UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM CB
TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM
Please place an X in the box(es) to designate the appropriate rule provision(s)
relied upon to file this Form:
Securities Act Rule 801 (Rights Offering) [ ]
Securities Act Rule 802 (Exchange Offer) [X]
Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer) [ ]
Exchange Act Rule 14d-1(c) (Third Party Tender Offer) [ ]
Exchange Act Rule 14e-2(d) (Subject Company Response) [ ]
Filed or submitted in paper if permitted by Regulation S-T Rule 101(b)(8) [ ]
Good Morning Shinhan Securities Co.,Ltd.
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(Name of Subject Company)
N/A
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(Translation of Subject Company's Name into English (if applicable))
The Republic of Korea
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(Jurisdiction of Subject Company's Incorporation or Organization)
Shinhan Financial Group Co., Ltd.
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(Name of Person(s) Furnishing Form)
Common Stock and Preferred Stock
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(Title of Class of Subject Securities)
None
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(CUSIP Number of Class of Securities (if applicable))
Shinhan Bank, New York Branch
800 Third Avenue, 32nd Floor
New York, New York 10022
212-371-8000
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(Name, Address (including zip code) and Telephone Number (including area code)
of Person(s) Authorized to Receive Notices and Communications on Behalf
of Subject Company)
September 17, 2004
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(Date Tender Offer/Rights Offering Commenced)
PART I - INFORMATION SENT TO SECURITY HOLDERS
ITEM 1. HOME JURISDICTION DOCUMENTS
(a) See Exhibit I.1.(a).
(b) Not applicable.
ITEM 2. INFORMATIONAL LEGENDS
Included in document attached hereto as Exhibit I.1.(a).
PART II - INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS
(1) Not applicable.
(2) Not applicable.
(3) Not applicable.
PART III - CONSENT TO SERVICE OF PROCESS
(1) Form F-X filed concurrently with the Commission on September 20, 2004.
(2) Not applicable.
2
PART IV - SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
/s/ Byung Jae Cho
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(Signature)
Byung Jae Cho, Chief Financial Officer
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(Name and Title)
September 20, 2004
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(Date)
3
EXHIBIT DESCRIPTION PAGE NO.
I.1.(a) Registration Statement relating to Exchange Offer for 5
Common Stock and Preferred Stock of Good Morning Shinhan
Securities Co., Ltd.
4
EXHIBIT I.1.(a)
REGISTRATION STATEMENT
RELATING TO EXCHANGE OFFER
FOR
COMMON STOCK AND PREFERRED STOCK OF
GOOD MORNING SHINHAN SECURITIES CO., LTD.
SHINHAN FINANCIAL GROUP CO., LTD.
5
Notice to U.S. Shareholders
- This proposed exchange offer is made for the securities of a foreign
company. The offer is subject to disclosure requirements of a foreign
country that are different from those of the United States. Financial
statements included in this document have been prepared in accordance with
foreign accounting standards that may not be comparable to the financial
statements of United States companies.
- It may be difficult for you to enforce your rights and any claim you may
have arising under the federal securities laws, since the issuer is
located in a foreign country, and some or all of its officers and
directors may be residents of a foreign country. You may not be able to
sue a foreign company or its officers or directors in a foreign court for
violations of the U.S. securities laws. It may be difficult to compel a
foreign company and its affiliates to subject themselves to a U.S. court's
judgment.
- You should be aware that the issuer may purchase securities otherwise than
in connection with the exchange offer, such as in open market or privately
negotiated purchases.
6
1. Registration Statement Relating to Exchange Offer for Common Stock and
preferred stock of Good Morning Shinhan Securities
2. Appendix
Appendix 1) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Shinhan Financial Group as
of and for the year ended December 31, 2001
Appendix 2) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Shinhan Financial Group as
of and for the year ended December 31, 2002
Appendix 3) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Shinhan Financial Group as
of and for the year ended December 31, 2003
Appendix 4) The Independent Accountant's Review Report (under Korean GAAP) to
the Non-consolidated Financial Statements of Shinhan Financial
Group as of and for the 6 months ended June 30, 2004
Appendix 5) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Good Morning Securities as
of and for the year ended March 31, 2002
Appendix 6) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Good Morning Shinhan
Securities as of and for the year ended March 31, 2003
Appendix 7) The Independent Accountant's Audit Report (under Korean GAAP) to the
Non-consolidated Financial Statements of Good Morning Shinhan
Securities as of and for the year ended March 31, 2004
Appendix 8) The Independent Accountant's Review Report (under Korean GAAP) to
the Non-consolidated Financial Statements of Good Morning Shinhan
Securities as of and for the 3 months ended June 30, 2004
Appendix 9) Shinhan Financial Group's Article of Incorporation
Appendix 10) Good Morning Shinhan Securities' Article of Incorporation
Appendix 11) The Minutes of Extraordinary Meeting of the Board of Directors
(Shinhan Financial Group)
Appendix 12) The Minutes of Extraordinary Meeting of the Board of Directors
(Good Morning Shinhan Securities)
REGISTRATION STATEMENT RELATING TO EXCHANGE OFFER FOR COMMON STOCK AND PREFERRED
STOCK OF GOOD MORNING SHINHAN SECURITIES CO., LTD.
CHAPTER 1. SUMMARY OF SHARE SWAP
Company Name: Shinhan Financial Group Co., Ltd. and Good Morning Shinhan
Securities Co., Ltd.
1. PURPOSE OF SHARE SWAP
- The purpose of the share swap is to incorporate Good Morning Shinhan
Securities Co., Ltd. into Shinhan Financial Group Co., Ltd.'s
wholly-owned subsidiary, thereby preventing conflicts of interest from
arising among the shareholders of each company while enabling
strategic operations of the business such as promoting business
synergy within the group and providing for efficiency in its
distribution of resources.
2. METHOD OF SHARE SWAP
A. Election Regarding Share Swap and Share Transfer
- Share swap
* Shinhan Financial Group Co., Ltd. will execute the share swap as
a small-sized share swap under Article 360-10 of Commercial Code.
(The number of shares to be newly issued for the proposed share
swap will not exceed 5% of the total number of shares issued by
Shinhan Financial Group Co., Ltd.)
* The common stock and the preferred stock of Good Morning Shinhan
Securities Co., Ltd. will be exchanged with common stock of
Shinhan Financial Group Co. Ltd. at the applicable exchange rate
set for each such common and preferred stock.
B. Summary Information concerning Parties to of the Share swap
1
Company Company name Shinhan Financial Group Co., Ltd.
becoming a Address 120 Taepyung-ro 2-ga, Jung-gu, Seoul
wholly-controlling Representative Director Young Hwi Choi, Eung Chan Ra
parent company Stock listed company Stock listed company
or registered company
Company Company name Good Morning Shinhan Securities Co., Ltd.
becoming a Address 23-2 Yoeuido-dong, Youngdeungpo-gu, Seoul
wholly-owned Representative Director Kangwon Lee
subsidiary Stock listed company Stock listed company
or registered company
Existing Company name Shinhan Bank
wholly-owned Address 120 Taepyung-ro 2-ga, Jung-gu, Seoul
subsidiaries Representative Director Sang Hoon Shin
Company name Shinhan Capital Co., Ltd.
Address 526-3 Gojan-dong, Danwon-gu, Ansan-si, Kyunggido
Representative Director Dong Girl Lee
Company name Shinhan Card Co., Ltd.
Address 120 Taepyung-ro 2-ga, Jung-gu, Seoul
Representative Director Seong Gyoon Hong
Company name Chohung Bank Co., Ltd.
Address 14 Namdaemoon-ro1-ga, Jung-gu, Seoul
Representative Director Dong Soo Choi
Company name Shinhan Credit Information Co., Ltd.
Address 983-16 Doksan-dong, Geumchun-gu, Seoul
Representative Director Bum Seong Shin
3. SUMMARY OF THE SHARE SWAP
A. The name and address, etc. of the wholly-controlling parent company and the
wholly-owned subsidiary
- Wholly-controlling parent company
* Company name: Shinhan Financial Group Co., Ltd. (hereinafter,
"Shinhan Financial Group")
* Address: 120 Taepyung-ro 2-ga, Jung-gu, Seoul
2
- Wholly-owned subsidiary
* Company name: Good Morning Shinhan Securities Co., Ltd.
(hereinafter, "Good Morning Shinhan Securities")
* Address: 23-2 Yeoido-dong, Youngdeungpo-gu, Seoul
B. Contents of any change in the articles of incorporation of the
wholly-controlling parent company
- Not applicable
C. Changes in the number of the authorized capital stock, etc. of the
wholly-controlling parent company
Unit: Million Won, Share
CLASSIFICATION TYPE OF STOCK BEFORE SHARE SWAP AFTER SHARE SWAP
-------------- ------------- ----------------- ----------------
Number of authorized capital - 1,000,000,000 1,000,000,000
stock
Number of shares issued and Common stock 309,083,890 320,952,439
outstanding
Preferred stock 97,304,564 97,304,564
Paid-in-capital - 2,031,942 2,091,285
Capital reserve - 3,537,940 3,758,490
Note 1) The number of shares issued and outstanding, paid-in-capital and
capital reserve after the share swap were each calculated on the basis
of the maximum possible number of shares that can be issued for the
share swap. Such numbers may change subject to the number of shares
actually issued for the share swap.
* The maximum possible number of common shares to be issued(11,868,549)
has been calculated by multiplying (i) the share exchange rate for the
common and preferred shares, as the case may be, and (ii) the sum of
(A) the number of shares issued by Good Morning Shinhan Securities and
held by shareholders other than Shinhan Financial Group (common
stock:61,491,966 [and] preferred stock: 3,823,314) and (B) the number
of shares subject to stock options granted by Good Morning Shinhan
Securities that have been exercised on or before the date immediately
preceding the swap date (8,900,025 of common shares)
- Common stock =(61,491,966+8,900,025) * 0.1633 = 11,495,012
3
- Preferred stock = 3,823,314 * 0.0977 = 373,537
* As preferred stock of Good Morning Shinhan Securities will be
exchanged into common stock of Shinhan Financial Group in accordance
with applicable stock exchange rate, the increase in the number of
issued stock of Shinhan Financial Group after the share swap will only
take place with respect to its common stock.
* The maximum possible number of shares to be issued calculated as
described above is 2.92% of the total number of issued and outstanding
shares of Shinhan Financial Group, and therefore, the proposed share
swap meets the requirements for a small-sized share swap under the
Korean Commercial Code.
* The number of common shares that are to be actually issued will be
within the maximum possible number of shares that will be issued for
the share swap and will be calculated by multiplying the applicable
exchange rate set forth in Paragraph E and the number of common and
preferred shares of Good Morning Shinhan Securities held by
shareholders other than Shinhan Financial Group as of the due date for
the submission of the share certificates for the share swap (December
22, 2004) (Such number of actual shares to be issued will be
determined pursuant to the result of the tender offer to be executed
by Shinhan Financial Group before the share swap for the preferred
stock of Good Morning Shinhan Securities and the number of stock
options granted by Good Morning Shinhan Securities that have been
exercised by the due date for the submission of share certificates).
2) The amount of capital reserve after the share swap may change as a
result of calculations carried out in accordance with the applicable
laws and regulations and the accounting principles, in addition to the
changes in the number of issued and outstanding shares referred to
above.
D. Par Value of 1 share
- Par value of 1 share: 5,000 Won
E. Matters regarding the allocation of new shares to shareholders of the
company which is becoming a wholly-owned subsidiary
- As of the due date for the submission of stock certificates for the
share swap (December 22, 2004), Shinhan Financial Group will allocate
0.1633 and 0.0977 common shares in registered form of Shinhan
Financial Group for 1 share each of common stock or preferred stock in
registered form of Good Morning Shinhan
4
Securities held by the shareholders other than Shinhan Financial Group
("shareholders subject to the share swap") as of the due date for the
submission of the share certificates (December 22, 2004) for the share
swap.
- Provided however, the shareholders who are subject to the share swap
shall be paid in cash with respect to any fractional shares that
result from the share swap, which amount will be calculated based on
the market closing price of the new shares issued by Shinhan Financial
Group for the share swap on the first day of their listing.
F. Matters regarding the cash amount to be paid to shareholders of the company
which is becoming a wholly-owned subsidiary.
- Not applicable
G. Ownership status of treasury stock by the company executing share swap
BEFORE SHARE SWAP
CLASSIFICATION TYPE (RATE) REMARKS
-------------- ---- ----------------- -------
Company becoming a Treasury stock Common stock -
wholly-controlling
parent company Preferred stock -
Shares issued by a Common stock 94,084,384
company becoming a (59.0%)
wholly-owned subsidiary Preferred stock -
Company becoming a Treasury stock Common stock 4,795
wholly-owned (0.003%)
subsidiary Preferred stock 1,042,418
(0.654%)
Shares issued by a Common stock -
company becoming a Preferred stock -
wholly-controlling
parent company
Existing wholly-owned Shares issued by a Common stock 8,985,567
subsidiary wholly-controlling (2.21%)
(Chohung Bank) parent company Preferred stock -
Note 1) As of the end of June, 2004
5
2) Each rate appearing in a parenthesis above is a percentage of shares
based on the total number of issued shares.
3) In the case of Shinhan Financial Group, 18,979 shares newly issued
with respect to fractional shares that resulted from the share swap
with Chohung Bank implemented in June, 2004 were acquired as treasury
shares on July 7th, 2004.
4) Common shares comprising the treasury stock of Good Morning Shinhan
Securities were acquired through disposition of shares newly issued
with respected to fractional shares that resulted from a capital
decrease for value effected on January 2003, and the preferred shares
comprising the treasury stock were acquired for the purpose of price
stabilization and also constituted acquisition of shares newly issued
with respect to fractional shares that resulted from the above capital
decrease.
5) In the case of Chohung Bank, the treasury shares acquired as a result
of exercise of appraisal right by shareholders who opposed the share
swap with Shinhan Financial Group effected during June of 2004 were
exchanged to common shares in accordance with the share swap, and as
such shares must be disposed of within three years from the date of
their acquisition in accordance with Financial Holding Companies Act,
such shares are expected to be disposed of at an appropriate time by
appropriate means as share price movements warrant.
H. Plan for disposal of treasury stock, etc.
1) Treasury stock held by Shinhan Financial Group
- Treasury stock (18,979) held by Shinhan Financial Group will be
disposed at an appropriate time by appropriate means.
- In addition to the stock mentioned above, shares newly issued
with respect to fractional shares that result from the proposed
share swap will be acquired, and such new additional shares will
also be disposed of at an appropriate time by appropriate means
at a later date.
2) Treasury stock held by Good Morning Shinhan Securities
- Common stock: Common shares will be exchanged to the common stock
of Shinhan Financial Group in accordance with the share swap and
they will be disposed of at an appropriate time and by
appropriate means within six month of their swap date.
6
- Preferred stock: Preferred shares will be disposed of by
tendering such stock in its entirety at a tender offer to be
issued by Shinhan Financial Group prior to the proposed share
swap.
- Others: In the case of Good Morning Shinhan Securities, it may
acquire treasury shares upon the exercise of appraisal right by
dissenting shareholders in the course of the proposed share swap,
and such treasury shares will be exchanged into the common shares
of Shinhan Financial Group pursuant to the share swap. As the
foregoing common shares of Shinhan Financial Group are required
to be disposed of within three years from their acquisition date
under the Financial Holding Companies Act, they are expected to
be disposed of at an appropriate time by appropriate means in the
future.
I. Maximum amount in the case of dividend (including quarterly dividend) to be
declared until the date of share swap
- Not applicable
J. Name and background of any directors and statutory auditors (including the
members of the audit committee) to be appointed for the wholly-controlling
parent company
- No director or statutory auditor will be newly appointed at the
company becoming the wholly controlling parent company in connection
with the share swap.
- In addition, the term of office for the directors and members of the
audit committee of Shinhan Financial Group, the wholly controlling
parent company, who were appointed before the proposed share swap will
remain unchanged.
- Under Article 360-13 of the Commercial Code, the directors and
statutory auditors of the company, which is to become the
wholly-controlling parent company pursuant to a share swap, who were
appointed before the share swap are to leave their offices at the end
of the first ordinary general meeting of shareholders held with
respect to the fiscal year in which the share swap is implemented,
unless otherwise provided in the share swap agreement.
K. Share swap schedule
7
* The present share swap is a share swap being effected pursuant to Article
360-3 of the Commercial Code (the case of Shinhan Financial Group, it is a
small-sized share swap undertaken pursuant to Article 360-10 of the
Commercial Code), and the details of the schedule for the swap will be
determined in accordance with Article 62-2 of the Financial Holding
Companies Act (special provisions regarding share swaps and transfers).
(1) The date of the resolution of the board of directors and the date of the
share swap agreement
- Shinhan Financial Group and Good Morning Shinhan Securities: September
17, 2004 (Fri)
* As the meeting of the board of directors of Shinhan Financial
Group is to be held in New York, US, the local date for the
meeting is September 16 (Thu) but according to Korean standard
time, the date of the meeting is September 17 (Fri).
(2) The record date for the determination of shareholders for the general
meeting of shareholders for the share swap
- Good Morning Shinhan Securities: October 27, 2004 (Wed)
* Only Good Morning Shinhan Securities will need to convene a
general meeting of shareholders for the approval of the share
swap.
* In the case of Shinhan Financial Group, the approval of
shareholders may be replaced with an approval of the board of
directors pursuant to Article 360-10 of the Commercial Code.
Provided however that if the shareholders holding 20/100 of total
number of shares issued and outstanding notify their objection to
the share swap, the share swap may not be implemented as a
small-sized share swap. The date on which the identity of
shareholders who are eligible to express their objections will be
determined is September 30, 2004 (Thu).
- The record date for the determination of shareholders holding
preferred stock of Good Morning Shinhan Securities for the general
meeting of preferred shareholders is October 27, 2004 (Wed).
8
* In the case of present share swap, as the preferred stock of Good
Morning Shinhan Securities will be exchanged into common stock of
Shinhan Financial Group, the approval of preferred shareholders
of Good Morning Shinhan Securities convened at a class meeting of
preferred shareholders will be needed, and accordingly, the
record date for the determination of shareholders for such class
meeting of preferred shareholders will be needed to be set.
(3) The date of the general meeting of shareholders for the share swap approval
- Good Morning Shinhan Securities general meeting of shareholders:
November 26, 2004 (Fri)
- Good Morning Shinhan Securities' class meeting of preferred
shareholders: November 26, 2004 (Fri)
* In the case of the present share swap, as the preferred stock of
Good Morning Shinhan Securities will be exchanged into common
stock of Shinhan Financial Group, the approval of the preferred
shareholders of Good Morning Shinhan Securities convened at a
class meeting of preferred shareholders is needed, and
accordingly the record date for the determination of shareholders
for such class meeting of preferred shareholders will be needed
to be set.
* In the case of Shinhan Financial Group, since the share swap is a
small-sized share swap pursuant to Article 360-10 of the
Commercial Code, the approval of shareholders is replaced with
the approval of the board of directors.
(4) Exercise period of appraisal rights
- Good Morning Shinhan Securities: November 26, 2004 (Fri) ~ December 6,
2004 (Mon)
* In accordance with Article 62-2 of the Financial Holding
Companies Act, the exercise period of the shareholders' appraisal
right will be reduced from 20 days to 10 days from the date of
the resolution adopted at the applicable general shareholders
meeting.
9
* In the case of Shinhan Financial Group, since the present share
swap is a small-sized share swap being effected under Article
360-10 of the Commercial Code, the appraisal right of dissenting
shareholders will not be granted
(5) The expected date of public notice and the individual notice of
invalidation of share certificates of the company becoming a wholly-owned
subsidiary
- Good Morning Shinhan Securities: November 27, 2004 (Sat)
(6) Date of share swap
- December 23, 2004 (Thu)
(7) Other Dates
- Date of public notice of share swap: September 24, 2004 (Fri)
* In accordance with Article 360-10 of the Commercial Code and
Article 62-2 of the Financial Holding Companies Act, Shinhan
Financial Group will make a public notice regarding the terms of
the share swap within 7 days after the execution of the
applicable share swap agreement (In the case of Good Morning
Shinhan Securities, on the date of public and individual notice
for the convening the general meeting of shareholders.)
- Notice of opposition by shareholders of Shinhan Financial Group:
Shareholders of Shinhan Financial Group do not have dissenting
shareholders' appraisal right, but they may express their opposition
to the proposed share swap within 7 days from the date of public
notice for the share swap as provided in Article 62-2 of the Financial
Holding Companies Act and Article 360-10 of the Commercial Code. Such
opposition should be made by October 1, 2004 (Fri), but as the
relevant period includes chu-suk holidays, the period for opposition
will be extended until October 6, 2004 (Wed).
L. Other major items subject to resolution of the board of directors or
material terms of the share swap agreement
(1) As the present share swap is a small-sized share swap under Article 360-10
of the Commercial Code, if the shareholders holding 20/100 of the total
number of
10
shares issued by Shinhan Financial Group notify their objections to the
share swap, the share swap may not be implemented as a small-sized share
swap.
(2) The present share swap requires an approval by the general meeting of
shareholders of Good Morning Shinhan Securities as well as the class
meeting of preferred shareholders of Good Morning Shinhan Securities, and
in the event that foregoing approvals are not obtained, the share swap may
not be implemented.
* As the preferred stock of Good Morning Securities will be exchanged
into the common stock of Shinhan Financial Group, an approval by a
class meeting of the preferred shareholders is required.
(3) Although not provided for in the agreement related to the small-sized share
swap, Shinhan Financial Group has decided to issue a tender offer for the
preferred stock of Good Morning Shinhan Securities under Chapter 4 of the
Securities and Exchange Act. Material terms of the tender offer are as
follows:
- Total number of shares to be purchased by the tender offer: 1,529,326
shares of preferred stock in registered form of Good Morning Shinhan
Securities (equivalent to 40 % of all issued and outstanding preferred
shares)
- Tender offer price: Won 2,500 per share
- Tender offer period: September 24, 2004 (Fri) ~ October 13, 2004 (Wed)
(20 days)
- Conditions of tender offer: In the event that the shares tendered in
response to the tender offer is less than the target number of shares
solicited for purchase, all of the tendered shares will be purchased
(since the amount of shares solicited for purchase equals 100% of all
issued and outstanding preferred shares, the number of tendered shares
will not exceed the target amount of shares to be purchased).
4. SHARE EXCHANGE AND TRANSFER RATE AND THE BASIS OF CALCULATION
A. Share exchange and transfer rate
- The share exchange rate for the common stock of Good Morning Shinhan
Securities: 0.1633
11
* 0.1633 shares of common stock in registered form of Shinhan
Financial Group (par value: 5,000 Won ) will be allocated per 1
share of common stock in registered form of Good Morning Shinhan
Securities (par value: 5,000 Won ).
- The Share exchange rate for the preferred stock of Good Morning
Shinhan Securities: 0.0977
* 0.0977 shares of common stock in registered form of Shinhan
Financial Group (par value: 5,000 Won ) will be allocated per 1
share of common stock in registered form of Good Morning Shinhan
Securities (par value: 5,000 Won).
B. Basis of calculation
(1) Summary
- In the case of share swap between Shinhan Financial Group and
Good Morning Shinhan Securities, as both are listed companies,
the share exchange rate will be calculated by using the base
share price method set forth in Article 190-2 of the Securities
and Exchange Act, Article 84-7 of the related Enforcement Decree,
and Article 36-12 of the related Enforcement Regulation.
(2) Exchange ratio
- The share swap price will be the lower of the following item (1)
or (2), determined as of the date (September 16, 2004)
immediately preceding the date of the board of directors'
resolution (the submission date of the share swap statement)
(1) The arithmetic mean of (i) the trading volume-weighted
average of market closing price for the past one (1) month,
(ii) the trading volume-weighted average of market closing
price for the past one (1) week, and (iii) the market
closing price for the most recently ended trading day
(2) The closing market price for the most recently ended trading
day
- The exchange ratio will be calculated based on the exchange price
calculated using the method described above
12
- Details of the exchange ratio calculation
(A) Exchange ratio
1) Common stock of Good Morning Shinhan Securities
Good Morning Shinhan
Classification Shinhan Financial Group Securities Remarks
-------------- ----------------------- -------------------- -------
Exchange price Won 20,492 Won 3,345
Exchange ratio 1 0.1633
Note) The exchange ratio will be rounded up to the fourth decimal place.
2) Preferred stock of Good Morning Stock Securities
Good Morning Shinhan
Classification Shinhan Financial Group Securities Remarks
-------------- ----------------------- -------------------- -------
Exchange price Won 20,492 Won 2,002
Exchange ratio 1 0.0977
Note) The exchange ratio will be rounded up to the fourth decimal place
(B) Calculation of base share price (exchange price)
Details of the calculation of base share price of Shinhan Financial Group
Date Closing price (Won) Trading volume (share) Closing price*trading volume
---- ------------------- ---------------------- ----------------------------
2004.09.16 20,950 1,066,290 22,338,775,500
2004.09.15 20,550 1,281,269 26,330,077,950
2004.09.14 20,500 940,256 19,275,248,000
2004.09.13 20,250 1,525,350 30,888,337,500
13
2004.09.10 20,150 1,345,086 27,103,482,900
2004.09.09 19,900 1,725,520 34,337,848,000
2004.09.08 20,150 1,138,789 22,946,598,350
2004.09.07 20,500 642,396 13,169,118,000
2004.09.06 21,000 642,012 13,482,252,000
2004.09.03 21,050 923,219 19,433,759,950
2004.09.02 21,250 1,679,757 35,694,836,250
2004.09.01 20,850 1,602,996 33,422,466,600
2004.08.31 19,500 493,808 9,629,256,000
2004.08.30 19,750 496,774 9,811,286,500
2004.08.27 19,900 1,286,517 25,601,688,300
2004.08.26 20,000 1,519,008 30,380,160,000
2004.08.25 19,800 1,260,027 24,948,534,600
2004.08.24 18,700 1,026,953 19,204,021,100
2004.08.23 19,050 704,527 13,421,239,350
2004.08.20 19,150 507,339 9,715,541,850
2004.08.19 19,000 1,019,290 19,366,510,000
2004.08.18 18,750 902,377 16,919,568,750
2004.08.17 19,150 1,083,724 20,753,314,600
Volume weighted average of share price for one month 20,077 Won
Volume weighted average of share price for one week 20,450 Won
Most recent closing price (September 16, 2004) 20,950 Won
Arithmetic Average 20,492 Won
Base share price (exchange price) 22,143 Won
Details of the calculation of base share price of common stock of Good Morning
Shinhan Securities
Date Closing price (Won) Trading volume (share) Closing price*trading volume
---- ------------------- ---------------------- ----------------------------
2004.09.16 3,345 1,091,350 3,650,565,750
2004.09.15 3,285 2,158,013 7,089,072,705
2004.09.14 3,430 956,627 3,281,230,610
2004.09.13 3,595 911,038 3,275,181,610
2004.09.10 3,500 475,270 1,663,445,000
2004.09.09 3,500 629,930 2,204,755,000
2004.09.08 3,445 618,720 2,131,490,400
2004.09.07 3,550 490,971 1,742,947,050
2004.09.06 3,600 963,293 3,467,854,800
2004.09.03 3,450 676,510 2,333,959,500
2004.09.02 3,480 1,433,206 4,987,556,880
14
2004.09.01 3,325 1,004,370 3,339,530,250
2004.08.31 3,165 1,061,065 3,358,270,725
2004.08.30 3,225 651,960 2,102,571,000
2004.08.27 3,350 529,949 1,775,329,150
2004.08.26 3,380 1,900,330 6,423,115,400
2004.08.25 3,265 399,499 1,304,364,235
2004.08.24 3,210 491,120 1,576,495,200
2004.08.23 3,290 513,625 1,689,826,250
2004.08.20 3,260 350,430 1,142,401,800
2004.08.19 3,320 846,771 2,811,279,720
2004.08.18 3,240 400,145 1,296,469,800
2004.08.17 3,200 616,290 1,972,128,000
Volume weighted average of share price for one month 3,371 Won
Volume weighted average of share price for one week 3,390 Won
Most recent closing price (September 16, 2004) 3,345 Won
Arithmetic Average 3,369 Won
Base share price (exchange price) 3,345 Won
Details of the calculation of the base share price of preferred stock of Good
Morning Shinhan Securities
Date Closing price (Won) Trading volume (share) Closing price*trading volume
---- ------------------- ---------------------- ----------------------------
2004.09.16 2,020 1,970 3,979,400
2004.09.15 1,985 2,710 5,379,350
2004.09.14 2,040 5,040 10,281,600
2004.09.13 2,105 19,030 40,058,150
2004.09.10 2,030 4,910 9,967,300
2004.09.09 1,965 840 1,650,600
2004.09.08 1,980 12,940 25,621,200
2004.09.07 1,960 7,253 14,215,880
2004.09.06 1,980 17,203 34,061,940
2004.09.03 1,860 8,130 15,121,800
2004.09.02 1,860 13,170 24,496,200
2004.09.01 1,795 9,370 16,819,150
15
2004.08.31 1,770 4,420 7,823,400
2004.08.30 1,760 3,152 5,547,520
2004.08.27 1,785 2,011 3,589,635
2004.08.26 1,840 2,950 5,428,000
2004.08.25 1,785 871 1,554,735
2004.08.24 1,770 221 391,170
2004.08.23 1,785 4,732 8,446,620
2004.08.20 1,800 3,380 6,084,000
2004.08.19 1,805 7,721 13,936,405
2004.08.18 1,780 6,861 12,212,580
2004.08.17 1,775 4,444 7,888,100
Volume weighted average of share price for one month 1,916 Won
Volume weighted average of share price for one week 2,070 Won
Most recent closing price (September 16, 2004) 2,020 Won
Arithmetic Average 2,002 Won
Base share price (exchange price) 2,002 Won
5. SUMMARY OF THE APPRAISAL OPINION PROVIDED BY AN APPRAISAL AGENCY
- Not applicable since the exchange ratio has been calculated based on
the market price pursuant to the Securities and Exchange Act.
6. DETAILS OF EQUITY CONTRIBUTIONS, GUARANTEES OF LIABILITY AND OTHER
TRANSACTIONS BY THE COMPANY PARTY TO THE SHARE SWAP
[Company Name: Shinhan Financial Group Co., Ltd.]
A. Details of equity contributions
(Unit: Million Won, 1000 shares, %)
COMPANY NAME RELATION NUMBER OF SHARE OWNERSHIP ACQUISITION COST
------------ -------- --------------- --------- ----------------
Shinhan Bank Subsidiary 244,807 100.00% 2,994,511
Chohung Bank Subsidiary 719,118 100.00% 2,196,392
Good Morning Shinhan Subsidiary 94,084 59.41% 507,761
Securities
16
Shinhan Card Subsidiary 30,569 100.00% 246,957
Shinhan Capital Subsidiary 16,000 100.00% 54,091
Shinhan BNP Paribas Subsidiary 4,000 50.00% 20,621
ITMC
Jeju Bank Subsidiary 9,692 62.42% 42,935
SH&C Subsidiary 3,000 50.00% 15,000
e-Shinhan Subsidiary 415 73.67% 8,270
Shinhan Macquarie Subsidiary 102 51.00% 510
Shinhan Credit Subsidiary 600 100.00% 4,577
Information
Note) as of June 30, 2004
B. Details of guarantees of liability
(Unit: million Won )
COMPANY NAME RELATION CREDITOR LIABILITY GUARANTEE PERIOD AMOUNT
------------ -------- -------- --------- ---------------- ------
Good Morning Subsidiary Macquairie Capital Guarantee of 2003. 7. 1 60,000
Shinhan Securities Korea performance of ~ 2006. 6.30 Leasing
liability July 1, 2004 ~ fee
relating to June 30, 2006 (50
lease of IT billion
equipment Won +
interest
thereon
Note) as of June 30, 2004
C. Details of provision of security
(Unit: )
PRIORITY AND
MAXIMUM
SECURITY AMOUNT OF
COMPANY NAME RELATION CREDITOR SECURITY PERIOD SECURITY AMOUNT
------------ -------- -------- -------- ------ ------------ ------
N/A None
17
Note) A promissory note has been pledged as collateral in connection with a
loan from KorAm Bank.
D. Other transactions
- Currently holding subordinated bonds in the aggregate principal amount
of 130 billion Won issued by Good Morning Shinhan Securities which is
the counterparty to the present share swap transaction
* Maturity date: September 26, 2004 (Date of issuance: September
26, 2002)
* Interest rate: 6.23%
[Company name: Good Morning Shinhan Securities Co., Ltd.]
A. Details of equity contributions
(Unit: Million Won, share, %)
COMPANY NAME RELATION NUMBER OF SHARE OWNERSHIP ACQUISITION COST
------------ -------- --------------- --------- ----------------
SAEHAN INDUSTRIES INC None 202,666 0.15 1,841
Sub-total of marketable shares 202,666 1,841
Korea Securities Computer Corporation None 8,735 0.16 44
Korea Securities Corporation None 2,304,469 3.39 11,573
Korea Securities Depository None 9,882 1.60 843
Kihyup Technology Banking Corp. None 100,000 1.72 500
KOSDAQ None 92,000 2.19 460
Hanwha Investment Trust Management Co., Ltd. None 270,000 4.50 1,350
Korea Money Broker Corp. None 20,000 1.00 100
Madas International Asset Management Ltd. None 85,714 4.29 301
IGLOO SECURITY, INC. None 25,000 0.42 500
I Investment Trust Management Co., Ltd. None 100,000 3.16 500
Korea ENC Securities Co., Ltd. None 319,999 6.25 1,600
SYSPOL CO., Ltd None 187,500 1.19 210
SEOKYUNG TSC CO., LTD None 100,454 1.23 703
Mp man.com None 2,722 0.43 193
18
THE & COMPANY. CO., LTD. None 1,334 1.06 20
Institute for Social Development and
Policy Research None 10,000 1.70 10
Daehan Investment Trust Securities Co., Ltd. None 266,000 0.05 1,900
Korea Investment & Securities Co., Ltd. None 271,515 0.03 2,801
Shinhan Life Insurance Co., Ltd. None 464,800 1.16 2,324
Korea Tarpaulin Inc None 631 0.15 505
Sub-total of non-marketable shares 26,437
Total number of shares 28,278
KOREA STOCK EXCHANGE None 3.40 2,612
Securities Market Stabilization Funds None 10.30 4,612
Good-KDB 2nd Securitization Specialty
Co., Ltd None 6.00 3,000
S.S Koram Securitization Specialty Co., Ltd None 2.90 0.3
SMI V ABS Securitization Specialty Co., Ltd. None 2.00 0.2
Dream Pool ABS Specialty, Co. Ltd None 1.50 0.2
New Expert ABS Specialty Co., Ltd. None 1.00 0.1
Expert ABS Specialty Co., Ltd None 1.00 0.1
Grand Consortium Specialty
Securitization Co., LTD None 1.00 0.1
Total equity contributions 10,225
Good Morning Securities USA Inc. Application of 15,000 100.00 3,342
equity method
Good Morning Securities Europe Limited Application of 5,000,000 100.00 9,669
equity method
Total number of shares of companies subject to equity method 13,011
Total 51,514
Note) As of June 30, 2004
B. Details of guarantees of liability
- Not applicable
19
C. Details of provisions of security
(Unit: Million Won)
PRIORITY
AND
MAXIMUM
SECURITY AMOUNT OF
COMPANY NAME RELATION CREDITOR SECURITY PERIOD SECURITY AMOUNT REMARKS
------------ -------- -------- -------- ------- --------- ------ -------
Good Morning
Shinhan Head office
Securities Related Shinhan Bank building - - 91,000 Mortgage
Head office
" Related Shinhan ITMC annex building - - 850 Mortgage
Head office - - 2,646 Mortgage
" Related Shinhan ITMC annex building
PCA Investment
Trust
Management Head office
" None Corp. annex building - - 3,678 Mortgage
National
Pension Gumi office
" None Corporation building - - 800 Mortgage
DONGBU
INSURANCE CO., Gumi office - - 20 Jeonsae Kwon
" None LTD building
Samsung Life
Insurance Co., Gumi office - - 130 Mortgage
" None Ltd. building
HYUNDAI
CAPITAL Gumi office - - 82 Mortgage
" None SERVICES, INC. building
Cheju Ko
Family Kunsan office
" None Association building - - 25 -
KB Investment
Trust
Management
Co., Ltd (KB
Asset Kunsan office
" None Management) building - - 419 Mortgage
Agere Systems Kunsan office
" None Korea Ltd. building - - 219 Mortgage
20
" None Shinhan Life Kunsan office - - 15 Mortgage
Insurance Co., building
Ltd.
" None DAEKYO CO., Kunsan office - - 110 Mortgage
LTD building
Korea
" None Broadcasting Woolsan
Advertising office - - 350 Mortgage
Corp. building
(KOBACO)
Woolsan
" None 3Com Korea office - - 165 -
Limited building
Kyobo life Woolsan
" None insurance co., office - - 350 Mortgage
ltd building
Korean Woolsan
" None Teachers' office - - 208 Mortgage
Mutual Fund building
Duo Kwangju
" None information, office - - 184 -
Inc. building
Kwangju
" None China Eastern office - - 125 -
Airlines building
Lucky Travel Kwangju
" None Service Co., office - - 100 -
Ltd building
Kwangju
" None TRC Korea office - - 373 Mortgage
Ltd. building
Hungkuk Life Yeochun
" None Insurance Co., office - - 16 Mortgage
Ltd. building
Shinhan Life Yeochun
" None Insurance Co., office - - 208 Mortgage
Ltd. building
Tongkwang
" None LG TeleCom, office - - 240 Mortgage
Ltd. building
Total 102,313
Note) As of June 30, 2004
D. Details of other transactions
- Shinhan Financial Group holds subordinated bonds in the aggregate
principal amount of 130 billion Won issued by Good Morning Shinhan
Securities which is the counterparty to the present share swap
21
* Maturity date: September 26, 2004 (Date of issuance: September
26, 2002)
* Interest rate: 6.23%
7. MATTERS CONCERNING THE TERMS AND EXERCISE OF SHAREHOLDERS' APPRAISAL RIGHT
A. Summary
(1) Wholly controlling parent company (Shinhan Financial Group)
- Because the share swap will be implemented in accordance with the
procedures in effect for a small-sized share swap stated in
Article 360-10 of the Commercial Code, shareholders' appraisal
right does not apply
- Provided however, if any shareholder with more than 20/100 of the
total number of the issued and outstanding shares of Shinhan
Financial Group Co., Ltd. provides a notice of objection to the
proposed share swap, the share swap will not be implemented as a
small-sized share swap.
(2) Wholly owned subsidiary (Good Morning Shinhan Securities)
- Relevant Regulatory Basis: Article 360-5 of the Commercial Code,
Article 191 of the Securities and Exchange Act and Article 62-2
of the Financial Holding Companies Act
- A shareholder objecting to the board's resolution regarding the
share swap may request the company to purchase the shares in
his/her own possession only if he/she notifies Good Morning
Shinhan Securities of his/her objection in writing prior to the
convening of the general shareholders' meeting. The request for
the share purchase shall be made by a written notice stating the
type and number of shares subject to purchase within ten (10)
days from the date on which the relevant resolution is adopted at
a general shareholders' meeting.
- In the event that a shareholder makes a request for a share
purchase, Good Morning Shinhan Securities, the company party to
the share swap, shall purchase relevant shares within one (1)
month from the date on which it receives such shareholder's
request.
- The purchase price of shares subject to such purchase shall be
determined by a mutual agreement between the company and the
relevant shareholder.
22
Provided however, in the event the parties are unable to reach an
agreement, the purchase price shall be the arithmetic average of
the volume weighted average of the market closing price for each
of two (2) month period, one (1) month period and one (1) week
period ending on the date immediately preceding the date of the
board resolution approving the share swap (hereinafter, referred
to as the " standard purchase price") as determined pursuant to
Article 84-9, Paragraph 2 of the Enforcement Decree of the
Securities and Exchange Act.
- If the company or shareholders with more than 30/100 of the
number of shares with respect to which appraisal right has been
exercised object to the purchase price calculated as described
above, the Financial Supervisory Commission may adjust the
purchase price. In such a case, the application for adjustment of
the purchase price shall be filed within 10 days prior to the
date by which the purchase must be completed.
B. Shareholders eligible to exercise appraisal right
- Per Article 360-5 of the Commercial Code, Article 191 of the
Securities and Exchange Act and Article 62-2 of the Financial
Holding Companies Act, the appraisal right shall be granted only
to the shareholders, who (i) is registered as a shareholder
(including holders of preferred shares) as of the closing date
for the shareholders' registry (the record date for determination
of the shareholders eligible to exercise appraisal right) which
is October 27, 2004 17:00 (Wed), (ii) has given a written notice
of objection to the company regarding the board resolution
approving the share swap by a date prior to the date of the
shareholders' meeting, (iii) has submitted a written request for
the purchase of shares within 10 days from the date of the
general shareholders' meeting approving the share swap and (iv)
has held his/her shares continuously during the period from the
closing date for the shareholders' registry (the record date for
determination of the shareholders eligible to exercise appraisal
right) to the appraisal exercise date. However, the shareholders
may not exercise appraisal rights with respect to shares which
were purchased during such period.
C. Estimated purchase price of the shares
23
Price offered by the Won 3,330 per common stock
Company for negotiation (Won) Won 1,933 per preferred stock
- Basis for calculation - Per Article 62-2 of Financial Holding Companies Act and Article 84-9 of
the Securities and Exchange Act, the offer price shall be the arithmetic
mean of the volume-weighted average price in effect for the past two (2)
months, one (1) month and one (1) week from the date immediately preceding
the date of the board resolution.
- Common stock of Good Morning Shinhan Securities
* Volume weighted average of the closing prices for two (2) month period (A):
3,229 Won
* Volume weighted average of the closing prices for one (1) month period (B):
3,371 Won
* Volume weighted average of the closing prices for one (1) week period (C):
3,390 Won
* Standard purchase price (Arithmetic mean of A, B, C):
3,330 Won
- Preferred stock of Good Morning Shinhan Securities
* Volume weighted average of closing prices for two (2) month period (A):
1,811 Won
* Volume weighted average of closing prices for one (1) month period (B):
1,916 Won
* Volume weighted average of closing prices for one (1) week period (C):
2,070 Won
- Standard purchase price (Arithmetic mean of A, B, C):
1,933 Won
Method of disposition in Per Article 62-2 of Financial Holding Companies Act and Article 191
the event an agreement is of the Securities and Exchange Act, in case where the company party
not reached to the share swap or shareholders holding 30/100 or more of the shares
with respect to which subject to appraisal right has been exercised object
to the standard purchase price, the dissenting parties may request the
Financial Supervisory Commission to adjust the purchase price, and
accordingly, the purchase price is subject to such adjustment.
* Method for adjustment of share purchase price (Article 95 of the
Regulations on Issuance and Public Disclosure of Securities)
(1) In the event that the Financial Supervisory Commission adjusts the
share purchase price in accordance with the provisions of Article 191,
Item 3 of the Securities and Exchange Act, such price shall be determined
in accordance with the following clause:
24
1. In the case where the stock price index as of
the last day of the period during which
shareholders may exercise appraisal rights is
higher than the stock price index as of the
date of the board resolution.
A. In the event that the standard adjusted price
calculated according to the following formula
based on the amount determined pursuant to
Article 84-9, Paragraph 2, Item 1
(hereinafter referred to as "standard
purchase price") is higher than the share
market price of the company (hereinafter
referred to as the "market price") as of the
last day of the period during which
shareholders may exercise appraisal right,
the higher of the standard purchase price and
the market price.
* Standard adjusted price = standard purchase
price * (stock price index effective as of
the last day of the period during which
shareholders may exercise appraisal
right /stock price index as of the date of
the board resolution)
B. In the event that the standard adjusted price
is lower than the market price, the standard
adjusted price:
2. In a case where the stock price index as of
the last day of the period during which
shareholders exercise their appraisal right
is lower than the stock price index as of the
date of the Board resolution
A. In a case where the standard adjusted price
is higher than the market price, the standard
adjusted price
B. In a case where the standard adjusted price
is lower than the market price, the lower of
the standard purchase price and the market
price
(2) In applying the provisions of Section 1
above, the share price index as of the date
of the board resolution or such index as of
the last day of the period during which
shareholders may exercise their appraisal
right shall mean the arithmetic average of
the stock price index for the business
category applicable to the types of business
engaged in by the company (which means the
stock price index per industry as calculated
and announced by the Korea Stock Exchange and
the Korea Securities Dealers Association),
for the period of seven (7) trading days
commencing on the date of the board
resolution concerning a merger or a business
transfer or a share swap or the last day of
the period during which shareholders may
25
exercise their appraisal right. The market
price shall mean the trading volume weighted
average of the price (based on the market
closing price) of the shares as traded on the
securities market of the company or KOSDAQ
market.
Provided however, in applying the business
category stock index, if on the last day of
the period during which shareholders may
exercise the appraisal right, the number of
companies that comprise a business category
to which the company belongs is less than
ten, or if the company's market
capitalization is more than 10/100 of the
aggregate traded share value for the
applicable business category, or if it is not
feasible to determine the applicable business
category stock index, then the composite
stock price index, rather than a business
category stock price index, shall be used.
(3) The application for adjustment to the
purchase price per item 1 above must be made
within 10 days prior to the date on which the
purchase must be completed.
C. Procedures, method, period and place for the exercise of appraisal rights
(1) Procedures and methods for the exercise of shareholders' appraisal
right
(1) Notice regarding the objection to the board resolution
- A shareholder of Good Morning Shinhan Securities who objects to
the proposed share swap shall give a written notice of his/her
objection to the company by a date not later than the date
immediately preceding the date of the shareholders' meeting for
the approval of such share swap. However, a beneficiary
shareholder who owns shares through a securities company may give
a notice of his/her objection through the securities company. In
such case, a beneficiary shareholder shall give such notice of
objection at least two (2) or three (3) business days prior to
the date of the shareholders' meeting, given the additional time
needed for the administrative processing of such notice by the
relevant securities company. (A beneficial shareholder will need
to confirm the specific deadline for such notice with the
relevant securities company).
* The securities company shall collect the objection notices
of the beneficiary shareholders, and notify the same to the
Korea Securities Depository by the date immediately
preceding the date of the
26
shareholders' meeting. The Korea Securities Depository
shall, on behalf of the beneficiary shareholders, give a
notice to the company of their objection by the date
immediately preceding the date of the shareholders meeting.
(2) Exercise of appraisal rights
- In the event that the share swap agreement is approved at both
the general meeting of shareholders and the class meeting of the
preferred shareholders of Good Morning Shinhan Securities, only
those who have given a written notice of his/her objection to the
board resolution according to the foregoing procedures may,
within ten (10) days from the date of resolution of the
shareholders' meeting, request the company to purchase his/her
shares. However, a beneficiary shareholder who holds shares
through a securities company may make such a request through the
relevant securities company. In such case, a beneficiary
shareholder shall make a request for purchase of his/her shares
at least one (1) or two (2) business days prior to the last day
of the exercise period for the appraisal right, given the
additional time needed for the administrative processing of such
notice by the relevant securities company (A beneficial
shareholder will need to confirm the specific deadline applicable
to the exercise of appraisal right with the relevant securities
company).
* The securities company shall collect the notices by the
beneficiary shareholders regarding their exercise of
appraisal right, and notify the same to the Korea Securities
Depository.
(2) Exercise period
- Notwithstanding the provisions of Article 360-5 of the Commercial
code and Article 191 of the Securities and Exchange Act, the
exercise period for the shareholders' appraisal right shall be
shortened from 20 days to 10 days, commencing from the date of
the shareholders' meeting, pursuant to Article 62-2 of the
Financial Holding Companies Act.
* A beneficiary shareholder may exercise his or her appraisal
right through the securities company with which he/she holds
the shares. In such case, a beneficiary shareholder shall
exercise such appraisal rights at least one (1) or two (2)
business days prior to the last day of the exercise period,
given the time required for the administrative
27
processing of such request by the relevant securities
company (A beneficial shareholder will need to confirm the
specific deadline applicable to such exercise with the
relevant securities company).
- Exercise period of appraisal rights: From November 26, 2004 (Fri)
to December 6, 2004 (Mon)
E. Miscellaneous
(1) Method of funding the share purchase price: The company's existing
funds or funds raised by borrowing.
(2) Expected date of payment for the share purchase price: December 21,
2004 (Tue)
(3) Method of payment
- Registered shareholder: The share purchase price will be paid in
cash or wire transferred to a designated account.
- Beneficiary shareholder: The share purchase price will be paid to
his or her account maintained with the relevant securities
company.
(4) Please note that to the extent necessary other matters regarding the
share purchase price and the exercise of appraisal rights may change
in the course of negotiations with the shareholders and/or the
relevant authorities.
(5) Details of the calculation of the proposed purchase price of the
shares of Good Morning Shinhan Securities
1) Common stock
Date Closing price (Won) Trading volume (share) Closing price * trading volume
---- ------------------- ---------------------- ------------------------------
2004.09.16 3,345 1,091,350 3,650,565,750
2004.09.15 3,285 2,158,013 7,089,072,705
2004.09.14 3,430 956,627 3,281,230,610
2004.09.13 3,595 911,038 3,275,181,610
2004.09.10 3,500 475,270 1,663,445,000
2004.09.09 3,500 629,930 2,204,755,000
2004.09.08 3,445 618,720 2,131,490,400
28
2004.09.07 3,550 490,971 1,742,947,050
2004.09.06 3,600 963,293 3,467,854,800
2004.09.03 3,450 676,510 2,333,959,500
2004.09.02 3,480 1,433,206 4,987,556,880
2004.09.01 3,325 1,004,370 3,339,530,250
2004.08.31 3,165 1,061,065 3,358,270,725
2004.08.30 3,225 651,960 2,102,571,000
2004.08.27 3,350 529,949 1,775,329,150
2004.08.26 3,380 1,900,330 6,423,115,400
2004.08.25 3,265 399,499 1,304,364,235
2004.08.24 3,210 491,120 1,576,495,200
2004.08.23 3,290 513,625 1,689,826,250
2004.08.20 3,260 350,430 1,142,401,800
2004.08.19 3,320 846,771 2,811,279,720
2004.08.18 3,240 400,145 1,296,469,800
2004.08.17 3,200 616,290 1,972,128,000
2004.08.16 3,230 590,810 1,908,316,300
2004.08.13 3,265 2,380,102 7,771,033,030
2004.08.12 3,110 714,702 2,222,723,220
2004.08.11 3,080 991,670 3,054,343,600
2004.08.10 3,100 809,349 2,508,981,900
2004.08.09 3,105 683,560 2,122,453,800
2004.08.06 3,025 621,421 1,879,798,525
2004.08.05 3,030 1,286,234 3,897,289,020
2004.08.04 2,910 525,833 1,530,174,030
2004.08.03 2,865 630,430 1,806,181,950
2004.08.02 2,750 353,926 973,296,500
2004.07.30 2,815 245,690 691,617,350
2004.07.29 2,790 274,784 766,647,360
2004.07.28 2,905 373,489 1,084,985,545
2004.07.27 2,845 285,459 812,130,855
2004.07.26 2,860 241,260 690,003,600
2004.07.23 2,930 476,132 1,395,066,760
29
2004.07.22 3,000 619,120 1,857,360,000
2004.07.21 2,995 1,609,408 4,820,176,960
2004.07.20 2,905 297,214 863,406,670
2004.07.19 2,930 469,641 1,376,048,130
Trading volume weighted average of share price for
the past two (2) months 3,229 Won
Trading volume weighted average of share price for
the past one (1) month 3,371 Won
Volume weighted average of share price for the past
one (1) week 3,390 Won
Base share purchase price 3,330 Won
2) Preferred stock
Date Closing price (Won) Trading volume (share) Closing price * trading volume
---- ------------------- ---------------------- ------------------------------
2004.09.16 2,020 1,970 3,979,400
2004.09.15 1,985 2,710 5,379,350
2004.09.14 2,040 5,040 10,281,600
2004.09.13 2,105 19,030 40,058,150
2004.09.10 2,030 4,910 9,967,300
2004.09.09 1,965 840 1,650,600
2004.09.08 1,980 12,940 25,621,200
2004.09.07 1,960 7,253 14,215,880
2004.09.06 1,980 17,203 34,061,940
2004.09.03 1,860 8,130 15,121,800
2004.09.02 1,860 13,170 24,496,200
2004.09.01 1,795 9,370 16,819,150
2004.08.31 1,770 4,420 7,823,400
2004.08.30 1,760 3,152 5,547,520
2004.08.27 1,785 2,011 3,589,635
2004.08.26 1,840 2,950 5,428,000
2004.08.25 1,785 871 1,554,735
2004.08.24 1,770 221 391,170
2004.08.23 1,785 4,732 8,446,620
2004.08.20 1,800 3,380 6,084,000
30
2004.08.19 1,805 7,721 13,936,405
2004.08.18 1,780 6,861 12,212,580
2004.08.17 1,775 4,444 7,888,100
2004.08.16 1,785 5,010 8,942,850
2004.08.13 1,850 41,290 76,386,500
2004.08.12 1,710 2,150 3,676,500
2004.08.11 1,675 2,720 4,556,000
2004.08.10 1,680 2,290 3,847,200
2004.08.09 1,675 2,370 3,969,750
2004.08.06 1,655 3,990 6,603,450
2004.08.05 1,710 6,990 11,952,900
2004.08.04 1,680 13,080 21,974,400
2004.08.03 1,685 15,270 25,729,950
2004.08.02 1,620 940 1,522,800
2004.07.30 1,650 4,420 7,293,000
2004.07.29 1,600 7,290 11,664,000
2004.07.28 1,685 5,470 9,216,950
2004.07.27 1,660 3,990 6,623,400
2004.07.26 1,670 14,910 24,899,700
2004.07.23 1,690 2,090 3,532,100
2004.07.22 1,720 19,140 32,920,800
2004.07.21 1,730 14,730 25,482,900
2004.07.20 1,700 6,400 10,880,000
2004.07.19 1,725 6,960 12,006,000
Volume weighted average of share price of the past
two (2) months 1,811 Won
Volume weighted average of share price of the past
one (1) month 1,916 Won
Volume weighted average of share price of the past
one (1) week 2,070 Won
Base share purchase price 1,933 Won
8. OTHER MATTERS REGARDING THE PROTECTION OF INVESTORS
31
A. Matters regarding (i) listing of the new shares issued in share swap with
the Korea Stock Exchange; (ii) registration of such shares with the KOSDAQ;
and (iii) the trading thereof
- The expected date of listing of such newly issued common shares is
January 7, 2005, provided that such date may change during the course
of negotiations with the relevant authorities (the expected date of the
share issuance will be determined based on negotiations with the
relevant authorities).
B. Details of changes in the shareholding ratio of the largest shareholders
and the major shareholders resulting from the share swap
(1) Status of the largest shareholders and the major shareholders of the
wholly-controlling parent company before and after the share swap
(Unit : Share, %)
NAME OF
CLASSIFICATION SHAREHOLDERS CLASS OF SHARES NUMBER OF SHARES SHAREHOLDING RATIO
-------------- ------------ --------------- ---------------- ------------------
Largest shareholders BNP Parisbas Common stock 13,557,832 4.22
Luxembourg
Preferred stock - -
Total Common stock 13,557,832 4.22
Preferred stock - -
Other shareholders Korea Deposit Common stock - -
Insurance
Corporation Preferred stock 91,304,564 21.83
Note 1) The shareholding ratio after the share swap has been
calculated by adding the maximum number of shares to be issued
for the share swap to the number of existing issued and
outstanding shares.
2) After the share swap, no major shareholder, as defined by the
Securities and Exchange Act, will exist for Shinhan Financial
Group.
* Currently, Korea Deposit Insurance Corporation owns
non-voting preferred shares
3) Shinhan Bank sold all of its 29,873,359 shares of common stock of
Shinhan Financial Group, owned as of December 31, 2003, in an
after hours block trading before the commencement of session on
March 3, 2004.
32
4) While the shareholding ratio of BNP Paribas Luxembourg is based
on the number of common stock, the preferred stock shareholding
ratio of Korea Deposit Insurance Corporation is based on the
total number of issued and outstanding shares of the company,
including the shares of common and preferred stock.
(2) Status of the largest shareholders and the major shareholders before
the share swap
Shinhan Financial Group (Unit: Share, %)
CLASSIFICATION NAME OF SHAREHOLDERS CLASS OF SHARES NUMBER OF SHARES SHAREHOLDING RATIO
-------------- -------------------- --------------- ---------------- ------------------
Largest shareholders BNP Paribas Common stock 13,557,832 4.39
Luxembourg
Preferred stock - -
Total Common stock 13,557,832 4.39
Preferred stock - -
Other shareholders Korea Deposit Common stock - -
Insurance
Corporation Preferred stock 91,304,564 22.47
Note 1) As of June 30, 2004.
2) Shares of preferred stock held by the Korea Deposit Insurance
Corporation do not have voting rights (except that if no
dividends are declared with respect to such shares at the general
meeting of shareholders for a fiscal year, it may exercise voting
rights during the period that follows such general meeting of
shareholders until the time of the general meeting of
shareholders at which such dividends are declared). Therefore,
BNP Paribas Luxembourg is the largest shareholder based on the
number of shares with voting rights.
3) 29,873,359 shares of Shinhan Financial Group held by Shinhan Bank
as of December 31, 2003 were sold in an after hours block trading
prior to the commencement of session on March 3, 2004.
4) While the shareholding ratio of BNP Paribas Luxembourg is based
on the number of shares of common stock, the preferred stock
shareholding ratio of Korea Deposit Insurance Corporation is
based on the total number of issued and outstanding shares of the
company, including the shares of common and preferred stock.
C. Other matters regarding investment decisions
33
(1) With respect to the details of changes in the shareholding ratio of
the largest shareholders and the major shareholders of Shinhan
Financial Group, a wholly-controlling parent company, before and after
the share swap
- Details of changes in the shareholding ratio described above have
been calculated based on their equity holdings as of June 30,
2004, and, therefore, may differ from their actual equity
holdings.
- Details of changes in the shareholding ratio after the share swap
described above have been calculated based on the maximum number
of shares to be issued for the proposed share swap, and,
therefore, may change based on the actual number of shares issued
for the share swap.
(2) With respect to tender offer by Shinhan Financial Group for the
preferred stock of Good Morning Shinhan Securities
- Shinhan Financial Group has decided to executed tender offer for
the preferred stock of Good Morning Shinhan Securities pursuant
to Article 4 of Securities Exchange Act, and the material terms
of such tender offer are as follows:
* the number of shares targeted for purchase: 1,529,326
preferred shares in registered form of Good Morning Shinhan
Securities (equivalent to 40 % of the issued and outstanding
preferred shares)
* Tender offer price: Won 2,500 per share
* Tender offer period: From September 24, 2004 (Fri) to
October 13, 2004 (Wed) (20 days)
* Terms and conditions of the tender offer :
If the number of shares tendered pursuant to the tender
offer is less than that the number of shares solicited for
purchase, Shinhan Financial Group shall purchase all of the
tendered shares (as the number of shares solicited for
purchase is equivalent to 100 % of issued and outstanding
preferred stock, the number of tendered shares will not
exceed the number of shares to be purchased).
* Shinhan Financial Group will announce and give a public
notice of the details of the tender offer through the
publication of tender offer and the tender offer statement.
34
CHAPTER 2. MATTERS CONCERNING THE COMPANY
I. COMPANY OVERVIEW
[Company Name: Shinhan Financial Group Co., Ltd.]
1. OBJECTIVES OF THE COMPANY
A. Business being conducted by the Company
OBJECTIVES REMARKS
---------- -------
1. To control or manage a financial company or a company having close relation
with the financial business;
2. To provide the financial support to its subsidiary, etc. (which expression
shall include the subsidiary, sub-subsidiary, and the company under the
control of sub-subsidiary; hereinafter the same shall apply.);
3. To invest in the subsidiary or to raise the fund for financial support to
its subsidiary, etc.;
4. To develop and sell the products jointly with its subsidiary, etc., and to
provide the business support for joint use of facility, computer system,
etc. with its subsidiary, etc.; and
5. To engage in the other business incidental or related to the foregoing.
B. Business not being conducted by the Company
OBJECTIVES REMARKS
---------- -------
N/A
C. Business being conducted by the Subsidiaries
OBJECTIVES REMARKS
---------- -------
Shinhan Bank
------------
1. Banking business under the Banking Act;
2. Trust business;
3. Foreign exchange business; and
4. Other businesses incidental or related to the foregoing.
Chohung Bank
------------
1. Banking business under the Banking Act;
2. Trust business;
3. Foreign exchange business; and
4. Other businesses incidental or related to the foregoing.
35
Objectives Remarks
Good Morning Shinhan Securities Co., Ltd.
-----------------------------------------
1. Trading of securities;
2. Brokerages of securities trading;
3. Intermediation or agency of securities trading;
4. Intermediation, arrangement or agency for brokerage of securities trading
on the Korea Stock Exchange, the Korea Securities Dealers Association, or a
similar market in a foreign country;
5. Underwriting of securities;
6. Arrangement of offering or sale of securities;
7. Arrangement of a public offering of new or outstanding securities;
8. Intermediation or agency of securities trading conducted through the Korea
ECN Securities Co., Ltd.; trading of securities associated with
intermediation services;
9. Margin loan service;
10. Secured loan (collateralized by securities);
11. Securities saving account service;
12. Stock (index) futures business;
13. OTC derivatives transactions; Intermediation, arrangement or agency
thereof;
14. Advisory service for investment and total investment service;
15. Evaluation of securities and equity holdings;
16. Intermediation, arrangement, or agency of corporate mergers & acquisitions;
17. Transactions and intermediation of certificate of deposits(CDs);
18. Trustee business for offering of corporate bonds;
19. Proxy business related to securities trading;
20. Financial advisory services on corporate management, restructuring and
financing;
21. Lending and borrowing of securities; Intermediation, arrangement or agency
thereof;
22. Underwriting of securities issued through a method other than a public
offering; Intermediation, arrangement or agency thereof;
23. Transactions of loan receivables and other transactions related thereto;
Intermediation, arrangement or agency thereof;
24. Securities custody business;
25. Real estate leasing;
26. Business related to management of vault for customers;
27. Lending of securities held by the Company to institutional investors;
28. Sales of lottery tickets, admission tickets and other similar services;
29. training related to securities;
30. Publication of periodicals and books;
31. Rental or sale of IT system or software in relation to securities business;
32. Fiduciary service regarding service and special purpose company (SPC)
businesses pursuant to the Asset Securitization Act;
33. Trading, brokerage, intermediation or agency of futures and options;
Intermediation, arrangement or agency for brokerage of futures and options
trading;
34. Paying agency service related to corporate bonds;
35. Securities business in overseas markets;
36. Discount and trading of corporate papers(CPs);
37. Intermediation of trading of CPs;
38. Brokerage of sale of investment trust beneficiary certificates;
39. Brokerage of sale of mutual funds;
40. Wrap account service;
36
Objectives Remarks
41. Agency and intermediation for sale of insurance products; and
42. Other businesses incidental or related to the foregoing.
Shinhan Card Co., Ltd.
----------------------
1. Credit card services defined by the Specialized Credit Financial Business
Act;
2. Agency and entrustment of the business set forth in Item 1 above;
3. Telemarketing, insurance agency service, travel-related services;
4. Exchange of money;
5. Card production services;
6. Organization and operation of various clubs for members;
7. Business-related publications;
8. Real estate leasing;
9. Conduct of the foregoing services through the Internet; and
10. Other businesses incidental to the foregoing and prescribed by the relevant
laws and regulations.
Shinhan Capital Co., Ltd.
-------------------------
1. Leasing of facilities, equipment, machinery, heavy machinery, vehicles,
vessels and aircrafts, and real estates and property rights directly
related thereto (hereinafter the "Products");
2. Sale of the Products through a deferred payment method;
3. Installment financing;
4. New technology financing;
5. Grant of credit loans or collateral loans;
6. Discount of notes;
7. Assumption and collection of accounts receivables held by a company from
the supply of the goods and services;
8. Payment guarantees;
9. Purchase of credits held by other specialized or crossover credit finance
companies and securities backed by such credits; and
10. Credit check and other incidental businesses related to the foregoing Items
1 through 7.
Jeju Bank
---------
1. Banking business under the Banking Act;
2. Trust business;
3. Foreign exchange business; and
4. Other businesses incidental or related to the foregoing.
Shinhan BNP Paribas Investment Trust Management Co., Ltd.
---------------------------------------------------------
1. Investment and trust of securities;
2. Advisory services for investment;
3. Raising of futures investment funds;
4. Call transactions;
5. Purchase of notes; and
37
Objectives Remarks
6. Other businesses incidental or related to the foregoing Items 1 through 5.
Shinhan Macquarie Financial Advisory Co., Ltd.
----------------------------------------------
1. Asset-based financing;
2. Advisory services for project financing;
3. Infrastructure management;
4. Structured finance;
5. Cross-border leasing;
6. Technology and infrastructure mergers and acquisitions;
7. Specialized funds management; and
8. Other businesses incidental or related to the foregoing.
e-Shinhan Inc.
--------------
1. Processing of comprehensive financial information and provision of
information through the Internet;
2. Financial advisory service through the Internet;
3. Brokerage of financial products sold through the Internet;
4. Provision of real estate information and brokerage of real estate-related
products through the Internet;
5. Development and sale of software;
6. Advertising services and advertising agency services;
7. Development of various Internet contents and sale of products;
8. Telemarketing for brokerage of financial products;
9. Specific telecommunications service; and
10. Other businesses incidental or related to the foregoing.
Shinhan Credit Information Co., Ltd.
------------------------------------
1. Debt collection services;
2. Credit check;
3. Civil affairs and petitions handling agency; and
4. Other businesses incidental or related to the foregoing.
SH&C Life Insurance Co., Ltd.
-----------------------------
1. Personal insurance;
2. Reinsurance of personal insurance policies;
3. Operation of assets incidental or related to life insurance; and
4. Other businesses incidental or related to the foregoing.
D. Business to be implemented by stock swap and transfer in the future
- N/A
2. HISTORY OF THE COMPANY
38
A. History of Relevant Company
(1) Proceedings of the Establishment and Changes Thereafter
1) Date of Establishment: September 1, 2001
2) Location of the Head Office and the Change Thereof: 120, 2Ga,
Taepyung-Ro, Jung-Gu, Seoul, Korea
3) Branch, Business Office and Office, etc.
- N/A
4) Material Change of the Management
September 1, 2001 Chairman/President Eung Chan Ra
March 31, 2003 Chairman Eung Chan Ra
CEO/President Choi, Young Hwi
5) Change of Largest Shareholder
December 14, 2001: The largest shareholder was changed from Daekyo
Co., Ltd. and two others (4,754,679 shares, 1.63%)
to BNP Paribas (11,693,767 shares, 4%).
February 7, 2002: The largest shareholder was changed from
BNP Paribas to BNP Paribas Luxembourg (11,693,767
shares, 4%), an affiliate of BNP Paribas.
* The number of shares held by BNP Paribas Luxembourg is
13,557,832 shares and its equity share is 4.39% as of the
end of December 2003. (additional acquisition of 1,864,065
shares by capital increase via third-party allotment)
6) Material Change of Business Objectives
N/A
7) Any Other Material Change after the Establishment
- April 4, 2002 Execution of purchase agreement of 51% equity
shares owned by Korea Deposit Insurance Corporation and Jeju
Bank
39
- April 8, 2002 Execution of purchase agreement of 30% common
shares held by Good Morning Securities with Asia Pacific
Growth II, LP etc.
- May 10, 2002 Obtaining of approval of incorporation of Jeju
Bank as SFG subsidiary
- June 4, 2002 Credit card division of Shinhan Bank was spun
off and established Shinhan Card Co, Ltd.
- July 8, 2002 Establishment of Shinhan Credit Information
- August 1, 2002 Good Morning Securities was launched followed
by the merger between Good Morning Securities Co., Ltd. and
Shinhan Securities Co., Ltd.
- September 16, 2002 Withdrawal of Good Morning ITMC from
sub-subsidiary
- September 23, 2002 Execution of agreement for sale of 50%-1
equity shares owned by Shinhan ITMC to BNP Paribas Asset
Management Group [the company name was changed to Shinhan
BNP Paribas Investment Trust Management Co., Ltd.]
- October 1, 2002 Establishment of SH&C life Insurance
- June 9, 2003 Execution of agreement for sale of 49% equity
share of Shinhan Credit Information Co., Ltd. to Loan Star
Fund
- July 9, 2003 Execution of agreement for acquisition of
80.04% equity ownership of Chohung Bank from the Korea
Deposit Insurance Corporation
- August 18, 2003~August 19, 2003 Acquisition of 80.04% equity
ownership of Chohung Bank from the Korea Deposit Insurance
Corporation
- September 5, 2003 Obtaining of approval of incorporation of
Chohung Bank as SFG subsidiary
- September 16, 2003 Registration with U.S. Securities
Exchange Commission and listing on New York Stock Exchange
- November 20, 2003 Acquisition of bank holding company
license in the US market from the Federal Reserve Board
40
- December 26, 2003 Chohung Bank's additional investment
equivalent to 200 billion won (81.15% shareholding after
investment)
- March 5, 2004 Sold 29,873,359 shares (10.15%) of the Company
owned by Shinhan Bank
- April 12, 2004 Resolution of implementation of share swap
and tender offer in order to make Chohung Bank its
wholly-owned subsidiary
- April 29, 2004 In credit information business unit, the
termination of affiliation with Lone Star and determination
of purchase of equity in Shinhan Credit Information Co.,
Ltd.
- June 22, 2004 Completion of small scale share swap for
wholly-owned subsidiary of Chohung Bank
- July 2, 2004 Delisting of Chohung Bank
(2) Change of Corporate Name
N/A
(3) Stock Swap and Transfer and Business Sale and Purchase
- Establishment of the financial holding company by stock transfer
method on September 1, 2001
* Subject Companies: Shinhan Bank, Shinhan Securities, Shinhan
Capital, Shinhan ITMC) (former company names used)
* Issuance of common shares of 292,344,192 shares by stock
transfer.
- Pursuant to Article 360, Paragraph (9) and (10) of Commercial
Code, small scale and simple stock swaps with Shinhan Bank are
carried out as below.
* 1st: June 6, 2002 (Issuance of 15,891 new shares in common
shares)
* 2nd: October 1, 2002 (Issuance of 786 new shares in common
shares)
41
* 3rd: December 31, 2002 (Issuance of 256 new shares in common
shares)
* 4th: October 1, 2003 (Issuance of 11,626 new shares in
common shares)
* 5th: December 31, 2003 (Issuance of 164,484 new shares in
common shares)
* The foregoing stock swaps are between additionally issued
common shares of Shinhan Bank and common shares of 'Shinhan
Financial Group' pursuant to the enforcement of the rights
of bonds with warrants that Shinhan Bank has already issued.
- The small scale share swap with Chohung Bank as subsidiary was
implemented pursuant to Article 360-3 and 360-10 of the
Commercial Code as follows:
* Share swap date: June 22, 2004
* Number of common stock issued upon share swap: 14,682,590
Won
- There is no applicable information on business transfer.
(4) Occurrence of Important Matters relating to the Management
- December 12, 2001 Execution of "Agreement for strategic alliance
and establishment of a joint-venture company (bancassurance and
consumer banking part)" with BNP Paribas Group
- April 4, 2002 Execution of "Jeju Bank's Share (51%) Purchase
Agreement" with Korea Deposit Insurance Corporation
- April 8, 2002 Execution of "Good Morning Securities Co., Ltd.'s
Share (30% of common shares) Purchase Agreement" with Asia
Pacific Growth II, LP and others
- August 9, 2002 Execution of "Strategic alliance agreement on
investment trust management business" with BNP Paribas Group (BNP
PAM)
- September 23, 2002 Execution of "Agreement for sale of 3,999,999
shares (50%-1 shares) owned by Shinhan ITMC" with BNP Paribas
Asset Management Group
- June 9, 2003 Execution of "Agreement for sale of shares of
Shinhan Credit Information Co., Ltd. [49% of total number of
42
issued and outstanding shares (294,000 shares)]" with Loan Star
Fund
- July 9, 2003 Execution of "Chohung Bank's Share [543,570,144
shares (80.04% of total number of issued and outstanding shares)]
Purchase Agreement" with Korea Deposit Insurance Corporation
- December 26, 2003 Chohung Bank's additional investment equivalent
to 200 billion won (equity share of 81.15% after the investment)
- March 5, 2004 Sold 29,873,359 shares (10.15%) of the Company
owned by Shinhan Bank
- April 12, 2004 Resolution of implementation of share swap and
tender offer in order to make Chohung Bank its wholly-owned
subsidiary
- April 29, 2004 In credit information business unit, the
termination of affiliation with Lone Star and determination of
purchase of equity in Shinhan Credit Information Co., Ltd.
- June 22, 2004 Completion of small scale share swap for wholly-
owned subsidiary of Chohung Bank
- July 2, 2004 Delisting of Chohung Bank
B. Corporate Group to which the Company belongs
(1) Summary of the Corporate Group
1) Corporate Name: Shinhan Financial Group
2) History
- May 24, 2000 Announcement of establishment of Shinhan Financial
Group Co., Ltd. (hereinafter, Shinhan Financial Group)
- June 28, 2001 Resolution of the Board of Directors' meeting of
Shinhan Bank, Shinhan Securities, Shinhan Capital, Shinhan ITMC
for establishment of financial holding company; execution of MOU
for strategic alliance
43
with BNP Paribas Group; application for preliminary approval of
establishment of Shinhan Financial Group
- July 27, 2001 Obtaining of preliminary approval of establishment
of Shinhan Financial Group
- August 9, 2001 Approval of share transfer for establishment of
Shinhan Financial Group at an extraordinary general meeting of
shareholders
- August 22, 2001 Application for approval of establishment of
Shinhan Financial Group
- August 31, 2001 Obtaining of approval of establishment of Shinhan
Financial Group
- September 1, 2001 Registration of establishment of Shinhan
Financial Group; incorporation of E-Shinhan and Shinhan Macquarie
as SFG subsidiary
- September 10, 2001 Listing of SFG's shares
- December 12, 2001 Execution of the strategic alliance agreement
with BNP Paribas Group and establishment of joint corporation
- December 31, 2001 Registration of dissolution of Shinhan Complex
Laboratory as sub-subsidiary (subsidiary of Shinhan Bank)
- April 4, 2002 Execution of purchase agreement of 51% equity
shares owned by Korea Deposit Insurance Corporation and Jeju Bank
- April 8, 2002 Execution of purchase agreement of 30% common
shares held by Good Morning Securities with Asia Pacific Growth
II, LP etc.
- May 10, 2002 Obtaining of approval of incorporation of Jeju Bank
as SFG subsidiary
- May 24, 2002 Obtaining of approval of incorporation of Shinhan
Card as SFG subsidiary
- July 8, 2002 Establishment of Shinhan Credit Information
- July 26, 2002 Obtaining of approval of incorporation of Good
Morning Shinhan Securities (merged with Good
44
Morning Securities and Shinhan Securities) as SFG subsidiary
- August 1, 2002 Launching of Good Morning Shinhan Securities
- September 16, 2002 Withdrawal of Good Morning ITMC from
sub-subsidiary
- September 23, 2002 Execution of agreement for sale of 50%-1
equity shares (3,999,999 shares) owned by Shinhan ITMC to BNP
Paribas Group
- October 1, 2002 Establishment of SH&C life Insurance
- June 9, 2003 Execution of agreement for sale of 49% equity shares
(294,000 shares) owned by Shinhan Credit Information to Lone Star
Fund
- July 9, 2003 Execution of "Chohung Bank's Share [543,570,144
shares (80.04% of issued and outstanding shares)] Purchase
Agreement" with Korea Deposit Insurance Corporation
- August 18, 2003~August 19, 2003 Acquisition of 80.04% equity
ownership of Chohung Bank from Korea Deposit Insurance
Corporation
- September 5, 2003 Obtaining of approval of incorporation of
Chohung Bank as SFG subsidiary
- September 16, 2003 Registration with U.S. Securities Exchange
Commission and listing on New York Stock Exchange
- November 20, 2003 Acquisition of bank holding company license in
the US market from the Federal Reserve Board
- December 26, 2003 Chohung Bank's additional investment equivalent
to 200 billion won (81.15% shareholding after investment)
- April 12, 2004 Resolution of implementation of share swap and
tender offer in order to make Chohung Bank its wholly-owned
subsidiary (tender offer period: April 26, 2004 ~ May 17, 2004)
- April 29, 2004 In credit information business unit, the
termination of affiliation with Lone Star and determination
45
of purchase of equity in Shinhan Credit Information Co., Ltd.
- June 22, 2004 Completion of small scale share swap for
wholly-owned subsidiary of Chohung Bank
- July 2, 2004 Delisting of Chohung Bank
(2) Companies belonging to the Corporate Group
NUMBER OF
CLASSIFICATION COMPANY COMPANY NAME REMARKS
-------------- -------- ------------ -------
Listed 1 Shinhan Financial Group Parent
Company Company
2 Good Morning Shinhan Securities, Jeju Bank Subsidiary
Unlisted Shinhan Bank, Chohung Bank, Shinhan Card, Shinhan Subsidiary
Company Capital,
9 Shinhan BNP Paribas ITMC, E-Shinhan,
Shinhan Macquarie, Shinhan Credit Information,
SH&C life Insurance
Shinhan Data System, Shinhan Finance, Sub-subsidiary
Chohung ITM, Chohung Finance, CHB America Bank,
Chohung Bank GmbH, Chohung Vina Bank
12 CHB Valuemeet 2001 year 1st Securitization
CHB Valuemeet 2001 year 2nd Securitization
CHB Valuemeet 2002 year 1st Securitization
Good Morning Shinhan Securities Europe Ltd.
