori LB Third Asset Securitization Specialty Co., Ltd.

 

  1) Transfer, management and disposition of all rights related to securitized assets of Woori Bank, Kyongnam Bank and Woori Credit Card under the Asset Securitization Law

 

  2) Issue and redemption of securitized assets

 

  3) Preparing and registering of the asset securitization plan to the Financial Supervisory Service

 

  4) Consummation of contracts required to execute the asset securitization plan

 

  5) Provisional borrowing and other similar procedures for ABS redemption

 

  6) Investment of surplus funds

 

  7) Other businesses and activities related to the businesses listed above

 

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Table of Contents
2. History of the Company

 

a. Company History

 

(1) Background to establishment and major changes

 

December 23, 2000    Establishment of Financial Holding Company Act
December 30, 2000    KDIC invested public funds of 8.5 trillion won in Hanvit Bank, Peace Bank, Kwangju Bank, Kyongnam Bank and Hanaro Merchant Bank
March 14, 2001    Filed for establishment approval of ‘Woori Finance Holdings’
March 24, 2001    Official approval from the Financial Supervising Service for ‘Woori Finance Holdings’
March 27, 2001    Incorporated as ‘Woori Finance Holdings, Co. Ltd’ (Total Capital: 3.6 trillion won)
April 2, 2001    Official launch of ‘Woori Finance Holdings’
July 16, 2001    Issued bond with warrants
September 29, 2001    Woori Finance Information System incorporated as a subsidiary
December 3, 2001    Woori Asset Management incorporated as a subsidiary
December 3, 2001    Woori First Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
December 26, 2001    Woori Second Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
December 31, 2001    Spin-off and merger of Peace Bank; Launch of Woori Credit Card
March 15, 2002    Woori Third Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
March 29, 2002    Woori Investment Trust Management incorporated as subsidiary
June 11, 2002    Capital increase through public offering (Total capital: 3.8 trillion won)
June 24, 2002    Listed on the Korea Stock Exchange
July 29, 2002    Woori Securities as incorporated as subsidiary
September 5, 2002    Consummated strategic investment agreement with Lehman Brothers with respect to managing distressed assets
December 23, 2002    Purchase and Acquisition contract with credit card division of Kwangju Bank
December 31, 2002    IT outsourcing contract with Kwangju Bank and Kyongnam Bank
March 10, 2003    Integrated IT platform with Kyongnam Bank
August 1, 2003    Woori Merchant Bank merged into Woori Bank
August 15, 2003    Integration of Kwangju Bank IT platform
September 3, 2003    Launching of bancassurance business
September 29, 2003    Listing on New York Stock Exchange
December 11, 2003    Liquidation of Woori LB First Asset Securitization Specialty Co., Ltd.
December 12, 2003    Announcement of merger between Woori Card and Woori Bank
March 30, 2004    Appointment of new management
June 18, 2004    Woori Securities becomes a wholly owned subsidiary

 

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Table of Contents
b. Associated Business Group

 

(1) Overview of Business Group

 

  1) Name of business group : Woori Finance Group

 

  2) History

 

December 23, 2000    Establishment of Financial Holding Company Act
December 30, 2000    KDIC invested public funds of 8.5 trllion won in Hanvit Bank, Peace Bank, Kwangju Bank, Kyongnam Bank and Hanaro Merchant Bank
March 14, 2001    Filed for establishment approval of ‘Woori Finance Holdings’
March 24, 2001    Official approval from the Financial Supervising Service for ‘Woori Finance Holdings’
March 27, 2001    Incorporated as ‘Woori Finance Holdings, Co. Ltd’ (Total Capital: 3.6 trillion won)
April 2, 2001    Official launch of ‘Woori Finance Holdings’
July 16, 2001    Issued bond with warrants
September 29, 2001    Woori Finance Information System incorporated as a subsidiary
December 3, 2001    Woori Asset Management incorporated as a subsidiary
December 3, 2001    Woori First Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
December 26, 2001    Woori Second Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
December 31, 2001    Spin-off and merger of Peace Bank; Launch of Woori Credit Card
March 15, 2002    Woori Third Asset Securitization Specialty Co., Ltd. incorporated as a subsidiary
March 29, 2002    Woori Investment Trust Management incorporated as subsidiary
June 11, 2002    Capital increase through public offering (Total capital: 3.8 trillion won)
June 24, 2002    Listed on the Korea Stock Exchange
July 29, 2002    Woori Securities as incorporated as subsidiary
September 5, 2002    Consummated strategic investment agreement with Lehman Brothers with respect to managing distressed assets
December 23, 2002    Purchase and Acquisition contract with credit card division of Kwangju Bank
December 31, 2002    IT outsourcing contract with Kwangju Bank and Kyongnam Bank
March 10, 2003    Integrated IT platform with Kyongnam Bank
August 1, 2003    Woori Merchant Bank merged into Woori Bank
August 15, 2003    Integration of Kwangju Bank IT platform
September 3, 2003    Launching of bancassurance business
September 29, 2003    Listing on New York Stock Exchange
December 11, 2003    Liquidation of Woori LB First Asset Securitization Specialty Co., Ltd.
December 12, 2003    Announcement of merger between Woori Card and Woori Bank
March 30, 2004    Appointment of new management
June 18, 2004    Woori Securities becomes a wholly owned subsidiary

 

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Table of Contents
(2) Related companies within Business Group

 

Type


  

Name of Company


  

Controlling
Company


  

Notes


Holding Company    Woori Finance Holdings (*1)    KDIC     

1st Tier Subsidiaries

  

 

Woori Bank

   Woori Finance Holdings    9 companies
   Kyongnam Bank      
   Kwangju Bank      
   Woori Finance Information System      
   Woori F & I      
   Woori Second Asset Securitization Specialty      
   Woori Third Asset Securitization Specialty      
   Woori Investment Trust Management, Co.      
   Woori Securities (*2)      
2nd Tier Subsidiaries   

 

Woori Credit Information

   Woori Bank    6 companies
   Woori America Bank      
   P.T. Bank Woori Indonesia      
   Shinwoo Corporate Restructuring Company      
   Nexbi Tech   

Woori Finance Information

System

  
   Woori CA Asset Management    Woori F&I   

(*1) Listed company on the New York Stock Exchange
(*2) Listing was cancelled on June 24, 2004 following exchange of stocks between Woori Securities and Woori Finance Holdings

 

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Table of Contents
3. Capital Structure

 

a. Change in Capital

 

(units: won)

 

Date

  

Category


  

Stock Decrease/Increase


    Changed
Capital


   Method

   Ratio

     

Type


   Quantity

   Par
Value


   Issue
price


         
2001.3.27    Establishment    Common    727,458,609    5,000    5,000     3,637,293,045    —      —  
2002.5.31    Exercise B/W    Common    165,782    5,000    5,000     3,638,121,955    —      —  
2002.6.12    Capital increase w/consideration    Common    36,000,000    5,000    6,800     3,818,121,955    Public
Offering
   0.0494
2002.6.30    Exercise B/W    Common    1,416,457    5,000    5,000     3,825,204,240    —      —  
2002.9.30    Exercise B/W    Common    2,769,413    5,000    5,000     3,839,051,305    —      —  
2002.12.31    Exercise B/W    Common    4,536    5,000    5,000     3,839,073,985    —      —  
2003.3.31    Exercise B/W    Common    1,122    5,000    5,000     3,839,079,595    —      —  
2003.6.30    Exercise B/W    Common    7,688,991    5,000    5,000     3,877,524,550    —      —  
2004.6.18   

Stock

Exchange

   Common    8,571,262    5,000    8,9021 )   3,920,380,860    Exchange with
WooriSec shares on a
1-to-0.55 basis
   0.0110

1) Applied share price when deriving the exchange ratio

 

b. Expected Changes in Capital

 

Unsecured Convertible Bonds can be converted a year after their issuance and, therefore, can bring about changes in capital.

 

On November 4, 2004 there was a request for conversion of Unsecured C/B Series 6-3 (USD 3,000,000), and therefore increase in capital of 3,331,505,000 won (666,301 shares) is anticipated.

 

(1) Unsecured Convertible Bond Series No. 6-1

 

Item


  

Information


Date of Issuance

   2002.9.27

Total Amount of Issuance

   USD 36,000,000

Exercise Period

   2003.9.28 ~ 2005.08.27

Exercise Price

   7,313 won

Total amount of unexercised bond with warrants

   USD 36,000,000

Number of Shares

   5,914,180

 

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Table of Contents
(2) Unsecured Convertible Bond Series No. 6-2

 

Item


  

Information


Date of Issuance

   2002.12.20

Total Amount of Issuance

   USD 16,000,000

Exercise Period

   2003.12.21 ~ 2005.11.20

Exercise Price

   5,588 won

Total amount of unexercised bond with warrants

   USD 16,000,000

Number of Shares available for issuance

   3,481,173

 

(3) Unsecured Convertible Bond Series No. 6-3

 

Item


  

Information


Date of Issuance

   2003.3.26

Total Amount of Issuance

   USD 39,000,000

Exercise Period

   2004.3.27 ~ 2006.2.26

Exercise Price

   5,380 won

Total amount of unexercised bond with warrants

   USD 39,000,000

Number of Shares available for issuance

   8,661,914

 

(4) Unsecured Convertible Bond Series No. 6-4

 

Item


  

Information


Date of Issuance

   2003.3.26

Total Amount of Issuance

   20 billion won

Exercise Period

   2004.3.27 ~ 2006.2.26

Exercise Price

   5,380 won

Total amount of unexercised bond with warrants

   20 billion won

Number of Shares available for issuance

   3,717,472

 

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Table of Contents
5) Unsecured Convertible Bond Series No. 6-5

 

Item


  

Information


Date of Issuance

   2003.7.10

Total Amount of Issuance

   USD 1,000,000

Exercise Period

   2004.7.11 ~ 2006.6.10

Exercise Price

   7,228 won

Total amount of unexercised bond with warrants

   USD 1,000,000

Number of Shares available for issuance

   164,429

 

c. Convertible Bonds

 

(units: won, USD, shares)

 

Item


  

Unsecured

C/B

Series 6-1


 

Unsecured

C/B

Series 6-2


 

Unsecured

C/B

Series 6-3


 

Unsecured

C/B

Series 6-4*


 

Unsecured

C/B

Series 6-5


  Total

Date of Issue    2002.9.27   2002.12.20   2003.3.26   2003.3.26   2003.7.10   —  
Total Amount    USD
36,000,000
  USD
16,000,000
  USD
39,000,000
  20 billion
won
  USD
1,000,000
  USD92,000,000
+20 billion won
Allotment Method    Private   Private   Private   Private   Private   —  
Conversion Period    2003.9.28~
2005.8.27
  2003.12.21 ~
2005.11.20
  2004.3.27 ~
2006.2.26
  2004.3.27 ~
2006.2.26
  2004.7.11 ~
2006.6.10
  —  
Conditions    ratio    100%   100%   100%   100%   100%   —  
     price    7,313   5,588   5,380   5,380   7,228   —  
Type of Stock when converted    Common   Common   Common   Common   Common   —  

Converted

Bonds

   amount    —     —     —     —     —     —  
     shares    —     —     —     —     —     —  

Unconverted

Stock

   amount    USD
36,000,000
  USD
16,000,000
  USD
39,000,000
  20 billion
won
  USD
1,000,000
  —  
     shares    5,914,180   3,481,173   8,661,914   3,717,472   164,429   21,939,168
Notes    Maturity:
2005.9.27
  Maturity:
2005.12.20
  Maturity:
2006.3.26
  Maturity :
2006.3.26
  Maturity :
2006.7.10
  —  

* Units in won, because “dart system” does not convert into USD.

Series 6-1, 6-2, 6-3, 6-5 issuances are in dollars, while series 6-4 is in won

Conversion value is stated in won; the currency rate used in series 6-1 was 1,201.40 won/$, 6-2 was 1,215.80 won/$, 6-3 was 1,194.90 won/$ and 6-5 was 1,188.50 won/$, respectively.

 

- On November 4, 2004 there was a request for conversion of Unsecured C/B Series 6-3 (USD 3,000,000), and therefore increase in capital of 3,331,505,000 won (666,301 shares) is anticipated.

 

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4. Total Number of Authorized Shares

 

a. Total Number of Authorized Shares

 

[as of 2004.9.30]

 

Total Number of shares authorized


  

Total Number of Issued Stock


  

Total Number of Unissued Stock


2,400,000,000    784,076,172    1,615,923,828

 

b. Information of Issued Shares

 

[as of 2004.9.30]

 

[Par Value : 5,000 won]

  (units: 1,000 won, shares)

 

Type


  

Number of Stock

Issued


   Face Value

  

Notes


Registered    Common Stock    784,076,172    3,920,380,860     
Total    784,076,172    3,920,380,860     

 

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c. Stock Options

 

(as of 2004.9.30)

  (units: won, shares)

 

Grant date


  

Relationship


  

Grantee


  

Type of

stock


   No. of
granted
options


  

Exercised

options


  

Exercisable

options


  

Exercise

period


  

Exercise

price


2002.12.04   

Standing director

(Retired)

  

Byung Chul

Yoon

   Common    100         100    2005.12.4
~2008.12.3
    
2002.12.04   

Standing director

(Retired)

  

Kwang Woo

Chun

   Common    80    —      80    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Euoo Sung

Min

   Common    80    —      80    2005.12.4
~2008.12.3
   —  
2002.12.04   

Non-standing dir.

(Retired)

  

Hwan Kyu

Park

   Common    40    —      40    2005.12.4
~2008.12.3
   —  
2002.12.04   

Non-standing dir.

(Retired)

   Ki Chul Han    Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04   

Non-standing dir.

(Retired)

  

Tae Ho

Sohn

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04   

Non-standing dir.

(Retired)

  

Won Gihl

Sohn

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Nam Hong

Cho

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Sang Chul

Lee

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Jae Woong

Lee

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Gae Min

Lee

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04   

Standing director

(Retired)

  

Hae-Seok

Suh

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company (R)   

Duk Hoon

Lee

   Common    80    —      80    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Jong Wook

Kiim

   Common    45    —      45    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Jin Kyu

Park

   Common    45    —      45    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Jong Ku

Min

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Jong Hwee

Lee

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Dong Myun

Suh

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Ki Shin

Kim

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Young Seok

Kim

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Byung Kil

Choi

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Young Ho

Park

   Common    30    —      30    2005.12.4
~2008.12.3
   —  

 

15


Table of Contents

Grant date


  

Relationship


  

Grantee


  

Type of

stock


   No. of
granted
options


  

Exercised

options


  

Exercisable

options


  

Exercise

period


  

Exercise

price


2002.12.04    Director of related company   

Tae Woong

Chung

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Dong Chan

Bae

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Dae Hwan

Kim

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Young Ha

Kim

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Young Yong

Kim

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company    Taik Su Han    Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Sang Im Park    Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Joon Ho

Hahm

   Common    10    —      10    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Joon Ho Lee    Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Joo Sun Yeom    Common    20    —      20    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Ga Seok

Chae

   Common    20    —      20    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Sung Wook

Park

   Common    5    —      5    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Ki Seok

Kim

   Common    5    —      5    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Jae Ki Hong    Common    5    —      5    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Sam Su

Pyo

   Common    40    —      40    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Won Chul Hwang    Common    20    —      20    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Jong Hwee

Kim

   Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Seok Hwan

Lee

   Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    In kee baek         30         30    2005.12.4
~2008.12.3
    
2002.12.04    Director of related company   

Ki Jong

Chung

   Common    5    —      5    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Hun Il Nam    Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company   

Young Soo

Kim

   Common    30    —      30    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company    Jin Ho Yoon    Common    20    —      20    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)   

Seok Koo

Yoon

   Common    15    —      15    2005.12.4
~2008.12.3
   —  

 

16


Table of Contents

Grant date


  

Relationship


  

Grantee


  

Type of

stock


   No. of
granted
options


  

Exercised

options


  

Exercisable

options


  

Exercise

period


  

Exercise

price


2002.12.04    Director of related company    Ji Yeon Joo    Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company    Ho Hyun Lee    Common    20    —      20    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Chan Kook Chung    Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Duk Yoon Kim    Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company(R)    Young Wook Kim    Common    15    —      15    2005.12.4
~2008.12.3
   —  
2002.12.04    Director of related company    Dae Kyu Ko    Common    15    —      15    2005.12.4
~2008.12.3
   —  

Total

   —      —      —      1,340    —      1,340    —      —  

- Exercise price is derived based on the banking industry stock price index at the point of exercise.
-

 

d. Status of Employee Stock Option Program

 

[as of 2004.9.30]

  (units: won, shares)

 

Type of stock


  

Initial

Balance


   Increase

   Decrease

  

Ending

Balance


   Notes

Common stock    2,430,703    —      139,343    2,291,360     

Total

   2,430,703    —      139,343    2,291,360     

 

5. Voting Rights

 

[as of 2004.9.30]

  (units: shares)

 

Items


   Number of stock

   Notes

1. Stock with voting rights (A-B)

   784,076,172     

A. Total Number of issued stocks

   784,076,172     

B. Stocks without voting rights

   —       

2. Stocks with limited voting rights (A+B+C+D)

   -2,542     

A. Limited by the Business Law

   -2,542     

B. Limited by the Securities & Exchange Law

   —       

C. Restrictions due to monopoly regulations and Fair Trade Act

   —       

D. Limited by other law enforcements

   —       

3. Stocks with voting rights restored

   —       

Stocks with Voting Rights (1-2+3)

   784,073,630     

 

17


Table of Contents

6. Dividend Information

 

a. Dividend information for past years

 

(Par value : 5,000 won)

  (units: won)

 

Items


   2003

   2002

   2001

Net profit

   202,565,030,433    589,214,226,635    684,102,036,323

Earnings per share (won)

   262    786    940

Profit available for Dividend distribution

   1,203,688,237,170    1,086,596,253,235    558,501,102,453

Propensity to Dividend

   38.28    9.72    —  

DIVIDENDS

              

CASH PAYOUT

              

a. Dividend per Share

              

Majority

              

Common

   100    50    —  

Preferred

   —      —      —  

Minority

              

Common

   100    250    —  

Preferred

   —      —      —  

b. Total Dividend Amount

              

Majority

              

Common

   67,345,860,900    33,672,930,450    —  

Preferred

   —      —      —  

Minority

              

Common

   10,204,630,100    23,586,047,000    —  

Preferred

   —      —      —  

c. Dividend Ratio

              

Majority

              

Common

   1.54    1.04    —  

Preferred

   —      —      —  

Minority

              

Common

   1.54    5.22    —  

Preferred

   —      —      —  

STOCK

              

a. Stock Dividend Ratio

              

Majority

              

Common

   —      —      —  

Preferred

   —      —      —  

Minority

              

Common

   —      —      —  

Preferred

   —      —      —  

b. Stock Dividend per Share

              

Majority

              

Common

   —      —      —  

Preferred

   —      —      —  

Minority

              

Common

   —      —      —  

Preferred

   —      —      —  

Net Asset per Share

   7,218    6,596    5,605

Ordinary Income per Share

   262    786    943

 

18


Table of Contents
II. Description of Business

 

1. Business Overview

 

a. Current Trend of Industry

 

Increased competition in the banking sector

 

Restructuring of the 2nd tier financial industry

 

Convergence of products/services in the financial industry

 

Expansion of financial services due to the development of the capital market and technology

 

b. Company Status

 

(1) General Overview

 

(a) Group Description

 

Woori Finance Holdings Co., Ltd. (the “Company”) was established on March 27, 2001. The Company was engaged in the business of managing the five financial institutions (Woori Bank (formerly Hanvit Bank), Kyongnam Bank, Kwangju Bank, Woori Credit Card Co., Ltd. (formerly Peace Bank of Korea) and Woori Investment Bank (hereinafter the “five subsidiaries”)), whose shares were contributed to the Company by the Korea Deposit Insurance Corporation (the “KDIC”) in accordance with the provisions of the Financial Holding Company Act. In connection with its functional restructuring, the Company established or acquired seven more subsidiaries and has four second-tier subsidiaries. Upon establishment, the Company’s common stock amounted to (Won)3,637,293 million, consisting of 727,459,000 common shares ((Won) 5,000 per share) issued and outstanding. However as a result of several capital increases since establishment, the Company’s common stock amounted to (Won) 3,920,380,860 million, consisting of 784,076,172 common shares issued and outstanding as of September 30, 2004. On June 24, 2002, the Company listed its common shares on the Korea Stock Exchange through a public offering at a price of (Won)6,800 per share, which included 36 million new shares and 54 million issued shares. The KDIC owned 628,458,609 (80.15%) shares of the Company’s common shares as of September 30, 2004.

 

Woori Bank (formerly Hanvit Bank) was established in 1899 and is engaged in the commercial banking business under the Korean Banking Law, trust business under the Trust Business Law and foreign exchange business with approval from the Bank of Korea (“BOK”) and the Ministry of Finance and Economy (“MOFE”). In connection with the infusion of public funds, Woori Bank and the KDIC have entered into an Agreement on the Implementation of the Business Plan. Woori Bank changed its name from Hanvit Bank to Woori Bank on May 20, 2002. Its common stock amounted to (Won) 3,179,783 million consisting of 636 million common shares issued and outstanding as of September 30, 2004. Woori Bank is wholly owned by the Company. The head office of Woori Bank is located in Seoul, Korea. Woori Bank has 697 branches and offices in Korea, and 11 branches overseas.

 

Kyongnam Bank was incorporated on April 18, 1970 and is engaged in the commercial banking business under the Korean Banking Law, trust business under the Trust Business Law and foreign exchange business with approval from the BOK and the MOFE. In connection with the infusion of public funds, Kyongnam Bank and the KDIC have entered into an Agreement on the Implementation of the Business Plan. As of September 30, 2003, Kyongnam Bank’s common stock

 

19


Table of Contents

amounted to (Won) 259,000 million consisting of 51 million shares issued and outstanding. The Company owns 99.99% of Kyongnam Bank. The head office of Kyongnam Bank is located in Masan, Korea. Kyongnam Bank has 118 branches and offices in Korea.

 

Kwangju Bank was established on September 17, 1968 and is engaged in the commercial banking business under the Korean Banking Law, trust business under the Trust Business Law and foreign exchange business with approval from the BOK and the MOFE. In connection with the infusion of public funds, Kwangju Bank and the KDIC have entered into an Agreement on the Implementation of the Business Plan. As of September 30, 2003, Kwangju Bank’s common stock amounted to (Won) 170,403 million consisting of 34 million shares issued and outstanding. The Company owns 99.99% of Kwangju Bank. The head office of Kwangju Bank is located in Kwangju City, Korea. Kwangju Bank has 115 domestic branches and offices in Korea.

 

Woori Securities Co., Ltd. (“Woori Securities”, formerly Hanvit Securities Co., Ltd.) was established on August 26, 1954 to engage mainly in trading, agency, brokerage and underwriting of securities, and listed its shares on the Korea Stock Exchange on July 26, 1988. On June 1, 2002, Woori Securities changed its name from Hanvit Securities Co., Ltd. to Woori Securities Co., Ltd. In connection with its functional restructuring, as of July 29, 2002, the Company acquired 40.2% interest (13,250,570 shares of common stock) of Woori Securities from Woori Bank, making Woori Securities a subsidiary of the Company. On April 28, 2004, the Board of Directors approved additional acquisition of its shares to 100% and on June 18, 2004 became wholly owned by the Company. As of September 30, 2003, its common stocks amounted to (Won)164,782 million consisting of 32,956,413 shares issued and outstanding of which is wholly owned by the Company. As the acquisition of LG Investment & Securities was approved by the Board of Directors, merger with LG Investment & Securities is anticipated. The head office of Woori Securities is located in Seoul, Korea. Woori Securities has 71 branches and offices in Korea.

 

Woori Investment Trust Management Co., Ltd. (“WITM”, formerly Hanvit Investment Trust Management Co., Ltd.) was established on June 24, 1988 and is engaged in the investment trust business under the Investment Trust Business Law with approval from the MOFE. In connection with its functional restructuring, on March 29, 2002, the Company purchased the entire common stock of WITM from Woori Bank, making WITM a subsidiary of the Company. On May 17, 2002, WITM changed its name from Hanvit Investment Trust Management Co., Ltd. to Woori Investment Trust Management Co., Ltd. As of September 30, 2003, its common stock amounted to (Won) 30,000 million consisting of 6,000,000 shares issued and outstanding all of which are owned by the Company. The office of WITM is located in Seoul, Korea.

 

Woori Finance Information System Co., Ltd. (“WFIS”, formerly Hanviteun System) was established on April 17, 1989 and is engaged in the business of installing computerized financial systems. On September 29, 2001, the Company purchased all the common stock of WFIS from Woori Bank, which was part of the group’s functional restructuring and therefore, WFIS was incorporated as a subsidiary of the Company. On October 15, 2001, WFIS changed its name from Hanviteun System Co., Ltd. to Woori Finance Information System Co., Ltd. As of September 30, 2003, its common stock amounted to (Won) 4,500 million ($3,749 thousand) consisting of 900,000 shares issued and outstanding. WFIS is wholly owned by the Company. The office of WFIS is located in Seoul, Korea.

 

Woori F&I Co., Ltd. (“WF&I”, formerly Woori Asset Management Co., Ltd. (“WAMC”)) was established on November 16, 2001 to engage in the business of management, operation and disposition of securitization assets. On September 13, 2002, WF&I, formerly WAMC, spun off the asset management business segment and established Woori CA Asset Management Co., Ltd. (“WCAAMC”). As a result, WF&I is engaged in the business of acquisition and disposition of securities issued by asset securitization specialty corporations, established based on the Act on Asset-Backed Securitization for the purpose of non-performing assets securitization, and in the business of acquisition and disposition of equity of asset management corporations, which are established for the purpose of non-performing assets management. On September 16, 2002, WF&I changed its name from Woori Asset Management Co., Ltd. to Woori F&I Co., Ltd. As of September 30, 2003, its common stock amounted to (Won)10,000 million ($8,349 thousand) consisting of 2,000,000 shares issued and outstanding. WF&I is wholly owned by the Company. The office of WF&I is located in Seoul, Korea.

 

20


Table of Contents
(2) Market Share

 

Woori, Shinhan and Dongwon are the domestic finance holding groups that have a separate banking business as a subsidiary.

 

(units: hundreds of millions of won)

 

Items


   As of end of March 2003

   Woori Finance Holdings

   Shinhan Finance Holdings

  

Dongwon Finance

Holdings


Total Assets

   86,501    88,925    11,217

Total Liabilities

   27,916    25,337    997

Total Shareholder’s Equity

   58,585    63,588    10,220

Capital

   38,775    19,585    3,079

Operating Revenue

   280    1,845    211

Operating Expense

   1,795    392    13

Operating Income

   -1,515    1,453    198

Ordinary Income

   -1,514    1,456    219

Net profit

   -1,514    1,456    219

 

21


Table of Contents
(3) Organization Chart

 

LOGO

 

22


Table of Contents
2. Overview of Operations

 

a. Performance of Operations

 

As a financial holdings corporation under the Financial Holding Corporation Act, our main income consists of dividend payments of our subsidiaries. We are not involved in any other operations.

 

b. Financing of operations

 

(1) Source of Funds

 

(units: millions of won)

 

Items


   2004 3Q

   2003

   2002

   2001

Shareholders’ Equity

   6,289,105    5,597,895    5,064,129    4,077,347

Capital

   3,920,381    3,877,525    3,839,074    3,637,293

Capital Surplus

   75,451    61,324    58,645    —  

Retained Earnings

   1,507,372    1,282,866    1,145,518    558,501

Capital Adjustments

   785,901    376,180    20,892    -118,447

Borrowings

   2,709,026    2,649,920    2,325,021    1,616,466

Debentures

   2,548,129    2,621,182    1,999,250    1,298,304

Bank Borrowings

   120,00    —      300,000    310,000

Commercial Paper

   —      —      —      —  

Other Borrowings

   —      —      —      —  

Other Liabilities

   40,897    28,738    25,771    8,162

Total

   8,998,131    8,247,815    7,389,150    5,693,813

 

23


Table of Contents
(2) Use of Funds

 

(units: millions of won)

 

Items


   2004 3Q

    2003

   2002

   2001

Subsidiary Stock

   8,000,257     7,007,222    6,062,119    5,016,864

Woori Bank

   6,620,217     5,869,558    4,500,143    3,255,964

Kyongnam Bank

   589,734     504,629    424,060    327,005

Kwangju Bank

   433,078     364,955    290,003    213,177

Woori Credit Card

   Note 1 )        379,126    1,008,866

Woori Merchant Bank

   —            222,936    195,613

Woori Financial Information System

   8,354     7,284    3,364    6,511

Woori F&I

   43,431     35,896    17,016    9,728

Woori 2nd Asset Securitization Specialty

   25,537     20,016    31,666    —  

Woori 3rd Asset Securitization Specialty

   15,817     1,266    —      —  

Woori Investment Trust Management

   34,891     34,978    39,646    —  

Woori Securities

   229,198     168,639    154,159    —  

Loan Obligations

   231,726     830,566    1,231,207    648,365

Tangible Assets

   259     242    324    627

Intangible Assets

   50     51    50    24

Cash

   719,328     349,585    73,256    13,825

Other Assets

   46,511     60,148    22,195    14,108

Total

   8,998,131     8,247,815    7,389,151    5,693,813

· 1) Losses of 105,581 million won, which was not recognized the last quarter, was recognized in the 2nd quarter. Following the merger of Woori Credit Card into Woori Bank, the invested stocks of Woori Credit Card were merged with invested stocks of Woori Bank

 

c. Transactions related to Commission Fees

 

(units: millions of won)

 

Category


  

Items


   2004 3Q

   2003

   2002

   2001

Commission Revenue (A)

                        

Commission Expense (B)

   Fees    5,073    6,704    5,611    4,641

Commission Profit (A-B)

        -5,073    -6,704    -5,611    -4,641

 

24


Table of Contents
3. Other Details Relevant to Investment Decisions

 

Instead of following the format of exhibiting BIS equity capital ratio and status of non-performing loans to indicate capital adequacy and asset quality, we exhibit the current ratio and debt ratio as similar indicators under the ‘Finance Holding Company Act’

 

a. Won-denominated Current Ratio

 

(units: millions of won)

 

Items


   2004 3Q

    2003

    2002

    2001

 

Current Assets (A)

   578,440     203,202     78,357     185,154  

Current Liabilities (B)

   458,104     9,711     9,317     316,615  

Current Ratio (A/B)

   126.27 %   2,092.5 %   841.0 %   58.5 %

* Current ratio of won
= assets with maturity less than 3 months

       liabilities with maturity less than 3 months

 

b. Foreign Currency-denominated Current Ratio

 

(units: millions of won)

 

Items


   2004 3Q

    2003

    2002

   2001

Current Assets (A)

   172,160     147,754     —      —  

Current Liabilities (B)

   194,116     148,598     —      —  

Current Ratio (A/B)

   88.7 %   99.4 %   —      —  

* Current ratio of foreign currency
= assets with maturity less than 3 months

       liabilities with maturity less than 3 months

 

c. Debt Ratio

 

(units: millions of won)

 

Items


   2004 3Q

    2003

    2002

    2001

 

Liabilities (A)

   2,709,026     2,649,920     2,325,022     1,616,466  

Equity (B)

   6,289,105     5,597,895     5,064,129     4,077,347  

Debt Ratio (A/B)

   43.1 %   47.3 %   45.9 %   39.7 %

 

25


Table of Contents
d. Credit Ratings for the Past 3 years

 

Date of

Rating


   Evaluated
Securities


  

Credit

Rating


  

Company

(Ratings Range)


  

Evaluation

Category


2001.6.27

   Debentures    AA+    Korea Ratings (AAA~D)    Case evaluation

2001.6.28

   Debentures    AA+    KIS Ratings (AAA~D)    Case evaluation

2001.9.26

   Debentures    AA+    KIS Ratings (AAA~D)    Case evaluation

2001.9.26

   Debentures    AA+    Korea Ratings (AAA~D)    Case evaluation

2001.11.29

        BBB-    R&I (AAA~C)    Case evaluation

2002.10.17

   Debentures    AA+    Korea Ratings (AAA~D)    Case evaluation

2002.10.22

   Debentures    AA+    KIS Ratings (AAA~D)    Case evaluation

2002.11.8

        BBB    R&I (AAA~C)    Periodic evaluation

2002.12.13

   Debentures    AA+    Korea Ratings (AAA~D)    Case evaluation

2002.12.16

   Debentures    AA+    KIS Ratings (AAA~D)    Case evaluation

2003.6.30

   Debentures    AA+    KIS Ratings (AAA~D)    Periodic evaluation

2003.9.8

   Debentures    AAA    Korea Ratings (AAA~D)    Case evaluation

2003.9.8

   Debentures    AAA    KIS Ratings (AAA~D))    Case evaluation

2003.11.13

        BBB    R&I (AAA~C)    Periodic evaluation

2003.12.04

   Debentures    AAA    NICE (AAA~D)    Case evaluation

2003.12.04

   Debentures    AAA    KIS Ratings (AAA~D))    Case evaluation

2004.2.6

        BBB    Fitch Rating (AAA~D)    Case evaluation

2004.3.11

        BBB-    S&P (AAA~D)    Case evaluation

2004.5.27

        Baa3    Moody’s (Aaa~C)    Case evaluation

2004.6.9

   Debentures    AAA    KIS Ratings (AAA~D))    Case evaluation

2004.6.9

   Debentures    AAA    NICE (AAA~D)    Case evaluation

2004.7.16

   Debentures    AAA    NICE (AAA~D)    Case evaluation

2004.7.16

   Debentures    AAA    Korea Ratings (AAA~D)    Case evaluation

 

e. Other Important Information

 

Please refer to our annual report for the BIS capital ratio and non-performing loans of our subsidiaries.

 

26


Table of Contents
III. Financial Information

 

1. Condensed Financial Statements (Non-consolidated)

 

(units: millions of won)

 

Items


   2004 3Q

   2003

   2002

   2001

Cash and Due from Banks

   719,328    349,585    73,256      13,825

Securities

   8,000,257    7,007,222    6,062,119      5,016,864

Loans

   231,725    830,566    1,231,207      648,365

Fixed Assets

   309    293    374      651

Other Assets

   46,511    60,148    18,361      14,108

Total Assets

   8,998,130    8,247,815    7,389,151      5,693,813

Borrowings

   120,000    —      300,000      310,000

Debentures

   2,548,129    2,621,182    1,999,250      1,298,304

Other Liabilities

   40,897    28,738    25,772      8,162

Total Liabilities

   2,709,026    2,649,920    2,325,022      1,616,466

Common Stock

   3,920,381    3,877,525    3,839,074      3,637,293

Capital Surplus

   75,451    61,324    58,645      —  

Retained Earnings

   1,507,372    1,282,866    1,145,518      588,501

Capital Adjustment

   785,900    376,180    20,892    D 118,447

Total Stockholder’s Equity

   6,289,104    5,597,895    5,064,129      4,077,347

Operating Income

   582,404    396,624    878,488      717,112

Operating Expenses

   143,890    193,527    302,721      31,222

Operating Profit

   438,514    203,097    575,767      685,890

Ordinary Income

   440,157    202,565    589,214      685,885

Net profit

   440,157    202,565    589,214      684,102

[D stands for negative numbers]

* Refer to Exhibits to see detailed financial statements

 

27


Table of Contents
2. Condensed Financial Statements (Consolidated)

 

(units: millions of won)

 

Items


   2003

   2002

   2001

Cash and Due from Banks

   6,471,855    6,568,852      6,432,890

Marketable Securities

   2,727,843    2,943,800      3,217,882

Invested Securities

   24,278,834    23,508,709      21,806,451

Loans

   86,077,297    73,604,113      59,876,198

Fixed Assets

   2,734,616    2,796,183      2,831,851

Other Assets

   6,477,275    5,421,877      5,920,545

Total Assets

   128,767,720    114,843,534      100,058,817

Deposits

   89,049,625    78,917,388      69,332,217

Borrowings

   12,813,104    13,839,614      13,742,572

Debentures

   12,195,159    10,792,932      5,491,533

Other Liabilities

   9,011,532    5,987,833      7,080,301

Total Liabilities

   123,069,420    109,528,767      95,646,623

Common Stock

   3,877,525    3,839,074      3,637,293

Consolidated Capital Surplus

   57,844    25,029      —  

Consolidated Retained Earnings

   1,152,053    245,045      558,852

Consolidated Capital Adjustment

   414,969    5,314,767    D 116,546

Minority Interest

   195,909    9,623,990      359,595

Total Stockholder’s Equity

   5,698,300    5,314,767      4,439,194

Operating Income

   10,403,445    9,623,990      10,159,156

Operating Expenses

   10,261,111    8,908,732      9,847,439

Operating Profit

   142,334    715,258      311,717

Non-operating Income

   586,267    540,113      1,190,685

Non-operating Expenses

   497,539    800,487      937,984

Ordinary Income

   231,062    454,884      564,418

Aggregated Net Profit

   52,374    613,576      736,616

Consolidated Net Profit

   56,279    591,588      686,287

No. of Companies Consolidated

   15    17      17

[D stands for negative numbers]

 

28


Table of Contents
3. Accounting Information

 

a. Loan Loss Reserves

 

(1) Loan Loss Reserves for past 3 years by classification

 

(units: millions of won)

 

Period


  

Item


   Total Credits

   Loan Loss Reserves

   Provisioning Ratio

2004 3Q

   Lendings    155,000    775    0.5%
     Loans    77,890    389    0.5%
     Total    232,890    1,164    0.5%

2003

   Lendings    156,850    784    0.5%
     Loans    677,890    3,390    0.5%
     Total    834,740    4,174    0.5%

2002

   Lendings    214,600    1,073    0.5%
     Loans    1,167,822    146,308    12.5%
     Total    1,382,422    147,381    10.7%

 

    (2) Change in Loan Loss Reserves for past 3 years

 

(units: millions of won)

 

Item


   2004 3Q

   2003

   2002

1.      Initial loan loss reserves balance

   4,174    147,381    3,258

2.      Net credit costs

   —      127,551    144,123

1) Write-offs

   —      127,400    —  

2) Recovery of written-off assets

   —      —      —  

3) Other changes

   —      151    144,123

Recovery of credit costs

   -3,010    15,656    —  

Ending loan loss reserve balance

   1,164    4,174    147,381

 

29


Table of Contents

IV. Independent Auditor’s Opinion

 

1. Independent Auditor’s Opinion

 

a. Independent Auditor

 

2004 3Q


 

2003 Dec. 31


 

2002 Dec. 31


 

2001 Dec. 31


Deloitte & Touche

  Deloitte & Touche   Deloitte Touche   Arthur Andersen

 

2. Compensation to the Independent Auditor

 

a. Auditing Service

 

(units: millions of won)

 

Year


   Auditor

  

Activity


   Compensation

  

Accrued Time

(hr)


2004 3Q

   Deloitte & Touche   

Quarter, Half Year, Annual Interim

Financial Statement (Consolidated,

Non-consolidated)

   310    4,960

2003

   Arthur Andersen
Deloitte Touche
  

Quarter Interim Financial Statement

Half Year Interim Financial Statement

Annual Financial Statement

(Consolidated, Non-consolidated)

   140
70
36
37
   1,200
600
300
300

2002

   Arthur Andersen   

Quarter Interim Financial Statement

Half Year Interim Financial Statement

Year-end Financial Statement

Consolidated Financial Statement

   140
70
30
30
   1,200
600
300
300

 

30


Table of Contents
b. Compensation for services other than the Audit

 

(units: thousands of dollars)

 

Year

   Contract
Date


  

Activity


   Period

   Comp.

  

Note


2004 3Q    Not Applicable
2003    2003.7.30    US GAAP Auditing    2003.8~2004.5    4,500    Deloitte Touche
2002    2003.2.28    US GAAP Auditing    2002.12~2003.5    4,250    Deloitte Touche

 

31


Table of Contents
V. Corporate Governance and Affiliated Companies

 

1. Overview of Corporate Governance

 

a. About the Board of Directors

 

(1) Board of Directors

 

At our 3rd Annual General Shareholders’ Meeting held on March 30, 2004 a new Board of Directors was appointed, consisting of the Group’s Chairman Young-Key Hwang, Vice Chairman Jong-Wook Kim and Vice Chairman Euoo-Sung Min. Our non-standing directors currently consist of Suk-Jean Kang (Chairman of CEO Consulting Group), Je-Hoon Lee (President of Korea BBB Association), Sung-Tae Ro (Dean of the School of Business at Myongji University), Do-Soung Choi (Professor of Finance at Seoul National University), Oh-Seok Hyun (President of the Trade Research Institute) and Chung-Sook Moon (Professor of Economics at Sookmyung University).

 

Sung-Hwan Bae was appointed as a non-standing director at the May 18, 2004 extraordinary shareholders’ meeting. Vice Chairman Euoo-Sung Min resigned in May 2004.

 

(A) Duties of Boards of Directors

 

- The Board of Directors shall consist of directors and shall determine the matters which are provided for as the authority of the Board of Directors under the relevant laws and regulations

 

- The Board of Directors shall perform its duties set forth in the Rules for the Board of Directors for the purpose of enhancement of shareholders’ benefits

 

32


Table of Contents

(B) Information Regarding the Board of Directors

 

Position


  

Name


  

Information


  

Relationship
with KDIC


  

Transaction
with WFG


Non-standing Director candidate and audit Committee candidate    Suk-Jean Kang   

- B.A. in Economics, Chungang University

- Completed ISMP at Harvard Business School

- Chairman of GE Korea

- Currently Chairman of CEO Consulting Group

   N/A    N/A
Non-standing Director candidate and audit Committee candidate    Je-Hoon Lee   

- B.A. in History, Seoul National University

- M.A. in Journalism, Seoul National University

- CEO & President of The Joongang Ilbo

- Currently President of Korea BBB Association

   N/A    N/A
Non-standing Director candidate and audit Committee candidate   

Sung-Tae

Ro

  

- B.A. in Economics, Seoul National University

- Ph.D. in Economics, Harvard University

- Chief Editor of The Korea Economic Daily

- Currently Dean of Business School at Myongji University

   N/A    N/A
Non-standing Director candidate and audit Committee candidate   

Oh-Seok

Hyun

  

- B.A. in Business Administration, Seoul National University

- Ph.D. in Economics, University of Pennsylvania

- Former employee at Ministry of Finance and Economy

- Currently President of Trade Research Institute, Korea Int’l Trade Association

   N/A    N/A
Non-standing Director candidate and audit Committee candidate    Dosoung Choi   

- B.A. in Business Administration, Seoul National University

- Ph.D. in Finance, Pennsylvania State University

- Chairman of Korean Securities Association

- Currently Professor of Finance at Seoul National University

   N/A    N/A
Non-standing Director candidate and audit Committee candidate    Chung-Sook Moon   

- B.A. in Home Management, Sookmyung Women’s University

- Ph.D. in Consumer Economics, Kansas State University

- Currently Professor of Economics at Sookmyung Women’s University

   N/A    N/A
Non-standing Director candidate and audit Committee candidate    Sung-Hwan Bae   

- B.A. in Business Administration at Yeungnam University

- Masters in Economics at University of Illinois

- Ph.D. in Business Administration at SungKyunKwan University

- Banking Supervisory Authority of the Bank of Korea

-Member, Board of Directors of Seoul Guarantee Insurance

  

Employee

(Director)

   N/A

 

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Table of Contents
(C) Appointment of Non-standing Directors

 

Pursuant to Article 42 of the Articles of Association and the non-standing director candidate nomination committee regulations Article 5, a non-standing director is appointed through process where the non-standing director candidate nomination committee recommends candidates and the decision is made through a resolution by the shareholders’ meeting.