Good Morning Shinhan Securities USA Inc.
Total 24 - -
Note 1)Pursuant to the "Resolution of debt-equity swap by the creditor
financial institutions of Samyang Foods Co., Ltd.", the subsidiaries,
Shinhan Bank and Shinhan Capital converted the loan receivables of
Samyang Foods Co., Ltd. into equity as of June 26, 2003, and thereby
became the largest shareholder of Samyang Foods Co., Ltd.
Note 2)Pursuant to the "Resolution made at the council of the creditor
financial institutions of Ssangyong Corporation", the subsidiaries,
Chohung Bank and Shinhan Bank converted the loan receivables into
equity, and thereby became the largest shareholder of Ssangyong
Corporation with the equity share of 45.5%.
(3) Relevant Laws and Regulations
- See to the Financial Holding Company Act and its Supervisory
Regulations, Securities and Exchange Act and its Supervisory
Regulations, and the Fair Trade Act and Regulations.
46
3. CHANGE OF CAPITAL STOCK
A. Changes of Capital Stock
(Unit : Share, Won)
DESCRIPTION OF INCREASED (DECREASED) SHARES
----------------------------------------------
PAR METHOD OF
VALUE ISSUE CAPITAL STOCK ALLOCATION CAPITAL
PER PRICE AFTER CAPITAL OF NEW INCREASE
DATE CAUSE TYPE VOLUME SHARE PER SHARE INCREASE (DECREASE) SHARES RATIO
---- ----- ---- ------ ------ --------- ------------------- ---------- ---------
2001.09.01 Incorporation Common share 292,344,192 5,000 11,761 1,461,720,960,000 Share transfer --
2002.06.06 Share swap Common share 15,891 5,000 - 1,461,800,415,000 Share swap 0.0054 %
2002.10.01 Share swap Common share 786 5,000 - 1,461,804,345,000 Share swap 0.0003 %
2002.12.31 Share swap Common share 256 5,000 - 1,461,805,625,000 Share swap 0.0001 %
Redeemable
2003.08.19 Right issue preferred 6,000,000 5,000 150,000 1,491,805,625,000 Third party 2.05 %
share
Redeemable
2003.08.19 Right issue preferred 46,583,961 5,000 18,086 1,724,725,430,000 Third party 15.61 %
share Note 1)
Redeemable
convertible
2003.08.19 Right issue preferred 44,720,603 5,000 18,086 1,948,328,445,000 Third party 12.96 %
share Note 1)
2003.09.26 Right issue Common share 1,864,065 5,000 14,832 1,957,648,770,000 Third party 0.4784 %
2003.10.01 Share swap Common share 11,626 5,000 - 1,957,706,900,000 Share swap 0.003 %
2003.12.31 Share swap Common share 164,484 5,000 - 1,958,529,320,000 Share swap 0.042 %
2004. 6.22 Share swap Common share 14,682,590 5,000 - 2,031,942,270,000 Share swap 3.748%
Note 1) The issue price per share under the financial statements in accordance
with Paragraphs 12 and 14 of the Financial Holding Company's Accounting
Rules is KRW 10,181.
Note 2) Capital increase ratio = Number of shares increased/Total number of
issued and outstanding shares just prior to the capital increase
B. Convertible Bond
- N/A
C. Bond with Warrants
- N/A
* Contribution in Kind
(1) Name: Korea Deposit Insurance Corporation
(2) Type and volume: 266,349,371 common shares of Chohung Bank
47
(3) Price: The certified appraisal firm (KPMG Samjong Accounting
Corp.) assessed at KRW 6,207 per share.
(4) Type and volume of the shares granted: 46,583,961 redeemable
preferred shares and 44,720,603 redeemable convertible preferred
shares newly issued by Shinhan Financial Group
(5) Date of Contribution: August 18, 2003
(6) Results of the Court's Review: On July 29, 2003, Shinhan
Financial Group obtained the approval on the certified appraisal
firm's appraisal results, submitted by Shinhan Financial Group,
from the 50th Civil Division of the Seoul District Court.
4. TOTAL NUMBER OF SHARES, ETC.
A. Total Number of Shares
(As of June 30, 2004)
TOTAL NUMBER OF SHARES TO BE ISSUED TOTAL NUMBER OF SHARES ISSUED TOTAL NUMBER OF SHARES UN-ISSUED
----------------------------------- ----------------------------- --------------------------------
1,000,000,000 Shares 406,388,454 Shares 593,611,546 Shares
B. Description of Shares Issued
[Par Value per Share: 5,000 Won] (Unit: Won, Share)(As of June 30, 2004)
NUMBER OF SHARES TOTAL AMOUNT OF
CLASSIFICATION TYPES OF SHARE ISSUED PAR VALUE REMARKS
-------------- -------------- ---------------- --------------- -------
Registered form Common share 309,083,890 1,545,419,450,000
Registered form Redeemable 52,583,961 262,919,805,000
preferred shares
Registered form Redeemable 44,720,603 223,603,015,000
convertible
preferred shares
Total 406,388,454 2,031,942,270,000
C. Treasury Stock
(1) Acquisition and disposition of treasury stock for retirement by profit
- N/A
(2) Acquisition and disposition of treasury stock for reasons other than
retirement by profit
- 18,979 fractional shares resulted from small scale share swap
made by and between Chohung Bank and the Company on June 22, 2004
(acquisition cost per share: KRW 17,000) were paid out to the
48
minority shareholders of Chohung Bank and the Company acquired
18,979 treasury shares on July 7, 2004
- The fractional shares which were resulted from the computation on
a basis of ratio of share swap (SFG: CHB = 1: 0.1354) were
purchased by the Company and the cost was paid to the
shareholders.
- Unit cost per share was determined as KRW 17,000 which was the
closing price as of the first date of listing new shares of the
Company (July 2).
- These shares will be disposed at the appropriate time and in
accordance with the appropriate procedure.
- N/A
D. Treasury Stock Fund
- N/A
E. Stock Option
[As of June 30, 2004] (Unit: Won, Share)
RECENT
STOCK
NAME NO. OF NO. OF PRICE
OF GRANTED NO. OF NO- EXER- (OFFER-
THE TYPE OF STOCK EXERCISABLE EXERCISE EXERCISE CISE ING
GRANT DATE RELATIONSHIPS GRANTEE SHARE OPTION OPTION OPTION PERIOD PRICE PRICE) REMARKS
---------- ------------- ------- ------- ------- ----------- -------- ----------------------- ------ ------- -------
Eung Shinhan
May 22,2002 Registered Chan Ra Common Financial
Officer Stock 94,416 - 94,416 May 23,2004~May 22,2008 18,910 20,950 Group
Young Shinhan
May 22,2002 Registered Hwi Choi Common 47,208 - 47,208 May 23,2004~May 22,2008 18,910 20,950 Financial
Officer Stock Group
Sang Shinhan
May 22,2002 Non-registered Hoon Shin Common 28,325 - 28,325 May 23,2004~May 22,2008 18,910 20,950 Financial
Officer Stock Group
Bhang Shinhan
May 22,2002 Non-registered Gil Choi Common 18,883 - 18,883 May 23,2004~May 22,2008 18,910 20,950 Financial
Officer Stock Group
Officer of In Ho Lee Common Shinhan
May 22,2002 Affiliated Stock 32,162 - 32,162 May 23,2004~May 22,2008 18,910 20,950 Bank
Company
Officer of Hong Common Shinhan
May 22,2002 Affiliated Soon Stock 17,426 - 17,426 May 23,2004~May 22,2008 18,910 20,950 Bank
Company Moon
Officer of Jae Woo Common Shinhan
May 22,2002 Affiliated Lee Stock 18,873 - 18,873 May 23,2004~May 22,2008 18,910 20,950 Bank
Company
49
RECENT
STOCK
NAME NO. OF NO. OF PRICE
OF GRANTED NO. OF NO- EXER- (OFFER-
THE TYPE OF STOCK EXERCISABLE EXERCISE EXERCISE CISE ING
GRANT DATE RELATIONSHIP GRANTEE SHARE OPTION OPTION OPTION PERIOD PRICE PRICE) REMARKS
------------ ------------- ------- ----- ------ ---------- ------ ------------------------- ----- ------- -------
Officer of Joong Common Shinhan
May 22, 2002 Affiliated Ok Huh Stock 15,564 - 15,564 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company
Officer of Sahng Common Shinhan
May 22, 2002 Affiliated Dae Stock 18,873 - 18,873 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Kim
Officer of Gwang Common Shinhan
May 22, 2002 Affiliated Lim Stock 18,873 - 18,873 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Youn
Officer of Young Common Shinhan
May 22, 2002 Affiliated Kook Stock 8,041 - 8,041 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Oh
Officer of Kee Common Shinhan
May 22, 2002 Affiliated Do Nam Stock 8,041 - 8,041 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company
Officer of Myoung Common Shinhan
May 22, 2002 Affiliated Kee Stock 14,918 - 14,918 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Jang
Officer of Yong Common Shinhan
May 22, 2002 Affiliated Soon Stock 11,673 - 11,673 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Shin
Officer of Dae Common Shinhan
May 22, 2002 Affiliated Woon Stock 11,673 - 11,673 May 23, 2004~May 22, 2008 18,910 20,950 Bank
Company Lee
Officer of Dong Common Shinhan
May 22, 2002 Affiliated Girl Stock 26,953 - 26,953 May 23, 2004~May 22, 2008 18,910 20,950 Capital
Company Lee
Officer of Yun Common Shinhan
May 22, 2002 Affiliated Kang Stock 7,409 - 7,409 May 23, 2004~May 22, 2008 18,910 20,950 Capital
Company Jung
Officer of Woong Common Shinhan
May 22, 2002 Affiliated Man Stock 3,828 - 3,828 May 23, 2004~May 22, 2008 18,910 20,950 Capital
Company Son
Officer of Jung Common Shinhan
May 22, 2002 Affiliated Hun Stock 3,828 - 3,828 May 23,2004~May 22,2008 18,910 20,950 Capital
Company Hwang
Byung
Kuk Song Shinhan
May 22, 2002 Employee and other Common 13,325 - 13,325 May 23,2004~May 22,2008 18,910 20,950 Financial
6 persons Stock Group
Duck
Joong
May 22, 2002 Employee of Kim and Common 449,929 - 449,929 May 23,2004~May 22,2008 18,910 20,950 Affiliated
Affiliated other Stock Company
Company 329
persons
50
RECENT
NAME NO. OF NO. OF STOCK
OF GRANTED NO. OF NO- PRICE
THE TYPE OF STOCK EXERCISABLE EXERCISE EXERCISE EXERCISE (OFFERING
GRANT DATE RELATIONSHIP GRANTEE SHARE OPTION OPTION OPTION PERIOD PRICE PRICE) REMARKS
---------- ------------- ------- ----- ------ ------ ------ ------ ----- ------- -------
Eung Shinhan
May 15,2003 Registered Chan Common 100,000 - 100,000 May 16,2005~May 15,2009 11,800 20,950 Financial
Officer Ra Stock Group
Young Shinhan
May 15,2003 Registered Hwi Common 90,000 - 90,000 May 16,2005~May 15,2009 11,800 20,950 Financial
Officer Choi Stock Group
Bhang Shinhan
May 15,2003 Non-registered Gil Common 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Financial
Officer Choi Stock Group
Shinhan
May 15,2003 Non-registered Min Common 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Financial
Officer Ky Han Stock Group
Young Shinhan
May 15,2003 Non-registered Soo Common 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Financial
Officer Song Stock Group
Officer of Sang Common Shinhan
May 15,2003 Affiliated Hoon Stock 80,000 - 80,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Shin
Officer of Hong Common Shinhan
May 15,2003 Affiliated Soon Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Moon
Officer of Jae Common Shinhan
May 15,2003 Affiliated Woo Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Lee
Officer of Joong Common Shinhan
May 15,2003 Affiliated Ok Huh Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company
Officer of Sahng Common Shinhan
May 15,2003 Affiliated Dae Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Kim
Officer of Gwang Common Shinhan
May 15,2003 Affiliated Lim Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Youn
Officer of Woo Common Shinhan
May 15,2003 Affiliated Seop Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Cho
Officer of Hee Common Shinhan
May 15,2003 Affiliated Soo Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Kim
Officer of Do Common Shinhan
May 15,2003 Affiliated Heui Stock 20,000 - 20,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Han
Officer of Yong Common Shinhan
May 15,2003 Affiliated Soon Stock 15,000 - 15,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Shin
Officer of Dae Common Shinhan
May 15,2003 Affiliated Woon Stock 15,000 - 15,000 May 16,2005~May 15,2009 11,800 20,950 Bank
Company Lee
51
RECENT
NAME NO. OF NO. OF STOCK
OF GRANTED NO. OF NO- PRICE
THE TYPE OF STOCK EXERCISABLE EXERCISE EXERCISE EXERCISE (OFFERING
GRANT DATE RELATIONSHIP GRANTEE SHARE OPTION OPTION OPTION PERIOD PRICE PRICE) REMARKS
---------- ------------- ------- ----- ------ ------ ------ ------ ----- ------- -------
Officer of Sung Common Shinhan
May 15,2003 Affiliated Kyun Stock 30,000 - 30,000 May 16,2005~May 15,2009 11,800 20,950 Card
Company Hong
Officer of Tae Common Shinhan
May 15,2003 Affiliated Kyu Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Card
Company Lee
Officer of Seong Common Shinhan
May 15,2003 Affiliated Won Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Card
Company Kim
Officer of Woo Common Shinhan
May 15,2003 Affiliated Yeob Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Card
Company Shim
Officer of Dong Common Shinhan
May 15,2003 Affiliated Girl Stock 30,000 - 30,000 May 16,2005~May 15,2009 11,800 20,950 Capital
Company Lee
Officer of Yun Common Shinhan
May 15,2003 Affiliated Kang Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Capital
Company Jung
Officer of Myoung Common Shinhan
May 15,2003 Affiliated Kee Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Capital
Company Jang
Officer of Beom Common Shinhan
May 15,2003 Affiliated Seong Stock 10,000 - 10,000 May 16,2005~May 15,2009 11,800 20,950 Credit
Company Shin Infor-
mation
Byung
Kuk Song Shinhan
May 15,2003 Employee and other Common 14,600 - 14,600 May 16,2005~May 15,2009 11,800 20,950 Financial
7 Stock Group
officers
Jin
Won Seo Affil-
May 15,2003 Employee of and other Common 501,700 - 501,700 May 16,2005~May 15,2009 11,800 20,950 iated
Affiliated 329 Stock Company
Company officers
Eung Shinhan
March 25,2004 Registered Chan Common 100,000 - 100,000 March 26,2006~March 25,2009 21,595 20,950 Financial
Officer Ra Stock Group
Young Shinhan
March 25,2004 Registered Hwi Common 90,000 - 90,000 March 26,2006~March 25,2009 21,595 20,950 Financial
Officer Choi Stock Group
Bhang Shinhan
March 25,2004 Non-registered Gil Common 30,000 - 30,000 March 26,2006~March 25,2009 21,595 20,950 Financial
Officer Choi Stock Group
Chil Shinhan
March 25,2004 Non-registered Sun Common 20,000 - 20,000 March 26,2006~March 25,2009 21,595 20,950 Financial
Officer Hong Stock Group
52
Recent
No. of No. of Stock
Name of Granted Exercis- No. of No- Price
the Type of Stock able exercise Exercise (Offering
Grant Date Relationship Grantee Share Option Option option Exrecise Period Price Price) Remarks
---------- ------------ -------- ------- ------- ------- --------- --------------------- ------- --------- -------
Heed Shinhan
March 25, Non-registered Soo Common 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Financial
2004 Officer Kim Stock Group
Byung Shinhan
March 25, Non-registered Jae Common 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Financial
2004 Officer Cho Stock Group
Baek Shinhan
March 25, Non-registered Soon Common 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Financial
2004 Officer Lee Stock Group
Officer
of Sang Common Shinhan
March 25, Affiliated Hoon Stock 80,000 - 80,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Shin
Officer
of Jae Common Shinhan
March 25, Affiliated Ho Cho Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company
Officer
of Jae Common Shinhan
March 25, Affiliated Woo Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Lee
Officer
of Gwang Common Shinhan
March 25, Affiliated Lim Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Youn
Officer
of Woo Common Shinhan
March 25, Affiliated Seop Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Cho
Officer
of Min Common Shinhan
March 25, Affiliated Ky Han Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20, 950 Bank
2004 Company
Officer
of Youn Common Shinhan
March 25, Affiliated Soo Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20, 950 Bank
2004 Company Song
Officer
of Do Common Shinhan
March 25, Affiliated Heui Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20, 950 Bank
2004 Company Han
Officer
of Jin Common Shinhan
March 25, Affiliated Won Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Seo
Officer
of Shin Common Shinhan
March 25, Affiliated Keun Stock 20,000 - 20,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Yang
Officer
of Sang Common Shinhan
March 25, Affiliated Young Stock 15,000 - 15,000 March 26, 2006~March 25,2009 21,595 20,950 Bank
2004 Company Oh
Officer
of Sung Common Shinhan
March 25, Affiliated Kyun Stock 30,000 - 30,000 March 26, 2006~March 25,2009 21,595 20,950 Card
2004 Company Hong
53
Recent
No. of No. of Stock
Name of Granted Exercis- No. of No- Price
the Type of Stock able exercise Exercise (Offering
Grant Date Relationship Grantee Share Option Option option Exercise Period Price Price) Remarks
---------- ------------ -------- ------- ------- ------- --------- --------------------- ------- --------- -------
Officer
of Tae Common Shinhan
March 25, Affiliated Kyu Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Card
2004 Company Lee
Officer
of Seong Common Shinhan
March 25, Affiliated Won Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Card
2004 Company Kim
Officer
of Woo Common Shinhan
March 25, Affiliated Yeob Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Card
2004 Company Shim
Officer
of Moon Common Shinhan
March 25, Affiliated Han Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Card
2004 Company Kim
Officer
of Dong Common Shinhan
March 25, Affiliated Girl Stock 30,000 - 30,000 March 26, 2006~March 25,2009 21,595 20,950 Capital
2004 Company Lee
Officer
of Sahng Common Shinhan
March 25, Affiliated Dae Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Capital
2004 Company Kim
Officer
of Seung Common Shinhan
March 25, Affiliated Keun Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Capital
2004 Company Oh
Officer
of Beom Common Shinhan
March 25, Affiliated Seong Stock 10,000 - 10,000 March 26, 2006~March 25,2009 21,595 20,950 Credit
2004 Company Shin Information
Byung
Kuk
Song Shinhan
March 25, Employee and Common 13,900 - 13,900 March 26, 2006~March 25,2009 21,595 20,950 Financial
2004 other Stock Group
7
officers
Hong
Gon
Employee Kam
March 25, of and Common 582,700 - 582,700 March26, 2006~March25,2009 21,595 20,950 Affiliated
2004 Affiliated other Stock Company
Company 400
officers
Total - - - 3,328,121 - 3,328,121 - - - -
Note 1) The number of shares granted and relationship with the Company are
recorded as of the date of granting of stock option.
Note 2) The initial volume of the stock options granted as of May 22, 2002
was 1,004,200 options. Among them, the volume of the stock options
which was finally determined in May and June of 2004 to be granted in
accordance with the condition at the time of execution of stock option
agreement is 406,976 shares to officers and 463,254 shares to team
head. The total volume is 870,221 shares. Accordingly, the number of
shares granted as of May 22, 2004 is the number of shares which was
finally determined. Further, it was determined that the finally
determined shares for stock option will be treated as granting of
difference.
Note 3) The initial volume of stock option granted as of May 15, 2003 is
1,156,300 shares.
Note 4) The initial volume of stock option granted as of March 25, 2004 is
1,301,600 shares.
Note 5) The volume of stock option granted as of May 22, 2002 and May 15,
2003 may be exercised for 4 years after 2 years from the date of
granting of stock option. The volume of stock option as of March 25,
2004 may be exercised for 3 years after 2 years from the date of
granting of stock option.
54
Note 6) The most current stock price is the closing price as of September 16,
2004.
F. Status of the Equity Ratio of Employee Stockownership Association
TYPE OF SHARE OPENING BALANCE INCREASE DECREASE ENDING BALANCE REMARKS
------------- --------------- -------- -------- -------------- -------
Common share 357,888 292,655 -241 650,302 -
Total 357,888 292,655 -241 650,302 -
Note) On December 5, 2002, the Employee Stockownership Program was introduced.
The record date for 650,302 shares for ending balance is July 15, 2004,
consisting of 10,370 shares (SFG), 633,085 shares (Shinhan Bank), 6,847
shares (Shinhan Capital).
* The volume of decrease is the decrease resulted from retirement under
the age limit of the employees of Shinhan Bank.
5. MATTERS WITH RESPECT TO THE DIVIDEND DURING THE RECENT FIVE (5) FISCAL
YEARS
[Par Value per Share: 5,000 Won](Unit Million Won)
CLASSIFICATION THE 3RD PERIOD THE 2ND PERIOD THE 1ST PERIOD - -
-------------- -------------- -------------- -------------- --- ---
Net earnings 362,227 603,9311 220,763 - -
Net earnings per share (KRW) 952 2,066 755 - -
Income available for dividends 747,706 590,061 197,846 - -
Payout ratios 66.84 26.08 68.31 - -
A.
Details Dividend
of per
dividends Cash share Majority Common 600 600 30 - -
dividends (KRW) share
Preferred - - - - -
share
Minority Common 600 600 600 - -
share
Preferred 857 - - - -
share
B. Total
amount
of
dividends Majority Common 8,134,699,200 7,016,260,200 346,007,352 - -
(KRW) share
Preferred - - - - -
share
Minority Common 150,582,065,400 150,476,210,400 150,466,278,000 - -
share
Preferred 83,397,139,955 - - - -
share
C.
Dividend
ratio at
market Common 3.24 4.34 0.19 - -
price Majority share
(%)
Preferred - - - - -
share
55
CLASSIFICATION THE 3RD PERIOD THE 2ND PERIOD THE 1ST PERIOD - -
-------------- -------------- -------------- -------------- --- ---
Minority Common 3.24 4.34 3.79 - -
share
Preferred - - - - -
share
A. Stock - - - - -
Stock dividend Common
dividends rate (%) Majority share
Preferred - - - - -
share
Minority Common - - - - -
share
Preferred - - - - -
share
B. - - - - -
Number
of stock
dividend
per Common
share Majority share
(Share)
Preferred - - - - -
share
Minority Common - - - - -
share
Preferred - - - - -
share
Book-value per share (KRW) 15,618 13,717 12,440 - -
Ordinary income per share (KRW) 952 2,066 755 - -
Note 1) The basis for the calculation of the net earnings per share during
the 3rd period
(1)Net earnings : KRW 362,227 million
(2)Preferred share dividend : KRW 83,397 million
(3)Common share net earnings((1)-(2)) : KRW 278,830 million
(4)Weighted average number of traded common shares : 292,856,507
shares
(5)Net Earnings per share((3)/(4)) : KWR 952
Note 2) The payout ratio of the 3rd period was calculated by dividing the
total dividends on common share and preferred share by the net
earnings before deducting the dividends on preferred share. For your
reference, the payout ratio of common share [Dividend on common
share/(Net earnings-Dividends on preferred share)] is 56.92%.
Note 3) Dividend per share of each period is not different between
shareholders (largest shareholders and minority shareholders).
Provided, however, that KRW 30 (5,000x12%x18/365) was paid as a
dividend per share on the shares held by BNP Paribas for the 1st
period in proportion to the date of holding.
Note 4) Dividends on shares held by the subsidiary Shinhan Bank as of the
end of the 1st, 2nd and 3rd period are not paid.
Note 5) Dividends per share on preferred stock are calculated by dividing
the total dividends on preferred stock by total number of issued
preferred stock. (KRW 83,397,139,955/97,304,564 shares = KRW 857 per
share)
Dividends per share on preferred stock are as follows:
- Series 1 to series 5 Redeemable preferred shares : KRW 270,249
- Series 6 Redeemable preferred shares : KRW 10,500
- Series 7 Redeemable preferred shares : KRW 11,190
- Series 8 Redeemable preferred shares : KRW 11,790
56
- Series 9 Redeemable preferred shares : KRW 135,125
Note 6) In case of preferred stock, the dividend ratio at market price was
not calculated since the market price was not calculated.
Note 7) Net earnings per share are the amount calculated by dividing total
net worth by the total number of issued common share and preferred
share.
57
II. DETAILS OF BUSINESS
1. OUTLINE OF BUSINESS
A. Status of the Industry
** The Trend toward Expansions and Business Cross-overs, and the
Existence of Pressure for the Restructuring in the Finance Industry
Expansions of financial institutions through alliances, and business
crossovers resulting from a loosening of regulations by the government
are the major trend in the global financial market. In Korea, as the
barriers between the different business areas are rapidly being
dismantled in the financial industry, forming financial groups or
expansion coupled with the progression towards crossing over has
become the major trend in the Korean finance industry. Following the
introduction of bankassurance last year, providing one-stop financial
services, which provide all major financial services including
banking, securities, investment, and insurance through a single
distribution channel, is emerging as a major task.
In the meantime, the restructuring of the finance sector which has
continued since the IMF crisis, is changing from a
government-initiated restructuring aimed at resolving past
deficiencies to the current private-initiated restructuring aimed at
increasing the competitiveness of Korean financial institutions, and
this trend is expected to remain a key issue in the changing finance
industry of Korea. Accordingly, a small number of large financial
institutions, including enlarged financial institutions centered
around banking and financial groups in the form of holding companies,
will fiercely compete for a leading position in the market based on an
enlarged customer base and relevant channels. Small or medium sized
financial institutions will struggle to survive through
differentiation and by addressing a niche market. However, in cases
where even this proves impossible, in losing its competitiveness, the
small or medium institutions will become subject to merger during the
restructuring process.
** Incorporation of a Global Competition System within the Financial
Market upon Accelerated Entry of Foreign Funds into the Korean
Financial Market
In the future, the domestic finance industry will become fully
incorporated into the global competition system. Foreign financial
institutions have already accelerated their inroads into the Korean
financial market, and the type of investments are clearly changing
from past short-term investments aimed at simple capital gains to
acquiring managerial control for the purpose of making mid to
long-term advancements into the financial market.
Under these circumstances, competition with leading foreign financial
institutions is inevitable in the Korean market, and it is imperative
to the
58
long-term survival and growth of domestic financial institutions to
secure competitiveness at a world class level and establish world
class standards.
From a wider perspective, the rapid growth of the Chinese economy is
another threat to our finance industry, while being recognized as a
chance for infinite growth. Many global financial institutions have
already begun full-scale advancements into the Chinese market. The
potential of the Korean financial market is expected to attract
considerable attention as a bridgehead to the Chinese market and as a
banking hub of Northeast Asia.
** Diversification of Financial Needs and Offering Customized Financial
Services
Despite the delayed recovery rate of the economy resulting from the
decrease in domestic demand, it appears that the domestic financial
industry has steadily established a foundation for growth, both in
quantity and quality. This is because, while floating liquidity on the
market fails to find appropriate investment outlets due to long-term
low interest rates and remains around the financial sector, a
financial deepening is forecast pursuant to an increase in financial
assets during the process of economic growth. In particular, the
improvement of services and an increase of hybrid financial products
offered by each financial institution in response to the changing
quality of financial demands during the progressing financial
deepening, together with the convergence trend of different service
fields during the process of IT-based industrial development, are
expected to become further accelerated.
As for individual customers, pursuant to the changes in lifestyle
patterns resulting from the development of an aging society, a
gentrification of consumption, and an increase in the high-income HNWI
class, the growth of the PB market is likely to be further
accelerated. The wealth-management service has made rapid growth as a
new area in the finance industry, and as such, the importance of
customized service which responds to the nature of the demands of each
class is increasing. In addition, the development of hybrid stores and
hybrid financial products in line with the cross-over tendency of the
finance industry is also expected to be accelerated. Also, in the case
of corporate customers, a reduction in the indirect financial market
which relies on bank loans, and an enlargement of the direct financial
market are expected to be the established trend, and the polarization
of the supply and demand of funds according to the size and
credibility of corporations will be more clearly defined.
** Banking Business
Despite the fact that the domestic economy is gradually recovering
based on the recovery of the world economy and the increase in
exports, it has been predicted that the domestic financial market will
focus on management for internal interest, which emphasizes risk
management rather than external growth because of a serious decrease
in domestic consumption, excessive
59
household debts, and individual credit problems which have become
extended long-term.
It seems the tendency towards the short term instability of market
funds will be difficult to solve for a while due to basic conditions
of prolonged low interest rates and delayed economic recovery, and
thus, relying on a simple earnings-based structure centered on
deposit-loan margins in order to secure revenue will hit a limit.
Therefore, each bank is likely to make more efforts to develop new
revenue sources such as revenue from fees and cross-selling of
financial products in order to secure a proper rate of returns from
asset management.
From the viewpoint of the structure of the industry, there is always
the possibility for additional market reorganization including mergers
and acquisitions during the process of expansion and of the formation
of bank-centered holding companies. In particular, it is anticipated
that foreign banks' advances in the Korean market will gradually
become a reality through the process of the withdrawal of existing
foreign funds, domestic commercial banks will compete for leading
positions through expansion measures, a movement towards
differentiation will be pervasive among small to medium sized banks,
and the restructuring of the financial sector will enter the final
phase.
** Securities/Investment Trust Business
In the securities/investment trust industry, where the restructuring
has been relatively late compared to the banking sector, it is
expected that the restructuring will start in earnest this year.
Restructuring of the investment trust industry is under way in earnest
with overseas sales of ailing companies surfacing, and in the
securities industry where the pricing competition has already hit its
limit with the increase in cyber securities transactions, the industry
is centering around the large security companies in the struggle for
control of the industry. Under these conditions, small and medium
companies that fail to find a model for independent survival will
inevitably be driven out of the market. Accordingly, large security
companies will actively seek changes in the revenue model from simple
brokeraging services to asset management services represented by wrap
accounts and corporate banking services, and small to medium sized
companies, with the exception of a small number of online security
companies which lead discount brokeraging, face a limit in continually
generating revenue and will inevitably be subject to mergers and
acquisitions in the process of restructuring.
** Credit Cards
As the household debt and individual credit problems that had become
serious since the latter half of the year 2002 have not yet been
solved, for the time being, it does not seem that the credit card
industry will be able to rely on rapid growth-type recovery as in the
past. This is because the
60
improvement and maintenance of asset quality, including the default
rate, will be the key issue. However, while the position of
specialized credit card companies that were previously in the leading
position in the market is being weakened, bank credit card companies
are expected to do well. At the same time, the latecomers who are
relatively free from insolvency problems will seek to expand their
market share through aggressive marketing. However, because of the
tightening of regulations by the government and delay in the economic
recovery rate due to the decrease in domestic consumption, it is
unlikely that the card market will easily be normalized.
It follows that the credit card industry is likely to focus its
efforts on strategic alliances with other industries such as
telecommunications rather than focusing on competing in quantity
through expanding the number of customers and credit sales as it did
in the past, in order to cope with the changing credit card industry.
B. Status of the Company
(1) General Condition of Operations and Classification of Business Sectors
(A) General Condition of Operations
** There were many changes in the financial sector in 2001,
including the emergence of large banks through mergers
between banks and the launch of state-initiated financial
holding companies. Shinhan also successfully established a
privately initiated holding company, taking full advantage
of its strengths in having various customers and many
affiliated companies across the financial industry.
** Since its incorporation, Shinhan Financial Group has set its
strategic goal as building its business structure as a
universal financial group, and specified systematic
strategies centering on the following four major tasks: (1)
consolidation of the structure of the holding company; (2)
materialization of strategic alliance negotiations; (3)
promotion of the strategy of early synergistic expansion(4)
strengthening of internal and external communications.
** First of all, in order to establish the holding company
structure, Shinhan Financial Group reorganized the
governance structure and management system to secure
managerial transparency, and solidified the mutual
assistance and support systems among member companies by
forming various councils according to each business
division, including retail, corporate banking, and asset
management to build the foundation for a one portal, one
stop comprehensive financial service provider.
** Shinhan Financial Group signed a strategic alliance
agreement on December 12, 2001 with BNP Paribas for equity
investment (4% equity, KRW 155.4 billion), and a joint
venture for consumer finance and bankassurance.
61
** Shinhan Financial Group signed an agreement with the Korea
Deposit Insurance Corporation on April 4, 2002 for the
transfer of Korea Deposit Insurance Corporation's 51% equity
in Jeju Bank, and signed another share transfer agreement
with Asia Pacific Growth II, LP, etc. for the acquisition of
30% of the common shares in Good Morning Securities on April
8, 2002. Good Morning Shinhan Securities was launched upon
the merger between Shinhan Securities and Good Morning
Securities.
** The credit card division of Shinhan Bank was spun off and
officially established as an independent, wholly-owned
subsidiary on June 4, 2002. Shinhan Credit Information Co.,
Ltd was incorporated on July 8, 2002 as to engage in the
business of debt collection services and credit research.
** Shinhan Financial Group sold Good Morning Investment Trust
Management Co. to Prudential Corporation Holdings to resolve
the redundant investment in the investment trust management
sector, and in order to enhance the sales power, signed an
agreement with BNP Paribas Asset Management Group for an
alliance in the investment trust management sector and the
sale of 50% equity in the Shinhan Investment Trust
Management Co., Ltd., which has been renamed to Shinhan BNP
Paribas ITMC.
** On October 1, 2002, SH&C Life Insurance was incorporated as
a result of the ongoing efforts for a joint venture in the
bankassurance industry.
** On June 9, 2003, Shinhan Financial Group sold 49% equity
shares of Shinhan Credit Information to Loan Star Fund, and
signed an alliance agreement for the debt collection
operations, but on April 29, 2004 it decided to repurchase
49% of equity in Shinhan Credit Information (24,000 shares)
held by Lone Star again. After repurchase, the equity ratio
held by Shinhan Financial Group was changed into 100%.
** Shinhan Financial Group acquired 80.04% equity ownership
(543,570,144 shares) of Chohung Bank from the Korea Deposit
Insurance Corporation on August 18 and 19, 2003, and the
inclusion of Chohung Bank as a Shinhan Financial Group
subsidiary was officially granted on September 5, 2003.
Thereafter, Shinhan Financial Group resolved the share swap
and tender offer in order to make Chohung Bank its
wholly-owned subsidiary at its board of directors' meeting
held on April 12, 2004, and during the period from April 26,
2004 until May 17, 2004, Shinhan Financial Group implemented
tender offer with respect to 27,109,657 shares of common
stock of CHB at the price of 3,500 Won per share. On June
22, 2004, Shinhan Financial Group implemented share swap at
the rate of 0.1354 share per one common share of Chohung
Bank, and included Chohung Bank as its wholly-owned
subsidiary.
** Upon completion of its incorporation of the banks, security,
credit card, investment trust, capital and insurance
companies as its subsidiaries, the Shinhan Financial Group
has become systemized as a universal financial
62
group covering all financial sectors, and has pursued cross
sales including funds and FNA security savings deposit among
its subsidiaries, and is concentrating its efforts on the
development of hybrid or tie-in-sale products between
insurance and credit cards. In addition, as a consolidated
group database has been completed, database-marketing
activities are being conducted at the group level.
** In addition, Shinhan Financial Group is informing customers
and shareholders of our new transformation process being
endeavored under the holding company system through IR
activities for investors and group advertising. Internally,
the company is pursuing workshops for group officers and
executives, synergy forums, survival summit and other
various programs in order to expand understanding of and
sympathy towards the group vision and strategy direction,
and is deriving various tasks to generate synergy which is
being pursued through close consultation among member
companies.
** Shinhan Financial Group was registered with the U.S.
Securities and Exchange Commission on September 16, 2003 in
an attempt to enhance the corporate governance and
managerial transparency, and the American Depositary Shares
were listed on the New York Stock Exchange on the same day.
** Especially in 2004, Shinhan Financial Group will strive to
realistically construct One-Bank structure through the
stable and efficient operation of its two banks: Chohung
Bank, which has been incorporated as a new subsidiary, and
Shinhan Bank, while securing the basis for the emergence of
a New-Bank, in which will be completely new in terms of its
quality.
** Furthermore, Shinhan Financial Group will strengthen its
synergistic capabilities by extending the scope of its
business and target markets based on the wide expansion of
its customer base and channels with the inclusion of Chohung
Bank, and construct a new performance-centered and
market-oriented corporate culture, whereby securing its
position as a leader in the Korean financial industry. In
the meantime, Shinhan will exert constant efforts to build a
managerial system which conforms to world-class standards
and secure world-class competency for its long-term survival
and as the basis for growth in the global financial
competition.
(B) Classification of Business Divisions to be Disclosed
Shinhan Financial Group's business divisions subject to
disclosure are restricted to the administration management
business and incidental businesses thereto of Shinhan Financial
Group and its subsidiaries.
(2) Outline of Businesses and Products-Services
63
The administration management business of a Subsidiary and
incidental businesses thereto (See Article 15 of the Financial
Holding Companies Act and Article 11 of the Enforcement Decree of
the Act).
(3) Market Share
As there are currently three financial holding companies
including Woori and Dongwon besides Shinhan in Korea, it is
difficult to determine the accurate market share due to the
special characteristics of a holding company, such as the
relations with other financial businesses.
(Unit: 100 Million Won)
AS OF MARCH 31, 2004
----------------------------------------------------------------------------
WOORI FINANCE
CLASSIFICATION SHINHAN FINANCIAL GROUP HOLDINGS DONGWON FINANCIAL HOLDING
-------------- ----------------------- ------------- -------------------------
Total assets 88,925 86,501 11,217
Total liabilities 25,337 27,916 997
Total stockholders' 63,588 58,585 10,220
equity
Capital 19,585 38,775 3,079
Operating revenue 1,845 280 211
Operating expense 392 1,795 14
Operating income 1,453 -1,515 198
Ordinary income 1,456 -1,514 219
Net earnings 1,456 -1,514 219
(4) Details and Prospects of New Business, etc.
- Not Applicable
(5) Organization Chart (as of end of August, 2004)
64
2. STATUS OF BUSINESS
A. Business Performance
(Unit: Million Won)
2ND QUARTER OF 4TH FY 3RD FY 2ND FY
CLASSIFICATION (2004.1.1~2004.6.30) (2003.1.1~2003.12.31) (2002.1.1~2002.12.31)
-------------- -------------------- --------------------- ---------------------
Operating income 550,199 617,147 645,367
Valuation gain
using the 491,697 519,360 620,697
equity method
Interest income 58,502 97,787 24,670
Other income
Operating expense 81,195 252,199 43,147
Valuation
gain using
the equity 4,049 130,719 2,007
method
Operating profit 469,004 364,948 602,220
According to the Statements Korea Accounting Standards ("SKAS") No. 15, the gain
and loss using the equity method is recorded respectively. As a result, the
business results for the previous period are also prepared for disclosure, which
does not affect the operating gain.
B. Financing and Performance of its Operation
(1) Performance of Financing
(Unit: Million Won,%)
4th FY (Semi-annual) 3rd FY 2nd FY
Classification (2004.1.1~2004.6.30) (2003.1.1~2003.12.31) (2002.1.1~2002.12.31)
-------------- -------------------- --------------------- ---------------------
Average Balance Ratio Average Balance Ratio Average Balance Ratio
--------------- ----- --------------- ----- --------------- -----
Aggregate Amount 6,380,716 72.97 4,768,492 73.82 3,877,215 89.45
of Equity Capital
Capital Stock 1,983,000 22.68 1,660,319 25.70 1,461,770 33.72
Capital Surplus 3,390,233 38.77 2,512,502 38.89 1,976,637 45.60
Retained Earnings 893,120 10.21 692,409 10.72 379,170 8.75
Capital Adjustment 114,364 1.31 -96,738 -1.50 59,638 1.38
-65-
(Unit: Million Won, %)
4th FY (Semi-annual) 3rd FY 2nd FY
Classification (2004.1.1~2004.6.30) (2003.1.1~2003.12.31) (2002.1.1~2002.12.31)
-------------- -------------------- --------------------- ---------------------
Average Balance Ratio Average Balance Ratio Average Balance Ratio
--------------- ----- ------ ------- ----- ------ ------- -----
Borrowings 2,363,857 27.03 1,691,375 26.18 457,359 10.55
Debentures 2,030,154 23.22 1,434,951 22.21 359,240 8.29
Borrowings
from other 333,702 3.82 256,424 3.97 98,119 2.26
Banks
- -
- -
Total 8,744,572 100.00 6,459,867 100.00 4,334 ,574 100.00
Note) The Average Balance was calculated by arithmetically averaging the
ending balance (including the beginning balance) of each quarter.
(2) Operating Performance of Funds
(Unit: Million Won, %)
4th FY (Semi-annual) 3rd FY 2nd FY
Classification (2004.1.1~2004.6.30) (2003.1.1~2003.12.31) (2002.1.1~2002.12.31)
-------------- -------------------- --------------------- ---------------------
Average Average Average
Balance Ratio Balance Ratio Balance Ratio
------- ----- ------- ----- ------- -----
Investment 6,606,094 75.55 5,882,011 77.81 3,874,018 89.38
shares
Shinhan Bank 3,517,304 40.22 3,139,126 41.53 3,134,106 72.30
Chohung Bank 2,178,747 24.92 1,831,964 24.24 - -
Good Morning
Shinhan 551,578 6.31 537,265 7.11 447,117 10.32
Securities
Shinhan Card 150,363 1.83 191,094 2.53 149,800 3.46
Shinhan Capital 107,906 1.23 95,384 1.26 71,171 1.64
Shinhan BNP 22,389 0.26 22,109 0.29 39,010 0.90
Paribas ITMC
e-Shinhan 2,641 0.03 3,331 0.04 4,281 0.10
Shinhan 1,387 0.02 578 0.01 583 0.01
Macquarie
Jeju Bank 47,391 0.54 44,783 0.59 23,855 0.55
Shinhan Credit 3,263 0.04 2,392 0.03 1,169 0.03
Information
-66-
4th FY (Semi-annual) 3rd FY 2nd FY
Classification (2004.1.1~2004.6.30) (2003.1.1~2003.12.31) (2002.1.1~2002.12.31)
-------------- -------------------- --------------------- ---------------------
Average Balance Ratio Average Balance Ratio Average Balance Ratio
--------------- ----- ------ ------- ----- ------ ------- -----
SH&C life 13,126 0.15 13,985 0.19 2,926 0.07
Insurance
Investment bonds - 0.00 905 0.01 1,279 0.03
Loan receivables 2,019,786 23.10 1,618,091 21.41 390,275 9.00
Tangible assets 1,564 0.02 1,434 0.02 1,272 0.03
Intangible assets 392 0.00 471 0.01 163 0.00
Deposit in cash 76,806 0.88 25,326 0.34 57,241 1.32
Other assets 39,930 0.46 30,808 0.41 10,325 0.24
Total 8,744,572 100.00 7,559,046 100.00 4,334,574 100.00
Note) The average balance was calculated by arithmetically averaging the
ending balance (including the beginning balance) of each quarter.
3. REQUIRED MATTERS FOR DECISION-MAKING OF INVESTMENT
A. Ratio of Equity Capital relative to Requisite Capital Ratio
(Unit: Million Won)
CLASSIFICATION 4TH FY (SEMI-ANNUAL) 3RD FY 2ND FY
-------------- -------------------- ------ ------
Aggregate Amount of 10,052,694 8,847,673 4,842,795
Equity Capital (A)
Requisite Capital (B) 7,744,421 7,472,030 3,698,754
Requisite Capital Ratio 129.81% 118.41% 130.93%
(A/B) 1)
Note 1) Ratio of equity capital relative to requisite capital ratio
(Article 25 of the Supervisory Regulations on Financial Holding
Companies and Exhibit to the Detailed Regulations thereof)
={total(Equity capital by financial institution - Contributions to
subsidiaries)}/total Requisite capital by financial institution
B. Won Liquidity Ratio
(Unit: Million Won)
CLASSIFICATION 4TH FY (SEMI-ANNUAL) 3RD FY 2ND FY
-------------- -------------------- ------ ------
Current Assets (A) 253,038 16,687 14,945
Current Liabilities (B) 242,469 15,504 6,480
Won Liquidity Ratio (A/B) 1) 104.36% 107.63% 230.63%
-67-
Note) Won liquidity ratio(Article 25 of Supervisory Regulations on
Financial Holding Companies and Exhibit to Detailed Regulations
thereof)
= (Current assets due within 3 months)/(Current liabilities
due within 3 months)
C. Won Liquidity Ratio
N/A
D. Liability Ratio
(Unit: Million Won)
CLASSIFICATION 4TH FY (SEMI-ANNUAL) 3RD FY 2ND FY
-------------- -------------------- ------ ------
Liability(A) 2,380,977 2,176,875 774,759
Aggregate Amount of 6,665,810 6,117,555 4,010,220
Equity Capital(B)
Liability Ratio(A/B) 35.72% 35.58% 19.32%
E. Credit Rating for recent three (3) Years
SUBJECT OF VALUATION CREDIT
VALUATION DATE (MARKETABLE SECURITIES, ETC) RATING CREDIT RATING AGENCY TYPE OF RATING
-------------- ---------------------------- ------ -------------------- --------------
2001.09.17 Debentures AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
Debentures AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Commercial papers A1 National Information & Definite rating
Credit Evaluation Inc.
(A1 ~ D)
2001.12.12 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
2002.01.21 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
2002.01.22 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
68
SUBJECT OF VALUATION CREDIT
VALUATION DATE (MARKETABLE SECURITIES, ETC) RATING CREDIT RATING AGENCY TYPE OF RATING
-------------- ---------------------------- ------ -------------------- --------------
2002.03.20 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
2002.04.19 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
2002.05.10 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
2002.06.14 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
Commercial papers A1 National Information &
Credit Evaluation Inc.
(A1 ~ D)
Commercial papers A1 Korea MGT Consulting & Definite rating
Credit Rating Corp.
(A1 ~ D)
2002.07.19 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
2002.09.13 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA ~ D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA ~ D)
69
SUBJECT OF VALUATION CREDIT
VALUATION DATE (MARKETABLE SECURITIES, ETC) RATING CREDIT RATING AGENCY TYPE OF RATING
-------------- ---------------------------- ------ -------------------- --------------
2002.11.07 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
2002.11.08 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2002.12.06 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.01.14 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
2003.01.15 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.02.10 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.02.12 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
2003.02.13 Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2003.03.03 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.04.14 Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2003.04.15 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.05.15 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
70
SUBJECT OF VALUATION CREDIT
VALUATION DATE (MARKETABLE SECURITIES, ETC) RATING CREDIT RATING AGENCY TYPE OF RATING
-------------- ---------------------------- ------ -------------------- --------------
Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2003.06.16 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
2003.07.14 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2003.10.13 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
2003.10.14 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2003.12.12 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2004.03.16 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
71
SUBJECT OF VALUATION CREDIT
VALUATION DATE (MARKETABLE SECURITIES, ETC) RATING CREDIT RATING AGENCY TYPE OF RATING
-------------- ---------------------------- ------ -------------------- --------------
Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2004.6.16 Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
2004.6.29 Non-guaranteed bonds AAA Korea MGT Consulting & Definite rating
Credit Rating Corp.
(AAA~D)
Non-guaranteed bonds AAA National Information & Definite rating
Credit Evaluation Inc.
(AAA~D)
Non-guaranteed bonds AAA Korea Investors Service Inc. Definite rating
(AAA~D)
F. Ratio of Shareholder's Equity of Subsidiaries
1) Shinhan Bank
-72-
(Unit: 100 Million Won,%)
CLASSIFICATION 2004 (SEMI-ANNUAL) AS OF THE END OF 2003 AS OF THE END OF 2002
-------------- ------------------ --------------------- ---------------------
Aggregate Amount of Equity
Capital(A) 57,781 49,365 44,076
Risk Weighted Asset(B) 493,580 470,649 403,873
Shareholders' Equity on the
basis of BIS(A/B) 11.71 10.49 10.91
2) Chohung Bank
(Unit: KRW 100 Million,%)
CLASSIFICATION 2004 (SEMI-ANNUAL) AS OF THE END OF 2003 AS OF THE END OF 2002
-------------- ------------------ --------------------- ---------------------
Aggregate Amount of Equity
Capital(A) 36,369 35,724 37,088
Risk Weighted Asset(B) 406,884 402,609 428,409
Shareholders' Equity On The
Basis Of BIS(A/B) 8.94 8.87 8.66
3) Good Morning Shinhan Securities
(Unit: KRW 100 Million,%)
AS OF END OF JUNE, AS OF THE END OF AS OF THE END OF
CLASSIFICATION 2004 MARCH, 2004 MARCH, 2003
-------------- ----------------- ---------------- -----------------
Operating net capital(A) 4,016 4,218 3,961
Risk-weighted Amount(B) 864 878 960
Operating Net Capital 464.54 480.69 412.6
Ratio(A/B)
Note) Good Morning Securities and Shinhan Securities were merged on
August 1, 2002
4) Shinhan Card
(Unit: KRW 100 Million,%)
CLASSIFICATION 2004 (SEMI-ANNUAL) AS OF THE END OF 2003 AS OF THE END OF 2002
-------------- ------------------ --------------------- ---------------------
Adjusted Equity Capital(A) 2,506 2,619 2,685
Adjusted Total Assets(B) 15,391 19,012 24,737
Adjusted Equity Capital
Ratio(A/B) 16.30 13.78 10.86
5) Shinhan Capital
-73-
(Unit: KRW 100 Million, %)
CLASSIFICATION 2004 (SEMI-ANNUAL) AS OF THE END OF 2003 AS OF THE END OF 2002
-------------- ------------------ --------------------- ---------------------
Adjusted Equity Capital(A) 1,377 1,128 910
Adjusted Total Assets(B) 13,276 11,393 9,467
Equity Capital Ratio(A/B) 10.37 9.90 9.61
6) Shinhan BNP Paribas ITMC
(Unit: Million Won, %)
AS OF THE END OF AS OF THE END OF AS OF THE END OF
CLASSIFICATION JUNE, 2004 MARCH, 2004 MARCH, 2003
-------------- ---------------- ---------------- ----------------
Net Capital Equity(A) 43,094 46,004 43,575
Risk-weighted Amount(B) 12,838 11,711 8,226
Equity Capital Ratio to 335.68 392.83 529.72
Risk(A/B)
7) Jeju Bank
(Unit: KRW 100 Million, %)
CLASSIFICATION 2004 (SEMI-ANNUAL) AS OF THE END OF 2003 AS OF THE END OF 2002
-------------- ------------------ --------------------- ---------------------
Aggregate Amount of Equity 1,290 1,369 1,421
Capital(A)
Risk Weighted Asset(B) 12,108 12,491 12,133
Shareholders' Equity on the 10.66 10.96 11.71
Basis of BIS(A/B)
8) SH&C life Insurance
(Unit: Million Won, %)
AS OF THE END OF AS OF THE END OF AS OF THE END OF
CLASSIFICATION JUNE, 2004 MARCH, 2004 MARCH, 2003
-------------- ----------------- ---------------- ----------------
Solvency Margin(A) 25,688 24,950 28,065
Solvency Margin Standard(B) 2,511 2,202 151
Solvency Margin Ratio(A/B) 1,023.02 1,132.98 18,606.45
G. Status of Non-Performing Loans of Subsidiaries and others
1) Shinhan Bank
23rd Semi-Annual: 2004.1.1. ~ 2004.6.30
22nd FY : 2003.1.1 ~ 2003.12.31
21st FY : 2002.1.1 ~ 2002.12.31
-74-
[Status of Increase/Decrease in Non-performing Loans]
(Unit: KRW 100 Million, %)
---------------------------------------------------------------------------------------------------------------------
23RD FY (SEMI-ANNUAL) 22ND FY 21ST FY INCREASE/DECREASE
---------------------------------------------------------------------------------------------------------------------
Non-performing Ratio Non-performing Ratio Non-performing Ratio Non-performing loan
loan balance loan balance loan balance balance
---------------------------------------------------------------------------------------------------------------------
4,581 0.88 3,985 0.82 2,983 0.69 596
---------------------------------------------------------------------------------------------------------------------
[Loan Loss Allowance]
(Unit: KRW 100 Million)
---------------------------------------------------------------------------------------------------------
CLASSIFICATION 23RD FY 22ND FY 21ST FY
(SEMI-ANNUAL)
---------------------------------------------------------------------------------------------------------
General 8,291 8,664 4,925
Loan Loss Domestic Special - - -
Allowance Subtotal 8,291 8,664 4,925
---------------------------------------------------------------------------------------------------------
General 741 745 733
Overseas Special - - -
Subtotal 741 745 733
---------------------------------------------------------------------------------------------------------
Total 9,032 9,409 5,658
---------------------------------------------------------------------------------------------------------
Provision for Guarantee 24 34 37
---------------------------------------------------------------------------------------------------------
Provision for Write-Offs 192 249 315
---------------------------------------------------------------------------------------------------------
Write-Offs Domestic 1,439 627 1,047
for the Bank Overseas 120 74 160
Period Account Subtotal 1,559 701 1,207
---------------------------------------------------------------------------------------------------------
Trust Account 145 14 168
-------------------------------------------------------------------------------------------
Total 1,704 715 1,375
---------------------------------------------------------------------------------------------------------
2) Chohung Bank
173rd FY (Semi-Annual): 2004.1.1.~ 2004.6.30
172nd FY : 2003.1.1 ~ 2003.12.31
171st FY: 2002.1.1 ~ 2002.12.31
[Status of Increase/Decrease in Non-performing Loans]
(Unit: KRW 100 Million, %)
-----------------------------------------------------------------------------------------------------------------
173RD (SEMI-ANNUAL) 172ND FY 171ST FY INCREASE/DECREASE
-----------------------------------------------------------------------------------------------------------------
Non-performing Ratio Non-performing Ratio Non-performing Ratio Non-performing
loan balance loan balance loan balance loan balance
-----------------------------------------------------------------------------------------------------------------
15,146 3.43 18,796 4.0 19,811 4.02 -3,650
-----------------------------------------------------------------------------------------------------------------
-75-
[Loan Loss Allowance]
(Unit: KRW 100 Million)
-----------------------------------------------------------------------------------------------------
CLASSIFICATION 173RD FY 172ND FY 171ST FY
(SEMI-ANNUAL)
-----------------------------------------------------------------------------------------------------
General 14,456 16,026 16,988
Domestic Special - - -
Subtotal 14,456 16,026 16,988
Loan Loss --------------------------------------------------------------------------------
Allowance General 620 563 563
Overseas Special - - -
Subtotal 620 563 563
-----------------------------------------------------------------------------------------------------
Total 15,076 16,589 17,551
-----------------------------------------------------------------------------------------------------
Provision for Guarantee 393 540 -
-----------------------------------------------------------------------------------------------------
Provision for Write-Offs 187 384 -
-----------------------------------------------------------------------------------------------------
Write-Offs for the Period 4,690 17,812 11,007
-----------------------------------------------------------------------------------------------------
3) Good Morning Shinhan Securities
1st Quarter of 6th FY: 2004.4.1. ~ 2004.6.30
5th FY : 2003.4.1 ~ 2003.3.31
4th FY : 2002.4.1 ~ 2003.3.31
[Status of Increase/Decrease in Non-performing Loans ]
(Unit: KRW 100 Million, %)
----------------------------------------------------------------------------------------------------------------
1ST QUARTER OF 6TH FY 5TH FY 4TH FY INCREASE/DECREASE
----------------------------------------------------------------------------------------------------------------
Non-performing Ratio Non-performing Ratio Non-performing Ratio Non-performing
loan balance loan balance Loan balance Loan balance
----------------------------------------------------------------------------------------------------------------
392 15.85 382 13.48 410 19 -3982
----------------------------------------------------------------------------------------------------------------
* Non-performing loan is selected among substandard loans pursuant to the
asset soundness classification criteria and the present value discount
account shall be calculated after including in the estimated loss.
[Loan Loss Allowance]
-76-
(Unit: KRW 100 Million)
---------------------------------------------------------------------------------------------------
CLASSIFICATION 1ST QUARTER OF 6TH FY 5TH FY 4TH FY
---------------------------------------------------------------------------------------------------
Domestic General 329 309 370
Special - - -
Subtotal 329 309 370
Loan Loss ------------------------------------------------------------------------------------
Allowance Overseas General - - -
Special - - -
Subtotal - - -
---------------------------------------------------------------------------------------------------
Total 329 309 370
---------------------------------------------------------------------------------------------------
Write-Offs for the Period 211 - 75
---------------------------------------------------------------------------------------------------
4) Shinhan Card
3rd FY (Semi-Annual) : 2004.1.1~2004.6.30
2nd FY : 2003.1.1 ~ 2003.12.31
1st FY:2002.9.1 ~ 2002.12.31
[Status of Increase/Decrease in Non-performing Loans]
(Unit: KRW 100 Million, %)
-----------------------------------------------------------------------------------------------------
3RD FY (SEMI-ANNUAL) 2ND FY 1ST FY INCREASE/DECREASE
-----------------------------------------------------------------------------------------------------
Non-performing Ratio Non-performing Ratio Non-performing Ratio Non-performing
loan balance loan balance loan balance loan balance
-----------------------------------------------------------------------------------------------------
553 5.40 747 6.34 714 2.82 -194
-----------------------------------------------------------------------------------------------------
* Ratio shall be the ratio of non-performing loans relative to those assets
for which provision is to be established.
[Loan Loss Allowance]
(Unit: KRW 100 Million)
-------------------------------------------------------------------------------------------------------
CLASSIFICATION 3RD FY 2ND FY 1ST FY
(SEMI-ANNUAL)
-------------------------------------------------------------------------------------------------------
Domestic General 696 946 961
Special - - -
Subtotal 696 946 961
Loan Loss ----------------------------------------------------------------------------------------
Allowance Overseas General - - -
Special - - -
Subtotal - - -
-------------------------------------------------------------------------------------------------------
Total 696 946 961
-------------------------------------------------------------------------------------------------------
Write-Offs for the Period 1,291 2,770 544
-------------------------------------------------------------------------------------------------------
5) Shinhan Capital
-77-
14th FY (Semi-Annual): 2004.1.1~2004.6.30
13th FY: 2003.1.1 ~ 2003.12.31
12th FY: 2002.4.1 ~ 2002.12.31
[Status of Increase/Decrease in Non-performing Loans]
(Unit: KRW 100 Million, %)
------------------------------------------------------------------------------------------------------------------------
14TH FY (SEMI-ANNUAL) 13TH FY 12TH FY INCREASE/DECREASE
------------------------------------------------------------------------------------------------------------------------
Non-performing loan Ratio Non-performing loan Ratio Non-performing loan Ratio Non-performing loan
balance balance balance balance
------------------------------------------------------------------------------------------------------------------------
298 2.49 281 2.74 436 5.0 17
------------------------------------------------------------------------------------------------------------------------
* Non-performing loans: Substandard loan under the asset soundness
classification criteria
[Loan Loss Allowance]
(Unit: KRW 100 Million)
---------------------------------------------------------------------------------------------------
CLASSIFICATION 14TH FY 13TH FY 12TH FY
(SEMI-ANNUAL)
---------------------------------------------------------------------------------------------------
Domestic General 218 179 266
Special - - -
Subtotal 218 179 266
Loan Loss -------------------------------------------------------------------------------------
Allowance Overseas General - - -
Special - - -
Subtotal - - -
---------------------------------------------------------------------------------------------------
Total 218 179 266
---------------------------------------------------------------------------------------------------
Write-Offs for the Period 9 160 789
---------------------------------------------------------------------------------------------------
* Loan Loss Allowance includes the provision for disposition
of lease assets and the loan loss allowance.
6) Shinhan BNP Paribas ITMC
1st Quarter of 9th FY: 2004.4.1 ~ 2004.6.30
8th FY: 2003.4.1 ~ 2003.3.31
7th FY: 2002.4.1 ~ 2003.3.31
[Status of Increase/Decrease in Non-performing Loans]
N/A
[Loan Loss Allowance]
N/A
7) Jeju Bank
-78-
45th FY (Semi-Annual): 2004.1.1 ~ 2004.6.30
44th FY: 2003.1.1 ~ 2003.12.31
43rd FY: 2002.1.1 ~ 2002.12.31
[Status of Increase/Decrease in Non-performing Loans]
(Unit: KRW 100 Million, %)
---------------------------------------------------------------------------------------------------------------------
45TH FY (SEMI-ANNUAL) 44TH FY 43RD FY INCREASE/DECREASE
---------------------------------------------------------------------------------------------------------------------
Non-performing loan Ratio Non-performing Ratio Non-performing Ratio Non-performing Loan
balance loan balance loan balance balance
---------------------------------------------------------------------------------------------------------------------
568 4.41 298 2.27 238 1.86 270
---------------------------------------------------------------------------------------------------------------------
[Loan Loss Allowance]
(Unit: KRW 100 Million)
--------------------------------------------------------------------------------------------------
CLASSIFICATION 45TH FY 44TH FY 43RD FY
(SEMI-ANNUAL)
--------------------------------------------------------------------------------------------------
Domestic General 429 345 273
Special - - -
Subtotal 429 345 273
Loan Loss -----------------------------------------------------------------------------------
Allowance Overseas General - - -
Special - - -
Subtotal - - -
--------------------------------------------------------------------------------------------------
Total 429 345 273
--------------------------------------------------------------------------------------------------
Write-Offs for the Period 106 179 240
--------------------------------------------------------------------------------------------------
8) SH&C LIFE INSURANCE
1st Quarter of 3rd FY: 2004.4.1~2004.6.30
2nd FY: 2003.4.1 ~ 2003.3.31
1st FY: 2002.10.1 ~ 2003.3.31
[Status of Increase/Decrease in Non-performing Loans]
N/A
[Loan Loss Allowance]
N/A
-79-
III. FINANCIAL MATTERS
1. SUMMARY OF FINANCIAL INFORMATION
(Unit: 100 Million Won)
4TH FY 3RD FY 2ND FY 1ST FY
CLASSIFICATION (SEMI-ANNUAL) (ANNUAL) (ANNUAL) (ANNUAL)
---------------------------------------------------------------------------------------------------------------------
[Assets]
---------------------------------------------------------------------------------------------------------------------
-Cash and due from banks 80 54 106 7
---------------------------------------------------------------------------------------------------------------------
-Investment securities under
the equity method 69,625 63,085 39,908 38,016
---------------------------------------------------------------------------------------------------------------------
-Available-for- sale securities 10
---------------------------------------------------------------------------------------------------------------------
-Loans 20,437 19,352 7,653 1,457
---------------------------------------------------------------------------------------------------------------------
-Fixed assets 19 20 18 15
---------------------------------------------------------------------------------------------------------------------
-Other assets 307 433 155 65
---------------------------------------------------------------------------------------------------------------------
Total assets 90,468 82,944 47,850 39,560
---------------------------------------------------------------------------------------------------------------------
[Liabilities]
---------------------------------------------------------------------------------------------------------------------
-Borrowings 2,742 1,659 360 200
---------------------------------------------------------------------------------------------------------------------
-Debentures 20,802 19,805 7,320 1,470
---------------------------------------------------------------------------------------------------------------------
-Other liabilities 266 305 68 1,521
---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 23,810 21,769 7,748 3,191
---------------------------------------------------------------------------------------------------------------------
[Stockholders' equity] 20,319 19,585 14,618 14,617
---------------------------------------------------------------------------------------------------------------------
[Capital surplus] 35,379 33,164 19,766 19,766
---------------------------------------------------------------------------------------------------------------------
-Paid-In Capital in Excess of
Par Value 35,379 33,164 19,766 19,766
---------------------------------------------------------------------------------------------------------------------
[Retained earnings] 10,411 8,664 6,725 691
---------------------------------------------------------------------------------------------------------------------
[Capital adjustments] 549 -238 -1,007 1,295
---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 66,658 61,175 40,102 36,369
---------------------------------------------------------------------------------------------------------------------
Operating revenue 5,502 4,864 6,434 2,265
---------------------------------------------------------------------------------------------------------------------
Operating expense 812 1,215 412 57
---------------------------------------------------------------------------------------------------------------------
Operating income 4,690 3,649 6,022 2,208
---------------------------------------------------------------------------------------------------------------------
Ordinary income 4,695 3,622 6,039 2,208
---------------------------------------------------------------------------------------------------------------------
Net income for the year 4,695 3,622 6,039 2,208
---------------------------------------------------------------------------------------------------------------------
[- means (-)]
2. BASIS OF FINANCIAL STATEMENTS PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
-80-
A. Basis of financial statements presentation
The Company prepared the financial statements in accordance with the
generally accepted accounting principles in the Republic of Korea
("Korean GAAP") and the accounting rules applicable to financial holding
companies of Korea, and the significant accounting policies are
summarized below.
(1) Allowance for loan losses
Allowance for loan losses is provided to cover estimated losses on
loan receivables, such as loans and privately-placed bonds, based
on past experience of collection and analysis of the collectibility
of individual outstanding loans.
(2) Investments in securities
Securities should be classified into one of the three categories of
held-to-maturity, available-for-sale, or trading securities at the
time of acquisition and such determination should be reassessed at
each balance sheet date.
Held-to-maturity securities are those with fixed and determinable
payments and fixed maturity that the Company has the positive
intent and ability to hold to maturity. Securities that are bought
and held principally for the purpose of selling them in the near
term (thus held for only a short period of time) are classified as
trading securities. Trading generally reflects active and frequent
buying and selling, and trading securities are generally used to
generate profit on short-term differences in price. Investments not
classified as either held-to-maturity or trading securities are
classified as available-for-sale securities.
Marketable securities are initially stated at cost plus incidental
expenses with the individual moving average method. Held-to-maturity
securities are stated at amortized cost, and trading securities and
available-for-sale securities are carried at fair value. Of
available-for-sale securities, investments in equity that do not
have readily determinable fair values are stated at cost. Unrealized
holding gains and losses on valuation of trading securities are
included in earnings, and unrealized holding gains and losses on
valuation of available-for-sale securities are included in capital
adjustments. Accumulated capital adjustment of securities is charged
to current operations in lump-sum at the time of disposal or
impairment recognition.
Marketable securities are at the quoted market prices as of the
period end. Non-marketable debt securities are recorded at the fair
values derived from the discounted cash flows by using an interest
rate deemed to approximate the market interest rate. The market
interest rate is determined by the issuers' credit rate announced
by the accredited credit rating agencies in Korea.
-81-
(3) Investment securities under the equity method
Equity securities in companies over which the Company has
significant management control are stated at an amount as
determined using the equity method.
Under the equity method, the Company's initial investment is
recorded at cost plus incidental expenses with the individual
moving average method, and the resulting figure is deemed the
balance sheet value. If any difference between the book value and
the balance sheet value of investments in securities under the
equity method is (i) due to the investor's share in net income or
net loss of investee, such amount is reflected as current
operations of the investor under the account title of valuation
gain using the equity method; (ii) due to the changes in the
retained earnings of the investee, such amount is reflected as the
retained earnings of the investor; or (iii) due to changes in the
capital surplus or other capital adjustments of the investee, such
amount is reflected as changes in capital adjustments of the
investor under the account title of valuation gains on investment
securities accounted for by the equity method.
For the equity method, the Company applies the same criteria for
allowances for loan losses with respect to loan receivables from
its affiliated companies to the extent that the degree of risk
involved and the borrower of the loan receivables are identical.
Accordingly, additional allowances provided for the year ended
December 31, 2003 for Chohung and Jeju Bank amount to KRW32,390
million and KRW1,143 million, respectively, by the equity method.
Of investment elimination difference arising from valuation gain
using the equity method, the difference stemming from the book
value and fair value is amortized or reversed in accordance with
the accounting method of the investee. Any excess is generally
recorded as goodwill (negative goodwill). Goodwill (negative
goodwill) is amortized over a reasonable period, generally less
than 20 years. Provided, that if the investee using the equity
method is a subsidiary, the difference stemming from the
acquisition value arising from additional acquisition of
subsidiary's securities and the additional securities acquisition
portion out of subsidiary's net assets is recorded as valuation
gain (loss) on investment securities accounted for by the equity
method.
(4) Tangible assets
Tangible assets are initially stated at cost plus incidental
expenses. Depreciation is computed over 5 years using the
declining-balance method (straight-line method for leasehold
improvements) based on the estimated useful lives of the assets.
Expenditures that result in the enhancement of the value or the
extension of the useful lives of the facilities involved are
-82-
capitalized as additions to tangible assets, and routine
maintenance and repairs are expensed as incurred.
(5) Intangible assets
Intangible assets are stated at cost plus incidental expenses, less
amortization computed using the straight-line method over 5 years.
(6) Income taxes
Income tax on the earnings or loss for the year comprises current
and deferred tax. The difference between the amount currently
payable for the period and the income tax expense is accounted for
as deferred income tax assets or liabilities and offset against
income tax assets and liabilities in future periods. The amount of
deferred tax provided is based on the expected manner of
realization or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantially enacted at
the balance sheet date. Changes in net tax effects resulting from
changes in tax rates are recognized in earnings for the year in
which the relevant tax rates are enacted.
(7) Discounts on debentures
Discounts on debentures issued, which represent the difference
between the face value of debentures issued and the issuance price
of debentures (the value of debentures less the debenture issuance
fees and other direct costs associated with the issuance of
debentures) are reflected in the accompanying balance sheets as a
deduction from the face value of debentures, and are amortized on
the effective interest method over the life of the debentures. The
amount amortized is included in interest expense.
(8) Retirement and severance benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and
length of service when they leave the Company. The Company's
estimated liability under the plan which would be payable if all
employees left on the balance sheet date is accrued in the
accompanying non-consolidated balance sheets. A portion of the
liability is covered by an employees' severance pay insurance where
the employees have a vested interest in the deposit with the
insurance company. The deposit for severance benefit insurance is,
therefore, reflected in the accompanying balance sheets as a
deduction from the liability for retirement and severance benefits.
(9) Translation of foreign currency denominated assets and liabilities
Non-monetary assets and liabilities denominated in foreign
currencies are translated into Korean Won based on the prevailing
exchange rate effective
-83-
on the acquisition or assumption date of such assets or
liabilities. On the other hand, monetary assets and liabilities
denominated in foreign currencies are translated into Korean Won at
KRW1,152.50 and KRW1,197.80 to US$1, the base exchange rate
announced by Seoul Money Brokerage Services Limited on the balance
sheet date. The resulting gains (losses) are recognized in current
operations.
(10) Stock options
The stock option program allows the Company's employees to acquire
shares of the Company or to be compensated for the market price
difference. In case of stock grant type, the Company values stock
options based upon an option pricing model under the fair value
method and recognizes this value as an expense and a capital
adjustment (stock option) over the period in which the options
vest. When the Company issues new shares upon employees' exercise
of stock options, difference between the sum of the stock options
and the exercise price thereof and the face value of new shares is
accounted for as subscription premium paid for the shares. On the
other hand, when the Company delivers treasury shares, difference
between the sum of the stock options and the exercise price thereof
and the book value of treasury stocks is accounted for as loss on
disposition of treasury stocks. In case of price compensation type,
the Company recognizes the compensation expense as an expense and a
liability (long-term outstanding expenses) over the period in which
the options vest.
In case officers and employees fail to perform their obligations
due to death, retirement or resignation during the period in which
the options vest, the stock options granted to such officers and
employees become null and void. In such a case, the relevant
amounts are reduced from capital adjustments (stock options) or
long-term outstanding expenses recorded in the balance sheet in
respect of stock options, and the corresponding amounts are
deducted from compensation expenses. In case stock options of stock
grant type are not exercised after the period in which the options
vest and become null and void, the relevant amounts are reduced
from capital adjustments, and the corresponding amounts are
transferred to other capital surplus.
(11) Contingent liabilities
Contingent losses are generally recognized as a liability when
probable and reasonably estimable as of the balance sheet date.
(12) Use of estimates
The preparation of financial statements in accordance with the
Korean GAAP requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
related notes to financial statements in respect of the amounts of
assets and liabilities,
-84-
disclosure of contingent liabilities, estimates of revenues and
expenses. The foregoing applies to the valuation of the book value
of tangible assets, accounts receivable, inventories, deferred
income tax assets or liabilities, and derivatives. Actual results
could differ from those estimates.
(13) Adoption of new accounting standard
The Company adopted Statements of Korea Accounting Standards ("SKAS")
Nos. 10, 12 and 13, effective from the first fiscal year beginning after
December 31, 2003, and early adopted SKAS No. 15, effective from the
first fiscal year beginning after December 31, 2004, to prepare this
semi-annual financial statements. The annual and semi-annual financial
statements for the prior FY, marked comparatively with this semi-annual
financial statement due to the application of SKAS No. 15, was
reclassified pursuant to the accounting titles of this semi-annual
financial statement.
B. Violation of the GAAP, etc.
(1) Violation that may require the financial statements to be adjusted
N/A
(2) Violation irrelevant to the adjustment of the financial statements
N/A
C. Other matters to be noted
N/A
3. Financial Statements
A. Balance Sheet
Balance Sheet
The 4th Fiscal Year (Semi-annual) (As of June 30, 2004)
The 3rd Fiscal Year (As of December 31, 2003)
The 2nd Fiscal Year (As of December 31, 2002)
Unit: Million Won)
-----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 4TH FY 3RD FY 2ND FY
(SEMI-ANNUAL)
-----------------------------------------------------------------------------------------------------------------------------
Assets
-----------------------------------------------------------------------------------------------------------------------------
I. Cash & Due from Banks 7,983 5,353 10,613
-----------------------------------------------------------------------------------------------------------------------------
-85-
-----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 4TH FY 3RD FY 2ND FY
(SEMI-ANNUAL)
-----------------------------------------------------------------------------------------------------------------------------
1. Due from Banks 7,983 5,353 10,613
-----------------------------------------------------------------------------------------------------------------------------
II. Securities 6,962,491 6,308,538 3,991,864
-----------------------------------------------------------------------------------------------------------------------------
(1) Equity Securities Accounted for by the Equity 6,962,491 6,308,538 3,990,775
Method
-----------------------------------------------------------------------------------------------------------------------------
1. Stocks 6,308,538 3,990,775
-----------------------------------------------------------------------------------------------------------------------------
(2) Available-for-Sale Securities 1,089
-----------------------------------------------------------------------------------------------------------------------------
1. Bonds 1,089
-----------------------------------------------------------------------------------------------------------------------------
III. Loans 2,043,702 1,935,180 765,281
-----------------------------------------------------------------------------------------------------------------------------
(Allowance for Possible Loan Losses) -10,270 -9,725 -3,846
-----------------------------------------------------------------------------------------------------------------------------
1. Loans in Won 1,747,200 1,637,200 497,200
-----------------------------------------------------------------------------------------------------------------------------
2. Loans in Foreign Currency 103,632 107,705 71,927
-----------------------------------------------------------------------------------------------------------------------------
3. Privately Placed Bonds 203,140 200,000 200,000
-----------------------------------------------------------------------------------------------------------------------------
IV. Fixed Assets 1,891 2,020 1,754
-----------------------------------------------------------------------------------------------------------------------------
(1) Premises and Equipment 1,517 1,606 1,212
-----------------------------------------------------------------------------------------------------------------------------
1. Vehicles 405 391 242
-----------------------------------------------------------------------------------------------------------------------------
Accumulated Depreciation -226 -177 -129
-----------------------------------------------------------------------------------------------------------------------------
2. Equipments 1,126 993 344
-----------------------------------------------------------------------------------------------------------------------------
Accumulated Depreciation -669 -549 -161
-----------------------------------------------------------------------------------------------------------------------------
3. Other 1,479 1,404 1,283
-----------------------------------------------------------------------------------------------------------------------------
Accumulated Depreciation -598 -456 -367
-----------------------------------------------------------------------------------------------------------------------------
(2) Intangible Assets 374 414 542
-----------------------------------------------------------------------------------------------------------------------------
1. Organization Costs 20
-----------------------------------------------------------------------------------------------------------------------------
2. Other 374 414 522
-----------------------------------------------------------------------------------------------------------------------------
V. Other Assets 30,720 43,339 15,467
-----------------------------------------------------------------------------------------------------------------------------
1. Guarantee Deposits 7,840 7,840 7,069
-----------------------------------------------------------------------------------------------------------------------------
2. Accounts Receivables 7,317 7,612 2,361
-----------------------------------------------------------------------------------------------------------------------------
3. Accrued Income 11,234 11,334 4,332
-----------------------------------------------------------------------------------------------------------------------------
4. Advance Payments 10 10 -
-----------------------------------------------------------------------------------------------------------------------------
5. Prepaid Expenses 1,506 1,667 48
-----------------------------------------------------------------------------------------------------------------------------
6. Prepaid Income Tax 1,008 13,867 982
-----------------------------------------------------------------------------------------------------------------------------
7. Sundry Assets 1,805 1,009 675
-----------------------------------------------------------------------------------------------------------------------------
Total Assets 9,046,787 8,294,430 4,784,979
-----------------------------------------------------------------------------------------------------------------------------
Liabilities
-----------------------------------------------------------------------------------------------------------------------------
1. Borrowings 274,150 165,868 36,012
-----------------------------------------------------------------------------------------------------------------------------
1. Borrowings in Won 205,000 94,000 -
-----------------------------------------------------------------------------------------------------------------------------
2. Borrowings in Foreign Currency 69,150 71,868 36,012
-----------------------------------------------------------------------------------------------------------------------------
II. Debentures 2,080,227 1,980,543 732,030
-----------------------------------------------------------------------------------------------------------------------------
1. Debentures in Won 2,050,000 1,950,000 700,000
-----------------------------------------------------------------------------------------------------------------------------
Discounts -4,306 -5,331 -3,887
-----------------------------------------------------------------------------------------------------------------------------
-86-
-----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 4TH FY 3RD FY 2ND FY
(SEMI-ANNUAL)
-----------------------------------------------------------------------------------------------------------------------------
2. Debentures in Foreign Currency 34,575 35,934 36,012
-----------------------------------------------------------------------------------------------------------------------------
Discounts -42 -60 -95
-----------------------------------------------------------------------------------------------------------------------------
III. Other Liabilities 26,601 30,464 6,717
-----------------------------------------------------------------------------------------------------------------------------
1. Taxes Withheld 230 1,176 523
-----------------------------------------------------------------------------------------------------------------------------
2. Dividends Payable 1,296 928 453
-----------------------------------------------------------------------------------------------------------------------------
3. Accounts Payable 14,097 14,492 1,541
-----------------------------------------------------------------------------------------------------------------------------
4. Accrued expenses 10,782 12,189 3,962
-----------------------------------------------------------------------------------------------------------------------------
5. Unearned income 94 1,679 -
-----------------------------------------------------------------------------------------------------------------------------
6. Accrued Severance Benefits 546 530 570
-----------------------------------------------------------------------------------------------------------------------------
Deposits with Insurance Company for Severance Benefits -444 -530 -332
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,380,978 2,176,875 774,759
-----------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------------------
I. Capital Stock 2,031,942 1,958,530 1,461,806
-----------------------------------------------------------------------------------------------------------------------------
1.Common Stock 1,545,419 1,472,007 1,461,806
-----------------------------------------------------------------------------------------------------------------------------
2.Preferred Stock 486,523 486,523 -
-----------------------------------------------------------------------------------------------------------------------------
II. Capital Surplus 3,537,940 3,316,380 1,976,625
-----------------------------------------------------------------------------------------------------------------------------
1.Paid-In Capital in Excess of Par Value 3,537,940 3,316,380 1,976,625
-----------------------------------------------------------------------------------------------------------------------------
III. Retained Earnings 1,041,145 866,398 672,530
-----------------------------------------------------------------------------------------------------------------------------
1. Legal Reserve 118,692 82,469 22,076
-----------------------------------------------------------------------------------------------------------------------------
2.Retained Earnings Before Appropriations 922,453 783,929 650,454
-----------------------------------------------------------------------------------------------------------------------------
(Net Income for the Year:
-----------------------------------------------------------------------------------------------------------------------------
For 3rd FY: KRW 362,227 million)
-----------------------------------------------------------------------------------------------------------------------------
For 2nd FY: KRW 603,931 million)
-----------------------------------------------------------------------------------------------------------------------------
IV. Capital Adjustments 54,782 -23,753 -100,741
-----------------------------------------------------------------------------------------------------------------------------
1. Change in Capital by the Equity Method 215,232 181,583 9,254
-----------------------------------------------------------------------------------------------------------------------------
2. Change in Capital by the Negative Equity Method -165,123 -214,962 -112,999
-----------------------------------------------------------------------------------------------------------------------------
3. Valuation Loss on Available-for Sale Securities
-----------------------------------------------------------------------------------------------------------------------------
4. Stock Option 4,673 9,626 3,004
-----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 6,665,809 6,117,555 4,010,220
-----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 9,046,787 8,294,430 4,784,979
-----------------------------------------------------------------------------------------------------------------------------
As a result of application of SKAS No. 15 from this fiscal year, changes
in capital by the equity method were recorded as the total amount
respectively; therefore, the prior fiscal year's financial statements
were also reclassified. This reclassification does not result in any
material change to the total capital.