 

* Article 42 (Committee)

 

  1. We currently have the following management committees that serve under the board.

 

  1. The BOD Management Committee

 

  2. The Business Strategy & Compensation Committee

 

  3. The Risk Management Committee

 

  4. Executive Committee

 

  5. Ethics Committee

 

  6. Non-standing Director Nomination Committee

 

  7. MOU Review Committee

 

  8. The Audit Committee

 

(D) Committees within Board of Directors

 

[as of 2004.9.30]

 

1) BOD Management Committee

 

Name


 

Position


 

Notes


Young-Key Hwang   Chairman and CEO   Chairman/CEO Young-Key Hwang heads the committee consisting of the heads of sub-committees. Non-standing directors must the majority.
Suk-Jean Kang   Non-standing Director  
Sung-Tae Ro   Non-standing Director  
Dosoung Choi   Non-standing Director  
Chung-Sook Moon   Non-standing Director  

 

2) Business Strategy and Compensation Committee

 

Name


 

Position


 

Notes


Suk-Jean Kang   Non-standing Director  

Non-standing director Suk-Jean Kang heads the committee consisting of 4 non-standing directors.

Je-Hoon Lee   Non-standing Director  
Oh-Seok Hyun   Non-standing Director  
Dosoung Choi   Non-standing Director  

 

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Table of Contents
3) Risk Management Committee

 

Name


 

Position


 

Notes


Young-Key Hwang   Chairman and CEO   Chairman/CEO Young-Key Hwang heads the committee consisting of 1 director and 3 non-standing directors.
Sung-Tae Ro   Non-standing Director  
Oh-Seok Hyun   Non-standing Director  
Dosoung Choi   Non-standing Director  

 

4) Executive Committee

 

Name


 

Position


 

Notes


Young-Key Hwang   Chairman and CEO   Chairman/CEO Young-Key Hwang heads the committee consisting of all executive directors
Jong-Wook Kim   Vice Chairman  

 

5) Ethics Committee

 

Name


 

Position


 

Notes


Young-Key Hwang   Chairman and CEO   Non-standing director Chung-Sook Moon heads the committee consisting of all executive directors and no less than 2 non-standing directors.
Jong-Wook Kim   Vice Chairman  
Je-Hoon Lee   Non-standing Director  
Oh-Seok Hyun   Non-standing Director  
Chung-Sook Moon   Non-standing Director  

 

6) Non-standing Director Nomination Committee

 

Name


 

Position


 

Notes


Young-Key Hwang   Chairman and CEO   Non-standing director Sung-Tae Ro heads the committee consisting of the Chairman/CEO and no less than 3 non-standing directors
Suk-Jean Kang   Non-standing Director  
Je-Hoon Lee   Non-standing Director  
Sung-Tae Ro   Non-standing Director  

 

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Table of Contents
7) Audit Committee

 

Name


 

Position


 

Notes


Suk-Jean Kang

  Non-standing Director   Non-standing director Do-Soung Choi heads the committee consisting of more than 3 directors of which no less than 2/3 are non-standing directors.

Je-Hoon Lee

  Non-standing Director  

Sung-Tae Ro

  Non-standing Director  

Oh-Seok Hyun

  Non-standing Director  

Dosoung Choi

  Non-standing Director  

Sung-Hwan Bae

  Non-standing Director  

Chung-Sook Moon

  Non-standing Director  

 

8) MOU Review Committee

 

Name


 

Position


 

Notes


Young-Key Hwang

  Chairman and CEO   Chairman/CEO Young-Key Hwang heads the committee consisting of the entire board of directors

Jong-Wook Kim

  Vice Chairman  

Suk-Jean Kang

  Non-standing Director  

Je-Hoon Lee

  Non-standing Director  

Sung-Tae Ro

  Non-standing Director  

Oh-Seok Hyun

  Non-standing Director  

Dosoung Choi

  Non-standing Director  

Sung-Hwan Bae

  Non-standing Director  

Chung-Sook Moon

  Non-standing Director  

 

36


Table of Contents
2. Related Companies

 

a. Invested Shares in Related Companies

 

Investor


  

Investee


   Number of Invested
Stock


   Shareholding Ratio (%)

Woori Finance Holdings

   Woori Bank    635,956,580    100.0
    

Kyongnam Bank

   51,800,000    99.9
    

Kwangju Bank

   34,080,000    99.9
    

Woori Finance Information Systems

   900,000    100.0
    

Woori F&I

   2,000,000    100.0
    

Woori Second SPC

   1,900    95.0
    

Woori Third SPC

   2,000    100.0
    

Woori Investment Management

   6,000,000    100.0
    

Woori Securities

   32,956,413    100.0

Woori Bank

   Woori Credit Information    1,008,000    100.0
    

Woori America Bank

   8,500,000    100.0
    

P.T. Bank Woori Indonesia

   1,618    95.2

Woori F&I

   Woori CA Asset Management    408,000    51.0

 

37


Table of Contents
b. Year-end Performance of Affiliated Companies and Subsidiaries

 

Name : Woori Bank Co., Ltd.

 

Company number : 00254045

  (units: millions of won)

 

Items


  

Period 171 3Q

(2004.9.30)


  

Period 170

(2003.12.31)


  

Period 169

(2002.12.31)


  

Period 168

(2001.12.31)


Cash and Due from Banks

   5,715,994    4,833,325    4,098,110    3,911,225

securities

   16,762,950    17,967,751    17,930,546    17,223,404

Loans

   75,472,628    71,198,169    58,967,737    48,177,595

Fixed Assets

   1,745,367    1,718,556    1,762,660    1,843,368

Other Assets

   9,655,901    7,591,909    4,718,317    5,502,176

Total Assets

   109,352,840    103,309,710    87,477,370    76,657,768

Deposits

   76,888,719    70,811,000    62,184,865    53,768,338

Borrowings

   8,835,706    9,632,495    10,008,637    10,883,858

Debentures

   10,732,957    7,780,156    5,941,886    3,084,569

Other Liabilities

   83,435,408    80,240,310    67,245,663    59,760,809

Total Liabilities

   103,004,071    97,652,961    83,196,186    73,729,236

Capital

   3,179,783    2,852,838    2,764,400    2,764,400

Capital Surplus

   463,003    654,708    516,026    31,903

Retained Earnings

   2,006,910    1,798,918    984,683    203,690

Capital Adjustments

   699,073    350,285    16,075    -71,461

Total Shareholder’s Equity

   6,348,769    5,656,749    4,281,184    2,928,532

Operating Revenue

   7,051,057    7,621,300    6,607,882    6,848,493

Operating Expense

   6,295,535    6,341,472    6,004,933    6,565,299

Operating income

   755,522    1,279,828    602,949    283,194

Ordinary Income

   961,411    1,429,662    595,988    610,679

Net profit

   850,707    1,332,185    779,571    712,945

 

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Table of Contents

Name of Company : Kyongnam Bank

 

Company Number : 00101363

  (units: millions of won)

 

    

Period 43 3Q

(2004.9.30)


  

Period 42

(2003.12.31)


  

Period 41

(2002.12.31)


  

Period 40

(2001.12.31)


Cash and Due from Banks

   743,319    834,276    1,148,370    1,387,331

securities

   3,253,553    3,147,183    2,535,037    2,177,126

Loans

   6,995,291    6,435,508    5,819,418    4,727,537

Fixed Assets

   201,689    202,198    208,970    214,581

Other Assets

   284,681    366,973    264,051    236,469

Total Assets

   11,478,533    10,986,138    9,975,846    8,759,824

Deposits

   8,536,417    8,462,345    7,544,267    5,930,101

Borrowings

   1,708,939    1,278,626    1,286,963    1,435,321

Debentures

   210,000    310,238    303,304    424,974

Other Liabilities

   440,663    437,756    425,091    656,143

Total Liabilities

   10,896,019    10,488,965    9,559625    8,446,454

Capital

   259,000    259,000    259,000    259,000

Capital Surplus

   26,910    26,910    26,910    26,906

Retained Earnings

   285,924    214,411    134,371    51,905

Capital Adjustments

   10,680    -3,148    -4,059    -24,441

Total Shareholder’s Equity

   582,514    497,173    416,222    313,370

Operating Revenue

   574,804    767,171    742,140    721,643

Operating income

   98,637    93,859    108,121    87,040

Ordinary Income

   85,082    54,731    82,466    69,158

Net profit

   84,459    85,224    82,466    69.158

 

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Table of Contents

Name of Company : Kwangju Bank

 

Company Number : 00104078

  (units: millions of won)

 

    

Period 46 3Q

(2004.9.30)


  

Period 45

(2003.12.31)


  

Period 44

(2002.12.31)


  

Period 43

(2001.12.31)


Cash and Due from Banks

   401,016    390,078    386,827    299,088

securities

   2,802,726    2,564,942    2,111,943    2,202,522

Loans

   5,611,459    5,336,775    4,896,333    3,964,489

Fixed Assets

   223,237    223,669    224,952    229,929

Others

   224,197    262,118    426,879    424,910

Total Assets

   9,262,635    8,777,582    8,046,934    7,120,938

Deposits

   6,579,950    6,737,967    6,077,260    5,250,418

Borrowings

   1,634,163    1,165,133    967,696    946,702

Debentures

   250,000    200,556    200,485    297,723

Other Liabilities

   381,314    325,974    532,307    434,702

Total Liabilities

   8,845,427    8,429,330    7,777,749    6,929,545

Capital

   170,403    170,403    170,403    170,403

Capital Surplus

   24,173    24,173    —      —  

Retained Earnings

   214,909    155,238    98,185    26,813

Capital Adjustments

   7,723    -1,561    598    -5,822

Total Shareholder’s Equity

   417,208    348,252    269,185    191,393

Operating Revenue

   438,253    581,314    578,844    532,712

Operating income

   63,581    40,735    85,962    71,290

Ordinary Income

   78,695    32,542    74,839    66,346

Net profit

   68,231    57,052    74,839    66,346

 

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Table of Contents

Name of Company : Woori Securities

 

Company Number : 00163178

  (units: millions of won)

 

    

Period 51 1H

(2004.9.30)


  

Period 50

(2004.3.31)


  

Period 49

(2003.3.31)


  

Period 48

(2002.3.31)


Current Assets

   624,797    473,470    413,056    443,421

Fixed Assets

   143,615    93,278    127,777    173,906

Total Assets

   768,412    566,748    540,833    617,327

Current Liabilities

   398,034    190,476    170,239    203,504

Fixed Liabilities

   7,191    6,283    4,585    7,448

Total Liabilities

   405,225    196,759    174,824    210,952

Capital

   164,782    164,782    164,782    164,782

Capital Surplus

   131,497    131,424    131,776    131,776

Retained Earnings

   72,242    99,525    107,529    133,463

Capital Adjustments

   -5,334    -25,742    -38,078    -23,646

Total Shareholder’s Equity

   363,187    369,989    366,009    406,375

Operating Revenue

   73,977    173,648    186,664    205,208

Operating income

   -5,907    10,099    21,332    45,434

Ordinary Income

   -11,946    4,073    1,570    56,434

Net profit

   -13,377    2,369    1,627    40,107

 

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Table of Contents

Company : Woori Investment Trust Management

 

Company Number : 00243377

  (units: millions of won)

 

    

Period 17 1H

(2004.9.30)


  

Period 16

(2004.3.31)


  

Period 15

(2003.3.31)


  

Period 14

(2002.3.31)


Current Assets

   31,616    30,749    27,878    30,235

Fixed Assets

   3,785    4,637    13,490    12,839

Total Assets

   35,401    35,386    41,368    43,074

Current Liabilities

   193    82    3,686    6,172

Fixed Liabilities

   317    253    177    124

Total Liabilities

   510    335    3,863    6,296

Capital

   30,000    30,000    30,000    30,000

Capital Surplus

   —      —      —      —  

Retained Earnings

   4,891    5,051    7,504    6,778

Capital Adjustments

   —      —      —      —  

Total Shareholder’s Equity

   34,891    35,051    37,504    36,778

Operating income

   2,604    5,979    10,360    11,830

Operating Profit

   162    692    5,276    4,348

Ordinary Income

   3,121    919    5,330    4,568

Net profit

   2,240    546    3,726    3,128

 

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Table of Contents

Name of Company : Woori Finance Information System

 

Company Number : 00378947

  (units: millions of won)

 

    

Period 16 3Q

(2004.9.30)


  

Period 15

(2003.12.31)


  

Period 14

(2002.12.31)


  

Period 13

(2002.3.31)


Current Assets

   63,439    66,061    76,504    5,933

Fixed Assets

   236,110    214,158    164,549    2,882

Total Assets

   299,549    280,219    241,053    8,815

Current Liabilities

   54,362    49,763    53,942    2,362

Fixed Liabilities

   235,851    222,753    184,349    373

Total Liabilities

   290,213    272,516    238,291    2,735

Capital

   4,500    4,500    4,500    4,500

Capital Surplus

   —      —      —      —  

Retained Earnings

   4,830    3,197    -808    1,580

Capital Adjustments

   6    6    —      —  

Total Shareholder’s Equity

   9,336    7,703    3,692    6,080

Sales

   215,797    281,787    131,843    25,444

Operating income

   10,667    20,870    4,404    1,127

Ordinary Income

   2,637    5,871    -3,190    1,421

Net profit

   1,633    4,005    -2,182    1,123

 

43


Table of Contents

Company Name : Woori F&I

 

Company Number : 00416593

  (units: millions of won)

 

    

Period 4 3Q

(2004.9.30)


  

Period 3

(2003.12.31)


  

Period 2

(2002.12.31)


  

Period 1

(2001.12.31)


Current Assets

   45,119    24,231    2,290    8,531

Fixed Assets

   159,910    147,534    52,493    1,153

Total Assets

   205,029    171,765    54,783    9,684

Current Liabilities

   36,124    4,669    823    50

Fixed Liabilities

   125,000    130,783    37,033    —  

Total Liabilities

   161,124    135,452    37,856    50

Capital

   10,000    10,000    10,000    10,000

Capital Surplus

   —      —      —      —  

Retained Earnings

   26,336    22,315    6,961    -366

Capital Adjustments

   7,569    3,998    -34    —  

Total Shareholder’s Equity

   43,905    36,313    16,927    9,634

Operating Revenue

   15,645    31,552    18,913    196

Operating income

   14,961    31,244    10,253    -414

Ordinary Income

   7,845    24,088    10,335    -366

Net profit

   5,521    16,854    7,327    -366

 

44


Table of Contents

Company Name : Woori Second Asset Securitization Specialty

 

Company Number : 00391665

  (units: millions of won)

 

    

Period 4 3Q

(2004.9.30)


  

Period 3

(2003.12.31)


  

Period 2

(2002.12.31)


  

Period 1

(2001.12.31)


Current Assets

   25,187    730    23,560    10

Securitized Assets

   1,053    19,623    74,106    167,136

Total Assets

   26,240    20,353    97,666    167,146

Current Liabilities

   34,447    34,081    4,425    167,170

Securitized Liabilities

   100    100    59,936    0

Total Liabilities

   34,547    34,181    64,361    167,170

Capital

   10    10    10    10

Capital Surplus

   —      —      —      —  

Retained Earnings

   -8,317    -13,838    33,295    -34

Capital Adjustments

   —      —      —      —  

Total Shareholder’s Equity

   -8,307    -13,828    33,305    -24

Operating Revenue

   5,442    15,256    52,425    —  

Operating income

   5,442    -480    32,553    -34

Ordinary Income

   5,521    -289    33,367    -34

Net profit

   5,521    -289    33,329    -34

 

45


Table of Contents

Company Name : Woori Third Asset Securitization Specialty

 

Company Number : 00399357

  (units: millions of won)

 

    

Period 3 3Q

(2004.9.30)


  

Period 2

(2003.12.31)


  

Period 1

(2002.12.31)


Current Assets

   1,208    3,044    18,226

Securitized Assets

   42,894    26,503    48,764

Total Assets

   44,102    29,547    66,990

Current Liabilities

   60,264    60,260    11,676

Securitized Liabilities

   27,790    27,790    65,204

Total Liabilities

   88,054    88,050    76,880

Capital

   10    10    10

Capital Surplus

   —      —      —  

Retained Earnings

   -74,577    -72,337    -9,899

Capital Adjustments

   30,615    13,824    —  

Total Shareholder’s Equity

   -43,952    -58,503    -9,889

Operating Revenue

   -2,279    4,473    33,566

Operating income

   -2,279    -2,804    -10,008

Ordinary Income

   -2,240    -2,669    -9,899

Net profit

   -2,240    -2,669    -9,899

 

46


Table of Contents
3. Investment in Other Companies

 

(units: thousand shares, millions of won)

 

Type


  

Name


   Beginning Balance

   Changes

   Ending Bal.

   Dividend
Revenue


      Quantity

   Share

   Cost

   Quantity

   Cost

   Quantity

   Share

   Cost

  

DOMESTIC

                                                 
     Woori Bank    570,568    100.0    2,912,311    65,389    913,000    635,957    100.0    3,825,311    620,019
    

Kwangju Bank

   34,080    99.9    170,400    —      —      34,080    99.9    170,400    8,502
    

Kyong-nam Bank

   51,800    99.9    259,000    —      —      51,800    99.9    259,000    12,950
    

Woori Credit Card

   22,600    100.0    113,000    (-)22,600    (-)113,000    —      100.0    —      —  
    

Woori Inv’t Mgmt.

   6,000    100.0    39,128    —      —      6,000    100.0    39,128    2,400
    

Woori Securities

   17,372    52.7    169,621    15,584    56,999    32,956    100.0    226,620    8,686
    

Woori Finance Info Sys.

   900    100.0    5,244    —      —      900    100.0    5,244    —  
    

Woori F&I

   2,000    100.0    10,094    —      —      2,000    100.0    10,094    1,500
    

Woori 2nd SPC

   2    95.0    10    —      —      2    95.0    10    13,000
    

Woori 3rd SPC

   2    100.0    10    —      —      2    100.0    10    —  

Foreign

        —      —      —      —      —      —      —      —      —  

Total

        705,324         3,678,818    58,373    856,999    763,697         4,535,817    667,057

* Dividends derived on a fiscal basis
1. As of March 31, 2004, Woori Bank merged with it’s subsidiary Woori Credit Card. From the merger, Woori Bank’s common shares were newly issued in the ratio of 1 Woori Credit Card to 0.3581 Woori Bank, thereby increasing Woori Bank’s number of shares and capital to 636 million shares and 3,179,800 million won from 571 million shares and 2,852,800 million won respectively.
2. As Woori Bank and Woori Credit Card merged, investment securities of Woori Credit Card was added to Woori Bank’s investment securities.
3. 1,900,000 million won from capital reduction without consideration is reflected in the initial purchase.
4. Woori Finance Holdings acquired 15,584,113 shares of Woori Securities in the 2nd quarter through exchange of stocks.

 

47


Table of Contents
VI. Stock Information

 

1. Stock Distribution

 

a. Stock Information of Major Shareholders and Related Parties

 

[as of 2004. 9.30]

  (units: shares, %)

 

Name


   Relation

   Type

   Shares Held

   Reasons
Behind
Change


         Beginning balance

   (+)

   (-)

   Ending balance

  
         Stock

   Share

             Stock

   Share

  
KDIC    Major S/H    Common    673,458,609    86.8         45,000,000    628,458,609    80.15     

Total

   Common    673,458,609    86.8         45,000,000    628,458,609    80.15     
   Preferred                        0    0     
       Total    673,458,609    86.8         45,000,000    628,458,609    80.15     

 

Major Shareholder : KDIC

 

b. Share Ownership of more than 5%

 

[as of 2003.12.31]

  (units: shares, %)

 

No.