-87-
B. Income Statement
Income Statement
The 4th Fiscal Year (Semi-annual) (January 1, 2004 ~ June 30, 2004)
The 3rd Fiscal Year (Semi-annual) (January 1, 2003 ~ June 30, 2003)
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
(Unit: Million won)
-------------------------------------------------------------------------------------------------------------------
4TH FY 3RD FY
DESCRIPTION (SEMI-ANNUAL) (SEMI-ANNUAL) 3RD FY 2ND FY
(SECOND HALF YEAR) (FIRST HALF YEAR) (ANNUAL) (ANNUAL)
-------------------------------------------------------------------------------------------------------------------
1. Operating Revenues 362,503 550,199 78,081 225,150 617,147 645,367
-------------------------------------------------------------------------------------------------------------------
(1) Valuation Gain using the 332,749 491,697 51,058 182,870 519,360 620,697
Equity Method of Accounting
-------------------------------------------------------------------------------------------------------------------
(2) Interest Income 29,569 58,502 27,023 42,280 97,787 24,670
-------------------------------------------------------------------------------------------------------------------
1. Interest on Due from Banks 423 507 231 321 631 1,861
-------------------------------------------------------------------------------------------------------------------
2. Interest on Loans 25,787 51,280 23,462 35,277 83,720 15,931
-------------------------------------------------------------------------------------------------------------------
3. Interest on Privately Placed 3,359 6,715 3,330 6,682 13,436 6,878
Bonds
-------------------------------------------------------------------------------------------------------------------
(3) Other Operating Income 185
-------------------------------------------------------------------------------------------------------------------
1. Reversal of Allowance for Bad 185
Debt
-------------------------------------------------------------------------------------------------------------------
II. Operating Expenses 38,757 81,195 33,248 121,742 252,199 43,147
-------------------------------------------------------------------------------------------------------------------
(1) Valuation Loss using the 629 4,049 2,007 69,097 130,719 2,007
Equity Method of Accounting
-------------------------------------------------------------------------------------------------------------------
(2) Interest Expenses 31,305 61,671 25,349 39,635 92,616 21,632
-------------------------------------------------------------------------------------------------------------------
1. Interest on Borrowings 2,919 5,461 6,290 6,861 11,020 1,152
-------------------------------------------------------------------------------------------------------------------
2. Interest on Debentures 28,231 55,901 19,051 32,758 81,362 20,452
-------------------------------------------------------------------------------------------------------------------
3. Other 155 309 8 16 234 28
-------------------------------------------------------------------------------------------------------------------
(3) Commission Expenses 19 71 27 29 4,962 69
-------------------------------------------------------------------------------------------------------------------
(4) Selling and Administrative 6,804 15,404 5,865 12,981 23,902 19,440
Expenses
-------------------------------------------------------------------------------------------------------------------
1. Salaries 673 4,461 2,343 3,974 9,821 7,008
-------------------------------------------------------------------------------------------------------------------
2. Retirement Allowance 53 106 140 594
-------------------------------------------------------------------------------------------------------------------
3. Employee Benefits 222 448 101 268 601 370
-------------------------------------------------------------------------------------------------------------------
4. Rent 147 254 24 40 142 46
-------------------------------------------------------------------------------------------------------------------
5. Entertainment 138 299 47 312 1,455 1,903
-------------------------------------------------------------------------------------------------------------------
6. Depreciation 160 310 126 232 568 489
-------------------------------------------------------------------------------------------------------------------
-88-
-------------------------------------------------------------------------------------------------------------------
4TH FY 3RD FY
DESCRIPTION (SEMI-ANNUAL) (SEMI-ANNUAL) 3RD FY 2ND FY
(SECOND HALF YEAR) (FIRST HALF YEAR) (ANNUAL) (ANNUAL)
-------------------------------------------------------------------------------------------------------------------
7. Amortization on Intangible 28 55 27 54 109 24
Asset
-------------------------------------------------------------------------------------------------------------------
8. Bad Debt 545 2,032 6,148 5,879 2,374
-------------------------------------------------------------------------------------------------------------------
9. Taxes and Dues 24 92 13 66 361 125
-------------------------------------------------------------------------------------------------------------------
10. Advertising 1 8 3 4 22 72
-------------------------------------------------------------------------------------------------------------------
11. Commissions 2,407 5,368 389 938 1,374 5,748
-------------------------------------------------------------------------------------------------------------------
12. Other 2,951 3,458 760 945 3,430 687
-------------------------------------------------------------------------------------------------------------------
III. Operating Income 323,746 469,004 44,833 103,408 364,948 602,219
-------------------------------------------------------------------------------------------------------------------
IV. Non-Operating Income 205 4,543 5,038 626 424 5,380
-------------------------------------------------------------------------------------------------------------------
1. Gain on Foreign Currency 99 4,077 2,712 440 231 3,645
Translation
-------------------------------------------------------------------------------------------------------------------
2. Gain on Foreign Currency 1 1 3 -
Transaction
-------------------------------------------------------------------------------------------------------------------
3. Gain on Disposition of 1,731
Equity Securities
-------------------------------------------------------------------------------------------------------------------
4. Miscellaneous 106 466 2,325 185 190 4
-------------------------------------------------------------------------------------------------------------------
IV. Non-Operating Expenses 109 4,089 3,882 1,611 3,145 3,668
-------------------------------------------------------------------------------------------------------------------
1. Loss on Foreign Currency 1 2 2 1
Transaction
-------------------------------------------------------------------------------------------------------------------
2. Loss on Foreign Currency 99 4,075 2,713 438 231 3,645
Translation
-------------------------------------------------------------------------------------------------------------------
3. Loss on Disposition of Equity 166 166 166 -
Securities
-------------------------------------------------------------------------------------------------------------------
4. Loss on Disposition of 1,725
Available-for-Sale Securities
-------------------------------------------------------------------------------------------------------------------
5. Contribution 9 12 16 19 34 22
-------------------------------------------------------------------------------------------------------------------
6. Miscellaneous 987 988 987 -
-------------------------------------------------------------------------------------------------------------------
IV. Ordinary Income 323,842 469,458 45,989 102,423 362,227 603,931
-------------------------------------------------------------------------------------------------------------------
VII. Extraordinary Gain or Loss - - -
-------------------------------------------------------------------------------------------------------------------
VIII. Income Before Income Tax 323,842 469,458 45,989 102,423 362,227 603,931
Expense
-------------------------------------------------------------------------------------------------------------------
IX. Income Tax Expense - - -
-------------------------------------------------------------------------------------------------------------------
X. Net Income for the Period 323,842 469,458 45,989 102,423 362,227 603,931
-------------------------------------------------------------------------------------------------------------------
(Earning per Share and Ordinary
Income Diluted Earning per
Share and Ordinary Income)
-------------------------------------------------------------------------------------------------------------------
-89-
(Unit: Won)
---------------------------------------------------------------------------------------------------------------
EARNING PER SHARE AND DILUTED EARNING PER SHARE AND
ORDINARY INCOME ORDINARY INCOME
---------------------------------------------------------------------------------------------------------------
4th FY (Semi-annual) (3 months) 998 878
---------------------------------------------------------------------------------------------------------------
4th FY (Semi-annual) (Accumulation) 1,397 1,236
---------------------------------------------------------------------------------------------------------------
3rd FY (Semi-annual) (3 months) 157 157
---------------------------------------------------------------------------------------------------------------
3rd FY (Semi-annual) (Accumulation) 350 350
---------------------------------------------------------------------------------------------------------------
3rd FY (Annual) 831 831
---------------------------------------------------------------------------------------------------------------
2nd FY (Annual) 1,483 1,483
---------------------------------------------------------------------------------------------------------------
As a result of application of SKAS No. 15, accounts related to the equity method
were recorded as the total amount, respectively, and the previous financial
statements were also reclassified. This reclassification does not result in any
material change to the operating income and the net income for the period.
C. Statement Of Appropriation Of Retained Earnings Or Statement Of
Disposition Of Deficit
Statement Of Appropriation Of Retained Earnings
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2003 ~ December 31, 2002)
The 1st Fiscal Year (September 1, 2001 ~ December 31, 2001)
(Unit: Million Won)
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
1. Retained Earnings Before 783,928 650,454 219,922
Appropriation
---------------------------------------------------------------------------------------------------------------
1. Unappropriated Retained Earnings carried 432,569 47,033 0
over from prior years
---------------------------------------------------------------------------------------------------------------
2. Change in Retained Earnings of Subsidiaries -10,848 -510 -841
---------------------------------------------------------------------------------------------------------------
3. Cumulative Effect of Change in Accounting -20
Policy
---------------------------------------------------------------------------------------------------------------
4. Net Income for the Period 362,227 603,931 220,763
---------------------------------------------------------------------------------------------------------------
II. Appropriation of Retained Earnings 278,337 217,885 172,888
---------------------------------------------------------------------------------------------------------------
1. Legal Reserve 36,223 60,393 22,076
---------------------------------------------------------------------------------------------------------------
2. Dividends 242,114 157,492 150,812
---------------------------------------------------------------------------------------------------------------
a. Cash Dividends on Common Stock 158,717 157,492 150,812
---------------------------------------------------------------------------------------------------------------
b. Cash Dividends on Preferred Stock 83,397
---------------------------------------------------------------------------------------------------------------
III. Unappropriated Retained Earnings carried 505,591 432,569 47,034
over to Subsequent Year
---------------------------------------------------------------------------------------------------------------
D. Cash Flow Statements
Cash Flow Statements
-90-
The 4th Fiscal Year (Semi-annual) (January 1, 2004 ~ June 30, 2004)
The 3rd Fiscal Year (Semi-annual) (January 1, 2003 ~ June 30, 2003)
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
(Unit: Million Won)
------------------------------------------------------------------------------------------------------------------------------
4TH FY 3RD FY 3RD FY 2ND FY
DESCRIPTION (SEMI-ANNUAL) (SEMI-ANNUAL) (ANNUAL) (ANNUAL)
---------------------------------------------------------
3 MONTHS ACCUMULATION 3 MONTHS ACCUMULATION
------------------------------------------------------------------------------------------------------------------------------
I. Cashflows From Operating -4,481 -11,481 -5,319 -8,955 -12,347 -11,392
Activities
------------------------------------------------------------------------------------------------------------------------------
1. Net Income for the 323,842 469,458 45,988 102,423 362,227 603,931
Semi-annual Period
------------------------------------------------------------------------------------------------------------------------------
2. Addition of expense not 1,767 10,710 45,210 77,789 12,691 8,944
involving cash outflows
------------------------------------------------------------------------------------------------------------------------------
a. Valuation Loss using the 629 4,049 39,229 69,097
Equity Method
------------------------------------------------------------------------------------------------------------------------------
b. Interest Expenses 798 1,570 602 1,084 2,492 1,175
------------------------------------------------------------------------------------------------------------------------------
c. Depreciation 160 310 126 232 568 489
------------------------------------------------------------------------------------------------------------------------------
d. Amortization on Intangible 28 55 27 54 109 24
Assets
------------------------------------------------------------------------------------------------------------------------------
e. Bad Debt 0 545 2,032 6,148 5,879 2,374
------------------------------------------------------------------------------------------------------------------------------
f. Loss on Foreign Currency 99 4,075 2,711 438 231 3,645
Translation
------------------------------------------------------------------------------------------------------------------------------
g. Loss on Disposition of Equity 0 0 166 166 166
Securities
------------------------------------------------------------------------------------------------------------------------------
h. Loss on Disposition of 0 0 0 0 1,725
Available-for-Sale Securities
------------------------------------------------------------------------------------------------------------------------------
i. Retirement Allowance 53 106 0 0 140 594
------------------------------------------------------------------------------------------------------------------------------
j. Stock Option 0 0 317 570 1,381 643
------------------------------------------------------------------------------------------------------------------------------
3. Deduction Of Revenues Not 334,325 496,711 91,329 183,378 388,872 624,066
Involving Cash Inflows
------------------------------------------------------------------------------------------------------------------------------
a. Valuation Gain using the 332,749 491,697 88,280 182,870 388,641 618,690
Equity Method of Accounting
------------------------------------------------------------------------------------------------------------------------------
b. Gain on Disposition of 0 0 0 0 1,731
Investment Securities
------------------------------------------------------------------------------------------------------------------------------
c. Gain on Foreign Currency 99 4,077 2,712 438 231 3,645
Translation
------------------------------------------------------------------------------------------------------------------------------
d. Reversal of Allowance for Bad 185 0 0 0 -
Debts
------------------------------------------------------------------------------------------------------------------------------
e. Stock Option 1,292 937 0 0
------------------------------------------------------------------------------------------------------------------------------
f. Sundry Income 0 0 337 70
------------------------------------------------------------------------------------------------------------------------------
-91-
------------------------------------------------------------------------------------------------------------------------------
4TH FY 3RD FY 3RD FY 2ND FY
DESCRIPTION (SEMI-ANNUAL) (SEMI-ANNUAL) (ANNUAL) (ANNUAL)
-----------------------------------------------------------
3 MONTHS ACCUMULATION 3 MONTHS ACCUMULATION
------------------------------------------------------------------------------------------------------------------------------
4. Change in Assets and 4,235 5,062 -5,188 -5,789 1,607 -201
Liabilities Resulting from
Operations
------------------------------------------------------------------------------------------------------------------------------
a. Increase in Accounts Receivable -3,728 -3,720 462 0 -10 -
------------------------------------------------------------------------------------------------------------------------------
b. Increase in Accrued Income -261 100 -3,163 -5,385 -7,002 -3,596
------------------------------------------------------------------------------------------------------------------------------
c. Increase in Prepaid Expenses 324 162 312 -2,438 -1,619 -32
------------------------------------------------------------------------------------------------------------------------------
d. Increase in Prepaid Income 13,367 12,859 -2,520 -4,867 -12,884 -981
Taxes
------------------------------------------------------------------------------------------------------------------------------
e. Increase in Taxes Withheld -4,084 -947 -4,276 -288 653 320
------------------------------------------------------------------------------------------------------------------------------
f. Decrease in Accounts Payable 37 -396 776 -691 12,951 1,108
------------------------------------------------------------------------------------------------------------------------------
g. Increase in Accrued Expenses 392 -1,406 3,486 5,484 8,227 3,336
------------------------------------------------------------------------------------------------------------------------------
h. Increase in Unearned Income -1,812 -1,586 -268 2,406 1,679 -
------------------------------------------------------------------------------------------------------------------------------
i. Payment of Severance Benefits 0 -90 0 -35 -180 -24
------------------------------------------------------------------------------------------------------------------------------
j. Increase in Deposits with 0 86 3 25 -198 -332
Insurance Company for Severance
Benefits
------------------------------------------------------------------------------------------------------------------------------
k. Increase in Advance Payments 0 0 0 0 -10 -
------------------------------------------------------------------------------------------------------------------------------
II. Cash Flows From Investing -56,595 45,385 -413,665 -1,047,900 -2,118,074 -431,929
Activities
------------------------------------------------------------------------------------------------------------------------------
1. Cash Inflows From Investing 43,730 256,536 1,558 187,454 188,456 664,441
Activities
------------------------------------------------------------------------------------------------------------------------------
a. Dividend Income 3,730 256,536 0 185,896 186,896 640,771
------------------------------------------------------------------------------------------------------------------------------
b. Disposition of Equity 0 0 1,529 1,529 1,529 23,631
Securities Accounted for Using
the Equity Method
------------------------------------------------------------------------------------------------------------------------------
c. Disposition of 0 0 0 0 2
Available-for-sale Securities
------------------------------------------------------------------------------------------------------------------------------
d. Decrease in Sundry Assets 0 0 0 0 39
------------------------------------------------------------------------------------------------------------------------------
e. Disposition of Vehicles 0 0 29 29 29 -
------------------------------------------------------------------------------------------------------------------------------
f. Decrease in Loans in Won 40,000 0 0 0 -
------------------------------------------------------------------------------------------------------------------------------
2. Cash Outflows From Investing 100,325 211,151 415,223 1,235,354 2,306,530 1,096,370
Activities
------------------------------------------------------------------------------------------------------------------------------
a. Increase in Investment 96,979 96,979 0 0 1,128,423 467,962
Securities
------------------------------------------------------------------------------------------------------------------------------
b. Increase in Loans in Won 0 110,000 410,000 1,230,000 1,140,000 400,000
------------------------------------------------------------------------------------------------------------------------------
c. Increase in Loans in Foreign 0 0 0 0 36,009 75,572
Currency
------------------------------------------------------------------------------------------------------------------------------
-92-
------------------------------------------------------------------------------------------------------------------------------
4TH FY 3RD FY 3RD FY 2ND FY
DESCRIPTION (SEMI-ANNUAL) (SEMI-ANNUAL) (ANNUAL) (ANNUAL)
-----------------------------------------------------------
3 MONTHS ACCUMULATION 3 MONTHS ACCUMULATION
------------------------------------------------------------------------------------------------------------------------------
d. Increase in Privately Placed 3,140 3,140 0 0 150,000
Bonds
------------------------------------------------------------------------------------------------------------------------------
e. Increase in Vehicles 14 14 151 151 220 0
------------------------------------------------------------------------------------------------------------------------------
f. Increase in Equipment 21 132 72 73 649 59
------------------------------------------------------------------------------------------------------------------------------
g. Increase in Other Premises and 74 75 386 427 122 243
Equipment
------------------------------------------------------------------------------------------------------------------------------
h. Increase in Organization Costs 14 14 0 0 -
------------------------------------------------------------------------------------------------------------------------------
i. Increase in Other Intangible 0 0 0 0 2 496
Assets
------------------------------------------------------------------------------------------------------------------------------
j. Increase in Guarantee Deposits 0 0 771 771 771 1,738
------------------------------------------------------------------------------------------------------------------------------
k. Increase in Advance Payments 0 0 3,589 3,589 -
------------------------------------------------------------------------------------------------------------------------------
l. Increase in Sundry Assets 83 797 254 343 334 300
------------------------------------------------------------------------------------------------------------------------------
III. Cashflows From Financing -148,023 -31,274 382,184 1,070,346 2,125,161 453,222
Activities
------------------------------------------------------------------------------------------------------------------------------
1. Cash Inflows From Financing 65,000 211,000 510,000 1,230,000 2,307,657 625,669
Activities
------------------------------------------------------------------------------------------------------------------------------
a. Increase in Borrowings in Won 15,000 111,000 30,000 330,000 94,000 -
------------------------------------------------------------------------------------------------------------------------------
b. Increase in Borrowings in 0 0 0 0 36,009 39,582
Foreign Currency
------------------------------------------------------------------------------------------------------------------------------
c. Increase in Debentures in Won 50,000 100,000 480,000 900,000 1,250,000 550,000
------------------------------------------------------------------------------------------------------------------------------
d. Increase in Debentures in 0 0 0 0 36,087
Foreign Currency
------------------------------------------------------------------------------------------------------------------------------
e. Common Stock Issuance 0 0 0 0 27,648 -
------------------------------------------------------------------------------------------------------------------------------
f. Preferred Stock Issuance 0 0 0 0 900,000 -
------------------------------------------------------------------------------------------------------------------------------
2. Cash Outflows from Financing 213,023 242,274 127,816 159,654 182,496 172,447
Activities
------------------------------------------------------------------------------------------------------------------------------
a. Disbursement of Debenture 230 528 1,451 2,781 3,871 2,087
Issue Costs
------------------------------------------------------------------------------------------------------------------------------
b. Decrease in Borrowings in Won 0 0 0 0 20,000
------------------------------------------------------------------------------------------------------------------------------
c. Disbursement of Dividend 212,793 241,746 126,365 156,873 157,017 150,360
Payables
------------------------------------------------------------------------------------------------------------------------------
d. New Stock Issuance Costs 0 0 0 0 21,608 -
------------------------------------------------------------------------------------------------------------------------------
IV. Increase In Cash ([]+[]+[]) -209,099 2,630 -36,800 13,491 -5,260 9,901
------------------------------------------------------------------------------------------------------------------------------
V. Cash at Beginning of the Year 217,082 5,353 60,904 10,613 10,613 712
------------------------------------------------------------------------------------------------------------------------------
VI Cash at End of the Year 7,983 7,983 24,104 24,104 5,353 10,613
------------------------------------------------------------------------------------------------------------------------------
-93-
4. Consolidated Financial Statement
A. Summary of Consolidated Financial Information
(Unit: 100 Million Won)
----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
----------------------------------------------------------------------------------------------------------------------------
[Assets]
----------------------------------------------------------------------------------------------------------------------------
- Cash & Due from Banks 64,183 28,171 23,561
----------------------------------------------------------------------------------------------------------------------------
- Marketable Securities 48,766 20,763 21,983
----------------------------------------------------------------------------------------------------------------------------
- Investment Securities 231,270 134,079 129,622
----------------------------------------------------------------------------------------------------------------------------
- Loans 949,212 452,444 353,714
----------------------------------------------------------------------------------------------------------------------------
- Fixed Assets 28,537 11,004 6,578
----------------------------------------------------------------------------------------------------------------------------
- Other Assets 70,126 21,215 27,838
----------------------------------------------------------------------------------------------------------------------------
Total Assets 132,094 667,676 563,296
----------------------------------------------------------------------------------------------------------------------------
[Liabilities]
----------------------------------------------------------------------------------------------------------------------------
-Deposits 875,926 387,223 343,902
----------------------------------------------------------------------------------------------------------------------------
- Borrowings 172,096 113,518 100,494
----------------------------------------------------------------------------------------------------------------------------
- Debentures 177,479 83,954 37,488
----------------------------------------------------------------------------------------------------------------------------
- Other Liabilities 105,517 43,367 48,778
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,331,018 628,062 530,662
----------------------------------------------------------------------------------------------------------------------------
[Capital Stock] 19,585 14,618 14,617
----------------------------------------------------------------------------------------------------------------------------
[Consolidated Capital Surplus] 32,008 18,877 19,766
----------------------------------------------------------------------------------------------------------------------------
[Consolidated Retained Earnings] 8,721 6,708 2,199
----------------------------------------------------------------------------------------------------------------------------
[Capital Adjustment] -5,194 -3,798 -3.948
----------------------------------------------------------------------------------------------------------------------------
[Minority Interest] 5,956 3,209 -
----------------------------------------------------------------------------------------------------------------------------
Total Assets 61,076 39,614 32,634
----------------------------------------------------------------------------------------------------------------------------
Operating Revenues 80,721 59,289 25,599
----------------------------------------------------------------------------------------------------------------------------
Operating Expenses 72,863 49,904 24,398
----------------------------------------------------------------------------------------------------------------------------
Operating Income 7,858 9,385 1,201
----------------------------------------------------------------------------------------------------------------------------
Ordinary Income 6,310 8,523 2,511
----------------------------------------------------------------------------------------------------------------------------
Total Net Income for the Period 3,770 5,977 2,208
----------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income for the 3,630 6,022 2,208
Period
----------------------------------------------------------------------------------------------------------------------------
18 (the Company, 13 (the Company, 7 (the Company,
Subsidiaries 8, Subsidiaries 7, Subsidiaries 4,
Number of Subsidiaries Sub-subsidiaries 7, Sub-subsidiaries 3, Sub-subsidiaries
Bank Trust 3) Bank Trust 2) 1, Bank Trust 1)
----------------------------------------------------------------------------------------------------------------------------
Note) As a result of early application of SKAS No. 6, the amount of
liabilities in the financial statements of the first fiscal year
decreased by KRW 150,812 million and stockholders' equity
increased by KRW 150,812 million, both of which were described for
reference purposes.
-94-
B. Basis of financial statements presentation and summary of significant
accounting policies
The Company and the consolidated subsidiaries (collectively referred to
as the "Company") prepared the accompanying consolidated financial
statements in accordance with the generally accepted accounting
principles in the Republic of Korea ("Korean GAAP"), the consolidated
financial statements accounting rules and the business-specific
accounting rules, such as the banking business accounting rules, the
securities business accounting rules, the securities investment trust
business accounting rules, the lease accounting rules and the insurance
business accounting rules. The Company adopted Statements of Korea
Accounting Standards (SKAS) No. 2 through No. 9, effective from the first
fiscal year beginning after December 31, 2002, while SKAS No. 6, "Events
Occurring after the Balance Sheet Date", has been adopted since the year
ended December 31, 2002 with encouraged earlier application. Significant
accounting policies adopted by the Company in the preparation for the
consolidated financial statements for the current year are consistent
with those applied in the year-end consolidated financial statements
ended December 31, 2002, except for the application of the aforesaid
SKAS.
(1) Investments in securities
Securities should be classified into one of the three categories of
held-to-maturity, available-for-sale, or trading securities at the
time of acquisition and such determination should be reassessed at
each balance sheet date.
Held-to-maturity securities are those with fixed and determinable
payments and fixed maturity that the Company has the positive
intent and ability to hold to maturity. Securities that are bought
and held principally for the purpose of selling them in the near
term (thus held for only a short period of time) are classified as
trading securities. Trading generally reflects active and frequent
buying and selling, and trading securities are generally used to
generate profit on short-term differences in price. Investments not
classified as either held-to-maturity or trading securities are
classified as available-for-sale securities.
Marketable securities are initially stated at cost plus incidental
expenses with the individual moving average method.
Held-to-maturity securities are stated at amortized cost, and
trading securities and available-for-sale securities are carried at
fair value. Of available-for-sale securities, investments in equity
that do not have readily determinable fair values are stated at
cost. Unrealized holding gains and losses on valuation of trading
securities are included in earnings, and unrealized holding gains
and losses on valuation of available-for-sale securities are
included in capital adjustments. Accumulated capital adjustment of
securities is charged to current operations in lump-sum at the time
of disposal or impairment recognition.
-95-
Marketable securities are at the quoted market prices as of the
period end. Non-marketable debt securities are recorded at the fair
values derived from the discounted cash flows by using an interest
rate deemed to approximate the market interest rate. The market
interest rate is determined by the issuers' credit rate announced
by the accredited credit rating agencies in Korea. Money market
funds are recorded at the fair value determined by the investment
management companies.
(2) Investment securities under the equity method
Equity securities in companies over which the Company has
significant management control are stated at an amount as
determined using the equity method.
Under the equity method of accounting, changes in the investor's
initial investment arising from changes in the net asset of the
investee is reflected in the investor's investment in securities.
Based on the sources of changes, changes in the investor's
investments in securities are reflected as valuation gain (loss)
using the equity method (current operations of the investor), the
retained earnings of the investor, or valuation gains on investment
securities accounted for by the equity method (capital adjustments
of the investor). However, the Company does not record its share of
losses of affiliate companies when such losses would make the
Company's investment in such entity less than zero. Of investment
elimination difference arising from valuation gain under the equity
method, the difference stemming from the book value and fair value
is amortized or reversed in accordance with the accounting method
of the investee for the relevant asset. Any excess is generally
recorded as goodwill (negative goodwill). Goodwill (negative
goodwill) is amortized over a reasonable period, generally less
than 20 years.
In case of translating financial statements denominated in foreign
currencies, where the balances are determined by the equity method,
assets and liabilities are translated at current rate as of the
balance sheet date and capital accounts at historical rate. The
investor's share in differences between capital accounts translated
at historical rate and assets translated at current rate as of the
balance sheet date less liabilities translated at current rate as
of the balance sheet date is accounted for as overseas operation
translation credit (debit), a component of capital adjustments in
the stockholder's equity.
(3) Allowance for loan losses
The Company establishes the credit risk-rating model, which
considers the borrowers' capacity to repay and credit risk
("Forward Looking Criteria: FLC") in classifying its corporate
loans and making provisions for loan losses, while household loans
and credit card loans are classified by considering current
financial status including delinquency period, bankruptcies and
collaterals value.
-96-
(4) Troubled loans restructuring
Restructured loans which are related to companies involved
in bankruptcy proceedings, composition proceedings or
workout programs with creditors are stated at present value
of expected future cash flows, and the difference between
carrying amount and the present value of expected future
cash flows is presented as a present value discount, and
amortized and credited to operations as interest income
using the effective interest rate method.
In addition, an allowance for the present value on
restructured loans is made depending on the credit
conditions of borrowers.
(5) Tangible assets
Tangible assets are initially stated at cost plus incidental
expenses. Expenditures that result in the enhancement of the
value or the extension of the useful lives of the facilities
involved are capitalized as additions to tangible assets,
and routine maintenance and repairs are expensed as
incurred.
Depreciation is computed over 5 years using the
declining-balance method (straight-line method for buildings
and leasehold improvements) based on the estimated useful
lives of the assets.
(6) Intangible assets
Intangible assets are stated at cost plus incidental
expenses, less amortization computed using the straight-line
method over useful lives of related intangible assets.
(7) Bonds under resale or repurchase agreements
Bonds purchased under resale agreements are recorded as
loans and bonds sold under repurchase agreements are
recorded as borrowings. When the Company purchases or sells
securities under resale or repurchase agreements, the amount
calculated by applying the conditional selling interest rate
for each period is recorded as interest on bonds purchased
(sold) under resale or repurchase agreements.
(8) Discounts on debentures
Discounts on debentures issued, which represent the
difference between the face value of debentures issued and
the issuance price of debentures (the value of debentures
less the debenture issuance fees and other direct costs
associated with the issuance of debentures) are reflected in
the accompanying balance sheets as a deduction from the face
value of
-97-
debentures, and are amortized on the effective interest
method over the life of the debentures. The amount amortized
is included in interest expense.
(9) Retirement and severance benefits
In accordance with the Regulation on Severance Payment to
Officers and Employees, the Company's estimated liability
under the severance payment plan which would be payable if
all employees left on the balance sheet date is accrued in
the accompanying balance sheets. Under the National Pension
Scheme of Korea, the Company transferred a certain portion
of retirement allowances of employees to the National
Pension Fund. The amount transferred will reduce the
retirement and severance benefit amount to be payable to the
employees when they leave the Company and is accordingly
reflected in the accompanying financial statements as a
reduction from the retirement and severance benefit
liability. The Company obtains and maintains employees'
severance pay insurance where the employees have a vested
interest in the deposit with the insurance company. The
deposit for severance benefit insurance is, therefore,
reflected in the accompanying balance sheets as a deduction
from the liability for retirement and severance benefits.
(10) Allowance for guarantees and acceptances
The Company provides an allowance for losses on guarantees
and acceptances, which are classified as substandard,
doubtful and estimated loss using the same method as that
used to provide for losses on its corporate loans.
(11) Income taxes
Income tax on the earnings or loss for the year comprises
current and deferred tax. The difference between the amount
currently payable for the period and the income tax expense
is accounted for as deferred income tax assets or
liabilities and offset against income tax assets and
liabilities in future periods. The amount of deferred tax
provided is based on the expected manner of realization or
settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantially enacted at the
balance sheet date. Changes in net tax effects resulting
from changes in tax rates are recognized in earnings for the
year in which the relevant tax rates are enacted.
(12) Translation of foreign currency denominated assets and
liabilities
Assets and liabilities denominated in foreign currencies are
translated into Korean Won at KRW1,197.80 and KRW1,200.40 to
US$1, the base exchange rate announced by Seoul Money
Brokerage Services Limited on the balance sheet date, and
the resulting gains (losses) are recognized in current
operations. However, the SWAP funds provided by the Bank of
-98-
Korea under the repurchase agreement are translated at the
agreed exchange rate. In addition, operating leases that (i)
were contracted before March 31, 1998, (ii) the funds used
in purchasing the operating lease assets are denominated in
foreign currencies, (iii) the base lease expense or the
adjusted lease expense is denominated in foreign currencies
and, thus, the exchange rate risk is hedged, the resulting
gains (losses) are reflected as translation gains (losses)
related to operating leases, which is amortized or reversed
when the Company recognizes the above lease expense as
earnings. In addition, financial statements of overseas
branches are also translated into Korean Won at the above
base rates on the balance sheet dates.
(13) Derivatives
Derivative instruments are presented as assets or
liabilities valued principally at the fair value of rights
or obligations associated with the derivative contracts. The
unrealized gain or loss from derivative transactions is
recognized in current operations.
However, for derivative instruments for the purpose of
hedging the exposure to the variability of cash flows of a
forecasted transaction, the hedge-effective portion of the
derivative's gain or loss is deferred as a capital
adjustment, a component of stockholder's equity. The
ineffective portion of the gain or loss is charged or
credited to current results of operations.
(14) Stock options
The stock option program allows the Company's employees to
acquire shares of the Company or to be compensated for the
market price difference. In case of stock grant type, the
Company values stock options based upon an option pricing
model under the fair value method and recognizes this value
as an expense and a capital adjustment (stock option) over
the period in which the options vest. When the Company
issues new shares upon employees' exercise of stock options,
the difference between the sum of the exercise price of the
stock options and the sum of face value of new shares is
accounted for as subscription premium paid for the shares.
On the other hand, when the Company delivers treasury
shares, the difference between the sum of the exercise price
of the stock options and the sum of the book value of
treasury stocks is accounted for as loss on disposition of
treasury stocks. In case of price compensation type, the
Company recognizes the compensation expense as an expense
and a liability (long-term outstanding expenses) over the
period in which the options vest.
In case officers and employees fail to perform their
obligations due to death, retirement or resignation during
the period in which the options vest, the stock options
granted to such officers and employees become null and void.
In such a case, the relevant amounts are reduced from
capital adjustments (stock options) or long-term outstanding
expenses recorded in the balance sheet in respect of stock
options, and the corresponding amounts are
-99-
deducted from compensation expenses. In case stock options
of stock grant type are not exercised after the period in
which the options vest and become null and void, the
relevant amounts are reduced from capital adjustments, and
the corresponding amounts are transferred to other capital
surplus.
(15) Accounting for leases and rentals
The Company accounts for and classifies its lease
transactions as either the operating or capital lease,
depending on the terms of the lease under the Korean Lease
Accounting Standards.
If a lease is substantially non-cancelable and meets one or
more of the criteria listed below, the present value of
future minimum lease payments is reflected as an obligation
under capital lease. Otherwise, it is classified as an
operating lease with lease payments expensed as incurred.
o Ownership of the leased property shall be transferred to
the lessee at the end of the lease term without additional
payment or for a contract price.
o The lease has a bargain purchase option.
o The lease term is equal to 75% or more of the estimated
economic useful life of the leased property in respect of
lease transactions that were contracted before January 1,
1998.
o The present value at the beginning of the lease term of
the minimum lease payments equals or exceeds 90% of the
fair value of the leased property.
In case of capital leases, the portion originated from
principal is accounted for as collections of outstanding
receivables and the remaining interest income is accounted
for as revenue in the current period. Revenue from operating
leases is recognized on a straight-line basis over the lease
term.
All costs and charges incurred in connection with acquiring
lease assets by inception date of the lease are recorded as
advance payments on operating lease assets or capital lease
receivables.
Additionally, depreciation of assets for operating leases is
computed using the straight-line method over the economic
useful lives (or lease terms if contracted before March 31,
1998).
(16) Interest income recognition
The Company recognizes the interest income earned on loan
receivables and other loans on an accrual basis. For the
interest income on loans having
-100-
overdue interest and principal, dishonored bills and checks
and all credits to the customers that are given a grace
period or a reduction or exemption of interest payments or
listed as watch list clients, the Company discontinues the
recognition of interest accrual.
(17) Contingent liabilities
Contingent losses are generally recognized as a liability
when probable and reasonably estimable as of the balance
sheet date.
(18) Use of estimates
The preparation of financial statements in accordance with
the Korean GAAP requires management to make estimates and
assumptions that affect the amounts reported in the
financial statements and related notes to financial
statements in respect of the amounts of assets and
liabilities, disclosure of contingent liabilities, estimates
of revenues and expenses. The foregoing applies to the
valuation of the book value of tangible assets, accounts
receivable, inventories, deferred income tax assets or
liabilities, and derivatives. Actual results could differ
from those estimates.
(19) Reclassification of account titles
Certain accounts of prior year's non-consolidated financial
statements were reclassified to conform to the current
year's presentation. These reclassifications did not result
in any material change to reported net earnings or
stockholders' equity.
C. Consolidated Financial Statements
(1) Consolidated Balance Sheet
Consolidated Balance Sheet
The 3rd Fiscal Year (As of December 31, 2003)
The 2nd Fiscal Year (As of December 31, 2002)
The 1st Fiscal Year (As of December 31, 2001)
(Unit: Million Won)
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
Assets
---------------------------------------------------------------------------------------------------------------
I. Cash & Due from Banks 6,418,280 2,847,134
---------------------------------------------------------------------------------------------------------------
1. Cash 1,742,777 903,183
---------------------------------------------------------------------------------------------------------------
2. Foreign Currency 165,006 55,994
---------------------------------------------------------------------------------------------------------------
3. Due from Banks in Won 4,119,983 1,745,695
---------------------------------------------------------------------------------------------------------------
-101-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
4. Due from Banks in Foreign Currency 390,514 142,262
---------------------------------------------------------------------------------------------------------------
II. Securities 28,003,660 15,454,214
---------------------------------------------------------------------------------------------------------------
(1) Trading Securities 4,876,614 2,014,293
---------------------------------------------------------------------------------------------------------------
1. Stocks 188,922 76,934
---------------------------------------------------------------------------------------------------------------
2. Government Bonds 1,712,070 411,403
---------------------------------------------------------------------------------------------------------------
3. Finance Debentures 1,656,756 636,852
---------------------------------------------------------------------------------------------------------------
4. Corporate Bonds 996,699 742,440
---------------------------------------------------------------------------------------------------------------
5. Beneficiary Certificates 57,446 97,870
---------------------------------------------------------------------------------------------------------------
6. Commercial Paper 59,579 48,794
---------------------------------------------------------------------------------------------------------------
7. Securities denominated in Foreign Currency 1,330 -
---------------------------------------------------------------------------------------------------------------
8. Other 203,812 -
---------------------------------------------------------------------------------------------------------------
(2) Available-for-Sale Securities 19,443,355 9,146,301
---------------------------------------------------------------------------------------------------------------
1. Stocks 1,123,476 224,488
---------------------------------------------------------------------------------------------------------------
2. Equity Investment 64,489 9,371
---------------------------------------------------------------------------------------------------------------
3. Government Bonds 2,575,282 556,279
---------------------------------------------------------------------------------------------------------------
4. Finance Debentures 4,625,283 1,919,808
---------------------------------------------------------------------------------------------------------------
5. Corporate Bonds 6,481,937 3,203,031
---------------------------------------------------------------------------------------------------------------
6. Beneficiary Certificates 2,525,018 2,432,095
---------------------------------------------------------------------------------------------------------------
7. Securities In Foreign Currency 1,415,713 801,229
---------------------------------------------------------------------------------------------------------------
8. Other 632,157 -
---------------------------------------------------------------------------------------------------------------
(3) Investment Securities under the Equity Method 19,631 9,437
---------------------------------------------------------------------------------------------------------------
(4) Held-to-Maturity Securities 3,664,060 4,284,183
---------------------------------------------------------------------------------------------------------------
1. Government Bonds 558,336 539,505
---------------------------------------------------------------------------------------------------------------
2. Finance Debentures 543,791 402,768
---------------------------------------------------------------------------------------------------------------
3. Corporate Bonds 2,389,916 3,213,403
---------------------------------------------------------------------------------------------------------------
4. Securities In Foreign Currency 172,017 128,504
---------------------------------------------------------------------------------------------------------------
5. Other - 3
---------------------------------------------------------------------------------------------------------------
III. Loans 94,921,179 45,244,360
---------------------------------------------------------------------------------------------------------------
(Allowance for Possible Loan Losses) (2,808,118) (785,773)
---------------------------------------------------------------------------------------------------------------
(Present Value Premium (Discounts)) 80,236 (17,894)
---------------------------------------------------------------------------------------------------------------
1. Loans in Won 72,853,369 32,616,614
---------------------------------------------------------------------------------------------------------------
2. Loans in Foreign Currency 6,779,634 3,489,504
---------------------------------------------------------------------------------------------------------------
3. Domestic Import Usance Bills 2,714,909 1,154,569
---------------------------------------------------------------------------------------------------------------
4. Call Loans 1,438,737 610,606
---------------------------------------------------------------------------------------------------------------
5. Bills Bought in Won 1,058,981 833,721
---------------------------------------------------------------------------------------------------------------
6. Bills Bought in Foreign Currency 3,610,006 2,263,872
---------------------------------------------------------------------------------------------------------------
7. Advances for Customers 107,743 89,657
---------------------------------------------------------------------------------------------------------------
8. Credit Card Accounts 4,931,496 2,795,865
---------------------------------------------------------------------------------------------------------------
-102-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
9. Bonds Purchased under Repurchase Agreements 470,300 -
---------------------------------------------------------------------------------------------------------------
10. Privately Placed Bonds 2,416,843 1,484,356
---------------------------------------------------------------------------------------------------------------
11. Factoring Receivables 174,955 63,627
---------------------------------------------------------------------------------------------------------------
12. Receivables to be converted into Equity 80,933 6,504
---------------------------------------------------------------------------------------------------------------
13. Financing Leases 807,396 621,427
---------------------------------------------------------------------------------------------------------------
14. Bill Management Account Assets 186,369 -
---------------------------------------------------------------------------------------------------------------
15. Other 17,390 17,706
---------------------------------------------------------------------------------------------------------------
IV. Fixed Assets 2,853,680 1,093,844
---------------------------------------------------------------------------------------------------------------
(1) Tangible Assets 1,878,795 927,231
---------------------------------------------------------------------------------------------------------------
(Accumulated Depreciation) (974,792) (455,839)
---------------------------------------------------------------------------------------------------------------
1. Land 995,168 346,538
---------------------------------------------------------------------------------------------------------------
2. Building 729,315 465,484
---------------------------------------------------------------------------------------------------------------
3. Other 1,129,104 571,048
---------------------------------------------------------------------------------------------------------------
(2). Intangible Assets 974,573 166,567
---------------------------------------------------------------------------------------------------------------
1. Goodwill 964,788 161,542
---------------------------------------------------------------------------------------------------------------
2. Negative Goodwill (5,655) (6,340)
---------------------------------------------------------------------------------------------------------------
3. Other 15,440 11,365
---------------------------------------------------------------------------------------------------------------
(3) Other Fixed Assets 312 46
---------------------------------------------------------------------------------------------------------------
V. Other Assets 7,012,593 2,128,042
---------------------------------------------------------------------------------------------------------------
(Allowance for Doubtful Accounts) (26,036) (19,753)
---------------------------------------------------------------------------------------------------------------
(Present Value Discounts) (146) (614)
---------------------------------------------------------------------------------------------------------------
1. Accounts Receivable 1,570,819 572,367
---------------------------------------------------------------------------------------------------------------
2. Advance Payments 42,827 11,623
---------------------------------------------------------------------------------------------------------------
3. Prepaid Expense 29,146 24,863
---------------------------------------------------------------------------------------------------------------
4. Prepaid Income Tax 13,988 3,268
---------------------------------------------------------------------------------------------------------------
5. Accrued Income 696,940 465,144
---------------------------------------------------------------------------------------------------------------
6. Operating Lease Assets 405,794 177,678
---------------------------------------------------------------------------------------------------------------
(Accumulated Depreciation) (182,375) (79,247)
---------------------------------------------------------------------------------------------------------------
(Allowance for Losses on Disposition of Lease Assets) (2,210) (147)
---------------------------------------------------------------------------------------------------------------
7. Guarantee Deposits 956,596 454,956
---------------------------------------------------------------------------------------------------------------
8. Deferred Income Tax Assets 78,135 102,052
---------------------------------------------------------------------------------------------------------------
9. Derivative Assets 518,836 120,443
---------------------------------------------------------------------------------------------------------------
10. Sundry Assets 2,910,279 295,409
---------------------------------------------------------------------------------------------------------------
Total Assets 139,209,392 66,767,595
---------------------------------------------------------------------------------------------------------------
Liabilities
---------------------------------------------------------------------------------------------------------------
I. Deposits 87,592,605 38,722,333
---------------------------------------------------------------------------------------------------------------
(Present Value Premium) 45,166 -
---------------------------------------------------------------------------------------------------------------
1. Deposits in Won 75,496,450 33,851,353
---------------------------------------------------------------------------------------------------------------
-103-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
2. Negotiable Certificate of Deposits 7,118,586 2,776,649
---------------------------------------------------------------------------------------------------------------
3. Deposits in Foreign Currency 4,932,403 2,094,331
---------------------------------------------------------------------------------------------------------------
II. Borrowings 17,209,576 11,351,814
---------------------------------------------------------------------------------------------------------------
1. Borrowings in Won 4,401,380 1,900,616
---------------------------------------------------------------------------------------------------------------
2. Borrowings in Foreign Currency 7,193,596 4,670,846
---------------------------------------------------------------------------------------------------------------
3. Bonds Sold under Repurchase Agreements 4,427,073 4,300,609
---------------------------------------------------------------------------------------------------------------
4. Bills Sold 705,954 206,965
---------------------------------------------------------------------------------------------------------------
5. Due to the Bank of Korea in Foreign Currency 64,051 75,285
---------------------------------------------------------------------------------------------------------------
6. Call Money 417,522 197,493
---------------------------------------------------------------------------------------------------------------
III. Debentures 8,395,403
---------------------------------------------------------------------------------------------------------------
(Present Value Premium) 135,445 -
---------------------------------------------------------------------------------------------------------------
1. Debentures in Won 16,177,484 8,331,629
---------------------------------------------------------------------------------------------------------------
(Discounts) (144,500) (404,239)
---------------------------------------------------------------------------------------------------------------
2. Debentures in Foreign Currency 1,591,121 469,236
---------------------------------------------------------------------------------------------------------------
(Discounts) (11,671) (1,223)
---------------------------------------------------------------------------------------------------------------
IV. Other Liabilities 10,551,701 4,336,678
---------------------------------------------------------------------------------------------------------------
1. Accrued Severance Benefits 347,913 225,188
---------------------------------------------------------------------------------------------------------------
(Deposits with Insurance Company for Severance Benefits) (133,645) (56,802)
---------------------------------------------------------------------------------------------------------------
(Transfer to National Pension) (8,317) (8,867)
---------------------------------------------------------------------------------------------------------------
2. Allowance or Doubtful Accounts on Acceptances 57,398 3,659
and Guarantees
---------------------------------------------------------------------------------------------------------------
3. Other Allowances 68,025 30,716
---------------------------------------------------------------------------------------------------------------
4. Borrowings from Trust Accounts 665,158 278,578
---------------------------------------------------------------------------------------------------------------
5. Foreign Exchange Remittances Pending 159,954 158,937
---------------------------------------------------------------------------------------------------------------
6. Securities Sold 353,732 -
---------------------------------------------------------------------------------------------------------------
7. Accounts Payable 1,397,803 539,108
---------------------------------------------------------------------------------------------------------------
8. Accrued Expense 1,742,597 1,108,373
---------------------------------------------------------------------------------------------------------------
9. Income Taxes Payable 103,873 172,343
---------------------------------------------------------------------------------------------------------------
10. Dividends Payable 1,645 2,629
---------------------------------------------------------------------------------------------------------------
11. Advance Receipts 95,116 6,056
---------------------------------------------------------------------------------------------------------------
12. Unearned Revenues 163,650 87,414
---------------------------------------------------------------------------------------------------------------
13. Taxes Withheld 78,271 76,096
---------------------------------------------------------------------------------------------------------------
14. Guarantee Deposits 270,766 149,729
---------------------------------------------------------------------------------------------------------------
15. Derivative Liabilities 471,442 112,677
---------------------------------------------------------------------------------------------------------------
16. Deferred Income Tax Liabilities 34 262
---------------------------------------------------------------------------------------------------------------
17. Deposits for Stock Subscription 19,090 4,945
---------------------------------------------------------------------------------------------------------------
18. Sundry Liabilities 4,697,196 1,445,637
---------------------------------------------------------------------------------------------------------------
Total Liabilities 133,101,761 62,806,228
---------------------------------------------------------------------------------------------------------------
Stockholders' Equity -
---------------------------------------------------------------------------------------------------------------
-104-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
I. Capital Stock 1,958,530 1,461,806
---------------------------------------------------------------------------------------------------------------
1. Common Stock 1,472,007 1,461,806
---------------------------------------------------------------------------------------------------------------
2. Preferred Stock 486,523 -
---------------------------------------------------------------------------------------------------------------
II. Consolidated Capital Surplus 3,200,805 1,887,708
---------------------------------------------------------------------------------------------------------------
III. Consolidated Retained Earnings 872,053 670,763
---------------------------------------------------------------------------------------------------------------
(Consolidated Net Income for the Period:
---------------------------------------------------------------------------------------------------------------
For the Year: KRW 362,988 million Won
---------------------------------------------------------------------------------------------------------------
For the Previous Year: KRW 602,163 million
---------------------------------------------------------------------------------------------------------------
IV. Consolidated Capital Adjustment (-)519,362 (-)379,797
---------------------------------------------------------------------------------------------------------------
1. Treasury Stock (391,300) (391,300)
---------------------------------------------------------------------------------------------------------------
2. Valuation Gain (Loss) on Available-for-Sale Securities (153,786) 6,065
---------------------------------------------------------------------------------------------------------------
3. Valuation Gain on Investment Securities Accounted for by the 137 26
Equity Method
---------------------------------------------------------------------------------------------------------------
4. Stock Option 10,552 2,905
---------------------------------------------------------------------------------------------------------------
5. Adjustment for Foreign Currency Translation 15,035 2,507
---------------------------------------------------------------------------------------------------------------
V. Minority Interest 595,605 320,887
---------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 6,107,631 3,961,367
---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 139,209,392 66,767,595
---------------------------------------------------------------------------------------------------------------
As a result of application of SKAS No. 8 upon closing of the third
fiscal year, the financial statements for the second fiscal year
were also reclassified, which does not result in any material
change to the total assets.
Consolidated Balance Sheet
The 3rd Fiscal Year (As of December 31, 2003)
The 2nd Fiscal Year (As of December 31, 2002)
The 1st Fiscal Year (As of December 31, 2001)
(Unit: Million Won)
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
Assets See the above See the above
---------------------------------------------------------------------------------------------------------------
I. Cash & Due from Banks 2,356,145
---------------------------------------------------------------------------------------------------------------
1. Cash 808,995
---------------------------------------------------------------------------------------------------------------
2. Foreign Currency 42,925
---------------------------------------------------------------------------------------------------------------
3. Due from Banks in Won 1,483,782
---------------------------------------------------------------------------------------------------------------
4. Due from Banks in Foreign Currency 19,456
---------------------------------------------------------------------------------------------------------------
5. Other 988
---------------------------------------------------------------------------------------------------------------
II. Marketable Securities 2,198,360
---------------------------------------------------------------------------------------------------------------
1. Stocks 89,144
---------------------------------------------------------------------------------------------------------------
-105-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
2. Government Bonds 359,092
---------------------------------------------------------------------------------------------------------------
3. Finance Debentures 1,011,714
---------------------------------------------------------------------------------------------------------------
4. Corporate Bonds 593,095
---------------------------------------------------------------------------------------------------------------
5. Beneficiary Certificates 65,944
---------------------------------------------------------------------------------------------------------------
6. Commercial Paper 50,000
---------------------------------------------------------------------------------------------------------------
7. Marketable Securities denominated in Foreign Currency 28,931
---------------------------------------------------------------------------------------------------------------
8. Other 441
---------------------------------------------------------------------------------------------------------------
III. Investment Securities 12,962,204
---------------------------------------------------------------------------------------------------------------
1. Stocks 274,024
---------------------------------------------------------------------------------------------------------------
2. Equity Investment 29,508
---------------------------------------------------------------------------------------------------------------
3. Government Bonds 1,983,968
---------------------------------------------------------------------------------------------------------------
4. Finance Debentures 2,262,200
---------------------------------------------------------------------------------------------------------------
5. Corporate Bonds 6,546,329
---------------------------------------------------------------------------------------------------------------
6. Beneficiary Certificates 1,171,508
---------------------------------------------------------------------------------------------------------------
7. Investment Securities In Foreign Currency 689,106
---------------------------------------------------------------------------------------------------------------
8.Other 5,561
---------------------------------------------------------------------------------------------------------------
IV. Loans 35,371,372
---------------------------------------------------------------------------------------------------------------
(Allowance for Possible Loan Losses)
---------------------------------------------------------------------------------------------------------------
(Present Value Discounts)
---------------------------------------------------------------------------------------------------------------
1. Loans in Won 23,071,054
---------------------------------------------------------------------------------------------------------------
2. Loans in Foreign Currency 3,114,850
---------------------------------------------------------------------------------------------------------------
3. Domestic Import Usance Bills 10,840
---------------------------------------------------------------------------------------------------------------
4. Call Loans 1,897,650
---------------------------------------------------------------------------------------------------------------
5. Bills Bought in Won 2,061,137
---------------------------------------------------------------------------------------------------------------
6. Bills Bought in Foreign Currency 1,877,234
---------------------------------------------------------------------------------------------------------------
7. Advances for Customers 46,783
---------------------------------------------------------------------------------------------------------------
8. Credit Card Accounts 2,093,272
---------------------------------------------------------------------------------------------------------------
9. Bonds Purchased under Repurchase Agreements 6,631
---------------------------------------------------------------------------------------------------------------
10. Privately Placed Bonds 1,136,410
---------------------------------------------------------------------------------------------------------------
11. Factoring Receivables 31,817
---------------------------------------------------------------------------------------------------------------
12. Receivables to be converted into Equity 125,355
---------------------------------------------------------------------------------------------------------------
13. Financing Leases 549,423
---------------------------------------------------------------------------------------------------------------
14. Termination Financing Lease Receivables
---------------------------------------------------------------------------------------------------------------
15. Other 13,434
---------------------------------------------------------------------------------------------------------------
V. Fixed Assets 657,764
---------------------------------------------------------------------------------------------------------------
1. Investments 250
---------------------------------------------------------------------------------------------------------------
2. Premises and Equipment 656,776
---------------------------------------------------------------------------------------------------------------
-106-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
(1) Land 276,705
---------------------------------------------------------------------------------------------------------------
(2) Building 291,013
---------------------------------------------------------------------------------------------------------------
(3) Other 419,011
---------------------------------------------------------------------------------------------------------------
(Accumulated Depreciation)
---------------------------------------------------------------------------------------------------------------
3. Intangible Assets 739
---------------------------------------------------------------------------------------------------------------
(1) Goodwill
---------------------------------------------------------------------------------------------------------------
(2) Negative Goodwill
---------------------------------------------------------------------------------------------------------------
(3) Other 739
---------------------------------------------------------------------------------------------------------------
4. Other
---------------------------------------------------------------------------------------------------------------
VI. Other Assets 2,783,804
---------------------------------------------------------------------------------------------------------------
(Allowance for Doubtful Accounts)
---------------------------------------------------------------------------------------------------------------
(Present Value Discounts)
---------------------------------------------------------------------------------------------------------------
1. Accounts Receivable 1,634,648
---------------------------------------------------------------------------------------------------------------
2. Advance Payments 30,465
---------------------------------------------------------------------------------------------------------------
3. Prepaid Expense 13,383
---------------------------------------------------------------------------------------------------------------
4. Accrued Income 584,711
---------------------------------------------------------------------------------------------------------------
5. Operating Lease Assets 153,944
---------------------------------------------------------------------------------------------------------------
(Accumulated Depreciation)
---------------------------------------------------------------------------------------------------------------
(Allowance for Losses on Disposition of Lease Assets)
---------------------------------------------------------------------------------------------------------------
6. Guarantee Deposits 377,663
---------------------------------------------------------------------------------------------------------------
7. Deferred Income Tax Assets 18,049
---------------------------------------------------------------------------------------------------------------
8. Derivative Assets 91,932
---------------------------------------------------------------------------------------------------------------
9. Sundry Assets 70,513
---------------------------------------------------------------------------------------------------------------
Total Assets 56,329,649
---------------------------------------------------------------------------------------------------------------
Liabilities
---------------------------------------------------------------------------------------------------------------
I. Deposits 34,390,192
---------------------------------------------------------------------------------------------------------------
(Present Value Premium) -
---------------------------------------------------------------------------------------------------------------
1. Deposits in Won 29,714,108
---------------------------------------------------------------------------------------------------------------
2. Negotiable Certificate of Deposits 2,866,823
---------------------------------------------------------------------------------------------------------------
3. Deposits in Foreign Currency 1,809,261
---------------------------------------------------------------------------------------------------------------
II. Borrowings 10,049,401
---------------------------------------------------------------------------------------------------------------
1. Borrowings in Won 2,250,439
---------------------------------------------------------------------------------------------------------------
2. Borrowings in Foreign Currency 3,208,201
---------------------------------------------------------------------------------------------------------------
3. Bonds Sold under Repurchase Agreements 3,849,967
---------------------------------------------------------------------------------------------------------------
4. Bills Sold 257,887
---------------------------------------------------------------------------------------------------------------
5. Due to the Bank of Korea in Foreign Currency 139,084
---------------------------------------------------------------------------------------------------------------
6. Call Money 343,822
---------------------------------------------------------------------------------------------------------------
III. Debentures 3,748,773
---------------------------------------------------------------------------------------------------------------
-107-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
(Present Value Premium)
---------------------------------------------------------------------------------------------------------------
1. Debentures in Won 3,708,036
---------------------------------------------------------------------------------------------------------------
(Discounts)
---------------------------------------------------------------------------------------------------------------
2. Debentures in Foreign Currency 367,936
---------------------------------------------------------------------------------------------------------------
(Discounts)
---------------------------------------------------------------------------------------------------------------
IV. Other Liabilities 4,877,799
---------------------------------------------------------------------------------------------------------------
1. Accrued Severance Benefits 192,465
---------------------------------------------------------------------------------------------------------------
(Deposits with Insurance Company for Severance Benefits)
---------------------------------------------------------------------------------------------------------------
(Transfer to National Pension)
---------------------------------------------------------------------------------------------------------------
2. Allowance or Doubtful Accounts on Acceptances and Guarantees 13,077
---------------------------------------------------------------------------------------------------------------
3. Other Allowances 2,320
---------------------------------------------------------------------------------------------------------------
4. Borrowings from Trust Accounts 651,160
---------------------------------------------------------------------------------------------------------------
5. Foreign Exchange Remittances Pending 82,304
---------------------------------------------------------------------------------------------------------------
6. Securities Sold 12,461
---------------------------------------------------------------------------------------------------------------
7. Accounts Payable 1,627,273
---------------------------------------------------------------------------------------------------------------
8. Accrued Expense 1,166,807
---------------------------------------------------------------------------------------------------------------
9. Income Taxes Payable 9,881
---------------------------------------------------------------------------------------------------------------
10. Dividends Payable 2,116
---------------------------------------------------------------------------------------------------------------
11. Advance Receipts 8,284
---------------------------------------------------------------------------------------------------------------
12. Unearned Revenues 79,145
---------------------------------------------------------------------------------------------------------------
13. Taxes Withheld 36,946
---------------------------------------------------------------------------------------------------------------
14. Guarantee Deposits 92,634
---------------------------------------------------------------------------------------------------------------
15. Derivative Liabilities 104,985
---------------------------------------------------------------------------------------------------------------
16. Deferred Income Tax Liabilities 33,671
---------------------------------------------------------------------------------------------------------------
17. Deposits for Stock Subscription 26,455
---------------------------------------------------------------------------------------------------------------
18. Sundry Liabilities 782,162
---------------------------------------------------------------------------------------------------------------
Total Liabilities 53,066,166
---------------------------------------------------------------------------------------------------------------
Stockholders' Equity -
---------------------------------------------------------------------------------------------------------------
I. Capital Stock 1,461,721
---------------------------------------------------------------------------------------------------------------
1. Common Stock 1,461,721
---------------------------------------------------------------------------------------------------------------
2. Preferred Stock -
---------------------------------------------------------------------------------------------------------------
II. Consolidated Capital Surplus 1,976,650
---------------------------------------------------------------------------------------------------------------
III. Consolidated Retained Earnings 219,923
---------------------------------------------------------------------------------------------------------------
(Consolidated Net Income for the Period: -
---------------------------------------------------------------------------------------------------------------
For the Year: KRW 362,987,975,940 -
---------------------------------------------------------------------------------------------------------------
For the Previous Year: KRW 602,163,036,549) -
---------------------------------------------------------------------------------------------------------------
IV. Consolidated Capital Adjustment
---------------------------------------------------------------------------------------------------------------
-108-
---------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
---------------------------------------------------------------------------------------------------------------
1. Treasury Stock
---------------------------------------------------------------------------------------------------------------
2. Gain (Loss) on Valuation Of Investment Securities
---------------------------------------------------------------------------------------------------------------
3. Stock Option
---------------------------------------------------------------------------------------------------------------
4. Adjustment for Foreign Currency Translation
---------------------------------------------------------------------------------------------------------------
V. Minority Interest -
---------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 3,263,483
---------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 56,329,649
---------------------------------------------------------------------------------------------------------------
As a result of early application of SKAS No. 6 (Un-appropriated dividends
payable) upon closing of the second fiscal year, the amount of liabilities in
the financial statements of the first fiscal year decreased by KRW 150,812
million and stockholders' equity increased by KRW 150,812 million.
(2) Consolidated Income Statements
Consolidated Income Statements
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
The 1st Fiscal Year (September 1, 2001
(Date of Incorporation) ~ December 31, 2001)
(Unit: Million Won)
----------------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------------
I. Operating Revenues 8,072,077 5,929,417
----------------------------------------------------------------------------------------------------------------------
(1) Interest Income 4,995,954 3,646,365
----------------------------------------------------------------------------------------------------------------------
1. Interest on Due from banks 56,845 50,342
----------------------------------------------------------------------------------------------------------------------
2. Interest on Trading Securities 181,706 121,815
----------------------------------------------------------------------------------------------------------------------
3. Interest on Available-for-Sale Securities 644,001 455,107
----------------------------------------------------------------------------------------------------------------------
4. Interest on Held-to-Maturity Securities 297,186 399,929
----------------------------------------------------------------------------------------------------------------------
5. Interest on Loans 3,779,897 2,598,517
----------------------------------------------------------------------------------------------------------------------
6. Others 36,319 20,655
----------------------------------------------------------------------------------------------------------------------
(2) Commission Income 1,355,949 842,973
----------------------------------------------------------------------------------------------------------------------
1. Commissions Received 1,341,942 831,749
----------------------------------------------------------------------------------------------------------------------
2. Guarantee Fees 13,462 10,438
----------------------------------------------------------------------------------------------------------------------
3. Commissions Received 545 786
from Termination of Commodities
----------------------------------------------------------------------------------------------------------------------
(3) Insurance Income 42,934
----------------------------------------------------------------------------------------------------------------------
1. Premium Income 42,824 -
----------------------------------------------------------------------------------------------------------------------
2. Reinsurance Income 110 -
----------------------------------------------------------------------------------------------------------------------
(4) Other Operating Income 1,677,240 1,440,079
----------------------------------------------------------------------------------------------------------------------
-109-
----------------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------------
1. Gain on Sale of Trading Securities 133,377 89,965
----------------------------------------------------------------------------------------------------------------------
2. Gain on Valuation of Trading Securities 32,063 4,238
----------------------------------------------------------------------------------------------------------------------
3. Dividend on Trading Securities 2,439 3,371
----------------------------------------------------------------------------------------------------------------------
4. Dividend on Available-for-Sale Securities 6,057 12,719
----------------------------------------------------------------------------------------------------------------------
5. Gain on Foreign Currency Trading 256,046 214,869
----------------------------------------------------------------------------------------------------------------------
6. Fees and Commissions from Trust Account 48,812 48,752
----------------------------------------------------------------------------------------------------------------------
7. Gain on Disposition of Operating Lease Properties 7,232 2,105
----------------------------------------------------------------------------------------------------------------------
8. Gain on Derivatives Trading 1,043,246 1,043,567
----------------------------------------------------------------------------------------------------------------------
9. Reversal of Allowance for Bad Debts 21,338 2,022
----------------------------------------------------------------------------------------------------------------------
10. Reversal of Acceptance and Guarantees Allowance 35,258 9,418
----------------------------------------------------------------------------------------------------------------------
11. Reversal of Other Allowances 3,653 -
----------------------------------------------------------------------------------------------------------------------
12. Reversal of Negative Goodwill 685 514
----------------------------------------------------------------------------------------------------------------------
13. Securitization Assets Operating Income 52,440 -
----------------------------------------------------------------------------------------------------------------------
14. Other 34,594 8,539
----------------------------------------------------------------------------------------------------------------------
II. Operating Expenses 7,286,291 4,990,400
----------------------------------------------------------------------------------------------------------------------
(1) Interest Expenses 2,996,896 2,352,140
----------------------------------------------------------------------------------------------------------------------
1. Interest on Deposits 1,865,645 1,497,088
----------------------------------------------------------------------------------------------------------------------
2. Interest on Borrowings 473,069 441,794
----------------------------------------------------------------------------------------------------------------------
3. Interest on Debentures 630,406 392,526
----------------------------------------------------------------------------------------------------------------------
4. Other 27,776 20,732
----------------------------------------------------------------------------------------------------------------------
(2) Commission Expenses 195,099 160,115
----------------------------------------------------------------------------------------------------------------------
1. Commissions Paid 101,100 111,450
----------------------------------------------------------------------------------------------------------------------
2. Commissions on Credit Cards 93,999 48,221
----------------------------------------------------------------------------------------------------------------------
3. Other Commission Expenses - 444
----------------------------------------------------------------------------------------------------------------------
(3) Insurance Expenses 47,618
----------------------------------------------------------------------------------------------------------------------
1. Claims Paid 955 -
----------------------------------------------------------------------------------------------------------------------
2. Reinsurance Expenses 167 -
----------------------------------------------------------------------------------------------------------------------
3. Increase in Policy Reserve 37,103 -
----------------------------------------------------------------------------------------------------------------------
4. Operating Expenses 9,393 -
----------------------------------------------------------------------------------------------------------------------
(4) Other Operating Expenses 2,698,539 1,536,388
----------------------------------------------------------------------------------------------------------------------
1. Loss on Sale of Trading Securities 111,004 69,901
----------------------------------------------------------------------------------------------------------------------
2. Loss on Valuation of Trading Securities 53,776 16,280
----------------------------------------------------------------------------------------------------------------------
3. Loss on Foreign Currency Trading 135,622 129,305
----------------------------------------------------------------------------------------------------------------------
4. Contribution to Fund 80,627 47,200
----------------------------------------------------------------------------------------------------------------------
5. Bad Debt Expense 1,150,491 192,690
----------------------------------------------------------------------------------------------------------------------
6. Provision for Other Allowance 6,151 29,296
----------------------------------------------------------------------------------------------------------------------
7. Loss on Disposition of Operating Lease 4,386 3,443
----------------------------------------------------------------------------------------------------------------------
-110-
----------------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------------
Properties
----------------------------------------------------------------------------------------------------------------------
8. Depreciation Expense on Operating Lease Properties 35,165 28,225
----------------------------------------------------------------------------------------------------------------------
9. Loss on Derivatives Trading 989,540 981,550
----------------------------------------------------------------------------------------------------------------------
10. Loss on Operation of Trust Business 13,327 -
----------------------------------------------------------------------------------------------------------------------
11. Other 118,450 38,498
----------------------------------------------------------------------------------------------------------------------
(5) Selling and Administrative Expenses 1,348,139 941,757
----------------------------------------------------------------------------------------------------------------------
1. Salaries 514,793 345,682
----------------------------------------------------------------------------------------------------------------------
2. Retirement Allowance 46,003 73,657
----------------------------------------------------------------------------------------------------------------------
3. Other Employee Benefits 179,065 144,229
----------------------------------------------------------------------------------------------------------------------
4. Rent 47,598 30,073
----------------------------------------------------------------------------------------------------------------------
5. Entertainment 13,665 8,720
----------------------------------------------------------------------------------------------------------------------
6. Depreciation 139,486 89,064
----------------------------------------------------------------------------------------------------------------------
7. Amortization on Intangible Asset 43,269 12,328
----------------------------------------------------------------------------------------------------------------------
8. Taxes and Dues 53,816 36,394
----------------------------------------------------------------------------------------------------------------------
9. Advertising 42,922 52,736
----------------------------------------------------------------------------------------------------------------------
10. Research 3,300 2,509
----------------------------------------------------------------------------------------------------------------------
11. Other 264,222 146,365
----------------------------------------------------------------------------------------------------------------------
III. Operating Income 785,786 939,017
----------------------------------------------------------------------------------------------------------------------
IV. Non-Operating Income 224,874 163,373
----------------------------------------------------------------------------------------------------------------------
1. Gain on Sale of Available-for-Sale Securities 89,579 84,089
----------------------------------------------------------------------------------------------------------------------
2. Recovery of Available-for Sale Securities Impairment 15,562 14,192
Loss
----------------------------------------------------------------------------------------------------------------------
3. Valuation Gain using the Equity Method 2,410 -
----------------------------------------------------------------------------------------------------------------------
4. Gain on Valuation of Fund-Invested Money - 8,613
----------------------------------------------------------------------------------------------------------------------
5. Gain on Sale of Loans 3,684 11,636
----------------------------------------------------------------------------------------------------------------------
6. Gain on Sale of Tangible Assets 28,879 788
----------------------------------------------------------------------------------------------------------------------
7. Rental Income 12,006 8,831
----------------------------------------------------------------------------------------------------------------------
8. Other 72,754 35,224
----------------------------------------------------------------------------------------------------------------------
V. Non-Operating Expenses 379,681 250,074
----------------------------------------------------------------------------------------------------------------------
1. Loss on Disposition of Available-for-Sale Securities 32,938 100,705
----------------------------------------------------------------------------------------------------------------------
2 Available-for-Sale Securities Impairment Loss 103,110 109,279
----------------------------------------------------------------------------------------------------------------------
3. Valuation Loss using the Equity Method - 414
----------------------------------------------------------------------------------------------------------------------
4. Loss on Disposition of Investment Securities using 166 -
the Equity Method
----------------------------------------------------------------------------------------------------------------------
5. Loss on Sale of Loans 169,786 7,815
----------------------------------------------------------------------------------------------------------------------
6. Loss on Disposition of Tangible Assets 2,282 394
----------------------------------------------------------------------------------------------------------------------
7. Losses on Redemption of Debentures - 476
----------------------------------------------------------------------------------------------------------------------
-111-
----------------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY
DESCRIPTION AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------------
8. Contribution 1,206 412
----------------------------------------------------------------------------------------------------------------------
9. Other 70,193 30,579
----------------------------------------------------------------------------------------------------------------------
VI. Ordinary Income 630,979 852,316
----------------------------------------------------------------------------------------------------------------------
VII. Extraordinary Loss/Gain - -
----------------------------------------------------------------------------------------------------------------------
VIII. Income Before Income Tax Expense 630,979 852,316
----------------------------------------------------------------------------------------------------------------------
IX. Income Tax Expense 253,947 254,572
----------------------------------------------------------------------------------------------------------------------
X. Net Income 377,032 597,744
----------------------------------------------------------------------------------------------------------------------
XI. Net Gain (Loss) in Minority Interest 14,044 (4,419)
----------------------------------------------------------------------------------------------------------------------
XII. Consolidated Net Income 362,988 602,163
----------------------------------------------------------------------------------------------------------------------
(Ordinary Income / Earning per Share)
----------------------------------------------------------------------------------------------------------------------
For the year (3rd FY): 1,063 Won/1,063 Won
----------------------------------------------------------------------------------------------------------------------
For the previous year (2nd FY): 2,294 Won/2,294 Won)
----------------------------------------------------------------------------------------------------------------------
1st FY: 883 Won/882 Won
----------------------------------------------------------------------------------------------------------------------
(Diluted Ordinary Income / Earning per Share)
----------------------------------------------------------------------------------------------------------------------
For the year (3rd FY): 1,022 Won/1,022 Won
----------------------------------------------------------------------------------------------------------------------
For the previous year (2nd FY): 2,294 Won/2,294 Won)
----------------------------------------------------------------------------------------------------------------------
1st FY: 883 Won/882 Won
----------------------------------------------------------------------------------------------------------------------
As a result of application of SKAS No. 8 upon closing of the third fiscal year,
the financial statements for the second fiscal year were also reclassified,
which does not result in any material change to the operating income and the
consolidated net income for the period.