   Name

   Common Stock

   Preferred Stock

   Total

      No. of shares

   %

   No. of shares

   %

   No. of shares

   %

1

   KDIC    628,458,609    80.15              628,458,609    80.15

Total

   628,458,609    80.15              628,458,609    80.15

 

48


Table of Contents
c. Shareholder Distribution

 

[as of 2003.12.31]

 

Items


   Shareholder
number


   Ratio

    Number of shares

   Ratio

 

Government

   3    0.01 %   7,398    0.00 %

Government related companies

   4    0.02 %   673,492,609    86.85 %

Securities companies

   66    0.25 %   2,506,076    0.32 %

Insurance companies

   8    0.03 %   490,870    0.06 %

Asset Management

   9    0.03 %   180,940    0.02 %

Financial Institutions

   139    0.52 %   21,206,778    2.73 %

Finance Companies

   0    0.00 %   0    0.00 %

Financial Groups

   4    0.02 %   999,164    0.13 %

Mutual Savings

   2    0.01 %   4,140    0.00 %

Other companies

   67    0.25 %   8,782,528    1.13 %

Individuals

   26,236    98.42 %   32,865,520    4.24 %

Foreigners

   116    0.44 %   34,961,395    4.51 %

Other

   1    0.00 %   150    0.00 %

KSD

   1    0.00 %   7,342    0.00 %

Total

   26,656    100.0 %   775,504,910    100.0 %

 

d. Total Minority Shareholders, Major Shareholders and Other Shareholders

 

(as of 2003.12.31)

 

Items


   Shareholder
number


   Ratio

    Number of shares

   Ratio

    Notes

Total Minority shareholders

   26,652    99.99 %   84,615,239    10.91 %    

Minority Shareholders (companies)

   379    1.42 %   44,597,568    5.75 %    

Minority Shareholders (individuals)

   26,273    98.56 %   40,017,671    5.16 %    

Major shareholder

   1    0.00 %   673,458,609    86.84 %    

Total other shareholders

   2    0.01 %   17,423,720    2.25 %    

Other shareholders (companies)

   1    0.00 %   8,146,720    1.05 %    

Other shareholders (individuals)

   1    0.00 %   9,277,000    1.20 %    

KSD

   1    0.00 %   7,342    0.00 %    

Total

   26,656    100.00 %   775,504,910    100.00 %    

 

49


Table of Contents
2. Stock Price and Stock Market Performance for the Past Six Months

 

a. Domestic Stock Market

 

(units: won, shares)

 

Period


   April

   May

   June

   July

   August

   September

     High    9,210    8,750    7,510    7,490    7,850    8,200
     Low    8,030    6,180    6,520    6,600    6,500    7,430

Monthly Trade Volume

   34,580,246    41,736,095    35,985,286    26,174,739    35,503,225    113,547,828

Monthly Trade Volume

                             

 

b. Foreign Stock Market

 

[name of market : NYSE]

  (units: dollars, shares)

 

Period


   April

   May

   June

   July

   August

   September

ADR

   High    23.57    21.95    19.30    19.32    19.90    22.00
     Low    21.60    17.00    17.15    16.91    16.45    19.44

Monthly Trade Volume

   45,700    83,800    37,100    19,900    32,300    50,000
     High    —      —      —      —      —      —  
     Low    —      —      —      —      —      —  

Monthly Trade Volume

   —      —      —      —      —      —  

* The ADR exchange ratio is 3 shares of Common Stock for one ADS.

 

50


Table of Contents
VII. Directors and Employee Information

 

1. Directors

 

Position


 

Name


 

Common Stocks

Owned


Chairman

  Registered   Young-Key Hwang    

Vice Chairman

  Registered   Jong-Wook Kim    

Managing Director

  Registered   Seung –Hee Park    

Managing Director

  Registered   Jin-hyung Ju    

Non-standing Director

  Registered   Suk-Jean Kang    

Non-standing Director

  Registered   Je-Hoon Lee    

Non-standing Director

  Registered   Sung-Tae Ro    

Non-standing Director

  Registered   Oh-Seok Hyun    

Non-standing Director

  Registered   Dosoung Choi    

Non-standing Director

  Registered   Sung-Hwan Bae    

Non-standing Director

  Registered   Chung-Sook Moon    

 

 

2. Employee Status

 

(units: years, thousands of won)

 

Items


   Staff

  

Average

Tenure


   Annual
Compensation


  

Average
Compensation

Per Person


   Note

   Admin.

   Manu.

   Misc.

   Total

           
Male    46    —      3    49    2.67    2,647,644    54,034     
Female    4    —      12    16    2.38    317,482    19,843     
Total    51    —      15    65         2,965,126    45,617     

* Based on compensation from Jan. to Sept.

 

3. Labor Union Membership

 

Items


 

Details


 

Remarks


Total Membership Base

  Deputy Director and below    

Actual Members

  22    

Full-time Members

  —      

Associated Labor Union Group

  —      

Miscellaneous

  —      

 

51


Table of Contents

Related Party Transactions

 

1. Transactions with Affiliated Parties

 

a. Transactions of Provisional Payments and Loans (including secured loans)

 

(units: millions of won)

 

TYPe


   Name

   Relation

   Transactions of provisional payments & loans

         Item

   Conditions

   Changes

            Date

   Maturity
Date


   Interest Rate

   Beg.

   Change

   End.

                  Loan

    Borrow

      +

   —  

  
     Woori 2nd
SPC
   subsidiary    Other
loan
   2002.1.8    2012.1.8    7.5 %   —      100    —      —      100
     Woori 3rd
SPC
   subsidiary    Other
loan
   2002.4.15    2012.4.15    7.8 %   —      27,790    —      —      27,790
     Woori
Bank
   subsidiary    Other
loan
   2002.9~
2002.11
   10 yr    4.0 %   —      600,000    —      600,000    —  
     Kwangju
Bank
   subsidiary    Other
loan
   2002.
12.31
   10 yr    4.5 %   —      50,000    —      —      50,000
     Woori
Finance
Info.
Sys
   subsidiary    Other
loan
   2002.4
~
2002.10
   4yr    7.3 %   —      30,000    —      —      30,000
     Woori
F&I
   subsidiary    Other
loan
   2002.9
~
2003.3
   4yr    7.3
~
7.6
%
 
%
  —      126,850    —      1,850    125,000

Foreign

   —      —      —      —      —      —       —      —      —      —      —  

Total

                                       834,740    —      601,850    232,890

 

52


Table of Contents

b. Payment Transactions

 

(units: millions of won)

 

Name


  

Relation


  

Transactions of Payments


    
                Transactions

  

Gain

/
Loss


     

Item


   Par
value


   Beginning

   Increase

   Decrease

   Ending

  

Woori Bank

   Subsidiary    Investment stock    5,000    5,869,559    750,658         6,620,217     

Kyongnam

Bank

   Subsidiary    Investment stock    5,000    504,628    85,106         589,734     

Kwangju

Bank

   Subsidiary    Investment stock    5,000    364,955    68,123         433,078     

Woori Credit Card

   Subsidiary    Investment stock    5,000    —      —      —           *1

Woori Finance Info. System

   Subsidiary    Investment stock    5,000    7,284    1,070         8,354     

Woori F&I

   Subsidiary    Investment stock    5,000    35,896    7,535         43,431     

Woori 2nd SPC

   Subsidiary    Investment stock    5,000    20,016    5,521         25,537     

Woori 3rd SPC

   Subsidiary    Investment stock    5,000    1,266    14,551         15,817     

Woori Inv’t Mgmt

   Subsidiary    Investment stock    5,000    34,978    —      13    34,891     

Woori Securities

   Subsidiary    Investment stock    5,000    168,640    60,558         229,198    *2

Total

   7,007,222    1,250,251    2,295    8,00,257     

* The above transactions have been derived using the equity method.
1) Losses of 105,581 million won, which was not recognized the last quarter, was recognized in the 2nd quarter. Following the merger of Woori Credit Card into Woori Bank, the invested stocks of Woori Credit Card were merged with invested stocks of Woori Bank
2) 15,584,113 Woori Securities shares (47.3% of total shares) were acquired through a stock exchange in the 2nd quarter

 

c. Real-Estate Transactions (including rent activities)

 

(1) Transactions of Real-estate Rent activities

 

(units: millions of won)

 

         

Transactions of Payments


                   
   Quantity

   Information

                         Rent

   Rent

              

Name


  

Relation


  

Item


  

location


   Inc

   Dec

   Inc

   Dec

   Maturity

   Guarantee

   Rent

Woori Bank    Affiliate    Rent    Bldg    Hoeihyun-dong 1ga, 203bunji    —      —      —      —      2004.7.11~
2007.6.30
   4,153    1,130
Total                                  4,153    1,130

 

53


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

 

NON-CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS

 

ENDED SEPTEMBER 30, 2004 AND 2003

AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT


Table of Contents

Independent Accountants’ Review Report

 

To the Board of Directors and Shareholders of

Woori Finance Holdings Co., Ltd.

 

We have reviewed the accompanying non-consolidated balance sheet of Woori Finance Holdings Co., Ltd. (the “Company”) as of September 30, 2004 and the related non-consolidated statements of operations and cash flows for the three-month and nine-month periods ended September 30, 2004 and 2003, all expressed in Korean won. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

 

We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. These standards require that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus, provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

 

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

 

We have previously audited, in accordance with auditing standards generally accepted in the Republic of Korea, the non-consolidated balance sheet of the Company as of December 31, 2003 and the related non-consolidated statements of income, appropriations of retained earnings and cash flows for the year then ended (not presented herein) and in our report dated February 17, 2004, we expressed an unqualified opinion on those non-consolidated financial statements. The accompanying non-consolidated balance sheet as of December 31, 2003 comparatively presented does not differ, in material respects, from such audited non-consolidated balance sheet.

 

Our reviews also comprehended the translation of the Korean won amounts into U.S. dollar amounts and nothing has come to our attention that causes us to believe that such translation is not made in conformity with the basis stated in Note 2 to the accompanying non-consolidated interim financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside of the Republic of Korea.


Table of Contents

Without affecting our conclusion, we draw attention to the following:

 

As explained in Notes 1 and 25 to the accompanying non-consolidated interim financial statements, Woori Bank, a subsidiary of the Company, merged with Woori Credit Card Co., Ltd. (“WCC”), a subsidiary of the Company, on March 31, 2004. Woori Bank took over substantially all of the assets and liabilities of WCC by exchanging one common share of WCC with 0.3581 share of Woori Bank and (Won) 330.4 billion (US$ 287.8million) of the difference between (Won) 657.3billion (US$ 572.6million) of net assets acquired from WCC and (Won) 326.9billion (US$ 284.8 million) of consideration for the merger was recorded as capital surplus of Woori Bank. As a result, the number of issued common shares of Woori Bank increased from 570.6 million to 636.0 million and contributed capital of Woori Bank increased from (Won) 2,852.8 billion (US$ 2,485.2 million) to (Won) 3,179.8 billion (US$ 2,770.1 million).

 

As explained in Notes 1 and 26 to the accompanying non-consolidated interim financial statements, on June 18, 2004 the Company issued 8.6 million new common shares and exchanged them for 15.6 million common shares of Woori Securities, a subsidiary of the Company, in order to wholly own the subsidiary. As a result, the number of issued common shares of the Company increased from 775.5 million to 784.1 million and contributed capital of the Company increased from (Won) 3,877.5 billion (US$ 3,377.9 million) to (Won) 3,920.4 billion (US$ 3,415.3 million).

 

As explained in Note 27 to the accompanying non-consolidated interim financial statements, on September 15, 2004, the Company made a resolution to acquire 25,877,487 shares of LG Investment & Securities Co., Ltd.’s common stock, 21.2% of ownership interest, for (Won) 297.6 billion (US$ 259.3 million) and on September 23, 2004, the Company has entered into a purchase agreement with LG Card Co., Ltd., which currently owns those common shares of LG Investment & Securities Co., Ltd., and paid a deposit of (Won) 29.8 billion (US$ 25.9 million).

 

As explained in Note 20 to the accompanying non-consolidated interim financial statements, the Company’s receivables from its subsidiaries as of September 30, 2004 and December 31, 2003 are (Won) 963.8 billion (US$ 839.6 million) and (Won) 1,238.1 billion (US$ 1,078.6), respectively, and payables to its subsidiaries are (Won) 31.3 billion (US$ 27.2 million) and (Won) 18.5 billion (US$ 16.1 million), respectively. In addition, for the nine months ended September 30, 2004 and 2003 revenues from transactions with its subsidiaries are (Won) 25.0 billion (US$ 21.8 million) and (Won) 59.6 billion (US$ 51.9 million), respectively, and expenses from transactions with its subsidiaries are (Won)15.8 billion (US$ 13.8 million) and (Won)13.8 billion (US$ 12.0 million), respectively.


Table of Contents

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

 

November 5, 2004

 

Notice to Readers

 

This report is effective as of November 5, 2004, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between this review report date and the time the review report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the accountants’ review report.


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003

 

(See Independent Accountants’ Review Report.)

 

     Korean won

   US dollars (Note 2)

     September 30,
2004


   December 31,
2003


   September 30,
2004


   December 31,
2003


     (In millions)    (In thousands)

ASSETS

                           

Cash and bank deposits (Notes 16, 18 and 20)

   (Won) 719,328    (Won) 349,585    US$ 626,647    US$ 304,543

Investment securities of subsidiaries (Notes 3 and 18)

     8,000,257      7,007,222      6,969,472      6,104,384

Loans, net of allowance for possible loan losses (Notes 4, 5, 18 and 20)

     231,726      830,566      201,870      723,553

Fixed assets (Note 6)

     309      293      269      255

Other assets (Notes 7, 10 and 20)

     46,511      60,149      40,518      52,399
    

  

  

  

     (Won) 8,998,131    (Won) 8,247,815    US$ 7,838,776    US$ 7,185,134
    

  

  

  

LIABILITIES AND SHAREHOLDERS’ EQUITY

                           

LIABILITIES

                           

Borrowings (Notes 8 and 18)

   (Won) 120,000    (Won) —      US$ 104,538    US$ —  

Debentures, net of discounts and reconciliation for conversion rights plus accrued interest and redemption premium (Notes 9, 10 and 18)

     2,548,129      2,621,182      2,219,818      2,283,458

Other liabilities (Notes 10, 11, 12 and 20)

     40,897      28,738      35,628      25,036
    

  

  

  

       2,709,026      2,649,920      2,359,984      2,308,494
    

  

  

  

SHAREHOLDERS’ EQUITY

                           

Common stock (Note 13)

     3,920,381      3,877,525      3,415,264      3,377,929

Capital surplus (Note 13)

     75,451      61,324      65,730      53,423

Retained earnings (Notes 3 and 13):

                           

Legal reserve

     79,177      58,921      68,976      51,329

Voluntary reserve

     1,120,000      1,000,000      975,695      871,156

Retained earnings before appropriations (Net income of (Won) 440,157 million and (Won) 202,565 million for the nine months ended September 30, 2004 and for the year ended December 31, 2003, respectively)

     308,195      223,945      268,485      195,091
    

  

  

  

       1,507,372      1,282,866      1,313,156      1,117,576

Capital adjustments (Notes 3 and 14)

     785,901      376,180      684,642      327,712
    

  

  

  

       6,289,105      5,597,895      5,478,792      4,876,640
    

  

  

  

     (Won) 8,998,131    (Won) 8,247,815    US$ 7,838,776    US$ 7,185,134
    

  

  

  

 

See accompanying notes to non-consolidated interim financial statements.


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003

 

(See Independent Accountants’ Review Report.)

 

     Korean won

    US dollars (Note 2)

 
     2004

    2003

    2004

    2003

 
     Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


 
     (In millions, except for income per share data)     (In thousands, except for income per share data)  

OPERATING REVENUE

                                                                

Gain on valuation using the equity method of accounting (Notes 3 and 19)

   (Won) 292,686     (Won) 539,143     (Won) —       (Won) 420,371     US$ 254,975     US$ 469,678     US$ —       US$ 366,209  

Interest income (Note 20)

     7,426       25,053       16,925       54,284       6,469       21,825       14,744       47,290  

Gain on valuation of swap contracts

(Notes 9 and 20)

     1,091       —         7,805       5,296       950       —         6,799       4,614  

Gain on foreign currencies transactions

     —         2,884       —         —         —         2,512       —         —    

Gain on foreign currencies translation

     1,144       12,183       7,892       14,894       997       10,614       6,876       12,974  

Reversal of allowance for possible loan losses (Note 5)

     —         3,141       11,161       14,935       —         2,736       9,723       13,011  
    


 


 


 


 


 


 


 


       302,347       582,404       43,783       509,780       263,391       507,365       38,142       444,098  
    


 


 


 


 


 


 


 


OPERATING EXPENSES

                                                                

Loss on valuation using the equity method of accounting

     —         —         (129,083 )     —         —         —         (112,451 )     —    

Interest expense (Note 20)

     (37,771 )     (112,253 )     (33,473 )     (103,371 )     (32,904 )     (97,790 )     (29,160 )     (90,052 )

Loss on valuation of swap contracts

(Notes 9 and 20)

     —         (12,440 )     (9,165 )     (12,082 )     —         (10,837 )     (7,984 )     (10,525 )

Loss on foreign currencies translation

     —         —         (2,409 )     (2,409 )     —         —         (2,099 )     (2,099 )

Provision for possible loan losses

     (3 )     —         —         —         (3 )     —         —         —    

Fees and commissions (Note 20)

     (2,093 )     (5,073 )     (1,795 )     (4,363 )     (1,823 )     (4,419 )     (1,564 )     (3,801 )

General and administrative (Notes 17 and 20)

     (4,299 )     (14,124 )     (4,749 )     (17,098 )     (3,745 )     (12,305 )     (4,137 )     (14,895 )
    


 


 


 


 


 


 


 


       (44,166 )     (143,890 )     (180,674 )     (139,323 )     (38,475 )     (125,351 )     (157,395 )     (121,372 )
    


 


 


 


 


 


 


 


OPERATING INCOME (LOSS)

     258,181       438,514       (136,891 )     370,457       224,916       382,014       (119,253 )     322,726  

NON-OPERATING INCOME

     1,522       1,724       —         190       1,326       1,502       —         166  

NON-OPERATING EXPENSES

     (21 )     (81 )     (520 )     (556 )     (18 )     (71 )     (453 )     (485 )
    


 


 


 


 


 


 


 


 

(continued)


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003 (CONTINUED)

 

(See Independent Accountants’ Review Report.)

 

     Korean won

   US dollars (Note 2)

     2004

   2003

   2004

   2003

     Three months
ended Sep. 30


   Nine months
ended Sep. 30


   Three months
ended Sep. 30


    Nine months
ended Sep. 30


   Three months
ended Sep. 30


   Nine months
ended Sep. 30


   Three months
ended Sep. 30


    Nine months
ended Sep. 30


     (In millions, except for income per common share data)    (In thousands, except for income per common share data)

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

     259,682      440,157      (137,411 )     370,091      226,224      383,445      (119,706 )     322,407
                                                           

INCOME TAX EXPENSE (Note 15)

     —        —        —         —        —        —        —         —  
                                                           

NET INCOME (LOSS)

   (Won) 259,682    (Won) 440,157    (Won) (137,411 )   (Won) 370,091    US$ 226,224    US$ 383,445    US$ (119,706 )   US$ 322,407
    

  

  


 

  

  

  


 

BASIC ORDINARY INCOME (LOSS) PER COMMON SHARE (Note 21)

   (Won) 331    (Won) 565    (Won) (177 )   (Won) 480    US$ 0.289    US$ 0.492    US$ (0.154 )   US$ 0.418
    

  

  


 

  

  

  


 

BASIC NET INCOME (LOSS) PER COMMON SHARE (Note 21)

   (Won) 331    (Won) 565    (Won) (177 )   (Won) 480    US$ 0.289    US$ 0.492    US$ (0.154 )   US$ 0.418
    

  

  


 

  

  

  


 

DILUTED ORDINARY INCOME (LOSS) PER COMMON SHARE (Note 21)

   (Won) 324    (Won) 558    (Won) (177 )   (Won) 468    US$ 0.282    US$ 0.486    US$ (0.154 )   US$ 0.408
    

  

  


 

  

  

  


 

DILUTED NET INCOME (LOSS) PER COMMON SHARE (Note 21)

   (Won) 324    (Won) 558    (Won) (177 )   (Won) 468    US$ 0.282    US$ 0.486    US$ (0.154 )   US$ 0.408
    

  

  


 

  

  

  


 

 

See accompanying notes to non-consolidated financial statements.


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003

 

(See Independent Accountants’ Review Report.)

 

     Korean won

    US dollars (Note 2)

 
     2004

    2003

    2004

    2003

 
     Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


 
     (In millions)     (In thousands)  

CASH FLOWS FROM OPERATING ACTIVITIES:

                                                                

Net income (loss)

   (Won) 259,682     (Won) 440,157     (Won) (137,411 )   (Won) 370,091     US$ 226,224     US$ 383,445     US$ (119,706 )   US$ 322,407  
    


 


 


 


 


 


 


 


Adjustments to reconcile net income (loss) to net cash used in operating activities:

                                                                

Loss on valuation using the equity method of accounting

     —         —         129,083       —         —         —         112,451       —    

Interest expense (amortization of discounts on debentures)

     2,797       8,807       2,937       8,155       2,437       7,672       2,559       7,104  

Provision for possible loan losses

     3       —         —         —         3       —         —         —    

Loss on valuation of swap contracts

     —         12,440       9,165       12,082       —         10,837       7,984       10,525  

Loss on foreign currencies translation

     —         —         2,409       2,409       —         —         2,099       2,099  

Provision for severance benefits

     38       63       20       287       33       55       17       250  

Depreciation

     39       125       35       105       34       109       30       91  

Amortization on intangible assets

     5       14       3       10       4       12       3       9  

Stock compensation

     114       343       117       351       99       299       102       306  

Other non-operating expense

     —         8       —         —         —         7       —         —    

Gain on valuation using the equity method of accounting

     (292,686 )     (539,143 )     —         (420,371 )     (254,975 )     (469,678 )     —         (366,209 )

Interest income (long-term accrued interest)

     (568 )     (1,690 )     (6,690 )     (19,659 )     (495 )     (1,472 )     (5,828 )     (17,126 )

Gain on valuation of swap contracts

     (1,091 )     —         (7,805 )     (5,296 )     (950 )     —         (6,799 )     (4,614 )

Gain on foreign currencies translation

     (1,144 )     (12,183 )     (7,892 )     (14,894 )     (997 )     (10,614 )     (6,876 )     (12,974 )

Reversal of allowance for possible loan losses

     —         (3,141 )     (11,161 )     (14,935 )     —         (2,736 )     (9,723 )     (13,011 )

Gain on disposal of tangible assets

     (2 )     (15 )     —         —         (2 )     (13 )     —         —    

Other non-operating revenue

     —         (11 )     —         —         —         (10 )     —         —    
    


 


 


 


 


 


 


 


       (292,495 )     (534,383 )     110,221       (451,756 )     (254,809 )     (465,532 )     96,019       (393,550 )
    


 


 


 


 


 


 


 


 

(continued)


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003 (CONTINUED)

 

(See Independent Accountants’ Review Report.)