Consolidated Income Statements
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
The 1st Fiscal Year (September 1, 2001
(Date of Incorporation) ~ December 31, 2001)
(Unit: Million Won)
----------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------
I. Operating Revenues 2,559,860
----------------------------------------------------------------------------------------------------------------
(1) Interest Income 1,822,591
----------------------------------------------------------------------------------------------------------------
1. Interest on Due from banks 37,598
----------------------------------------------------------------------------------------------------------------
2. Interest on Marketable Securities 63,077
----------------------------------------------------------------------------------------------------------------
3. Interest on Investment Securities 497,270
----------------------------------------------------------------------------------------------------------------
4. Interest on Loans 1,208,969
----------------------------------------------------------------------------------------------------------------
5. Others 15,677
----------------------------------------------------------------------------------------------------------------
-112-
----------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------
(2)Commission Income 319,299
----------------------------------------------------------------------------------------------------------------
1. Commissions Received 311,847
----------------------------------------------------------------------------------------------------------------
2. Guarantee Fees 5,691
----------------------------------------------------------------------------------------------------------------
3. Commissions Received from Termination of Commodities 852
----------------------------------------------------------------------------------------------------------------
4. Other 908
----------------------------------------------------------------------------------------------------------------
(3) Insurance Income
----------------------------------------------------------------------------------------------------------------
1. Premium Income
----------------------------------------------------------------------------------------------------------------
2. Reinsurance Income
----------------------------------------------------------------------------------------------------------------
(4) Other Operating Income 417,971
----------------------------------------------------------------------------------------------------------------
1. Gain on Sale of Marketable Securities 67,644
----------------------------------------------------------------------------------------------------------------
2. Gain on Valuation of Marketable Securities 296
----------------------------------------------------------------------------------------------------------------
3. Dividend on Marketable Securities 202
----------------------------------------------------------------------------------------------------------------
4. Dividend on Investment Securities 667
----------------------------------------------------------------------------------------------------------------
5. Gain on Foreign Currency Trading 75,628
----------------------------------------------------------------------------------------------------------------
6. Fees and Commissions from Trust Account 22,189
----------------------------------------------------------------------------------------------------------------
7. Gain on Disposition of Operating Lease Properties
----------------------------------------------------------------------------------------------------------------
8. Gain on Derivatives Trading 247,042
----------------------------------------------------------------------------------------------------------------
9. Reversal of Allowance for Bad Debts 799
----------------------------------------------------------------------------------------------------------------
10. Reversal of Acceptance and Guarantees Allowance
----------------------------------------------------------------------------------------------------------------
11. Other 3,503
----------------------------------------------------------------------------------------------------------------
II. Operating Expenses 2,439,767
----------------------------------------------------------------------------------------------------------------
(1) Interest Expenses 1,243,015
----------------------------------------------------------------------------------------------------------------
1. Interest on Deposits 823,705
----------------------------------------------------------------------------------------------------------------
2. Interest on Borrowings 266,621
----------------------------------------------------------------------------------------------------------------
3. Interest on Debentures 125,029
----------------------------------------------------------------------------------------------------------------
4. Other 27,660
----------------------------------------------------------------------------------------------------------------
(2) Commission Expenses 57,875
----------------------------------------------------------------------------------------------------------------
1. Commissions Paid 42,656
----------------------------------------------------------------------------------------------------------------
2. Commissions on Credit Cards 14,348
----------------------------------------------------------------------------------------------------------------
3. Other Commission Expenses 871
----------------------------------------------------------------------------------------------------------------
(3) Insurance Expenses
----------------------------------------------------------------------------------------------------------------
1. Claims Paid
----------------------------------------------------------------------------------------------------------------
2. Reinsurance Expenses
----------------------------------------------------------------------------------------------------------------
3. Increase in Policy Reserve
----------------------------------------------------------------------------------------------------------------
4. Operating Expenses
----------------------------------------------------------------------------------------------------------------
(4) Other Operating Expenses 768,249
----------------------------------------------------------------------------------------------------------------
-113-
----------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------
1. Loss on Sale of Marketable Securities 51,030
----------------------------------------------------------------------------------------------------------------
2. Loss on Valuation of Marketable Securities 12,648
----------------------------------------------------------------------------------------------------------------
3. Loss on Foreign Currency Trading 31,002
----------------------------------------------------------------------------------------------------------------
4. Contribution to Fund 21,709
----------------------------------------------------------------------------------------------------------------
5. Bad Debt Expense 384,443
----------------------------------------------------------------------------------------------------------------
6. Provision for Possible Losses of Acceptances and Guarantees 3,268
----------------------------------------------------------------------------------------------------------------
7. Provision for Other Allowance
----------------------------------------------------------------------------------------------------------------
8. Loss on Disposition of Operating Lease Properties
----------------------------------------------------------------------------------------------------------------
9. Depreciation Expense on Operating Lease Properties
----------------------------------------------------------------------------------------------------------------
10. Loss on Derivatives Trading 247,926
----------------------------------------------------------------------------------------------------------------
11. Other 16,224
----------------------------------------------------------------------------------------------------------------
(5) Selling and Administrative Expenses 370,629
----------------------------------------------------------------------------------------------------------------
1. Salaries 114,429
----------------------------------------------------------------------------------------------------------------
2. Retirement Allowance 29,462
----------------------------------------------------------------------------------------------------------------
3. Other Employee Benefits 71,592
----------------------------------------------------------------------------------------------------------------
4. Rent 12,947
----------------------------------------------------------------------------------------------------------------
5. Entertainment 4,341
----------------------------------------------------------------------------------------------------------------
6. Depreciation 55,753
----------------------------------------------------------------------------------------------------------------
7. Amortization on Intangible Asset 28
----------------------------------------------------------------------------------------------------------------
8. Taxes and Dues 12,872
----------------------------------------------------------------------------------------------------------------
9. Advertising 18,329
----------------------------------------------------------------------------------------------------------------
10. Research
----------------------------------------------------------------------------------------------------------------
11. Other 50,876
----------------------------------------------------------------------------------------------------------------
III. Operating Income 120,093
----------------------------------------------------------------------------------------------------------------
IV. Non-Operating Income 222,191
----------------------------------------------------------------------------------------------------------------
1. Gain on Sale of Tangible Assets 77
----------------------------------------------------------------------------------------------------------------
2. Rental Income 3,773
----------------------------------------------------------------------------------------------------------------
3. Gain on Sale of Investment Securities 49,963
----------------------------------------------------------------------------------------------------------------
4. Recovery of Investment Securities Impairment Loss 17,385
----------------------------------------------------------------------------------------------------------------
5. Gain on Valuation of Fund-Invested Money 4,654
----------------------------------------------------------------------------------------------------------------
6. Gain on Sale of Loans 1,880
----------------------------------------------------------------------------------------------------------------
7. Amortization on Negative Goodwill 123,543
----------------------------------------------------------------------------------------------------------------
8. Other 20,917
----------------------------------------------------------------------------------------------------------------
V. Non-Operating Expenses 91,134
----------------------------------------------------------------------------------------------------------------
1. Loss on Disposition of Tangible Assets 137
----------------------------------------------------------------------------------------------------------------
-114-
----------------------------------------------------------------------------------------------------------------
3RD FY 2ND FY 1ST FY
DESCRIPTION AMOUNT AMOUNT AMOUNT
----------------------------------------------------------------------------------------------------------------
2. Loss on Disposition of Investment Securities 39,308
----------------------------------------------------------------------------------------------------------------
3. Investment Securities Impairment Loss 26,405
----------------------------------------------------------------------------------------------------------------
4. Loss on Sale of Loans
----------------------------------------------------------------------------------------------------------------
5. Loss on Valuation of Fund-Invested Money 10,991
----------------------------------------------------------------------------------------------------------------
6. Losses on Redemption of Debentures 807
----------------------------------------------------------------------------------------------------------------
7. Contribution 1,061
----------------------------------------------------------------------------------------------------------------
8. Loss on Valuation of Equity Method 3,246
----------------------------------------------------------------------------------------------------------------
9. Other 9,179
----------------------------------------------------------------------------------------------------------------
10. Loss on Disposition of Equity Securities by the 0
Equity Method
----------------------------------------------------------------------------------------------------------------
VI. Ordinary Income 251,150
----------------------------------------------------------------------------------------------------------------
VII. Extraordinary Loss 508
----------------------------------------------------------------------------------------------------------------
1. Other Extraordinary Loss 508
----------------------------------------------------------------------------------------------------------------
VIII. Income Before Income Tax Expense 250,642
----------------------------------------------------------------------------------------------------------------
IX. Income Tax Expense 29,879
----------------------------------------------------------------------------------------------------------------
X. Net Income 220,763
----------------------------------------------------------------------------------------------------------------
XI. Net Loss in Minority Interest)
----------------------------------------------------------------------------------------------------------------
XII. Consolidated Net Income 220,763
----------------------------------------------------------------------------------------------------------------
(Ordinary Income/Earning per Share)
----------------------------------------------------------------------------------------------------------------
For the year (3rd FY): 1,063 Won/1,063 Won
----------------------------------------------------------------------------------------------------------------
For the previous year(2nd FY): 2,294 Won/2,294 Won)
----------------------------------------------------------------------------------------------------------------
1st FY: 883 Won/882 Won
----------------------------------------------------------------------------------------------------------------
(Diluted Ordinary Income/Earning per Share)
----------------------------------------------------------------------------------------------------------------
For the year (3rd FY): 1,022 Won/1,022 Won
----------------------------------------------------------------------------------------------------------------
For the previous year(2nd FY): 2,294 Won/2,294 Won)
----------------------------------------------------------------------------------------------------------------
1st FY: 883 Won/882 Won
----------------------------------------------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
The 1st Fiscal Year (September 1, 2001
(Date of Incorporation) ~ December 31, 2001)
-115-
(Unit : Million Won)
---------------------------------------------------------------------------------------------------------------
CONSOLIDATED CONSOLIDATED
CAPITAL CONSOLIDATED RETAINED CAPITAL MINORITY
DESCRIPTION STOCK CAPITAL SURPLUS EARNINGS ADJUSTMENT INTERESTS TOTAL
---------------------------------------------------------------------------------------------------------------
2001.9.1 (Beginning of the
previous year)
---------------------------------------------------------------------------------------------------------------
Incorporation of Company by 1,461,721 1,976,650 0 0 0 3,438,371
the Method of Stock Swap)
---------------------------------------------------------------------------------------------------------------
Consolidated Net Income 0 0 220,763 0 0 220,763
---------------------------------------------------------------------------------------------------------------
Subsidiaries 0 0 0 0 0 0
---------------------------------------------------------------------------------------------------------------
Changes in Retained 0 0 -840 0 0 -840
Earnings
---------------------------------------------------------------------------------------------------------------
Acquisition of Treasury 0 0 0 -394,475 0 -394,475
0 0 0 0 0 0
---------------------------------------------------------------------------------------------------------------
Changes in Consolidated 0 0 0 -335 0 -335
Capital Adjustment
---------------------------------------------------------------------------------------------------------------
2001.12.31 (End of the 1,461,721 1,976,650 219,923 -394,810 0 3,263,483
Previous Year)
---------------------------------------------------------------------------------------------------------------
2002.1.1.(Beginning of the 1,461,721 1,976,650 219,923 -394,810 0 3,263,484
Previous Year)
---------------------------------------------------------------------------------------------------------------
Issuance of new stock for 85 -25 0 0 0 60
cash of Controlling Company
---------------------------------------------------------------------------------------------------------------
Subsidiaries' Issuance of 0 730 0 0 0 730
new stock for cash
---------------------------------------------------------------------------------------------------------------
Subsidiaries' Acquisition 0 -62,939 0 0 0 -62,939
of treasury
---------------------------------------------------------------------------------------------------------------
Merger between Subsidiaries 0 -40,110 0 0 0 -40,110
---------------------------------------------------------------------------------------------------------------
Other Changes in 0 13,402 0 0 0 13,402
Consolidated Capital Surplus
---------------------------------------------------------------------------------------------------------------
Consolidated Net Income 0 0 602,163 0 0 602,163
---------------------------------------------------------------------------------------------------------------
Dividends 0 0 -150,812 0 0 -150,812
---------------------------------------------------------------------------------------------------------------
Changes in Retained 0 0 -511 0 0 -511
Earnings of Subsidiaries
---------------------------------------------------------------------------------------------------------------
Changes in Capital 0 0 0 15,013 0 15,013
Adjustment
---------------------------------------------------------------------------------------------------------------
Net Loss in Minority 0 0 0 0 -4,419 -4,419
Interests
---------------------------------------------------------------------------------------------------------------
Other Changes in Minority 0 0 0 0 325,306 325,306
Interests
---------------------------------------------------------------------------------------------------------------
2002.12.31.(End of the 1,461,806 1,887,708 670,763 -379,797 320,887 3,961,367
Previous Year)
---------------------------------------------------------------------------------------------------------------
-116-
---------------------------------------------------------------------------------------------------------------
CONSOLIDATED CONSOLIDATED
CAPITAL CONSOLIDATED RETAINED CAPITAL MINORITY
DESCRIPTION STOCK CAPITAL SURPLUS EARNINGS ADJUSTMENT INTERESTS TOTAL
---------------------------------------------------------------------------------------------------------------
2003.1.1.(Beginning of the 1,461,806 1,887,708 670,763 -379,797 320,887 3,961,367
Year)
---------------------------------------------------------------------------------------------------------------
Issuance of new stock for 496,724 1,339,756 0 0 0 1,836,480
cash of Controlling Company
---------------------------------------------------------------------------------------------------------------
Other Changes in 0 -26,659 0 0 0 -26,659
Consolidated Capital Surplus
---------------------------------------------------------------------------------------------------------------
Consolidated Net Income 0 0 362,988 0 0 362,988
---------------------------------------------------------------------------------------------------------------
Dividend 0 0 -157,493 0 0 -157,493
---------------------------------------------------------------------------------------------------------------
Changes in Retained 0 0 -4,205 0 0 -4,205
Earnings of Subsidiaries
---------------------------------------------------------------------------------------------------------------
Changes in Consolidated 0 0 0 -139,565 0 -139,565
Capital Adjustment
---------------------------------------------------------------------------------------------------------------
Net Income in Minority 0 0 0 0 14,044 14,044
Interests
---------------------------------------------------------------------------------------------------------------
Other Changes in Minority 0 0 0 0 260,674 260,674
Interests
---------------------------------------------------------------------------------------------------------------
2003.12.31.(End of the Year) 1,958,530 3,200,805 872,053 -519,362 595,605 6,107,631
---------------------------------------------------------------------------------------------------------------
(4) Consolidated Statements of Cash Flow
Consolidated Statements of Cash Flows
The 3rd Fiscal Year (January 1, 2003 ~ December 31, 2003)
The 2nd Fiscal Year (January 1, 2002 ~ December 31, 2002)
The 1st Fiscal Year (September 1, 2001
(Date of Incorporation) ~ December 31, 2001)
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
I. Cashflows from Operating Activities 1,497,636 1,544,032 214,793
---------------------------------------------------------------------------------------------------------------
1. Consolidate Net Income for the Period 362,988 602,163 220,763
---------------------------------------------------------------------------------------------------------------
2. Addition of expense not involving cash outflows 3,321,059 742,297 693,905
---------------------------------------------------------------------------------------------------------------
a. Other Interest Expenses 364,953 21,952
---------------------------------------------------------------------------------------------------------------
b. Depreciation 139,486 89,064 55,753
---------------------------------------------------------------------------------------------------------------
c. Depreciation of Operating Lease Properties 35,165 28,225
---------------------------------------------------------------------------------------------------------------
d. Amortization on Intangible Assets 43,269 12,328 28
---------------------------------------------------------------------------------------------------------------
e. Bad Debt 1,150,491 192,690 384,443
---------------------------------------------------------------------------------------------------------------
g. Provision for Other Allowance 6,151 29,296
---------------------------------------------------------------------------------------------------------------
h. Retirement Allowance 46,003 73,657 29,459
---------------------------------------------------------------------------------------------------------------
-117-
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
i. Loss on Disposition of Marketable Securities 111,004 69,901 51,030
---------------------------------------------------------------------------------------------------------------
j. Loss on Valuation of Marketable Securities 53,776 16,280 12,648
---------------------------------------------------------------------------------------------------------------
k. Loss on Disposition of Investment Securities 33,104 100,705 39,308
---------------------------------------------------------------------------------------------------------------
l. Loss on Valuation of Investment Securities 103,110 109,279 26,405
---------------------------------------------------------------------------------------------------------------
m. Loss on Valuation of Fund-Invested Money 10,991
---------------------------------------------------------------------------------------------------------------
n. Loss on Valuation of Equity Method 414 3,246
---------------------------------------------------------------------------------------------------------------
o. Loss on Disposition of Tangible Assets 2,282 394 137
---------------------------------------------------------------------------------------------------------------
p. Loss on Disposal of Operating Lease Properties 4,385 3,443
---------------------------------------------------------------------------------------------------------------
q. Loss on Foreign Currency Trading 133,250 3,645 30,784
---------------------------------------------------------------------------------------------------------------
r. Losses on Redemption of Debentures 476 807
---------------------------------------------------------------------------------------------------------------
s. Allowance for Possible Losses of Acceptances and 3,268
Guarantees
---------------------------------------------------------------------------------------------------------------
t. Loss on Derivatives Trading 836,379 968 18,967
---------------------------------------------------------------------------------------------------------------
u. Stock Option 10,911 3,718 735
---------------------------------------------------------------------------------------------------------------
v. Other Miscellaneous Operating Expenses 1,637 2,729
---------------------------------------------------------------------------------------------------------------
w. Other Selling and Administrative Expenses 1,215
---------------------------------------------------------------------------------------------------------------
x. Loss on Sale of Loans 169,786 7,815
---------------------------------------------------------------------------------------------------------------
y. Amortization of Present Value Premium 24,770
---------------------------------------------------------------------------------------------------------------
z. Increase in Policy Reserve 37,103
---------------------------------------------------------------------------------------------------------------
aa.Net Income in Minority Interest 14,044
---------------------------------------------------------------------------------------------------------------
3. Deduction of revenues not involving cash inflows -1,586,820 -236,915 -390,191
---------------------------------------------------------------------------------------------------------------
a. Other Interest Income 12,318
---------------------------------------------------------------------------------------------------------------
b. Gain on Sale of Marketable Securities 133,377 89,965 67,644
---------------------------------------------------------------------------------------------------------------
c. Gain on Valuation of Marketable Securities 32,063 4,238 296
---------------------------------------------------------------------------------------------------------------
d. Gain on Sale of Investment Securities 89,579 84,089 49,963
---------------------------------------------------------------------------------------------------------------
e. Recovery of Investment Securities Impairment Loss 15,562 14,192 17,385
---------------------------------------------------------------------------------------------------------------
f. Gain on Valuation of Fund-Invested Money 8,613 4,654
---------------------------------------------------------------------------------------------------------------
g. Reversal of Allowance for Bad Debts 21,338 2,022 799
---------------------------------------------------------------------------------------------------------------
h. Gain on Sale of Loans 3,684 11,636 1,880
---------------------------------------------------------------------------------------------------------------
i. Gain on Disposition of Tangible Assets 28,879 788 77
---------------------------------------------------------------------------------------------------------------
j. Gain on Disposal of Property under Operating Lease 7,232 2,105
---------------------------------------------------------------------------------------------------------------
k. Amortization on Negative Goodwill 685 514 123,543
---------------------------------------------------------------------------------------------------------------
l. Reversal of Acceptance and Guarantees Allowance 35,258 9,418
---------------------------------------------------------------------------------------------------------------
m. Gain on Derivatives Trading 858,478 1,271 34,900
---------------------------------------------------------------------------------------------------------------
n. Commissions Received 8
---------------------------------------------------------------------------------------------------------------
o. Gain on Foreign Currency Trading 251,744 3,645 75,523
---------------------------------------------------------------------------------------------------------------
p. Other Miscellaneous Operating Income 16,675 1,201
---------------------------------------------------------------------------------------------------------------
q. Net Loss in Minority Interest) 4,419
---------------------------------------------------------------------------------------------------------------
r. Reversal of Present Value Discounts 19,106
---------------------------------------------------------------------------------------------------------------
s. Amortization of Withholdings Premium 38,844
---------------------------------------------------------------------------------------------------------------
-118-
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
t. Amortization of debenture premium 28,253
---------------------------------------------------------------------------------------------------------------
u. Reversal of Other Allowance Accounts 3,653
---------------------------------------------------------------------------------------------------------------
v. Gain on Valuation Using Equity Method 2,410
---------------------------------------------------------------------------------------------------------------
4. Change in assets and liabilities resulting from -599,591 436,486 -309,685
operations
---------------------------------------------------------------------------------------------------------------
a. Decrease (Increase) in Accounts Receivables 1,152,210 1,062,000 -719,835
---------------------------------------------------------------------------------------------------------------
b. Decrease (Increase) in Advance Payments -294,515 19,771 -202,589
---------------------------------------------------------------------------------------------------------------
c. Decrease (Increase) in Prepaid Expenses 5,734 -9,201 15,925
---------------------------------------------------------------------------------------------------------------
d. Prepaid Expenses in Prepaid Income Taxes -10,720 -801 -2
---------------------------------------------------------------------------------------------------------------
e. Decrease in Accrued Income 97,841 156,116 79,555
---------------------------------------------------------------------------------------------------------------
f. Increase in Deferred Income Tax Assets 35,121 -50,151 -6,614
---------------------------------------------------------------------------------------------------------------
g. Payment of Severance Benefits -29,114 -60,720 -9,919
---------------------------------------------------------------------------------------------------------------
h. Increase in Deposits with Insurance Company for Severance -27,292 -12,492 -32,613
Benefits
---------------------------------------------------------------------------------------------------------------
i. Decrease (Increase) in Transfer to National Pension 551 2,125 -11
---------------------------------------------------------------------------------------------------------------
j. Increase (Decrease) in Accounts Payable -1,245,009 -1,145,478 653,271
---------------------------------------------------------------------------------------------------------------
k. Decrease in Accrued Expenses -326,919 -106,901 -49,276
---------------------------------------------------------------------------------------------------------------
l. Increase (decrease) in Accrued Income Taxes -74,519 162,463 -8,401
---------------------------------------------------------------------------------------------------------------
m. Increase(Decrease) in Advance Receipts 89,059 -2,228 5,513
---------------------------------------------------------------------------------------------------------------
n. Increase (Decrease) in Unearned Revenue -19,910 5,971 -37,390
---------------------------------------------------------------------------------------------------------------
o. Increase in Taxes Withheld 42,625 34,807 351
---------------------------------------------------------------------------------------------------------------
p. Increase (Decrease) in Deferred income tax credits -228 -33,409 2,351
---------------------------------------------------------------------------------------------------------------
q. Decrease in Trading Securities 5,494
---------------------------------------------------------------------------------------------------------------
II Cashflows from Investing Activities -6,472,550 9,903,317 -1,319,339
---------------------------------------------------------------------------------------------------------------
1. Cash inflows from investing 24,010,832 3,067,539 2,809,632
activities
---------------------------------------------------------------------------------------------------------------
a. Decrease in Marketable Securities 384,614 428,390
---------------------------------------------------------------------------------------------------------------
b. Disposition of Investment Securities 16,274,371 1,390,229 60,241
---------------------------------------------------------------------------------------------------------------
c. Decrease in Loans in Won 59,159
---------------------------------------------------------------------------------------------------------------
d. Decrease in Loans in Foreign Currency 13,059
---------------------------------------------------------------------------------------------------------------
e. Decrease in Domestic Import Usance Bills 3,634
---------------------------------------------------------------------------------------------------------------
f. Decrease in Call Loans - 1,359,616 297,207
---------------------------------------------------------------------------------------------------------------
g. Decrease in Bills Bought in Won 556,753
---------------------------------------------------------------------------------------------------------------
h. Decrease in Bills Bought in Foreign Currency 640,197 285,276
---------------------------------------------------------------------------------------------------------------
i. Decrease in Advances for Customers 64,798 23,931 21,224
---------------------------------------------------------------------------------------------------------------
j. Decrease in Bonds Bought under Resale Agreements 684,700 6,631 83,700
---------------------------------------------------------------------------------------------------------------
k. Decrease in Factoring Loans 863
---------------------------------------------------------------------------------------------------------------
l. Decrease in Loans for Debt-Equity Swap 156,951 118,851
---------------------------------------------------------------------------------------------------------------
m. Decrease in Financing Lease Receivables 188,213 215,052
---------------------------------------------------------------------------------------------------------------
n. Decrease in Other Loans - 7,227 8,956
---------------------------------------------------------------------------------------------------------------
o. Disposition of Tangible Assets 610,680 80,636 42,305
---------------------------------------------------------------------------------------------------------------
-119-
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
p. Disposition of Intangible Assets 1,090 35
---------------------------------------------------------------------------------------------------------------
q. Disposition of Non-Business Use Fixed Assets 1,821
---------------------------------------------------------------------------------------------------------------
r. Disposition of Other Fixed Assets 653
---------------------------------------------------------------------------------------------------------------
s. Disposition of Operating Lease Properties 23,587 9,165
---------------------------------------------------------------------------------------------------------------
t. Decrease in Guarantee Deposits 90,987 69,593 70
---------------------------------------------------------------------------------------------------------------
u. Decrease in Loan to Trust Account 712,318
---------------------------------------------------------------------------------------------------------------
v. Decrease in Sundry Assets 944,806 12,260
---------------------------------------------------------------------------------------------------------------
w. Increase in Derivative Liabilities 8,316
---------------------------------------------------------------------------------------------------------------
x. Decrease in Investment Securities 2,197,657
---------------------------------------------------------------------------------------------------------------
y. Decrease in Credit Card Accounts 1,883,623
---------------------------------------------------------------------------------------------------------------
z. Decrease in Cash Management Accounts 249,172
---------------------------------------------------------------------------------------------------------------
2. Cash outflows from investing -30,483,382 -12,970,857 -4,128,970
activities
---------------------------------------------------------------------------------------------------------------
a. Increase in Marketable Securities 8,238
---------------------------------------------------------------------------------------------------------------
b. Increase in Investment Securities 20,427,161 1,974,920 497,375
---------------------------------------------------------------------------------------------------------------
c. Increase in Loans in Won 5,507,202 7,338,497 2,699,350
---------------------------------------------------------------------------------------------------------------
d. Increase in Loans in Foreign Currency 483,464 378,299 55,600
---------------------------------------------------------------------------------------------------------------
e. Increase in Domestic Import Usance Bills 423,431 1,143,729
---------------------------------------------------------------------------------------------------------------
f. Increase in Call Loans 295,439 225,191
---------------------------------------------------------------------------------------------------------------
g. Increase in Bills Bought in Won 141,232 101,410
---------------------------------------------------------------------------------------------------------------
h. Increase in Bills Bought in Foreign Currency - 385,243 1,359
---------------------------------------------------------------------------------------------------------------
i. Increase in Advances for Customers - 7,693
---------------------------------------------------------------------------------------------------------------
j. Increase in Credit Card Accounts - 622,193 335,004
---------------------------------------------------------------------------------------------------------------
k. Increase in Bonds Bought under Resale Agreements - 231
---------------------------------------------------------------------------------------------------------------
l. Increase in Privately Placed Bonds 669,261 307,481 103,634
---------------------------------------------------------------------------------------------------------------
m. Increase in Factoring Receivables 18,964 31,810 10,913
---------------------------------------------------------------------------------------------------------------
n. Increase in Financing Lease Receivables - 61,065 63,897
---------------------------------------------------------------------------------------------------------------
o. Increase in Terminated Financing Lease Receivables - 10,939
---------------------------------------------------------------------------------------------------------------
p. Increase in Other Loans 173 256
---------------------------------------------------------------------------------------------------------------
q. Increase in Investments - 1,569
---------------------------------------------------------------------------------------------------------------
r. Increase in Tangible Assets 724,345 204,780 105,776
---------------------------------------------------------------------------------------------------------------
s. Increase in Intangible Assets 9,870 6,821 232
---------------------------------------------------------------------------------------------------------------
t. Increase in Operating Lease Properties 34,693 87,349 2,796
---------------------------------------------------------------------------------------------------------------
u. Increase in Guarantee Deposits 109,784 88,524 4,659
---------------------------------------------------------------------------------------------------------------
v. Increase in Derivative Assets - 27,549
---------------------------------------------------------------------------------------------------------------
w. Increase in Sundry Assets 1,049,322 198,679 6,764
---------------------------------------------------------------------------------------------------------------
x. Decrease in Derivative Liabilities 589,041
---------------------------------------------------------------------------------------------------------------
III. Cashflows from Financing Activities 6,194,314 8,146,681 845,465
---------------------------------------------------------------------------------------------------------------
1. Cash inflows from financing 41,132,762 35,014,972 4,897,378
activities
---------------------------------------------------------------------------------------------------------------
-120-
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
a. Increase in Deposits in Won 1,806,760 2,437,289 1,768,628
---------------------------------------------------------------------------------------------------------------
b. Increase in Deposits in Foreign Currency 1,087,676 284,080 486,643
---------------------------------------------------------------------------------------------------------------
c. Increase in Negotiable certificate of deposits 1,186,446 79,615
---------------------------------------------------------------------------------------------------------------
d. Increase in Borrowings in Won 13,829,740 10,523,052 260,320
---------------------------------------------------------------------------------------------------------------
e. Increase in Borrowings in Foreign Currency 8,861,502 9,618,190 1,477
---------------------------------------------------------------------------------------------------------------
f. Increase in Bonds Sold under Repurchase Agreements 4,856,950 406,675 54,432
---------------------------------------------------------------------------------------------------------------
g. Increase in Due to Bank of Korea in Foreign Currency 580,663
---------------------------------------------------------------------------------------------------------------
h. Increase in Call Money 45,000
---------------------------------------------------------------------------------------------------------------
i. Issuance of Debentures in Won Currency 6,808,337 6,384,522 805,575
---------------------------------------------------------------------------------------------------------------
j. Issuance of Debentures in Foreign Currency 646,465 447,906
---------------------------------------------------------------------------------------------------------------
k. Increase in Borrowings from Trust Accounts 638,249
---------------------------------------------------------------------------------------------------------------
l. Increase in Securities Sold 6,755 441,324
---------------------------------------------------------------------------------------------------------------
m. Increase in Deposits for Letter of Guarantees and Others 54,538 3,589,815 23,378
---------------------------------------------------------------------------------------------------------------
n. Increase in Foreign Exchange Remittances Pending 76,633
---------------------------------------------------------------------------------------------------------------
o. Increase in Sundry Liabilities 1,056,765 637,296 137,350
---------------------------------------------------------------------------------------------------------------
p. Issuance of new stock for cash 2,007 1
---------------------------------------------------------------------------------------------------------------
q. Sale of Treasury Stock 1 3,176 155,387
---------------------------------------------------------------------------------------------------------------
r. Increase in Minority Interest -
---------------------------------------------------------------------------------------------------------------
s. Disposal of Capital Stock of Subsidiaries 23,668
---------------------------------------------------------------------------------------------------------------
t. Issuance of Common Stock 27,648
---------------------------------------------------------------------------------------------------------------
u. Issuance of Preferred Stock 900,000
---------------------------------------------------------------------------------------------------------------
v. Increase in Deposits for Stock Subscription 3,179
---------------------------------------------------------------------------------------------------------------
2. Cash outflows from financing activities -34,938,448 -26,868,291 -4,051,912
---------------------------------------------------------------------------------------------------------------
a. Decrease in Deposits in Won 55,121
---------------------------------------------------------------------------------------------------------------
b. Decrease in Deposits in Foreign Currency 130,504
---------------------------------------------------------------------------------------------------------------
c. Decrease in Negotiable certificate of deposits 93,561
---------------------------------------------------------------------------------------------------------------
d. Decrease in Borrowings in Won 12,720,479 10,973,617 1,365,816
---------------------------------------------------------------------------------------------------------------
e. Decrease in Borrowings in Foreign Currency 9,459,701 8,152,056 318,157
---------------------------------------------------------------------------------------------------------------
f. Decrease in Bonds Sold under Repurchase Agreements 5,963,184 194,359
---------------------------------------------------------------------------------------------------------------
g. Decrease in Bills Sold 64,703 51,469 620,114
---------------------------------------------------------------------------------------------------------------
h. Decrease in Due to Bank of Korea in Foreign Currency 17,117 645,126 21,487
---------------------------------------------------------------------------------------------------------------
i. Decrease in Call Money 446,667 146,524 382,774
---------------------------------------------------------------------------------------------------------------
j. Redemption of Debentures in Won Currency 5,553,602 1,965,899 27,807
---------------------------------------------------------------------------------------------------------------
k. Redemption of Debentures in Foreign Currency 201,666 347,213 222,817
---------------------------------------------------------------------------------------------------------------
l. Decrease in Allowance for Possible Losses of Acceptances 7,800
and Guarantees
---------------------------------------------------------------------------------------------------------------
m. Decrease in Borrowings from Trust Accounts 242,957 378,767
---------------------------------------------------------------------------------------------------------------
n. Decrease in Foreign Exchange Remittances Pending 77,581 19,876
---------------------------------------------------------------------------------------------------------------
o. Decrease in Securities Sold 12,461 428,867
---------------------------------------------------------------------------------------------------------------
p. Decrease in Deposits for Letter of Guarantees and Others 3,556,324 10,301
---------------------------------------------------------------------------------------------------------------
-121-
---------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD FY 2ND FY 1ST FY
---------------------------------------------------------------------------------------------------------------
q. Decrease in Deposits for Stock Subscription 21,710 240,831
---------------------------------------------------------------------------------------------------------------
r. Decrease in Sundry Liabilities 4,797
---------------------------------------------------------------------------------------------------------------
s. Disbursement of Dividend Payables 159,616 150,359 484
---------------------------------------------------------------------------------------------------------------
t. Acquisition of Treasury 26 373,180
---------------------------------------------------------------------------------------------------------------
u. Cash Outflows from Stock Swap on a Small Scale 26
---------------------------------------------------------------------------------------------------------------
v. Disbursement of Debentures Expenses 9,541
---------------------------------------------------------------------------------------------------------------
w. Disbursement of Stock issue costs 21,608
---------------------------------------------------------------------------------------------------------------
IV. Increase (Decrease) in Cash ([ ]+ [ ]+ [ ]) 3,571,146 490,989 -259,081
---------------------------------------------------------------------------------------------------------------
V. Increase in Cash from Change of Scope subject to 2,351,746 703,594 2,615,226
Consolidated Financial Statements
---------------------------------------------------------------------------------------------------------------
VI. Cash at Beginning of the Year 2,847,134 2,356,145 -
---------------------------------------------------------------------------------------------------------------
VII. Cash at End of the Year 6,418,280 2,817,134 2,356,145
---------------------------------------------------------------------------------------------------------------
D. Companies Excluded from the Consolidated Financial Statements
As of the end of 2003: e-Shinhan Inc., Shinhan Credit Information
Co., Ltd, Shinhan Macquarie Financial Advisory Co., Ltd.
(from among the subsidiaries)
5. Financial Status per Business Division
- N/A
IV. AUDITOR'S OPINION
1. AUDITOR'S (CPA) OPINION. ETC.
A. Auditor
4TH FY (SEMI-ANNUAL) 3RD FY (SEMI-ANNUAL) 3RD FY 2ND FY
-----------------------------------------------------------------------------------------------------
Samjong Accounting Corp. Samjong Accounting Corp. Samjong Accounting Corp. Ahnkwon Co., Ltd.
-----------------------------------------------------------------------------------------------------
B. Auditor's Opinion
FISCAL YEAR AUDITOR'S OPINION AND OTHER COMMENTS
-------------------------------------------------------------------------------------------
4TH FY (SEMI-ANNUAL) Unqualified opinion
-------------------------------------------------------------------------------------------
3RD FY (SEMI-ANNUAL) Unqualified opinion
-------------------------------------------------------------------------------------------
3RD FY Unqualified opinion
-------------------------------------------------------------------------------------------
2ND FY Unqualified opinion
-------------------------------------------------------------------------------------------
C. Summary of Particular Comments
-122-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
(1) Changes in Subsidiary
As described in Note 1 to the semi-annual
financial statements, the Company resolved a
tender off of stock and the share swap to include
Chohung Bank, a subsidiary of the Company as its
wholly-owned subsidiary through the resolution of
the Board of Directors Meeting on April 12, 2004.
Pursuant thereto, through the public notice on
April 20, 2004, the Company made a tender offer of
shares representing 3.77% among 18.85% of
ownership interest, at KRW 3,500 per share for the
period from April 26, 2004 to May 17, 2004. The
Company made an off-setting purchase of 15.08% of
ownership interest at the price of KRW 3,067 per
share from May 25, 2004 to June 3, 2004 through
the resolution of the extraordinary general
meeting of shareholders of Chohung Bank on May 24,
2004. Also the Company completed the share swap
(swap rate: 1 share of Chohung Bank to 0.1354
share of the Company) of the remaining shares on
June 22, 2004. Thus, Chohung Bank was classified
as a wholly-owned subsidiary. Pursuant to the
share swap of the shares subject to the exercise
of appraisal right of the shareholders of Chohung
Bank who opposed to the share swap (66,363,126
shares on the basis of the shares of Chohung
Bank), Chohung Bank held 8,985,567 shares of
common stock in the Company. In addition, the
Company terminated the joint alliance in the
credit information sector with LSH Holdings and
acquired 49% of the ownership interest in Shinhan
Credit Information Co., Ltd. held by LSH Holdings
on May 21, 2004 and it became a wholly-owned
4TH FY (SEMI-ANNUAL) subsidiary of the Company.
(2) Credits and Securities for LG Card Co., Ltd.
As described in Note 4 to the semi-annual
financial statements, as of the end of this half,
Shinhan Bank and Chohung Bank, the subsidiaries,
are holding loans provided to and securities
issued by LG Card Co., Ltd., which has been
controlled by creditor banks due to its liquidity
crisis, amounting to KRW 273,517 million and KRW
235,408 million, respectively. Actual amount of
collection from these loans and securities may
differ from the management's assessments. The
impact of the uncertainty on the financial
position of the Company is not reflected when
applying the equity method to Shinhan Bank and
Chohung Bank. Additionally, Shinhan Bank and
Chohung Bank, the subsidiaries, newly provided
fund amounting to KRW 81,000 million and KRW
73,400 million, respectively, during this period,
and made debt-equity swap on July 28, 2004, after
the balance sheet date.
(3) Loans to SK Networks Held by Subsidiaries
As described in Note 4 to the semi-annual
financial statements, Shinhan Bank and Chohung
Bank, subsidiaries of the Company, are holding
loans (including securities and guarantees and
acceptances) provided to
-123-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
and securities issued by SK Networks Co., Ltd.,
which has been controlled by creditor banks
amounting to KRW 367,257 million and KRW 306,031
million, respectively. As regards to those loans
and securities, they provide allowances for loan
losses amounting to KRW 43,636 million and KRW
42,319 million, respectively. Actual losses on
these loans and securities may differ materially
from the management's assessments. The impact of
the uncertainty on the financial position of the
Company is not reflected when applying the equity
method to Shinhan Bank and Chohung Bank.
(4) Related Party Transaction
As described in Note 8 to the semi-annual
financial statements, the Company recorded KRW
58,502 million of operating revenue (representing
10.61% of the Company's total operating revenue)
for this half through its transactions with
related parties including Shinhan Card Co., Ltd.
and KRW 2,088,179 million of receivables
(representing 23.1% of the Company's total assets)
as of the end of this half.
(5) Disposition of Stock Held by Subsidiaries
As described in Note 1 to the semi-annual
financial statements, on March 3, 2004, Shinhan
Bank, a subsidiary, sold 29,873,295 shares (10.2%)
of total outstanding shares in the Company at KRW
627,339 million (KRW 21,000 per share), through
after-hour block trading.
(6) Change of Accounting
As described in Note 2 to the financial
statements, the Company adopted Statements of
Korea Accounting Standards ("SKAS") Nos. 10, 12
and 13, effective from the first fiscal year
beginning after December 31, 2003, and early
adopted SKAS No. 15, effective from the first
fiscal year beginning after December 31, 2004, to
prepare this semi-annual financial statements. The
annual and semi-annual financial statements for
the prior FY, marked comparatively with this
semi-annual financial statement due to the
application of SKAS No. 15, was reclassified
pursuant to the accounting titles of this
semi-annual financial statement.
(7) Contingent Events
As described in No. 11 to the semi-annual
financial statements, on July 9, 2003, the Company
made an agreement with the Korea Deposit Insurance
Corporation ("KDIC") to acquire 543,570,144 shares
(80.04% of total outstanding shares) in Chohung
Bank. In accordance with the agreement, the
Company purchased 266,349,371 shares among the
total number of shares in exchange for the
Company's shares on August 18, 2003 and the
remaining 277,220,773 shares in cash on August 19,
2003. The acquisition of the aforementioned shares
was accounted for using the purchase method, and
the acquisition cost of the shares and goodwill
were KRW 1,857,983 million and KRW
-124-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
840,244 million, respectively. Additionally, with
respect to the foregoing acquisition, there is a
provision of paying the contingent purchase prices
to the KDIC related to changes of fair value of
Chohung Bank's assets and liabilities and its
profit and loss in the future. Accordingly, the
Company would be required to pay contingent
purchase prices to the KDIC at the maximum amount
of KRW 652,284 million related to Asset Indemnity
Payment, KRW 166,516 million related to General
Indemnity Payment and additional Earn Out Payment
based on net income of Chohung Bank in future
periods. These contingent purchase prices are not
included in the acquisition cost on the date of
acquisition, for the possibility of occurrence or
the amount of the contingent purchase is not
reasonably determinable or quantified.
-------------------------------------------------------------------------------------
(1) Changes in Subsidiary
As described in Note 1 to the semi-annual
financial statements, on June 18, 2003, the
Company sold 294,000 shares (49%) in Shinhan
Credit Information Co., Ltd. to LSH Holdings.
(2) Change of Accounting
As described in Note 1 to the semi-annual financial
statements, the Company adopted SKAS No. 2 through
No. 9 in preparing this semi-annual financial
statements, as it is obligated to apply from this
half of FY. Such change of accounting policy seems
reasonable, while, SKAS No. 6 "Events Occurring
after the Balance Sheet Date" has been adopted
since the prior year with encouraged earlier
application. The cumulative effect on the assets
or liabilities due to the change of accounting
standards was reflected to the un-appropriated
retained earning carried over from prior years.
The financial statements for the prior FY, marked
comparatively, was classified pursuant to the
existing standards and the change was not applied
retroactively, unless specifically required by the
amended standards.
(3) Loans to SK Global Co., Ltd. Held by Subsidiaries
As described in Note 4 to the semi-annual financial
statements, Shinhan Bank, a subsidiary of the
Company, is holding loans (including securities
and guarantees and acceptances) provided to and
securities issued by SK Global Co., Ltd. amounting
3RD FY (SEMI-ANNUAL) to KRW 505,532 million. As regards to those loans
and securities, Shinhan Bank provides KRW 223,678
million of allowance for loan losses and recorded
KRW 4,677 million of impairment loss on
available-for-sale securities, in accordance with
the standards for provision of allowances of Shinhan
Bank. Actual losses on these loans and
securities may differ materially from the
management's assessments. The impact of the
uncertainty on the financial position of the
Company is not reflected when applying the equity
method to Shinhan Bank.
-125-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
(4) Related Party Transaction
As described in Note 9 to the semi-annual
financial statements, the Company recorded KRW
42,280 million of operating revenue (representing
27.1% of the Company's total operating revenue)
for this half through its transactions with
related parties including Shinhan Card Co., Ltd.
and KRW 2,045,723 million of receivables
(representing 34.3% of the Company's total assets)
as of the end of this half year.
(5) Major Events after Interim Financial Statement Date
As described in Note 24 to the semi-annual
financial statements, the Company resolved to
acquire 543,570,144 shares of Chohung Bank (80.04%
of total outstanding shares) at the price of
maximum KRW 6,200 per share, through the
resolution of the Board of Directors Meeting on
June 21, 2003. On July 9, 2003, the Company
executed a share purchase agreement with the Korea
Deposit Insurance Corporation.
-------------------------------------------------------------------------------------
(1) Changes in Subsidiary
As described in Notes 1 and 5 to the quarterly
financial statements, on July 9, 2003, the Company
made an agreement with the Korea Deposit Insurance
Corporation ("KDIC") to acquire 543,570,144 shares
(80.04% of total outstanding shares) in Chohung
Bank. In accordance with the agreement, the
Company purchased 266,349,371 shares among the
total number of shares in exchange for the
Company's shares on August 18, 2003 and the
remaining 277,220,773 shares in cash on August 19,
2003. The acquisition of the aforementioned shares
was accounted for using the purchase method, and
the acquisition cost of the shares and goodwill
were KRW 1,856,593 million and KRW 803,589
3RD FY million, respectively. Additionally, with respect
to the foregoing acquisition, there is a provision
of paying additional considerations to the KDIC
related to changes of fair value of Chohung Bank's
assets and liabilities and its profit and loss in
the future. Accordingly, the Company would be
required to pay contingent consideration to the
KDIC at the maximum amount of KRW 652,284 million
related to Asset Indemnity Payment, KRW 166,516
million related to General Indemnity Payment and
additional Earn Out Payment based on earnings of
Chohung Bank in future periods. These contingent
considerations are not included in the acquisition
cost on the date of acquisition, for the
possibility of occurrence or the amount is not
reasonably determinable or quantified. In
addition, on June 18, 2003, the Company sold
294,000 shares (49%) in Shinhan Credit Information
Co., Ltd. to LSH Holdings LLC.
(2) Listing on the New York Stock Exchange
As described in Note 1 to the quarterly financial
statements, the Company was registered with the
U.S. Securities and Exchange Commission on
September 16, 2003 and the Company's American
-126-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
Depository Shares were listed on the New York
Stock Exchange on the same day.
(3) Loans to SK Networks (Formerly known as SK Global Co., Ltd.)
Held by Subsidiaries
As described in Note 4 to the quarterly financial
statements, Shinhan Bank and Chohung Bank,
subsidiaries of the Company, are holding loans
(including securities and guarantees and
acceptances) provided to and securities issued by
SK Networks Co., Ltd. (formerly known as SK Global
Co., Ltd.) amounting to KRW 473,912 million and
KRW 346,332 million, respectively, as of the end
of this quarter. As regards to those loans and
securities, Shinhan Bank provides KRW 225,430
million of allowance for loan losses and recorded
KRW 4,768 million of impairment loss on
available-for-sale securities, and Chohung Bank
provides KRW 133,498 million of allowance for loan
losses. Actual losses on these loans and
securities may differ materially from the
management's assessments. The impact of the
uncertainty on the financial position of the
Company is not reflected when applying the equity
method to Shinhan Bank and Chohung Bank.
(4) Credits and Securities for Credit Card
Companies Including LG Card Co., Ltd.
As described in Note 4 to the financial
statements, Shinhan Bank, Chohung Bank and Good
Morning Shinhan Securities Co., Ltd. are holding
loans provided to and securities issued by LG Card
Co., Ltd., which has been controlled by creditor
banks due to its liquidity crisis, amounting to
KRW 189.3 billion, KRW 172.9 billion and KRW 22.6
billion, respectively as of December 31, 2003.
Actual losses on these loans and securities may
differ materially from the management's
assessments. The impact of the uncertainty on the
financial position of the Company is not reflected
when applying the equity method to the foregoing
subsidiaries. Additionally, Shinhan Bank and
Chohung Bank have agreed with creditor banks to
provide additional capital, amounting to KRW 81.3
billion and KRW 73.4 billion, respectively.
(5) Related Party Transaction
As described in Note 10 to the non-consolidated
financial statements, the Company recorded KRW
97,787 million of operating revenue (representing
20.1% of the Company's total operating revenue)
for the year ended December 31, 2003 through its
transactions with related parties including
Shinhan Card Co., Ltd. and KRW 1,976,841 million
of receivables (representing 23.8% of the
Company's total assets) as of December 31, 2003.
(6) Transactions after the Balance Sheet Date
As described in Note 1 to the financial
statements, on March 3, 2004,
-127-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
Shinhan Bank, a subsidiary, sold 29,873,295 shares
(10.2%) of total outstanding shares in the Company
at KRW 627,339 million (KRW 21,000 per share),
through after-hour block trading.
(7) Change of Accounting
As described in Note 2 to the financial
statements, the Company adopted Statements of
Korea Accounting Standards ("SKAS") Nos. 2 through
9, effective from the first fiscal year beginning
after December 31, 2002, while, SKAS No. 6,
"Events Occurring after the Balance Sheet Date"
has been adopted since the year ended December 31,
2002 with encouraged earlier application.
-------------------------------------------------------------------------------------
2ND FY (1) Changes in Subsidiary
As described in Note 1 to the financial
statements, on April 4, 2002, the Company took
over a 51% share of Jeju Bank from the Korea
Deposit Insurance Corporation ("KDIC") pursuant to
the share purchase agreement with the KDIC and its
percentage of ownership subsequently increased to
62% with the acquisition of additional common
shares at KRW 20,177 million on July 5th of the
same year. In addition, on June 1, 2002, Shinhan
Card Co., Ltd. was established as 100% subsidiary
of the Company through the spin-off of Shinhan
Bank's credit card division, and on July 8, 2002,
Shinhan Credit Information Co., Ltd. was
established as a 100% subsidiary of the Company
with KRW 3 billion of initial capital stock. On
October 1, 2002, SH&C Life Insurance Co., Ltd. was
established under a joint venture agreement with
KRW 30 billion of initial capital stock and the
Company owns 3,000,001 shares (50% of total
outstanding shares + 1 share). Additionally, on
June 18, 2002, the Company acquired a 29% share of
Good Morning Securities Co., Ltd., and on July 31,
2002, Good Morning Securities Co., Ltd. was merged
with Shinhan Securities Co., Ltd., which was one
of subsidiaries of the Company, at the exchange
rate of 1.9976 Good Morning Securities Co., Ltd.
shares for each Shinhan Securities Co., Ltd.
share, and renamed to Good Morning Shinhan
Securities Co., Ltd. In addition, on October 24,
2002, the Company sold 3,999,999 shares (50% of
total outstanding shares - 1 share) of Shinhan BNP
Paribas Investment Trust Management Co., Ltd.
(formerly known as Shinhan Investment Trust
Management Co., Ltd.) to BNP Paribas Asset
Management.
(2) Use of Other Reports When Applying the Equity Method
As described in Note 4 to the financial
statements, the Company used the financial
statements that were reviewed or audited by other
accountants in applying the equity method of
accounting to Good Morning Shinhan Securities Co.,
Ltd. and Jeju Bank. Those statements reflect total
investment securities and operating revenues upon
the equity method of accounting as KRW 578,258
million (12.1% of total assets of the Company) and
KRW 5,934 million (1.0% of total
-128-
ACCOUNTING PERIOD PARTICULAR COMMENTS (OR REFERENCES)
-------------------------------------------------------------------------------------
operating revenue of the Company).
(3) Loans to SK Networks (Formerly known as
SK Global Co., Ltd.) Held by Subsidiary
As described in Note 4 to the financial
statements, Shinhan Bank, a subsidiary,
is holding KRW 461,867 million of loans
(including guarantees and acceptances)
provided to SK Global Co., Ltd. that
recently confirmed its accounting fraud.
Actual losses on these loans in the
future may differ materially from the
management's assessments. The financial
statements do not reflect the impact of
the uncertainty on the financial position
of the Company, for the equity method of
accounting.
(4) Related Party Transaction
As described in Note 9 to the financial
statements, the Company recorded KRW 24,670
million of operating revenue for the year then
ended through transactions with its related party
including Shinhan Capital Co., Ltd. and KRW
793,336 million of receivables as of December 31,
2002.
(5) Early Application of the Korea Accounting Standards No. 6
As described in Note 2 to the financial
statements, the Company adopted the Statement of
Korea Accounting Standards (SKAS) No. 6, "Events
Occurring after the Balance Sheet Date", in
preparation for financial statements as of and for
the year ended December 31, 2002. The adoption of
SKAS No. 6 had no effects on earnings for the year
ended December 31, 2002 and resulted in a decrease
in liabilities and an increase in stockholders'
equity, amounting to KRW 157,492 million,
respectively. According to the adoption of the new
statement, the Company amended financial
statements of 1st FY, presented herein for
comparative purposes, and its liabilities
decreased and stockholders' equity increased,
amounting to KRW 150,812 million, respectively.
2. AUDITOR'S OPINION REGARDING CONSOLIDATED BALANCE SHEET
A. Auditor
3RD FY 2ND FY 1ST FY
------------------------------------------------------------------------------------------
Samjong Accounting Corp. Samjong Accounting Corp. Ahnkwon Co., Ltd.
------------------------------------------------------------------------------------------
B. Consolidated Auditor's Opinion
FISCAL YEAR AUDITOR'S OPINION AND OTHER COMMENTS
------------------------------------------------------------------------------------------
3rd FY Unqualified opinion
------------------------------------------------------------------------------------------
2nd FY Unqualified opinion
------------------------------------------------------------------------------------------
1st FY Unqualified opinion
------------------------------------------------------------------------------------------
-129-
C. Summary of Particular Comments
FISCAL YEAR PARTICULAR COMMENTS
-------------------------------------------------------------------------------------------------
3RD FY (1) Changes in Consolidated Subsidiaries and Companies Subject to Equity Method
As described in Notes 1 and 4 to the consolidated financial statements, on
July 9, 2003, the Company made an agreement with the Korea Deposit
Insurance Corporation ("KDIC") to acquire 543,570,144 shares (80.04% of
total outstanding shares) in Chohung Bank. In accordance with the
agreement, the Company purchased 266,349,371 shares among the total number
of shares in exchange for the Company's shares on August 18, 2003 and the
remaining 277,220,773 shares in cash on August 19, 2003. The acquisition
of the aforementioned shares was accounted for using the purchase method,
and the acquisition cost of the shares and goodwill were KRW 1,857,983
million and KRW 840,244 million, respectively. Additionally, with respect
to the foregoing acquisition, there is a provision of paying additional
considerations to the KDIC related to changes of fair value of Chohung
Bank's assets and liabilities and its profit and loss in the future.
Accordingly, the Company would be required to pay contingent consideration
to the KDIC at the maximum amount of KRW 652,284 million related to Asset
Indemnity Payment, KRW 166,516 million related to General Indemnity
Payment and additional Earn Out Payment based on earnings of Chohung Bank
in future periods. These contingent considerations are not included in the
acquisition cost on the date of acquisition, for the possibility of
occurrence or the amount is not reasonably determinable or quantified. On
December 30, 2003, its percentage of ownership subsequently increased to
81.15% through additional equity acquisition at KRW 200,000 million. In
addition, on June 18, 2003, the Company sold 294,000 shares of total
outstanding shares (49%) in Shinhan Credit Information Co., Ltd. to LSH
Holdings LLC.
(2) Listing on the New York Stock Exchange
As described in Note 1 to the consolidated financial statements, the Company
was registered with the U.S. Securities and Exchange Commission on September 16,
2003 and the Company's American Depository Shares were listed on the New York
Stock Exchange on the same day.
(3) Loans to SK Networks (Formerly known as SK Global Co., Ltd.) Held by Subsidiaries
As described in Note 29 to the consolidated financial statements,
Shinhan Bank and Chohung Bank, subsidiaries of the Company, are holding loans
(including securities and guarantees and acceptances) provided to and
securities issued by SK Networks Co., Ltd. (formerly known as SK Global
-130-
FISCAL YEAR PARTICULAR COMMENTS
-------------------------------------------------------------------------------------------------
Co., Ltd.) amounting to KRW 396,058 million and KRW 303,011 million,
respectively as of December 31, 2003. As regards to those loans
and securities, Shinhan Bank provides KRW 110,982 million of
allowance for loan losses and recorded KRW 1,178 million of
impairment loss on available-for-sale securities, and Chohung
Bank provides KRW 93,784 million of allowance for loan losses.
Actual losses on these loans and securities may differ materially
from the management's assessments. The impact of the uncertainty
on the financial position of the Company is not reflected when
applying the equity method to Shinhan Bank and Chohung Bank.
(4) Credits and Securities for Credit Card Companies Including LG Card Co., Ltd.
As described in Note 29 to the consolidated financial statements,
Shinhan Bank, Chohung Bank and Good Morning Shinhan Securities
Co., Ltd. are holding loans provided to and securities issued by
LG Card Co., Ltd., which has been controlled by creditor banks
due to its liquidity crisis, amounting to KRW 189.3 billion, KRW
172.9 billion and KRW 22.6 billion, respectively, as of December
31, 2003. Actual losses on these loans and securities may differ
materially from the management's assessments. The impact of the
uncertainty on the financial position of the Company is not
reflected when applying the equity method to the foregoing
subsidiaries. Additionally, Shinhan Bank and Chohung Bank have
agreed with creditor banks to provide additional capital,
amounting to KRW 81.3 billion and KRW 73.4 billion, respectively.
(5) Transactions after the Balance Sheet Date
As described in Note 1 to the consolidated financial statements,
on March 3, 2004, Shinhan Bank, a subsidiary, sold 29,873,295
shares (10.2%) of total outstanding shares in the Company at KRW
627,339 million (KRW 21,000 per share), through after-hour block
trading.
(6) Change of Accounting
As described in Note 2 to the consolidated financial statements, the
Company adopted Statements of Korea Accounting Standards ("SKAS") Nos. 2
through 9, effective from the first fiscal year beginning after December
31, 2002, while, SKAS No. 6, "Events Occurring after the Balance Sheet Date"
has been adopted since the year ended December 31, 2002 with encouraged
earlier application.
-------------------------------------------------------------------------------------------------
2ND FY (1) Change of Consolidated Companies
As described in Note 1 to the accompanying consolidated financial
statements, on April 4, 2002, the Company took over shares of
Jeju Bank and on June 1, 2002, Shinhan Card Co., Ltd. was
established through the spin-off of Shinhan Bank's credit card
division. Additionally, on June 18, 2002, the Company acquired
shares of Good Morning Securities Co., Ltd., and on July 31,
2002, Good Morning Securities Co., Ltd. was merged with
-131-
FISCAL YEAR PARTICULAR COMMENTS
-------------------------------------------------------------------------------------------------
Shinhan Securities Co., Ltd (renamed to Good Morning Shinhan
Securities Co., Ltd. after such merger). On October 1, 2002, SH&C
Life Insurance Co., Ltd. was established under the joint venture
agreement. According to the change of consolidated companies
mentioned above, assets, capital, operating income and net
earnings as of and for the year ended December 31, 2002 increased
by KRW 3,401,577 million, KRW 722,190 million, KRW 469,421
million and KRW 246 million, respectively than when the
consolidated companies were not included in the consolidated
balance sheet.
(2) Early Application of the Korea Accounting Standards No. 6
As described in Note 2 to the consolidated financial statements,
the Company adopted the Statement of Korea Accounting Standards
(SKAS) No. 6, "Events Occurring after the Balance Sheet Date", in
preparation for financial statements as of and for the year ended
December 31, 2002. The adoption of SKAS No. 6 had no effects on
earnings for the year ended December 31, 2002 and resulted in a
decrease in liabilities and an increase in stockholders' equity,
amounting to KRW 157,492 million, respectively. According to the
adoption of the new statement, the Company amended financial
statements of 1st FY, presented herein for comparative purposes,
and its liabilities decreased and stockholders' equity increased,
amounting to KRW 150,812 million, respectively.
(3) Loans to SK Networks (Formerly known as SK Global Co., Ltd.) Held by Subsidiary
As described in Note 4 to the financial statements, Shinhan Bank,
a subsidiary, is holding KRW 461,867 million of loans (including
guarantees and acceptances) provided to SK Global Co., Ltd. that
recently confirmed its accounting fraud. Actual losses on these
loans in the future may differ materially from the management's
assessments. The financial statements do not reflect the impact
of the uncertainty on the financial position of the Company, for
the equity method of accounting.
-------------------------------------------------------------------------------------------------
1ST FY (1) Re-issuance of the Audit Report
The Auditor has audited the accompanying financial statements of
the fiscal year that ends as of December 31, 2001 and issued the
Audit Report on January 25, 2002. However, dividend ratio and
accrued dividends under the financial statements attached to the
Audit Report of the same date were amended according to
resolutions at the shareholders' meeting, held on March 20, 2002.
Accordingly, the Audit Report was reissued upon reflecting such
amendments.
(2) Uncertainty in Economic Conditions
The operations of the Company have been affected, and may
continue to be affected for the foreseeable future, by the
general unstable economic conditions in the Republic of Korea and
in the Asia pacific region. The ultimate effect of these
uncertainties of the financial position of the
-132-
FISCAL YEAR PARTICULAR COMMENTS
-------------------------------------------------------------------------------------------------
Company as of December 31, 2001 cannot presently be determined.
Therefore, any amendments related to the foregoing uncertainties
have not been reflected in the Company's financial statements.
3. OTHERS
- N/A
V. STATUS OF CORPORATE GOVERNANCE AND AFFILIATES, ETC.
1. OUTLINE OF CORPORATE GOVERNANCE
A. Matters relating to Board of Directors
(1) Matters concerning Organization of Board of Directors
(A) Authority of Board of Directors
(1) The board of directors shall approve the managerial
strategy and goal of the company and its subsidiaries and
oversee its performance.
(2) The board of directors shall have environment and system
for the risk management consistent with the business
strategy of the company and its subsidiaries.
** Resolutions, etc.
(1) Matters relating to convening of the general meeting of
shareholders
(2) Matters relating to agendas to be submitted to the general
meeting of shareholders
(3) Matters relating to establishment and alteration or
abolition of important regulations
a. Regulations of the board of directors, regulations of
committee within the board of directors, regulations
on the management operation and regulations on the
management for the operation of subsidiaries
b. Other important regulations deemed necessary by the
resolution of the board of directors
(4) Matters relating to basic operation
-133-
a. Establishment and approval of the company's business
plan containing the subsidiaries' business plan
b. Approval on the budget including the compensation for
directors, management and employees and closing
c. Change of shares and capital
(5) Matters relating to including and excluding of subsidiaries
(6) Matters relating to the corporate governance structure
(7) Matters relating to directors, etc.
a. Appointment and dismissal of the management other than
the representative director & chairman, representative
director & president, vice-president and other
non-director management
b. Establishment of committee and appointment and
dismissal of the members of committee (except the
appointment and dismissal of the members of audit
committee)
c. Determination of the compensation for the director to
the extent authorized by the general meeting of
shareholders
d. Approval on the transactions between directors and
the company
(8) Matters relating to material contracts, etc.
a. Capital contribution exceeding 1/100 of equity capital
for each case
b. Fund raising to provide to subsidiaries, etc.
exceeding 3/100 of equity capital for each case
c. Matters relating to strategic alliance or agreements
for the comprehensive business alliance with foreign
financial institutions and participation in capital
(9) Matters relating to entrustment of counsel, honorary
director and advisor
(10) Matters specially submitted by committee or president
(11) Other matters that shall be determined by the Board of
Directors under the laws and regulations or the articles
of incorporation
-134-
(B) Whether personal information on director candidates was announced
prior to the General Meeting of Shareholders and whether they were
recommended by shareholders
Announced on March 8, 2004 in accordance with Paragraph 2 of
Article 191-10 of the Securities and Exchange Act
-- Director and Outside Director Candidates (Public announcement
on March 8, 2004)
DETAILS OF
TRANSACTIONS
WITH THE
COMPANY FOR RELATIONSHIP
NAME RECENT WITH
(DATE TERM OF THREE (3) LARGEST
CLASSIFICATION OF BIRTH) OFFICE MAJOR CAREER RECOMMENDER YEARS SHAREHOLDER REMARKS
-----------------------------------------------------------------------------------------------------------------------------------
-President of Shinhan Bank
Director (former)
Candidate -Representative Director &
(Director) Eung Chan Ra 3 years Chairman of Shinhan Steering None None
(1938.11.25) Financial Group (current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-Vice-president of Shinhan
Director Bank (former)
Candidate Young Hwi Choi 3 years -Representative Director & Steering None None
(Director) (1945.10.28) President of Shinhan Committee
Financial Group (current)
-----------------------------------------------------------------------------------------------------------------------------------
-President of Shinhan Bank
Director In Ho Lee (former) Steering
Candidate (1943.11.02) 3 years -Director of Shinhan Committee None None
(Director) Financial Group (current)
-----------------------------------------------------------------------------------------------------------------------------------
Candidate
Director -Representative Director for
Candidate Young Seok Choi 3 years of CYS (current) Steering None None Member
(Director) (1929.7.2) -Director of Shinhan Committee of Audit
Financial Group (current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-Outside Director of
Director Young Woong Shinhan Financial Group
Candidate Yang 3 years (former) Steering None None
(Director) (1948.8.4) -Representative Director Committee
of Doen (Limited) (current)
-----------------------------------------------------------------------------------------------------------------------------------
-Professor of KDI
Director International Policy Outside None None
Candidate Pyung Joo Kim Graduate School (current) Director
(Outside (1939.2.6) 1 year -Outside Director of Candidate
Director) Shinhan Financial Group Recommendation
(current) Committee
-135-
DETAILS OF
TRANSACTIONS
WITH THE
COMPANY FOR RELATIONSHIP
NAME RECENT WITH
(DATE TERM OF THREE (3) LARGEST
CLASSIFICATION OF BIRTH) OFFICE MAJOR CAREER RECOMMENDER YEARS SHAREHOLDER REMARKS
-----------------------------------------------------------------------------------------------------------------------------------
-Vice-President for
Planning & Finance at Ewha Outside Candidate
Director Woman's University Director None None for
Candidate Il Sup Kim 1 year (current) Candidate Member
(Outside (1946.7.1) -Outside Director of Recommendation of Audit
Director) Shinhan Financial Group Committee Committee
(current)
-----------------------------------------------------------------------------------------------------------------------------------
-Non-standing Vice
Chairman of Korea Foods Outside Candidate
Director Industry Association Director None None for
Candidate Sang Yoon Lee 1 year (current) Candidate Member
(Outside (1942.9.13) -Representative Director & Recommendation of Audit
Director) President of Nongshim Committee Committee
(current)
-----------------------------------------------------------------------------------------------------------------------------------
Outside
Director -Non-standing director of Director None None
Candidate Yoon Soo Yoon 1 year Hanvit Bank (former) Candidate
(Outside (1946.3.5) -Representative Director Recommendation
Director) of FILA Korea (current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-Minister of Information & Outside
Director Communication (former) Director None None
Candidate Sang Chul Lee 1 year -Professor of Korea Candidate
(Outside (1948.2.20) University (Endowed Chair Recommendation
Director) System) (current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-Chairman of Daesung
Director Electric Industries Co., Outside None None
Candidate Byung Hun Park Ltd. (current) Director
(Outside (1928.9.10) 1 year -Outside Director of Candidate
Director) Shinhan Financial Group Recommendation
(current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-President of Hwanhwa Outside Candidate
Director Heung San Co., Ltd. Director None None for
Candidate Moon Pil Oh 1 year -Outside Director of Candidate Member
(Outside (1930.12.31) Shinhan Financial Group Recommendation of Audit
Director) (current) Committee Committee
-----------------------------------------------------------------------------------------------------------------------------------
Outside
Director -President of Teni Director None None
Candidate Young Soo Lee 1 year Corporation (current) Candidate
(Outside (1934.4.4) -Director of Shinhan Recommendation
Director) Financial Group (current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-136-
DETAILS OF
TRANSACTIONS
WITH THE
COMPANY FOR RELATIONSHIP
NAME RECENT WITH
(DATE TERM OF THREE (3) LARGEST
CLASSIFICATION OF BIRTH) OFFICE MAJOR CAREER RECOMMENDER YEARS SHAREHOLDER REMARKS
-----------------------------------------------------------------------------------------------------------------------------------
-Outside Director of Outside Candidate
Director Shinhan Financial Group Director None None for
Candidate Dong Hyun Kwon 1 year (former) Candidate Member
(Outside (1936.11.27) -President of King Koo Recommendation of Audit
Director) Tour Co., Ltd. (current Committee Committee
-----------------------------------------------------------------------------------------------------------------------------------
Outside
Director Philippe -General Manager of BNP Director None None
Candidate Reynieix 1 year Paribas Singapore (former) Candidate
(Outside (1949.6.24) -BNP Paribas Seoul Branch Recommendation
Director) (Current) Committee
-----------------------------------------------------------------------------------------------------------------------------------
-- Shareholder's Recommendation on the Director Candidate : None
(C) Status of Establishment and Organization of Outside Director Candidate
Recommendation Committee
Through the partial amendment to the articles of incorporation as resolved by
the general meeting of shareholders at March 24, 2004, the existing steering
committee was reorganized as steering committee for the board of directors,
outside director candidate recommendation committee, and compensation
committee. The organization and operation of the newly established outside
director candidate recommendation committee will be separately determined by
the resolution of the board of directors.
(D) Status of Outside Director (After the Ordinary General Meeting of
Shareholders on March 25, 2004)
INTEREST WITH
LARGEST
NAME CAREER SHAREHOLDER REMARKS
-----------------------------------------------------------------------------------------------------------------
Chairman of Risk
- Dean of the Graduate School of International Management Committee,
Pyung Joo Kim Studies at Sogang University Member of Steering
- Professor of KDI International Policy Graduate None Committee for the
School (current) Board of Directors
-----------------------------------------------------------------------------------------------------------------
Chairman of Audit
- Vice Chairman of Samil Pricewaterhouse Coopers Committee
Il Sup Kim - Professor for Planning & Finance at Ewha None Member of Compensation
Woman's University (current) Committee
-----------------------------------------------------------------------------------------------------------------
-137-
INTEREST WITH
LARGEST
NAME CAREER SHAREHOLDER REMARKS
-----------------------------------------------------------------------------------------------------------------
- Non-standing Vice Chairman of Korea Foods Member of Audit
Industry Association (current) Committee
Sang Yoon Lee - Representative Director & President of Nongshim None Member of Compensation
(current) Committee
-----------------------------------------------------------------------------------------------------------------
Chairman of
Compensation Committee,
Member of Risk
Yoon Soo Yoon - Non-standing director of Hanvit Bank None Management Committee,
- Representative Director of FILA Korea (current) Member of Steering
Committee for the
Board of Directors
-----------------------------------------------------------------------------------------------------------------
Sang Chul Lee - Minister of Information & Communication None Member of Compensation
- Senior Counsel of Kolon (current) Committee
-----------------------------------------------------------------------------------------------------------------
- Head of Central Headquarter of the Korean Member of Steering
Byung Hun Park Residents Union in Japan (current) None Committee for the
- Chairman of Daesung Eltec Co., Ltd. (current) Board of Directors
-----------------------------------------------------------------------------------------------------------------
Moon Pil Oh - Outside Director of Shinhan Bank (current) None Member of Audit
- President of Hwanhwa Heung San Co., Ltd. Committee
-----------------------------------------------------------------------------------------------------------------
- President of Teni Corporation (current)
Young Soo Lee - Chief Director of Baekdoo Academy, Kunkuk High None -
School in Japan (current)
-----------------------------------------------------------------------------------------------------------------
- Chief Director of Aichi Commercial Bank in
Dong Hyun Kwon Japan (Current) None Member of Audit
- President of King Koo Tour Co., Ltd. (current) Committee
-----------------------------------------------------------------------------------------------------------------
- General Manager of BNP Paribas Singapore
Philippe (former) None Member of Risk
Reynieix - BNP Paribas Seoul Branch (Current) Management Committee
-----------------------------------------------------------------------------------------------------------------
(E) Whether Directors' Liability Insurance is Subscribed or not
INSURANCE AMOUNT PAID BY THE
NAME INSURANCE PREMIUM PROCEEDS COMPANY REMARKS
----------------------------------------------------------------------------------------------------------------------
*Amount paid by the
Officers of Shinhan company : KRW 287.5 million
Financial Group and KRW 1,197.5 million KRW 30 billion KRW 1,197.5 million Remaining amount was
subsidiaries shared by subsidiaries
----------------------------------------------------------------------------------------------------------------------
-138-
(2) Matters relating to the Operation of Board of Directors
(A) Major Contents of the Regulations on the Operation of Board of
Directors
** Organization of Board of Directors
(1) The board of directors shall consist of directors.
(2) The chairman of the board of directors shall be the
representative director and chairman.
(3) In case of the occurrence of accidents of the chairman
of the board of directors, such officers who rank in
the order of priority determined by the board of
directors shall perform the duties.
** Role of the Board of Directors
(1) The board of directors shall approve the managerial
strategy and goal of the company and its subsidiaries
and oversee its performance.
(2) The board of directors shall have environment and
system for the risk management consistent with the
business strategy of the company and its subsidiaries.
** Convening of the Board of Directors' Meeting
(1) The board of directors' meeting shall consist of
ordinary and extraordinary board of directors'
meeting, and the chairman shall convene the board of
directors' meeting.
(2) The ordinary board of directors' meeting shall be held
at least once per fiscal quarter and the extraordinary
board of directors' meeting may be convened whenever
deemed to be necessary by the chairman.
** Resolutions, etc.
(1) Resolution of the board of directors' meeting shall be
obtained in any of the following cases; provided,
however, the Board of Directors may delegate a part of
the authorities to the committee within the board of
directors
-139-
to the extent permissible under applicable laws and
regulations and articles of incorporation.
a. Matters relating to convening of general meeting
of shareholders
b. Matters relating to the agenda to be brought to
the general meeting of shareholders
c. Matters relating to establishment and alteration
or abolition of important regulations
d. Matters relating to basic operation
e. Matters relating to including and excluding of
subsidiaries
f. Matters relating to director, etc.
g. Matters relating to material contracts, etc.
h. Matters relating to entrustment of counsel,
honorary director and advisor
i. Matters specially submitted by committee or
president
j. Other matters that shall be determined by the
board of directors under the laws and
regulations or the articles of incorporation
(B) Details of Major Activities of the Board of Directors
APPROVED OR
FY CONVENING DATE AGENDA NOT REMARKS
-------------------------------------------------------------------------------------------------------
1. Appointment of Non-director Management
1 2004. 1.13 Major Contents: Appointment of Managing Approved -
Directors, Hee Soo Kim and Baek Soon Lee
-------------------------------------------------------------------------------------------------------
1. Closing of the 3rd FY (2003.1.1~2003.12.31)
2 2004. 2.9 Major Contents: Settlement documents including Approved -
the net profit for the year of the holding
company: KRW 362.2 billion
-------------------------------------------------------------------------------------------------------
1. Convening of the 3rd Ordinary General
3 2004.2.24 Meeting of Shareholders
Major Contents: Meeting shall be held on March
25, 10 a.m. Approved -
-------------------------------------------------------------------------------------------------------
-140-
APPROVED OR
FY CONVENING DATE AGENDA NOT REMARKS
-------------------------------------------------------------------------------------------------------
2. Partial Amendment to the Articles of
Incorporation
Major Contents: Specialization of Small
Committees and Introduction of Electric Approved -
Disclosure System
---------------------------------------------------------------------------
3. Limit of Directors' Compensation
Major Contents: KRW 3 billion, same as Approved -
pervious year
---------------------------------------------------------------------------
4.Granting Stock Option to the Management
Major Contents: The stock option was granted Approved -
to 27 persons with respect to 705,000 shares
---------------------------------------------------------------------------
5. Granting stock Option to the Head of the
Department
Major Contents: individually granted within Approved -
the limit of total 700,000 shares
-------------------------------------------------------------------------------------------------------
1. Appointment of Representative Director
Major Contents:
Representative Director & Chairman: Eung Chan Ra Approved -
Representative Director & President:
Young Hwi Choi
4 2004.3.25 ---------------------------------------------------------------------------
2. Appointment of Member of the Risk Management
Committee
Major Contents:
Chairman: Pyung Joo Kim, Member: Yoon Soo Yoon, Approved -
Philippe Reynieix
-------------------------------------------------------------------------------------------------------
1. Implementation of Share Swap and Tender
Offer in order to make Chohung Bank its
Wholly-owned Subsidiary
5 2004.4.12 Major Contents:
Exchange ratio: 1 share of Chohung Bank = Approved -
0.1354 share of Shinhan Financial Corp, etc.
-------------------------------------------------------------------------------------------------------
1. Establishment and Amendment for the
provision relating to the Improvement of
Governance Structure
6 2004.5.10 Major Contents: New Establishment of Steering Approved -
Committee for the Board of Directors, Outside
Director Candidate Recommendation Committee,
and Compensation Committee
---------------------------------------------------------------------------
2. Appointment of Members of Steering
Committee for the Board of Directors, Outside
Director Candidate Recommendation Committee,
and Compensation Committee Approved -
Major Contents: Appointment of 5 Members for
Steering Committee for the Board of Directors,
and 5 Members for Compensation Committee, etc.
-------------------------------------------------------------------------------------------------------
-141-
APPROVED OR
FY CONVENING DATE AGENDA NOT REMARKS
-------------------------------------------------------------------------------------------------------
3. Approval for the Limit of Corporate Bond at
the latter half of 2004
Major Contents: Approved -
Limit : KRW 1,100 billion (including US$50
million)
---------------------------------------------------------------------------
4. Adjustment of the Number of Shares executed
by Stock Option which was granted at 2002 Approved -
Major Contents: 13 officers who retired within
two years
-------------------------------------------------------------------------------------------------------
7 2004.9.17
-------------------------------------------------------------------------------------------------------
(C) Major Activities of Outside Directors at the Board of Directors'
Meeting
NUMBER OF OUTSIDE
FY CONVENING DATE DIRECTOR PRESENT REMARKS
-------------------------------------------------------------------------------------------------------
2004.1.13 5(9) Appointment of Non-Director Management
1 - Generally affirmative for the candidates
of non-director management
-------------------------------------------------------------------------------------------------------
2004.2.9 7(9) Closing of the 3rd FY (2003)
2 - Inquiries on the details to the closing:
nothing special.
-------------------------------------------------------------------------------------------------------
2004.2.24 8(9) Granting Stock Option to the Group Management
- Requested to clarify the increase ratio
3 for the stock price index of banking
industry, which is the basis of granting
stock option
-------------------------------------------------------------------------------------------------------
2004.3.25 8(10) Appointment of Representative Director and
Member of the Risk Management Committee
- Upon the appointment of representative
4 director and member of the risk management
committee, expressed their active opinion
with respect to the professionalism
-------------------------------------------------------------------------------------------------------
2004.4.12 9(10) Implementation of Share Swap and Tender Offer in
order to make Chohung Bank its Wholly-owned Subsidiary
- Activation of the disclosure for the general investors
5 with respect to the matters which are not legally
obligated to disclose publicly, Chohung Bank
includes in the supervised issues, so that the
outside director contributed to the public interests
-------------------------------------------------------------------------------------------------------
2004.5.10 9(10) Establishment and Amendment for the Provision relating
to the Improvement of Governance Structure
- With respect to the improvement of governance
6 structure, discussion of necessity for the
-------------------------------------------------------------------------------------------------------
-142-
NUMBER OF OUTSIDE
FY CONVENING DATE DIRECTOR PRESENT REMARKS
-------------------------------------------------------------------------------------------------------
deliberation of the board of directors to the
appointment of non-director standing management
-------------------------------------------------------------------------------------------------------
7 2004.9.17
-------------------------------------------------------------------------------------------------------
Note) The parenthesized number is the total number of the outside directors.