 

     Korean won

    US dollars (Note 2)

 
     2004

    2003

    2004

    2003

 
     Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


 
     (In millions)     (In thousands)  

Changes in operating assets and liabilities:

                                                                

Decrease (increase) in other receivables

   (Won) (2 )   (Won) 128     (Won) —       (Won) 4     US$ (2 )   US$ 112     US$ —       US$ 3  

Decrease in accrued income

     218       27,983       433       2,025       190       24,378       377       1,764  

Decrease in currency swap contracts

     —         16,463       —         —         —         14,342       —         —    

Increase in advance payment

     (29,775 )     (29,794 )     (5 )     (5 )     (25,939 )     (25,955 )     (4 )     (4 )

Decrease (increase) in prepaid expenses

     185       466       (42 )     769       161       406       (37 )     670  

Decrease (increase) in prepaid income tax

     (82 )     1,247       (1,600 )     1,467       (71 )     1,086       (1,394 )     1,278  

Retirement benefits payments

     (37 )     (567 )     —         —         (32 )     (494 )     —         —    

Decrease in retirement insurance

     11       448       —         —         10       390       —         —    

Increase (decrease) in other payables

     (1,308 )     (404 )     (95 )     233       (1,139 )     (352 )     (82 )     203  

Increase (decrease) in accrued expenses

     367       280       (3,497 )     (3,658 )     320       244       (3,046 )     (3,187 )

Increase (decrease) in withholdings

     (27 )     (100 )     85       99       (25 )     (87 )     74       87  
    


 


 


 


 


 


 


 


       (30,450 )     16,150       (4,721 )     934       (26,527 )     14,071       (4,112 )     814  
    


 


 


 


 


 


 


 


Net cash used in operating activities

     (63,263 )     (78,076 )     (31,911 )     (80,731 )     (55,112 )     (68,017 )     (27,799 )     (70,329 )
    


 


 


 


 


 


 


 


CASH FLOWS FROM INVESTING ACTIVITIES:

                                                                

Dividend income

     400,017       673,711       386,381       539,989       348,478       586,907       336,598       470,415  

Collection of loans

     —         1,850       19,200       29,600       —         1,612       16,726       25,786  

Collection of other loans

     —         600,000       65,411       357,697       —         522,694       56,983       311,610  

Disposition of tangible assets

     4       52       —         —         3       45       —         —    

Acquisition of investment securities of subsidiaries

     —         (800,000 )     (640,000 )     (840,000 )     —         (696,925 )     (557,540 )     (731,771 )

Increase in loans

     —         —         (31,850 )     (121,850 )     —         —         (27,746 )     (106,150 )

 

(continued)


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003 (CONTINUED)

 

(See Independent Accountants’ Review Report.)

 

     Korean won

    US dollars (Note 2)

 
     2004

    2003

    2004

    2003

 
     Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three months
ended Sep. 30


    Nine months
ended Sep. 30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


    Three
months
ended Sep.
30


    Nine
months
ended Sep.
30


 
     (In millions)     (In thousands)  

Acquisition of tangible assets

   (Won) (2 )   (Won) (179 )   (Won) —       (Won) (18 )   US$ (2 )   US$ (156 )   US$ —       US$ (16 )

Acquisition of intangible assets

     (2 )     (13 )     —         (3 )     (2 )     (11 )     —         (3 )

Increase in guarantee deposits

     (333 )     (333 )     —         —         (290 )     (290 )     —         —    
                                                                  

Net cash provided by (used in) investing activities

     399,684       475,088       (200,858 )     (34,585 )     348,187       413,876       (174,979 )     (30,129 )
    


 


 


 


 


 


 


 


CASH FLOWS FROM FINANCING ACTIVITIES:

                                                                

Proceeds from borrowings

     —         120,000       150,000       150,000       —         104,539       130,673       130,673  

Proceeds from debentures in local currency

     329,330       698,255       299,128       319,128       286,898       608,289       260,587       278,010  

Proceeds from debentures in foreign currencies

     —         —         1,179       49,812       —         —         1,027       43,394  

Capital increase with consideration

     —         —         —         38,450       —         —         —         33,496  

Payment of borrowings

     (100,000 )     —         —         (100,000 )     (87,116 )     —         —         (87,116 )

Payment of debentures in local currency

     (300,000 )     (600,000 )     (66,680 )     (66,680 )     (261,347 )     (522,694 )     (58,089 )     (58,089 )

Payment of debentures in foreign currencies

     —         (167,940 )     —         —         —         (146,302 )     —         —    

Share issuance cost

     —         (16 )     (544 )     (574 )     —         (14 )     (473 )     (500 )

Payment of dividends

     —         (77,550 )     —         (57,262 )     —         (67,558 )     —         (49,883 )

Acquisition of treasury stocks

     (18 )     (18 )     —         —         (15 )     (15 )     —         —    
    


 


 


 


 


 


 


 


Net cash provided by (used in) financing activities

     (70,688 )     (27,269 )     383,083       332,874       (61,580 )     (23,755 )     333,725       289,985  
                                                                  

NET INCREASE IN CASH AND BANK DEPOSITS

     265,733       369,743       150,314       217,558       231,495       322,104       130,947       189,527  

CASH AND BANK DEPOSITS, BEGINNING OF THE PERIOD

     453,595       349,585       140,500       73,256       395,152       304,543       122,397       63,817  
                                                                  

CASH AND BANK DEPOSITS, END OF THE PERIOD (Note 16)

   (Won) 719,328     (Won) 719,328     (Won) 290,814     (Won) 290,814     US$ 626,647     US$ 626,647     US$ 253,344     US$ 253,344  
    


 


 


 


 


 


 


 


 

See accompanying notes to non-consolidated interim financial statement.


Table of Contents

WOORI FINANCE HOLDINGS CO., LTD.

NOTES TO NON-CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE-MONTH AND NINE-MONTH PERIODS

ENDED SEPTEMBER 30, 2004 AND 2003

 

(See Independent Accountants’ Review Report.)

 

1. GENERAL

 

(1) Woori Finance Holdings Co., Ltd.

 

Woori Finance Holdings Co., Ltd. (the “Company”) was incorporated on March 27, 2001, to engage in the business of managing the following five financial institutions, Woori Bank (formerly Hanvit Bank), Kyongnam Bank, Kwangju Bank, Woori Credit Card Co., Ltd. (formerly Peace Bank of Korea and merged into Woori Bank on March 31, 2004) and Woori Investment Bank (merged into Woori Bank on July 31, 2003), whose shares were contributed to the Company by the Korea Deposit Insurance Corporation (the “KDIC”) in accordance with the provisions of the Financial Holding Company Act. As a result of its functional restructuring, the Company owns nine subsidiaries and four 2nd-tier subsidiaries as of September 30, 2004.

 

Upon incorporation, the Company’s stock amounted to (Won) 3,637,293 million (US$ 3,168,650 thousand), consisting of 727,458,609 common shares ((Won)5,000 per share) issued and outstanding. As a result of several capital increases and exercise of warrants since incorporation, as of September 30, 2004, the Company’s stock amounted to (Won) 3,920,381 million (US$ 3,415,264 thousand), consisting of 784,076,172 common shares issued and outstanding of which the KDIC owns 628,458,609 shares (80.15%).

 

On June 24, 2002, the Company listed its common shares on the Korea Stock Exchange through a public offering at a price of (Won) 6,800 per share with 36,000,000 new shares and 54,000,000 issued shares.

 

The Company was registered with the Securities and Exchange Commission in the United States of America and listed its American Depositary Shares on the New York Stock Exchange on September 29, 2003.

 

(2) Subsidiaries

 

General information pertaining to the Company’s subsidiaries as of September 30, 2004 does not differ materially from that as of December 31, 2003 except for set forth below.

 

a. Woori Bank, a subsidiary of the Company, merged with WCC, a subsidiary of the Company, on March 31, 2004. Woori Bank issued 0.3581 new common shares per one common share of WCC.


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Accordingly, the number of issued common shares of Woori Bank increased from 571 million to 636 million and contributed capital of Woori Bank increased from (Won) 2,852.8 billion (US$2,485.2 million) to (Won) 3,179.8 billion (US$2,770.1 million).

 

b. For the three-month period ended March 31, 2004, Woori Bank additionally acquired PT. Bank Woori Indonesia’s 231 shares of common stock which are 13.6% ownership interest in the 2nd-tier subsidiary of the Company.

 

c. For the three-month period ended June 30, 2004, the Company additionally acquired Woori Securities Co., Ltd.’s 15,584,113 shares of common stock which are 47.3% ownership interest in the subsidiary of the Company. As a result, the number of issued common shares of the Company increased from 775.5 million to 784.1 million and contributed capital of the Company increased from (Won) 3,877.5 billion (US$ 3,377.9 million) to (Won) 3,920.4 billion (US$ 3,415.3 million) and Woori Securities Co., Ltd. became a wholly owned subsidiary.

 

d. The summary of subsidiaries as of September 30, 2004 is as follows:

 

Parent companies


  

Subsidiaries


  

Number of
shares

owned


  

Percentage

of owner-

ship (%)


  

Fiscal year

end


Woori Finance Holdings Co., Ltd.

  

Woori Bank

   635,956,580    100.0    December 31

  

Kyongnam Bank

   51,800,000    99.9    December 31

  

Kwangju Bank

   34,080,000    99.9    December 31

  

Woori Finance Information System Co., Ltd. (WFIS)

   900,000    100.0    December 31

  

Woori F&I Co., Ltd. (WF&I)

   2,000,000    100.0    December 31

  

Woori Second Asset Securitization Specialty Co., Ltd. (WASS2)

   1,900    95.0    December 31

  

Woori Third Asset Securitization Specialty Co., Ltd. (WASS3)

   2,000    100.0    December 31

  

Woori Investment Trust Management Co., Ltd. (WITM)

   6,000,000    100.0    March 31

  

Woori Securities Co., Ltd. (Woori Securities)

   32,956,413    100.0    March 31

Woori Bank

  

Woori Credit Information Co., Ltd. (WCI)

   1,008,000    100.0    December 31

  

Woori America Bank (WAB)

   8,500,000    100.0    December 31

  

PT. Bank Woori Indonesia (BWI)

   1,618    95.2    December 31

Woori F&I Co., Ltd.

  

Woori CA Asset Management Co., Ltd. (WCAAMC)

   408,000    51.0    December 31


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e. The summary of subsidiaries as of December 31, 2003 was as follows:

 

Parent companies


  

Subsidiaries


  

Number of

shares

owned


  

Percentage

of owner-

ship (%)


  

Fiscal year

end


Woori Finance Holdings Co., Ltd.

  

Woori Bank (*1)

   570,567,520    100.0    December 31

  

Kyongnam Bank

   51,800,000    99.9    December 31

  

Kwangju Bank

   34,080,000    99.9    December 31

  

Woori Credit Card Co., Ltd. (*2)

   22,600,000    100.0    December 31

  

Woori Finance Information System Co., Ltd.

   900,000    100.0    December 31

  

Woori F&I Co., Ltd.

   2,000,000    100.0    December 31

  

Woori Second Asset Securitization Specialty Co., Ltd.

   1,900    95.0    December 31

  

Woori Third Asset Securitization Specialty Co., Ltd.

   2,000    100.0    December 31

  

Woori Investment Trust Management Co., Ltd.

   6,000,000    100.0    March 31

  

Woori Securities Co., Ltd. (*3)

   17,372,300    52.7    March 31

Woori Bank

  

Woori Credit Information Co., Ltd.

   1,008,000    100.0    December 31

  

Woori America Bank (*4)

   8,500,000    100.0    December 31

  

P.T. Bank Woori Indonesia

   1,387    81.6    December 31

Woori F&I Co., Ltd.

  

Woori CA Asset Management Co., Ltd.

   408,000    51.0    December 31

 


(*1) The number of outstanding shares of Woori Bank increased by 17,687,520 shares as a result of Woori Bank’s merger with Woori Investment Bank on July 31, 2003.
(*2) On March 27, 2003, the Company purchased 40,000,000 new shares of WCC for (Won) 200,000 million (US$ 174,231 thousand) and on September 30, 2003, the Company purchased 128,000,000 new shares of WCC for (Won) 640,000 million (US$ 557,540 thousand). However, WCC curtailed 380,000,000 shares amounting to (Won) 1,900,000 million (US$ 1,655,196 thousand) in a capital reduction without consideration on December 22, 2003.
(*3) The Company purchased 4,121,730 shares of Woori Securities for (Won) 16,899 million (US$ 14,722 thousand) on November 28, 2003.
(*4) Woori Bank purchased 1,500,000 new shares of WAB for US$ 15 million on September 3, 2003.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 

Basis of Financial Statement Presentation

 

The Company maintains its official accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying financial statements have been restructured and translated into English from the Korean language financial statements.

 

The US dollar amounts presented in these non-consolidated interim financial statements were computed by translating Korean won amounts into US dollars amounts at the rate of (Won) 1,147.9 to US$ 1.00 the Base Rate announced by Seoul Money Brokerage Service, Ltd. at September 30, 2004, solely for the convenience of the readers outside of the Republic of Korea. This convenience translation into US dollars should not be construed as representations that the Korean won amounts have been, could have been, or could in the future be, converted at this or any other rate of exchange.

 

The accounting policies, which have been adopted in preparing the accompanying non-consolidated interim financial statements, are not different materially from those used in preparing the non-consolidated financial statements for the year ended December 31, 2003.


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3. INVESTMENT SECURITIES OF SUBSIDIARIES

 

(1) Changes in equity securities during the nine-month period ended September 30, 2004, which are accounted for using the equity method of accounting, are as follows (Unit: Korean won in millions):

 

    

January 1,

2004


  

Gain (loss)

on valuation

using the

equity method


   

Capital

adjust-

ments


  

Other

increase

(decrease)


   

September 30,

2004


Woori Bank

   (Won) 5,869,559    (Won) 840,777     (Won) 352,309    (Won) (442,428 )   (Won) 6,620,217

Kyongnam Bank

     504,628      82,723       15,354      (12,971 )     589,734

Kwangju Bank

     364,955      67,015       9,668      (8,560 )     433,078

Woori Credit Card (*1)

     —        (466,410 )     1,677      464,733       —  

Woori Finance Information System

     7,284      1,070       —        —         8,354

Woori F&I

     35,896      5,464       3,571      (1,500 )     43,431

Woori Second Asset Securitization Specialty

     20,016      5,521       —        —         25,537

Woori Third Asset Securitization Specialty

     1,266      (2,240 )     16,791      —         15,817

Woori Investment Trust Management

     34,978      2,313       —        (2,400 )     34,891

Woori Securities

     168,640      2,910       9,335      48,313       229,198
    

  


 

  


 

     (Won) 7,007,222    (Won) 539,143     (Won) 408,705    (Won) 45,187     (Won) 8,000,257
    

  


 

  


 


(*1) (Won) 105,581 million (US$ 91,978 thousand) of unrecorded loss on valuation of the equity securities in WCC in 2003 due to discontinuance of the equity method of accounting was reflected in the other increase or decrease for the nine months ended September 30, 2004. In addition, the investment securities of WCC were combined in those of Woori Bank since WCC was merged into Woori Bank on March 31, 2004.
(2) The reconciliation between the acquisition costs and the book value as of December 31, 2003 is summarized as follows (Unit: Korean won in millions):

 

    

Acquisition

cost


  

Gain (loss)

on valuation

using the

equity method


  

Capital

adjust-

ments


  

Other

increase

(decrease)


    Dec. 31, 2003

Woori Bank

   (Won) 2,764,400    (Won) 2,760,234    (Won) 800,161    (Won) (455,236 )   (Won) 5,869,559

Kyongnam Bank

     259,000      235,406      32,074      (21,852 )     504,628

Kwangju Bank

     170,403      195,597      9,508      (10,553 )     364,955


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- 6 -

 

     Acquisition
cost


  

Gain (loss)

on valuation
using the
equity method


    Capital
adjust-
ments


    Other
increase
(decrease)


    Dec. 31, 2003

Woori Credit Card (*1)

     273,000      (1,490,901 )     (522,099 )     1,740,000       —  

Woori Investment Bank

   (Won) 170,493    (Won) 44,780     (Won) 34,627     (Won) (249,900 )   (Won) —  

Woori Finance Information System

     5,244      2,238       6       (204 )     7,284

Woori F&I

     10,094      23,304       3,998       (1,500 )     35,896

Woori First Asset Securitization Specialty

     10      (10 )     —         —         —  

Woori Second Asset Securitization Specialty

     10      33,006       —         (13,000 )     20,016

Woori Third Asset Securitization Specialty

     10      (2,678 )     13,824       (9,890 )     1,266

Woori Investment Trust Management

     39,128      3,350       —         (7,500 )     34,978

Woori Securities

     152,662      1,759       2,560       11,659       168,640
    

  


 


 


 

     (Won) 3,844,454    (Won) 1,806,085     (Won) 374,659     (Won) 982,024     (Won) 7,007,222
    

  


 


 


 


(*1) In 2003, the equity method of accounting was discontinued for the valuation of investment securities in WCC as the investment balance was reduced to zero during the year.
(3) The details of other increase or decrease during the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

    

Merger
between

subsidiaries


    Acquisition

  

Retained

earnings


   

Dividends

received


    Total

 

Woori Bank

   (Won) 200,163     (Won) —      (Won) (2,936)     (Won) (639,655 )   (Won) (442,428 )

Kyongnam Bank

     —         —        (21 )     (12,950 )     (12,971 )

Kwangju Bank

     —         —        (40 )     (8,520 )     (8,560 )

Woori Credit Card

     (200,163 )     800,000      (135,104 )     —         464,733  

Woori F&I

     —         —        —         (1,500 )     (1,500 )

Woori Investment Trust Management

     —         —        —         (2,400 )     (2,400 )

Woori Securities

     —         56,999      —         (8,686 )     48,313  
    


 

  


 


 


     (Won) —       (Won) 56,999    (Won) (138,101)     (Won) (673,711)     (Won) 45,187  
    


 

  


 


 



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- 7 -

 

(4) The details of other increase or decrease during the period from the acquisitions of the securities to December 31, 2003 are as follows (Unit: Korean won in millions):

 

    

Acquisition

(disposition)


   

Retained

earnings


   

Dividends

received


    Total

 

Woori Bank (*1)

   (Won) 227,084     (Won) (108,430 )   (Won) (573,890 )   (Won) (455,236 )

Kyongnam Bank

     —         (11,492 )     (10,360 )     (21,852 )

Kwangju Bank

     —         (3,737 )     (6,816 )     (10,553 )

Woori Credit Card

     1,740,000       —         —         1,740,000  

Woori Investment Bank

     (249,666 )     (234 )     —         (249,900 )

Woori Finance Information System

     —         (204 )     —         (204 )

Woori F&I

     —         —         (1,500 )     (1,500 )

Woori Second Asset Securitization Specialty

     —         —         (13,000 )     (13,000 )

Woori Third Asset Securitization Specialty

     —         (9,890 )     —         (9,890 )

Woori Investment Trust Management

     —         —         (7,500 )     (7,500 )

Woori Securities

     16,959       —         (5,300 )     11,659  
    


 


 


 


     (Won) 1,734,377     (Won) (133,987 )   (Won) (618,366 )   (Won) 982,024  
    


 


 


 



(*1) Woori Bank recorded a gain on disposition of the investment in WITM amounting to (Won) 17,715 million (US$ 15,433 thousand) and a loss on disposition of the investment in Woori Securities amounting to (Won) 40,297 million (US$ 35,105 thousand) which were recorded in capital surplus of Woori Bank in 2002. The Company recognized these amounts as an increase and a decrease, respectively, in acquisition cost of the investment in Woori Bank in 2002.

 

(5) For investments in the subsidiaries accounted for using the equity method, the excess of the acquisition cost over the proportionate net asset value on the acquisition date is amortized using the straight-line method over 20 years while excess of the proportionate net asset value on the acquisition date over the acquisition cost is amortized over 5 years.


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- 8 -

 

The details of changes in the difference between the acquisition cost and the proportionate net asset value on the acquisition date during the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

    

January 1,

2004


   

Increase or

decrease


    Amortization

   

September 30,

2004


 

Woori Bank

   (Won) 264,026     (Won) 24,056     (Won) 12,363     (Won) 275,719  

Kyongnam Bank

     7,565       —         334       7,231  

Kwangju Bank

     16,442       —         725       15,717  

Woori Credit Card

     24,415       (24,056 )     359       —    

Woori F&I

     84       —         4       80  

Woori Securities

     (30,223 )     (113,999 )     (10,233 )     (133,989 )
    


 


 


 


     (Won) 282,309     (Won) (113,999 )   (Won) 3,552     (Won) 164,758  
    


 


 


 


 

The details of changes in the difference between the acquisition cost and the proportionate net asset value on the acquisition date during the period from the acquisition to December 31, 2003 are as follows (Unit: Korean won in millions):

 

    

The initial

difference

at acquisition


   

Increase or

decrease


    Amortization

   

December 31,

2003


 

Woori Bank

   (Won) 328,323     (Won) (17,300 )   (Won) 46,997     (Won) 264,026  

Kyongnam Bank

     8,900       —         1,335       7,565  

Kwangju Bank

     19,343       —         2,901       16,442  

Woori Credit Card

     28,721       —         4,306       24,415  

Woori Investment Bank

     5,979       (5,282 )     697       —    

Woori Finance Information System

     (110 )     —         (110 )     —    

Woori F&I

     94       —         10       84  

Woori Securities

     355       (30,223 )     355       (30,223 )
    


 


 


 


     (Won) 391,605     (Won) (52,805 )   (Won) 56,491     (Won) 282,309  
    


 


 


 


 

(6) The details of the elimination of unrealized intercompany income or loss for the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

    

Operating

revenues


   

Operating

expenses


  

Non-operating

income


  

Non-operating

expenses


    Total

 

Woori Bank

   (Won) 1,069     (Won) —      (Won) 1,720    (Won) (90 )   (Won) 2,699  

Kyongnam Bank

     —         —        —        (14 )     (14 )

Kwangju Bank

     —         —        —        (88 )     (88 )

Woori Credit Card

     —         —        —        (173 )     (173 )

Woori Finance Information System

     (563 )     —        —        —         (563 )
    


 

  

  


 


     (Won) 506     (Won) —      (Won) 1,720    (Won) (365 )   (Won) 1,861  
    


 

  

  


 



Table of Contents

- 9 -

 

4. LOANS

 

Loans as of September 30, 2004 and December 31, 2003 are as follows:

 

     Issuance
date


   Maturity
date


   Annual
interest
rate (%)


   Korean won

    US dollars (Note 2)

 
            Sep. 30,
2004


    Dec. 31,
2003


   

Sep. 30,

2004


   

Dec. 31,

2003


 
                    (In millions)     (In thousands)  

Woori Finance Information System (*1)

   Oct. 31,
2002
   Oct. 31,
2006
   7.3    (Won) 30,000     (Won) 30,000     US$ 26,135     US$ 26,135  
                   


 


 


 


Woori F&I (*2)

   Dec. 20,
2002
   Dec. 20,
2006
   7.6      3,150       5,000       2,744       4,356  

   Mar. 25,
2003
   Mar. 25,
2007
   7.3      90,000       90,000       78,404       78,404  

   Jul. 7,
2003
   Jul. 7,
2007
   7.3      23,000       23,000       20,037       20,037  

   Jul. 29
2003
   Jul. 29
2007
   7.3      8,850       8,850       7,710       7,710  
                   


 


 


 


                      125,000       126,850       108,895       110,507  
                   


 


 


 


WASS2:

                                               

2-1 non-guaranteed privately placed bond (*3)

   Jan. 8,
2002
   Jan. 8,
2012
   7.5      100       100       87       87  
                   


 


 


 


WASS3:

                                               

3-1 non-guaranteed privately placed bond (*3)

   Apr. 15,
2002
   Apr. 15,
2012
   7.8      27,790       27,790       24,209       24,209  
                   


 


 


 


Woori Bank:

                                               

1st non-guaranteed subordinated convertible bonds

   Sep. 27,
2002
   Sep. 27,
2012
   —        —         150,000       —         130,673  

2nd non-guaranteed subordinated convertible bonds

   Oct. 30,
2002
   Oct. 30,
2012
   —        —         200,000       —         174,231  

3rd non-guaranteed subordinated convertible bonds

   Nov. 28,
2002
   Nov. 28,
2012
   —        —         250,000       —         217,789  
                   


 


 


 


                      —         600,000       —         522,693  
                   


 


 


 


Kwangju Bank:

                                               

Non-guaranteed subordinated convertible bonds (*4)

   Dec. 31,
2002
   Dec. 31,
2012
   —        50,000       50,000       43,558       43,558  
                   


 


 


 


Total

                    232,890       834,740       202,884       727,189  
                   


 


 


 


Allowance for possible loan losses (Note 5)

          (1,164 )     (4,174 )     (1,014 )     (3,636 )
                   


 


 


 


Net

                  (Won) 231,726     (Won) 830,566     US$  201,870     US$  723,553  
    
  
  
  


 


 


 



(*1) Loans granted to finance the transaction among Woori Bank, WCC and WFIS, in which Woori Bank and WCC transferred their IT equipment to WFIS.


Table of Contents

- 10 -

 

(*2) Loans granted to finance the acquisitions of the securitization debentures and the investment equity securities related to the joint venture special entities of WF&I.
(*3) The principal of the non-guaranteed privately placed bonds listed above shall be fully repaid on the maturity date, however, the trustees may exercise early redemption rights to pay in part or in whole the principal in accordance with the business trust contract pursuant to the asset securitization plan.
(*4) The coupon rate on the bonds is zero and the guaranteed return is 155.29%. The conversion price is (Won) 5,000 and conversion rights are valid from one year after the issuance date to one month before the maturity date. The common shares of Kwangju Bank will be issued upon conversion.

 

5. ALLOWANCE FOR POSSIBLE LOAN LOSSES

 

  (1) Allowances for possible loan losses as of September 30, 2004 and December 31, 2003 are as follows:

 

     Korean won

   US dollars (Note 2)

     Sep. 30, 2004

   Dec. 31, 2003

   Sep. 30, 2004

   Dec. 31, 2003

     (In millions)    (In thousands)

Loans:

                           

Woori Bank

   (Won) —      (Won) 3,000    US$ —      US$ 2,613

Kwangju Bank

     250      250      218      218

Woori Finance Information System

     150      150      131      131

Woori F&I

     624      634      543      552

Woori Second Asset Securitization Specialty

     1      1      1      1

Woori Third Asset Securitization Specialty

     139      139      121      121
    

  

  

  

Sub-total

     1,164      4,174      1,014      3,636
    

  

  

  

Long-term accrued interest income:

                           

Woori Bank

     —        140      —        122

Kwangju Bank

     20      11      17      10
    

  

  

  

Sub-total

     20      151      17      132
    

  

  

  

Total

   (Won) 1,184    (Won) 4,325    US$ 1,031    US$ 3,768
    

  

  

  


Table of Contents

- 11 -

 

  (2) Changes in allowances for possible loan losses during the nine-month periods ended September 30, 2004 and 2003 and the year ended December 31, 2003 are as follows (Unit: Korean won in millions):

 

    

Nine months
ended

Sep. 30, 2004


   

Year ended

Dec. 31, 2003


   

Nine months
ended

Sep. 30, 2003


 

Beginning balance

   (Won) 4,325     (Won) 147,381     (Won) 147,381  

Write-off of loans

     —         (127,400 )     (127,400 )

Provision for possible loan loss (reversal of allowance for doubtful loans)

     (3,141 )     (15,656 )     (14,935 )
    


 


 


Ending balance

   (Won) 1,184     (Won) 4,325     (Won) 5,046  
    


 


 


 

6. FIXED ASSETS

 

  (1) Changes in tangible assets for the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

     Jan. 1, 2004

   Acquisition

   Disposition

   Depreciation

   Sep. 30, 2004

Vehicles

   (Won) 57    (Won) —      (Won) 35    (Won) 14    (Won) 8

Furniture and equipment

     124      126      2      85      163

Structures in leased offices

     61      53      —        26      88
    

  

  

  

  

     (Won) 242    (Won) 179    (Won) 37    (Won) 125    (Won) 259
    

  

  

  

  

 

  (2) Changes in intangible assets for the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

     Jan. 1, 2004

   Acquisition

   Amortization

   Sep. 30, 2004

Software

   (Won) 20    (Won) —      (Won) 5    (Won) 15

Industrial property right

     31      13      9      35
    

  

  

  

     (Won) 51    (Won) 13    (Won) 14    (Won) 50
    

  

  

  

 

Accumulated amortization of software and industrial property right amounted to (Won) 18 million (US$ 16 thousand) and (Won) 23 million (US$ 20 thousand), respectively, as of September 30, 2004.


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7. OTHER ASSETS

 

Other assets as of September 30, 2004 and December 31, 2003 are as follows:

 

     Korean won

    US dollars (Note 2)

 
     Sep. 30, 2004

    Dec. 31, 2003

    Sep. 30, 2004

    Dec. 31, 2003

 
     (In millions)     (In thousands)  

Guarantee deposits

   (Won) 4,204     (Won) 3,871     US$ 3,662     US$ 3,372  

Other receivables

     1,721       1,146       1,499       998  

Accrued income

     5,176       31,471       4,509       27,416  

Currency swaps (Notes 9 and 10)

     —         16,463       —         14,342  

Advance payment

     29,795       1       25,956       1  

Prepaid expenses

     328       794       286       692  

Prepaid income tax

     5,307       6,554       4,623       5,710  
    


 


 


 


Total

     46,531       60,300       40,535       52,531  
    


 


 


 


Allowance for losses for accrued interest (Note 5)

     (20 )     (151 )     (17 )     (132 )
    


 


 


 


Net

   (Won) 46,511     (Won) 60,149     US$ 40,518     US$ 52,399  
    


 


 


 


 

8. BORROWINGS

 

Borrowings in local currency and line of credit as of September 30, 2004 and December 31, 2003 are as follows:

 

    

Annual

interest
rate (%)


    Maturity

   Korean won

   US dollars (Note 2)

          Sep. 30, 2004

   Dec. 31, 2003

   Sep. 30, 2004

   Dec. 31, 2003

                (In millions)   

(In thousands)

Hana Bank

   (*1)     Oct. 30, 2004    (Won)—      (Won) —      US$ —      US$ —  

KorAm Bank

   (*2)     Sep. 30, 2005    60,000      —        52,269      —  

Shinhan Bank

   (*3)     Aug. 19, 2005    60,000      —        52,269      —  

Korea First Bank

   (*4)     Jul. 16, 2005    —        —        —        —  

Samsung Insurance Company (*5)

   6.10 %   Sep. 15, 2005    —        —        —        —  
               
  

  

  

                (Won) 120,000    (Won) —      US$ 104,538    US$ —  
               
  

  

  


(*1) Interest at 3-month Negotiable Certificate of Deposit (“CD”) rate + 1.2%. Early redemption is permitted. The borrowing is made under the line of credit of (Won) 200,000 million (US$ 174,231 thousand) as of September 30, 2004.


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(*2) Interest at 3-month CD rate +1.3%. Early redemption is permitted. The borrowing is made under the line of credit of (Won) 100,000 million (US$ 87,116 thousand) as of September 30, 2004.
(*3) Interest at 3-month CD rate +1.4%. Early redemption is permitted. The borrowing is made under the line of credit of (Won) 200,000 million (US$ 174,231 thousand) as of September 30, 2004.
(*4) Interest at 3-month CD rate +1.5%. Early redemption is permitted. The borrowing is made under the line of credit of (Won) 100,000 million (US$ 87,116 thousand) as of September 30, 2004.
(*5) The borrowing is made under the line of credit of (Won) 100,000 million (US$87,116 thousand) as of September 30, 2004.

 

9. DEBENTURES

 

(1) Debentures in local currency as of September 30, 2004 and December 31, 2003 are as follows:

 

1) Bonds

 

    

Issue

date


   Annual
interest
rate (%)


  

Maturity


   Korean won

    US dollars (Note 2)

 
            Sep. 30, 2004

    Dec. 31, 2003

    Sep. 30, 2004

    Dec. 31, 2003

 
          (In millions)     (In thousands)  

The 2nd bonds

   Sep. 28, 2001    5.00    Sep. 28, 2004    (Won) —       (Won) 300,000     US$ —       US$ 261,347  

The 3rd bonds

   Dec. 03, 2001    5.93    Dec. 03, 2004      300,000       300,000       261,347       261,347  

The 4th bonds

   Dec. 17, 2001    6.00    Dec. 17, 2004      150,000       150,000       130,673       130,673  

The 5th bonds

   Dec. 28, 2001    6.86    Jun. 28, 2004      —         300,000       —         261,347  

The 7th bonds

   Nov. 27, 2002    5.80    Nov. 27, 2005      300,000       300,000       261,347       261,347  

The 8th bonds

   Dec. 26, 2002    6.05    Dec. 26, 2007      200,000       200,000       174,230       174,230  

The 9th bonds

   Sep. 19, 2003    4.64    Sep. 19, 2006      300,000       300,000       261,347       261,347  

The 10th bonds

   Dec. 16, 2003    5.92    Dec. 16, 2008      300,000       300,000       261,347       261,347  

The 11th bonds

   Jun. 18. 2004    5.05    Jun. 18, 2009      370,000       —         322,328       —    

The 12th bonds

   Jul. 26. 2004    4.84    Jul. 26, 2009      230,000       —         200,366       —    

The 13th bonds

   Aug.31 2004    4.42    Aug. 31, 2005      100,000       —         87,116       —    
                   


 


 


 


Total

                    2,250,000       2,150,000       1,960,101       1,872,985  

Less: discounts

               (4,075 )     (7,403 )     (3,550 )     (6,449 )
                   


 


 


 


                    (Won) 2,245,925     (Won) 2,142,597     US$ 1,956,551     US$ 1,866,536  
                   


 


 


 



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2) Convertible bonds

 

     Issue date

  

Annual
interest

rate (%)


   Maturity

   Korean won

    US dollars (Note2)

 
              Sep. 30, 2004

    Dec. 31, 2003

    Sep. 30, 2004

    Dec. 31, 2003

 
          (In millions)     (In thousands)  

The convertible bonds

   Mar. 26,
2003
   —      Mar. 26,
2006
   (Won) 20,000     (Won) 20,000     US$ 17,423     US$ 17,423  

Add: redemption premium

                    2,314       2,314       2,016       2,016  

Less: reconciliation for conversion rights

                    (1,698 )     (2,509 )     (1,479 )     (2,186 )
                   


 


 


 


                    (Won) 20,616     (Won) 19,805     US$ 17,960     US$ 17,253  
                   


 


 


 


 

The unguaranteed privately placed convertible bonds were issued to Lehman Brothers HY Opportunities Korea Inc.. The coupon rate is zero whereas yield to maturity of 3.683 % was guaranteed if the bonds would not be converted. The conversion price is (Won) 5,380 per share which might be adjusted due to additional stock issuances, stock dividends, and split or reverse split of shares. The number of the shares to be issued upon conversion is 3,717,472. The conversion rights are valid from one year after the issuance date to one month before the maturity date. The Company is obligated to issue new common shares upon the requests of the bondholders while the purchaser is obligated to hold the bonds or converted shares, if converted, until September 26, 2004.

 

(2) Debentures in foreign currencies as of September 30, 2004 and December 31, 2003 are as follows (Unit: Korean won in millions, US dollars in thousands, and Japanese yen in thousands):

 

1) Bonds in foreign currencies

 

     Issue date

   Annual
interest
rate (%)


   Maturity

   Foreign currencies

 
              Sep. 30, 2004

    Dec. 31, 2003

 

Floating rate notes

   Nov. 2, 2001    (*1)    Nov. 2, 2004    US$ 150,000     US$ 150,000  

Less: discount

                    (21 )     (204 )
                   


 


                    US$ 149,979     US$ 149,796  
                   


 


Korean won equivalent

                  (Won) 172,161     (Won) 179,426  
                   


 


Yen denominated bonds

   Jan. 16, 2002    1.74    Jan. 16, 2004    JPY —       JPY 15,000,000  

Less: discount

                    —         (1,563 )
                   


 


                    JPY —       JPY 14,998,437  
                   


 


Korean won equivalent

                  (Won) —       (Won) 167,922  
                   


 


Total

                  (Won) 172,161     (Won) 347,348  
                   


 



(*1) London Interbank Offered Rate (LIBOR) (6 months) + 1.6%


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2) Convertible bonds in foreign currency

 

     Issue date

   Annual
interest
rate (%)


   Maturity

   Foreign currencies

 
              Sep. 30, 2004

    Dec. 31, 2003

 

Convertible bonds (*1)

   Sep. 27, 2002    —      Sep. 27, 2005    US$ 36,000     US$ 36,000  

Long-term accrued interest

                    2,162       1,345  
                   


 


                    US$ 38,162     US$ 37,345  
                   


 


Korean won equivalent

                  (Won) 43,806     (Won) 44,732  
                   


 


Convertible bonds (*2)

   Dec. 20, 2002    —      Dec. 20, 2005    US$ 16,000     US$ 16,000  

Long-term accrued interest

                    792       454  
                   


 


                    US$ 16,792     US$ 16,454  
                   


 


Korean won equivalent

                  (Won)  19,276     (Won) 19,709  
                   


 


Convertible bonds (*3)

   Mar. 26, 2003    —      Mar. 26, 2006    US$ 39,000     US$ 39,000  

Add: redemption premium

                    2,664       2,664  

Less: reconciliation for conversion rights

                    (2,294 )     (3,407 )
                   


 


                    US$ 39,370     US$ 38,257  
                   


 


Korean won equivalent

                  (Won)  45,193     (Won) 45,818  
                   


 


Convertible bonds (*4)

   Jul. 10, 2003    —      Jul. 10, 2006    US$ 1,000     US$ 1,000  

Add: redemption premium

                    63       63  

Less: reconciliation for conversion rights

                    (59 )     (82 )
                   


 


                    US$ 1,004     US$ 981  
                   


 


                    (Won) 1,152     (Won) 1,173  
                   


 


Total

                  (Won) 109,427     (Won) 111,432  
                   


 



(*1) The unguaranteed privately placed bonds of US$ 36 million were issued to Lehman Brothers International Europe (“LBIE”) on September 27, 2002. The coupon rate on the bonds is zero whereas yield to maturity of 2.9245% was guaranteed if the bonds would not be converted. The conversion price is (Won) 7,313 per share (conversion-exchange rate applied was (Won) 1,201.4 : US$ 1), which might be adjusted due to additional stock issuances, stock dividends, and split or reverse split of shares. The number of shares available for conversion is 5,914,180 shares. The conversion rights are valid from one year after the issuance date to one month before the maturity date. The Company is obligated to issue new common shares upon the requests of the bondholders while the purchaser is obligated to hold the bonds or converted shares, if converted, until one and half year after the issuance date.
(*2) The unguaranteed privately placed bonds of US$ 16 million were issued to LBIE on December 20, 2002. The coupon rate on the bonds is zero whereas yield to maturity of 2.7335% was guaranteed if the bonds would not be converted. The conversion price is (Won) 5,588 per share (conversion-exchange rate applied was (Won) 1,215.8 : US$ 1), which might be adjusted due to additional stock issuances, stock dividends, and split or reverse split


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of shares. The number of shares available for conversion is 3,481,173 shares. The conversion rights are valid from one year after the issuance date to one month before the maturity date. The Company is obligated to issue new common shares upon the requests of the bondholders while the purchaser is obligated to hold the bonds or converted shares, if converted, until one and a half year after the issuance date.

(*3) The unguaranteed privately placed bonds of US$ 39 million were issued to LBIE on March 26, 2003. The coupon rate on the bonds is zero whereas yield to maturity of 2.215% was guaranteed if the bonds would not be converted. The conversion price is (Won) 5,380 per share (conversion-exchange rate applied was (Won) 1,194.9 : US$ 1), which might be adjusted due to additional stock issuances, stock dividends, and split or reverse split of shares. The number of shares available for conversion is 8,661,914 shares. The conversion rights are valid from one year after the issuance date to one month before the maturity date. The Company is obligated to issue new common shares upon the requests of the bondholders while the purchaser is obligated to hold the bonds or converted shares, if converted, until September 26, 2004.
(*4) The unguaranteed privately placed bonds of US$ 1 million were issued to LBIE on July 10, 2003. The coupon rate on the bonds is zero whereas yield to maturity of 2.034% was guaranteed if the bonds would not be converted. The conversion price is (Won) 7,228 per share (conversion-exchange rate applied was (Won) 1,188.5 : US$ 1), which might be adjusted due to additional stock issuances, stock dividends, and split or reverse split of shares. The number of shares available for conversion is 164,429 shares. The conversion rights are valid from one year after the issuance date to one month before the maturity date. The Company is obligated to issue new common shares upon the requests of the bondholders while the purchaser is obligated to hold the bonds or converted shares, if converted, until January 10, 2005.

 

(3) In connection with the debentures in foreign currencies listed above, the Company has entered into cross currency interest rate swaps with Woori Bank in order to hedge any risks involved with fluctuations in exchange rates and interest rates. As of September 30, 2004 and December 31, 2003, cross currency interest rate swap contracts are as follows (Unit: Korean won in millions, U.S. dollars in thousands, and Japanese yen in thousands):

 

    

Contract

date


  

Maturity

date


   Contracted amount

  

Interest rates and

terms of payment


           Sep. 30, 2004

   Dec. 31, 2003

  

Swap 1

   Nov. 7, 2001    Nov. 2, 2004    US$ 50,000    US$ 50,000    Receipt: LIBOR (6 months) + 1.6%
                 64,650      64,650    Payment: annual rate of 6.90% in every 3 months

Swap 2

   Nov. 18, 2001    Nov. 2, 2004    US$ 99,496    US$ 99,496    Receipt: LIBOR (6 months) + 1.6%
                 128,888      128,888    Payment: CD interest rate (3 months) + 1.5%


Table of Contents

- 17 -

 

     Contract date

   Maturity date

   Contracted amount

  

Interest rates and

terms of payment


         Sep. 30, 2004

   Dec. 31, 2003

  

Swap 3

   Jan. 28, 2002    Jan. 16, 2004      —      JPY 14,924,633   

Receipt: annual rate of 1.74% in every 6 months

                 —        147,754   

Payment: CD interest rate (91 days) + 1.59%

Swap 4

   Sep. 27, 2002    Sep. 27, 2005    US$  36,000    US$ 36,000   

Receipt: compound interest rate of 2.9245% (6 months)

                 44,136      44,136   

Payment: annual rate of 5%

Swap 5

   Dec. 20, 2002    Dec. 20, 2005    US$ 16,000    US$ 16,000   

Receipt: compound interest rate of 2.7335% (6 months)

                 19,248      19,248   

Payment: annual rate of 4.84%

Swap 6

   Mar. 26, 2003    Mar. 26, 2006    US$ 39,000    US$ 39,000   

Receipt: compound interest rate of 2.215% (6 months)

                 48,633      48,633   

Payment: annual rate of 3.04%

Swap 7

   Jul. 9, 2003    Jul. 10, 2006    US$ 1,000    US$ 1,000   

Receipt: compound interest rate of 2.034% (6 months)

                 1,179      1,179   

Payment: annual rate of 3.93%

 

Losses on valuation of swaps of (Won) 12,440 million (US$ 10,837 thousand) for the nine-month period ended September 30, 2004 and gains on valuation of (Won) 5,296 million (US$ 4,614 thousand) and losses on valuation of (Won) 12,082 million (US$ 10,525 thousand) for the nine-month period ended September 30, 2003, were recorded in connection with the above swap contracts.