(D) Organization and Activities of the Committee within the Board of
Directors
1) Steering Committee
A. Organization
- Chairman: Eung Chan Ra
- Members: Young Hwi Choi, Byung Hun Park (Outside
Director), Moon Pil Oh (Outside Director), Myung Ho Kim
(Outside Director), Pyung Joo Kim (Outside Director),
Young Seok Choi
B. Purpose
- Recommendation of Director Candidate
- Deliberation on Management Candidate for the Company
and Subsidiaries, Evaluation of Management and
Deliberation and Adjustment of Compensation Plan
- Operation of Board of Directors
C. Details of Activities
APPROVED OR
FY CONVENING DATE AGENDA NOT REMARKS
------------------------------------------------------------------------------------------------------
1. Deliberation on Non-director Management
Candidate
Major Contents: Appointment of Managing
Directors, Hee Soo Kim and Baek Soon Lee Approved -
--------------------------------------------------------------------------
2. Deliberation on Management Candidate of
1 2004. 1.13 Subsidiaries
Major Contents:
Shinhan Bank: 6 Persons, Chohung Bank: 2
Persons, Jeju Bank: 2 Persons, Shinhan Approved -
Capital: 2 Persons
------------------------------------------------------------------------------------------------------
1. Evaluation of Management of Subsidiaries,
Establishment of Compensation Plan (Draft)
2 2004.2.24 Major Contents: Establishment of Approved -
Compensation Plan for Chohung Bank
------------------------------------------------------------------------------------------------------
-143-
APPROVED OR
FY CONVENING DATE AGENDA NOT REMARKS
------------------------------------------------------------------------------------------------------
2. Evaluation of and Compensation for the
Management of the Company and Subsidiaries
in 2003
Major Contents: 34 Persons including Approved -
Holding Company and Subsidiaries
--------------------------------------------------------------------------
3. Establishment of KPI in 2004
Major Contents: Increase Ratio of Total
Yield for Shareholders, Increase Ratio of Approved -
Total Asset, and Ratio of Profit to Total
Capital
--------------------------------------------------------------------------
4. Guidelines (Draft) for Evaluation of
Management of the Company in 2004
Major Contents: Core Strategic Assignment Approved -
by Management
--------------------------------------------------------------------------
5. Compensation for the Management of the
Company in 2004 Approved -
Major Contents: same level as 2003
--------------------------------------------------------------------------
6. Approval on the Limit of Compensation
for Directors of Certain Subsidiaries
Major Contents: 6 Subsidiaries including Approved -
Shinhan Bank
--------------------------------------------------------------------------
7. Recommendation of Director Candidate of
the Company
Major Contents: Recommendation of 15 Approved -
Director Candidates, and 5 Candidates for
the Member of Audit Committee
--------------------------------------------------------------------------
8. Deliberation on the Management Candidate
of Subsidiaries
Major Contents: Vice-President In Jun Choi Approved -
for Chohung Bank
------------------------------------------------------------------------------------------------------
2) Risk Management Committee
A. Organization
- Chairman: Pyung Joo Kim (Outside Director)
- Members: Moon Pil Oh (Outside Director), Alain Penicaut
(Outside Director)
B. Purpose
- Establishment of Basic Policy for Risk Management
Consistent With Management Strategy
- Approval on the Appropriate Investment Ceiling or
Permissible Limit of Loss by each Subsidiary
-144-
C. Details of Activities
CONVENING APPROVED
FY DATE AGENDA OR NOT REMARKS
-- ---- ------ ------ -------
1 2004.2.24 1. Minimum Capital Adequacy Ratio and Plan Approved -
for Risk Management by each Type in 2004
3) Audit Committee
Please refer to "B. Matters relating to the Audit System".
* Through the partial amendment to the articles of incorporation as
resolved by the general meeting of shareholders at March 25, 2004,
the existing steering committee was reorganized as steering
committee for the board of directors, outside director candidate
recommendation committee, and compensation committee.
-- After the Ordinary General Meeting of Shareholders held at March 25, 2004
1) Steering Committee for the Board of Directors
A. Organization
- Chairman: Eung Chan Ra
- Members: Young Hwi Choi, Byung Hun Park (Outside
Director), Pyung Joo Kim (Outside Director), Yoon Soo
Yoon (Outside Director)
B. Purpose
- Deliberation of Matters relating to Governance Structure
of the Company
- Recommendation of Members of Committee within the Board
of Directors
- Recommendation of Non-outside Director Candidates of the
Company
- Deliberation of Appointment and Termination of
Non-director Management of the Company
- Other Determination relating to the Operation of the
Board of Directors
C. Details of Activities
APPROVED
FY CONVENING DATE AGENDA OR NOT REMARKS
-- -------------- ------ ------ -------
1 2004.5.10 1. Appointment of Chairman of Steering Approved -
- 145 -
APPROVED
FY CONVENING DATE AGENDA OR NOT REMARKS
-- -------------- ------ ------ -------
Committee for the Board of Directors
Major Contents : Appointment of Representative
Director Eung Chan Ra as Chairman
2) Risk Management Committee
A. Organization
- Chairman: Pyung Joo Kim (Outside Director)
- Members: Yoon Soo Yoon (Outside Director), Reynieix
(Outside Director)
B. Purpose
- Establishment of Basic Policy for Risk Management
Consistent With Management Strategy
- Approval on the Appropriate Investment Ceiling or
Permissible Limit of Loss by each Subsidiary
C. Details of Activities
APPROVED
FY CONVENING DATE AGENDA OR NOT REMARKS
-- -------------- ------ ------ -------
2 2004.5.10 - Nothing Approved
- Reported Matters: Status of Capital Adequacy
Ratio of Group and of Risk Limit by each Type,
etc. Approved -
3 2004.9.7 - Nothing Approved
- Reported Matters: Status of Capital Adequacy
Ratio of Group and of Risk Limit by each Type,
etc. Approved -
3) Audit Committee
Please refer to "B. Matters relating to the Audit System".
4) Outside Director Candidate Recommendation Committee
A. Organization
To be determined (to be organized upon the occurrence of
relevant matters in the future)
B. Purpose
- 146 -
- Recommendation of Outside Director Candidate
- Determination of Other Matters Necessary to recommend
the Outside Director Candidate of the Company
5) Compensation Committee
A. Organization
- Chairman: Yoon Soo Yoon (Outside Director)
- Members: Young Seok Choi, Il Sup Kim (Outside Director),
Sang Chul Lee (Outside Director), Sang Yoon Lee (Outside
Director)
B. Purpose
- Determination of Evaluation and Compensation Plan for
the Management of the Company
- Evaluation and Compensation Plan for the Management of the
Company
C. Details of Activities
APPROVED
FY CONVENING DATE AGENDA OR NOT REMARKS
-- -------------- ------ ------ -------
1 2004.5.10 1. Appointment of Chairman of Compensation Approved -
Committee
Major Contents : Appointment of Director Yoon
Soo Yoon as Chairman
B. Matters on Audit System
(1) Matters relating to Audit Organization
(A) Establishment and Organization of Audit Committee (Auditors),
etc.
CLASSIFICATION CONTENTS REMARKS
-------------- -------- -------
Establishment of Audit Committee Established the Audit Committee on -
September 1, 2001.
Constitution Within five members -
<1> The Company shall have the Audit Committee, as
prescribed by the Commercial Code, the Securities
Exchange Act and other laws, in stead of the Auditor.
<2> The Audit Committee of the Company shall consist of
three (3) or more, but not more than five (5) Directors,
and such Director shall meet the following requirements:
- 147 -
1. Two-thirds (2/3) of the total members of the Audit
Committee shall be elected from the Outside
Directors; and
2. More then one (1) members shall be the accounting
or financial professional, as determined in the
applicable laws and regulations.
<3> The chairman of the Audit Committee shall be elected
among the outside directors by a resolution of the Audit
Committee.
<4> The Audit Committee shall examine the accounts and
business of the Company.
(B) Preparation of Internal Measures for Access to Management
Information necessary for Audit Business of Audit Committee
(Auditors)
- Duties of Audit Committee under the AOI (Article 50,
Paragraph (3))
The Audit Committee may request business reports from
any subsidiary of the Company when it is necessary to
perform its duties. In this case, if such subsidiary
does not report to the Audit Committee immediately or
the Audit Committee needs to verify the contents of the
reports, it may investigate the status of business and
the financial condition of the subsidiary.
- Regulation of the Audit Committee (Articles 13 and 14)
Article 13. (Internal Audits, etc.)
<1> With respect to assist the efficient implement of audit
by the committee, internal audit department shall be
established.
Article 14. (Attendance of Related Parties)
<1> The chairman of the Audit Committee, if deemed
necessary, may have any of the management, relevant
staff or outsider attend the meeting of the Audit
Committee and give their opinion.
(C) Personal Matters of Members of Audit Committee (Auditors)
- 148 -
NAME MAJOR EDUCATION & EXPERIENCE REMARKS
---- ---------------------------- -------
Il Sup Kim -Representative of Samil Pricewaterhouse Coopers Outside
-Administrative Vice President of Ewha Woman's University Director
(current) (Chairman)
Young Seok Choi -Non-standing director of Shinhan Bank Non-standing
-Representative Director of CYS Co. in Japan (current) Director
Sang Yoon Lee -Non-standing Vice Chairman of Korea Foods Industry Association Outside
(current) Director
-Representative Director & President of Nongshim (current)
Moon Pil Oh -Outside Director of Shinhan Bank Outside
-President of Hwanhwa Heung San Co., Ltd. (current) Director
Dong Hyun Kwon -Chief Director of Aichi Commercial Bank in Japan (current) Outside
-President of King Koo Tour Co., Ltd. (current) Director
(2) Particulars of Major Activities of Meeting of Audit Committee
(Auditors)
CONVENING APPROVED OR
FY DATE AGENDA NOT REMARKS
-- ---- ------ --- -------
1 2004.02.24 1. Results of the year end audit of the 3rd FY Approved -
- Major Contents: Confirmation of Results of the year
end audit of the 3rd FY and Submission of Audit
Report
2. Evaluation of the operation status of the Approved -
internal Approved - accounting control
system for the second half of
2003
- Major Contents: The internal accounting control
system is properly operated.
3. Ratification of the company and its Approved -
subsidiaries' Approved - contracts on the
audit/non-audit matters
- Major Contents:
1) Audit for the Financial Statements on
Assets of Securities Investment Trust
(Shinhan BNP Paribas ITMC-PWC/Samil Pricewaterhouse
Coopers)
2) Training Contract of Advanced RM Course
(Shinhan Bank - PWC/Samil Pricewaterhouse Coopers)
3) Training Contract of RM Course
(Chohung Bank - PWC/Samil Pricewaterhouse Coopers)
4) Service Agreement on the Request for the Rulings of
Corporate Tax
(Shinhan Financial Corp. - PWC/Samil Pricewaterhouse
Coopers)
- 149 -
CONVENING APPROVED OR
FY DATE AGENDA NOT REMARKS
-- ---- ------ --- -------
4. Audit results to be presented to the 3rd ordinary Approved -
general meeting of shareholders
- Major Contents: As a result of review on the
presented agenda, it was judged as legal/appropriate.
2 2004.5.10 1. Appointment of Chairman of Audit Committee Approved -
- Major Contents: Chairman: Il Sup Kim
2. Appointment of the Members delegated the Partial Approved -
Power of Audit Committee
- Major Contents: Such power was delegated to the
Chairman, Il Sup Kim.
3. Approval on the company and its Approved -
subsidiaries' Contract on Non-audit Matters
- Major Contents: Consulting Service for the
Analysis of comprehensive requirements for Basel II
and for the establishment of implement strategy
(PWC/Samil Pricewaterhouse Coopers)
3 2004.6.16 Nothing Resolved - -
4 2004.9.17 1. Ratification of the subsidiaries' contracts on the Approved -
audit/non-audit matters
- Major Contents:
1) Training Contract of RM Course (Chohung
Bank - PWC/Samil Pricewaterhouse Coopers)
2) Audits and Tax Adjustment with respect to the
Financial Statements of Chohung Bank, Mumbai Branch
(Indo)
C. Matters on Exercise of Voting Rights of Shareholders
(1) Adoption of Cumulative Voting System
There is no specific provision about the cumulative voting system in
the articles of incorporation.
(2) Adoption of Written Voting System or Electronic Voting System
Exercise of Voting Right in Writing (Article 33 of the AOI)
<1> If the method of resolution in writing at the General Meeting
of Shareholders is adopted by the resolution of the Board of
Directors, the shareholders may exercise their voting rights
in writing without participating the meeting.
- 150 -
<2> In case of Paragraph (1), the Company shall attach the
documents and references necessary for exercise of voting
rights to the convening notice.
<3> If a shareholder intends to exercise his/her voting rights in
writing, the shareholder shall fill in and submit to the
Company the documents referred to in Paragraph (2) by the date
preceding the date set for the General Meeting of
Shareholders.
(3) Exercise of Minority Shareholders' Rights
Not applicable
D. Compensation for Officers, etc.
(1) Status of Compensations for Directors (including outside directors)
and Members of Audit Committee (Auditors)
(Unit: 1 million Won)
AMOUNT APPROVED AT AVERAGE PAID
TOTAL AMOUNT THE GENERAL MEETING AMOUNT PER
CLASSIFICATION PAID OF SHAREHOLDERS PERSON REMARKS
-------------- ---- --------------- ------ -------
Directors 1,436.5 718.3 Only two standing
directors shall
be paid.
Outside Directors 129.2 3000 21.5 Only six outside
directors shall
be paid.
Members of Audit No compensation --
Committee
Note) The compensation shall be paid for the period from Jan. 1, 2004 to
Jun. 30, 2004.
(2) Details of Stock Options Granted to Officers
(Unit: Share, Won)
NUMBER
OF RECENT
NUMBER OF NUMBER OF NUMBER OF NON- EXERCISE SHARE
TYPE OF GRANTED CONFIRMED EXERCISED EXERCISED PERIOD EXERCISE PRICE
GRANT DATE GRANTEE SHARES SHARES SHARES SHARES SHARES NOTE1) PRICE NOTE 2)
---------- ------- ------ ------ ------ ------ ------ ------ ----- -------
2002.5.22 Eung Common 100,000 94,416 - 94,416 2004.5.23- 18,910 20,950
Chan Ra Shares 2008.5.22
In Ho Lee 80,000 32,162 - 32,162 2004.5.23- 18,910 20,950
2008.5.22
- 151 -
NUMBER
OF RECENT
NUMBER OF NUMBER OF NUMBER OF NON- EXERCISE SHARE
TYPE OF GRANTED CONFIRMED EXERCISED EXERCISED PERIOD EXERCISE PRICE
GRANT DATE GRANTEE SHARES SHARES SHARES SHARES SHARES NOTE1) PRICE NOTE 2)
---------- ------- ------ ------ ------ ------ ------ ------ ----- -------
Young 50,000 47,208 - 47,208 2004.5.23- 18,910 20,950
Hwi Choi 2008.5.22
Bhang 20,000 18,803 - 18,803 2004.5.23- 18,910 20,950
Gil Choi 2008.5.22
Min Ky 1,000 1,000 - 1,000 2004.5.23- 18,910 20,950
Han 2008.5.22
Youn Soo 2,500 2,500 - 2,500 2004.5.23- 18,910 20,950
Song 2008.5.22
2003.5.15 Eung 100,000 To be - 100,000 2005.5.16- 11,800 20,950
Chan Ra determined 2009.5.15
Young 90,000 To be - 90,000 2005.5.16- 11,800 20,950
Hwi Choi determined 2009.5.15
Bhang 20,000 To be - 20,000 2005.5.16- 11,800 20,950
Gil Choi determined 2009.5.15
Min Ky 20,000 To be - 20,000 2005.5.16- 11,800 20,950
Han determined 2009.5.15
Youn Soo 20,000 To be - 20,000 2005.5.16- 11,800 20,950
Song determined 2009.5.15
2004.3.25 Eung 100,000 To be - 100,000 2006.5.25- 21,595 20,950
Chan Ra determined 2009.3.25
Young 90,000 To be - 90,000 2006.5.25- 21,595 20,950
Hwi Choi determined 2009.3.25
Bhang 30,000 To be - 30,000 2006.5.25- 21,595 20,950
Gil Choi determined 2009.3.25
Chil Sun 20,000 To be - 20,000 2006.5.25- 21,595 20,950
Hong determined 2009.3.25
Hee Soo 20,000 To be - 20,000 2006.5.25- 21,595 20,950
Kim determined 2009.3.25
Byung 20,000 To be - 20,000 2006.5.25- 21,595 20,950
Jae Cho determined 2009.3.25
Baek 20,000 To be - 20,000 2006.5.25- 21,595 20,950
Soon Lee determined 2009.3.25
Note 1) Exercise Period by Grant Date
- May 22, 2002, May 15, 2003: Four (4) years from the date when
two (2) years have passed from the grant date
- March 25, 2004: Three (3) years from the date when two (2)
years have passed from the grant date
Note 2) Resent share price means the closing price as of September 16, 2004.
- 152 -
2. STATUS OF AFFILIATES
A. Status of Ratio of Investment in Affiliates and Subsidiaries
B. Closing Performance of Affiliates and Subsidiaries
Company : Shinhan Bank
ID No. :00137571 (Unit: 100 Million Won)
22ND FY 21ST FY 20TH FY
(2003.1.1~ (2002.1.1~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Assets]
-Cash & Due from Bank 35,478 20,477 21,179
-Marketable Securities 7,382 4,670 6,425
-Investment securities 148,540 133,880 133,777
-Loans 477,839 405,790 338,812
-Fixed Assets 6,392 6,297 6,036
-Other Assets 25,081 17,780 27,331
Total Assets 700,712 588,894 533,560
[Liabilities]
-Deposits 419,918 351,835 318,929
-Borrowings 106,220 105,987 96,620
-Debentures 91,160 60,688 35,125
-Other Liabilities 48,260 41,779 51,177
Total Liabilities 665,558 560,289 501,851
[Capital Stock] 12,240 12,232 13,759
[Capital Surplus] 8,178 8,178 9,119
[Retained Earnings] 12,682 7,912 7,276
[Capital Adjustment] 2,053 283 1,555
Total Stockholders' Equity 35,154 28,605 31,709
Operating Revenues 48,520 48,213 46,796
Operating Expenses 41,806 38,889 42,391
Operating Income 6,714 9,324 4,405
Ordinary Income 6,858 8,430 4,957
Net Income for the Year 4,760 5,959 3,471
- 153 -
Company : Chohung Bank Co., Ltd.
ID No. :00149293 (Unit: 100 Million Won)
172ND FY 171ST FY 170TH FY
(2003.1.1~ (2002.1.1~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Assets]
-Cash & Due from Bank 15,506 26,988 20,379
-Marketable Securities 11,246 9,902 12,369
-Investment securities 80,837 100,824 128,394
-Loans 427,017 453,285 344,430
-Fixed Assets 12,807 14,153 15,658
-Other Assets 44,866 56,811 39,033
Total Assets 592,279 661,963 560,263
[Liabilities]
-Deposits 400,301 451,258 389,221
-Borrowings 57,119 68,437 74,297
-Debentures 64,242 56,723 24,197
-Other Liabilities 51,230 62,621 47,189
Total Liabilities 572,892 639,040 534,905
[Capital Stock] 35,956 33,956 33,954
[Capital Surplus] - 452 -
[Retained Earnings] -18,858 -9,659 -3,796
[Capital Adjustment] 2,289 -1,826 -4,799
Total Stockholders' Equity 19,386 22,923 25,358
Operating Revenues 54,252 53,171 51,923
Operating Expenses 61,071 54,518 44,662
Operating Income -6,819 -1,347 7,261
Ordinary Income -9,158 -6,112 3,364
Net Income for the Year -9,660 -5,860 5,225
Company : Good Morning Shinhan Securities Co., Ltd.
ID No. : 00138321 (Unit: Million Won)
5TH FY 4TH FY 3RD FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
[Current Assets] 1,913,789 1,549,518 1,251,093
-Cash & Due from Bank 28,001 91,116 247,779
-Due from Bank 731,084 699,934 677,234
-Marketable Securities 789,312 633,768 187,525
-Loans 240,972 61,594 47,523
-Other Current Assets 129,594 67,972 93,231
- 154 -
5TH FY 4TH FY 3RD FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
-Allowance for Credit
Loss-Current Assets -5,174 -4,983 -2,199
[Fixed Assets] 337,660 447,474 406,191
-Investment securities 46,012 74,364 104,162
-Investments 78,615 83,460 61,791
-Tangible Assets 182,235 205,993 168,483
-Other Fixed Assets 30,799 83,656 71,755
Total Assets 2,251,449 1,996,992 1,657,284
[Current Liabilities] 1,432,026 1,265,924 931,166
[Fixed Liabilities] 163,252 163,418 36,559
Total Liabilities 1,595,278 1,429,341 967,724
[Capital Stock] 796,998 796,998 933,628
[Capital Surplus] 15 14,750 -
-Capital Reserves 15 14,750 -
-Assets Revaluations Reserves - -
[Retained Earnings] 90,550 30,667 19,789
[Capital Adjustment] -231,392 -260,030 -263,857
Total Stockholders' Equity 656,171 567,650 689,560
Net Sales 685,477 624,682 465,969
Operating Income 53,980 -1,364 19,862
Ordinary Income 97,038 5,538 61,300
Net Income for the Year 80,655 10,879 51,106
Company : Shinhan Card Co., Ltd.
ID No. : 00426998 (Unit: Million Won)
2ND FY 1ST FY
(2003.1.1~ (2002.6.1~
CLASSIFICATION 2003.12.31) 2002.12.31)
-------------- ----------- -----------
[Current Assets] 175,675 15,958
-Quick Assets 175,675 15,958
[Credit Card Assets] 1,057,167 2,439,076
[Fixed Assets] 545,350 18,661
-Investments 535,277 7,946
-Tangible Assets 10,073 10,715
Total Assets 1,778,191 2,473,695
[Current Liabilities] 568,900 1,815,992
[Fixed Liabilities] 1,051,656 410,242
Total Liabilities 1,620,555 2,226,234
- 155 -
[Capital Stock] 152,847 152,847
[Capital Surplus] 94,109 94,109
[Retained Earnings] -89,320 504
[Capital Adjustment] - -
Total Stockholders' Equity 157,636 247,461
Operating Revenues 431,863 228,954
Operating Expenses 506,606 228,213
Operating Income -74,743 741
Ordinary Income -90,063 798
Net Income for the Year -89,824 504
Company : Shinhan Capital Co., Ltd.
ID No. : 00137456 (Unit: Million Won)
13TH FY 12TH FY 11TH FY
(2003.1.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Current Assets] 85,063 58,415 80,600
[Finance Assets] 226,401 136,811 93,878
[Lease Assets] 771,062 703,227 615,715
[Investments in Venture
Companies] 894 1,120 2,199
[Fixed Assets] 70,486 60,581 65,290
Total Assets 1,153,907 960,235 857,682
[Current Liabilities] 337,511 278,420 284,173
[Fixed Liabilities] 714,172 598,131 492,323
Total Liabilities 1,051,683 876,551 776,496
[Capital Stock] 80,000 80,000 80,000
[Capital Surplus] - - -
[Retained Earnings] 22,852 7,098 3,333
[Capital Adjustment] -628 -3,414 -2,147
Total Stockholders' Equity 102,224 83,684 81,186
Operating Revenues 145,355 118,470 150,281
Operating Expenses 116,084 109,928 179,817
Operating Income 29,271 8,541 -29,536
Ordinary Income 22,565 5,565 -32,527
Net Income for the Year 15,755 3,827 -23,049
Company : Shinhan BNP Paribas Investment Trust Management Co., Ltd.
ID No. : 00243553 (Unit: Million Won)
8TH FY 7TH FY 6TH FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
[Current Assets] 43,296 36,374 42,972
-Cash & Due from Bank 30,904 24,201 24,182
- 156 -
8TH FY 7TH FY 6TH FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
-Marketable Securities 9,601 9,525 13,089
-Loans 255 - 106
-Other Current Assets 2,357 2,648 5,595
[Fixed Assets] 5,717 8,934 3,217
-Investment securities 694 3,005 304
-Investments 4,262 4,836 1,346
-Tangible Assets 611 844 896
-Other Fixed Assets 150 249 671
Total Assets 49,013 45,308 46,189
[Current Liabilities] 2,414 1,259 4,590
[Fixed Liabilities] 500 237 245
Total Liabilities 2,914 1,496 4,835
[Capital Stock] 40,000 40,000 40,000
[Capital Surplus] - -
[Retained Earnings] 6,063 3,887 1,428
[Capital Adjustment] 36 -74 -74
Total Stockholders' Equity 46,099 43,812 41,354
Operating Revenues 12,739 9,873 11,267
Operating Expenses 7,319 4,614 5,417
Operating Income 5,420 5,259 5,850
Ordinary Income 6,059 5,407 5,304
Net Income for the Year 4,251 3,810 3,628
Company : Jeju Bank
ID No. : 00148832 (Unit: Million Won)
44TH FY 43RD FY 42ND FY
(2003. 1.1~ (2002.1.1~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Assets]
-Cash & Due from Bank 72,532 59,508 70,685
-Marketable Securities 18,569 50,671 1,356
-Investment securities 224,455 225,902 286,907
-Loans 1,326,103 1,317,843 961,793
-Fixed Assets 52,199 54,970 44,857
-Other Assets 92,103 91,754 79,216
Total Assets 1,785,961 1,800,648 1,444,814
[Liabilities]
-Deposits 1,438,284 1,399,105 117,312
-Borrowings 83,299 106,252 56,999
-Debentures 35,000 35,000 135,332
- 157 -
44TH FY 43RD FY 42ND FY
(2003. 1.1~ (2002.1.1~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
-Other Liabilities 125,745 155,338 1,383,664
Total Liabilities 1,682,328 1,695,695 1,074,021
[Capital Stock] 77,644 77,644 55,460
[Capital Surplus] 10,311 10,311 10,311
[Retained Earnings] 13,181 12,502 -
[Capital Adjustment] 2,496 4,496 -4,621
Total Stockholders' Equity 103,633 104,953 61,150
Operating Revenues 137,125 145,558 118,756
Operating Income 157 16,154 2,197
Net Income for the Year 4,751 12,502 1,163
Company : e-Shinhan, Inc.
ID No. : 00000000 (Unit: Million Won)
3RD FY 2ND FY 1ST FY
(2003.1.1~ (2002.1.1~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Current Assets] 2,706 4,210 4,311
-Quick Assets 2,706 4,210 4,311
[Fixed Assets] 1,218 1,548 2,160
-Investments 412 313 293
-Tangible Assets 420 675 1,159
-Intangible Assets 386 560 708
Total Assets 3,924 5,758 6,471
[Current Liabilities] 162 427 130
[Fixed Liabilities] 63 48 0
Total Liabilities 225 475 130
[Capital Stock] 2,820 2,820 2,820
[Capital Surplus] 6,710 6,710 6,710
[Retained Earnings] -5,866 -4,282 -3,189
[Capital Adjustment] 35 35 -
Total Stockholders' Equity 3,699 5,283 6,341
Operating Revenues 1,714 2,529 -3,189
Operating Expenses 3,361 3,776 3,659
Operating Income -1,647 -1,247 -6,848
Ordinary Income -1,583 -1,094 -3,189
Net Income for the Year -1,583 -1,094 -3,189
* The financial statements for the 1st FY have not been audited.
- 158 -
Company : Shinhan Macquarie Financial Advisory Co., Ltd.
ID No. : 00000000 (Unit: Million Won)
3RD FY 2ND FY 1ST FY
(2003.4.1~ (2002.4.1~ (2001.8.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
[Current Assets] 17,056 4,317 6,468
-Quick Assets 17,056 4,317 6,468
[Fixed Assets] 647 703 183
-Investments 479 475 71
-Tangible Assets 168 178 52
-Intangible Assets 0 50 60
Total Assets 17,703 5,020 6,651
[Current Liabilities] 13,140 4,064 5,554
Total Liabilities 13,414 4,064 5,554
[Capital Stock] 1,000 1,000 1,000
[Capital Surplus] - -
[Retained Earnings] 3,289 -44 97
[Capital Adjustment] - -
Total Stockholders' Equity 4,289 956 1,097
Operating Revenues 16,169 2,487 5,850
Operating Expenses 10,822 2,617 4,261
Operating Income 5,347 129 1,589
Ordinary Income 5,345 -534 1,539
Net Income for the Year 3,368 -268 1,070
Company : Shinhan Credit Information Co., Ltd.
ID No. : 00000000 (Unit: Million Won)
2ND FY 1ST FY
(2003.1.1~ (2002.7.8~
CLASSIFICATION 2003.12.31) 2002.12.31)
-------------- ----------- -----------
[Current Assets] 6,831 2,445
-Quick Assets 6,831 2,445
[Fixed Assets] 6,757 1,486
-Investments 3,543 806
-Tangible Assets 2,519 677
-Intangible Assets 695 3
Total Assets 13,588 3,931
[Current Liabilities] 3,585 804
- 159 -
2ND FY 1ST FY
(2003.1.1~ (2002.7.8~
CLASSIFICATION 2003.12.31) 2002.12.31)
-------------- ----------- -----------
[Fixed Liabilities] 6,141 6
Total Liabilities 9,726 810
[Capital Stock] 3,000 3,000
[Capital Surplus] - -
[Retained Earnings] 862 121
[Capital Adjustment] - -
Total Stockholders' Equity 3,862 3,121
Operating Revenues 25,557 3,137
Operating Expenses 24,309 3,001
Operating Income 1,248 136
Ordinary Income 1,096 162
Net Income for the Year 741 121
* Incorporation Date: July 8, 2002
Company : SH&C Life Insurance Co., Ltd.
ID No. : 00000000 (Unit: Million Won)
2ND FY 1ST FY
(2003.4.1~ (2002.10.1~
CLASSIFICATION 2004.3.31) 2003.3.31)
-------------- ---------- -----------
[Cash & Due from Bank ] 14,738 11,648
[Investment securities] 54,547 15,197
Total Assets 140,105 29,297
[Other Liabilities] 74,324 311
Total Liabilities 113,961 311
[Capital Stock] 30,000 30,000
[Capital Surplus] -
[Retained Earnings] -
[Capital Adjustment] 869 576
Total Stockholders' Equity 26,143 28,986
Operating Revenues 52,100
Operating Expenses 55,492
Operating Income -3,392
Ordinary Income -3,136
Net Income for the Year -3,136
* Incorporation date: October 1, 2002
- 160 -
Company : Shinhan Finance Ltd.
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Assets]
-Loans in Foreign Currency 370,131 167,667 284,730
-Due from Banks in Foreign
Currency 2,247 3,586 162,775
-Bills Bought in Foreign
Currency 14,577 20,235 5,078
-Securities 136,501 118,133 90,043
-Allowance for Possible
Loan Losses -1,388 -3,266 -3,949
-Other Assets 1,974 2,689 3,286
-Fixed Assets for Operations 137 374 437
Total Assets 524,180 513,726 542,399
[Liabilities]
-Deposits in Foreign Currency 60,964 75,974 463,790
-Borrowings in Foreign Currency 397,313 332,996 11,935
-Other Liabilities 1,321 10,480 1,533
Total Liabilities 459,598 446,894 477,258
[Stockholders' Equity]
-Capital Stock 63,684 63,684 63,684
-Retained Earnings -277 1,837 -6,334
-Capital Adjustment 1,175 1,310 7,791
Total Stockholders' Equity 64,582 66,832 65,141
Net Sales 16,868 22,3845 28,635
Operating Income -2,572 7,693 9,488
Ordinary Income -2,114 8,171 10,037
Net Income for the Year -2,114 8,171 10,037
Company : Shinhan Data System Co., Ltd.
ID No. : 00000000 (Unit: Million Won)
13TH FY 12TH FY 11TH FY
(2003.1.1~ (2002.1.1.~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
[Assets]
- 161 -
13TH FY 12TH FY 11TH FY
(2003.1.1~ (2002.1.1.~ (2001.1.1~
CLASSIFICATION 2003.12.31) 2002.12.31) 2001.12.31)
-------------- ----------- ----------- -----------
-Current Assets 2,431 2,197 1,914
-Investments and Other Assets 198 199 194
-Fixed Assets 68 60 19
Total Assets 2,696 2,457 2,127
[Liabilities]
-Current Liabilities 204 224 79
-Fixed Liabilities 338 231 183
Total Liabilities 543 455 262
[Stockholders' Equity]
-Capital Stock 1,000 1,000 1,000
-Retained Earnings 1,154 1,002 864
Total Stockholders' Equity 2,154 2,002 1,864
Liabilities and Total
Stockholders' Equity 2,696 2,457 2,127
Net Sales 4,264 3,551 2,769
Operating Income 121 128 60
Ordinary Income 204 212 165
Net Income for the Year 152 137 119
Company : Chohung Investment Trust Management Co., Ltd.
ID No. : 00230285 (Unit: Million Won)
16TH FY 15TH FY 14TH FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
[Current Assets] 64,043 62,279 47,487
Cash & Due from Bank 61,464 59,870 42,814
Marketable Securities - - -
Loans 2,579 - -
Other Current Assets - 2,409 4,673
[Fixed Assets] 5,593 10,087 21,284
Investment securities 1,972 5,040 16,794
Investments 2,380 3,788 3,762
Tangible Assets 263 281 328
Other Fixed Assets 978 978 400
Total Assets 69,636 72,366 68,771
[Current Liabilities] 1,342 7,446 8,891
- 162 -
16TH FY 15TH FY 14TH FY
(2003.4.1~ (2002.4.1~ (2001.4.1~
CLASSIFICATION 2004.3.31) 2003.3.31) 2002.3.31)
-------------- ---------- ---------- ----------
[Fixed Liabilities] 153 200 78
Total Liabilities 1,495 7,646 8,969
[Capital Stock] 45,000 45,000 45,000
[Retained Earnings] 23,141 19,720 14,878
[Capital Adjustment] - - (-)76
Total Stockholders' Equity 68,141 64,720 59,802
Net Sales 13,630 21,374 23,211
Operating Income 7,526 15,171 18,251
Ordinary Income 6,274 13,367 16,812
Net Income for the Year 4,411 9,343 11,622
Company : Chohung Finance Ltd., Hong Kong
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 129,414 153,378 193,874
Cash & Due from Bank 18,914 12,322 28,759
Marketable Securities 6,064 6,325 6,547
Loans 104,436 134,731 175,711
Other Current Assets - - -
[Fixed Assets] 15,294 13,827 30,075
Investment securities 14,470 12,677 28,333
Tangible Assets 384 282 359
Other Fixed Assets 440 868 1,384
Total Assets 144,708 167,205 223,949
[Current Liabilities] 109,682 120,029 172,679
[Fixed Liabilities] 265 660 6,849
Total Liabilities 109,947 120,689 179,529
[Capital Stock] 17,967 18,006 19,637
[Retained Earnings] 17,132 28,586 24,768
[Capital Adjustment] (-)338 (-)76 16
Total Stockholders' Equity 34,761 46,516 44,420
Net Sales 10,296 16,207 19,906
- 163 -
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
Operating Income (-)11,500 12,059 8,425
Ordinary Income (-)11,392 5,875 7,013
Net Income for the Year (-)11,392 5,875 7,013
Company: CHB America Bank
ID No.: 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 342,439 292,834 270,605
Cash & Due from Bank 10,135 11,651 12,446
Loans 332,304 281,183 258,159
Other Current Assets - - -
[Fixed Assets] 44,059 49,251 51,385
Investment securities 29,685 34,109 34,575
Tangible Assets 9,902 9,946 11,371
Other Fixed Assets 4,472 5,196 5,439
Total Assets 386,498 342,085 321,990
[Current Liabilities] 322,274 253,483 225,835
[Fixed Liabilities] - - 2,650
Total Liabilities 322,274 253,483 228,485
[Capital Stock] 60,876 73,012 79,623
[Retained Earnings] 3,183 15,311 13,988
[Capital Adjustment] 165 279 (-)106
Total Stockholders' Equity 64,224 88,602 93,505
Net Sales 22,325 22,876 29,254
Operating Income 3,710 18,451 9,525
Ordinary Income 3,949 4,343 6,510
Net Income for the Year 2,280 2,497 4,329
Note) On March 24, 2003, CHB America Bank is a wholly-owned subsidiary of
Chohung Bank created through a merger of Chohung Bank of New York and
California Chohung Bank. The closing performance before the merger is the
simple sum of the closing performances of the above two companies.
Company : Chohung Bank (Deutschland) GmbH
ID No. : 00000000 (Unit: Million Won)
- 164 -
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 200,120 207,394 203,710
Cash & Due from Bank 30,031 18,081 52,809
Loans 170,089 189,313 150,901
Other Current Assets - - -
[Fixed Assets] 3,951 4,696 10,024
Investment securities 2,403 2,400 8,660
Tangible Assets 225 392 280
Other Fixed Assets 1,323 1,904 1,084
Total Assets 204,071 212,090 213,734
[Current Liabilities] 170,795 182,001 189,717
[Fixed Liabilities] 207 1,635 2,464
Total Liabilities 171,002 183,636 192,181
[Capital Stock] 23,048 19,179 17,716
[Retained Earnings] 10,021 9,275 3,837
Total Stockholders' Equity 33,069 28,454 21,553
Net Sales 12,370 14,997 15,069
Operating Income (-)1,590 10,486 6,269
Ordinary Income (-)1,032 7,720 4,968
Net Income for the Year (-)1,130 5,024 3,097
Company : Chohung Vina Bank
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 146,730 146,261 113,501
Cash & Due from Bank 46,422 87,596 80,917
Loans 100,308 58,665 32,584
Other Current Assets - - -
[Fixed Assets] 2,617 1,955 2,102
Investment securities 544 554 623
Tangible Assets 1,010 356 617
Other Fixed Assets 1,063 1,045 862
Total Assets 149,347 148,216 115,603
[Current Liabilities] 126,849 129,440 93,759
[Fixed Liabilities] - - 2,709
- 165 -
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
Total Liabilities 126,849 129,440 96,468
[Capital Stock] 23,956 24,008 26,522
[Retained Earnings] (-)1,458 (-)5,232 (-)7,387
Total Stockholders' Equity 22,498 18,776 19,135
Net Sales 8,254 6,986 6,279
Operating Income 2,610 4,851 1,811
Ordinary Income 3,762 1,516 (-)9,020
Net Income for the Year 3,762 1,516 (-)9,025
Company : CHB Valuemeet 2001 year 1st Securitization
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.6.29~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 2,089 2,853 4,153
Cash & Due from Bank 1,993 1,771 3,713
Marketable Securities - - -
Loans - - -
Other Current Assets 96 1,082 440
[Securitization Assets] 625 5,360 30,615
Securitization Assets 625 5,360 30,615
[Fixed Assets] - - -
Tangible Assets - - -
Other Fixed Assets - - -
Total Assets 2,714 8,213 34,768
[Current Liabilities] 1,853 772 1,656
[Securitization Liabilities] 1,000 15,730 39,803
[Fixed Liabilities] - - -
Total Liabilities 2,853 16,502 41,459
[Capital Stock] 10 10 10
[Retained Earnings] (-)149 (-)8,299 (-)6,701
[Capital Adjustment] - - -
Total Stockholders' Equity (-)139 (-)8,289 (-)6,691
Operating Revenues 14,607 7,868 1,600
- 166 -
2003.1.1~ 2002.1.1~ 2001.6.29~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
Operating Income 7,149 (-)1,810 (-)6,879
Ordinary Income 8,150 (-)1,598 (-)6,701
Net Income for the Year 8,150 (-)1,598 (-)6,701
Company : CHB Valuemeet 2001 year 2nd Securitization
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.11.10~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 220 430 922
Cash & Due from Bank 220 398 922
Marketable Securities - - -
Loans - - -
Other Current Assets - 32 -
[Securitization Assets] 1,875 4,519 12,995
Securitization Assets 1,875 4,519 12,995
[Fixed Assets] - - -
Tangible Assets - - -
Other Fixed Assets - - -
Total Assets 2,095 4,949 13,917
[Current Liabilities] 260 226 344
[Securitization Liabilities] 6,068 7,678 14,431
[Fixed Liabilities] - - -
Total Liabilities 6,328 7,904 14,775
[Capital Stock] 10 10 10
[Retained Earnings] (-)4,243 (-)2,965 (-)868
[Capital Adjustment] - - -
Total Stockholders' Equity (-)4,233 (-)2,955 (-)858
Operating Revenues 179 719 424
Operating Income (-)1,341 (-)2,124 (-)868
Ordinary Income (-)1,278 (-)2,097 (-)868
Net Income for the Year (-)1,278 (-)2,097 (-)868
Company : CHB Valuemeet 2002 year 1st Securitization
ID No. : 00000000 (Unit: Million Won)
- 167 -
2003.1.1~ 2002.3.29~
CLASSIFICATION 2003.12.31 2002.12.31
-------------- ---------- ----------
[Current Assets] 401 569
Cash & Due from Bank 399 554
Marketable Securities - -
Loans - -
Other Current Assets 2 15
[Securitization Assets] 11,453 15,470
Securitization Assets 11,453 15,470
[Fixed Assets] - -
Tangible Assets - -
Other Fixed Assets - -
Total Assets 11,854 16,039
[Current Liabilities] 342 264
[Securitization Liabilities] 16,411 18,433
[Fixed Liabilities] - -
Total Liabilities 16,753 18,697
[Capital Stock] 10 10
[Retained Earnings] (-)4,909 (-)2,668
[Capital Adjustment] - -
Total Stockholders' Equity (-)4,899 (-)2,658
Operating Revenues 298 970
Operating Income (-)2,302 (-)2,679
Ordinary Income (-)2,240 (-)2,668
Net Income for the Year (-)2,240 (-)2,668
Company : Good Morning Shinhan Securities USA Inc.(New York subsidiary)
ID No. : 00000000 (Unit: Million Won)
2003.4.1~ 2002.4.1~ 2001.4.1~
CLASSIFICATION 2004.3.31 2003.03.31 2002.03.31
-------------- --------- ---------- ----------
[Current Assets] 5,331 7,633 10,367
-Quick Assets 5,331 7,633 10,367
-Inventories 0 0
[Fixed Assets] 351 335 600
-Investments 41 449
-Tangible Assets 162 88 50
-Intangible Assets 0 0
-Other Assets 189 205 101
Total Assets 5,682 7,969 10,967
- 168 -
2003.4.1~ 2002.4.1~ 2001.4.1~
CLASSIFICATION 2004.3.31 2003.03.31 2002.03.31
-------------- --------- ---------- ----------
[Current Liabilities] 1,070 2,021 4,336
[Fixed Liabilities] 0 0
Total Liabilities 1,070 2,021 4,336
[Capital Stock] 3,342 5,262 5,571
[Capital Surplus] 0 0
-Capital Reserves 0 0
-Assets Revaluations Reserves 0 0
[Retained Earnings] -21 685 1,060
[Capital Adjustment] 1,291 0 0
Total Stockholders' Equity 4,612 5,948 6,631
Operating Income -984 316 3,693
Ordinary Income -984 (-)624 3,693
Net Income for the Year -984 (-)309 2,387
Note1) The financial statements of the New York subsidiary prepared in
accordance with the laws and regulations of the U.S. are restructured
into the Korean language financial statements and, hence, there may
be some differences in classifying account titles.
Company : Good Morning Shinhan Securities Europe Limited.(London subsidiary)
ID No. : 00000000 (Unit: Million Won)
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 7,225 3,641 4,744
-Quick Assets 6,095 3,641 4,744
-Other Assets 1,130 0 0
[Fixed Assets] 139 147 97
-Investments 76 70 0
-Tangible Assets 63 72 97
-Intangible Assets 5 0
-Deferred Charges 0 0
Total Assets 7,364 3,789 4,773
[Current Liabilities] 60 58 59
[Fixed Liabilities] 0 0
Total Liabilities 60 58 59
[Capital Stock] 9,669 9,857 9,478
[Capital Surplus] 0 0
-Capital Reserves 0 0
- 169 -
2003.1.1~ 2002.1.1~ 2001.1.1~
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
-Assets Revaluations Reserves 0 0
[Retained Earnings] -5,210 (-)6,126 (-)4,764
[Capital Adjustment] 2,846 0 0
Total Stockholders' Equity 7,305 3,731 4,715
Net Sales 2,546 993 709
Operating Income -158 (-)1,113 (-)1,354
Ordinary Income -177 (-)1,122 (-)1,096
Net Income for the Year -177 (-)1,122 (-)1,096
Note 1) The financial statements of the London subsidiary prepared in
accordance with the laws and regulations of the U.K. are restructured
into the Korean language financial statements and, hence, there may
be some differences in classifying account titles.
VI. Matters concerning Shares
1 DISTRIBUTION OF SHAREHOLDING
A. Current Status of Largest Shareholders & its Specially Related Person
[As of June 30, 2004] (Unit : Shares, %)
NUMBER OF SHARES HELD (SHAREHOLDING RATIO)
------------------------------------------
BEGINNING INCREASE DECREASE ENDING
--------- -------- -------- ------
TYPE OF NUMBER OF SHAREHOLDING NUMBER OF NUMBER OF NUMBER SHAREHOLDING CAUSE OF
NAME RELATIONSHIP SHARES SHARES RATIO SHARES SHARES OF SHARES RATIO CHANGE
---- ------------ ------ ------ ----- ------ ------ --------- ----- ------
BNP Paribas Principal Common Stock 13,557,832 4.61 0 0 13,557,832 4.39 -
Luxembourg
BNP Paribas Principal Preferred 0 0 0 0 0 0 -
Luxembourg Stock
Total Common 13,557,832 4.61 0 0 13,557,832 4.39 -
Stock
Preferred
Stock 0 0 0 0 0 0
Total 13,557,832 3.46 - - 13,557,832 3.34
Name of Largest Shareholder BNP Paribas Luxembourg Number of Specially Related Party - persons
Note1 Notwithstanding no increase or decrease in the number of shares, the
change in shareholding ratio was incurred by a surge in the total number
of common stocks of the Company to 309,083,890 shares by
- 170 -
14,682,590 shares, as a result of small-scale of common stock swap
between Chohung Bank and the Company as of June 22, 2004. The total
number of shares issued and outstanding including preferred stocks rose
to 406,388,454 shares.
B. Current Status of Shareholding of Shareholders with 5% or more Shareholding
Ratio
[As of June 30, 2004] (Unit : Shares, %)
COMMON STOCK PREFERRED STOCK SUBTOTAL
------------ --------------- --------
SERIAL NUMBER OF SHAREHOLDING NUMBER OF SHAREHOLDING NUMBER OF SHAREHOLDING
NO. NAME SHARES RATIO SHARES RATIO SHARES RATIO
--- ---- ------ ----- ------ ----- ------ -----
- - - - - - - -
Total - - - - - -
Note) The shares in the holding company held by Shinhan Bank were completely
sold on March 3, 2004.
- Number of Shares Held: 29,873,359 shares
- Amount of Disposal : KRW627.3 billion
- Method of Sale: after hours block trading before commencement
of session
2. BUSINESS AFFAIRS RELATING TO SHARES
Details of Preemptive Rights Note1)
under Articles of Incorporation
Closing Date December 31 Ordinary General Within three (3) months after
Meeting of Shareholders closing date
Time to Close Entry in Note2)
Shareholders' Registry
Type of Stock Certificate 1,5,10,50,100,500,1000,10,000 shares (8 denominations)
Transfer Agent Korea Securities Depository (TEL : 3772-9000)
Privilege of Shareholders None Newspaper for Public Hankuk Economic Daily
Notice Maeil Economic Daily
Note 1) Article 13 of Articles of Incorporation
(1) The shareholders of the Company shall have pre-emptive rights to
subscribe for new shares to be issued by the Company in proportion to
their respective shareholdings.
(2) Notwithstanding the provision of Paragraph (1) above, the Company may
allocate new shares to persons other than existing shareholders of the
Company, in any of the following instances:
- 171 -
1. If the Company issues new shares by way of general public
offering, to the extent not exceeding 50/100 of the total
number of issued and outstanding shares of the Company, by a
resolution of the Board of Directors in accordance with the
provisions of the Securities Exchange Act ("SEA").
2. If the Company preferentially allocates new shares to members
of the Employee Stock Ownership Association in accordance with
the provisions of the SEA;
3. If the Company issues new shares for the issuance of
depositary receipts ("DR"s), to the extent not exceeding
50/100 of the total number of issued and outstanding shares of
the Company, in accordance with the provisions of the SEA;
4. If the Company issues new shares upon the exercise of stock
options in accordance with the provisions of the SEA;
5. If the Company issues new shares to the securities investment
company that runs exclusively the banking business, as set
forth in the Finance Holding Company Act (the "FHCA"); or
6. If the Company issues new shares to foreign investors, foreign
or domestic financial institutions, allied companies, etc. for
the necessity of management, such as introduction of advanced
technology, improvement of financial structure of or financial
support to the Company or its subsidiary, strategic business
alliance, etc., to the extent not exceeding 50/100 of the
total number of issued and outstanding shares of the Company.
(3) In case new shares are issued pursuant to Paragraph (2), type, number,
issue price, etc. of shares to be issued shall be determined by a
resolution of the Board of Directors, to the extent permitted by the
relevant laws, such as the SEA, etc.
(4) In the case of abandonment or loss of the pre-emptive right to
subscribe for new shares by any shareholder, the forfeited shares
resulting from such abandonment or loss of the pre-emptive right shall
be disposed by a resolution of the Board of Directors. If fractional
shares result from the allocation of new shares, such shares shall also
be disposed of by a resolution of the Board of Directors.
Note 2) Article 18 (Close of Shareholders' Registry and Record Date)
(1) The Company shall suspend entries of alteration with respect to its
rights, from the 1st day of January of each year up to the closing date
of the Ordinary General Meeting of Shareholders for the relevant fiscal
year.
(2) The shareholders registered in the shareholders' registry as of
December 31 of each fiscal year shall be entitled to exercise the
rights as shareholders at the Ordinary General
- 172 -
Meeting of Shareholders convened for such fiscal year.
(3) The Company may, if necessary for convening of an Extraordinary General
Meeting of Shareholders or any other necessary cases, suspend any entry
into the shareholders' registry with respect to shareholders' rights
for a period not exceeding three (3) months as determined by a
resolution of the Board of Directors, or cause the shareholders whose
names appear in the shareholders' registry on a record date set by a
resolution of the Board of Directors to exercise the rights as
shareholders. If the Board of Directors deems it necessary, the Company
may suspend any entry into the shareholders' registry and set the
record date at the same time. The Company shall give at least two (2)
weeks prior notice to the public.
(4) Notwithstanding the provision of Paragraph (3), if otherwise set forth
in the FHCA or other relevant laws, the Company may follow such
different provisions.
3. STOCK PRICE & RESULTS OF STOCK TRADING FOR THE MOST RECENT SIX (6)
MONTHS
A. Korea Securities Market
(Unit : Won, Shares)
TYPE MARCH 2004 APRIL 2004 MAY 2004 JUNE 2004 JULY 2004 AUG. 2004
---- ---------- ---------- -------- --------- --------- ---------
Common Stock High 22,700 23,250 21,550 18,800 17,400 20,350
Low 20,050 20,450 16,200 15,700 15,200 16,600
Monthly Trading Volume 67,106,149 21,938,659 27,771,913 32,986,317 27,090,639 24,600,301
B. Overseas Securities Market
[Name of Stock Exchange : NYSE] (Unit : USD, Shares)
TYPE MARCH 2004 APRIL 2004 MAY 2004 JUNE 2004 JULY 2004 AUG. 2004
---- ---------- ---------- -------- --------- --------- ---------
ADR High 38.50 40.80 37.27 32.00 30.23 34.90
Low 34.05 35.15 27.60 27.76 26.50 29.33
Monthly Trading Volume 160,700 90,700 110,300 110,800 174,500 189,100
- 173 -
VII. Matters concerning Officer & Employees
1. CURRENT STATUS OF OFFICERS
(Unit : Shares)
NUMBER OF
SHARES HELD
TITLE REGISTERED/ -----------
(STANDING/ NON- DATE OF COMMON PREFERRED
NON-STANDING REGISTERED NAME BIRTH BRIEF PERSONAL RECORD BUSINESS STOCK STOCK REMARK
------------ ---------- ---- ----- --------------------- -------- ----- ----- ------
Representative Registered Eung 38.11.25 Sunlin Commercial High Chairman of 109,973 - Re-appointed
Director & Chan Na School General Steering
Chairman President of Shinhan Bank Committee
(Standing) Vice Chairman of Shinhan
Bank
Representative Registered Young 45.10.28 Sungkyunkwan University, a Member of General 15,553 - Re-appointed
Director & Hwi Choi B.A. in economics Steering Committee
President Senior Executive Vice
(Standing) President of Shinhan Bank
Vice President of Shinhan
Bank
Outside Director of Shinhan
Bank and Chohung Bank
(current)
Director Registered In Ho 43.11.02 Yonsei University, a B.A. - 23,191 - Re-appointed
(Non-Standing) Lee in economics
Chief Executive Director
of Shinhan Bank
President of Shinhan Bank
Director Registered Young 29.07.02 Meiji University, a B.A. in Member of Audit 427,372 - Re-appointed
(Non Standing) Seok business Committee
Choi Non-standing Director of Member of
Shinhan Bank Compensation
Representative Director of Committee
CYS Co., Ltd. (current)
Director Registered Young 48.08.04 Chosun University in Japan ,- 12,261 - New
(Non-Standing) Woong Representative Director of
Yang Doen (Limited) (current)
Outside Director Registered Pyung 39.02.06 Princeton Graduate School Member of - - Re-appointed
Joo Kim a doctorate. in economics Steering
Dean of the Graduate School Committee,
of International Studies at Chairman of Risk
Sogang University
- 174 -
Management
Professor at KDI School of Committee
Public Policy and
Management (current)
Outside Director Registered Il Sup 46.07.01 Seoul Univ., a doctorate. Chairman of Audit - - Re-appointed
Kim in business administration Committee
Vice President of Samil Member of
Pricewaters Coopers. Compensation
Professor at College of Committee
Business Management at Ewha
Woman's University
(current)
Outside Director Registered Sang 42.09.13 Seoul University, a B.A. in Member of Audit - - New
Yoon Lee Commerce Committee
Non-standing Vice Chairman Member of
of Korea Foods Industry Compensation
Association (current) Committee
Representative Director &
President of Nongshim
(current)
Outside Director Registered Yoon 46.03.05 Hankuk University of Chairman of - - New
Soo Foreign Studies, a B.A. in Compensation
Yoon Political Science and Committee
Diplomacy Member of Risk
Non-standing director of Management
Hanvit Bank (former) Committee
Representative Director of Member of
FILA Korea (current) Steering
Committee,
Outside Director Registered Sang 48.02.02 Duke Univ., a doctorate in Member of - - New
Chul engineering Compensation
Lee Minister of Information & Committee
Communication (former)
Standing advisor at Kolon
(current)
Outside Director Registered Byung 28.09.10 Meiji University, a B.A. in Member of 12,903 - Re-appointed
Hun Park business Steering Committee
Head of Central Headquarter
of the Korean Residents
Union in Japan
Chairman of Daesung Eltec
Co., Ltd. (current)
- 175 -
Outside Director Registered Moon 30.12.31 Osaka University, LL.B Member of Audit - - Re-appointed
Pil President of Committee
Oh Non-standing Director of
Shinhan Bank
President of Hwanhwa Heung
San Co., Ltd. (current)
Director Registered Young 34.04.04 Chief Director of Baekdoo - - - Re-appointed
(Non Standing) Soo Academy, Kunkuk High School
Lee (current)
President of Teni
Corporation (current)
Outside Director Registered Dong 36.11.27 Chief Director of Aichi Member of Audit 10,162 - New
Hyun Commercial Bank in Japan Committee
Kwon (Current)
President of King Koo Tour
Co., Ltd. (current)
Outside Director Registered Philippe 49.06.24 l'Universite Pantheon-Assas : Member of Risk - - New
Reynieix Paris 2, a M.A. in Management
commercial law Committee
General Manager of BNP
Paribas Singapore (former)
General Manager of BNP
Paribas Seoul Branch
(Current)
Senior Executive Non- Bhang- 51.12.13 Yonsei University, MBA Integration - - Re-appointed
Vice President Registered Gil Choi General Manager of General Coordination Team
Planning and Management 1, 2
Department of Shinhan Bank (Relating to
Chohung Bank)
Senior Executive Non Chil 46.08.20 Sungkyunkwan University, a Public Relation - - New
Vice President -Registered Sun B.A. in business Team, Audit &
Hong administration Compliance Team
Acting President of Chohung Business Support
Bank Team 1, 2
Outside Director of Good
Morning Shinhan Securities
and Shinhan Card (current)
Senior Executive Non Hee 50.10.14 Korea University MBA Business Support 3,628 - New
Vice President -Registered Soo Deputy President of Shinhan Team 1
Kim Bank Integration
Outside Director of Shinhan Coordination Team
Bank and Cheju Bank 1
(current)
- 176 -
Senior Executive Non-Registered Byung 51.01.06 Seoul University, a B.A. in Planning & Financial - - New
Vice President Jae business administration Management Team
Cho Chohung Bank, General Manager IR Team
Planning and Management
Department Outside Director of
Chohung Bank and Shinhan
Capital (current)
Duksoo Commercial High School General Service Team 16,388 - New
Senior Executive Non-Registered Baek 52.10.08 General Manager of Shinhan IT Planning Team
Vice President Soon Bank Managing Director of Integration
Lee Shinhan Bank Coordination
Team II
Total Amount of Semiannual Salary : KRW2,729 million
Average Commission per Person : KRW210 million
* The said average commission per person is the total amount of semiannual
salary, which refers to the amount paid to 8 directors and 5 senior executive
vice presidents (no separate commission is paid to other directors), divided by
13.
2. CURRENT STATUS OF EMPLOYEES
(as of end of July 31, 2004, Unit :Million Won)
--------------------------------------------------------------------------------------------
NUMBER OF EMPLOYEES
-------------------------------------
MANAGEMENT AVERAGE ANNUAL AVERAGE
& CLERICAL LENGTH OF TOTAL SALARY PER
CLASSIFICATION WORK PRODUCTION OTHERS TOTAL SERVICE SALARY PERSON REMARK
-------------- ---------- ---------- ------ ----- --------- ------ ---------- ------
Male 62 - - 62 1.7 years 4,371 70 -
Female 14 - 1 15 1.8 years 381 25 -
Total 76 - 1 77 1.7 years 4,752 61 -
3. STATUS OF LABOR UNION
- /A
- 177 -
VIII. Other Necessary Matters
1. SUMMARY OF REPORT & PUBLIC DISCLOSURE
A. Reported Matter pursuant to Cap. 6 Section 2 of Regulation (Report of
Major Business Management)
DATE OF
REPORT SUBJECT REPORTED MATTERS REMARKS
------ ------- ---------------- -------
January 9, 2004 Extension of loans - Extended loans to the subsidiary, Shinhan Card.
to the largest * Terms of loan
shareholder, etc. -- KRW100 billion: January 9, 2004 ~ July 8, 2004 (181 days)
January 9, 2004 Execution of loan * Important matters relating to business management of the
agreement subsidiary (Shinhan Card)
- Determined to borrow loans from the holding company.
KRW100 billion (maturity: July 8, 2004)
January 14, 2004 Dismissal of an * Important matters relating to business management of the
outside director subsidiary (Shinhan Bank)
Youn Soo Song
January 14, 2004 Dismissal of an * Important matters relating to business management of the
outside director subsidiary (Shinhan Card)
Min Ky Han
January 14, 2004 Dismissal of a * Important matters relating to business management of the
member of the audit subsidiary (Shinhan Bank)
committee Youn Soo Song
January 14, 2004 Other important * Important matters relating to business management of the
matters relating to subsidiary (Shinhan Bank)
business management - In respect of the written resolution for the
normalization of business management of LG Card, Co., Ltd.
as determined by 16 creditor financial institutions,
Shinhan Bank resolved, at the meeting of the board of
directors held on January 13, 2004 (Thursday), to give its
consent to such creditor financial institutions' resolution
within the limit of KRW81.3 billion (in case of equity
conversion) and KRW81 billion (in case of additional
provision of liquidity which is to be converted into equity
in the future), respectively.
January 14, 2004 Appointment of a * Important matters relating to business management of the
member of the audit subsidiary (Shinhan Bank)
committee Kyung Seo Park
January 20, 2004 Other important * Important matters relating to business management of the
matters relating to subsidiary (Chohung Bank)
business management - In respect of the agreement for the normalization of
business management of LG Card Co., Ltd. as adopted at the
- 178 -
meeting of the creditor financial institutions, Chohung
Bank resolved, subject to obtaining consents from all of 16
creditor financial institutions, to submit a written
agreement under which it agrees to convert KRW73.7 billion
of the existing debts to equity and to additionally provide
KRW 73.4 billion of liquidity (which is to be converted
into equity in the future) at the meeting of the board of
director held on January 19, 2004.
February 10, 2004 Decrease in sales * Important matters relating to business management of the
volume by 10% or holding company
more compared with Decrease in sales volume: KRW156,932,284,748
that of the most Rate of decrease in sales volume: 24.39%
recent fiscal year
February 10, 2004 Decrease in ordinary * Important matters relating to business management of the
income by 30% or holding company
more compared with Decrease in ordinary income: KRW241,703,272,978
that of the most Rate of decrease in ordinary income: 40.02%
recent fiscal year
February 10, 2004 Decrease in net * Important matters relating to business management of the
earnings for the holding company
year by 30% or more Decrease in ordinary income: KRW241,703,272,978
compared with those Rate of decrease in ordinary income: 40.02%
of the most recent
fiscal year
February 10, 2004 Decrease in ordinary * Important matters relating to business management of the
income by 30% or subsidiary (Shinhan Bank)
more compared with Decrease in ordinary income: KRW157,236,520,567
that of the most Rate of decrease in ordinary income: 18.65%
recent fiscal year
February 10, 2004 Decrease in net * Important matters relating to business management of the
earnings for the subsidiary (Shinhan Bank)
year by 30% or more Decrease in net earnings for the year: KRW119,842,549,276
compared with those Rate of decrease in net earnings for the year: 20.11%
of the most recent
fiscal year
February 10, 2004 Increase in ordinary * Important matters relating to business management of the
loss by 30% or more subsidiary (Chohung Bank)
compared with that Increase in ordinary loss: KRW304,615,211,742
of the most recent Rate of increase in ordinary loss: 49.8%
fiscal year
February 10, 2004 Increase in net loss * Important matters relating to business management of the
for the year by 30% subsidiary (Chohung Bank)
or more compared Increase in net loss for the year: KRW379,906,487,536
with that of the Rate of increase in net loss for the year: 64.8%
most
- 179 -
recent fiscal year
February 12, 2004 Increase in sales * Important matters relating to business management of the
volume by 10% or subsidiary (Shinhan Card)
more compared with Increase in sales volume: KRW202,908,771,539
that of the most Rate of increase in sales volume: 88.6%
recent fiscal year
February 12, 2004 Increase in ordinary * Important matters relating to business management of the
loss by 30% or more subsidiary (Shinhan Card)
compared with that Increase in ordinary loss: KRW90,861,026,122
of the most recent Rate of increase in ordinary loss: - (deficit)
fiscal year
February 12, 2004 Increase in net loss * Important matters relating to business management of the
for the year by 30% subsidiary (Shinhan Card)
or more compared Increase in ordinary loss: KRW90,328,353,243
with that of the Rate of increase in ordinary loss: - (deficit)
most recent fiscal
year
February 13, 2004 Investment in other * Important matters relating to business management of the
company (acquisition subsidiary (Shinhan Bank)
of equity and - LG Card Co., Ltd.
equity-related
securities)
February 13, 2004 Other important * Important matters relating to business management of the
matters relating to subsidiary (Chohung Bank)
business management - Equity conversion for normalization of business
management of LG Card Co., Ltd.
February 13, 2004 Resolution for * Important matters relating to business management of the
issuance of overseas subsidiary (Shinhan Bank)
general bonds - Total issue amount: KRW116,920,000,000
- Date of payment: February 24, 2004
- Date of maturity: February 24, 2014
February 20, 2004 Execution of * Important matters relating to business management of the
agreement for subsidiary (Shinhan Bank)
issuance of overseas - Total issue amount: KRW57,730,000,000
general bonds - Date of payment: February 24, 2004
- Date of maturity: February 24, 2014
February 25, 2004 Resolution of board * Agenda and major contents thereof
of directors for - Agenda No. 1: Approval of (the proposal for) balance
convening a general sheet, income and loss statement and statement of
meeting of appropriation of retained earning for the 3rd fiscal year
shareholders (January 1, 2003 ~ December 31, 2003)
- Agenda No. 2: Partial amendment to articles of
incorporation
- Agenda No. 3: Appointment of directors
- Agenda No. 4: Appointment of a member of audit
- 180 -
committee who is also outside director:
- Agenda No. 5: Approval of limit of directors'
compensation
- Agenda No. 6: Granting stock options to the officers and
employees of the company and its subsidiary
February 25, 2004 Approval of board of * Important matters relating to business management of the
directors to grant holding company
stock option - Grantee: 26 persons including Ra Eung Chan
- Quantity: 1,405,000 shares
- Scheduled date of general meeting of shareholders: March
25, 2003
February 25, 2004 Resolution of * Important matters relating to business management of the
payment of cash holding company
dividends - Total amount of dividends: KRW242,113,904,555
- Dividend per share: KRW600 (common shares)
- Record date for payment of dividends: December 31, 2003
February 27, 2004 Resolution of board * Important matters relating to business management of the
of directors for subsidiary (Shinhan Card)
convening a general - Agenda No. 1: Approval of balance sheet, income and loss
meeting of statement and statement of appropriation of retained
shareholders earning for the 2nd fiscal year (January 1, 2003 ~ December
31, 2003)
- Agenda No. 2: Appointment of directors
- Agenda No. 3: Approval of limit of directors'
compensation
March 3, 2004 Disposal of equity * Important matters relating to business management of the
securities (shares) subsidiary (Shinhan Bank)
invested in other Shinhan Financial Group
company
March 8, 2004 Appointment of * Important matters relating to business management of the
independent auditor subsidiary (Chohung Bank)
KPMG Samjong Accounting Corp.
March 8, 2004 Approval of board of * Important matters relating to business management of the
directors to grant subsidiary (Chohung Bank)
stock option KPMG Samjong Accounting Corp.
March 8, 2004 Resolution of board * Important matters relating to business management of the
of directors for subsidiary (Shinhan Card)
convening a general - Agenda No. 1: Approval of balance sheet, income and loss
meeting of statement and statement of appropriation of retained
shareholders earning for the 172nd fiscal year (January 1, 2003 ~
December 31, 2003)
- Agenda No. 2: Amendment to articles of incorporation
- Agenda No. 3: Appointment of directors
- Agenda No. 4: Appointment of a standing member of the
- 181 -
audit committee
- Agenda No. 5: Appointment of a member of the audit
committee who is an outside director
- Agenda No. 6: Approval of limit of directors'
compensation
- Agenda No. 7: Repeal of regulations on severance payment
for officers
- Agenda No. 8: Granting stock options
March 10, 2004 Resolution of board * Important matters relating to business management of the
of directors for subsidiary (Shinhan Card)
convening a general - Agenda No. 1: Approval of balance sheet, income and loss
meeting of statement and statement of appropriation of retained
shareholders earning for the 22nd fiscal year (January 1, 2003 ~
December 31, 2003)
- Agenda No. 2: Partial amendment to articles of
incorporation
- Agenda No. 3: Approval of limit of directors'
compensation
- Agenda No. 4: Appointment of directors
March 10, 2004 Other important * Important matters relating to business management of the
matters relating to subsidiary (Chohung Bank)
business management - Fixed the quantity of shares for which the stock option
may be exercised (part of the stock options has been
cancelled).
- Number of persons previously granted with the stock
option: 68 persons
- Number of shares for which the stock options have been
previously granted: 1,352,735 shares (common shares)
- Persons whose stock options have been cancelled: Sung Bok
Wee and 14 others
- Number of shares for which the stock options have been
cancelled: 647,065 shares
- Reasons and grounds for cancellation: the quantity of
shares has been fixed in accordance with the conditions of
exercise.
March 11, 2004 Submission of audit * Important matters relating to business management of the
report subsidiary (Chohung Bank)
March 17, 2004 Submission of audit * Received the audit report from the independent auditor.
report
March 17, 2004 Submission of audit * Important matters relating to business management of the
report subsidiary (Shinhan Bank)
- Received the audit report for Shinhan Bank.
March 17, 2004 Submission of audit * Important matters relating to business management of the
report subsidiary (Shinhan Card)
- 182 -
- Received the audit report for Shinhan Card.
March 17, 2004 Extension of loans * Loans to Shinhan Capital
to the largest - KRW30 billion (3 yrs, general loan)
shareholder, etc. - KRW20 billion (5 yrs, subordinated loan)
March 24, 2004 Appointment of * Important matters relating to business management of the
independent auditor subsidiary (Shinhan Bank)
- Appointment of independent auditor for Shinhan Bank:
KPMG Samjong Accounting Corp.
March 24, 2004 Appointment of * Important matters relating to business management of the
independent auditor subsidiary (Shinhan Card)
- Appointment of independent auditor for Shinhan Card:
KPMG Samjong Accounting Corp.
March 26, 2004 Resolution of * Disclosed the major resolutions adopted by the general
ordinary general meeting of shareholders.
meeting of - All of 6 agendas were resolved as submitted.
shareholders
March 26, 2004 Granting stock - Officers: Eung Chan Ra and 26 others (705,000 shares in
option at the total)
special resolution - Heads of departments: Byung Kuk Song and 408 others
of the general (700,000 shares in total)
meeting of - Exercise price:
shareholders
March 26, 2004 Dismissal of outside * Resignation of outside directors (termination of the term
directors (4 persons) of office)
- Myung Ho Kim, Keon Chi Kim, Pyung Jo Park, Young Chul
Kwon (4 persons)
March 26, 2004 Dismissal of a * Resignation of a member of the audit committee
member of the audit (termination of the term of office)
committee - Pyung Jo Park
March 26, 2004 Resolution for * Appointment of outside directors
appointment of - Pyung Joo Kim, Il Sup Kim, Sang Yoon Lee, Yoon Soo Yoon,
outside directors Sang Chul Lee, Byung Hum Park, Moon Pil Oh, Young Soo Lee,
(10 persons) Dong Hyun Kwon, Reynieix (10 persons)
March 26, 2004 Appointment of * Appointment of members of the audit committee
members of the audit - Young Seok Choi, Il Sup Kim, Sang Yoon Lee, Moon Pil Oh,
committee (5 persons) Dong Hyun Kwon
March 26, 2004 Resolution of * Important matters relating to business management of the
ordinary general subsidiary (Shinhan Bank)
meeting of - Resolved as submitted.
shareholders
March 26, 2004 Dismissal of a * Important matters relating to business management of the
member of the audit subsidiary (Shinhan Bank)
committee Kyung Seo Park
March 26, 2004 Resolution for * Important matters relating to business management of the
- 183 -
appointment of subsidiary (Shinhan Bank)
outside directors (5 - Young Hwi Choi, Kap Young Chung, Kyung Seo Park, Sang Rok
persons) Seo, Hee Soo Kim (5 persons)
March 26, 2004 Appointment of * Important matters relating to business management of the
members of the audit subsidiary (Shinhan Bank)
committee (3 persons) - Sang Rok Seo, Hee Soo Kim, Jae Ho Cho (3 persons)
March 26, 2004 Resolution of * Important matters relating to business management of the
ordinary general subsidiary (Chohung Bank)
meeting of - Resolved as submitted.
shareholders
March 26, 2004 Granting stock * Important matters relating to business management of the
option at the subsidiary (Chohung Bank)
special resolution - Dong Soo Choi and 8 others (total 340,000 shares,
of the general exercise price KRW 5,000)
meeting of
shareholders
March 26, 2004 Resolution for * Important matters relating to business management of the
appointment of subsidiary (Chohung Bank)
outside directors (3 Dae Sik Kim, Yong Sung Park, Young Hwi Choi (3 persons)
persons)
March 26, 2004 Appointment of * Important matters relating to business management of the
members of the audit subsidiary (Chohung Bank)
committee (3 persons) Chang Sung Jang, Ji Hong Yoo, Byung Jae Cho (3 persons)
March 26, 2004 Resolution of * Important matters relating to business management of the
ordinary general subsidiary (Shinhan Card)
meeting of - Resolved as submitted.
shareholders
March 26, 2004 Resolution for * Important matters relating to business management of the
appointment of subsidiary (Shinhan Card)
outside director Chil Sun Hong
March 26, 2004 Investment in other * Equity conversion for Hyundai Engineering & Construction
company Co., Ltd. by the subsidiary, Shinhan Bank
- Amount of investment: KRW29,800,000,000
April 2, 2004 Disclosure of other * Fixed the quantity of shares issued by the subsidiary,
important matters Chohung Bank for which the stock option may be exercised.
relating to business - Number of shares for which the stock options have been
management previously granted: 1,045,670 common shares
- Number of shares for which the stock options have been
cancelled: 106,704 common shares
April 8, 2004 Disposal of equity * Disposal of shares of SK Corporation held by the
securities (shares) subsidiary, Shinhan Bank
invested in other - Number of disposed shares: 1,110,750 shares
company - Amount of disposed shares: KRW49,036,097,000
- 184 -
April 12, 2004 Resolution for share * Share swap with subsidiary, Chohung Bank, making Chohung
swap Bank a wholly-owned subsidiary.
- Exchange ratio: 13.54%
April 12, 2004 Resolution for * Provision of options other than share swap for purpose of
tender offer or making Chohung Bank a wholly-owned subsidiary
offered purchase - Number of shares: 27,109,657 shares
- Price per share: KRW 3,500
April 12, 2004 Resolution for * Correct number of shares held by others except for the
tender offer or Company
offered - Number of shares: 135,548,285 shares
purchase(corrected)
April 12, 2004 Report on share swap * Chohung Bank became a wholly-owned subsidiary through a
small scale of share swap.
- Exchange ratio: 0.1354
April 12, 2004 Resolution for * Provision of options to minority shareholders of Chohung
tender offer or Bank through tender offer as Chohung Bank became a
offered purchase wholly-owned subsidiary
- Number of shares: 27,109,657 shares
- Price per share: KRW 3,500
April 12, 2004 Resolution for share * Important matters relating to business management of the
swap subsidiary (Chohung Bank)
- Exchange/Transfer percentage against the total assets:
0.69%
April 12, 2004 Resolution of board * Important matters relating to business management of the
of directors for subsidiary (Chohung Bank)
convening a general - Agenda No. 1: Approval of share swap agreement
meeting of
shareholders
April 12, 2004 Resolution for * The disclosure concerned may apply to matters disclosed
tender offer or by Chohung Bank.
offered purchase
(corrected)
April 16, 2004 Increase in ordinary * Important matters relating to business management of the
income by 30% or subsidiary (Good Morning Shinhan Securities)
more compared with - Increase in ordinary income for the year: KRW
that of the most 91,663,093,349
recent fiscal year - Rate of increase in ordinary income for the year: 1,655.0%
April 16, 2004 Increase in sales * Important matters relating to business management of the
volume by 10% or subsidiary (Good Morning Shinhan Securities)
more compared with - Increase in sales volume for the year: KRW 59,078,150,117
that of the most - Rate of increase in sales volume for the year: 9.5%
recent fiscal year
April 16, 2004 Increase in net * Important matters relating to business management of the
earnings by 30% or subsidiary (Good Morning Shinhan Securities)
more compared with - Increase in net earnings for the year: KRW 69,661,436,647
that of the most - Rate of increase in net earnings for the year: 640.4%
- 185 -
recent fiscal year
April 27, 2004 Disclosure of other * Receipt of dissenting shares with respect to small-scale
important matters of share swap
relating to business - Total number of shares issued and outstanding:
management 391,705,864 shares
- Number of dissenting shares: 11,773,441 shares
- Dissenting share ratio: 3.01%
April 27, 2004 Exercise of a right * Change of DR
to claim for - Delivery of 3,018,894 shares of GDR, ADR
underlying share of - Number of remaining DR as of date of disclosure:
DR 3,287,035 shares
April 29, 2004 Disclosure of other * Purchase of subordinated bonds issued by Cheju Bank and
important matters held by Shinhan Bank
relating to business - Purchase Amount: KRW 3.14 billion
management
April 30, 2004 Disclosure of other * Acquisition of shares in Shinhan Credit Information held
important matters by Lone Star
relating to business - Number of shares acquired: 294,000 shares (49%)
management - The Shareholding ratio in Shinhan Credit Information is
scheduled to increase to 100% from 51%.