 

10. ASSETS AND LIABILITIES IN FOREIGN CURRENCIES

 

Assets and liabilities denominated in foreign currencies of the Company as of September 30, 2004 and December 31, 2003 are summarized as follows:

 

     Foreign currencies

   Korean won equivalent

     Sep. 30, 2004

   Dec. 31, 2003

   Sep. 30, 2004

   Dec. 31, 2003

     (In thousands)    (In millions)

(Assets)

                           

Currency swaps

   JPY —      JPY 1,470,444    (Won) —      (Won) 16,463
    

  

  

  

(Liabilities)

                           

Debentures in foreign currencies

   US$  241,979    US$ 241,796      277,767      289,624
                            ”    JPY —      JPY 14,998,437      —        167,922


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- 18 -

 

     Foreign currencies

    Korean won equivalent

 
     Sep. 30, 2004

    Dec. 31, 2003

    Sep. 30, 2004

    Dec. 31, 2003

 
     (In thousands)     (In millions)  

Long-term accrued interest payables

   US$ 2,954     US$ 1,799       3,391       2,155  

Redemption premium

   US$ 2,727     US$ 2,727       3,130       3,258  

Reconciliation for conversion rights

   US$ (2,353 )   US$ (3,489 )     (2,701 )     (4,179 )

Accrued expenses

   US$ 904     US$ 920       1,038       1,101  
     JPY —       JPY 54,611       —         611  

Currency swaps

   US$ 26,865     US$ 15,360       30,838       18,398  
    


 


 


 


     US$  273,076     US$ 259,113     (Won)  313,463     (Won)  478,890  
    


 


 


 


     JPY —       JPY 15,053,048                  
    


 


               

 

11. ACCRUED SEVERANCE BENEFITS

 

Employees and directors with more than one year of service are entitled to receive a lump-sum payment upon termination of their service with the Company. The accrued severance benefits that would be payable assuming all eligible employees and directors were to terminate amounted to (Won) 1,078 million (US$ 939 thousand) and (Won) 1,582 million (US$ 1,378 thousand) as of September 30, 2004 and December 31, 2003, respectively.

 

The details of changes in the accrued severance benefits for the nine-month period ended September 30, 2004 and the year ended December 31, 2003 are as follows:

 

     Korean won

    US dollars (Note2)

 
    

Nine months
ended

Sep. 30, 2004


   

Year

ended

Dec. 31, 2003


   

Nine months
ended

Sep. 30, 2004


   

Year

ended

Dec. 31, 2003


 
     (In millions)     (In thousands)  

Beginning balance

   (Won)  1,582     (Won) 968     US$  1,378     US$ 844  

Provision for severance benefits

     63       625       55       544  

Payment for severance benefits

     (567 )     (11 )     (494 )     (10 )
    


 


 


 


Ending balance

   (Won) 1,078     (Won)  1,582     US$ 939     US$  1,378  
    


 


 


 



Table of Contents

- 19 -

 

The Company has purchased an employee retirement trust and made deposits at Woori Bank. As of September 30, 2004 and December 31, 2003, the deposits, amounting to (Won) 506 million (US$ 441 thousand) and (Won) 954 million (US$ 831 thousand), respectively, are presented as a deduction from accrued severance indemnities.

 

12. OTHER LIABILITIES

 

Other liabilities as of September 30, 2004 and December 31, 2003 are as follows:

 

     Korean won

    US dollars (Note 2)

 
     Sep. 30, 2004

    Dec. 31, 2003

    Sep. 30, 2004

    Dec. 31, 2003

 
     (In millions)     (In thousands)  

Accrued severance benefits (Note 11)

   (Won)  1,078     (Won) 1,582     US$ 939     US$ 1,378  

Deposits with employee retirement trust (Note 11)

     (506 )     (954 )     (441 )     (831 )

Other payables

     103       508       90       443  

Accrued expenses

     9,297       9,016       8,099       7,854  

Withholdings

     87       188       76       164  

Currency swaps (Notes 9 and 10)

     30,838       18,398       26,865       16,028  
    


 


 


 


     (Won)  40,897     (Won)  28,738     US$  35,628     US$  25,036  
    


 


 


 


 

13. SHAREHOLDERS’ EQUITY

 

(1) The Company has 2,400,000,000 authorized shares of common stock with (Won) 5,000 par value, of which 784,076,172 shares [(Won) 3,920,381 million (US$ 3,415,264 thousand)] and 775,504,910 shares [(Won) 3,877,525 million (US$ 3,377,929 thousand)] are issued and outstanding as of September 30, 2004 and December 31, 2003, respectively.

 

(2) The changes in the capital stock of the Company during the period from the incorporation to September 30, 2004 are as follows (Unit: Korean won in millions):

 

Date of

issuance


  

Description


   Number of
shares issued


   Capital stock

  

Paid-in capital

in excess of

par value


 

March 27, 2001

   Establishment    727,458,609    (Won)  3,637,293    (Won) —    

June 12, 2002

   Issuance of new shares    36,000,000      180,000      58,645  

In 2002

   Exercise of warrants    4,356,188      21,781      —    
         
  

  


          767,814,797      3,839,074      58,645  
         
  

  


In 2003

   Exercise of warrants    7,690,113      38,451      (574 )
         
  

  


          775,504,910    (Won) 3,877,525    (Won)  58,071  
         
  

  


In 2004

   Issuance of new shares(*1)    8,571,262      42,856      14,126  
         
  

  


          784,076,172    (Won) 3,920,381    (Won) 72,197  
         
  

  



(*1) On June 18, 2004, the Company issued its new common shares to wholly own Woori Securities, one of its subsidiaries. Those new common shares were offered to exchange for 15,584,113 common shares of Woori Securities.


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(3) As of September 30, 2004 and December 31, 2003, other capital surplus is recorded for considerations for conversion rights relating to convertible bonds issued in 2003, of which details are as follows:

 

     Korean won

   US dollars (Note 2)

     (in millions)    (in thousands)

Convertible bond in foreign currencies issued on March 26, 2003

   (Won)  2,215    US$ 1,930

Convertible bond issued on March 26, 2003

     997      868

Convertible bond in foreign currencies issued on July 10, 2003

     41      36
    

  

     (Won) 3,253    US$  2,834
    

  

 

(4) Pursuant to the Financial Holding Company Act Article 53, legal reserves are appropriated at no less than one tenth of net income until reaching to an amount equal to the Company’s contributed capital, whenever dividends are declared.

 

(5) The reconciliation between retained earnings before appropriations as of September 30, 2004 and December 31, 2003 is as follows:

 

     Korean won

    US dollars (Note 2)

 
     (In millions)     (In thousands)  

December 31, 2003

         (Won) 223,945           US$ 195,091  

Appropriation

                            

Dividends in cash

   (77,550 )           (67,558 )        

Transfer to legal reserve

   (20,256 )           (17,647 )        

Transfer to voluntary reserve

   (120,000 )     (217,806 )   (104,539 )     (189,744 )
    

         

       

Decreases due to using the equity method of accounting for the nine months ended Sep. 30, 2004

           (138,101 )           (120,307 )

Net income for the nine months ended Sep. 30, 2004

           440,157             383,445  
          


       


September 30, 2004

         (Won) 308,195           US$ 268,485  
          


       



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14. STOCK OPTIONS

 

(1) On December 4, 2002, the Company granted stock options to 62 directors of the Company and its subsidiaries. The exercise price of 60 percent of the total number of stock options granted will be determined depending on the Korean banking industry stock index (at minimum (Won) 6,800 per share). In addition, for the remaining 40 percent of the total number of stock options granted, of which the exercise price is (Won) 6,800 per share, the number of stock options to be vested will be dependent on the Company’s management performance target levels; non-performing loans ratio, capital adequacy ratio and net income to total asset ratio by 15%, 15%, and 10%, respectively. The stock options are exercisable during a three-year period beginning after three years from the grant date. If the stock options are exercised, the Company has the option either to issue new shares or shares held as treasury stock, or to pay the difference between the market price and the exercise price in cash or with treasury stock.

 

(2) The stock options (220,000 shares) granted to 9 directors of the Company and its subsidiaries, who subsequently retired, were cancelled by the resolutions of the Company’s board of directors in 2003 and for the nine-month period ended September 30, 2004.

 

(3) The summary of stock options granted as of September 30, 2004 is summarized as follows:

 

Description


   The Company

   Subsidiaries

   Total

Exercisable number of shares

   440,000 shares    900,000 shares    1,340,000 shares

Type

   Share issue or
    balance compensation
   Share issue or
    balance compensation
    

Valuation method

   Fair value approach    Fair value approach     

 

(4) The Company estimated stock option costs using the Black-Scholes Option Pricing Model and the details are summarized as follows:

 

Description


  

Application


Risk free rate

  

Yield (5.70%) of treasury bond, which has the same residual maturity as the expected exercise period, as of December 4, 2002

Expected exercising period

  

4.5 year (average holding period)

Expected dividend income ratio

  

0%

Expected lapse ratio

  

0%

Expected volatility of stock price

  

56.72%, that is the annualized standard deviation of expected stock investment yield based on the continuous compounded method

Exercise price

  

(Won) 6,800 per share

Fair value

  

(Won) 2,081 per share


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(5) The summary of stock option costs over the exercisable period is summarized as follows (Unit: Korean won in millions):

 

Description


   The Company

   Subsidiaries

   Total

Total stock option costs

   (Won) 916    (Won) 1,873    (Won) 2,789

Recorded in 2002, 2003 and the first three quarters of 2004

     839      1,717      2,556

To be recorded thereafter

     77      156      233

 

Each subsidiary is responsible for absorbing the respective stock option cost for its management. The subsidiaries recorded the related cost as stock compensation expense and other payables, and the Company recorded the same amount as other receivables and capital adjustments.


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15. INCOME TAX EXPENSE

 

(1) Differences between financial accounting income and taxable income for the nine-month period ended September 30, 2004 are as follows:

 

     Korean won

    US dollars (Note 2)

 
     (In millions)     (In thousands)  

Net income

   (Won) 440,157     US$ 383,445  
    


 


Permanent differences

                

Additions:

                

Gain on valuation of investment securities

     408,705       356,046  

Deemed interest income

     11,488       10,008  

Other

     1,309       1,140  
    


 


       421,502       367,194  

Deductions:

                

Dividend

     (627,783 )     (546,898 )

Investment securities

     (138,101 )     (120,307 )

Deferred tax income

     (33,744 )     (29,396 )
    


 


       (799,628 )     (696,601 )
    


 


       (378,126 )     (329,407 )
    


 


Temporary differences

                

Additions:

                

Long-term accrued interest income

     33,744       29,396  

Investment securities

     811,811       707,215  

Other

     36,670       31,945  
    


 


       882,225       768,556  

Deductions:

                

Investment securities

     (947,847 )     (825,723 )

Other

     (13,385 )     (11,660 )
    


 


       (961,232 )     (837,383 )
    


 


       (79,007 )     (68,827 )
    


 


Income after tax adjustments

     (16,976 )     (14,789 )
    


 


Utilization of tax loss carryforwards

     —         —    
    


 


Taxable income

   (Won) —       US$ —    
    


 


 

(2) The changes in cumulative temporary differences and tax loss carryforwards for the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

     Jan. 1, 2004 (*1)

    Increase

    Decrease

    Sep. 30, 2004

   

Deferred tax

assets

(liabilities)(*2)


 

Investment securities

   (Won) (1,426,634 )   (Won) (947,847 )   (Won) (811,811 )   (Won) (1,562,670 )   (Won) (24,039 )

Swap contracts

     1,935       30,838       1,935       30,838       8,480  

Accrued income

     (461 )     (484 )     (461 )     (484 )     (133 )

Accrued severance benefits

     950       154       457       647       178  

Depreciation

     19       31       13       37       10  


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     Jan. 1, 2004 (*1)

    Increase

    Decrease

    Sep. 30, 2004

    Deferred tax
assets
(liabilities)(*2)


 

Accrued expenses

   (Won) 2,200     (Won) 1,202     (Won) 2,200     (Won) 1,202     (Won) 330  

Accounts receivable

     (1,014 )     (702 )     —         (1,716 )     (472 )

Employee retirement deposits

     (950 )     (14 )     (457 )     (507 )     (139 )

Long-term accrued interest payables

     2,154       1,236       —         3,390       932  

Long-term accrued interest income

     (30,232 )     (7,451 )     (33,744 )     (3,939 )     (1,083 )

Premiums on debentures

     5,572       —         128       5,444       1,497  

Adjustment of conversion rights

     (6,688 )     —         (2,290 )     (4,398 )     (1,210 )
    


 


 


 


 


       (1,453,149 )     (923,037 )     (844,030 )     (1,532,156 )     (15,649 )

Tax loss carry forwards

     197,308       —         —         197,308       54,260  
    


 


 


 


 


     (Won) (1,255,841 )   (Won) (923,037 )   (Won) (844,030 )   (Won) (1,334,848 )   (Won) 38,611  
    


 


 


 


 



(*1) Reflected the additional adjustment based on the reported tax returns.
(*2) The Company did not recognize deferred tax assets due to the uncertainty of its future realization.

 

(3) Remaining tax loss carryforwards and their expirations are as follows (Unit: Korean won in millions):

 

Year incurred


   Amount

   Utilized

   Remaining

   Expiration

    2001

   (Won) 25,588    (Won) —      (Won) 25,588    Dec. 31, 2006

    2002

     14,205      —        14,205    Dec. 31, 2007

2003 (*1)

     157,515      —        157,515    Dec. 31, 2008

    2004

     16,976      —        16,976    Sep. 30, 2009
    

  

  

    
     (Won) 214,284    (Won) —      (Won) 214,284     
    

  

  

    

(*1) Reflected the additional adjustment based on the reported tax returns.

 

(4) For the nine months ended September 30, 2004, there is no income tax expense reflected in the statement of income as there is no tax currently payable under the Corporate Tax Act and there are no changes in net deferred tax assets or liabilities.


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16. STATEMENTS OF CASH FLOWS

 

For the nine-month periods ended September 30, 2004 and 2003, the transactions without cash flows are as follows:

 

     Korean won

    US dollars (Note 2)

 

Transactions


   2004

    2003

    2004

    2003

 
     (In millions)     (In thousands)  

Increase in capital adjustments due to valuation of investment securities

   (Won) 408,705     (Won) 384,695     US$ 356,046     US$ 335,129  

Decrease in retained earnings due to valuation of investment securities

     (138,101 )     (9,712 )     (120,307 )     (8,461 )

Increase in investment securities and capital

     55,999       —         48,784       —    

Increase in other receivables and stock options

     702       866       612       754  

Increase in conversion rights

     —         3,253       —         2,834  

 

17. GENERAL AND ADMINISTRATIVE EXPENSES

 

General and administrative expenses for the three-month and nine-month periods ended September 30, 2004 and 2003 are summarized as follows:

 

     Korean won

     2004

   2003

     Three-month

   Nine-month

   Three-month

   Nine-month

     (In millions)

Salaries, wages and bonuses

   (Won) 1,748    (Won) 5,661    (Won) 1,805    (Won) 5,166

Provision for severance benefits

     38      63      20      287

Fringe benefits

     114      521      84      323

Rent

     579      1,719      577      1,746

Expenditure for business purpose

     93      301      91      348

Depreciation

     39      125      35      105

Amortization on intangible assets

     5      14      3      10

Taxes and dues

     17      43      17      60

Advertising

     93      1,970      967      6,234

Travel

     19      52      62      169

Telecommunications

     11      45      13      50

Service fees

     958      1,916      621      1,191

Suppliers

     27      82      27      76

Stock compensation (Note 14)

     114      343      117      351

Other

     444      1,269      310      982
    

  

  

  

     (Won) 4,299    (Won) 14,124    (Won) 4,749    (Won) 17,098
    

  

  

  


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- 26 -

 

     US dollar (Note 2)

     2004

   2003

     Three-month

   Nine-month

   Three-month

   Nine-month

     (In thousands)

Salaries, wages and bonuses

   US$  1,523    US$ 4,932    US$  1,572    US$ 4,500

Provision for severance benefits

     33      55      17      250

Fringe benefits

     99      454      73      281

Rent

     504      1,498      503      1,521

Expenditure for business purpose

     81      262      79      303

Depreciation

     34      109      30      91

Amortization on intangible assets

     4      12      3      9

Taxes and dues

     15      37      15      52

Advertising

     81      1,716      842      5,431

Travel

     17      45      54      147

Telecommunications

     10      39      11      44

Service fees

     835      1,669      541      1,038

Suppliers

     24      72      24      66

Stock compensation (Note 14)

     99      299      102      306

Other

     386      1,106      271      856
    

  

  

  

     US$ 3,745    US$  12,305    US$ 4,137    US$  14,895
    

  

  

  

 

18. FINANCIAL INFORMATION OF SUBSIDIARIES

 

(1) The condensed balance sheets of subsidiaries as of September 30, 2004 are as follows (Unit: Korean won in millions):

 

Company


   Total assets

   Total liabilities

  

Total stockholders’ equity

(capital deficiency)


 

Woori Bank

   (Won)  111,717,885    (Won)  105,363,525    (Won)  6,354,360  

Kyongnam Bank

     11,530,623      10,948,146      582,477  

Kwangju Bank

     9,272,166      8,854,978      417,188  

Woori Finance Information System

     299,549      290,213      9,336  

Woori F&I

     209,880      163,143      46,737  

Woori Second Asset Securitization Specialty

     26,240      34,547      (8,307 )

Woori Third Asset Securitization Specialty

     44,102      88,054      (43,952 )

Woori Investment Trust Management

     35,401      510      34,891  

Woori Securities

     768,412      405,225      363,187  
    

  

  


     (Won) 133,904,258    (Won) 126,148,341    (Won) 7,755,917  
    

  

  



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- 27 -

 

(2) The condensed statements of operations of subsidiaries for the nine-month period ended September 30, 2004 are as follows (Unit: Korean won in millions):

 

Company


   Operating
revenue


   Operating
expense


   Net operating
income (loss)


    Ordinary
income (loss)


   

Net income

(loss)


 

Woori Bank

   (Won)  7,212,014    (Won)  6,438,234    (Won)  773,780     (Won)  969,207     (Won)  850,442  

Kyongnam Bank

     575,804      475,818      99,986       83,693       83,070  

Kwangju Bank

     438,707      375,126      63,581       78,294       67,829  

Woori Credit Card (*1)

     220,798      609,694      (388,896 )     (465,879 )     (465,879 )

Woori Finance Information System

     216,399      215,129      1,270       2,637       1,633  

Woori F&I

     16,802      13,531      3,271       10,064       5,468  

Woori Second Asset Securitization Specialty

     11,924      6,363      5,561       5,521       5,521  

Woori Third Asset Securitization Specialty

     64      2,300      (2,236 )     (2,240 )     (2,240 )

Woori Investment Trust Management

     4,309      3,875      434       3,380       2,313  

Woori Securities

     134,191      138,209      (4,018 )     (11,103 )     (11,828 )
    

  

  


 


 


     (Won) 8,831,012    (Won) 8,278,279    (Won) 552,733     (Won) 673,574     (Won) 536,329  
    

  

  


 


 



(*1) The condensed statement of operations of Woori Credit Card was prepared for the three-month period ended March 31, 2004 prior to the merger into Woori Bank.