May 10, 2004 Increase in ordinary * Important matters relating to business management of the
income compared with subsidiary
that of the most The figures are corrected upon a settlement of accounting
recent fiscal year of Good Morning Shinhan Securities
(corrected)
May 10, 2004 Increase in sales * Important matters relating to business management of the
volume compared with subsidiary
that of the most The figures are corrected upon a settlement of accounting
recent fiscal year of Good Morning Shinhan Securities
(corrected)
May 10, 2004 Increase in net * Important matters relating to business management of the
earnings compared subsidiary
with that of the The figures are corrected upon a settlement of accounting
most recent fiscal of Good Morning Shinhan Securities
year
(corrected)
May 12, 2004 Resolution for * Important matters relating to business management of the
granting stock option subsidiary (Good Morning Shinhan Securities)
- Person to be granted: Woo Geun Lee and 109 others
- Number of shares to be granted: total 709,000 shares
May 12, 2004 Resolution of board * Important matters relating to business management of the
of directors for subsidiary (Good Morning Shinhan Securities)
convening a general - Agenda No. 1: Approval of balance sheet, income and loss
meeting of statement and statement of appropriation of retained
shareholders earning for the 5th fiscal year (April 1, 2003 ~ March 31,
2004)
- 186 -
- Agenda No. 2: Appointment of directors
- Agenda No. 3: Approval of ceiling of remuneration for
directors
- Agenda No. 4: Granting stock option
May 17, 2004 Outcome of tender - Estimated number of shares subject to tender offer:
offer 27,109,657 shares
- Total amount: KRW 94,883,799,500
- Amount per share: KRW 3,500
May 17, 2004 Outcome of tender * Important matters relating to business management of the
offer subsidiary (Chohung Bank)
May 21, 2004 Filing of audit * Important matters relating to business management of the
report subsidiary (Good Morning Shinhan Securities)
May 24, 2004 Disclosure of other * Decision on number of shares available to the group
important matters management in exercising a stock option
relating to business - Determined Number of exercisable shares: 406,967 shares
management
May 24, 2004 Resolution of * Important matters relating to business management of the
extraordinary subsidiary (Chohung Bank)
meeting of - Resolved as submitted
shareholders
May 29, 2004 Resolution of * Important matters relating to business management of the
ordinary general subsidiary (Good Morning Shinhan Securities)
meeting of - Resolved as submitted
shareholders
May 29, 2004 Granting stock * Important matters relating to business management of the
option at the subsidiary (Good Morning Shinhan Securities)
special resolution - Management: 7 persons (315,000 shares)
of the general - Deputy Branch Manager: 99 persons (318,000 shares)
meeting of - Exercise price: KRW 5,000
shareholders
May 29, 2004 Cancellation of * Important matters relating to business management of the
Granting of stock subsidiary (Good Morning Shinhan Securities)
options - Persons subject to cancellation: Gi Kwon Do, Geun Mo Lee,
Hong Sik Kim
- Number of shares cancelled: common stock 150,000 shares
May 29, 2004 Resolution for * Important matters relating to business management of the
appointment of subsidiary (Good Morning Shinhan Securities)
outside directors - Kyung Ho Kim, Jin Won Park, Hong Yeol Jeon, Hyung Tae Kim
(3 persons) (3 persons in total)
May 29, 2004 Appointment of * Important matters relating to business management of the
member of audit subsidiary (Good Morning Shinhan Securities)
committee (3 persons) - Hyung Tae Kim, Kyung Ho Kim, Sung Ro Lee (3 persons in
total)
May 29, 2004 Dismissal of member * Important matters relating to business management of the
of audit committee subsidiary (Good Morning Shinhan Securities)
- 187 -
- Jin Won Park
June 4, 2004 Disclosure of other * Decision on number of shares available to the heads of
important matters departments in exercising a stock option
relating to business - Determined Number of exercisable shares: 463,254 shares
management
June 17, 2004 Extension of loans * Extended loans to the subsidiary, Shinhan Capital
to the largest - Loan Amount: KRW 50 billion (5 yrs)
shareholder, etc. - Interest Rate: coupon rate of the Company (including
issuance expense) + 0.2%
June 23, 2004 Investment in the * Investment in a subsidiary, Chohung Bank
largest shareholder, - Amount: KRW 235,655,573,211
etc. - Purpose: acquisition of shares through small-scale of
share swap
- Subject: common stock 108,438,628 shares of Chohung Bank
June 28, 2004 Report on completion * Making Chohung Bank a wholly-owned subsidiary through
of share swap small-scale of share swap
- Exchange ratio: 0.1354
June 30, 2004 Extension of loans * Extended loans to the subsidiary, Shinhan Card
to the largest - Loan Amount: KRW 100 billion
shareholder, etc. - Term: 113 days (July 8, 2004 ~ October 29, 2004)
- Interest Rate: CP rate + 0.2%
July 12, 2004 Extension of loans * Extended loans to the subsidiary, Shinhan Capital
to the largest - Loan Amount: KRW 46,028 million
shareholder, etc. - Term: 2 yrs 11 months (July 15, 2004 ~ June 15, 2007)
- Interest Rate: funding rate of the Company + 0.2%
(3ML+90p)
July 28, 2004 Investment in other * Important matters relating to business management of the
company subsidiary (Chohung Bank)
- Purpose: Equity conversion for business management
normalization of LG Card Co., Ltd. by the subsidiary,
Chohung Bank
- Amount of investment: KRW 73.4 billion
- Number of Shares subject to equity conversion: 14.680.000
shares
- Percentage after equity conversion: 4.30%
July 28, 2004 Investment in other * Important matters relating to business management of the
company subsidiary (Shinhan Bank)
- Purpose: Equity conversion for business management
normalization of LG Card Co., Ltd. by the subsidiary,
Shinhan Bank
- Amount of investment: KRW 121,650 million
- Number of Shares subject to equity conversion: 24,330,000
shares
- 188 -
- Percentage after equity conversion: 4.74%
July 29, 2004 IR report and * Announcement of business performance in the first half of
disclosure 2004
August 31, 2004 Lease agreement with * Rent an office from Shinhan Bank
the largest - Lease value: 7,673,388,900
shareholder, etc. - Lease period: Sep1.2004 ~Aug.31, 2005
September 14, Resolution for * Important matters relating to business management of the
2004 issuance of overseas subsidiary (Shinhan Bank)
general bonds - Amount: USD 30,000,000 (KRW 34,377,000,000)
- Coupon rate: 6.83%
- Issue date: September 13, 2004
- Maturity date: September 24, 2014
September 14, Execution of * Important matters relating to business management of the
2004 agreement for subsidiary (Shinhan Bank)
issuance of overseas - Amount: USD 30,000,000 (KRW 34,377,000,000)
general bonds - Coupon rate: 6.83%
- Issue date: September 13, 2004
- Maturity date: September 24, 2014
- Early Redemption option
September 17, Investment in other * Important matters relating to business management of the
2004 company subsidiary (Shinhan Bank)
- Additional capital injection into Korea Road Infra Fund
- Ownership ratio after investment: 7.93%
September 17, Resolution for share * Share swap with Good Morning Shinhan Securities(GMSH)
2004 swap - Exchange ratio for GMSH Common Share: 16.33%
- Exchange ratio for GMSH Preferred Share: 9.77%
September 17, Resolution for * Tender offer for GMSH preferred shares
2004 tender offer or - number of shares subject to tender offer: 1,529,326
offered purchase - tender offer price: KRW 2,500
September 17, Resolution for share * Important matters relating to business management of the
2004 swap subsidiary (GMSH)
September 17, Resolution for * Important matters relating to business management of the
2004 tender offer or subsidiary (GMSH)
offered purchase
September 17, Resolution of board * Important matters relating to business management of the
2004 of directors for subsidiary (GMSH)
convening a general - BOD resolution for convening a general meeting of
meeting of shareholders of GMSH
shareholders
B. Disclosure pursuant to Regulation on Disclosure on Listed Corporations
(1) Interim Disclosure
Reported
Date of Report Subject Matters Remarks
----------------- ----------------------------------------------------------- -------- -------
January 9, 2004 Extension of loans to the largest shareholders, etc. - -
January 9, 2004 Execution of loan agreement
January 14, 2004 Dismissal of an outside director (Shinhan Bank)
January 14, 2004 Dismissal of an outside director (Shinhan Card)
January 14, 2004 Dismissal of a member of the audit committee
January 14, 2004 Other important matters relating to business management
January 14, 2004 Appointment of a member of the audit committee
January 20, 2004 Other important matters relating to business management
(Chohung Bank)
February 10, 2004 Decrease in sales volume by 10% or more compared with that
of the most recent fiscal year (Shinhan Financial Group)
February 10, 2004 Decrease in ordinary income by 30% or more comparing with
that of the most recent fiscal year (Shinhan Financial
Group)
February 10, 2004 Decrease in net earnings for the year by 30% or more
compared with that of the recent fiscal year (Shinhan
Financial Group)
February 10, 2004 Decrease in ordinary income by 30% or more compared with
that of the recent fiscal year (Shinhan Bank)
February 10, 2004 Decrease in net earnings for the year by 30% or more
compared with that of the recent fiscal year (Shinhan Bank)
February 10, 2004 Increase in ordinary loss by 30% or more compared with that
of the recent fiscal year (Chohung Bank)
February 10, 2004 Increase in net loss for the year by 30% or more compared
with that of the recent fiscal year (Chohung Bank)
February 12, 2004 Increase in sales volume by 10% or more compared with that
of the recent fiscal year (Shinhan Card)
- 190 -
Reported
Date of Report Subject Matters Remarks
----------------- ----------------------------------------------------------- -------- -------
February 12, 2004 Increase in ordinary loss by 30% or more compared with that
of the recent fiscal year (Shinhan Card)
February 12, 2004 Increase in net loss for the year by 30% or more compared
with that of the recent fiscal year (Shinhan Card)
February 13, 2004 Investment in other company (acquisition of equity and
equity-related securities)
February 13, 2004 Other important matters relating to business management
(Chohung Bank)
February 13, 2004 Resolution for issuance of overseas general bonds
February 20, 2004 Execution of agreement for issuance of overseas general
bonds
February 25, 2004 Resolution of board of directors for convening a general
meeting of shareholders
February 25, 2004 Resolution of board of directors for granting stock option
February 25, 2004 Resolution for cash distribution
February 27, 2004 Resolution of board of directors for convening a general
meeting of shareholders (Shinhan Card)
March 3, 2004 Disposal of equity securities in other company
March 8, 2004 Appointment of an independent auditor (Chohung Bank)
March 8, 2004 Resolution of board of directors for granting stock option
March 8, 2004 Resolution of board of directors for convening a general
meeting of shareholders (Chohung Bank)
March 10, 2004 Resolution of board of directors for convening a general
meeting of shareholders (Shinhan Bank)
March 10, 2004 Other important matters relating to business management
(Chohung Bank)
- 191 -
Reported
Date of Report Subject Matters Remarks
----------------- ----------------------------------------------------------- -------- -------
March 10, 2004 Submission of audit report (Chohung Bank)
March 17, 2004 Submission of audit report (Shinhan Financial Group)
March 17, 2004 Submission of audit report (Shinhan Bank)
March 17, 2004 Submission of audit report (Shinhan Card)
March 17, 2004 Extension of loans to the largest shareholders, etc.
March 24, 2004 Appointment of an independent auditor (Shinhan Bank)
March 24, 2004 Appointment of an independent auditor (Shinhan Card)
March 26, 2004 Matters resolved by an ordinary general meeting of
shareholders
March 26, 2004 Stock option granted by resolution of an extraordinary
general meeting of shareholders (Shinhan Financial Group)
March 26, 2004 Dismissal of an outside director (Shinhan Financial Group -
4 cases)
March 26, 2004 Dismissal of a member of the audit committee (Shinhan
Financial Group)
March 26, 2004 Resolution for appointment of an independent auditor
(Shinhan Financial Group - 10 cases)
March 26, 2004 Appointment of a member of the audit committee (Shinhan
Financial Group - 5 cases)
March 26, 2004 Matters resolved by an ordinary general meeting of
shareholders (Shinhan Bank)
March 26, 2004 Dismissal of a member of the audit committee (Shinhan Bank)
March 26, 2004 Resolution for appointment of an independent auditor
(Shinhan Bank - 5 cases)
March 26, 2004 Appointment of a member of the audit committee (Shinhan Bank
- 3 cases)
- 192 -
Reported
Date of Report Subject Matters Remarks
----------------- ----------------------------------------------------------- -------- -------
March 26, 2004 Matters resolved by an ordinary general meeting of
shareholders (Chohung Bank)
March 26, 2004 Stock option granted by special resolution of an
extraordinary general meeting of shareholders (Chohung Bank)
March 26, 2004 Resolution for appointment of an outside director (Chohung
Bank - 3 cases)
March 26, 2004 Appointment of a member of the audit committee (Chohung Bank
- 3 cases)
March 26, 2004 Matters resolved by an ordinary general meeting of
shareholders (Shinhan Card)
March 26, 2004 Resolution for appointment of an outside director (Shinhan
Card)
March 30, 2004 Investment in other company (acquisition of equity and
equity-related securities)
April 2, 2004 Disclosure of other important matters relating to business
management
April 8, 2004 Disposal of equity securities in other company
April 12, 2004 Resolution for share swap
April 12, 2004 Resolution for tender offer or offered purchase
April 12, 2004 Resolution for tender offer or offered purchase (corrected)
April 12, 2004 Report on Share swap
April 12, 2004 Resolution for tender offer or offered purchase
April 12, 2004 Resolution for share swap
April 12, 2004 Resolution of board of directors for convening a general
meeting of shareholders
April 12, 2004 Resolution for tender offer or offered purchase (corrected)
April 16, 2004 Increase in ordinary income by 30% or more compared with
that of the most recent fiscal year
April 16, 2004 Increase in sales volume by 10% or more compared with that
of the most recent fiscal year
April 16, 2004 Increase in net earnings by 30% or more compared with that
of the most recent fiscal year
April 27, 2004 Disclosure of other important matters relating to business
management
- 193 -
Reported
Date of Report Subject Matters Remarks
------------------ ----------------------------------------------------------- -------- -------
April 27, 2004 Exercise of a right to claim for underlying share of DR
April 29, 2004 Disclosure of other important matters relating to business
management
April 30, 2004 Disclosure of other important matters relating to business
management
May 10, 2004 Increase in ordinary income compared with that of the most
recent fiscal year (corrected) - Good Morning Shinhan
Securities
May 10, 2004 Increase in sales volume compared with that of the most
recent fiscal year (corrected) - Good Morning Shinhan
Securities
May 10, 2004 Increase in net earnings compared with that of the most
recent fiscal year (corrected) - Good Morning Shinhan
Securities
May 12, 2004 Resolution for granting stock option
May 12, 2004 Resolution of board of directors for convening a general
meeting of shareholders
May 17, 2004 Outcome of tender offer
May 17, 2004 Outcome of tender offer
May 21, 2004 Filing of audit report
May 24, 2004 Disclosure of other important matters relating to business
management
May 24, 2004 Resolution of extraordinary meeting of shareholders
May 29, 2004 Resolution of ordinary general meeting of shareholders
May 29, 2004 Granting stock option at the special resolution of the
general meeting of shareholders
May 29, 2004 Cancellation of Granting of stock options
May 29, 2004 Resolution for appointment of outside directors (3 persons)
May 29, 2004 Appointment of member of audit committee (3 persons)
May 29, 2004 Dismissal of member of audit committee
June 4, 2004 Disclosure of other important matters relating to business
management
June 17, 2004 Extension of loans to the largest shareholder, etc.
June 23, 2004 Investment in the largest shareholder, etc.
June 28, 2004 Report on completion of share swap
June 30, 2004 Extension of loans to the largest shareholder, etc.
July 12, 2004 Extension of loans to the largest shareholder, etc.
July 28, 2004 Investment in other company
July 28, 2004 Investment in other company
July 29, 2004 IR report and disclosure
August 31, 2004 Rent of Real Estates from the largest shareholder, etc.
September 14, 2004 Resolution for issuance of overseas general bonds
- 194 -
Reported
Date of Report Subject Matters Remarks
------------------ ----------------------------------------------------------- -------- -------
September 14, 2004 Execution of agreement for issuance of overseas general
bonds
September 17, 2004 Investment in other company
September 17, 2004 Resolution for share swap
September 17, 2004 Resolution for tender offer or offered purchase
September 17, 2004 Resolution for share swap
September 17, 2004 Resolution for tender offer or offered purchase
September 17, 2004 Resolution of board of directors for convening a general
meeting of shareholders
(2) Fair Disclosure
Date of
Report Subject Reported Matters Remarks
----------------- --------------------------------------- --------------------------------------------------------- -------
February 10, 2004 Matters in connection with the Results of business operations including sales volume,
obligation to fair disclosure (overall) operating income & loss, ordinary income & loss and net
earnings & income for the year, etc. of Shinhan Financial -
Group for 3rd quarter of 2003
April 26, 2004 Matters in connection with the Results of business operations including sales volume,
obligation to fair disclosure (overall) operating income & loss, ordinary income & loss and net
earnings & income for the year, etc. of Shinhan Financial
Group for 1st quarter of 2004
July 29, 2004 Matters in connection with the Results of business operations including sales volume,
obligation to fair disclosure (overall) operating income & loss, ordinary income & loss and net
earnings & income for the year, etc. of Shinhan Financial
Group for 1st half of 2004
(3) Inquired Disclosure
Date of Report Subject Reported Matters Remarks
----------------- ------------------------------------ ----------------------------------------------------- --------------
March 9, 2004 Rumor on Chohung Bank to become The Company is under reviewing to make Chohung Bank a Provided a
wholly-owned subsidiary wholly-owned subsidiary, but method and timing following- up
thereof are not yet decided. The Company will disclosure on
disclose it again as soon as confirmed. April 12, 2004
- 195 -
Date of Report Subject Reported Matters Remarks
----------------- ------------------------------------ ----------------------------------------------------- --------------
September 6, 2004 Rumor on merger between Credit Card The Company is planning to merge Credit Card business
business of Chohung Bank and Shinhan of Chohung Bank and Shinhan Card but method and
Card timing thereof are not yet decided. The Company will
disclose it again as soon as confirmed.
(4) Voluntary Disclosure
N/A
C. Matters Reported under Regulation on Disclosure of KOSDAQ
(1) Interim Disclosure
N/A
(2) Fair Disclosure
N/A
(3) Inquired Disclosure
N/A
(4) Voluntary Disclosure
N/A
D. Matters Reported under the Provision of Chapter 2 (Registration and
Management of Issuer) of the Regulation
N/A
E. Status of Important Matters Relating To Business Management Which Is
Previously Disclosed
N/A
2. SUMMARY OF MINUTES OF A GENERAL MEETING OF SHAREHOLDERS
- 196 -
Date Agenda Resolutions Remarks
------------------- -------------------------- --------------------------------------------- -------
1st general meeting 1. Approval on financial Approved as amended
of shareholders statements for the 1st FY (Details of dividend: cash dividend - General
(March 20, 2002) (September 1, 2001 ~ shareholder : 12%, largest shareholder:
December 31, 2001) KRW29.59, Shinhan Bank: non-dividend)
2. Partial amendment of Resolved as submitted
articles of incorporation
3. Appointment of director Reappointment - Dong Hyun Kwon, Si Jong Kim,
Hang Nam Jung, Yong Woong Yang, Myung Ho Kim,
Pyung Joo Kim New appointment - Alain
Penicaut
4. Appointment of member Re-appointed - Dong Hyun Kwon, Pyung Joo Kim
of the audit committee Newly appointed - Moon Pil Oh
5. Limit of directors' Resolved as submitted (limit of directors'
compensation compensation for the 2nd FY : KRW2.5 billion)
2nd general meeting 1. Approval on financial Resolved as submitted
of shareholders statements for the 2nd FY (Details of dividend: cash dividend - KRW600,
(March 31, 2003) (January 1, 2002 ~ Shinhan Bank: non-dividend)
December 31, 2002)
2. Partial amendment of Resolved as submitted
articles of incorporation
3. Appointment of a Director: Young Seok Choi, Jae Keun Yoo,
director Young Soo Lee (newly appointed) Outside
director :
Myung Ho Kim, Pyung Joo Kim, Byung Hun Park,
Moon Pil Oh (re-appointed) Il Sup Kim, Keon
Chi Kim, Pyung Jo Park Young Chul Kwon (Newly
appointed)
4. Appointment of a member Il Sup Kim, Young Seok Choi, Pyung Jo Park
of the audit committee
5. Limit of directors' Resolved as submitted (limit of directors'
compensation compensation for the 3rd FY : KRW3 billion)
3rd general meeting 1. Approval on financial Resolved as submitted
of shareholders statements for the 3rd FY (Details of dividend: common shares: KRW600
(March 25, 2004) (January 1, 2003 ~ per share, preferred shares: total
December 31, 2003) KRW83.4 billion)
2. Partial amendment of Resolved as submitted
articles of incorporation
3. Appointment of a Director: Eung Chan Ra, Young Hwi Choi, In
director
- 197 -
Date Agenda Resolutions Remarks
------------------- -------------------------- --------------------------------------------- -------
Ho Lee, Young Seok Choi (re-appointed) Yong
Woong Yang (Newly appointed) Outside
director:
Pyung Joo Kim, Il Sup Kim, Byung Hun Park,
Moon Pil Oh, Young Soo Lee (re-appointed)
Sang Yoon Lee, Yoon Soo Yoon, Sang Chul Lee,
Dong Hyun Kwon, Phillippe Reynieix (Newly
appointed)
4. Appointment of a member Appointed: Young Seok Choi, Il Sup Kim, Sang
of the audit committee Yoon Lee, Moon Pil Oh, Dong Hyun Kwon
5. Limit of directors' Resolved as submitted (limit of directors'
compensation compensation for the 4th FY : KRW3 billion)
6. Granting stock options Granting to the management (total 705,000
to the officers and shares): total 27 persons (the company : 7,
employees of the company Shinhan Bank: 11, Shinhan Card: 5, Shinhan
and its subsidiary Capital: 3, Shinhan Credit Information: 1)
Granting to the employees (total 596,600
shares): total 409 persons (the company : 8,
Shinhan Bank: 383, Shinhan Card: 9, Shinhan
Capital: 6, Shinhan Credit Information: 3)
3. CONTINGENT LIABILITIES, ETC.
A. Important Litigation, Etc.
N/A
B. Status of Pledged or Secured Note or Check
[Classification: Pledged Note] (Unit: )
TO NO. OF NOTE AMOUNT REMARKS
---------------------- ----------- ------ ----------
Bank 1 - KorAm Bank
Financial Institutions - - -
Corporation - - -
Others (Individual) - - -
C. Other Contingent Liabilities, Etc.
1) Contingent Liabilities payment
- 198 -
The company entered into the share purchase agreement with Korea
Deposit Insurance Corporation dated as of July 9, 2003 for purpose
of expanding banking business sector, pursuant to which the Company
shall acquire 543,570,144 shares in Chohung Bank (80.04% of the
total number of shares issued and outstanding). The agreement
provides additional consideration of purchase shall be paid in
connection with the change on fail value of assets ?liabilities of
Chohung Bank purchased and size of profit and loss in future. Major
contents of such contingent consideration of purchase shall be as
follows:
<1> Asset Indemnity Payment
A. Payment amount: amount deducting from KRW652,284 million
the loss amount of loans subject to asset indemnity
payment which is appraised by the provision of the
agreement
B. Payment period: Within 60 days after confirming the loss
amount as of the end of June, 2005 or agreed date
C. Loans: 9 largest corporate credits, loans with
redemption right of Korea Asset Management Corporation,
card loans
D. Interest: 4.3% p.a.
<2> General Indemnity Payment
A. Payment amount: KRW166,516 million (such payment can be
set off with the loss compensation amount in connection
with the general indemnity)
B. Payment period: two years after purchase date
C. Loan: items described in the representation and
warranties by the seller
D. Interest: 4.3% p.a.
<3> Earn Out Payment
A. Payment amount: 20% of the exceeding amount of net
earnings for the year of Chohung Bank (KRW1.8 trillion)
during 2004~2006 fiscal years
B. Payment period : within 30 days after the determination
of
- 199 -
exceeding amount for 2006 fiscal year
Such contingent consideration of purchase wasn't
included in the purchase price because no one can
reasonably estimate the occurrence of such consideration
and amount to be paid at purchase date. When contingent
consideration of purchase shall be actually fixed in
future, such consideration shall be added into the
purchase price and shall goodwill shall be adjusted.
2) Loss Compensation Arrangement
The Company has entered into the loss compensation arrangement with
respect to the sale on equities of Shinhan BNP Paribas Investment
Trust Management, the subsidiary by 50%. If any loss incurs in
relation with the following pending litigations in which Shinhan BNP
Paribas Investment Trust Management is the defendant, such losses
shall be compensated by BNP Paribas, a purchaser of the shares.
PLAINTIFF CONTENTS OF LITIGATION AMOUNT AT STAKE REMARKS
------------------------------------ -------------------------------- --------------- ------------------------
Bumin Mutual Saving's & Finance Co., Claim for compensation of damage 100 Pending in the 1st trial
Ltd.
With respect to the above litigation, final results cannot be
foreseen at this stage.
3) Pledged Note
The company provides KorAm Bank a sheet of blank note as a security
in connection with the limited loan as of the end of quarter
concerned.
- 200 -
CHAPTER 2. MATTERS CONCERNING THE COMPANY
I. COMPANY OVERVIEW
[Company Name: Good Morning Shinhan Securities Co., Ltd.]
1. OBJECTIVES OF THE COMPANY
A. Business being conducted by the Company
OBJECTIVES REMARKS
----------------------------------------------------------------------------------------------------
1. Trading of securities;
2. Brokerages of securities trading;
3. Providing intermediation or agency services for securities trading;
4. Providing intermediation, arrangement or agency services for procuring
brokerage of securities trading on the Korea Stock Exchange, KOSDAQ (the Korea
Securities Dealers Association Automated Quotation System), or a similar market
in a foreign country;
5. Underwriting of securities;
6. Arrangement of offering or sale of securities;
7. Arrangement of a public offering or sale of new or outstanding securities;
8. Providing intermediation or agency services for securities trading conducted
through the Korea ECN Securities Co., Ltd.; trading of securities in the
performance of intermediation services;
9. Provision of margin loan for securities trading;
10. Providing loans secured by securities;
11. Securities saving account service;
12. Stock (index) futures business;
13. OTC derivatives transactions and the provision of intermediation,
arrangement or agency services relating thereto
14. Investment advisory and discretionary investment management services;
15. Valuation of securities and equity holdings;
16. Providing intermediation, arrangement, or agency services in connection
with corporate mergers & acquisitions;
17. Sale and purchase of certificate of deposits (CDs) and intermediation
services for such transactions;
18. Trustee business for offering of corporate bonds;
19. Proxy business related to securities trading;
20. Financial advisory services for corporate management, restructuring and
financing;
21. Lending and borrowing of securities; Providing intermediation, arrangement
or agency services for such transactions;
22. Underwriting of securities issued through a method other than a public
offering; Providing intermediation, arrangement or agency services
relating thereto;
23. Transactions of loan receivables and other transactions related thereto;
Providing intermediation, arrangement or agency services in connection
therewith;
24. Securities custody business;
25. Real estate leasing;
26. Business related to management of vault for customers;
27. Lending of securities owned by the Company to institutional investors;
28. Brokered sales of lottery tickets, admission tickets and other similar services;
29. Trainings related to securities;
30. Publication of periodicals and books;
31. Rental or sale of IT system or software in relation to securities business;
32. Business trustee services regarding the business activities of special purpose asset
securitization company and asset management business pursuant to the Asset
Securitization Act;
33. Trading, brokerage, intermediation or agency services for futures and options
transactions; Providing intermediation, arrangement or agency services for brokerage
of futures and options trading;
34. Providing guarantee of principal payment on corporate bonds;
35. Securities business in overseas markets;
36. Discount and trading of commercial papers (CPs);
37. Intermediation of trading of CPs;
38. Brokerage of sale of investment trust beneficiary certificates;
39. Brokerage of sale of mutual funds;
40. Wrap account service;
41. Providing agency and intermediation services for the sale of insurance products; and
42. Other businesses incidental or related to the foregoing
B. Business not being conducted by the Company
OBJECTIVES REMARKS
----------------------------------------------------------------------------------------------------
1. Underwriting of notes or provision of guarantees for notes
2. Notes and bonds management account service
3. Securities saving account service in a form of trust
4. Trust business for international investment
5. Factoring service
6. Leasing business
7. Real estate investment trust and REITs related services
8. Sale of various investment information
9. Information system agency service
10. Corporate credit analysis, valuation and provision of associated services
11. Information exchange and intermediation of communication via a third party
12. Any business provided in a partnership with credit card company, insurance
company, banks or other financial service providers
13. Sales of products and goods and settlement thereof through the internet
14. Corporate promotion activities and PR agency service through the internet
C. Business being conducted by the Subsidiaries
OBJECTIVES REMARKS
----------------------------------------------------------------------------------------------------------
1. Securities business Local operations
2. Other business activities approved under relevant domestic and foreign law
and regulations
D. Future business to be implemented by share swap and transfer
- N/A
2. HISTORY OF THE COMPANY
A. History of the Relevant Company
(1) Proceedings of its Establishment and Changes Thereafter
1) Date of Establishment: April 2, 1973 (First established as
Hyoseong Securities and changed into Ssangyong Investment
Securities on December 16, 1983; changed its name to Good
Morning Securities Co., Ltd. on May 10, 1999, and changed its
name to Good Morning Shinhan Securities Co., Ltd. on August 5,
2002.
2) Location of the Head Office and the Changes Thereof:
DATE ADDRESS
-----------------------------------------------------------------------------------
1973.04.02 56-1, Sogong-dong, Jung-gu, Seoul, Korea
1975.03.10 199, Euljiro 2(i)-ga, Jung-gu, Seoul, Korea
1976.01.17 8, Namdaemunno 2(i)-ga, Jung-gu, Seoul, Korea
1977.10.22 65, Sogong-dong, Jung-gu, Seoul, Korea
1979.11.01 60, Myeong-dong 1(il)-ga, Jung-gu, Seoul, Korea
1982.05.17 83, Myeong-dong 2(i)-ga, Jung-gu, Seoul, Korea
1986.10.20 198, Euljiro 2(i)-ga, Jung-gu, Seoul, Korea
1995.05.27 23-2, Yoido-Dong, Youngdungpo-Gu, Seoul, Korea 150-712
3) Opening and Closing of Branch, Business Office and
Representative Office, etc
As of June 30, 2004, there are 79 branches
NAME OF DATE OF NAME OF DATE OF
BRANCH ESTABLISHMENT REMARKS BRANCH ESTABLISHMENT REMARKS
----------------------------------------------------------------------------------------------------
Branch 73.04.04 Gumi 89.09.09
Mapo 75.07.10 Olympic 89.11.28
Gangnam 77.02.11 Sanggye-dong 90.03.17
Merged and
consolidated into
Myeongdong Jungang
Myeongdong 77.11.05 on March 31, 2003 and Daegu-dong 89.12.13
renamed as
Meyongdong thereafter
Consolidated with
Daechi-dong 80.10.24 Dogok branch and Dunsan 93.12.01
thereafter closed
Changed name of
Consolidated with Bundang branch on
Youngdeungpo branc August 5, 2002; changed
Yeongdeungpo 82.12.13 on March 31, 2003 and Sunae - Station 94.05.16 name of Chorim station
Jungang thereafter closed branch on October 1, 2002
Busan 76.05.04 Sillim 94.12.01 Closed on July 24, 2000
Daegu 76.07.26 Haewndae 94.12.28
Jungbu 84.09.20 Jungang 95.05.12 Closed on May 18, 1998
Taepyeongno 84.10.01 Mokdong 95.07.06
Seocho 85.02.15 Closed on June 15, Gangseo 96.07.01 Closed on June 14, 2000
1998.
Bangbae-dong 85.11.11 Sinnae 96.07.01 Closed on June 14, 2000
Daejeon 86.06.01 Dapsimni 96.07.01
Changed name of
Gangju Jungang 86.11.15 Gwangju branch on Seolleung-Station 96.07.01 Closed on October 8,
August 5, 2002 2001
Gunsan 87.11.27 Jinju 96.07.01 Closed on June 8, 1998
Changed name of
Changwon 87.12.05 Changwon branch on Hanam 96.07.01
Jungang August 5, 2002
Yeocheon 88.02.17 Pyeongtaek 96.07.01
Seogwipo 88.07.01 Jeongeup 96.07.01
Gwanak 88.08.01 Dongdaemun 96.09.02 Closed on March 9, 1998
Relocation and change
Apgujeong in name of the Jamsil
Jungang 89.12.16 branch on November Mia 96.12.16 Closed on February 21,
13, 2000 2000
Yuseong 90.04.27 Sindang 96.12.16
Sampung 90.06.16 Bulgwang-dong 96.12.16 Closed on May 18, 1998
Relocation of
Samsungdong branch
and change in name on
Miryang 92.11.02 Nonhyeon 96.12.16 October 9, 1999
Songpa 90.12.20 Juyeop 96.12.16 closed on March 2, 2004
Chang-dong 89.01.10 Gyeyang 96.12.16
Jeonju 89.02.01 Donghae 96.12.16 Closed on March 7, 2000
Name of Juann branch
changed to Guwaldong
Dongnae 89.01.20 Guwol-dong 04.06.21 branch
Consolidated with
Dongchungju branch
and changed name to
Cheongju 89.01.04 Chungju branch Gwangmyeong 97.01.05 Closed on March 5,
thereafter 2001
Namcheon-dong 89.02.14 Closed on February Sangdo-dong 97.01.20 Closed on July 13,
2, 2004 1998
Sinseol-dong 89.02.17 Yeonhui-dong 97.03.20
Gangneung 89.02.24 Andong 97.05.20
Jeju 89.03.25 Ulsan Nam 97.07.28
Change in name of
Apgujeong Apgujung branch on
Masan 89.03.27 Royal 97.08.01 August 5, 2002
Daegu 89.03.28 Gijang 99.02.05 Closed on June 14,
2000
Dong-Gwangyang 91.12.23 Buan 99.03.11 Closed on June 14,
2000
Ulsan 89.07.11 Singapore 96.01.07 Closed on June 19,
Office 1998
Seogyo-dong 89.08.05 Tokyo Office 95.03.28 Closed on April 27,
1998
Suwon 89.08.05 Sanghai Office 97.03.28 Closed on June 2,
1998
Pyeongchon 92.11.06 Pohang 00.06.14 Closed on February
2, 2004
Seo-myeon 00.12.08 Dogok 01.10.04
Kangsuh branch
changed name to
Mokdong Mokdong Central Established pursuant
Jungang 02.8.5 branch Sangdo-dong 02.8.5 to merger
Gwacheon 02.8.5 Established Siji 02.8.5 Established pursuant
pursuant to merger to merger
Gwangju 02.8.5 Closed on February Sillim 02.8.5 Established pursuant
2, 2004 to merger
Guro 02.8.5 Established Sinbanpo 02.8.5 Established pursuant
pursuant to merger to merger
Consolidated with
Dapsipli branch and Established pursuant
Guri 02.8.5 closed thereafter Ansan 02.8.5 to merger
Geumjeong 02.8.5 Established Apgujeong 02.8.5 Established pursuant
pursuant to merger to merger
Consolidated with Consoliated with
Daegu branch and Dongrae branch and
Daegu Suseon 02.8.5 closed thereafter Yangjeong 02.8.5 closed thereafter
Change in the name of
Gangnam Dowhadong branch Established pursuant to
Jungang 03.11.24 after relocation Yeoido 02.8.5 merger
Established pursuant to Established pursuant to
Dongducheon 02.8.5 merger Yeonsinnae 02.8.5 merger
Established pursuant to Established pursuant to
DongCheongju 02.8.5 merger Yeongdeungpo 02.8.5 merger
Consolidated with
Dunsan Dunsan branch and Established pursuant to
Cheongsa 02.8.5 closed thereafter Uijeongbu 02.8.5 merger
Change in the name of Jeonju Seosin 02.8.5 Closed on March 10,
Madu branch after 2003
Ilsan 02.8.5 relocation Junggye 02.8.5 Closed on February 2,
2004
Established pursuant to
merger, and thereafter
former Migeum station
branch changed its
name to Jungjadong Established pursuant to
Jeongja-dong 04.6.28 branch Jung-dong 02.8.5 merger
Consolidated with
Changwon central
branch and thereafter
Established pursuant to changed name to
Sanbon 02.8.5 merger Changwon 02.8.5 Changwon branch
Established pursuant to
merger, and thereafter
former Chunggye branch
Samsung- Established pursuant to changed its name to
Station 02.8.5 merger Gwanghwamun 04.06.07 Gwanghwamun branch
Former PB branch
changed its name to PB Nonhyeon-dong
PB branch 04.6.15 Center BIB branch 03.10.2 Gangnam branch
Yeongtong
Jong-no Jungang
BIB branch 03.10.2 Gwanghwamun BIB branch 03.10.2 Suwon branch
Pohang Namcheon
BIB branch 04.1.28 Ulsan branch branch 04.2.2 Seomyeon branch
Samsung-Dong
I-Park Guui-dong
BIB branch 04.5.25 Samsung-Station branch BIB branch 04.6.14 Dapsimni branch
Jamsil Jangmi
APT Ichon-dong
BIB branch 04.6.16 Olympic branch BIB branch 04.6.22 Yeoido branch
Bucheon
Sang-dong PB Gangnam
BIB branch 04.6.29 Gyeyang branch branch 04.2.25 PB branch
PB Gangbook
branch 02.12.3 PB branch
4) Material Change in the Management
1983.09.20 - Inauguration of Byung Woo Go as Representative
Director/ President
1984.04.01 - Representative Director /President Byung Woo Go
1990.09.30 - Retirement of Byung Woo Go as Representative
Director/President and inauguration of Myung Sup Song as President
1991.05.22 - Retirement of Myung Sup Song and inauguration of Jin Ho
Ha as President
1994.04.15 - Retirement of Jin Oh Ha and inauguration of Ho Geun
Myung as Representative Director /President
1995.12.01 - Inauguration of Ho Geun Myung as Chairman and
inauguration of Seok Dong Kim as Representative Director /President
1996.12.15 - Retirement of Ho Geun Myung as Chairman
1999.02.04 - Inauguration of Ki Kwon Do as President
1999.02.28 - Inauguration of Seok Dong Kim and Ki Kwon Do as
Co-Representative Directors
2000.05.22 - Retirement of Seok Dong Kim as Co-Representative
Director
2000.05.31 - Inauguration of Ki Kwon Do as Representative Director
(provision relating to co-representative directors in articles of
association deleted)
2002.08.05 - Inauguration of Ki Kwon Do as Representative
Director/President of the merged securities company
2004.05.11 - Retirement of Ki Kwon Do as Representative
Director/President
2004.05.28 - Inauguration of Kang Won Lee as Representative
Director/President
5) Change in Largest Shareholder
(Unit: Share, %)
BEFORE THE CHANGE AFTER THE CHANGE
------------------------------------ -----------------------------------------
NAME OF LARGEST NUMBER OF NAME OF LARGEST NUMBER OF
DATE SHAREHOLDER SHARES SHAREHOLDER SHARES REMARKS
---------- --------------------- ----------- --------------------------- ----------- ----------------------
Ssangyong Cement
Industry Co., Ltd STX
Corporation 9,539,372
Ssyangyong 496,521 Asia Execution of share
1998.9.18 Engineering Co., Ltd. 5.655 Pacific Growth Fund II LP 10,035,893 purchase agreement
Capital increase
(allocated to existing
shareholders)
Asia 28,082,385
Asia Pacific Growth Pacific Growth Fund II LP
1998.12.22 Fund II LP 10,035,893 H&Q KGRF Investment Ltd 5,280,126 capital increase
(allocation to third
Asia parties)
Pacific Growth Fund II 28,082,385 24,569,823
LP (19.14) Asia (16.75)
H&Q KGRF 5,280,126 Pacific Growth Fund II LP 5,280,126 Settlement of
1999.12.15 Investment Ltd (3.60) H&Q KGRF Investment Ltd (3.60) purchase price
Asia Pacific Growth 24,569,823 24,569,823
Fund II LP (16.75) Asia (14.91)
H&Q KGRF 5,280,126 Pacific Growth Fund II LP 11,280,126 Request for
2000.01.29 Investment Ltd (3.60) H&Q KGRF Investment Ltd (6.84) conversion
Asia Pacific Growth 24,569,823 24,569,823 Request for
Fund II LP (14.91) Asia Pacific Growth Fund II (13.16) conversion and
H&Q KGRF 11,280,126 LP H&Q KGRF Investment 4,111,236 partial sale on the
2001.11.29 Investment Ltd (6.84) Ltd (2.20) stock exchange
Asia Pacific Growth 24,569,823 Settlement and
Fund II LP (13.16) delivery of shares
H&Q KGRF 4,111,236 53,911,695 pursuant a sale of
2002.06.18 Investment Ltd (2.20) Shinhan Financial Group (28.87) shares
Shinhan Financial 53,911,695 56,900,525 Purchase on the
2002.07.09 Group (28.87) Shinhan Financial Group (30.47) stock exchange
Shinhan Financial 56,900,525 104,538,205 Shares newly issued
2002.08.05 Group (30.47) Shinhan Financial Group (44.61) in merger
Retirement
(cancellation) of
Shinhan Financial 104,538,205 94,084,384 treasury shares and
2002.12.24 Group (44.61) Shinhan Financial Group (59.02%) capital decrease
6) Material Changes in Business Objectives
- Addition of agency and intermediation services for the sale of
insurance products in preparation for Bancassurance (May 30,
2003)
7) Any Other Material Change after the Establishment
1984.05.12. - Approval of securities business in a foreign country
1984.12.12. - Establishment of New York branch
1984.12.14. - Establishment of Tokyo branch
1985.12.16. - Establishment of Ssangyong Economic Research Institute
(with 500 million Won in capital)
1986.06.10. - Establishment of London branch
1986.12.02. - Public offering (capital increase through public
offering 8 billion Won, paid-in-capital of 40 billion Won after
public offering)
1987.04.03. - Lead manager for Korea Europe Fund
1988.03.19. - Capital increase with consideration (20 billion Won in
capital increase; paid-in-capital of 60 billion Won after the
capital increase)
1988.03.28. - Establishment of Ssangyong Investment Advisory Service
Co., (with 1 billion Won in capital)
1988.12.26. - Approval of securities brokerage business, and
intermediation and agency business relating to securities in a
foreign country
1991.10.30. - Establishment of Ssangyong Securities Europe Ltd.,
1992.12.01. - Opening of Hong Kong Representative Office
1993.06.15. - Establishment of Ssangyong Securities American Inc.
1993.11.13. - Selected as the sole online company (withdrawal from
the online securities information system in October of 1995)
1994.07.01. - Implementation of new personnel management system
1994.09.16. - Capital increase with consideration (21 billion Won in
capital increase; paid-in-capital of 195.8 billion Won after the
capital increase)
1994.10.27. - Acting as a lead manager in listing of ADR issued by
KEPCO (Korea Electric Power Corporation)
1995.01.19. - Acting as a co-lead manager in charge of GDR issuance
by Auror Corporation of Taiwan; the first in Korea to act as a lead
manager in charge of share issuance by a foreign company
1995.03.28. - Establishment of Tokyo branch
1995.03.28. - Public subscription of Incheon Investment Finance
1995.10.16. - Korean Construction Culture Award awarded to Ssangyong
Tower
1996.01.07. - Opening of Singapore representative office
1996.01.16. - Equity participation in Caspian-Holdings, one of the
largest securities firm in Europe and America
1996.03.27. - Opening ceremony for Ssangyong Securities Hong Kong
Ltd.,
1996.08.08. - Agreement to establish Ssangyong Templeton Investment
Management Co.,
1996.11.25. - Implementation of proprietary IT system for the
transfer of customer information; provision of loan for public
housing subscription for the first time in Korea
1997.03.02. - Opening of Manila office
1977.03.04. - Signing ceremony for the sales contract of Templeton
Global Fund
1997.03.28. - Opening of Shanghai representative office
1997.04.01. - Launching of home trading service
1997.04.15. - Opening ceremony of Ssangyong Templeton Investment
Management Corporation
1997.04.21. - Sales of Templeton Mutual Fund
1997.07.15. - Serving as a co-lead manager in the issuance of
overseas GDR by Housing and Commercial Bank
1997.11.10. - Launching of Ssangyong Satellite Network
1998.03.22. - Capital increase of 17.8 billion Won; paid-in-capital
of 213.6 billion Won after the capital increase
1998.09.18. - Execution of equity sale and purchase agreement
between Ssangyong Group and H&Q Asia Pacific
1998.12.22. - Issuance of subordinated convertible bond in the
amount of 43.75 billion Won 1999.01.02. Separation from Ssangyong
Group
1999.02.12. - Issuance of subordinated convertible bond in the
amount of 6.25 billion Won (IFC issuance underwriting)
1999.05.10. - Change of corporate name from Ssangyong Investment
Securities Co., to Good Morning Securities Co., Ltd.
2000.01.10. - Launching of online trading service under its brand
name "goodi", which is the first of its kind in the financial
industry
2000.07.25. - Sales of shares of Templeton Investment Trust
Management Co. owned by Good Morning Securities
2001.02.01. - Establishment of Good Morning Investment Trust
Management Co.,
2001.02.03. - Registration of Investment advisory service
2001.03.12. - Obtained approval for futures business pursuant to the
Futures Trading Act
2001.06.11. - Sales Launch of Good Morning Gold Wrap
2002.04.08. - Singing of a share sale and purchase agreement with
H&Q Asia Pacific and Shinhan Financial Group; approval by the Board
of Directors to merge with Shinhan Securities Co., Ltd.
2002.06.18. - Share transfer and payment settlement between H&Q and
Shinhan Financial Group
2002.06.27. - Conditional approval by the general shareholders'
meeting of merger with Shinhan Securities Co., Ltd.
2002.07.26. - Obtainment of approval from the Financial Supervisory
Commission of incorporation as a subsidiary of Shinhan Financial
Group
2002.07.26. - Obtainment of approval for merger between Good Morning
Securities and Shinhan Securities and incorporation as a subsidiary
of Shinhan Financial Group
2002.08.01. - Official launch of merged securities company
2002.08.05. - Change of corporate name to Good Morning Shinhan
Securities Co., Ltd.
2002.09.15. - Signing a contract to sell equity of Good Morning
Investment Management to PCH
2002.12.24. - Retirement of treasury shares and capital decrease
without consideration (capital: 1,171,816,635,000 Won ->
796,998,320,000 Won)
2003.02.03. - Information system integration of merged securities
company
2003.02.14. - Obtainment of approval for the sales of
over-the-counter derivatives
2003.09.03. - Launching of Bankassurance
2003.10.01. - Opening of BIB branch (as a office established in a
bank branch)
2003.10.09. - Establishment of an IT disaster recovery system
2003.11.14. - Development and implementation of new HTS (goodi 2001)
2003.11.20. - Launching of discretionary investment service
2003.12.19. - Capital increase (GBP 1,500,000) of London Securities
Ltd.
2004.01.22. - Capital decrease (GBP 3,100,000) of London Securities
Ltd.
2004.03.08. - Selected as a managing company for the housing fund of
the Ministry of Construction and Transportation
2004.05.03. - Launching of HTS (goodi-indi) exclusively for
specialists
(2) Change of Corporate Name
DATE NAME OF COMPANY REMARKS
---------- ---------------------------------------- ---------------------------------------
1973.04.02 Hyoseong Securities Establishment
1983.12.16 Ssangyong Investment Securities Acquired by Ssangyong Group
1999.05.10 Good Morning Securities Acquired by H&Q Pacific
2002.08.05 Good Morning Shinhan Securities Co., Ltd. After merger with Shinhan Securities,
incorporated as s subsidiary of Shinhan
Financial Group
(3) Share Swap/Transfer and Business Sale or Purchase
- N/A
(4) Occurrence of Material Matters relating to Management
2003.09.03. - Launching of Bank assurance
2003.10.01. - Opening of BIB branch (as a office established in a
bank branch)
2003.10.09. - Establishment and opening of an IT disaster recovery
system
2003.11.14. - Development and implementation of new HTS (goodi 2001)
2003.11.20. - Launching of discretionary investment service
2003.12.19. - Capital increase (GBP 1,500,000) of London Securities
Ltd.
2004.01.22. - Capital decrease (GBP 3,100,000) of London Securities
Ltd.
2004.03.08. - Selected as a managing company for the housing fund of
the Ministry of Construction and Transportation
2004.05.03. - Launching of HTS (goodi-indi) exclusively for
specialists
B. Corporate Group to which the Company belongs
(1) Summary of the Corporate Group
1) Corporate Name: Shinhan Financial Group
2) History
May 24, 2000: Announcement of establishment of Shinhan
Financial Group Co., Ltd. (hereinafter, Shinhan Financial
Group)
June 28, 2001: Approval of the Board of Directors for the
establishment of financial holding company of Shinhan Bank,
Shinhan Securities, Shinhan Capital, Shinhan Investment
Management; execution of MOU for strategic alliance with BNP
Paribas Group; application for preliminary approval of
establishment of Shinhan Financial Group
July 27, 2001: Obtainment of preliminary approval of
establishment of Shinhan Financial Group
August 22, 2001: Approval of share transfer proposal for the
establishment of Shinhan Financial Group at an extraordinary
general meeting of shareholders (of Shinhan Bank, Shinhan
Capital, and Shinhan Investment Management)
August 22, 2001: Application for approval of the establishment
of Shinhan Financial Group
August 31, 2001: Obtainment of approval of the establishment
of Shinhan Financial Group
September 1, 2001: Registration of the establishment of
Shinhan Financial Group; incorporation of E-Shinhan and
Shinhan Macquarie as subsidiary of Shinhan Financial Group
September 10, 2001: Listing of Shinhan Financial Group's
shares
December 12, 2001: Execution of the strategic alliance
agreement and a joint venture agreement with BNP Paribas Group
December 31, 2001: Registration of dissolution of Shinhan
Research Institute as a sub-subsidiary (subsidiary of Shinhan
Bank)
April 4, 2002: Execution of a purchase agreement for
acquisition of 51% equity shares of Jeju Bank owned by Korea
Deposit Insurance Corporation
April 8, 2002: Execution of a purchase agreement with Asia
Pacific Growth II, LP etc. for the acquisition of 30% of
common shares of Good Morning Securities
May 10, 2002: Obtainment of approval of incorporation of Jeju
Bank as Shinhan Financial Group subsidiary
May 24, 2002: Obtainment of approval of incorporation of
Shinhan Card as Shinhan Financial Group subsidiary
July 8, 2002: Establishment of Shinhan Credit Information
July 26, 2002: Obtainment of approval of incorporation of Good
Morning Shinhan Securities (merger between Good Morning
Securities and Shinhan Securities) as Shinhan Financial Group
subsidiary
August 1, 2002: Launching of Good Morning Shinhan Securities
September 16, 2002: Withdrawal of Good Morning Investment
Management as a sub-subsidiary
September 23, 2002: Execution of an agreement for the sale of
50% of equity (3,999,999 shares) owned by Shinhan ITMC to BNP
Paribas Group
October 1, 2002: Establishment of SH&C Life Insurance
October 24, 2002: Launching of Shinhan BNP Paribas Investment
Management, a joint asset management company of Shinhan and
BNP Paribas
September 5, 2003: Obtainment of approval of incorporation of
Chohung Bank and its eight (8) subsidiaries as subsidiaries
and sub-subsidiaires of Shinhan Financial Group
September 16, 2003: Registration with U.S. Securities Exchange
Commission and listing on the New York Stock Exchange
November 20, 2003: Obtainment of bank holding company license
in the US from the Federal Reserve Board
December 26, 2003: Additional contribution of capital to
Chohung Bank in the amount of 200 billion Won (81.15%
shareholding after investment)
March 5, 2004: Sale on stock exchange of 29,873,359 shares
(10.15%) held by Shinhan Bank
April 12, 2004: Decision to initiate share swap and tender
offer for the purpose of making Chohung Bank a wholly owned
subsidiary (tender period: from April 26, 2004 to May 17,
2004)
April 29, 2004: Dissolution of strategic alliance with Loan
Star and decision to purchase shares of Shinhan Credit
Information held by Loan Star
June 22, 2004: Completion of share swap as a small-sized swap
for the purpose of making Chohung Bank a wholly owned
subsidiary
July 2, 2004: Delisting of shares of Chohung Bank
(2) Companies belonging to the Corporate Group
NUMBER OF
CLASSIFICATION COMPANIES NAME OF COMPANY REMARKS
-------------- --------- --------------- -------
Listed 1 Shinhan Financial Group Parent Company
Company 2 Good Morning Shinhan Securities, Jeju Bank Subsidiary
9 (Shinhan Bank, Chohung Bank, Shinhan Card, Shinhan Subsidiary
Capital, Shinhan BNP Paribas ITMC, E-Shinhan, Shinhan
Macquarie, Shinhan Credit Information,
SH&C life Insurance
Unlisted Company 12 Shinhan Data System, Shinhan Finance, Good Morning Sub-subsidiary
Shinhan Securities Europe Ltd. Good Morning Shinhan
Securities USA Inc,
Chohung ITM, Chohung Finance, CHB America Bank,
Chohung Bank GmbH, Chohung Vina Bank
CHB Valuemeet 2001 year 1st Securitization [Company?]
CHB Valuemeet 2001 year 2nd Securitization
CHB Valuemeet 2002 year 1st Securitization
Total 24
Note 1) Pursuant to the "Resolution of debt-equity swap by the
creditor financial institutions of Samyang Foods Co., Ltd.",
Shinhan Bank and Shinhan Capital, subsidiaries of Shinhan
Financial Group, converted the loan receivables of Samyang
Foods Co., Ltd. into equity as of June 26, 2003, and thereby
became the largest shareholder of Samyang Foods Co., Ltd.
2) Pursuant to the "Resolution made at the meeting of the
creditor financial institutions of Ssangyong Corporation",
Chohung Bank and Shinhan Bank, subsidiaries of Shinhan
Financial Group, converted the loan receivables into equity,
and thereby became the largest shareholder of Ssangyong
Corporation with the equity share of 45.5% after the merger of
the two banks.
3) The corporate name of Shinhan Eun System was changed to
Shinhan Data System on October 10, 2003.
(3) Relevant Laws and Regulations
See the Financial Holding Company Act and its enforcement
regulations, Securities and Exchange Act and its enforcement
regulations, and the Monopoly Regulation and Fair Trade Act
and its regulations.
3. CHANGE IN PAID-IN-CAPITAL
A. Changes in Paid-in-Capital
PAID-IN-
DESCRIPTION OF INCREASED (DECREASED) SHARES CAPITAL
------------------------------------------- AFTER
PAR VALUE ISSUE PRICE CAPITAL METHOD OF CAPITAL
PER SHARE PER SHARE INCREASE ALLOCATION OF INCREASE
DATE CAUSE TYPE VOLUME (WON) (WON) (DECREASE) NEW SHARES RATIO
-------- ---------------------------- --------------- ---------- --------- ----------- ---------- --------------- --------
73.04.02 Incorporation Common shares 500,000 1,000 1,000 500 - -
78.03.01 Bonus issue Common shares 170,000 1,000 670 Shareholder 34.00%
78.03.20 Rights issue " 130,000 1,000 1,000 800 " 19.40%
80.01.17 " " 200,000 1,000 1,000 1,000 " 25.00%
80.01.24 " " 1,000,000 1,000 1,000 2,000 " 100.00%
80.01.26 " " 1,000,000 1,000 1,000 3,000 " 50.00%
81.11.13 Bonus Issue " 250,000 1,000 3,250 " 8.30%
" Rights Issue " 1,750,000 1,000 1,000 5,000 " 53.80%
82.12.15 " " 2,000,000 1,000 1,000 7,000 " 40.00%
83.10.17 " " 3,000,000 1,000 1,000 10,000 " 42.80%
83.10.21 " " 10,000,000 1,000 1,000 20,000 " 100.00%
86.05.28 Stock Dividend " 800,000 1,000 20,800 " 4.00%
86.10.15 Rights Issue " 11,200,000 1,000 1,000 32,000 " 53.80%
86.12.02 Public Offering " 8,000,000 1,000 1,000 40,000 Public Offering 25.00%
87.07.25 Stock Consolidation " - 5,000 5,000 40,000 - -
88.03.19 Rights Issue " 4,000,000 5,000 15,800 60,000 Shareholder 50.00%
88.08.12 " " 6,000,000 5,000 19,300 90,000 " 50.00%
89.05.11 " Preferred share 5,400,000 5,000 37,500 117,000 " 30.00%
89.05.27 Stock Dividend Common share 948,821 5,000 121,744 " 6.00%
89.06.16 Bonus Issue " 5,684,646 5,000 150,167 " 30.00%
" " Preferred share 1,620,000 5,000 158,267 " 30.00%
90.05.26 Stock Dividend Common share 931,850 5,000 162,927 " 3.00%
94.05.28 " " 977,560 5,000 167,814 " 3.00%
94.09.16 Rights Issue " 4,200,000 5,000 14,800 188,814 " 10.00%
95.05.26 Stock Dividend " 1,387,744 5,000 195,753 " 4.00%
98.03.22 Rights Issue " 3,575,026 5,000 5,000 213,628 " 9.13%
98.12.22 " " 80,000,000 5,000 1,250 613,628 Shareholder 187.24%
98.12.22 " " 24,000,000 5,000 1,250 733,628 Third party 19.56%
00.01.18 Exercise of conversion right " 11,000,000 5,000 1,250 788,628 CB -
00.01.29 " " 7,100,000 5,000 1,250 824,128 CB -
00.03.03 " " 15,000,000 5,000 1,250 899,128 CB -
00.03.16 " " 1,100,000 5,000 1,250 904,628 CB -
01.01.30 " " 800,000 5,000 1,250 908,628 CB -
01.07.30 " " 5,000,000 5,000 1,250 933,628 CB -
02.08.05 Merger " 47,637,680 5,000 5,000 1,171,816 Merger -
02.12.24 Capital decrease Common share (71,766,97) 5,000 5,000 777,882 Capital decrease -
Preferred share (3,196,686) 5,000 5,000 19,117 -
B. Convertible Bond
- N/A
C. Bond with Warrants
- N/A
4. TOTAL NUMBER OF SHARES, ETC.
A. Total Number of Shares
As of June 30, 2004
TOTAL NUMBER OF SHARES TO BE TOTAL NUMBER OF NON-ISSUED
AUTHORIZED TOTAL NUMBER OF SHARES ISSUED SHARES
---------- ----------------------------- ------
600,000,000 Shares 234,363,327 Shares 365,636,673 Shares
B. Description of Issued Shares
Par Value per Share: 5,000 Won
(As of June 30, 2004) (Unit: Won, Share)
NUMBER OF ISSUED TOTAL AMOUNT OF
CLASSIFICATION TYPES OF SHARE SHARES PAR VALUE REMARKS
----------------------------------------------------------------------------------------------------------------------
Registered form Common share 227,343,327 1,136,716,635,000
Registered form Preferred share 7,020,000 35,100,000,000
Registered form Common share -71,766,977 -358,834,880,000 Retirement of shares
and capital decrease of
10% without
consideration on
December 24, 2002
Registered form Preferred share -3,196,686 -15,983,430,000 Retirement of shares
and capital decrease of
10% without
consideration on
December 24, 2002
Total 159,399,664 796.998,320,000
C. Treasury Stock
(1) Acquisition of treasury stock for retirement with proceeds of profit
- N/A
(2) Acquisition of treasury stock for reasons other than retirement with
proceeds of profit
As of June 30, 2004 (Unit: Won, Share)
Date of Acquisition Types of Shares Number of shares Price of Acquisition REMARKS
------------------- --------------- ---------------- -------------------- -------
94.11.22 Preferred share 1,157,120 16,176,736,000
~95.03.31
02.07.29 Common share 54,480,716 360,498,897,772
02.07.29 Preferred share 2,771,874 12,681,323,550
02.12.24 Common share -54,480,716 -360,498,897,772 Retirement of treasury
stock
02.12.24 Preferred share -2,771,874 12,681,323,550 Retirement of treasury
stock
02.12.24 Preferred share -115,712 -5,785,600,000 Capital decrease of
10% without
consideration
03.01.06 Common share 4,795 21,241,850 After capital decrease,
acquisition of
fractional share during
amended listing
03.01.06 Preferred share 1,010 3,822,850 After capital decrease,
acquisition of
fractional share during
amended listing
Total 1,047,213 14,559,062,400
D. Treasury Stock Fund
- N/A
E. Stock Option
[As of August 13, 2004] (Unit: Won, Share)
NO. OF RECENT STOCK
NO. OF NO. OF NON- PRICE (PUBLIC
GRANT TYPE OF GRANTED EXERCISED EXERCISED EXERCISE EXERCISE OFFERING
DATE RELATION GRANTEE SHARE OPTION OPTION OPTION PERIOD PRICE PRICE) REMARKS
---- -------- ------- ----- ------ ------ ------ ------ ----- ------ -------
04.05.28 Registered Woo-Keun Lee Common 50,000 - 50,000 Within third 5,000 3,345
Officer share to fifth year
from the
option grant
date
06.5.29~
09.5.28
04.05.28 Registered Kang-Won Lee Common 100,000 - 100,000 Within third 5,000 3,345
Officer share to fifth year
from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Registered Sung-No Lee Common 35,000 - 35,000 Within third 5,000 3,345
Officer share to fifth year
from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Non- Dae-Seok Kang Common 35,000 - 35,000 Within third 5,000 3,345
registered share to fifth year
Officer from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Non- Jong-Kil Park Common 35,000 - 35,000 Within third 5,000 3,345
registered share to fifth year
Officer from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Non- Hyeon-Jae Han Common 35,000 - 35,000 Within third 5,000 3,345
registered share to fifth year
Officer from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Non- Chae-Young Jung Common 25,000 - 25,000 Within third 5,000 3,345
registered share to fifth year
Officer from the
option grant
date
06.5.29 ~
09.5.28
04.05.28 Employee 100 employee Common 318,000 - 318,000 Within third 5,000 3,345
including vice share to fifth year
manager from the
option grant
date
06.5.29 ~
09.5.28
Total 106 633,000 - 633,000
* Recent stock price is the market closing price on September 16, 2004.
[ ] Current status of total amount of stock options granted, and
cancellation and exercise thereof.
NO. OF
NO. OF NO. OF NON-
GRANT NAME OF THE TYPE OF GRANTED EXERCISED EXERCISED EXERCISE EXERCISE
DATE RELATION GUARANTEE SHARE OPTION OPTION OPTION PERIOD PRICE REMARKS
---- -------- --------- ----- ------ ------ ------ ------ ----- -------
99.02.04 Registered Timothy McCarthy Common 1,617,000 1,455,300 Within fourth to 7,640
Officer Seok-Dong Kim share 1,501,500 1,351,350 tenth from the 7,085
Ki-Gwon Do 1,351,350 - 1,216,215 option grant
date
99.12.17 Non- Jong-Seob Yeom Common 250,000 225,000 Within fourth to 7,590 01.03.19
registered Jeong-Sam Park share 250,000 225,000 eight year from Cancelled
Officer Geun-Mo Lee 250,000 225,000 the option grant
Jeong-Hwan Cheong 250,000 225,000 date
Byoung-Ho Lee 200,000 -
(Cancelled)
Heung-Ju Lee 200,000 180,000
Jong-Kil Park 100,000 - 90,000
99.12.17 Employee Deok-Hwan Jo Common 200,000 180,000 Within fourth to 7,590 00.09.04
Jin-Won Jeong share 100,000 90,000 eight year from Cancelled
Doo Sik Yoon 100,000 90,000 the option grant
Se-Won Kim 100,000 90,000 date
Jae-Deuk Kim 100,000 90,000
Soo-Hyun Jo 100,000 90,000
Hyeon-Jae Han 100,000 90,000
Dong-Dae Kim 100,000 90,000
Chul-Mo Jeong 100,000
(Cancelled) 100,000 - -
00.05.27 Non- Geun-Mo Lee Common 50,000 - 45,000 Within fourth 5,000
registered Chae-Young Jung share 100,000 90,000 to eighth year
Officer Seung-Soo Kim 100,000 90,000 from the
Byoung-Ho Lee 50,000 - option grant
(Cancelled) date
00.05.27 Employee Jin-Won Jeong Common 100,000 - 90,000 Within fourth 5,000
Doo-Hun Kim share 100,000 90,000 to
Chul-Mo Jeong 100,000 eighth year
(Cancelled) from the
option grant
date
01.05.26 Non- Jeong-Sam Park Common 50,000 - 45,000 Within fourth 5,850
registered Heoung-Ju Lee share 50,000 45,000 to eighth
Officer Jong-Kil Park 100,000 90,000 year from the
Seoung-Soo Kim 100,000 90,000 option grant
Chae-Young Jung 100,000 90,000 date
Soo-Hyun Cho 100,000 90,000 2003.02.06
Jae-Deuk Kim 100,000 90,000 Cancelled
Se-Won Kim 100,000 90,000
Doo-Sik Yoon 100,000 90,000
Doo-Hun Kim 100,000 90,000
Gi-Yong Kang 100,000 - -
(Cancelled) -
01.05.26 Employee Myeong-Soo Kim Common 100,000 - Within fourth 5,850 2001.11.15
(Cancelled) share to eighty Cancelled
Gil-Gong Yoo 100,000 90,000 year from the
Jae-Ho Jeong 100,000 90,000 option grant
Gwan-Hee Nam 100,000 90,000 date
Seo Uk 100,000 90,000
Sunny Il Jin 100,000 90,000
Yoon 200,000 -
Geong-Chul Han 2001.11.15
(Cancelled) Cancelled
02.01.31 Employee Young-Ju Noh Common 100,000 - 90,000 Within fourth 6,040
share to
eighth year
from the
option grant
date
02.05.25 Registered Gi-Gwon Doh Common 500,000 - 450,000 Within third 6,370
Officer share to tenth
year from the
option
grant date
02.05.25 Employee Sunny Il Jin Common 100,000 - 90,000 Within third 6,370
Yoon share to tenth
year from the
option
grant date
02.05.25 Registered Woo-Keun Lee Common 47,942 - 43,147 03.5.26-06.5.25 5,000
Officer share
01.05.26 Registered Woo-Keun Lee Common 47,942 - 43,147 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non- Jeong-Woo Seo Common 47,942 - 43,147 03.5.26-06.5.25 5,000
registered share
Officer
01.05.26 Non-registered Jeong-Woo Seo Common 47,942 - 43,147 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Tae-Hyun Lee Common 35,957 - 32,361 03.5.26-06.5.25 5,000
Officer share
01.05.26 Non-registered Tae-Hyun Lee Common 35,957 - 32,361 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Dae-Seok, Kang Common 35,957 - 32,361 03.5.26-06.5.25 5,000
Officer share
01.05.26 Non-registered Dae-Seok Kang Common 35,957 - 32,361 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Yang-Sang Yoo Common 99,880 - 89,892 03.5.26-06.5.25 5,000
Officer share
01.05.26 Non-registered Yang-Sang, Yoo Common 99,880 - 89,892 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Jeong-Soo Shim Common 47,942 - 43,147 03.5.26-06.5.25 5,000
Officer share
01.05.26 Non-registered Jeong-Soo, Shim Common 47,942 - 43,147 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Jin-Seob Ahn Common 35,957 - 32,361 03.5.26-06.5.25 5,000
Officer share
01.05.26 Non-registered Jin-Seob Ahn Common 35,957 - 32,361 04.5.27-07.5.26 5,837
Officer share
00.05.25 Non-registered Sung-Suk Jo Common 35,957 - 32,361 03.5.26-06.5.25 5,000
Officer share
00.05.25 Non-registered Jin-Seok Oh Common 29,964 26,967 - 03.5.26-06.5.25 5,000 2003.09.18
Officer share Exercised
01.05.26 Non-registered Yeol-Ju Kim Common 29,964 - 26,967 04.5.27-07.5.26 5,837
Officer share
Within third
to sixth year
03.05.30 Registered Woo-Keun Lee Common 50,000 - 50,000 from the 5,000
Officer share option grant
date 05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Registered Gi-Gwon Do Common 90,000 - - option grant 5,000 2004.05.28
Officer (Cancelled) share date Cancelled
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Registered Sung-Ro Lee Common 35,000 - 35,000 option grant 5,000
Officer share date
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Non-registered Dae-Seok Kang Common 35,000 - 35,000 option grant 5,000
Officer share date
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Non-registered Jong-Kil Park Common 35,000 - 35,000 option grant 5,000
Officer share date
05.5.31~09.5.30
Within
second to
sixth year
03.05.30 Non-registered Geun-Mo, Lee Common 35,000 - - from the 5,000 2004.05.28
Officer (Cancelled) share option grant Cancelled
date
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Non-registered Hyun-Jae Han Common 35,000 - 35,000 option grant 5,000
Officer share date
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Non-registered Hong-Sik Kim Common 25,000 - - option grant 5,000 2004.05.28
Officer (Cancelled) share date Cancelled
05.5.31~09.5.30
Within third
to sixth year
from the
03.05.30 Non-registered Chae-Young Jung Common 25,000 - 25,000 option grant 5,000
Officer share date
05.5.31~09.5.30
Within third
to fifth year
from the
Common option grant
04.05.28 Registered Woo-Keun Lee share 50,000 - 50,000 date 5,000
Officer
06.5.29~09.5.28
Within third
to fifth year
from the
04.05.28 Registered Kang-Won Lee Common 100,000 - 100,000 option grant 5,000
Officer share date
06.5.29~09.5.28
04.05.28 Registered Sung-No Lee Common 35,000 - 35,000 Within third 5,000
Officer share to fifth year
from the option
grant date
06.5.29~09.5.28
04.05.28 Non-registered Dae-Seok Kang Common 35,000 - 35,000 Within third 5,000
Officer share to fifth year
from the option
grant date
06.5.29~09.5.28
04.05.28 Non-registered Jong-Kil Park Common 35,000 - 35,000 Within third 5,000
Officer share to fifth year
from the option
grant date
06.5.29~09.5.28
04.05.28 Non-registered Hyun-Jae Han Common 35,000 - 35,000 Within third 5,000
Officer share to fifth year
from the option
grant date
06.5.29~09.5.28
04.05.28 Non-registered Chae-Young, Jung Common 25,000 - 25,000 Within second 5,000
Officer share to fifth year
from the option
grant date
06.5.29~09.5.28
04.05.28 Employees 100 employees Common 318,000 - 318,000 Within third 5,000
including chief of share to fifth year
branch from the option
grant date
Total 11,501,889 26,967 9,838,025 06.5.29~09.5.28
Note) The gap between the number of granted shares and nonexercised shares
(exercised shares) is due to a 10% capital decrease effected in December
2002.
F. Status of Equity Ratio of Employee Stock Ownership Association
(Unit: Won, Share)
TYPES OF SHARE INITIAL BALANCE INCREASE DECREASE FINAL BALANCE REMARKS
-------------- --------------- -------- -------- ------------- -------
Common share 94,119 93,722 397
Preferred share 424 0 424
Total 94,543 93,722 821
5. MATTERS WITH RESPECT TO THE DIVIDEND DURING THE RECENT FIVE (5) FISCAL
YEARS
(Par value per share: 5000 Won) (Unit: Million Won)
CLASSIFICATION 5TH 4TH 3RD 2ND 1ST
-------------- --- --- --- --- ---
Net profit 80,655 10,879 51,106 71,128 210,327
Net profit per share (Won) 518 68 284 407 1,209
Profit available for dividend distribution - - - - -
Payout ratio - - - - -
Details A. Majority Common - - - - -
of Dividend share
Dividend per share
(Won) Preferred - - - - -
share
Minority Common - - - - -
share
Preferred - - - - -
share
Cash B. Majority Common - - - - -
Dividend Total share
dividend
(Won) Preferred - - - - -
share
Minority Common - - - - -
share
Preferred - - - - -
share
C. Majority Common - - - - -
Dividend share
ratio at
market Preferred - - - - -
price share
Minority Common - - - - -
share
Preferred - - - - -
share
Stock A. Majority Common - - - - -
Dividend Stock share
dividend
ratio (%) Preferred - - - - -
share
Minority Common - - - - -
share
Preferred - - - - -
share
B. Majority Common - - - - -
Number of share
stock Preferred - - - - -
dividend share
per share
(share)
Minority Common - - - - -
share
Preferred - - - - -
share
Net assets value per share (Won) 4,218 3,649 3,693 3,468 3,071
Ordinary profit per share (Won) 518 36 284 235 1,209
II. DETAILS OF BUSINESSES (SECURITIES BUSINESS)
1. SUMMARY OF BUSINESS
A. Status of Industry
Securities industry assists in allowing capital to flow directly from
investors who supply capital to companies that have demands for capital,
thereby contributing to the development of national economy and providing
investment opportunities for investors. It could perhaps be said that the
securities business is more volatile than any other industry in that not
only is it a type of business highly impacted by economic conditions,
cyclical fluctuations, and movements of the capital market, but it is
directly linked to overseas market due to fullscale globalization of
capital. During the first quarter of this year, Korean securities market
suffered from various setbacks including reduced foreign demand for
investment in the market, a slowdown in corporate investment due to
anticipated delay in economic recovery and the avoidance of the securities
market by individual investors which resulted in Korea Composite Stock
Price Index (the "KOSPI") recording 720 points during May after having
surpassed 930 points at a point in April, and the market has continued
such path without showing any particular sign of upward movement. As if
reflecting the market situations, the total volume of transactions has
significantly decreased, resulting in reduction in brokerage commissions,
a major source of revenue for securities companies. For most securities
companies, it has been a difficult year with most securities companies
facing deficit for the year, and the situation is expected to continue for
sometime.
On the other hand, restructuring of the securities sector, which has been
relatively delayed compared to the banking sector, is expected to take
place in full scale this year. In the industry where price competition has
already reached a limit with the spreading of cyber trading of securities,
it is expected that the competition among large securities companies to
become the market leader will intensify. In
particular, with emerging signs of M&As against such companies as Daehan
Investment Trust Securities Co., Ltd, Korea Investment Co., Ltd, Daewoo
Investment Securities Co., Ltd, LG Investment Securities, and other large
securities companies by foreign or premium domestic banks, it is
anticipated that the restructuring of the securities sector and
competition among securities companies for survival will intensify even
more.
B. Status of the Company
(1) General Condition of Operations and Classification of Business
Sectors
(A) General Conditions of Operations
During the 1st quarter of the 6th fiscal year, the securities market
has shown signs of stagnation due to instability at home and abroad,
continued credit crisis in the household sector, severe reduction in
trading volume and the delay in recovery of domestic demand.
Although KOSPI showed signs of testing the prior record-high point
(April of 2002: 943.54 pt.) as it surpassed 930 points in April
2004, further analysis of the market shows that such rise in index
was due to foreign investors' concentrated purchase of domestic
blue-chip stocks and the continued sell-off by the institutional and
individual investors that appears to function as a limit to such
rise. As of the end of June, KOSPI recorded 785.79 points, 92.99
points down from 878.78 points as of the beginning of April, and
KOSDAQ index fell from 435.71 to 385.18 points, both indices falling
more than 10%. Furthermore, trading volume has continuously
decreased since March and April of 2002.
[] Brokerage
In terms of market share, during the 1st quarter of the 6th fiscal year,
the Company recorded 4.23 % in retail sales, 0.89% in domestic institution
sales, and 0.70% in international sales in brokerage transactions. In
particular, the Company actively developed a new sector known as network
financial transaction by utilizing the business network of Shinhan
Financial Group after the merger and earning 0.83% market share in
brokerage contracts with bank linked accounts. The Company recorded a
10.25% market share in brokerage in futures market and 12.45% in the
options market in the first quarter of the 6th fiscal year.
[] Corporate Finance
After the merger, the acquisition and intermediation services division is
being upgraded in competency and business strength through the
restructuring of investment banking center, introduction of joint
marketing of corporate finance services among subsidiaries of Shinhan
Financial Group, sponsoring of corporate finance seminars, and development
of specialized corporate finance services.
[] Financial Products
By obtaining the approval to engage in the business of OTC derivatives
such as stock index linked securities and discretionary wrap investment
services, the Company has created an opportunity for itself to strengthen
its financial product sales segment by offering diversified products to
its customers. As of the 1st quarter of the 6th fiscal year, the balance
of financial products under its management was 1.6539 trillion Korean Won
(the "Won") for equity-type products, 1.7098 trillion Won for bond-type
products, 998.8 billion Won for MMF, and 435.7 billion Won for ELS. In
addition, the case of Bankassurance, which is rapidly becoming a new
source of profit for the Company, recorded a balance of 18.9 billion Won
for the first quarter of the 6th fiscal year, maintaining a top
performance in the industry.
[] Portfolio Management
During the first quarter of the 6th fiscal year, the Company recognized a
net loss of 8.8 billion Won in stock investment, and a net profit of 7.5
billion Won and 19.9 billion Won in bonds and derivatives investment,
respectively, due to the introduction and development of advanced trading
techniques. In the area of risk management, the Company is making all
efforts to achieve stable profits based on minimized risk by vigilantly
managing risks associated with financial products by using advanced risk
management skills and systems.
(B) Classification of Business Division to be Disclosed
- N/A
(2) Market Share
[] Market Share of Stock Brokerage Business for the past 3 years
1ST QUARTER, 6TH FY 5TH FY 4TH FY
CLASSIFICATION (JUNE 30, 2004) (MARCH 31, 2004) (MARCH 31, 2003)
-------------------- ----------------------- ---------------- ----------------
Good Morning Shinhan
Securities 5.81% 6.03% 6.32%
(3) Outline and Prospect of New Businesses
(1) Business cooperation and accomplishments
- Chohung Bank: May 2002, Jeju Bank: February 2003.
Offered services for opening trading account through the
bank and transfer of funds related to trading of
securities
- Shinhan Bank: May 2003.
Offered preferred interest rates to nontaxable EFN
deposit customers depending on the FNA securities
trading results
- Shinhan Bank: October 2003
Partnership contract for operating securities business
office within a bank (BIB)
- Opening of five business offices: June 2004
- Shinhan Bank: Sales offices at Jamsil Rose
Apartment Complex, Samsung I-Park, and Bucheon
Sangdong
- Chohung Bank: Sales offices at Guhui-dong and
Ichon-dong
- A total of nine business offices are in operation
- Future plans: The Company will try to establish
business offices within bank branches with central
location in a favorable area.
(2) FNA (Financial Network Account)
- Shinhan Bank/Shinhan Card: September 2002
- Chohung Bank: January 2004
- Offered sharing of account service for securities
trading deposit account and each company's premium
services
- As of June 2004, 556,097 accounts opened
(3) KB Securities Trading account
- Kookmin Bank: November 2003
- Offered account service for securities trading account
and premium services by Kookmin Bank and Good Morning
Shinhan Securities
- As of June 2004, opened 4,385 accounts
(4) Co-Brand Card
PARTNERED
CONTENTS COMPANY DATE OF EXECUTION PERFORMANCE PLANS
----------------------- ------------ ----------------- ------------------------ ----------------------
Launched Co-Brand cards Launched Co-Brand cards Diversification of
and acted as sales Shinhan Card 03.05 and attracted 40,828 new profit source through
distributor credit card customers continuous development
of credit cards
Launched Co-Brand cards exclusively for
and acted as sales Kukmin Card 03.05 Enrolled 102,104 credit securities transaction
distributor card member customers and
distribution of credit
cards.
(5) Launched Bankassurance (December 31, 2003)
- As of June 2004, a balance amount of 19 trillion Won,
one of the top results in the industry
- Shinhan Life Insurance, LG Fire Insurance, Kyobo Life
Insurance, Samsung Fire Insurance, etc. (alliance with
three life insurance and four fire insurance companies):
August 2003
- Enrollment agent for insurance solicitation and
commission sharing.
(6) Launched discretionary wrap investment services,
(November 20, 2003)
- Launched Good Morning Gold Wrap: January 2004
- Direct management of client assets by asset management
specialists
(7) Selected as managing company for the housing fund of the
Ministry of Construction and Transportation (March 8,
2004)
- Date of Launch: April 20 (began management of 200
billion Won among a total amount of 300 billion Won)
(8) Expected Launch of FNA Wrap (in the second half of 2004)
(4) Organizational Chart
2. PERFORMANCE OF EACH TYPE OF BUSINESS
(Unit: million Won)
-------------------------------------------------------------------------------------------------
TYPE OF BUSINESS OPERATING REVENUE (RATIO) REMARKS
-------------------------------------------------------------------------------------------------
Commissions received 63,814(30.6%)
Interest Income 17,886(8.6%)
Dividends (Distribution) income 1,264(0.6%)
Gain on sales of trading securities 6,526(3.1%)
Gain on valuation of trading securities 1,792(0.9%)
Gain on hybrid securities transaction 231(0.1%)
Gain on valuation of trading securities sold 806(0.4%)
Gain on hybrid securities transaction sold 66,996(32.2%)
Gain on future transaction 46,445(22.3%)
Other operating incomes 2,549(1.2%)
-----------
Total 208,309(100%)
-----------
3. STATUS OF EACH TYPE OF BUSINESS
A. Trading on own Account
(1) Status of Each Type of Securities
(Unit: million Won)
1ST QUARTER OF 6TH FY 5TH FY 4TH FY
------------------------------ ---------------------------------- --------------------------------
TRADING AMOUNT TRADING AMOUNT TRADING AMOUNT
---------------------- ----------------------- -----------------------
OTC
CLASSIFICATION BALANCE MARKET MARKET BALANCE MARKET OTC MARKET BALANCE MARKET OTC MARKET
-------------- ------- ------ ------ ------- ------ ---------- ------- ------ ----------
Stock 82,480 553,025 29 28,245 6,697,130 354 2,371 5,214,686 17
Government 701,209 442,974 292,289
and
public
bonds
Bond
Corporate 31,172 44,265 16,955
bonds
Sub-total 732,381 6,956,950 17,662,450 487,239 25,610,054 98,317,971 311,615 4,673,634 82,775,084
Beneficiary 15,869 23,405,340 23,754 82,193,700 275,591 62,719,017
certificates
Securities in foreign 32 37,940 97 121,315 308,950
currency
Stock Buy 36,585 17,462,765 97,927,469 271 65,154,204
index 58,427 17,583,225 92,455 97,846,098 265 2,548 65,112,666
futures Sell
Stock Buy 191 1,724,021 5,643,894 117 2,530,354
index 32 1,728,755 5,639,694 2,235,379
option Sell
Others 8,017,490 67,326,760 48,794 82,900,273
Total 925,997 46,008,741 49,123,248 1,119,029 239,364,340 247,960,636 638,665 144,920,923 228,703,341
(2) Performance of Investment in Securities
(A) Stock
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales - 8,775 3,052 63,143
Gain (loss) on valuation - 4,051 186 46,571
Dividends income 1,109 2,256 8,156
Total - 11,717 5,256 24,728
- Dividends income is total amount of dividends from short-term stock,
long-term stock, and mutual fund.
(B) Bond
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales and
redemption 797 1,043 - 3,936
Gain (loss) on valuation - 238 -194 - 1,463
Distribution income 6,703 6,509 28,311
Total 7,262 7,358 22,912
(C) Beneficiary Certificates
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales and
redemption - 812 1,406 6,096
Gain (loss) on valuation 349 -931 1,628
Distribution income 155 1,089 2,016
Total - 308 1,564 9,740
(D) Securities in Foreign Currency
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales - - 148
Gain (loss) on valuation - - 9
Dividends and interest
income - - -
Total - - 157
(E) Profit and Loss of Derivatives Transaction
1) Stock Index Future Transaction
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales 5,543 1,961 8,345
Gain (loss) on
settlement - 495 34 1,574
Total 5,048 1,995 9,919
2) Stock Index Option Transaction
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales 4,760 2,079 13,061
Gain (loss) on
valuation - 56 110 -
Total 4,704 1,969 13,061
3) OTC Derivatives Transaction
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Gain (loss) on sales 215 - 7,326
Gain (loss) on
settlement - 8,335 425 11,247
Total - 8,120 425 18,573
B. Brokerage of Securities Business
(1) Customers' Deposits and Trading Performance
(Unit: million Won)
1ST QUARTER OF 6TH FY 5TH FY 4TH FY
------------------------- ------------------------- ------------------------
CLASSIFICATION MARKET OTC MARKET MARKET OTC MARKET MARKET OTC MARKET
-------------- ------ ---------- ------ ---------- ------ ----------
Customers'
Deposits for
brokerage 423,539 439,489 548,790
Customers' Customers'
Deposits deposits for
futures and
options
trading 252,790 209,978 133,630
Trading Stock 22,909,563 36,685 103,772,317 167,886 95,829,184 104,449
Amount Bond 832,057 6,560,995 - 6,786,734 -
Beneficiary
certificates - - - -
Securities
in foreign
currency - - - -
Stock index
futures 174,951,443 471,328,922 - 119,118,199 -
Stock index
Option 10,828,256 33,046,324 - 12,915,097 -
Others - - - 145,282
Total 209,521,319 36,685 614,708,558 167,886 314,649,214 249,731
Stock 43,750 57 202,042 290 182,914 205
Bond 49 120 - 49 3
Beneficiary
certificates - - -
Securities
Commissions in foreign
currency - - - -
Stock index
futures 3,386 11,264 - 12,283 -
Stock index
Option 7,347 22,364 - 14,640 -
Others - - - -
Total 54,532 57 235,790 290 209,887 208
Note 1) KOSDAQ and KOFEX are classified as OTC market in the 3rd FY, but
market in the 4th FY
Note 2) "Other" trading results above is the results from brokerage of
negotiable commercial papers, and the brokerage commission of KRW 83
million in the 4th FY is recorded as "Brokerage commissions on
negotiable commercial papers" under "Commission received" in the
Statements of Income.
(2) Profit and Loss of Brokerage of Securities
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Brokerage commissions 54,589 64,878 236,081
Sales commissions 7,313 6,620 22,401
Profit (loss) 61,902 58,258 213,680
C. Underwriting of Securities
(1) Performance of Underwriting of Securities
(Unit: million Won)
1ST QUARTER OF 6TH FY 5TH FY 4TH FY
------------------------------------ --------------------------------------- ----------------------------------
LEAD LEAD
MANAGER UNDERWRITIN LEAD MANAGE UNDERWRITIN MANAGER UNDERWRITING
CLASSIFICATION RESULTS RESULTS COMMISSIONS RESULTS RESULTS COMMISSIONS RESULTS RESULTS COMMISSIONS
-------------- ------- ----------- ----------- ----------- ----------- ----------- --------- ----------- -----------
IPO - 442 22 89,775 55,024 2,168 16,320 189,020 668
Stock - - - - - - 15,646 39,185 238
Government
and public
bonds 350,000 482,699 190 530,000 2,026,668 378 190,000 1,320,238 157
Corporate
bonds 270,000 170,000 478 3,459,200 2,343,900 6,747 2,373,300 1,705,800 5,761
Securities in
foreign
currency - - - - - - - - -
Others - - - - - - - - -
Total 620,000 653,141 690 4,078,975 4,425,592 9,294 2,595,266 3,443,263 6,823
(2) Profit from Underwriting of Securities
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY
-------------- --------------------- --------------------- ------
Underwriting Commissions 690 2,424 9,294
Commissions expenses - - 902
Profit (loss) 690 2,424 8,392
D. Provision of Credit
(1) Credit line
- Credit provided with own funds: No credit line
- Credit provided with funds borrowed from third party: 100
million Won per account
(2) Interest rate on credit: the applicable interest rate depends on the
credit period.
LOAN PERIOD 15 DAYS OR LESS 16~30 DAYS 31~90 DAYS 91 DAYS OR MORE
----------- --------------- ---------- ---------- ---------------
Annual interest rate 6% 7% 9% 17%
(3) Balance of Margin Transaction Loan and Stock Loan for Margin
Transaction
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 5TH FY 4TH FY
-------------- --------------------- ------ ------
Balance of Margin
Transaction Loan 5,191 6,515 5,587
Balance of Stock Loan for
Margin Transaction - - -
E. Trading of Bonds subject to Repurchase Agreement
(Unit: 100 million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 5TH FY 4TH FY
-------------- --------------------- ------ ------
RP sold 2,257 1,754 1,517
Balance (Hybrid RP) - - -
RP purchased - - -
Trading RP sold 1,804 50,849 842,346
amount (Hybrid RP) - - -
RP purchased - 50 97,737
F. Other Business
(1) Provision of Payment Guarantee for Corporate Bonds
(A) Status of Guarantee by Corporate Size
- Not Applicable
(Unit:)
1ST QUARTER OF 3RD FY 2ND FY 1ST FY
--------------------- --------------------- --------------------
NUMBER OF NUMBER OF NUMBER OF
GUARANTEES GUARANTEE GUARANTEE
CLASSIFICATION ISSUED AMOUNT ISSUED AMOUNT ISSUED AMOUNT
-------------- ---------- ------ ---------- ------ ---------- ------
Large companies
Small and medium sized
companies
Total
(B) Status of Payment under Guarantee
(Unit: million Won)
AMOUNT OF
PAYMENT MADE UNDER REMARKS
GUARANTEE AMOUNT COLLECTED (PAYMENT MADE
AMOUNT DUE --------------------------- -------------------------- UNDER
NO. UNDER 1ST QUARTER OF ACCUMULATED 1ST QUARTER OF ACCUMULATE GUARANTEE FOR
COMPANY OF PAYMENT QUARANTINE 6TH FY AMOUNT COLLATERAL 6TH FY AMOUNT BONDS)
------- ---------- ---------- -------------- ----------- ---------- -------------- ---------- -------------
Hankook
Corporation 1 7,770 - 7,770 - - 2,861 4,909
Haitai
Confectionery
& Foods Co.,
LTD 1 6,660 - 6,660 - 43 4,947 48
CECROP CO., LTD 1 2,070 - 2,070 - - 600 1,470
Total 5 20,452 - 20,452 43 8,408 6,427
Note 1) The amount that are collected, written off for bad debt or otherwise
settled is excluded
(2) Others
- Not applicable
4. STATUS OF BUSINESS FACILITIES
A. Status of Establishment of Branch
(As of June 30 2004)
GENERAL SALE
LOCATION BRANCH OFFICE BIB SALES OFFICE TOTAL
-------- ------ ------------ ---------------- -----
Seoul Metropolitan
Government 36 2 6 44
Incheon Metropolitan City 2 - - 2
Daegu Metropolitan City 4 - - 4
Busan Metropolitan City 5 1 - 6
Ulsan Metropolitan City 2 - - 2
Gwangju Metropolitan City 2 - - 2
Daejeon Metropolitan City 3 - - 3
Gyeonggi-do 11 - 2 13
Gyeongsangbuk-do 2 - 1 3
Gyeongsangnam-do 3 - - 3
Jeollabuk-do 3 - - 3
Jeollanam-do 2 - - 2
Chungcheongbuk-do 1 - - 1
Chungcheongnam-do - - 0
Gangwon-do 1 - - 1
Jeju-do 2 - - 2
Total 79 3 9 91
Note 1) Number of branch includes one headquarter office counted as branch.
B. Status of Business Facilities
(Unit: million Won)
CLASSIFICATION LAND (BOOK VALUE) BUILDING (BOOK VALUE) TOTAL REMARKS
-------------- ----------------- --------------------- ------- -------
Main Building 7,674 83,441 91,115
Extension 18,890 12,711 31,602
Gumi 1,267 8,094 9,362
Madu 271 609 881
Migeum Station 311 483 795
Sanbon 258 474 732
Ulsan 1,420 5,467 6,887
Yeocheon 873 5,176 6,049
Gunsan 4,181 777 4,959
Gwangju 2,583 951 3,534
Juyeop 979 1,390 2,369
Sanggye 280 641 922
Apgujeong Jungang 1,935 2,889 4,824
Dong-Gwangyang 1,214 1,149 2,363
Jeongja-dong 511 1,669 2,180
Total 42,653 125,927 168,580
5. OTHER FACTORS NECESSARY FOR INVESTMENT DECISION
A. Status of bad debt written off
(Unit: million Won)
CLASSIFICATION 1ST QUARTER OF 6TH FY 5TH FY 4TH FY
-------------- --------------------- ------ ------
Amount of write-off 211 1,756 7,543
B. Status of Commissions
(As of June 30, 2004)
BROKERAGE OF SECURITIES ON-LINE TRADING, ETC. ETC
------------------------------ ----------------------------------------------------------------
TRADING COMMISSION
CLASSIFICATION AMOUNT RATE TRADING AMOUNT HTS/WEB PDA ARS
-------------- ------- ---------- -------------- ------- --- ---
200 million Less than 1
Won or less 0.50% million Won 0.15%+500 Won 0.17%+500 Won 0.25%+500
200~500 0.45%+100,000 1~3 million Won 0.14%+1,000 Won 0.16%+1,000 Won 0.23%
million Won Won 3~30 million Won 0.13%+2,000 Won 0.15%2,000 Won
Stock Over 500 0.40%+350,000 30~50 million
million Won Won Won 0.13% 0.15%
Less the 10
shares 50~100 million
(Odd shares) 0.50% Won 0.12% 0.13% 0.20%
100 million Won
or more 0.10% 0.12%
Futures 500 million - KOSPI200
(KOSPI200 Won or less 0.045% - 1 billion Won or less: 0.01%
KOSDAQ 50) 500 million - more than 1 billion Won : 0.003%
Won~1 0.040%+25,000
billion Won Won - KOSDAQ50 : 0.02% (regardless of transaction amount)
1~2 billion 0.035%+75,000
Won Won
2~5 billion 0.030%+175,000
Won Won
Over 5 0.025%+425,000
billion Won Won
10 million Won or
KOSPI200 less 0.3%
Option More than 10
(including [Applicable million Won 0.15%
Stock Index for all 10 million Won or
Option) transaction] 1.20% KOSDAQ50 less 0.5%
More than 10
million Won 0.3%
C. Securities to be sold
PRODUCT TYPE CHARACTERISTICS AND DESCRIPTION
------- ---- -------------------------------
Beneficiary MMF New - Free to invest and withdraw. High liquidity and high yield
Certificate product (even in case of very short-term investment period, it
allows investors to receive market rate of interest). Invest in
short-term high yield products such as CP, CD, Call, bonds for
currency balance, etc.
Clean - A Product suitable for investment for approximately one month
duration. A high liquidity product to be invested for one day
much like New MMF.
Bond Type - Stable yield due to 60% or more not being invested in the stocks
but in bonds such as government and public bonds, corporate
bonds, CD, etc. and liquidity assets. Diverse product mix
according to investment period and investment method.
Hybrid Type - Stability feature of bond investment and profitability feature of
equity investment are combined in this product.
- Mostly invests in the bond market but some portion is invested in
stocks for higher yield in addition to interest income in case
the price of stock increases
Equity type - 60% or more is invested in stocks. High yield when the prices of
stocks rise.
Mutual Fund Domestic - Corporate type investment trust for investment in securities.
- Indirect investment product. Invests funds collected from
investors in securities and distributes profit from the
investment to shareholders as dividends.
Off shore - Not invested in domestic stocks or bonds but in foreign stocks or
bonds. Stable increase in the rate of investments is expected due
to investments in mature and developed markets.
- Asset managed by companies with international reputation such as
Franklin Templeton, Schroder, Fidelity, etc.
Composite Tax benefit - Limitation of subscription: 40 million Won per person
Savings Fund * The elderly and the disabled : up to 60 million Won. Minors: up
with Tax to 15 million Won
Benefit - Low tax rate applied to interest and dividends: Individual income
tax rate is 10%. Agricultural and Fishery Special Tax rate is 0.5%
Non-taxable - Qualification: an individual who is 60 years or older, a disabled
Savings for Non-taxable person, a disabled veteran, a person who needs public relief.
living - Up to 30 million Won in principal (only allows one account per
person).
- Invests in such product as MMF, Beneficiary certificate, Bond,
RP, etc.
- Non-taxable on the entire interest amount even in case of just
one day deposit, unlike other non-taxable products.
Long-term - Qualification: A person who does not own a house or has one house
Savings for the size of which is not more than 85 square meters (until the
Housing Fund Non-taxable end of December 2006).
- Upper limit on savings amount: Up to 30 million Won for a quarter
(total amount of all savings in all financial institutions)
- Maturity period: 7 years
- Method: Can deposit any time.
- Interest income is non-taxable and 40% of savings amount is
deductible against income up to 3 million Won.
Long-term - Qualification: Resident under Korean Tax Law. * An individual who
Equity Type has domestic residence or has lived in a certain place for 1 or
Trust Savings Non-taxable more years (Individual Income Tax Law, Article 1)
- Upper limit on savings amount: The limit is 80 million Won per
person and a person can maintain deposit in several financial
institutions.
- Type: lump sum or installment payment
- Tax Benefit: Non-taxable (including Resident Surtax and
Agricultural and Fishery Special Tax) * only for interest income
until December 31, 2005
- Requirement for tax benefit: Must keep the account for 1 year or
more.
ELS OTC Derivatives - New securities. Distributes pre-agreed investment profit that is
linked with the terms and conditions of warrant or option
depending on the stock price index as of maturity date
- The amount of guarantee on the principal can be freely determined
and the amount leveraged can be changed depending on the
guaranteed amount.
- The diverse investment structure can be made to tailor customer's
preference and market situation.
Warrant OTC Derivatives - New securities with option to sell or buy underlying assets such
as stock index, basket, individual stock, etc. at pre-determined
exercise price at the time of maturity.
- The principal amount is not guaranteed, but the return on
principal can be leveraged. The European style option which is
generally exercised at the maturity date.
Bankassurance Insurance Product - Life insurance is usually sold as variable annuity type, pension
type or savings type.
- Damage insurance is usually sold as accident insurance
- This product can be used as investment portfolio of customer's
asset.
WRAP Direct type Product Minimum amount Investment in Equity Fee
Growth type 30 million Won 100% 2.4~3.2% of assets
Value type 30 million Won 100% 2.4~3.2% of assets
System type 30 million Won 100% 2.0% of assets
Premium type 500 million Won 100% 2.4~3.2% of assets
Hybrid type Product Minimum Amount Investment in Equity Fee
Growth Hybrid type 30 million Won choice of client direct type part: 2.4~3.2%
Value Hybrid type 30 million Won choice of client direct type part: 2.4~3.2%
Premium type 500 million Won choice of client bond type fund : 0.1%
Indirect type Product Minimum Amount Investment in Equity Fee
(Fund Wrap) Growth type 10 million Won 80% 0.1% of assets
Stability type 10 million Won 30% 0.1% of assets
Customization type 500 million Won choice of client fee negotiable
Other Products CD - Short-term financial product which is issued in bearer form and
is discounted by the bank based on fixed deposit and can be sold
in the market before maturity date at a negotiated price.
CP - It is a negotiable bill which can be issued by a qualified
company without a guarantee and in good standing regardless of
commercial transaction as short term financing.
RP - Product with a fixed interest rate which is
sold to clients with an agreement that it
shall be repurchased at a certain price and
at a specified period.
- No restriction on the amount and the duration.
D. Other important Matters
- No other Matters other Factors
E. Ratio of Net Capital
(Unit: million Won, %)
CLASSIFICATION 1ST QUARTER OF THE 6TH FY 5TH FY 4TH FY
-------------------------- --------------------------- ------- -------
Net Capital (A) 401,574 421,833 396,054
Gross Risk Amount (B) 86,446 87,756 95,982
Ratio of Net Capital (A/B) 464.5 480.7 412.6
Note) Ratio of net capital = Net capital / Gross risk amount
F. Credit Rating for Most Recent 3 years
CREDIT RATING AGENCY
VALUATION DATE SUBJECT SECURITIES CREDIT (GRADE RANGE) TYPE OF RATING
-------------- -------------------- ------ ------------------------------ ------------------
2001-03-28 Commercial Papers A3 Korea Investors Service Inc. Periodic Rating
(C~A1)
2001-04-02 Commercial Papers A3 Korea MGT Consulting & Credit Periodic Rating
Rating Corp. (C~A1)
2001-07-03 Commercial Papers A3+ Korea MGT Consulting & Credit Definite rating
Rating Corp. (C~A1)
2002-02-06 Commercial Papers A3+ Korea Investors Service Inc. Definite rating
(C~A1)
2002-09-13 Non-guaranteed BBB+ Korea MGT Consulting & Credit Rating in issuance
subordinated bonds Rating Corp. (C~AAA) of 15th Bond
2002-12-02 Commercial Papers A2- Korea MGT Consulting & Definite rating
Credit Rating Corp. (C~A1)
2002-12-02 Commercial Papers A2- Korea Investors Service Inc. Definite rating
(C~A1)
2003-03-13 Non-guaranteed bonds A Korea Investors Service Inc. Rating in issuance
(C~AAA) of 16th Bond
2003-03-13 Commercial Papers A2 Korea Investors Service Inc. Periodic Rating
(C~A1)
2003-04-23 Non-guaranteed bonds A Korea MGT Consulting & Credit Rating in issuance
Rating Corp. (C~AAA) of 16th Bond
2003-04-23 Commercial Papers A2 Korea MGT Consulting & Credit Periodic Rating
Rating Corp. (C~A1)
2003-09-30 Commercial Papers A2 Korea MGT Consulting & Credit Periodic Rating
Rating Corp. (C~A1)
2003-10-01 Commercial Papers A2 Korea Investors Service Inc. Periodic Rating
(C~A1)
III. FINANCIAL MATTERS
1. SUMMARY OF FINANCIAL INFORMATION
(Unit: million Won)
CLASSIFICATION 1Q OF 6TH FY 5TH FY 4TH FY 3RD FY 2ND FY
-------------------------- ------------- --------- --------- --------- ---------
[Current Assets] 2,214,014 1,913,789 1,549,518 1,251,093 1,026,140
- Cash and bank deposits 78,582 28,001 91,116 247,779 302,136
- Deposits 748,425 731,084 699,934 677,234 437,738
- Short-term securities 842,082 550,580 633,768 187,525 247,373
- Hybrid securities 343,799 238,732 - - -
-Option purchased 124 - - - -
-Loans 129,362 240,972 61,594 47,523 4,566
-Other current assets 77,018 129,594 67,972 93,231 36,385
-Allowance for credit
loss-current assets - 5,378 - 5,174 - 4,983 -2,199 -2,058
[Non-current assets] 341,325 337,660 447,474 406,191 393,523
-Long-term securities 47,383 46,012 74,364 104,162 89,519
-Investment assets 81,120 78,615 83,460 61,791 68,862
-Tangible fixed assets 184,201 182,234 205,993 168,483 176,737
-Other non-current assets 28,621 30,799 83,656 71,755 58,405
Total assets 2,555,339 2,251,449 1,996,992 1,657,284 1,419,663
[Current liabilities] 1,884,422 1,432,026 1,265,924 931,166 739,048
[Long-term liabilities] 5,608 163,252 163,418 36,559 50,372
Total liabilities 1,890,030 1,595,278 1,429,341 967,724 789,421
[Capital stock] 796,998 796,998 796,998 933,628 908,628
[Capital surplus] 15 15 14,750 - -
Capital reserve - - 14,750 - -
Gain on capital reduction 15 15 - - -
Appraisal surplus - - - - -
[Retained earnings] 8,413 - 9,894 19,789 29,683
[Capital adjustment] -140,117 -140,842 -239,257 -263,857 -308,069
Total shareholders' equity 665,309 656,171 567,650 689,560 630,242
Operating revenue 208,309 685,477 624,682 465,969 485,689
Operating income 8,463 53,980 1,364 19,862 65,590
Ordinary income 10,118 96,741 5,538 61,300 51,798
Net income 8,413 80,655 10,879 51,106 71,129
[-INDICATES NEGATIVE NUMBER]
2. NOTICE TO THE READERS
A. Standard for Preparation of Financial Statements
(1) The financial statements of Good Morning Shinhan Securities Co.,
Ltd. were prepared in compliance with the Financial Accounting
Standards and Regulation on Supervision of Securities Business. The
following table shows the auditor's opinion on the financial
statements of Good Morning Shinhan Securities Co., Ltd.
1ST QUARTER OF 6TH FY 5TH FY 4TH FY
CLASSIFICATION (APR. 1, 2003~JUN. 30, 2004) (APR. 1, 2003~MAR. 31, 2004) (APR. 1, 2002~MAR. 31, 2003)
---------------- ---------------------------- ---------------------------- ----------------------------
Auditor KPMG Samjong KPMG Samjong Samil Accounting Corp.
Accounting Corp. Accounting Corp.
Auditor's Opinion Unqualified Unqualified Unqualified
(2) Thus, the information in the "Summary of Financial Information" and
"Financial Statements" is in compliance with the Financial
Accounting Standards and Regulation on Supervision of Securities
Business.
(3) 1. Good Morning Shinhan Securities Co., Ltd. applies
Industry-specific Working Rules of Accounting under Article 90
of the Financial Accounting Standards.
2. Even though the Financial Accounting Standards is already
revised, the report for the current fiscal year was prepared
using the Financial Accounting Standards before the revision
under the guideline of Financial Supervisory Service regarding
closing of accounting book.
B. Violation under the Financial Accounting Standards
(1) Violation that may require the Financial Statements to be adjusted
N/A
(2) Violation irrelevant to the adjustment of the Financial Statements
N/A
C. Other Matters to be noted
- N/A
3. FINANCIAL STATEMENTS
A. Balance Sheet
Balance Sheet
The 1st quarter of 6th Fiscal Year (As of June 30, 2004)
The 5th Fiscal Year (As of March 31, 2004)
The 4th Fiscal Year (As of March 31, 2003)
(Unit: million Won)
1ST QUARTER OF 6TH FY 5TH FY
----------------------- --------------------
DESCRIPTION AMOUNT AMOUNT
------------------------------- ----------------------- --------------------
Assets
I. Current Assets 2,214,014 1,913,789
1. Cash and bank deposits 78,582 28,001
1) Fixed deposits 10,267 10,267
2) Demand deposits 1,254 659
3) Current deposits 434 492
4) Deposits in foreign currency 2,269 1,767
5) Negotiable certificate of deposits 49,025 -
6) Others 15,333 14,816
2. Deposits 748,425 731,084
1) Due from financial institutions for customers' accounts - 100
<1> Customers' deposits-futures and options transaction in - 100
the KOFEX
2) Reserve for claims of customers deposits (trust) 715,048 707,642
<1> Customers' deposits 457,941 509,326
<2> Customers' deposits-futures and options transaction in 257,107 198,316
the KOFEX
3) Guarantee trading deposits for futures and options 33,377 23,342
<1> Proprietary trading - 29
<2> Brokerage 33,377 23,313
3. Short-term securities 842,082 550,580
1) Short-term trading securities 830,763 539,335
<1> Stock 82,481 28,245
<2> Government and public bonds 701,209 442,974
<3> Corporate bonds 31,172 44,265
<4> Beneficiary certificates 15,869 23,754
Unsold beneficiary certificates 15,869 17,591
Other beneficiary certificates - 6,163
<5> Securities in foreign currency 32 97
Stock in foreign currency 32 97
2) Available-for-sale securities 11,319 11,245
<1> Others 11,319 11,245
4. Hybrid securities 343,799 238,732
1) Equity linked securities 343,799 238,732
5. Option purchased 124 -
6. Loans 129,362 240,972
1) Call loans 200 110,000
2) Broker's loans 129,142 130,945
<1> Margin to customers 5,188 6,515
<2> Delayed margin 2 1
<3> Loans guaranteed by securities 123,952 124,429
3) Short-term loans 10 17
<1> Others 10 17
4) Other loans 10 10
7. Other current assets 77,018 129,594
1) Receivables 32,245 57,313
<1> Receivables on stocks 20,692 41,614
<2> Receivables on futures and options 1,438 1,413
<3> Others 10,115 14,286
2) Accrued income 10,393 10,947
<1> Accrued commissions 2,434 2,832
<2> Accrued dividends 1,328 3,655
<3> Accrued interest receivables 5,449 3,622
<4> Accrued interest on margin) 50 48
<5> Others 1,132 790
3) Advance payments 8,784 18,336
<1> Accrued interest on bonds 6,344 4,873
<2> Others 2,440 13,463
4) Prepaid expenses 1,296 2,215
5) Prepaid income tax 3,772 4,129
6) Derivatives assets 16,137 32,135
7) Others 4,391 4,519
8. Allowance for credit loss-current assets (-)5,378 (-)5,174
1) Allowance for fiduciary loans (-)646 (-)655
2) Allowance for receivables (-)2,662 (-)2,670
3) Allowance for accrued income (-)2,060 (-)1,839
4) Allowance for other current assets (-)10 (-)10
II. Non-Current Assets 341,325 337,660
1. Long-term securities 47,383 46,012
1) Available-for-sale securities 34,657 34,132
<1> Stock 19,770 19,685
<2> Investment in partnerships 14,887 14,447
2) Securities on equity method 12,726 11,880
2. Investment assets 81,120 78,615
1) Long-term deposits 58 58
2) Long-term loans 16,008 16,211
3) Guarantee 60,002 57,288
<1> Leasehold rights 14,945 13,497
<2> Telex and telephone subscription rights 528 534
<3> Guarantee for rent 44,528 43,256
<4> Surety guarantee 1 1
4) Others 5,052 5,058
3. Tangible fixed assets 184,201 182,234
(Accumulated depreciation) (-)86,166 (-)84,141
1) Land 42,654 42,142
2) Buildings 161,571 159,689
3) Vehicles 34 34
4) Furniture and equipments 66,099 64,501
5) Others 9 9
4. Other non-current assets 28,621 30,799
1) Advances for customers 18,148 17,047
<1> Advances for payment on bonds guarantee 6,427 6,470
<2> Advances for payment on loss compensation 5,794 4,650
<3> Advances for payment others 5,927 5,927
2) Collective fund for default loss 6,441 6,356
<1> KSE 3,266 3,266
<2> KOSDAQ 3,171 3,087
<3> ECN 4 3
3) Dishonored bonds 10,917 10,917
4) Intangible assets 11,091 11,848
<1> Software 10,862 11,589
<2> Others 229 259
5) Deferred income tax debits 10,419 11,377
6) Allowance for credit loss-non-current assets (-)28,395 (-)26,746
<1> Allowance for long-term loans (-)762 (-)710
<2> Allowance for advances (-)17,778 (-)16,147
<3> Allowance for dishonored bonds (-)9,855 (-)9,889
Total Assets 2,555,339 2,251,449
Liabilities
I. Current Liabilities 1,884,422 1,432,026
1. Call money 127,500 -
2. Short-term borrowings - 30,000
1) Others - 30,000
3. Bonds sold under reverse resale agreements 225,782 175,394
4. Customers' deposits 690,558 665,469
1) Customers' deposits for brokerage 423,539 439,489
2) Customers' deposits for futures and options trading 252,790 209,978
3) Customers' deposits for savings 14,015 15,757
4) Others 214 245
5. Securities sold 20,220 14,781
1) Stock 12,280 1,685
2) Others 7,940 13,096
6. Hybrid securities sold 569,117 466,373
1) Equity linked securities sold 550,484 427,494
2) Securities on stock warrant sold 18,633 38,879
7. Options sold 22 -
8. Other current liabilities 251,223 80,009
1) Accrued dividends 717 717
2) Accounts payable 10,473 505
3) Accrued expenses 35,403 36,735
4) Guarantee deposits 4,935 5,070
<1> Deposits for opening margin accounts 3,071 3,150
<2> Deposits for margin loans 1,864 1,920
5) Withholding income taxes 4,308 8,271
6) Deposits for rent 23,937 24,219
7) Unearned income 48 15
8) Derivatives liabilities 7,604 672
9) Current portion of debentures 30,000 -
10) Current portion of subordinated debentures 130,000 -
11) Others 3,798 3,805
II. Long-Term Liabilities 5,608 163,252
1. Debentures 1,000 31,000
2. Reserve for severance and retirement benefits 9,238 6,906
(National pension fund for severance and retirement (-)37 (-)37
benefits)
(Retirement trust) (-)4,593 4,608 (-)4,617 2,252
3. Other long-term liabilities - 130,000
1) Subordinated debentures - 130,000
Total Liabilities 1,890,030 1,595,278
Stockholders' Equity
I. Capital Stock 796,998 796,998
1. Common stock 777,882 777,882
2. Preferred stock 19,116 19,116
II. Capital Surplus 15 15
1. Gain on capital reduction 15 15
III. Retained Earnings 8,413 90,549
1. Reserve for loss on securities transactions - 9,894
<1> Reserve for trading losses - 3,359
<2> Reserve for accidental losses - 6,535
2. Inappropriate retained earnings carried over to 8,413 80,655
subsequent period
(Net income for the quarter :
Current Quarter : 8,413 million Won
Prior FY : 80,655 million Won)
IV. Capital Adjustments (-)140,117 (-)231,391
1. Discount on stock issuance (-)147,764 (-)238,314
2. Treasury stock (-)14,584 (-)14,584
3. Stock options 12,066 11,787
4. Gain on valuation of available-for-sale securities 6,174 5,638
5. Gain on valuation of securities on equity method 3,991 4,082
Total Stockholders' Equity 665,309 656,171
Total Liabilities and Stockholders' Equity 2,555,339 2,251,449
[Footnote] (Unit : million Won)
DESCRIPTION 5TH FY
---------------------------------------------------------- -----------------------------------------
I. Securities in Custody 12,802,320
1. Trustor securities in custody 8,200,291
2. Saver securities in custody 76,652
3. Beneficiary securities in custody 4,525,267
4. Others 110
II. Undistributed Reserve for Claims of Customers'
Deposits(trust) 3,642
III. Derivatives Contracts 111,364
1. Contracts on interest rates 16,528
<1> Contracts on interest rate futures purchased -
<2> Contracts on interest rate forward 16,528
2. Contracts on stock and stock index 94,836
<1> Contracts on stock and stock index futures 92,455
<2> Contracts on stock and stock index options purchased -
<3> Contracts on stock and stock index swap 2,381
IV. Lending and Borrowing Securities 2,687
1. Borrowing securities 2,687
1) Stock 2,687
V. Receivable Charge-Offs 1,756
4TH FY
DESCRIPTION AMOUNT
---------------------------------------------------------- ---------------------------------------
Assets
I. Current Assets 1,549,518
1. Cash and bank deposits 91,116
1) Current deposits 642
2) Deposits in foreign currency 49
3) Negotiable certificate of deposits 989
4) Others 89,436
2. Deposits 699,934
1) Subscription deposits 8,923
2) Reserve for claims of customers deposits 658,900
<1> Customers' deposits 537,900
<2> Customers' deposits-futures and options transaction in
the KSE 120,900
<3> Customers' deposits-futures and options transaction in
the KOFEX 100
3) Due from financial institutions for customers' accounts -
<1> Customers' deposits -
<2> Customers' deposits-futures and options transaction in
the KOFEX -
4) Reserve for performance of transaction 7,326
5) Guarantee trading deposits for futures and options 24,785
<1> Proprietary trading 1,585
<2> Brokerage 23,200
3. Short-term securities 633,768
1) Short-term transaction securities 633,768
<1> Stock 2,371
<2> Government and public bonds 292,289
<3> Corporate bonds 16,955
<4> Beneficiary certificates 273,359
Unsold beneficiary certificates 271,879
Other beneficiary certificates 1,480
<5> Negotiable commercial papers 48,794
<6> Securities in foreign currency -
Stock in foreign currency -
2) Available-for-sale securities -
<1> Others -
4. Hybrid securities -
1) Equity linked securities -
5. Option purchased 117
6. Loans 61,594
1) Call loans 5,000
2) Broker's loans 56,432
<1> Margin to customers 5,457
<2> Delayed margin -
<3> Loans guaranteed by securities 50,975
3) Short-term loans 24
<1> Others 24
4) Other loans 138
7. Other current assets 67,972
1) Receivables 49,363
<1> Fail to deliver 30,771
<2> Others 18,591
2) Accrued income 8,953
<1> Accrued commissions 3,178
<2> Accrued dividends 213
<3> Accrued interest receivables 1,880
<4> Accrued interest on margin 155
<5> Others 3,527
Advance payments 6,484
<1> Accrued interest on bonds 4,754
<2> Others 1,730
4) Prepaid expenses 921
5) Prepaid income tax 1,686
6) Derivatives assets -
7) Others 565
8. Allowance for credit loss-current assets (-)4,983
1) Allowance for fiduciary loans (-)282
2) Allowance for short-term loans (-)1
3) Allowance for receivables (-)3,544
4) Allowance for accrued income (-)1,142
5) Allowance for other current assets (-)14
II. Non-Current Assets 447,474
1. Long-term securities 74,364
1) Available-for-sale securities 64,686
<1> Stock 19,725
<2> Investment in partnerships 35,170
<3> Corporate bonds 9,791
2) Securities on equity method 9,678
2. Investment assets 83,460
1) Long-term deposits 70
2) Long-term loans 17,225
3) Guarantee 59,955
<1> Leasehold rights 12,062
<2> Telex and telephone subscription rights 595
<3> Guarantee for rent 47,297
<4> Surety guarantee 1
4) Others 6,210
3. Tangible fixed assets 205,993
Accumulated depreciation (-)135,618
1) Land 42,209
2) Buildings 159,598
3) Vehicles 113
4) Furniture and equipments 139,682
5) Others 9
4. Other non-current assets 83,657
1) Advances for customers 62,032
<1> Advances for payment on bonds guarantee 49,582
<2> Advances for payment on loss compensation 3,516
<3> Advances for payment others 7,020
<4> Others 1,914
2) Collective fund for default loss 5,631
<1> KSE 3,204
<2> KOSDAQ 2,425
<3> ECN 2
3) Dishonored bonds 11,928
4) intangible assets 10,639
<1> Software 10,109
<2> Others 530
5) Deferred income tax debits 27,461
6) Allowance for credit loss-non-current assets (-)32,871
<1> Allowance for long-term loans (-)1,069
<2> Allowance for private placement bonds (-)3,224
<3> Allowance for advances (-)18,609
<4> Allowance for dishonored bonds (-)9,969
7) Present value discount account (-)1,163
Total Assets 1,996,992
Liabilities
I. Current Liabilities 1,265,924
1. Call money 135,000
2. Short-term borrowings 177,200
1) Bank borrowings 20,000
2) Borrowings from KSFC 157,200
3) Others -
3. Bonds sold under reverse resale agreement 151,723
4. Customers' deposits 717,436
1) Customers' deposits for brokerage 548,790
2) Customers' deposits for futures and options trading 133,629
<1> KSE 133,604
<2> KOFEX 25
3) Customers' deposits for subscriptions 8,929
4) Customers' deposits for savings 25,826
5) Others 262
5. Securities sold 4,968
1) Stock 4,968
2) Others -
6. Hybrid securities sold -
1) Equity linked securities -
2) Securities on stock warrant -
7. Other current liabilities 79,597
1) Accrued dividends 717
2) Accounts payable 1,058
3) Accrued expenses 25,292
4) Guarantee deposits 4,049
<1> Deposits for opening margin accounts 3,459
<2> Deposits for margin loans 590
5) Withholding income taxes 9,708
6) Deposits for rent 22,072
7) Unearned income 297
8) Derivatives liabilities -
9) Others 16,404
II. Long-term Liabilities 163,418
1. Debentures 30,000
2. Reserve for severance and retirement benefits 9,295
(National pension fund for severance and retirement
benefits) (-)39
(Retirement trust) (-)5,838 3,418
3. Other long-term liabilities 130,000
1) Subordinated debentures 130,000
Total Liabilities 1,429,342
Stockholders' Equity
I. Capital Stock 796,998
1. Common stock 777,882
2. Preferred stock 19,116
II. Capital Surplus 15
1. Gain on capital reduction 15
III. Retained Earnings 30,667
1. Reserve for loss on securities transactions 19,789
<1> Reserve for trading losses 6,718
<2> Reserve for accidental losses 13,071
2. Inappropriate retained earnings carried over to
subsequent period) 10,878
(Net income
Current period: 80,655 million Won
Prior period: 10,878 million Won)
IV. Capital Adjustments (-)260,030
1. Discount on stock issuance (-)259,087
2. Treasury stock (-)14,584
3. Stock options 10,377
4. Gain on valuation of available-for-sale securities (-)1,014
5. Gain on valuation of securities on equity method 4,278
Total Stockholders' Equity 567,650
Total Liabilities and Stockholders' Equity 1,996,992
[Footnote] (Unit : million Won)
DESCRIPTION 4TH FY
----------------------------------------------------------- --------------------------------------
I. Securities in Custody 9,364,527
1. Trustor securities in custody 5,438,883
2. Saver securities in custody 90,916
3. Beneficiary securities in custody 3,834,670
4. Others 58
II. Undistributed Reserve for Claims of Customers' Deposits
(trust) -
III. Derivatives Contracts 29,872
1. Contracts on interest rates 27,207
<1> Contracts on interest rate futures purchased 27,207
<2> Contracts on interest rate forward -
2. Contracts on stock and stock index 2,665
<1> Contracts on stock and stock index futures 2,548
<2> Contracts on stock and stock index options purchased 117
<3> Contracts on stock and stock index swap -
IV. Lending and Borrowing Securities 1,420
1. Borrowing securities 1,420
1) Stock 1,420
V. Receivable Charge-offs 7,543
B. Statement of Income
Statement of Income
The 1st Quarter of the 6th FY (April 1, 2004 ~ June 30, 2004)
The 1st Quarter of the 5th FY (April 1, 2003 ~ June 30, 2003)
The 5th FY (April 1, 2003 ~ March 31, 2004)
The 4th FY (April 1, 2002 ~ March 31, 2003)
(Unit : million Won)
1ST QUARTER OF THE 6TH FY 1ST QUARTER OF THE 5TH FY
DESCRIPTION AMOUNT AMOUNT
------------------------------------------------------ ------------------------- -------------------------
I. Operating Revenue 208,309 166,164
1. Commissions received 63,814 74,369
1) Brokerage commissions 54,589 64,878
<1> KSE 40,591 43,303
<2> KOSDAQ 13,914 21,514
<3> KOFEX 20 7
<4> Bond transaction (OTC) 1 -
<5> ECN 56 49
<6> Others 7 5
2) Underwriting commissions 690 2,424
3) Brokerage commissions on beneficiary certificates 2,474 3,367
4) Management fee on wrap account and asset management 8 -
5) Sales commissions on hybrid securities sold 5,220 2,598
<1> Equity linked securities sold 4,480 2,207
<2> Securities on stock warrant sold 740 391
6) Others 833 1,102
2. Interest income 17,886 16,022
1) Interest on margin loans 139 157
2) Interest on loans 2,567 1,356
3) Interest on bonds 6,703 5,897
4) Interest on negotiable commercial papers - 612
5) Interest on deposits with KSFC 5,173 4,520
6) Interest on certificate of deposits 339 11
7) Interest on deposits - 45
8) Interest on call loans 333 272
9) Interest on bonds purchased under repurchase agreements - -
10) Gain on transactions of certificate of deposits 41 45
11) Interest on advances for customers - 173
12) Interest on bank deposits 264 481
13) Interest on receivables 1,515 1,988
14) Others 812 465
3. Dividends income 1,109 2,256
4. Distribution income 155 1,089
5. Gain on sales of trading securities 6,526 20,560
1) Gain on sales of stocks 3,153 16,070
2) Gain on sales of bonds 2,436 2,248
3) Gain on sales of beneficiary certificates 50 123
4) Gain on sales of negotiable commercial papers 231 286
5) Gain on redemption of trading securities 39 1,833
6) Others 617 -
6. Gain on valuation of trading securities 1,792 1,767
1) Gain on valuation of stocks 577 320
2) Gain on valuation of bonds 405 417
3) Gain on valuation of beneficiary certificates 810 1,030
7. Gain on transactions of hybrid securities 231 6,769
1) Gain on valuation of hybrid securities 231 6,768
<1> Gain on valuation of equity linked securities 231 3,716
<2> Gain on valuation of securities on stock warrant - 3,052
2) Gain on redemption of hybrid securities - 1
<1> Gain on redemption of equity linked securities - 1
8. Gain on valuation of trading securities sold 806 4
9. Gain on transactions of hybrid securities sold 66,996 3,032
1) Gain on valuation of hybrid securities sold 60,706 3,030
<1> Gain on valuation of equity linked securities sold 52,351 2,986
<2> Gain on valuation of securities on stock warrant sold 8,355 44
2) Gain on redemption of hybrid securities sold 6,290 2
<1> Gain on redemption of equity linked securities sold 363 2
<2> Gain on redemption of securities on stock warrant sold 5,927 -
10. Gain on valuation of reserve for claims of
customer's deposits 2,549 2,318
11. Gain on derivatives transactions 46,445 37,978
1) Gain on futures transactions 26,141 24,140
<1> Gain on sales of futures 25,310 24,106
<2> Gain on settlement of futures 831 34
2) Gain on exchange trading options transactions 13,358 13,331
<1> Gain on sales of options 13,340 13,004
<2> Gain on valuation of options 18 327
3) Gain on OTC derivatives transactions 6,946 507
<1> Gain on sales of OTC derivatives 4,681 -
<2> Gain on valuation of OTC derivatives 2,265 507
II. Operating Expenses 199,846 144,905
1. Commissions expenses 13,226 11,122
1) Trading commissions 7,313 6,620
2) Investment consultant fees 2,262 2,099
3) Other commissions 3,651 2,403
2. Interest expenses 7,010 9,559
1) Interest on borrowings from KSFC 10 913
2) Interest on bank borrowings 55 468
3) Interest on customers' deposits 2,020 2,350
4) Interest on bonds sold under repurchase agreements 1,974 2,045
5) Loss on transactions of certificate of deposits - -
6) Interest on call money 213 1,072
7) Interest on debentures 2,509 2,516
8) Others 229 195
3. Loss on sales of trading securities 14,797 15,063
1) Loss on sales of stocks 11,928 13,018
2) Loss on sales of bonds 1,635 1,320
3) Loss on sales of beneficiary certificates 850 82
4) Loss on sales of negotiable commercial papers 5 166
5) Loss on redemption of trading securities 54 474
6) Others 325 3
4. Loss on valuation of trading securities 5,734 2,706
1) Loss on valuation of stocks 4,628 134
2) Loss on valuation of bonds 645 612
3) Loss on valuation of beneficiary certificates 461 1,960
5. Loss on transaction of hybrid securities 37,840 30
1) Loss on sales of hybrid securities 54 -
<1> Loss on sales of equity linked securities 54 -
2) Loss on valuation of hybrid securities 37,786 30
<1> Loss on valuation of equity linked securities 37,786 25
<2> Loss on valuation of securities on stock warrant - 5
6. Loss on valuation of trading securities sold 302 106
7. Loss on transaction of hybrid securities sold 11,084 3,693
1) Loss on valuation of hybrid securities sold 5,785 3,693
<1> Loss on valuation of equity linked securities sold 1,848 641
<2> Loss on valuation of securities on stock warrant sold 3,937 3,052
2) Loss on redemption of hybrid securities sold 5,299 -
<1> Loss on redemption of equity linked securities sold 940 -
<2> Loss on redemption of securities on stock warrant sold 4,359 -
8. Loss on derivatives transactions 44,812 33,589
1) Loss on futures transactions 21,092 22,144
<1> Loss on sales of futures 19,767 22,144
<2> Loss on settlement of futures 1,325 -
2) Loss on exchange trading options transactions 8,654 11,363
<1> Loss on sales of options 8,580 10,926
<2> Loss on valuation of options 74 437
3) Loss on OTC derivatives transactions 15,066 82
<1> Loss on sales of OTC derivatives 4,466 -
<2> Loss on valuation of OTC derivatives 10,600 82
9. General and administrative expenses 65,041 69,037
1) Salary 28,611 29,488
2) Severance pay 2,499 3,003
3) Other benefits for employees 6,039 7,432
4) Computer system operation expenses 8,663 3,119
5) Rental expenses 1,577 1,511
6) Miscellaneous commissions 873 689
7) Entertainment expenses 765 650
8) Advertising expenses 3,152 5,283
9) Depreciation 2,428 5,849
10) Research and study expenses 597 670
11) Training expenses 160 232
12) Credit loss expenses 2,099 416
13) Amortization of intangible assets 1,335 1,408
14) Tax and dues 1,795 3,973
15) Others 4,448 5,314
III. Operating Income 8,463 21,259
IV. Non-Operating Income 4,110 39,113
1. Gain on disposition of tangible assets 2 28,510
2. Rental income 1,489 1,745
3. Gain on disposition of available-for-sale securities - 62
4. Reversal of impairment loss on available-for-sale
securities 1,638 -
5. Gain on equity method valuation 937 195
6. Gain on foreign currency transactions - 10
7. Gain on foreign exchanges translation 1 -
8. Others 43 8,591
V. Non-Operating Expenses 2,455 7,794
1. Loss on disposition of tangible assets 6 728
2. Impairment loss on available-for-sale securities 1,337 -
3. Loss on foreign currency transactions 163 10
4. Loss on foreign exchanges translation 17 2
5. Donations 64 44
6. Others 868 7,010
VI. Ordinary Income 10,118 52,578
VII. Extraordinary Gain - -
VIII. Extraordinary Loss - -
IX. Net Income before Income Tax Expenses - 10,118 - 52,578
X. Income Tax Expenses - 1,705 - 8,224
XI. Net Income for the Quarter - 8,413 - 44,354
(Quarterly net earnings per share :
Current Quarter : 54 Won
Prior Quarter : 285 Won
Diluted quarterly net earnings per share :
Current Quarter : 54 Won
Prior Quarter : 285 Won)
(Unit : million Won )
5TH FY 4TH FY
DESCRIPTION AMOUNT AMOUNT
--------------------------------------------------------- ---------------------- -------------------------
I. Operating Revenue 685,477 624,682
1. Commissions received 278,018 248,189
1) Brokerage commissions 236,080 210,095
<1> KSE 166,082 156,118
<2> KOSDAQ 69,662 53,763
<3> KOFEX 46 6
<4> Bond transaction (OTC) - 3
<5> ECN 259 170
<6> Others 31 35
2) Underwriting commissions 9,294 6,824
3) Brokerage commissions on beneficiary certificates 13,657 24,248
4) Brokerage commissions on negotiable commercial papers 1 83
5) Management fee on wrap account and asset management 5 22
6) Others 18,981 6,917
2. Interest income 75,130 60,713
1) Interest on margin loans 669 990
2) Interest on loans 8,128 4,773
3) Interest on bonds 28,311 11,665
4) Interest on negotiable commercial papers 800 1,584
5) Interest on deposits with KSFC 23,241 24,686
6) Interest on certificate of deposits 29 629
7) Interest on deposits 1,915 3,778
8) Interest on call loans 1,227 338
9) Gain on transactions of certificate of deposits 168 239
10) Interest on advances for customers 290 1,825
11) Others 10,352 10,206
3. Dividends income 8,156 1,634
4. Distribution income 2,016 5,076
5. Gain on sales of trading securities 82,821 44,193
1) Gain on sales of stocks 62,759 28,876
2) Gain on sales of stocks warrants 145 -
3) Gain on sales of bonds 9,294 8,150
4) Gain on sales of beneficiary certificates 3,365 4,531
5) Gain on sales of negotiable commercial papers 1,207 1,653
6) Gain on redemption of trading securities 5,137 983
7) Others 914 -
6. Gain on valuation of trading securities 3,996 1,001
1) Gain on valuation of stocks 385 3
2) Gain on valuation of bonds 1,225 727
3) Gain on valuation of beneficiary certificates 2,386 271
7. Gain on transactions of hybrid securities 48,917 -
1) Gain on sales of hybrid securities 882 -
<1> Gain on sales of equity linked securities 882 -
2) Gain on valuation of hybrid securities 48,035 -
<1> Gain on valuation of equity linked securities 48,035 -
8. Gain on valuation of trading securities sold 300 240
9. Gain on transactions of hybrid securities sold 5,869 -
1) Gain on valuation of hybrid securities sold 5,000 -
<1> Gain on valuation of securities on stock warrant sold 5,000 -
2) Gain on redemption of hybrid securities sold 869 -
<1> Gain on redemption of equity linked securities sold 10 -
<2> Gain on redemption of securities on stock warrant sold 859 -
10. Gain on valuation of reserve for claims of
customer's deposits 3,643 -
11. Gain on derivatives transactions 176,611 252,993
1) Gain on futures transactions 92,925 120,056
<1> Gain on sales of futures 91,334 120,055
<2> Gain on settlement of futures 1,591 1
2) Gain on exchange trading options transactions 61,456 130,184
<1> Gain on sales of options 61,456 130,177
<2> Gain on valuation of options - 7
3) Gain on OTC derivatives transactions 22,230 2,753
<1> Gain on sales of OTC derivatives 8,579 2,753
<2> Gain on valuation of OTC derivatives 13,651 -
12. Others - 10,643
1) Reversal of allowance for credit losses - 10,600
2) Others - 43
II. Operating Expenses 631,497 626,046
1. Commissions expenses 43,616 34,959
1) Trading commissions 22,401 12,368
2) Investment consultant fees 7,699 8,943
3) Other commissions 13,516 13,648
2. Interest expenses 33,402 26,177
1) Interest on borrowings from KSFC 1,688 3,332
2) Interest on bank borrowings 699 1,195
3) Interest on customers' deposits 8,347 7,537
4) Interest on bonds sold under repurchase agreement 9,203 2,185
5) Interest on call money 1,758 2,906
6) Interest on debentures 10,203 8,947
7) Others 1,504 75
3. Loss on sales of trading securities 62,054 54,996
1) Loss on sales of stocks 45,069 42,030
2) Loss on sales of bonds 13,813 5,858
3) Loss on sales of beneficiary certificates 213 2,673
4) Loss on sales of negotiable commercial 194 125
5) Loss on redemption of trading securities 2,622 4,310
6) Others 143 -
4. Loss on valuation of trading securities 4,948 6,030
1) Loss on valuation of stocks 1,501 864
2) Loss on valuation of bonds 2,689 333
3) Loss on valuation of beneficiary certificates 758 4,833
5. Loss on valuation of trading securities sold 107 4
6. Loss on transaction of hybrid securities sold 80,611 -
1) Loss on valuation of hybrid securities sold 63,602 -
<1> Loss on valuation of equity linked securities sold 49,981 -
<2> Loss on valuation of securities on stock warrant sold 13,621 -
2) Loss on redemption of hybrid securities sold 17,009 -
<1> Loss on redemption of equity linked securities 8,156 -
<2> Loss on redemption of securities on stock warrant sold 8,853 -
7. Loss on derivatives transactions 135,059 228,559
1) Loss on sales of futures 83,006 107,705
<1> Loss on sales of futures 82,989 107,625
<2> Loss on settlement of futures 17 80
2) Loss on exchange trading options transactions 48,395 118,293
<1> Loss on sales of options 48,395 118,293
3) Loss on OTC derivatives transactions 3,658 2,561
<1> Loss on sales of OTC derivatives 1,254 2,561
<2> Loss on valuation of OTC derivatives 2,404 -
8. General and administrative expenses 271,700 275,321
1) Salary 117,055 117,386
2) Severance pay 9,984 23,833
3) Other benefits for employees 24,573 21,998
4) Computer system operation expenses 26,556 15,238
5) Rental expenses 6,237 6,575
6) Miscellaneous commissions 3,847 4,171
7) Entertainment expenses 3,397 3,685
8) Advertising expenses 17,732 19,064
9) Depreciation 13,849 24,075
10) Research and study expenses 2,869 3,734
11) Training expenses 1,075 779
12) Credit loss expenses 3,774 -
13) Amortization of intangible assets 5,630 4,417
14) Tax and dues 14,468 11,120
15) Others 20,654 19,246
III. Operating Income(Loss) 53,980 (-)1,364
IV. Non-Operating Income 53,040 27,125
1. Gain on disposition of tangible assets 28,521 94
2. Rental income 6,087 7,940
3. Gain on disposition of available-for-sale securities 7,016 17,245
4. Gain on foreign currency transactions 592 7
5. Gain on foreign exchange translation 123 1
6. Others 10,701 1,838
V. Non-Operating Expenses 10,279 20,223
1. Loss on disposition of tangible assets 1,158 207
2. Loss on disposition of available-for-sale securities - 10,795
3. Impaired loss on available-for-sale securities 1 1,437
4. Loss on valuation of stabilization fund for stock
market - 4,959
5. Loss on valuation using equity method of accounting 772 1,413
6. Loss on foreign currency transactions 104 248
7. Loss on foreign exchanges translation 32 -
8. Donations 336 386
9. Others 7,876 778
VI. Ordinary Income 96,741 5,538
VII. Extraordinary Gain - -
VIII. Extraordinary Loss 2 -
1. Casualty losses 2 -
IX. Net Income before Income Tax Expenses 96,739 5,538
X. Income Tax Expenses 16,084 (-)5,340
XI. Net Income 80,655 10,878
(Ordinary income per share:
Current period: 518 Won Prior period: 68 Won
Earnings per share
Current period: 518 Won Prior period: 68 Won)
C. Statement of Appropriation of Retained Earnings or Statement of
Disposition of Deficit
Statement of Appropriation of Retained Earnings
The 5th Fiscal Year (April 1, 2003 ~ March 31, 2004)
The 4th Fiscal Year (April 1, 2002 ~ March 31, 2003)
The 3rd Fiscal Year (April 1, 2001 ~ March 31, 2002)
(Unit : million Won)
5TH FY 4TH FY
DESCRIPTION AMOUNT AMOUNT
------------------------------------------------------- ---------------------- ----------------------
I. Retained Earnings before Appropriation - 80,655 - 10,879
1. Inappropriate retained earnings carried over from
prior year - - - -
2. Net income for the year 80,655 - 10,879 -
II Transfers from Voluntary Reserves - 9,894 - 9,894
1. Reserve for trading losses 3,359 - 3,359 -
2. Reserve for accidental losses 6,535 - 6,535 -
III. Appropriation of Retained Earnings - 90,549 - 20,773
1. Amortization of discount on stock issuance 90,549 - 20,773 -
IV. Inappropriate Retained Earnings to be carried
over to Subsequent Year - - - -
3RD FY
DESCRIPTION AMOUNT
-------------------------------------------------------- -------------------------------------
I. Retained Earnings before Appropriation - 51,106
1. Inappropriate retained earnings carried over from
prior year - -
2. Net income for the year 51,106 -
II. Transfers from Voluntary Reserves - 9,894
1. Reserve for trading losses 3,359 -
2. Reserve for accidental losses 6,535 -
III. Appropriation of Retained Earnings - 61,000
1. Amortization of discount on stock issuance 61,000 -
IV. Inappropriate Retained Earnings to be carried over
to Subsequent Year - -
D. Cash Flow Statement
Cash Flow Statement
The 1st quarter of the 6th Fiscal Year (April 1, 2004 ~ June 30, 2004)
The 1st quarter of the 5th Fiscal Year (April 1, 2003 ~ June 30, 2003)
The 5th Fiscal Year (April 1, 2003 ~ March 31, 2004)
The 4th Fiscal Year (April 1, 2002 ~ March 31, 2003)
Company Name : Good Morning Shinhan Securities Co., Ltd. (Unit : million Won)
1ST QUARTER OF THE 6TH FY 1ST QUARTER OF THE 5TH FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------- -------------------------- -------------------------
I. Cash Flows from Operating Activities (-)268,153 40,589
1. Net income 8,413 44,354
2. Addition expense not involving cash outflows 70,193 18,846
1) Loss on valuation of trading securities 5,734 2,706
2) Loss on valuation of hybrid securities 37,786 30
3) Loss on valuation of options - 437
4) Loss on OTC derivatives transactions 10,600 82
5) Credit loss expenses 2,099 416
6) Loss on disposition of available-for-sale securities - -
7) Impairment loss on available-for-sale securities 1,337 -
8) Loss on valuation using equity method of accounting - -
9) Other operating expenses - -
10) Loss on disposition of tangible assets 6 728
11) Depreciation 2,428 5,849
12) Amortization of intangible assets 1,335 1,408
13) Loss on valuation of trading securities sold 302 106
14) Loss on valuation of hybrid securities sold 5,785 3,693
15) Severance pay 2,499 3,003
16) Loss on foreign exchanges transactions - -
17) Other general and administrative expenses 280 389
18) Other non-operating expenses 2 -
3. Deduction of revenues not involving cash inflows (-)68,413 (-)52,184
1) Gain on valuation of reserve for claims of
customer's deposits 2,318
2) Gain on valuation of trading securities 1,793 1,767
3) Gain on valuation of hybrid securities 231 6,768
4) Gain on valuation of options - 327
5) Gain on valuation of OTC derivatives 2,265 507
6) Reversal of allowance for credit losses - -
7) Gain on disposition of available-for-sale securities 1,638 62
8) Reversal of impaired loss on available-for-sale
securities - -
9) Gain on equity method valuation 937 195
10) Other non-operating income - 8,524
11) Gain on disposition of tangible assets 2 28,510
12) Interest income 35 173
13) Gain on valuation of trading securities sold 806 4
14) Gain on valuation of hybrid securities sold 60,706 3,029
15) Gain on foreign currency translations 1 -
4. Change in assets and liabilities resulting from
operations (-)278,347 (-)51,605
1) Decrease(Increase) in Short-term trading securities (-)295,370 (-)64,334
2) Decrease(Increase) in Option purchased -
3) Decrease(Increase) in Accrued income 553 (-)977
4) Decrease(Increase) in Receivables - -
5) Decrease(Increase) in Advance payments 9,551 184
6) Decrease(Increase) in Prepaid expenses 919 (-)888
7) Decrease(Increase) in Prepaid income tax 358 629
8) Decrease(Increase) in Derivatives assets - -
9) Decrease(Increase) in Other current assets 128 (-)291
10) Decrease(Increase) in Deferred income tax debits 959 8,224
11) Increase(Decrease) in Securities sold - -
12) Increase(Decrease) in Hybrid securities sold - -
13) Increase(Decrease) in Accounts payable 9,969 (-)882
14) Increase(Decrease) in Accrued expenses (-)1,332 7,702
15) Increase(Decrease) in Withholding income taxes (-)3,964 (-)6,034
16) Increase(Decrease) in Unearned income 32 427
17) Increase(Decrease) in Derivatives liabilities - -
18) Increase(Decrease) in Other current liabilities (-)8 5,986
19) Payment of Severance benefits (-)166 (-)231
20) Decrease(Increase) in National pension fund for
severance and retirement benefits - -
21) Decrease(Increase) in Retirement trust 24 138
II. Cash Flows from investing activities 96,214 182,555
1. Cash inflows from investing activities 6,161,243 6,227,257
1) Decrease in Negotiable certificate of deposits - 11
2) Decrease in Other deposits - 8,050
3) Decrease in Hybrid securities - 30
4) Decrease in Option purchased - 608,388
5) Decrease in Call loans 1,933,400 -
6) Decrease in Broker's loans 1,803 213,832
7) Collection of Short-term loans 399 620
8) Disposition of Available-for-sale securities 4,303 25,451
9) Decrease in Securities on equity method - 294
10) Decrease in Long-term deposits - -
11) Decrease in Long-term loans 1,172 1,274
12) Decrease in Guarantee 1,976 6,876
13) Decrease in Other investment assets 6 1,734
14) Disposition of Tangible fixed assets 3 46,508
15) Disposition of Intangible assets - 1,038
16) Decrease in Receivables 4,037,755 128,664
17) Decrease in Derivatives assets 7,664 13,296
18) Decrease in Deposits - 73,865
19) Decrease in Collective fund for default loss - -
20) Decrease in Other loans - 513
21) Decrease in Receivable(Fail to deliver) - 4,269,222
22) Decrease in Advances for customers - 49,675
23) Decrease in Dishonored bonds - 541
24) Increase in Securities sold 5,942 -
25) Increase in Hybrid securities sold 157,666 231,009
26) Increase in Options sold 22 556,452
27) Increase in Guarantee deposits - 38,386
28) Increase in Derivatives liabilities 6,932 -
29) Increase in Deposits for rent 2,201 1,527
2. Cash outflows from investing activities (-)6,065,029 (-)6,094,703
1) Increase in Negotiable certificate of deposits 49,025 -
2) Increase in Other deposits 517 -
3) Increase in Deposits 17,341 -
4) Increase in Call loans 1,823,600 -
5) Increase in Short-term loans 392 608
6) Increase in Long-term deposits - -
7) Increase in Available-for-sale securities 74 17,480
8) Increase in Securities on equity method 3,991 -
9) Increase in Long-term loans 969 934
10) Increase in Guarantee 4,690 2,591
11) Increase in Other investment assets - 163
12) Acquisition of Tangible fixed assets 4,402 1,599
13) Increase in Collective fund for default loss 84 -
14) Acquisition of Intangible assets 581 2,798
15) Decrease in Hybrid securities sold - 100
16) Decrease in Options sold - 555,732
17) Increase in Other loans - 467
18) Increase in Receivables(Fail to deliver) 4,284,465
19) Increase in Hybrid securities 142,623 158,570
20) Increase in Option purchased 124 609,510
21) Increase in Broker's loans - 237,769
22) Increase in Receivables 4,012,696 176,257
23) Increase in Derivatives assets 15,820
24) Increase in Advances for customers 1,302 387
25) Increase in Collective fund for default loss(KOSDAQ) 140
26) Increase in Dishonored bonds - -
27) Decrease in Guarantee deposits 136 13,282
28) Decrease in Deposits for rent 2,482 43
29) Increase in Available-for-sale securities(short-term) - 15,987
III. Cash Flows from Financing Activities 172,978 142,809
1. Cash inflows from financing activities 202,978 102,030
1) Increase in Call money 127,500 -
2) Increase in Short-term borrowings - -
3) Increase in Bonds sold under reverse resale agreements 50,388 102,030
4) Increase in Customers' deposits 25,090 -
5) Issuance of Debentures - -
6) Issuance of Subordinated debentures - -
2. Cash outflows from financing activities (-)30,000 (-)244,839
1) Decrease in Call money - 40,000
2) Decrease in short-term borrowings 30,000 107,200
3) Decrease in Bonds sold under reverse resale agreements - -
4) Decrease in Customers' deposits - 93,459
5) Decrease in Current portion of long-term liabilities - -
6) New Stock Issuance Costs - -
7) Acquisition of Treasury stock - -
8) Decrease in Securities sold - 4,180
IV. Increase(Decrease) in Cash (I+II+III) 1,039 (-)844
V. Cash at Beginning of the Year 2,919 2,305
VI. Cash at End of the Year 3,958 1,461
5TH FY 4TH FY
DESCRIPTION AMOUNT AMOUNT
------------------------------------------------------- ------------------------- ---------------------
I. Cash Flows from Operating Activities 142,727 - (-)325,448
1. Net income 80,655 10,878
2. Addition of expense not involving cash outflows 107,664 78,906
1) Loss on valuation of trading securities 4,948 6,030
2) Loss on OTC derivatives transactions 2,404 -
3) Credit loss expenses 3,774 -
4) Loss on disposition of available-for-sale securities - 10,795
5) Impairment loss on available-for-sale securities 1 1,014
6) Loss on valuation using equity method of accounting 772 1,413
7) Other operating expenses 2 5,382
8) Loss on disposition of tangible assets 1,158 207
9) Depreciation 13,849 24,075
10) Amortization of intangible assets 5,630 4,417
11) Loss on valuation of trading securities sold 107 5
12) Loss on valuation of hybrid securities sold 63,602 -
13) Severance pay 9,984 23,833
14) Loss on foreign exchanges transactions 24 -
15) Other general and administrative expenses 1,409 1,735
3. Deduction of revenues not involving cash inflows 119,144 31,516
1) Gain on valuation of reserve for claims of
customer's deposits 3,643 -
2) Gain on valuation of trading securities 3,996 1,001
3) Gain on valuation of hybrid securities 48,035 -
4) Gain on valuation of options - 7
5) Gain on valuation of OTC derivatives 13,651 -
6) Reversal of allowance for credit losses - 10,600
7) Gain on disposition of available-for-sale securities 7,016 17,245
8) Other non-operating income 8,569 -
9) Gain on disposition of tangible assets 28,521 94
10) Interest income 290 2,329
11) Gain on valuation of trading securities sold 300 240
12) Gain on valuation of hybrid securities sold 5,000 -
13) Gain on foreign currency translations 123 -
4. Change in assets and liabilities resulting from
operations 73,552 (-)383,716
1) Decrease(Increase) in Short-term trading securities 93,581 (-)292,681
2) Decrease(Increase) in Accrued income (-)1,994 7,336
3) Decrease(Increase) in Advance payments (-)11,852 (-)1,882
4) Decrease(Increase) in Prepaid expenses (-)1,294 (-)147
5) Decrease(Increase) in Prepaid income tax (-)2,443 338
6) Decrease(Increase) in Other current assets (-)3,953 (-)415
7) Decrease(Increase) in Deferred income tax debits 16,084 (-)5,494
8) Increase(Decrease) in Accounts payable (-)553 (-)23,699
9) Increase(Decrease) in Accrued expenses 11,442 (-)36,686
10) Increase(Decrease) in Withholding income taxes (-)1,437 (-)541
11) Increase(Decrease) in Unearned income (-)281 (-)747
12) Increase(Decrease) in Other current liabilities (-)12,598 (-)1,934
13) Payment of Severance benefits (-)12,373 (-)30,267
14) Decrease(Increase) in National pension fund 2 633
for severance and retirement benefits
15) Decrease(Increase) in Retirement trust 1,221 2,470
II. Cash Flows from Investing Activities 167,383 413,541
1. Cash inflows from investing activities 7,300,255 2,172,517
1) Decrease in Negotiable certificate of deposits 989 58,270
2) Decrease in Other deposits 62,739 98,210
3) Decrease in Call loans 6,648,800 1,662,500
4) Collection of Short-term loans 1,267 3,854
5) Disposition of Available-for-sale securities 40,994 54,835
6) Decrease in Long-term deposits 19 263
7) Decrease in Long-term loans 4,592 3,994
8) Decrease in Guarantee 14,914 43,122
9) Decrease in Other investment assets 2,149 250
10) Disposition of Tangible fixed assets 46,531 299
11) Disposition of Intangible assets 1,090 -
12) Decrease in Deposits - 2
13) Decrease in Collective fund for default loss - 139,143
14) Decrease in Other loans 128 -
15) Decrease in Option purchased 117 531
16) Decrease in Receivable - 79,493
17) Decrease in Advances for customers 48,888 7,588
18) Decrease in Dishonored bonds - 6,536
19) Increase in Securities sold 10,006 4,183
20) Increase in Hybrid securities sold 407,772 -
21) Increase in Guarantee deposits 1,022 -
22) Increase in Derivatives liabilities 672 -
23) Increase in Deposits for rent 7,566 8,938
24) Cash inflows from merger - 506
2. Cash outflows from investing activities 7,132,872 1,758,976
1) Increase in Call loans 6,753,800 1,667,500
2) Increase in Short-term loans 1,261 3,870
3) Increase in Long-term deposits 7 -
4) Increase in Available-for-sale securities - 6,612
5) Increase in Securities on equity method 3,167 -
6) Increase in Long-term loans 3,614 5,591
7) Increase in Guarantee 12,247 41,663
8) Increase in Other investment assets 186 2
9) Acquisition of Tangible fixed assets 9,257 14,869
10) Increase in Collective fund for default loss 725 -
11) Acquisition of Intangible assets 7,292 4,096
12) Increase in Deposits 27,508 -
13) Increase in Other loans - 125
14) Increase in Hybrid securities 190,696 -
15) Increase in Broker's loans 74,513 6,876
16) Increase in Receivables 7,950 -
17) ) Increase in Derivatives assets 20,888 -
18) Increase in Advances for customers - 1,017
19) Increase in Dishonored bonds 3,097 80
20) Decrease in Guarantee deposits - 2,431
21) Decrease in Deposits for rent 5,419 3,399
22) Decrease in Options sold - 845
23) Increase in Available-for-sale
securities(short-term) 11,245 -
III. Cash Flows from Financing Activities (-)309,496 (-)91,397
1. Cash inflows from financing activities 14,324,993 412,377
1) Increase in Call money 5,704,000 134,000
2) Increase in Short-term borrowings 3,530,000 53,328
3) Increase in Bonds sold under reverse resale
agreements 5,089,993 95,049
4) Issuance of Debentures 1,000 -
5) Issuance of Subordinated debentures - 130,000
2. Cash outflows from financing activities 14,634,489 503,774
1) Decrease in Call money 5,839,000 -
2) Decrease in short-term borrowings 3,677,200 -
3) Decrease in Bonds sold under reverse resale
agreements 5,066,323 -
4) Decrease in Customers' deposits 51,966 90,521
5) Decrease in Current portion of long-term liabilities - 40,000
6) New Stock Issuance Costs - 48
7) Acquisition of Treasury stock - 373,205
IV. Increase(Decrease) in Cash (I+II+III) 614 (-)3,303
V. Cash at beginning of the Year 2,305 5,608
VI. Cash at End of the Year 2,919 2,305
4. CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Consolidated Financial Information
(Unit : million Won)
CLASSIFICATION 5TH FY 4TH FY 3RD FY 2ND FY 1ST FY
----------------------------------- --------- --------- --------- --------- ---------
[Current Assets] 1,924,379 1,559,572 1,268,826 1,044,782 1,472,621
- Cash and bank deposits 37,856 98,972 263,298 319,931 376,746
- Deposits 731,084 699,934 677,234 437,738 569,943
- Short-term securities 789,778 633,768 189,960 247,974 334,846
- Loans 240,972 61,594 47,523 4,645 133,232
- Other current assets 129,863 70,171 93,013 36,552 71,755
- Allowance for credit loss-current
assets -5,174 -4,983 -2,202 -2,058 -13,901
[Non-current assets] 326,261 438,121 383,204 371,634 442,181
- Long-term securities 34,132 64,686 77,884 64,139 102,726
- Investment assets 78,690 83,571 62,712 69,661 77,145
- Tangible fixed assets 182,452 206,159 169,442 177,698 173,667
- Other non-current assets 30,988 83,704 73,165 60,136 88,644
Total assets 2,250,641 1,997,693 1,652,030 1,416,416 1,916,125
[Current liabilities] 1,431,218 1,266,625 925,757 735,670 1,237,798
[Long-term liabilities] 163,252 163,418 36,679 50,484 107,961
Total liabilities 1,594,470 1,430,042 962,436 786,154 1,345,759
Minority Interest - - - - 14,926
[Capital stock] 796,998 796,998 933,628 908,628 904,628
[Consolidated capital surplus] 15 15 - - -
[Consolidated retained earnings] 90,549 9,894 19,789 29,683 30,717
[Consolidated capital adjustments] -231,391 -239,257 -263,823 -308,049 -379,926
Total stockholders' equity 656,171 567,650 689,594 630,262 555,440
Operating revenue 688,067 624,885 475,012 487,226 908,146
Operating income 53,223 -3,196 22,313 63,258 203,638
Ordinary Income 96,741 5,223 62,583 51,826 222,499
Net income 80,655 10,879 51,106 71,129 210,165
Consolidated net income 80,655 10,879 51,106 71,129 210,420
No. of consolidated company
[- INDICATES NEGATIVE NUMBER]
B. Notice to Readers of Consolidated Financial Statements
(1) Good Morning Shinhan Securities Co., Ltd. prepared the accompanying
consolidated financial statements in compliance with the
consolidated financial statements accounting rules. The auditor's
opinions on the consolidated financial statements are as follows:
CLASSIFICATION 5TH FY 4TH FY 3RD FY
----------------- ----------------------------- ---------------------------- ----------------------------
(APR. 1, 2003~MAR. 31, 2004) (APR. 1, 2002~ MAR. 31, 2003) (APR. 1,2001~ MAR. 31, 2002)
Auditor KPMG Samjong Accounting Corp. Samil Accounting Corp. Samil Accounting Corp.