 

(3) Major debt and assets of the Company and its subsidiaries as of September 30, 2004 are summarized as follows (Unit: Korean won in millions):

 

  1) Major debt

 

Company


   Deposits

   Borrowings

   Debentures

   Total

Woori Finance Holdings

   (Won) —      (Won) 120,000    (Won) 2,548,129    (Won) 2,668,129

Woori Bank

     76,888,719      8,796,487      10,732,956      96,418,162

Kyongnam Bank

     8,603,290      1,708,939      210,000      10,522,229

Kwangju Bank

     6,608,125      1,634,163      250,000      8,492,288

Woori Finance Information System

     —        210,000      —        210,000

Woori F&I

     —        158,700      —        158,700

Woori Second Asset Securitization Specialty

     —        100      —        100

Woori Third Asset Securitization Specialty

     —        27,790      —        27,790

Woori Securities

     183,052      9,552      —        192,604
    

  

  

  

     (Won)  92,283,186    (Won)  12,665,731    (Won)  13,741,085    (Won)  118,690,002
    

  

  

  


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- 28 -

 

  2) Major assets

 

Company


  

Cash and due

from banks


   Securities

   Loans

   Total

Woori Finance Holdings

   (Won) 719,328    (Won) 8,000,257    (Won) 231,726    (Won) 8,951,311

Woori Bank

     5,778,545      20,692,182      77,065,337      103,536,064

Kyongnam Bank

     747,283      3,294,655      7,004,964      11,046,902

Kwangju Bank

     401,016      2,808,597      5,612,767      8,822,380

Woori Finance Information System

     3,515      519      —        4,034

Woori F&I

     51,012      45,058      110,429      206,499

Woori Second Asset Securitization Specialty

     25,187      232      —        25,419

Woori Third Asset Securitization Specialty

     1,208      42,867      —        44,075

Woori Investment Trust Management

     29,021      338      —        29,359

Woori Securities

     212,527      237,623      27,020      477,170
    

  

  

  

Total

   (Won)  7,968,642    (Won)  35,122,328    (Won)  90,052,243    (Won)  133,143,213
    

  

  

  

 

(4) Allowances for possible loan losses of each subsidiary as of September 30, 2004 are summarized as follows (Unit: Korean won in millions):

 

Company


   Loans subject to
allowance for possible
loan losses


   Allowance

  

Percentage of
allowance

to loans (%)


Woori Bank

   (Won)  78,989,241    (Won) 1,923,904    2.44

Kyongnam Bank

     7,120,615      115,651    1.62

Kwangju Bank

     5,702,109      89,342    1.57

Woori F&I

     110,984      555    0.50

Woori Securities

     34,493      7,473    21.67
    

  

  

Total

   (Won) 91,957,442    (Won)  2,136,925    2.32
    

  

  

 

Allowances for possible loan losses of each subsidiary as of December 31, 2003 are summarized as follows (Unit: Korean won in millions):

 

Company


   Loans subject to
allowance for possible
loan losses


   Allowance

  

Percentage of
allowance

to loans (%)


Woori Bank

   (Won)  74,343,819    (Won)  1,550,988    2.09

Kyongnam Bank

     6,550,115      103,556    1.58

Kwangju Bank

     5,409,972      72,042    1.33

Woori Credit Card

     1,809,395      379,651    20.98


Table of Contents

- 29 -

 

Company


   Loans subject to
allowance for possible
loan losses


   Allowance

  

Percentage of
allowance

to loans (%)


Woori F&I

     115,237      501    0.43

Woori Second Asset Securitization Specialty

   (Won) 17,980    (Won) 11,675    64.93

Woori Third Asset Securitization Specialty

     445      19    4.27

Woori Securities

     59,582      21,034    35.30
    

  

  

Total

   (Won)  88,306,545    (Won)  2,139,466    2.42
    

  

  

 

19. CONTRIBUTIONS TO NET INCOME BY SUBSIDIARIES:

 

Contributions to net income of the Company by subsidiaries after elimination of unrealized inter-companies incomes or losses for the nine-month period ended September 30, 2004 are as follows:

 

Company


   Korean won

    US dollars
(Note 2)


   

Ratio

(%)


 
     (In millions)     (In thousands)        

Woori Bank

   (Won)  840,777     US$ 732,448     155.9  

Kyongnam Bank

     82,723       72,065     15.4  

Kwangju Bank

     67,015       58,381     12.4  

Woori Credit Card

     (466,410 )     (406,316 )   (86.5 )

Woori Finance Information System

     1,070       932     0.2  

Woori F&I

     5,464       4,760     1.0  

Woori Second Asset Securitization Specialty

     5,521       4,810     1.1  

Woori Third Asset Securitization Specialty

     (2,240 )     (1,951 )   (0.4 )

Woori Investment Trust Management

     2,313       2,015     0.4  

Woori Securities

     2,910       2,534     0.5  
    


 


 

Gain on valuation using the equity method

     539,143       469,678     100.0  
    


 


     

Other income

     44,985       39,189        

Other expenses

     (143,971 )     (125,422 )      
    


 


     

Net income

   (Won) 440,157     US$ 383,445        
    


 


     


Table of Contents

- 30 -

 

20. TRANSACTIONS AND ACCOUNT BALANCES WITH RELATED PARTIES:

 

(1) Account balances with the subsidiaries as of September 30, 2004 and December 31, 2003 are as follows:

 

          Korean won

   US dollars (Note 2)

    
          Sep. 30, 2004

   Dec. 31, 2003

   Sep. 30, 2004

   Dec. 31, 2003

   Account

          (In millions)    (In thousands)     

Assets

   Woori Bank    (Won) 669,436    (Won)  322,145    US$  583,183    US$  280,639    Cash and bank deposits
            —        600,000      —        522,693    Loans
          4,153      3,846      3,618      3,350    Guarantee deposits
          1,116      652      972      568    Other receivables
          352      28,379      307      24,723    Accrued income
          —        16,463      —        14,342    Currency swaps
(assets)
     Kyongnam Bank      29,728      16,204      25,898      14,116    Cash and bank deposits
          27      14      23      12    Accrued income
     Kwangju Bank      20,164      11,236      17,566      9,788    Cash and bank deposits
          50,000      50,000      43,558      43,558    Loans
          3,947      2,253      3,438      1,963    Accrued income
     Woori Credit
Card
     —        8      —        7    Other receivables
     Woori Finance
Information
System
     30,000      30,000      26,135      26,135    Loans
          172      101      150      88    Other receivables
          366      363      319      316    Accrued income
     Woori F&I      125,000      126,850      108,895      110,507    Loans
     Woori Second
Asset
Securitization
Specialty
     100      100      87      87    Loans
          2      2      2      2    Accrued income
     Woori Third
Asset
Securitization
Specialty
     27,790      27,790      24,209      24,209    Loans
          459      459      400      400    Accrued income
     Woori
Investment
Trust
Management
     67      39      58      34    Other receivables
     Woori Credit
Information
     153      90      133      78    Other receivables
     Woori CA Asset
Management
     210      124      183      108    Other receivables
     Principal
guaranteed

trust accounts of
Woori Bank
     506      954      441      831    Deposits with
employee retirement
trust


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- 31 -

 

          Korean won

   US dollars (Note 2)

    
          Sep. 30, 2004

   Dec. 31, 2003

   Sep. 30, 2004

   Dec. 31, 2003

   Account

          (In millions)    (In thousands)     
    

     23      —        20      —      Accrued income
         

  

  

  

    

Total

        (Won)  963,771    (Won) 1,238,072    US$  839,595    US$  1,078,554     
         

  

  

  

    

Liabilities

  

Woori Bank

   (Won) 39    (Won) —      US$ 34    US$ —      Other payables
    

     30,838      18,398      26,865      16,028    Currency swaps (liabilities)
    

Woori Credit Card

     —        93      —        81    Other payables
    

Woori Finance Information System

     383      —        333      —      Accrued expense
         

  

  

  

    

Total

        (Won) 31,260    (Won) 18,491    US$ 27,232    US$ 16,109     
         

  

  

  

    
(2) Transactions with the subsidiaries for the nine-month periods ended September 30, 2004 and 2003 are as follows:

 

          Korean won

   US dollars (Note 2)

    
          2004

   2003

   2004

   2003

   Account

          (In millions)    (In thousands)     

Revenues

  

Woori Bank

   (Won) 6,346    (Won) 3,102    US$ 5,528    US$ 2,702    Interest income
    

     5,762      17,976      5,020      15,660    Interest income
    

     —        5,296      —        4,614    Gain on valuation of
swap contracts
    

Kyongnam Bank

     587      377      511      328    Interest income
    

Kwangju Bank

     413      305      360      266    Interest income
    

     1,689      1,683      1,471      1,466    Interest income
    

Woori Credit Card

     —        3,163      —        2,755    Interest income
    

Woori Finance Informat-ion System

     1,647      9,968      1,435      8,684    Interest income
    

Woori F&I

     6,881      5,408      5,995      4,711    Interest income
    

Woori First Asset Securitization Specialty

     —        9,190      —        8,006    Interest income
    

Woori Second Asset Securitization Specialty

     6      1,120      5      976    Interest income
    

Woori Third Asset Securitization Specialty

     1,626      1,992      1,416      1,735    Interest income
    

Principal guaranteed trust accounts of Woori Bank

     32      —        28      —      Interest income
         

  

  

  

    

Total

          24,989      59,580      21,769      51,903     
         

  

  

  

    

Expenses

  

Woori Bank

     12,440      12,082      10,837      10,525    Loss on valuation of
swap contracts
    

     1,504      1,488      1,310      1,296    Rent


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          Korean won

   US dollars (Note 2)

  
          2004

   2003

   2004

   2003

   Account

          (In millions)    (In thousands)     
    

Woori Finance Information System

     623      259      543      226    Other administrative
    expenses
    

     1,254      —        1,092      —      Fee expenses
         

  

  

  

    

Total

        (Won)  15,821    (Won) 13,829    US$  13,782    US$  12,047     
         

  

  

  

    

 

(3) Repurchase of the transferred credit card subscriber base

 

Kwangju Bank sold its credit card subscriber base to WCC on February 28, 2003. However, due to WCC’s merger into Woori Bank in the first quarter of 2004, Kwangju Bank repurchased such credit card subscriber base including the related card assets and liabilities from WCC on March 29, 2004. The consideration for the transaction was (Won) 72.8 billion (US$ 63.4 million) and no gain or loss was recorded in connection.

 

21. EARNINGS PER COMMON SHARE:

 

(1) Basic ordinary income (loss) per common share and basic net income (loss) per common share for the three-month and nine-month periods ended September 30, 2004 and 2003 are as follows:

 

     Korean won

     2004

   2003

     Three-month

   Nine-month

   Three-month

    Nine-month

     (In millions, except for income per share data)

Net income (loss) on common shares

   (Won) 259,682    (Won) 440,157    (Won) (137,411 )   (Won) 370,091

Extraordinary gain (loss)

     —        —        —         —  

Income tax effect on extraordinary gain (loss)

     —        —        —         —  
    

  

  


 

Ordinary income (loss) on common shares

   (Won) 259,682    (Won) 440,157    (Won) (137,411 )   (Won) 370,091
    

  

  


 

Weighted average number of common shares outstanding (in shares)

     784,076,172      778,789,518      775,504,910       770,449,840
    

  

  


 

Basic ordinary income (loss) per common shares

   (Won) 331    (Won) 565    (Won) (177 )   (Won) 480
    

  

  


 

Basic net income (loss) per common shares

   (Won) 331    (Won) 565    (Won) (177 )   (Won) 480
    

  

  


 


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- 33 -

 

     US dollars (Note2)

     2004

   2003

     Three-month

   Nine-month

   Three-month

    Nine-month

     (In thousands, except for income per share data)

Net income (loss) on common shares

   US$ 226,224    US$ 383,445    US$ (119,706 )   US$ 322,407

Extraordinary gain (loss)

     —        —        —         —  

Income tax effect on extraordinary gain (loss)

     —        —        —         —  
    

  

  


 

Ordinary income (loss) on common shares

   US$ 226,224    US$ 383,445    US$ (119,706 )   US$ 322,407
    

  

  


 

Weighted average number of common shares outstanding (in shares)

     784,076,172      778,789,518      775,504,910       770,449,840

Basic ordinary income (loss) per common shares

   US$ 0.289    US$ 0.492    US$ (0.154 )   US$ 0.418
    

  

  


 

Basic net income (loss) per common shares

   US$ 0.289    US$ 0.492    US$ (0.154 )   US$ 0.418
    

  

  


 

 

Basic net income per common share was (Won) 262 (US$ 0.228) for the year ended December 31, 2003. Basic net loss per common share was (Won) 195 (US$ 0.170) for the three months ended March 31, 2004 and basic net income for the three months ended June 30, 2004 was (Won) 427 (US$ 0.372). Basic net income per common share were (Won) 237 (US$ 0.206) and (Won) 424 (US$ 0.369) for the three months ended March 31, 2003 and June 30, 2003, respectively. The ordinary income (loss) per share for such periods were the same as the basic net income (loss) per share.

 

(2) Diluted ordinary income (loss) per common share and diluted net income (loss) per common share for the three-month and nine-month periods ended September 30, 2004 and 2003 are as follows:

 

     Korean won

     2004

   2003

     Three-month

   Nine-month

   Three-month

    Nine-month

     (In millions, except for income per share data)

Diluted net income (loss) on common shares

   (Won) 261,367    (Won) 446,679    (Won) (137,411 )   (Won)  372,296

Extraordinary gain (loss)

     —        —        —         —  

Income tax effect on extraordinary gain (loss)

     —        —        —         —  
    

  

  


 

Diluted ordinary income (loss) on common shares

   (Won) 261,367    (Won) 446,679    (Won) (137,411 )   (Won) 372,296
    

  

  


 

Weighted average number of common and dilutive common shares outstanding (in shares)

     807,355,340      800,728,686      775,504,910       795,662,969
    

  

  


 

Diluted ordinary income (loss) per common shares

   (Won) 324    (Won) 558    (Won) (177 )   (Won) 468
    

  

  


 

Diluted net income (loss) per common shares

   (Won) 324    (Won) 558    (Won) (177 )   (Won) 468
    

  

  


 


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     US dollars (Note2)

     2004

   2003

     Three-month

   Nine-month

   Three-month

    Nine-month

     (In thousands, except for income per share data)

Diluted net income (loss) on common shares

   US$ 227,691    US$ 389,127    US$ (119,706 )   US$ 324,328

Extraordinary gain (loss)

     —        —        —         —  

Income tax effect on extraordinary gain (loss)

     —        —        —         —  
    

  

  


 

Diluted ordinary income (loss) on common shares

   US$ 227,691    US$ 389,127    US$ (119,706 )   US$ 324,328
    

  

  


 

Weighted average number of common and dilutive common shares outstanding (in shares)

     807,355,340      800,728,686      775,504,910       795,662,969
    

  

  


 

Diluted ordinary income (loss)per common shares

   US$ 0.282    US$ 0.486    US$ (0.154 )   US$ 0.408
    

  

  


 

Diluted net income (loss) per common shares

   US$ 0.282    US$ 0.486    US$ (0.154 )   US$ 0.408
    

  

  


 

 

Diluted basic net income per common share was(Won) 261 (US$ 0.227) for the year ended December 31, 2003. Diluted basic net loss per common share was (Won) 188 (US$ 0.164) for the three months ended March 31, 2004 and diluted basic net income for three months ended June 30, 2004 was (Won) 420 (US$ 0.366). Diluted basic net income per common share were (Won) 234 (US$ 0.204) and (Won) 413 (US$ 0.360) for the three months ended March 31, 2003 and June 30, 2003, respectively. The diluted ordinary income (loss) per share for such periods were the same as the basic net income (loss) per share.

 

(3) All common stock equivalents as of September 30, 2004 are as follows (Unit: Korean won in millions and US dollars in thousands):

 

Item


   Face value

   Exercise period

  

Common stock

to be issued
(shares)


   Remarks

Convertible bonds

   US$  36,000    Sep. 28, 2003 ~
Aug. 27, 2005
   5,914,180    Using exchange rate of
    (Won)1,201.4, convert 1 share at
    (Won)7,313

Convertible bonds

   US$ 16,000    Dec. 21, 2003 ~
Nov. 20, 2005
   3,481,173    Using exchange rate of
    (Won)1,215.8, convert 1 share at
    (Won)5,588

Convertible bonds

   (Won) 20,000    Mar. 27, 2004 ~
Feb. 26, 2006
   3,717,472    Convert 1share at
    (Won)5,380


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- 35 -

 

Item


   Face value

   Exercise period

   Common stock
to be issued
(shares)


   Remarks

Convertible bonds

   US$  39,000    Mar. 27, 2004 ~
Feb. 26, 2006
   8,661,914    Using exchange rate of
(Won)1,194.9, concert 1 shares at
(Won)5,380

Convertible bonds

   US$ 1,000    Jul. 10, 2004 ~
Jun. 10, 2006
   164,429    Using exchange rate of
(Won)1,188.5, concert 1 shares at
(Won)7,228

Stock options

     —      Dec. 5, 2005 ~
Dec. 4, 2008
   1,340,000    (Note 14)

 

22. INSURANCE

 

As of September 30, 2004, the Company has insurance for liability of reparation of directors with LG Insurance Co., Ltd.. The insurance coverage is (Won) 20,000 million (US$ 17,423 thousand).

 

23. CREDITS TO SK NETWORKS CO., LTD.

 

As of September 30, 2004, Woori Bank has loans receivable from and payment guarantees for SK Networks Co., Ltd. (formerly known as “SK Global”) and its overseas subsidiaries (collectively referred to as “SK Networks”) in the total amount of (Won) 184.1 billion (US$ 160.4 million) and available-for-sale securities in the total amount of (Won) 94.9 billion (US$ 82.7 million). In connection therewith, Woori Bank provided (Won) 33.7 billion (US$ 29.4 million) as allowances for credit losses as of September 30, 2004. However, Woori Bank’s actual loss on SK Networks credit may differ from the current estimate.

 

24. CREDITS TO LG CARD CO., LTD.

 

Woori Bank, Kyongnam Bank and Kwangju Bank, subsidiaries of the Company, have loans receivable, equity securities and debt securities from LG Card Co., Ltd. (LG Card) in the total amount of (Won) 194.0 billion (US$ 169.0 million), (Won) 351.8 billion (US$ 306.5 million) and (Won) 239.4 billion (US$ 208.6 million), respectively as of September 30, 2004. In connection therewith, the banks provided (Won) 368.1 billion (US$ 320.7 million) as allowances for credit losses and cumulative impairment losses on securities and recorded (Won) 69.5 billion (US$ 60.5 million) of gains on valuation of available-for-sale securities on capital adjustments. In addition, Woori Bank recorded (Won) 51.0 billion (US$ 44.4 million) in the related losses on trust management of trust accounts, for which


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repayment of principal or interest is guaranteed by Woori Bank, in 2003 and for the nine-month period ended September 30, 2004. Such trust accounts have Commercial Paper (CP) in total amount of (Won) 69.7 billion (US$ 60.7 million) as of September 30, 2004. However, the Company’s bank subsidiaries’ actual losses on LG Card credit may differ from the current estimate.

 

25. WOORI BANK’S MERGER WITH WOORI CREDIT CARD

 

Woori Bank, a subsidiary of the Company, merged with WCC, a subsidiary of the Company, on March 31, 2004. Woori Bank took over substantially all of the assets and liabilities of WCC by exchanging one common share of WCC with 0.3581 share of Woori Bank and (Won) 330,394 million (US$ 287,825 thousand) of the difference between (Won) 657,339 million (US$ 572,645 thousand) of net assets acquired from WCC and (Won) 326,945 million (US$ 284,820 thousand) of consideration for the merger was recorded as capital surplus of Woori Bank. As a result, the number of issued common shares of Woori Bank increased from 570.6 million to 636.0 million and contributed capital of Woori Bank increased from (Won) 2,852.8 billion (US$ 2,485.2 million) to (Won) 3,179.8 billion (US$ 2,770.1 million).

 

26. ACQUISITION OF WOORI SECURITIES’ STOCK

 

On June 18, 2004, the Company issued 8.6 million new common shares and exchanged them for 15.6 million common shares of Woori Securities, a subsidiary of the Company, in order to wholly own the subsidiary. As a result, the number of issued common shares of the Company increased from 775.5 million to 784.1 million and contributed capital of the Company increased from (Won) 3,877.5 billion (US$ 3,377.9 million) to (Won) 3,920.4 billion (US$ 3,415.3 million).

 

27. RESOLUTION OF ACQUISITION OF LG INVESTMENT & SECURITIES CO., LTD.

 

On September 15, 2004, the Company made a resolution to acquire 25,877,487 shares of LG Investment & Securities Co., Ltd.’s common stock, 21.2% of ownership interest, for (Won) 297.6 billion (US$ 259.3 million) and on September 23, 2004, the Company has entered into a purchase agreement with LG Card Co., Ltd., which currently owns those common shares of LG Investment & Securities Co., Ltd., and paid a deposit of (Won) 29.8 billion (US$ 25.9 million).

 

28. AGREEMENT ON THE IMPLEMENTATION OF A MANAGEMENT IMPROVEMENT PLAN

 

Since December 30, 2000, the Company’s three subsidiaries, Woori Bank, Kyongnam Bank, and Kwangju Bank and the KDIC have entered into agreements for the implementation of management


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improvement plans for the banks. Under the agreements, the three subsidiaries are obligated to sell non-performing loans and fixed assets, close certain branches and subsidiaries, improve financial ratios including the capital adequacy ratio, and reinforce their risk management systems. If the three subsidiaries fail to implement the agreements, the KDIC may command for the three subsidiaries to increase or decrease their capital, pursue mergers, assign contracts such as loans and deposits, or close or sell parts of their business operations.

 

Since July 2, 2001, the Company and the KDIC have entered into an agreement whereby the Company would integrate the Company’s above subsidiaries, Woori Bank, Kyongnam Bank, and Kwangju Bank, and improve the performance of the subsidiaries. The agreement stipulates that the Company should build a governance and management structure plan, implement a short-term business improvement strategy, enhance subsidiaries’ competitiveness, expedite privatization, meet the financial ratio targets, and dispose of business units in case of failure to carry out the agreement.

 

In order to implement the agreements of above three subsidiaries with the KDIC, on July 2, 2001, the Company and its three subsidiaries entered into agreements for the implementation of the management improvement for the three subsidiaries. Pursuant to the agreements, the three subsidiaries should meet management goals given by the Company, consult with the Company about material business decisions before execution, and prepare and implement a detailed business plan in conformity with the Company’s business strategies. If the three subsidiaries fail to implement the management improvement plan, the Company may order the three subsidiaries to limit sales of the specific financial products, investments in fixed assets, promotion of new business or new equity investment, or to close or merge their branch operations and subsidiaries.

 

29. ECONOMIC UNCERTAINTIES

 

The economic environment in the Republic of Korea continues to be volatile. In addition, the Korean government and the private sector continue to implement structural reforms to historical business practices, including corporate governance. The Company may be either directly or indirectly affected by these economic conditions and the reform program described above. The accompanying financial statements reflect management’s assessment of the impact to date of the economic environment on the financial position and results of operations of the Company. Actual results may differ materially from management’s current assessment.


Table of Contents

SIGNATURES

 

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

 

    Woori Finance Holdings Co., Ltd.
    (Registrant)

Date: November 12, 2004

  By:  

/s/ Young Sun Kim


        (Signature)
    Name:   Young Sun Kim
    Title:   Director