Auditor's Opinion Unqualified Unqualified Unqualified
(2) Thus, the information on the "Consolidated Balance Sheet" in Section
(1) of C, and "Consolidated Statement of Income" is in compliance
with the consolidated financial statements accounting rules.
(3) Subsidiaries included in the Consolidated Financial Statements for
the most recent 3 years.
NAME OF SUBSIDIARIES NAME OF SUBSIDIARIES
NAME OF SUBSIDIARIES INCLUDED IN THE ADDED TO CONSOLIDATED EXCLUDED FROM CONSOLIDATED
CLASSIFICATION CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS FINANCIAL STATEMENTS
-------------- ------------------------------------ --------------------- --------------------------
5th FY -Good Morning Securities - -
Europe Limited
-Good Morning Securities
USA Inc
4th FY -Good Morning Securities - -Good Morning Investment
Europe Limited Trust Management Co., Ltd.
-Good Morning Securities
USA Inc
3rd FY -Good Morning Investment Trust - -
Management Co., Ltd.
-Good Morning Securities
Europe Limited
-Good Morning Securities
USA Inc
C. Consolidated Financial Statements
(1) Consolidated Balance Sheet
Consolidated Balance Sheet
The 5th Fiscal Year (as of March 31, 2004)
The 4th Fiscal Year (as of March 31, 2003)
The 3rd Fiscal Year (as of March 31, 2002)
Good Morning Shinhan Securities Co., Ltd. (Unit : million Won)
5TH FY 4TH FY
DESCRIPTION AMOUNT AMOUNT
---------------------------------------------------------- ------------------------ ------------------------
Assets
I. Current Assets 1,924,379 1,559,572
1. Cash and bank deposits 37,856 98,971
1) Current deposits 492 642
2) Deposits in foreign currency 1,767 49
3) Negotiable certificate of deposits - 989
4) Others 35,597 97,291
2. Deposits 731,084 699,934
1) Subscription deposits - 8,923
2) Reserve for claims of customers deposits 100 658,900
<1> Customers' deposits - (537,900)
<2> Customers' deposits-futures and options transaction in
the KSE - (120,900)
<3> Customers' deposits-futures and options transaction in
the KOFEX (100) (100)
3) Due from financial institutions for customers' accounts 707,642 -
<1> Customers' deposits (509,326) -
<2> Customers' deposits-futures and options transaction in
the KOFEX (198,316) -
4) Reserve for performance of transaction - 7,326
5) Guarantee trading deposits for futures and options 23,342 24,785
<1> Proprietary trading (29) (1,585)
<2> Brokerage (23,313) (23,200)
3. Short-term securities 551,046 633,768
1) Short-term trading securities 539,801 633,768
<1> Stock (28,711) (2,371)
<2> Government and public bonds (442,974) (292,289)
<3> Corporate bonds (44,265) (16,955)
<4> Beneficiary certificates (23,754) (273,359)
Unsold beneficiary certificates (17,591) (271,879)
Other beneficiary certificates (6,163) (1,480)
<5> Negotiable commercial papers - (48,794)
<6> Securities in foreign currency (97) -
Stock in foreign currency (97) -
2) Available-for-sale securities 11,245 -
<1> Others (11,245) -
4. Hybrid securities 238,732 -
1) Equity linked securities 238,732 -
5. Option purchased - 117
6. Loans 240,972 61,594
1) Call loans 110,000 5,000
2) Broker's loans 130,945 56,432
<1> Margin to customers (6,515) (5,457)
<2> Delayed margin (1) -
<3> Loans guaranteed by securities (124,429) (50,975)
3) Short-term loans 17 24
<1> Others (17) (24)
4) Other loans 10 138
7. Other current assets 129,863 70,171
1) Receivables 57,352 49,363
<1> Fail to deliver (33,587) (30,772)
<2> Others (23,765) (18,591)
2) Accrued income 11,068 8,752
<1> Accrued commissions (2,953) (2,961)
<2> Accrued dividends (3,655) (213)
<3> Accrued interest receivables (3,622) (1,880)
<4> Accrued interest on margin (48) (155)
<5> Others (790) (3,543)
3) Advance payments 18,336 6,484
<1> Accrued interest on bonds (4,873) (4,754)
<2> Others (13,463) (1,730)
4) Prepaid expenses 2,324 1,054
5) Prepaid income tax 4,129 3,952
6) Derivatives assets 32,135 -
7) Others 4,519 566
8. Allowance for credit loss-current assets (-)5,174 (-)4,983
1) Allowance for fiduciary loans (-)655 (-)282
2) Allowance for short-term loans - (-)1
3) Allowance for receivables (-)2,670 (-)3,544
4) Allowance for accrued income (-)1,839 (-)1,142
5) Allowance for other current assets (-)10 (-)14
II. Non-Current Assets 326,261 438,121
1. Long-term securities 34,132 64,686
1) Available-for-sale securities 34,132 64,686
<1> Stock (19,685) (19,725)
<2> Investment in partnerships (14,447) (35,170)
<3> Corporate bonds - (9,791)
2. Investment assets 78,690 83,572
1) Long-term deposits 58 70
2) Long-term loans 16,211 17,225
3) Guarantee 57,363 60,067
<1> Leasehold rights (13,497) (12,062)
<2> Telex and telephone subscription rights (534) (595)
<3> Guarantee for rent (43,331) (47,409)
<4> Surety guarantee (1) (1)
4) Others 5,058 6,210
3. Tangible fixed assets 182,452 206,159
(Accumulated depreciation) (-)84,518 (-)135,955
1) Land 42,142 42,209
2) Buildings 159,689 159,598
3) Vehicles 34 113
4) Furniture and equipments 65,096 140,185
5) Others 9 9
4. Other non-current assets 30,988 83,704
1) Advances for customers 17,047 62,032
<1> Advances for payment on bonds guarantee (6,470) (49,582)
<2> Advances for payment on loss compensation (4,650) (3,516)
<3> Advances for payment others (5,927) (7,020)
<4> Others - (1,914)
2) Collective fund for default loss 6,356 5,631
<1> KSE (3,266) (3,204)
<2> KOSDAQ (3,087) (2,425)
<3> ECN (3) (2)
3) Dishonored bonds 10,917 11,928
4) Intangible assets 11,848 10,639
<1> Software (11,589) (10,109)
<2> Others (259) (530)
5) Deferred income tax debits 11,566 27,508
6) Allowance for credit loss-non-current assets (-)25,873 (-)32,871
<1> Allowance for long-term loans (-)710 (-)1,069
<2> Allowance for private placement bonds - (-)3,224
<3> Allowance for advances (-)16,147 (-)18,609
<4> Allowance for dishonored bonds (-)9,016 (-)9,969
7) Present value discount account (-)873 (-)1,163
Total assets 2,250,641 1,997,693
Liabilities
I. Current Liabilities 1,431,218 1,266,625
1. Call money - 135,000
2. Short-term borrowings 30,000 177,200
1) Bank borrowings - 20,000
2) Borrowings from KSFC - 157,200
3) Others 30,000 -
3. Bonds sold under reverse resale agreement 175,394 151,723
4. Customers' deposits 665,469 717,436
1) Customers' deposits for brokerage 439,489 548,790
2) Customers' deposits for futures and options trading 209,978 133,629
<1> KSE (209,884) (133,604)
<2> KOFEX (94) (25)
3) Customers' deposits for subscriptions - 8,929
4) Customers' deposits for savings 15,757 25,826
5) Others 245 262
5. Securities sold 14,781 4,968
1) Stock 1,685 4,968
2) Others 13,096 -
6. Hybrid securities sold 466,373 -
1) Equity linked securities 427,494 -
2) Securities on stock warrant 38,879 -
7. Other current liabilities 79,201 80,298
1) Accrued dividends 717 717
2) Income taxes payable 39 -
3) Accounts payable 581 1,174
4) Accrued expenses 35,725 25,776
5) Guarantee deposits 5,070 4,049
<1> Deposits for opening margin accounts (3,150) (3,459)
<2> Deposits for margin loans (1,920) (590)
6) Withholding income taxes 8,291 9,737
7) Deposits for rent 24,286 22,072
8) Unearned income 15 297
9) Derivatives liabilities 672 -
10) Others 3,805 16,476
II. Long-term Liabilities 163,252 163,418
1. Debentures 31,000 30,000
2. Reserve for severance and retirement benefits 6,906 9,295
(National pension fund for severance and retirement
benefits) (-)37 (-)39
(Retirement trust) (-)4,617 2,252 (-)5,838 3,418
3. Other long-term liabilities 130,000 130,000
1) Subordinated debentures 130,000 130,000
Total Liabilities 1,594,470 1,430,043
Stockholders' Equity
I. Capital Stock 796,998 796,998
1. Common stock 777,882 777,882
2. Preferred stock 19,116 19,116
II. Consolidated Capital Surplus 15 15
III. Consolidated Retained Earnings 90,549 30,667
(Consolidated net income
Current period : 80,655 million Won
Prior period : 10,878 million Won)
IV. Consolidated Capital Adjustments (-)231,391 (-)260,030
1. Discount on stock issuance (-)238,314 (-)259,087
2. Treasury stock (-)14,584 (-)14,584
3. Stock options 11,787 10,377
4. Adjustment for foreign currency translation 4,082 4,278
5. Gain on valuation of available-for-sale securities 5,638 (-)1,014
V. Minority Interest - -
Total Stockholders' Equity 656,171 567,650
Total Liabilities and Stockholders' Equity 2,250,641 1,997,693
3RD FY
DESCRIPTION AMOUNT (UNIT : WON)
-------------------------------------------------------------------- ---------------------------------------
Assets
I. Current Assets (1,268,825,963,729)
1. Cash and bank deposits 263,298,218,699
1) Cash 26,589,557
2) Current deposits 673,107,564
3) Deposits in foreign currency 3,011,922,388
4) Negotiable certificate of deposits 59,258,449,010
5) Other Deposits 200,328,150,180
2. Deposits 677,233,985,438
1) Subscription deposits 134,145,499,100
<1> Brokerage (134,145,499,100)
2) Reserve for claims of customers deposits 522,447,700,000
<1> Customers' deposits (507,100,000,000)
<2> Customers' deposits-futures and options transaction in the KSE (14,800,000,000)
<3> Customers' deposits-futures and options transaction in the KOFEX (547,700,000)
3) Reserve for performance of transaction -
4) Guarantee trading deposits for futures and options 20,640,786,338
<1> Proprietary trading (3,398,659,926)
<2> Brokerage (17,242,126,412)
3. Trading Securities 186,365,322,924
1) Stock 44,124,817,990
2) Government and public bonds 103,503,460,228
3) Corporate bonds 2,020,260,000
4) Beneficiary certificates 33,699,745,713
<1> Unsold beneficiary certificates (33,086,637,706)
<2> Other beneficiary certificates (613,108,007)
5) Negotiable commercial papers -
6) Securities in foreign currency 1,030,189,678
<1> Stock in foreign currency (1,030,189,678)
7) Notes s bought 1,986,849,315
4. Option purchased 641,294,000
5. Loans 47,522,615,145
1) Call loans -
2) Broker's loans 47,515,035,044
<1> Margin to customers (9,945,520,720)
<2> Loans guaranteed by securities (37,569,514,324)
3) Short-term loans 7,580,101
<1> Others (7,580,101)
4) Other loans -
6. Other current assets 95,966,517,825
1) Receivables 77,665,669,484
<1> Fail to deliver (74,045,167,385)
<2> Others (3,620,502,099)
2) Accrued income 12,876,944,676
<1> Accrued commissions (3,712,782,714)
<2> Accrued dividends (267,956,942)
<3> Accrued interest receivables -
<4> Accrued interest on margin (90,561,047)
<5> Others (8,805,643,973)
3) Advance payments 3,443,335,786
<1> Accrued interest on bonds (2,953,850,250)
<2> Others (489,485,536)
4) Prepaid expenses 889,328,075
5) Prepaid income tax 868,436,188
6) Others 222,803,616
7. Allowance for credit loss-current assets (-)2,201,990,302
1) Allowance for fiduciary loans (-)475,150,350
2) Allowance for short-term loans (-)75,801
3) Allowance for receivables (-)1,412,268,477
4) Allowance for accrued income (-)314,495,674
5) Allowance for other current assets -
II. Non-Current Assets (383,203,710,362)
1. Investment securities 77,884,397,461
1) Stock 19,792,760,061
2) Investment in partnerships 54,034,549,197
3) Corporate bonds 3,187,507,820
4) Securities in foreign currency 69,580,383
<1> Stock in foreign currency (69,580,383)
5) Securities in affiliated companies 800,000,000
2. Investment assets 62,711,485,362
1) Long-term deposits 290,491,200
2) Long-term loans 11,413,004,887
3) Guarantee 46,257,912,525
<1> Leasehold rights (28,238,582,000)
<2> Telex and telephone subscription rights (441,218,020)
<3> Guarantee for rent (17,345,598,505)
<4> Surety guarantee (1,000,000)
<5> Other guarantee (231,514,000)
4) Others 4,750,076,750
3. Tangible fixed assets 169,442,493,687
(Accumulated depreciation) (-)92,150,148,259
1) Land 22,410,262,252
2) Buildings 140,802,833,107
3) Vehicles 327,935,553
4) Furniture and equipments 98,042,921,034
5) Others 8,690,000
4. Other non-current assets 73,165,333,852
1) Advances for customers 82,639,056,096
<1> Advances for payment on bonds guarantee (66,869,220,406)
<2> Advances for payment on loss compensation (2,147,785,904)
<3> Advances for payment others (6,165,748,097)
<4> Others (7,456,301,689)
2) Collective fund for default loss 4,950,383,740
<1> KSE (3,231,307,508)
<2> KOSDAQ (1,718,734,948)
<3> ECN (341,284)
3) Dishonored bonds 46,400,803,893
4) Dishonored bills receivable 4,226,931,730
5) Intangible assets 9,558,600,576
<1> Goodwill (1,136,112,399)
<2> Software (7,450,781,594)
<3> Others (971,706,583)
6) Deferred income tax debits 16,073,645,685
7) Allowance for credit loss-non-current assets (-)80,412,840,626
<1> Allowance for long-term loans ((-)151,455,961)
<2> Allowance for private placement bonds ((-)3,187,507,820)
<3> Allowance for advances ((-)42,524,247,059)
<4> Allowance for dishonored bonds ((-)33,755,286,274)
<5> Allowance for dishonored bills ((-)794,343,512)
8) Present value discount account (-)10,271,247,242
Total Assets 1,652,029,674,091
=================
Liabilities
I. Current Liabilities (925,757,116,564)
1. Call money -
2. Short-term borrowings 121,921,870,720
1) Bank borrowings 50,000,000,000
2) Borrowings from KSFC 61,921,870,720
3) Others 10,000,000,000
3. Bonds sold under reverse resale agreement 37,222,780,000
4. Customers' deposits 633,951,190,319
1) Customers' deposits for brokerage 406,566,822,027
2) Customers' deposits for futures and options trading 42,078,301,281
<1> KSE (41,530,618,327)
<2> KOFEX (547,682,954)
3) Customers' deposits for subscriptions 132,094,715,000
4) Customers' deposits for savings 53,179,685,870
5) Others 31,666,141
5. Securities sold 1,021,250,000
1) Stock 1,021,250,000
6 Option sold 844,790,000
7. Other current liabilities 130,795,235,525
1) Accrued dividends -
2) Accounts payable 6,293,078,095
3) Accrued expenses 47,429,665,534
4) Guarantee deposits 5,438,646,716
<1> Deposits for opening margin accounts (3,093,700,000)
<2> Deposits for margin loans (2,344,946,716)
5) Withholding income taxes 6,743,689,474
6) Deposits for rent 12,614,802,140
7) Current portion of long-term liabilities 40,000,000,000
8) Unearned income 665,213,975
9) Others 11,610,139,591
II. Long-term Liabilities (36,678,912,538)
1. Debentures 30,000,000,000
2. Reserve for severance and retirement benefits 15,852,295,656
(National pension fund for severance and retirement benefits) (-)676,629,845
(Retirement trust) (-)8,496,753,273 6,678,912,538
3. Other long-term liabilities -
1) Subordinated debentures -
Total Liabilities 962,436,029,102
Stockholders' Equity
I. Capital Stock (933,628,235,000)
1. Common stock 898,528,235,000
2. Preferred stock 35,100,000,000
II. Consolidated Capital Surplus -
III. Consolidated Retained Earnings (19,788,502,563)
(Consolidated net income -
Current period : 10,878,554,441 Won
Prior period : 51,105,604,996 Won)
IV. Consolidated Capital Adjustments ((-)263,823,092,574)
1. Discount on stock issuance (-)259,397,079,572
2. Treasury stock (-)16,176,736,000
3. Stock options 8,641,448,053
4. Adjustment for foreign currency translation 4,503,380,807
5. Loss on valuation of investment securities (-)1,427,930,862
6. Others 33,825,000
Total Stockholders' Equity 689,593,644,989
Total Liabilities and Stockholders' Equity 1,652,029,674,091
(2) Consolidated Statements of Income
Consolidated Statements of Income
The 5th Fiscal Year (April 1, 2003 ~ March 31, 2004)
The 4th Fiscal Year (April 1, 2002 ~ March 31, 2003)
The 3rd Fiscal Year (April 1, 2001 ~ March 31, 2002)
Good Morning Shinhan Securities Co., Ltd. and its Subsidiaries
(Unit: million Won)
5TH FY 4TH FY
DESCRIPTION AMOUNT AMOUNT
-------------------------------------------------------- ------------------------ -----------------------
I. Operating Revenue 688,067 624,885
1. Commissions received 280,458 248,190
1) Brokerage commissions 238,222 210,097
<1> KSE (168,224) (156,118)
<2> KOSDAQ (69,662) (53,763)
<3> KOFEX (46) (6)
<4> Bond transaction (OTC) - (3)
<5> ECN (259) (170)
<6> Others (31) (37)
2) Underwriting commissions 9,294 6,823
3) Brokerage commissions on beneficiary certificates 13,657 24,248
4) Brokerage commissions on negotiable commercial papers 1 83
5) Management fee on wrap account and
asset management 5 22
6) Others 19,279 6,917
2. Interest income 75,272 60,915
1) Interest on margin loans 669 990
2) Interest on loans 8,128 4,773
3) Interest on bonds 28,311 11,665
4) Interest on negotiable commercial papers 800 1,584
5) Interest on deposits with KSFC 23,241 24,686
6) Interest on certificate of deposits 29 629
7) Interest on deposits 2,057 3,979
8) Interest on call loans 1,227 338
9) Gain on transactions of certificate of deposits 168 239
10) Interest on advances for customers 290 1,825
11) Others 10,352 10,207
3. Dividends income 8,156 1,634
4. Distribution income 2,016 5,076
5. Gain on sales of trading securities 82,824 44,193
1) Gain on sales of stocks 62,762 28,876
2) Gain on sales of stocks warrants 145 -
3) Gain on sales of bonds 9,294 8,150
4) Gain on sales of beneficiary certificates 3,365 4,531
5) Gain on sales of negotiable commercial papers 1,207 1,653
6) Gain on redemption of trading securities 5,137 983
7) Others 914 -
6. Gain on valuation of trading securities 4,001 1,001
1) Gain on valuation of stocks 390 3
2) Gain on valuation of bonds 1,225 727
3) Gain on valuation of beneficiary certificates 2,386 271
7. Gain on transactions of hybrid securities 48,917 -
1) Gain on sales of hybrid securities 882 -
<1> Gain on sales of equity linked securities (882) -
2) Gain on valuation of hybrid securities 48,035 -
<1> Gain on valuation of equity linked securities (48,035) -
8. Gain on valuation of trading securities sold 300 240
9. Gain on transactions of hybrid securities sold 5,869 -
1) Gain on valuation of hybrid securities sold 5,000 -
<1> Gain on valuation of securities on stock warrant sold (5,000) -
2) Gain on redemption of hybrid securities sold 869 -
<1> Gain on redemption of equity linked securities sold (10) -
<2> Gain on redemption of securities on stock warrant sold (859) -
10. Gain on valuation of reserve for claims of customer's
deposits 3,643 -
11. Gain on derivatives transactions 176,611 252,993
1) Gain on futures transactions 92,925 120,056
<1> Gain on sales of futures (91,334) (120,055)
<2> Gain on settlement of futures (1,591) (1)
2) Gain on exchange trading options transactions 61,456 130,184
<1> Gain on sales of options (61,456) (130,177)
<2> Gain on valuation of options - (7)
3) Gain on OTC derivatives transactions 22,230 2,753
<1> Gain on sales of OTC derivatives (8,579) (2,753)
<2> Gain on valuation of OTC derivatives (13,651) -
12. Others - 10,643
1) Reversal of allowance for credit losses - 10,600
2) Others - 43
II. Operating Expenses 634,844 628,082
1. Commissions expenses 38,382 26,709
1) Trading commissions 24,407 12,368
2) Investment consultant fees 7,699 8,942
3) Other commissions 6,276 5,399
2. Interest expenses 33,403 26,177
1) Interest on borrowings from KSFC 1,688 3,332
2) Interest on bank borrowings 699 1,195
3) Interest on customers' deposits 8,347 7,537
4) Interest on bonds sold under repurchase agreement 9,203 2,185
5) Interest on call money 1,758 2,906
6) Interest on debentures 10,203 8,947
7) Others 1,505 75
3. Loss on sales of trading securities 62,054 56,032
1) Loss on sales of stocks 45,069 43,066
2) Loss on sales of bonds 13,813 5,858
3) Loss on sales of beneficiary certificates 213 2,673
4) Loss on sales of negotiable commercial papers 194 125
5) Loss on redemption of trading securities 2,622 4,310
6) Others 143 -
4. Loss on valuation of trading securities 4,948 6,030
1) Loss on valuation of stocks 1,501 864
2) Loss on valuation of bonds 2,689 333
3) Loss on valuation of beneficiary certificates 758 4,833
5. Loss on valuation of trading securities sold 107 4
6. Loss on transaction of hybrid securities s old 80,611 -
1) Loss on valuation of hybrid securities sold 63,602 -
<1> Loss on valuation of equity inked securities sold (49,981) -
<2> Loss on valuation of securities on stock warrant sold (13,621) -
2) Loss on redemption of hybrid securities sold 17,009 -
<1> Loss on redemption of equity linked securities (8,156) -
<2> Loss on redemption of securities on stock warrant sold (8,853) -
7. Loss on derivatives transactions 135,059 228,559
1) Loss on sales of futures 83,006 107,705
<1> Loss on sales of futures (82,989) (107,625)
<2> Loss on settlement of futures (17) (80)
2) Loss on exchange trading options transactions 48,395 118,293
<1> Loss on sales of options (48,395) (118,293)
3) Loss on OTC derivatives transactions 3,658 2,561
<1> Loss on sales of OTC derivatives (1,254) (2,561)
<2> Loss on valuation of OTC derivatives (2,404) -
8. General and administrative expenses 280,280 284,571
1) Salary 122,201 122,946
2) Severance pay 9,984 23,833
3) Other benefits for employees 24,720 22,120
4) Computer system operation expenses 26,603 15,298
5) Rental expenses 6,856 7,067
6) Miscellaneous commissions 4,126 4,880
7) Entertainment expenses 3,610 3,936
8) Advertising expenses 17,732 19,064
9) Depreciation 13,894 24,120
10) Research and study expenses 3,264 4,160
11) Training expenses 1,078 1,262
12) Credit loss expenses 3,774 -
13) Amortization of intangible assets 5,630 4,417
14) Tax and dues 14,691 11,369
15) Others 22,117 20,099
III. Operating Income(Loss) 53,223 (-)3,197
IV. Non-Operating Income 53,083 27,238
1. Gain on disposition of tangible assets 28,521 94
2. Rental income 6,087 7,940
3. Gain on disposition of available-for-sale securities 7,016 17,263
4. Gain on foreign currency transactions 635 102
5. Gain on foreign exchange translation 123 1
6. Others 10,701 1,838
V. Non-Operating Expenses 9,565 18,819
1. Loss on disposition of tangible assets 1,158 207
2. Loss on disposition of available-for-sale securities - 10,795
3. Impaired loss on available-for-sale securities 1 1,437
4. Loss on valuation of stabilization fund for stock market - 4,959
5. Loss on foreign currency transactions 104 257
6. Loss on foreign exchanges transactions 90 -
7. Donations 336 386
8. Others 7,876 778
VI. Ordinary Income 96,741 5,222
VII. Extraordinary Gain - -
VIII. Extraordinary Loss 2 -
1. Casualty losses 2 -
IX. Net Income before Income Tax Expenses 96,739 5,222
X. Income Tax Expenses 16,084 (-)5,656
XI. Net Income 80,655 10,878
XII. Net Income in Minority Interest - -
XIII. Consolidated Net Income 80,655 10,878
(Ordinary income per share -
Current period: 518 Won Prior period: 68 Won
Earning per share -
Current period: 518 Won Prior period: 68 Won)
3RD FY
------------------------------------------------
DESCRIPTION AMOUNT (UNIT: WON)
I. Operating Revenue 475,011,626,768
1. Commissions received 273,537,853,185
1) Brokerage commissions 233,731,122,548
<1> KSE (147,126,181,805)
<2> KOSDAQ (81,673,136,490)
<3> KOFEX (13,577,070)
<4> Bond transaction (OTC) (5,946,760)
<5> ECN (58,338,830)
<6> Others (4,853,941,593)
2) Underwriting commissions 10,497,685,068
<1> Won-denominated securities (10,497,685,068)
3) Brokerage commissions on beneficiary certificates 22,888,682,288
4) Brokerage commissions on negotiable commercial papers -
5) Management fee on wrap account and asset management 58,303,760
6) Others 6,362,059,521
2. Interest income 56,555,000,653
1) Interest on margin loans 674,558,825
2) Interest on loans 1,080,499,223
3) Interest on bonds 8,945,242,303
4) Interest on negotiable commercial papers -
5) Interest on deposits with KSFC 22,863,239,609
6) Interest on certificate of deposits 2,458,384,688
7) Interest on deposits 11,721,488,537
8) Interest on call loans 137,786,267
9) Gain on transactions of certificate of deposits 156,724,866
10) Interest on advances for customers 881,653,543
11) others 7,635,422,792
3. Dividends income 2,612,778,395
4. Distribution income 2,289,263,185
5. Gain on sales of trading securities 29,206,427,373
1) Gain on sales of stocks 12,056,791,858
2) Gain on sales of bonds 9,328,680,308
3) Gain on sales of beneficiary certificates 1,432,502,347
4) Gain on sales of negotiable commercial papers 1,565,188,909
5) Gain on redemption of trading securities 4,823,263,951
6. Gain on valuation of trading securities 3,609,474,210
1) Gain on valuation of stocks 1,901,560,220
2) Gain on valuation of bonds 162,868,935
3) Gain on valuation of beneficiary certificates 1,545,045,055
7. Gain on valuation of trading securities sold -
8. Gain on derivatives transactions 107,200,829,767
1) Gain on futures transactions 41,547,117,043
<1> Gain on sales of futures (41,547,117,043)
<2> Gain on settlement of futures -
2) Gain on exchange trading options transactions 65,653,712,724
<1> Gain on sales of options (65,366,384,441)
<2> Gain on valuation of options (287,328,283)
3) Others -
<1> Gain on sales of OTC derivatives -
9. Others -
1) Reversal of allowance for credit losses -
2) Others -
II. Operating Expenses 452,698,597,181
1. Commissions expenses 36,173,836,222
1) Trading commissions 15,714,214,028
2) Investment consultant fees 14,504,328,018
3) Other commissions 5,955,294,176
2. Interest expenses 28,112,813,300
1) Interest on borrowings from KSFC 3,605,907,497
2) Interest on bank borrowings 963,813,469
3) Interest on customers' deposits 8,382,774,994
4) Interest on bonds sold under repurchase agreement 1,710,082,127
5) Loss on transactions of certificate of deposits 242,923
6) Interest on call money 1,389,395,947
7) Interest on debentures 8,740,482,747
8) Others 3,320,113,596
3. Loss on sales of trading securities 32,811,559,648
1) Loss on sales of stocks 21,038,279,437
2) Loss on sales of bonds 6,947,161,947
3) Loss on sales of beneficiary certificates 959,221,452
4) Loss on sales of negotiable commercial 188,332,210
5) Loss on redemption of trading securities 3,678,564,602
4. Loss on valuation of trading securities 9,671,795,776
1) Loss on valuation of stocks 925,422,707
2) Loss on valuation of bonds 322,259,394
3) Loss on valuation of beneficiary certificates 8,423,236,963
4) Others 876,712
5. Loss on valuation of trading securities sold 28,540,000
6. Loss on derivatives transactions 111,699,364,751
1) Loss on sales of futures 33,246,012,051
<1> Loss on sales of futures (33,181,405,071)
<2> Loss on settlement of futures (64,606,980)
2) Loss on exchange trading options transactions 78,453,352,700
<1> Loss on sales of options (78,445,007,554)
<2> Loss on valuation of options (8,345,146)
3) Loss on OTC derivatives transactions -
<1> Loss on sales of OTC derivatives -
7. General and administrative expenses 234,200,687,484
1) Salary 102,742,140,396
2) Severance pay 6,970,561,213
3) Other benefits for employees 13,345,642,753
4) Computer system operation expenses 10,726,390,047
5) Rental expenses 5,358,302,610
6) Miscellaneous commissions 2,436,456,212
7) Entertainment expenses 3,355,913,933
8) Advertising expenses 17,949,736,010
9) Depreciation 17,793,670,769
10) Research and study expenses 2,655,240,005
11) Training expenses 1,193,792,622
12) Credit loss expenses 24,405,751,876
13) Amortization of intangible assets 3,122,256,252
14) Tax and dues 4,135,858,486
15) Others 18,008,974,300
III. Operating Income(Loss) 22,313,029,587
IV. Non-Operating Income 48,942,329,113
1. Gain on disposition of tangible assets 105,495,420
2. Gain on disposition of intangible asset 3,832,175
3. Gain on disposition of investment asset 227,465,310
4. Rental income 8,019,899,057
5. Gain on disposition of investment securities 6,357,258,434
6. Gain on conversion of investment securities 836,451,211
7. Loss on valuation of stabilization fund for stock market 32,329,532,645
8. Gain on foreign currency transactions 829,209,425
9. Gain on foreign exchanges translation 9,027,810
10. Others 224,157,626
V. Non-Operating Expenses 8,672,696,247
1. Loss on disposition of tangible assets 249,800,668
2. Loss on disposition of investment assets 47,308,540
3. Impairment loss on investment assets -
4. Loss on disposition of investment securities 6,437,760,131
5. Impairment loss on investment securities 150,706,300
6. Loss on valuation of stabilization fund for stock market -
7. Loss on foreign currency transactions 650,597,952
8. Loss on foreign exchanges translation -
9. Donations 1,127,606,000
10. Others 8,916,656
VI. Ordinary Income 62,582,662,453
VII. Extraordinary Gain -
VIII. Extraordinary Loss -
IX. Net Income before Income Tax Expenses 62,582,662,453
X. Income Tax Expense 11,477,057,457
XI. Net Income 51,105,604,996
XII. Net Income in Minority Interest -
XIII. Consolidated Net Income 51,105,604,996
(Ordinary income per share -
Current period: 68 Won, Prior period: 316 Won
Earnings per share -
Current period: 68 Won, Prior period: 316 Won
Diluted Ordinary income per share -
Current period: 68 Won, Prior period: 316 Won
Diluted earnings per share -
Current period: 68 Won, Prior period: 316 Won)
(3) Consolidated Statements of Changes in Shareholders' Equity
(Consolidated Statements of Appropriation of Surplus)
Consolidated Statements of Changes in Shareholders' Equity
The 5th Fiscal Year (April 1, 2003 ~ March 31, 2004)
The 4th Fiscal Year (April 1, 2002 ~ March 31, 2003)
The 3rd Fiscal Year (April 1, 2001 ~ March 31, 2002)
Good Morning Shinhan Securities Co., Ltd. and its (Unit: million Won)
subsidiaries
CONSOLIDATED CONSOLIDATED CONSOLIDATED
CAPITAL RETAINED CAPITAL MINORITY
DESCRIPTION CAPITAL STOCK SURPLUS EARNINGS ADJUSTMENT INTERESTS TOTAL
------------------------------ ------------- ------------ ------------ ------------ --------- ----------
Apr. 1, 2001 (Beginning of the
prior year) 908,628 - 29,683 (308,049) - 630,262
Conversion of convertible bonds 25,000 - - - - 25,000
Occurrence of discount on stock
issuance costs - - - (18,889) - (18,889)
Consolidated net income - - 51,106 - - 51,106
Amortization of discounts on
stock issuance costs - - (61,000) 61,000 - -
Changes in consolidated capital
adjustment - - - 2,115 - 2,115
Mar. 31, 2002 (End of the prior
year) 933,628 ======= 19,789 (263,823) - 689,594
======= ========== ========== ==========
Apr. 1, 2002 (Beginning of the
prior year) 933,628 - 40,562 (-)284,596 - 689,594
Increases in merger with Shinhan
Securities Co., Ltd. 238,188 - - 310 - 238,498
Capital reduction without
consideration (-)374,818 15 - - - (-)374,803
Consolidated net income - - 10,878 - - 10,878
Amortization of discounts on
stock issuance costs - - (-)20,773 20,773 - -
Changes in consolidated capital
adjustment - - - 3,517 - 3,517
Changes in consolidation scope - - - (-)34 - (-)34
Mar. 31, 2003 (End of the prior
year) 796,998 15 30,667 (-)260,030 - 567,650
Apr. 1, 2003 (Beginning of the
current year) 796,998 15 30,667 (-)260,030 - 567,650
Consolidated net income - - 80,655 - - 80,655
Amortization of discounts on
stock issuance costs - - (-)20,773 20,773 - -
Changes in consolidated capital
adjustment - - - 7,866 - 7,866
Mar. 31, 2004 (End of the current
year) 796,998 15 90,549 (-)231,391 - 656,171
(4) Consolidated Statements of Cash Flow
Consolidated Statements of Cash Flows
The 5th Fiscal Year (April 1, 2003 ~ March 31, 2003)
The 4th Fiscal Year (April 1, 2003 ~ March 31, 2003)
The 3rd Fiscal Year (April 1, 2003 ~ March 31, 2003)
Good Morning Shinhan Securities Co., Ltd. and its (Unit: million Won)
subsidiaries
THE 5TH FY THE 4TH FY
(CURRENT YEAR) (PRIOR YEAR)
-------------------------- ------------------------
DESCRIPTION AMOUNT AMOUNT
-------------------------------------------------- -------------------------- ------------------------
I. Cash Flows from Operating Activities 526,604 (-)243,064
1. Net earnings 80,655 10,878
2. Addition of expense not involving cash outflows 106,943 77,538
1) Loss on valuation of trading securities 4,948 6,030
2) Loss on valuation of OTC derivatives 2,404 -
3) Credit loss expenses 3,774 -
4) Loss on disposition of available-for-sale securities - 10,795
5) Impairment loss on available-for-sale securities 1 1,437
6) Other operating expenses 2 -
7) Loss on disposition of tangible assets 1,158 207
8) Depreciation 13,894 24,120
9) Amortization of intangible assets 5,630 4,417
10) Loss on valuation of trading securities sold 107 4
11) Loss on valuation of hybrid securities sold 63,602 -
12) Severance pay 9,984 23,833
13) Loss on foreign exchanges translation 24 -
14) Stock compensation costs 1,415 1,736
15) Loss on valuation of stabilization fund for stock market - 4,959
3. Deduction of revenues not involving cash inflows (-)124,101 (-)31,534
1) Gain on valuation of reserve for claims of customer's 3,643 -
deposits
2) Gain on valuation of trading securities 4,001 1,001
3) Gain on valuation of hybrid securities 48,035 -
4) Gain on valuation of options - 7
5) Gain on valuation of OTC derivatives 13,651 -
6) Reverse from allowance for credit losses - 10,600
7) Gain on disposition of available-for-sale securities 7,016 17,263
8) Other non-operating expenses 8,569 -
9) Gain on disposition of tangible assets 28,521 94
10) Interest income 5,242 2,329
11) Gain on valuation of trading securities sold 300 240
12) Gain on valuation of hybrid securities sold 5,000 -
13) Gain on foreign exchanges translation 123 -
4. Change in assets and liabilities resulting from operations 463,107 (-)299,946
1) Decrease(Increase) in Short-term trading securities 93,120 (-)292,268
2) Decrease in Option purchased 117 531
3) Decrease(Increase) in Accrued income (-)2,316 7,272
4) Decrease(Increase) in Receivables (-)7,988 79,494
5) Increase in Advance payments (-)11,852 (-)1,882
6) Increase in Prepaid expenses 840 (-)176
7) Increase in Prepaid income tax (-)2,443 (-)3,036
8) Increase in Derivatives assets (-)20,888 -
9) Increase in Other current assets (-)3,953 (-)415
10) Decrease(Increase) in Deferred income tax debits 16,100 (-)5,541
11) Increase in Securities sold 10,006 4,183
12) Increase in Hybrid securities sold 407,772 -
13) Decrease in Options sold - (-)845
14) Decrease in Accounts payable (-)593 (-)23,655
15) Increase (Decrease) in Accrued expenses 9,950 (-)33,280
16) Decrease in Income tax liabilities 38 (-)19
17) Decrease in Withholding income taxes (-)1,446 (-)535
18) Decrease in Unearned income (-)281 (-)747
19) Increase in Derivatives liabilities 672 -
20) Decrease in Other current liabilities (-)12,598 (-)1,863
21) Payment of Severance benefits (-)12,373 (-)30,267
22) Decrease in Deposits with insurance company for 2 633
severance benefits
23) Decrease in Retirement trust 1,221 2,470
II. Cash Flows from Investing Activities (-)214,299 330,169
1. Cash inflows from investing activities 6,885,121 2,325,568
1) Decrease in Negotiable certificate of deposits 1,018 58,270
2) Decrease in Other deposits 64,654 98,210
3) Decrease in Call loans 6,650,027 1,662,500
4) Collection of Short-term loans 1,267 3,854
5) Disposition of Available-for-sale securities 40,994 54,835
6) Decrease in Long-term deposits 19 263
7) Decrease in Long-term loans 4,813 3,994
8) Decrease in Guarantee 14,955 43,176
9) Decrease in Other investment assets 2,149 250
10) Disposition of Tangible assets 46,531 299
11) Disposition of Intangible assets 1,090 -
12) Decrease in Deposits - 139,143
13) Decrease in Collective fund for default loss - 1,050
14) Decrease in Other loans 128 -
15) Decrease in Advances for customers 48,888 7,588
16) Decrease in Dishonored bonds - 6,536
17) Decrease in Broker's loans - 236,155
18) Increase in Guarantee deposits 1,022 -
19) Increase in Deposits for rent 7,566 8,939
20) Increase in Cash due to merger - 506
2. Cash outflows from investing activities (-)7,099,420 (-)1,995,399
1) Increase in Call loans 6,753,800 1,667,500
2) Increase in Short-term loans 1,261 3,870
3) Increase in Long-term deposits 7 -
4) Increase in Available-for-sale securities - 6,612
5) Increase in Long-term loans 3,614 5,591
6) Increase in Guarantee 12,254 41,663
7) Increase in Other investment assets 186 2
8) Acquisition of Tangible assets 9,355 14,933
9) Increase in Collective fund for default loss 500 1,048
10) Acquisition of Intangible assets 7,292 4,096
11) Increase in Deposits 26,173 -
12) Increase in Other loans - 125
13) Increase in Hybrid securities 190,696 -
14) Increase in Broker's loan 74,513 243,032
15) Increase in Advances for customers - 1,017
16) Increase in Dishonored bonds 3,097 80
17) Decrease in Guarantee deposits - 2,431
18) Decrease in Deposits for rent 5,427 3,399
19) Increase in Available-for-sale securities(Short-term) 11,245 -
III. Cash Flows from Financing Activities (-)309,496 (-)91,397
1. Cash inflows from financing activities 14,324,993 412,377
1) Increase in Call money 5,704,000 134,000
2) Increase in Short-term borrowings 3,530,000 53,328
3) Increase in Bonds sold under reverse resale agreement 5,089,993 95,049
4) Issuance of Debentures 1,000 -
5) Issuance of Subordinated debentures - 130,000
2. Cash outflows from financing activities (-)14,634,489 (-)503,774
1) Decrease in Call money 5,839,000 -
2) Decrease in Short-term borrowings 3,677,200 -
3) Decrease in Bonds sold under reverse sale agreement 5,066,323 -
4) Decrease in Customers' deposits 51,966 90,521
5) Decrease in Current liabilities - 40,000
6) Occurrence of Discounts on stock issuance costs - 48
7) Acquisition of Treasury stock - 373,205
IV. Decrease in Cash due to change of consolidation scope - (-)45
V. Decrease in Cash due to foreign currency translation (-)196 (-)132
VI. Net Increase (decrease) in Cash (I+II+III+IV+V) 2,613 (-)4,469
VII. Cash at Beginning of Year 10,160 14,629
VIII. Cash at End of Year 12,773 10,160
III
THE 3RD FY
----------------------------------------------
DESCRIPTION AMOUNT(UNIT: WON)
----------------------------------------------------------- ----------------------------------------------
I. Cash Flows from Operating Activities 75,533,182,573
1. Net earnings 51,105,604,996
2. Addition of expense not involving cash outflows 70,619,857,818
1) Loss on valuation of marketable securities 9,671,795,776
2) Loss on valuation of trading securities sold 28,540,000
3) Loss on valuation of options 8,345,146
4) Severance pay 6,970,561,213
5) Depreciation 17,793,670,769
6) Credit loss expenses 24,405,751,876
7) Amortization of intangible assets 3,122,256,252
8) Stock compensation costs 1,733,361,147
9) Loss on disposition of tangible assets 249,800,668
10) Loss on disposition of investment assets 47,308,540
11) Impairment loss on investment assets -
12) Loss on disposition of investment securities 6,437,760,131
13) Impairment loss on investment securities 150,706,300
14) Loss on valuation of stabilization fund for stock market -
3. Deduction of revenues not involving cash inflows (44,979,772,328)
1). Interest income 1,222,934,640
2) Gain on valuation of marketable securities 3,609,474,210
3) Gain on valuation of trading securities sold -
4) Gain on valuation of options 287,328,283
5) Gain on disposition of tangible assets 105,495,420
6) Gain on disposition of intangible assets 3,832,175
7) Gain on disposition of investment assets 227,465,310
8) Gain on disposition of investment securities 6,357,258,434
9) Gain on conversion of investment securities 836,451,211
10) Gain on valuation of stabilization fund for stock market 32,329,532,645
11) Reverse from allowance for credit losses -
4. Change in assets and liabilities resulting from operations (1,212,507,913)
1) Decrease(Increase) in Deposits (244,802,623,735)
2) Decrease(Increase) in Marketable securities 29,224,343,448
3) Decrease in Option purchased -
4) Decrease(Increase) in Fail to deliver (58,347,257,792)
5) Decrease(Increase) in Accrued income (1,862,634,984)
6) Decrease(Increase) in Advance payments 232,046,735
7) Increase in Prepaid expenses (137,316,566)
8) Decrease(Increase) in Prepaid income tax 885,727,170
9) Decrease(Increase) in Deferred income tax debits 10,194,786,433
10) Increase(Decrease) in Customer's deposits 247,524,951,754
11) Increase in Securities sold 980,427,000
12) Decrease in Options sold -
13) Increase (Decrease) in Accrued expenses 17,710,708,715
14) Decrease in Income tax liabilities -
15) Increase(Decrease) in Guarantee deposits 1,809,950,222
16) Increase(Decrease) in Withholding income taxes 1,124,166,981
17) Decrease in Unearned income (178,980,988)
18) Decrease in Other current liabilities (1,044,831,538)
19) Succession of Reserve for severance and retirement benefits 29,229,111
20) Payment of Severance benefit (2,151,853,493)
21) Decrease in Deposits with insurance company for 98,089,700
severance benefits
22) Decrease(Increase) in Retirement trust (2,501,436,086)
II. Cash Flows from Investing Activities 14,577,590,349
1. Cash inflows from investing activities 1,114,671,939,726
1) Decrease in Negotiable certificate of deposits -
2) Decrease in Other deposits 120,930,477,364
3) Decrease in Call loans 775,800,000,000
4) Decrease in Broker's loans 115,866,500,196
5) Decrease in Short-term loans 456,218,074
6) Decrease in Other Receivables 32,642,659,795
7) Decrease in Other current assets 737,674,544
8) Decrease in Investment securities 23,496,831,863
9) Decrease in Long-term deposits 105,000,000
10) Decrease in Long-term loans 4,002,532,277
11) Increase in Guarantee 19,199,836,418
12) Disposition of Other investment assets 677,107,327
13) Disposition of Land -
14) Disposition of Buildings -
15) Disposition of Vehicles 4,300,000
16) Disposition of Furniture and equipments 976,292,000
17) Decrease in Advances for customers 5,621,110,342
18) Decrease in Collective fund for default loss 207,178,122
19) Decrease in Dishonored bonds 8,807,137,146
20) Decrease in Dishonored notes 5,106,300,058
21) Decrease in Intangible assets 34,784,200
22) Increase in Cash due to merger -
2. Cash outflows from investing activities (1,100,094,349,377)
1) Increase in Negotiable certificate of deposits 59,258,449,010
2) Increase in Call loans 775,800,000,000
3) Increase in Broker's loans 158,737,697,880
4) Increase in Short-term loans 463,798,175
5) Increase in Other loans -
6) Increase in Other receivables 30,266,821,228
7) Increase in Other current assets -
8) Increase in Investment securities 7,279,115,364
9) Increase in Long-term deposits 52,500,000
10) Increase in Long-term loans 4,199,137,697
11) Increase in Deposits 11,565,197,510
12) Increase in Other investment assets 1,042,745,420
13) Acquisition of Buildings 199,998,254
14) Increase in Vehicles 128,283,913
15) Increase in Furniture and equipments 10,311,993,181
16) Increase in Assets under construction 11,626,157
17) Increase in Advances for customers 33,458,344,355
18) Decrease in Collective fund for default loss 1,221,455,050
19) Increase in Dishonored bonds -
20) Increase in Dishonored notes 10,000,000
21) Increase in Intangible assets 6,087,186,183
III. Cash Flows from Financing Activities (90,426,718,871)
1. Cash inflows from financing activities 115,214,328,558
1) Increase in Call money -
2) Increase in Short-term borrowings 68,243,468,560
3) Increase in Bonds sold under reverse resale agreement 6,333,780,000
4) Increase in Accounts payable 6,116,918,088
5) Increase in Deposits for rent 4,520,161,910
6) Issuance of Debentures 30,000,000,000
7) Issuance of Subordinated debentures -
2. Cash outflows from financing activities (205,641,047,429)
1) Decrease in Call money 81,000,000,000
2) Decrease in Short-term borrowings 512,940,867
3) Decrease in Accounts payable 841,696,454
4) Payment of Dividends -
5) Decrease in Deposits for rent 25,727,749,500
6) Decrease in Current portion of long-term liabilities 30,000,000,000
7) Decrease in Current portion of long-term subordinated debentures 67,420,000,000
8) Occurrence of Discounts on stock issuance costs 138,660,608
9) Acquisition of Treasury stock
IV. Decrease in Cash due to Change of Consolidation Scope -
V. Increase(Decrease) in Cash due to Foreign Currency Translation 90,253,649
VI. Net Increase (decrease) in Cash (I+II+III+IV+V) (225,692,300)
VII. Cash at Beginning of Year 14,855,061,267
VIII. Cash at End of Year 14,629,368,967
D. Companies Excluded from the Consolidated Financial Statements
-Not applicable
5. FINANCIAL STATUS PER BUSINESS DIVISION
- Not applicable
IV. AUDITOR'S OPINION
1. AUDITOR'S (CPA) OPINION, ETC.
A. Auditor
1ST QUARTER OF 6TH FY 1ST QUARTER OF 5TH FY 5TH FY 4TH FY
--------------------- --------------------- ------ ------
Samjong Accounting Corp. Samjong Accounting Corp. Samjong Accounting Corp. Samil Accounting Corp.
B. Auditor's Opinion
FISCAL YEAR SUMMARY OF AUDITOR'S OPINION AND OTHER COMMENTS
----------- -----------------------------------------------
1st quarter of 6th FY Based on our review, nothing has come to our
attention that cause us to believe that financial
statements above are not presented fairly, in all
material respects, in accordance with the Financial
Accounting Standards in Korea.
1st quarter of 5th FY Based on our review, nothing has come to our
attention that cause us to believe that financial
statements above are not presented fairly, in all
material respects, in accordance with the Financial
Accounting Standards in Korea.
5th FY Unqualified opinion
4th FY Unqualified opinion
C. Summary of Particular Comments
FISCAL YEAR PARTICULAR COMMENTS (OR REFERENCES)
----------- -----------------------------------
1st quarter of 6th FY (1) Related Party Transaction
As described in Note 10 to the non-consolidated
financial statements, Good Morning Shinhan Securities
Co., Ltd. (the "Company") recorded 2,536 million Won
of revenue earned from and 4,446 million Won of
expense incurred to Shinhan Financial Group Co., Ltd.
and other related parties for the quarter ended June
30, 2004. In addition, the Company has recorded
receivables from and payables to related parties as
of June 30, 2004 of 27,909 million Won and 174,505
million Won, respectively.
(2) Changes of Accounting
As described in Note 2 to the non-consolidated
financial statements, the Company adopted Statements
of Korea Accounting Standards No. 10 (Inventories),
12(Construction-Type Contracts), 13 (Rescheduling of
receivables and payables), effective from the first
fiscal year beginning after December 31, 2003 and
prepared non-consolidated financial statements for
the quarter ended June 30, 2004. These changes in
accounting have no effect on retained earnings and
net income of the Company.
1st quarter of 5th FY (1) Related Party Transaction
As described in Note 9 to the non-consolidated
financial statements, the Company recorded 183,022
million Won in revenue earned from and 6,394,119
million Won of expense incurred to Shinhan Financial
Group Co., Ltd. and other related parties for the
quarter ended June 30, 2003. In addition, the Company
has recorded receivables from and payables to related
parties as of June 30, 2003 of 16,896,040 million Won
and 170,408,253 million Won, respectively.
(2) Resettlement of selling price of troubled loans
and put option As described in Note 24 to the
non-consolidated financial statements, the Company
sold its troubled loans related to insolvent
companies to Korea Asset Management Corporation
("KAMCO"), in accordance with a contract made on
November 6, 1998 and a supplementary contract made on
December 12, 1998. The insolvent companies obtained
approval from the court for the receivership and
65,600 million Won of troubled loans, which was the
unsettled amount out of the total proceeds from the
sale of troubled loans, have been determined to be
61,600 million Won. Accordingly, on April 25, 2000,
the Company entered into a settlement agreement with
KAMCO in the amount of 61,600 million Won. However,
KAMCO can exercise a put option or require
resettlement, if the debt reorganization plans
approved by the court are changed or debts are not
collected as scheduled. As of June 30, 2003, the
potential amount of put option or resettlement, which
KAMCO can exercise, were estimated to be 29,200
million Won.
Also, the Company, in accordance with the contract
for sale of bond entered into on March 28, 2003 with
Global Korea Investment I Limited, sold 41,805,638
thousand Won (book value) of troubled loans related
to Freyaworld Co. Ltd.(Advances for payment on bond
guarantee and other advances for customers) at the
price of 48,900,000 thousand Won. Accounting entry
related to this transaction has been recorded on
April 25, 2003, the payment date of the balance. If,
however, the statements made in the aforementioned
contract are not consistent with the facts, the
Company is obligated to comply with the request of
put option or resettlement by Global Korea Investment
I Limited within 18 months from the date of balance
payment.
(3) Uncertainty related to corporate bonds issued by
domestic card companies.
As of June 30, 2003, the Company holds marketable
securities which include 26,068,181 thousand Won of
corporate bonds issued by credit card companies. As
of June 30, 2003, the credit card companies are
experiencing financial difficulties and the corporate
bonds issued by the above companies are suffering
from liquidity problem. The accompanying financial
statements do not reflect any uncertainties as the
ultimate result cannot presently be estimated.
(4) loans to companies under receivership
As described in Note 6 to the non-consolidated
financial statements, as of June 30, 2003, the
Company is holding a book value amount of 10,705,704
million Won of loans to companies under receivership
or composition procedure and recorded 7,906,351
million Won of allowance for bad debt against the
balance after subtracting 990,390 million Won of
present value discount due to rescheduling of
receivable.
The amount which could be collected from borrowers
under receivership or composition procedure would be
affected by final approval from the court and
execution of stabilization plan for business
administration, and thus, at the present time, it is
difficult to estimate the final result.
(5) Sales and lease back transaction
As described in Note 22 to the non-consolidated
financial statements, the Company sold to Macquarie
Capital Korea Co., Ltd. furniture and equipments
(electronic apparatus) and related intangible assets
at the price of 47,000 million Won and has leased
back the assets for use. The Company recorded 29,043
million Won of revenue and expense related to the
sale on a accrual basis since the above mentioned
sales lease back transaction falls under operating
lease in accordance with Article 23 of Lease
Accounting Standards and lease fee and sales price
are determined based on fair market value.
(6) Change of Accounting
As described in Note 2 to the non-consolidated
financial statements, the Company prepared the
non-consolidated financial statements for the 1st
quarter of 5th FY adopting Statements of Korea
Accounting Standards No. 2 through No. 9 which are
compulsorily applied from the current quarter of the
current fiscal year. This change of accounting policy
is reasonable.
The financial statements for the year ended June 31,
2003, are classified in accordance with the previous
Statements of Korea Accounting Standards so long as
the revised Statement does not specifically require
such adoption.
However, for comparison purposes, some accounting
items are reclassified as shown in the financial
statements for the year ended June 30, 2003. This
reclassification does not affect the Company's net
income or net assets reported in prior fiscal year.
5th FY (1) Related Party Transaction
As described in Note 10 to the non-consolidated
financial statements, the Company recorded 12,709
million Won of revenue earned from and 31,078 million
Won of expense incurred to Shinhan Financial Group
Co., Ltd. and other related parties for the year
ended March 31, 2004. In addition, the Company has
recorded receivables from and payables to related
parties as of March 31, 2004 of 29,437 million Won
and 174,628 million Won, respectively.
(2) Uncertainty related to corporate bonds issued by
card companies, etc. As described in Note 24 to the
non-consolidated financial statements, as of March
31, 2004, the Company is holding 4,879 million Won of
debt securities issued by LG Card Co., Ltd., which
are classified as short-term investment in
securities. Actual losses on these securities may
differ materially from the management's assessments
and the accompanying non-consolidated financial
statements do not reflect the impact of the
uncertainty on the financial position of the Company.
(3) Change of Accounting
As described in Note 2 to the non-consolidated
financial statements, the Company adopted Statements
of Korea Accounting Standards No. 2 through No. 9,
effective from the first fiscal year beginning after
December 31, 2002, in preparing the non-consolidated
financial statements for the current fiscal year.
4th FY (1) Merger
As described in Note 3 to the non-consolidated
financial statements, on April 8, 2002, Shinhan
Financial Holding Co., Ltd. entered into a contract
with Asia Pacific Growth Fund II, LP and another
shareholder (major shareholders collectively owning
15.36%) to acquire the Company's shares and to become
the largest shareholders, by holding 28.87% ownership
in the Company. The Company held a shareholders'
meeting on June 27, 2002 for the resolution of the
merger between the Company and Shinhan Securities
Co., Ltd. as of July 31, 2002. The Company issued
1.9976 shares of common stock for each outstanding
common stock of Shinhan Securities Co., Ltd. A total
of 47,637,680 shares of the Company's common stock
has been issued
as a result of the merger. The Company paid 13,293
million Won to employees as bonus and 11,882 million
Won as compensation to those who settled the
accumulated retirement pay as a lump sum in relation
to the above merger.
(2) Extinguishment of treasury common stock and
Reduction of outstanding shares
As described in Note 14 to the non-consolidated
financial statements, following the resolution from
the board of directors meeting held on October 25,
2002, and the shareholders' meeting held on December
12, 2002, the Company extinguished 54,480,716 shares
of treasury common stock and 2,771,874 shares of
treasury preferred stock which were purchased to
comply with dissenting shareholders' exercise of
claims for stock purchase in relation to merger with
Shinhan Securities Co., Ltd. Also, the Company
reduced outstanding shares by the ratio of 1:0.9 as
of December 24, 2002.
(3) Recognition of deferred tax assets for tax loss
carried forward
As described in Note 16 to the non-consolidated
financial statements, the Company did not recognized
deferred tax assets for tax loss carried forward
until March 31, 2002. However, as the Company's
ordinary income for the past three years has been
positive and the future average income is expected to
surpass the tax loss carried forward as of March 31,
2003, the Company recorded 9,622 million Won of
deferred income tax assets in relation to the tax
loss carried forward.
(4) Resettlement of selling price of troubled loans
and put option
As described in Note 13 to the non-consolidated
financial statements, the Company sold its troubled
loans related to insolvent companies to Korea Asset
Management Corporation ("KAMCO"), in accordance with
a contract made on November 6, 1998 and a
supplementary contract made on December 12, 1998. The
insolvent companies obtained approval from the court
for the receivership and 65,600 million Won of
troubled loans, which was the unsettled amount out of
the total proceeds from the sale of troubled loans,
have been determined to be 61,600 million Won.
Accordingly, on April 25, 2000, the Company entered
into a settlement agreement with KAMCO in the amount
of 61,600 million Won. However, KAMCO can exercise a
put option or require resettlement, if the debt
reorganization plans approved by the court are
changed or debts are not collected as scheduled. As
of March 31, 2003, the potential amounts of put
option or resettlement, which KAMCO can
exercise, were estimated to be 29,200 million Won.
(5) Uncertainty related to corporate bonds issued by
credit card companies and capital companies
As described in Note 5 to the non-consolidated
financial statements, as of March 31, 2003, the
Company holds marketable securities of 6,338 billion
Won, which include 1,808 billion Won of corporate
bonds issued by credit card companies and capital
companies. As of March 31, 2003, the credit card
companies and capital companies are experiencing
financial difficulties and the corporate bonds issued
by the above companies are suffering from liquidity
problem. The accompanying financial statements do not
reflect any uncertainties as the ultimate result
cannot presently be estimated.
(6) Related Party Transaction
As described in Note 18 to the non-consolidated
financial statements, the Company had revenue of
12,498 million Won and expenses of 13,983 million Won
with related parties for the year ended March 31,
2003 and a receivables and payables as of March 31,
2003 were 45,714 million Won and 188,611 million Won,
respectively.
(7) Material Matters after date of the Balance Sheet
As described in Note 19 to the non-consolidated
financial statements, on March 27, 2003, the Company
signed a contract with Global Korea Investment I
Limited to sell its troubled loans of Hynix Co., Ltd.
(book value as of March 31, 2003: 41,806 million Won)
at 48,900 million Won, which will come into force on
April 25, 2003.
3rd FY (1) Material Matters after date of the Balance Sheet
(Change of the major shareholders and Shinhan
Securities Co., Ltd.'s plan for merger with the
Company.)
As described in Note 19 to the non-consolidated
financial statements, on April 8, 2002, Shinhan
Financial Holding Co. made a contract with Asia
Pacific Growth Fund II, LP and another
shareholder(major shareholders collectively holding
15.36%) of the Company to acquire the Company's
shares held by the major shareholders and to become
the largest shareholders, by holding a combined
28.87% ownership in the Company. The Company plans to
hold a shareholders' meeting on June 27, 2002 for the
resolution of the merger with Shinhan Securities Co.,
Ltd. as of July 31, 2002. The Company will issue
1.9976 shares of common stock for each outstanding
common stock of Shinhan Securities Co., Ltd. A total
of 47,637,680 shares of the Company's
common stock will be issued as a result of the
merger.
(2) Resettlement of selling price of troubled loans
and put option
As described in Note 13 to the non-consolidated
consolidated financial statements, the Company sold
its troubled loans related to insolvent companies to
Korea Asset Management Corporation ("KAMCO"), in
accordance with a contract made on November 6, 1998
and a supplementary contract made on December 12,
1998. The insolvent companies obtained approval from
the court for the receivership and 65,600 million Won
of troubled loans, which was the unsettled amount out
of the total proceeds from the sale of troubled
loans, have been determined to be 61,600 million Won.
Accordingly, on April 25, 2000, the Company entered
into a settlement agreement with KAMCO in the amount
of 61,600 million Won. However, KAMCO can exercise a
put option or require resettlement, if the debt
reorganization plans approved by the court are
changed or debts are not collected as scheduled.
During the year ended March 31, 2002, the Company
reacquired 32,400 million Won of the troubled loans
of the companies which failed to make required
payments within due dates.
(3) Uncertainties in economic conditions
As described in Note 13 to the non-consolidated
financial statements, the operations of the Company
have been affected, and may continue to be affected
for the foreseeable future, by the general unstable
economic conditions in the Republic of Korea and in
the Asia Pacific region. The ultimate effect of these
uncertainties of the financial position of the
Company as of the balance sheet date cannot presently
be determined. Therefore, any amendments related to
the foregoing uncertainties have not been reflected
in the Company's financial statements.
2. AUDITOR'S OPINION ON CONSOLIDATED FINANCIAL STATEMENTS
A. Auditor
5TH FY 4TH FY 3RD FY
------ ------ ------
Samjong Accounting Corp. Samil Accounting Corp. Samil Accounting Corp.
B. Consolidated Auditor's Opinion
FISCAL YEAR AUDITOR'S OPINION AND OTHER COMMENTS
----------- ------------------------------------
5TH FY Unqualified opinion
4TH FY Unqualified opinion
3RD FY Unqualified opinion
C. Summary of Particular Comments
FISCAL YEAR PARTICULAR COMMENTS
----------- -------------------
5th FY (1) Related Party Transaction
As described in Note 11 to the consolidated financial
statements, the Company recorded 2,236 million Won of
revenue earned from and 23,632 million Won of expense
incurred to Shinhan Financial Group Co., Ltd. and
other related parties for the year ended March 31,
2004. In addition, as of March 31, 2004, the Company
has recorded 29,437 million Won of receivables from
and 172,677 million Won of payables to related
parties, respectively.
(2) Uncertainty related to debt securities issued by
LG Card Co., Ltd., etc. As described in Note 25 to
the consolidated financial statements, as of March
31, 2004, the Company is holding 4,879 million Won of
debt securities issued by LG Card Co., Ltd., which
are classified as short-term investment in
securities. Actual losses on these securities may
differ materially from the management's assessments
and the accompanying consolidated financial
statements do not reflect the impact of the
uncertainty on the financial position of the Company.
(3) Change of Accounting
As described in Note 2 to the consolidated financial
statements, the Company adopted Statements of Korea
Accounting Standards No. 2 through No. 9, effective
from the first fiscal year beginning after December
31, 2002, in preparing the consolidated financial
statements for the current fiscal year.
4th FY (1) Change of Consolidation Scope
As described in Note 1 to the consolidated financial
statements, the financial statements of Good Morning
Investment Trust Management Co., Ltd., which were
included in previous consolidated financial
statements, are excluded from the accompanying 2003
consolidated financial statements due to sale of Good
Morning Investment Trust Management Co, Ltd,'s shares
by the Company.
(2) Merger
As described in Note 3 to the consolidated financial
statements, on April 8,
2002, Shinhan Financial Holding Co., Ltd. entered
into a contract with Asia Pacific Growth Fund II, LP
and another shareholder (major shareholders
collectively holding 15.36%) to acquire the Company's
shares and to become the largest shareholders, by
holding 28.87% ownership in the Company. The Company
held a shareholders' meeting on June 27, 2002 for the
resolution of the merger between the Company and
Shinhan Securities Co., Ltd. as of July 31, 2002. The
Company issued 1.9976 shares of common stock for each
outstanding common stock of Shinhan Securities Co.,
Ltd. A total of 47,637,680 shares of the Company's
common stock has been issued as a result of the
merger. The Company paid 13,293 million Won to
employees as bonus and compensation of 11,882 million
Won as compensation to those who settled the
accumulated retirement pay as a lump sum in relation
to the above merger.
(3) Extinguishment of treasury common stock and
Reduction of outstanding shares
As described in Note 14 to the consolidated financial
statements, following the resolution from the board
of directors meeting held on October 25, 2002 and the
shareholders' meeting held on December 12, 2002, the
Company extinguished 54,480,716 shares of treasury
common stock and 2,771,874 shares of treasury
preferred stock which were purchased to comply with
dissenting shareholders' exercise of claims for stock
purchase in relation to merger with Shinhan
Securities Co., Ltd. Also, the Company reduced
outstanding shares by the ratio of 1:0.9 as of
December 24, 2002.
(4) Recognition of deferred tax assets for tax loss
carried forward
As described in Note 16 to the consolidated financial
statements, the Company did not recognized deferred
tax assets for tax loss carried forward until March
31, 2002. However, as the Company's ordinary income
for the past three years has been positive and the
future average income is expected to surpass the tax
loss carried forward as of March 31, 2003, the
Company recorded 9,622 million Won of deferred income
tax assets in relation to the tax loss carried
forward.
(5) Resettlement of selling price of troubled loans
and put option
As described in Note 13 to the consolidated financial
statements, the Company sold its troubled loans
related to insolvent companies to Korea Asset
Management Corporation ("KAMCO"), in accordance with
a contract made on November 6, 1998 and a
supplementary contract made on December
12, 1998. The insolvent companies obtained approval
from the court for the receivership and 65,600
million Won of troubled loans, which was the
unsettled amount out of the total proceeds from the
sale of troubled loans, have been determined to be
61,600 million Won. Accordingly, on April 25, 2000,
the Company entered into a settlement agreement with
KAMCO in the amount of 61,600 million Won. However,
KAMCO can exercise a put option or require
resettlement, if the debt reorganization plans
approved by the court are changed or debts are not
collected as scheduled. As of March 31, 2003, the
potential amounts of put option or resettlement,
which KAMCO can exercise, were estimated to be 29,200
million Won.
(6) Uncertainty related to corporate bonds issued by
credit card companies and capital companies
As described in Note 5 to the consolidated financial
statements, as of March 31, 2003, the Company holds
marketable securities of 6,338 billion Won, which
include 1,808 billion Won of corporate bonds issued
by credit card companies and capital companies. As of
March 31, 2003, the credit card companies and capital
companies are experiencing financial difficulties and
the corporate bonds issued by the above companies are
suffering from liquidity problem. The accompanying
financial statements do not reflect any uncertainties
as the ultimate result cannot presently be estimated.
(7) Material Matters after date of the Balance Sheet
As described in Note 20 to the consolidated financial
statements, on March 27, 2003, the Company signed a
contract with Global Korea Investment I Limited to
sell its troubled loans of Hynix Co., Ltd. (book
value as of March 31, 2003: 41,806 million Won) at
48,900 million Won, which will come into force on
April 25, 2003.
3rd FY (1) Material Matters after date of the Balance Sheet
(Change of the major shareholders and Shinhan
Securities Co., Ltd.'s plan for merger with the
Company)
As described in Note 19 to the consolidated financial
statements, on April 8, 2002, Shinhan Financial
Holding Co. made a contract with Asia Pacific Growth
Fund II, LP and another shareholder(major
shareholders collectively holding 15.36%)
collectively holding 15.36% of the Company to acquire
the Company's shares held by the major shareholders
and to become the largest shareholders, by holding a
combined 28.87% ownership in the Company. The Company
plans to hold a shareholders' meeting on June 27,
2002 for the resolution of the merger between the
Company and Shinhan Securities Co.,
Ltd. as of July 31, 2002. The Company will issue
1.9976 shares of common stock for each outstanding
common stock of Shinhan Securities Co., Ltd. A total
of 47,637,680 shares of the Company's common stock
will be issued as a result of the merger.
(2) Resettlement of selling price of troubled loans
and put option
As described in Note 13 to the consolidated financial
statements, the Company sold its troubled loans
related to insolvent companies to Korea Asset
Management Corporation ("KAMCO"), in accordance with
a contract made on November 6, 1998 and a
supplementary contract made on December 12, 1998. The
insolvent companies obtained approval from the court
for the receivership and 65,600 million Won of
troubled loans, which was the unsettled amount out of
the total proceeds from the sale of troubled loans,
have been determined to be 61,600 million Won.
Accordingly, on April 25, 2000, the Company entered
into a settlement agreement with KAMCO in the amount
of 61,600 million Won. However, KAMCO can exercise a
put option or require resettlement, if the debt
reorganization plans approved by the court are
changed or debts are not collected as scheduled.
During the year ended March 31, 2002, the Company
reacquired 32,400 million Won of the troubled loans
of the companies which failed to make required
payments within due dates.
(3) Uncertainties in economic conditions
As described in Note 13 to the consolidated financial
statements, the operations of the Company have been
affected, and may continue to be affected for the
foreseeable future, by the general unstable economic
conditions in the Republic of Korea and in the Asia
Pacific region. The ultimate effect of these
uncertainties of the financial position of the
Company as of the balance sheet date cannot presently
be determined. Therefore, any amendments related to
the foregoing uncertainties have not been reflected
in the Company's financial statements.
3. OTHERS
- N/A
V. STATUS OF CORPORATE GOVERNANCE STRUCTURE AND AFFILIATES, ETC.
1. SUMMARY OF CORPORATE GOVERNANCE STRUCTURE
A. Matters concerning Board of Directors
(1) Matters concerning the organization of board of directors
(A) Authority of board of directors
The company's Board of directors deliberate and resolve
material matters concerning the company including the
following: matters relating to the general meeting of
shareholders; the provision, amendment or deletion of
the articles of incorporation and other important
internal regulations; paid-in-capital and capital stock;
basic matters concerning management and operation;
matters relating to financing; matters relating to
assets of the company; matters relating to directors;
matters relating to execution of material contracts; and
etc.
Committees of the board of directors report to the board
regarding the following matters: the execution of the
resolutions of the board of directors and their results;
the analysis of activities of committees of the board
and their results; matters designated as items to be
reported to the board in other internal regulations;
other matters as deemed necessary by the chairman of the
board of directors or the representative
director/president of the company.
(B) Whether personal information regarding a candidate for a
directorship is announced prior to the general meeting
of the shareholders and whether such candidate is
supported by a shareholders' recommendation.
- Personal information regarding a director candidate are
reported to each shareholder through a report of
resolutions of the board of directors, public notice and
individual notice of convening of general shareholders'
meeting and publication of matters relating to
management.
- Candidates are recommended for appointment by the
recommendation committee of the board of directors.
(C) Establishment of the outside director recommendation
committee and its composition
NAME SERVING AS OUTSIDE DIRECTOR OR NOT REMARKS
--------------- ---------------------------------- -------
Chil Sun Hong No
Kang Won Lee No
Hong Ryul Cheon Yes
Kyung Ho Kim Yes
(D) Outside directors
RELATIONSHIP
WITH LARGEST
NAME MAJOR WORK EXPERIENCE SHAREHOLDER REMARKS
--------------- --------------------------------------------------------------------- ------------ -------
Jin Won Park 1970. Seoul National University (B.A. in Business)
1980 Completion of Ph.D course at Columbia University in
Economics
1990 Brooklyn Law School (J.D.)
1990 Paul Hastings Janofsky & Walker NY Office, Attorney
1993 Gribson Dunn & Crutcher NY Office, Attorney N/A
1995~ Shin & Kim, US Legal Consultant(current)
Hyoung Tae Kim 1985 Seoul National University (B.A. in Business Management)
1987 Seoul National University (M.A. in Business Management)
1993 Seoul National University (Ph.D. in Business Management)
1993 MIT post-doctorate
1995 Wharton School Senior Research Fellow
1998 Korea Securities Research Institute, Research Fellow N/A
2003~ Korea Securities Research Institute, Vice President
Hong Ryul Cheon 1972.02 Yonsei University (B.A. in Public Administration)
1977.02 Seoul National University (M.A. in Public Administration)
1985. Office of Finance Policies, Ministry of Finance and Economy,
Assistant director in charge of securities policy,
1999.05 Financial Supervisory Commission, member of Regulations
Review Committee N/A
1997.~ Kim & Chang, Senior Advisor
Kyung Ho Kim 1973.02 Gyeonggi High School
1978.02 Seoul National University (B.A. in Business Management)
1987.08 Purdue University (Ph.D. in Business Management)
1987.09 University of California, Los Angeles, Assistant
Professor
2000.12 Korea Accounting Research Institute, Senior Member of
Accounting Standard Committee N/A
1991.08 Hongik University, Professor of Business Administration
(current)
(E) Whether directors are covered by directors' liability insurance
AMOUNT PAID BY THE
NAME PREMIUM INSURANCE VALUE COMPANY REMARKS
----------------------- --------------- ------------------ ------------------ -------------------------
All officers of Shinhan 675 million Won 30,000 million Won 675 million Won Insurance premium and
Financial Group and its amount paid by the
affiliate company are calculated on
a annual basis
Note) The above directors' liability insurance is provided by Shinhan Financial
Group at a group level.
(2) Matters concerning the operations of the board of directors
(A) Material terms of regulations concerning the operation of
board of directors
1) Duty of board of directors
To approve management strategy and management objectives and
supervise their implementation
To assess the appropriateness of the internal control system
such those relating to risk management and to create an
internal control environment for the purpose of maintaining
sound management of the company
2) Organization of committee
Audit, recommendation, compensation and risk management
committees shall be established and other committees may be
established as needed by a resolution of the board of
directors (Abolition of execution committee: the resolution of
the board of directors on May 7, 2003, abolition of
regulations concerning the committee).
The composition and management of committees are governed by
regulations concerning committees, which are established
separately.
Committees shall report their resolutions to the board, and
the board may deliberate and resolve on matters that have been
decided by the committees.
3) Convening of board of directors and person entitled to convene
a meeting
Ordinary meeting of board of directors: once in every quarter
Extraordinary meeting of board of directors: in case the
chairman of the board or the representative director/president
deems that a convening of a meeting is necessary or more than
three directors make a request for a meeting, a meeting may be
convened by the parties entitled to call such meeting
designating a place and time for the meeting.
4) Convening notice
Notice of convening of a meeting should be sent to each
director at least seven days before the date of the meeting.
However, in case of an emergency, such notice period may be
shortened by a post or prior consent by more than a majority
of the directors.
5) Distribution of agenda
Agenda for a meeting of the board of directors or a committee
should be distributed to all directors, members of committees
and such others who will be present at the meeting, as
applicable, no later than five days before the date of the
meeting.
6) Matters subject to resolution
- Matters relating to the general meeting of shareholders
- Matters relating to provision, amendment or deletion
of the articles of incorporation or important internal
regulations
- Matters relating to paid-in-capital and capital stock
- Basic matters relating to the operation and management
of the company
- Matters relating to financing
- Matters relating to assets owned by the company
- Matters relating to directors
- Matters relating to execution of material contracts
- Other important matters
7) Method of resolution
- Except as otherwise stated in relevant law, regulations
or the articles of incorporation, a quorum is
constituted by the presence of the majority of
registered directors and a resolution is adopted by the
affirmative votes of the majority of directors present.
- It is possible for all or some of the members of the
board not to be physically present at a meeting but
participate in the meeting by a communication tool that
is capable of transmitting and receiving both visual
images and voice, and in such case, the directors
participating by such means will be deemed to have been
directly present at the meeting.
(B) Major activities of board of directors
FREQUENCY DATE OF MEETING AGENDA APPROVED OR NOT REMARKS
-------- --------------- ---------------------------------------------------------- --------------- -------
1 2004.04.14 Approval of financial statements for the fifth fiscal year Approved
Renewal of current account and outstanding debt
2 2004.05.11 Convening of the fifth general meeting of the shareholders Approved
Revision of important internal regulations; changes in
name and location of branches
Renewal of current account and outstanding debt
3 2004.05.28 Appointment of the representative director/president Approved
Organization of committees under the board of directors
Cancellation of stock options that have been granted
Name changes of branches
4 2004.07.29 Appointment of managing officer Approved
Organizational restructuring of 2004
Transfer of branches
Change of general managers
5 2004.09.17 Share swap with Shinhan Financial Group Approved
Convocation of an extraordinary shareholders meeting
Convocation of an extraordinary shareholders meeting for
preferred shareholders
(C) Major activities of outside directors on the board
FREQUENCY DATE OF MEETING NUMBER OF OUTSIDE DIRECTORS PRESENT REMARKS
--------- --------------- ----------------------------------- -------
1 2004.04.14 2(2)
2 2004.05.11 2(2)
3 2004.05.28 4(4)
4 2004.07.29 4(4)
5 2004.09.17 4(4)
(D) Status of committees of the board of directors and activities
thereof
As of June 30, 2004
NUMBER OF
NAME OF COMMITTEE MEMBERS STATUS OF MEMBERS STATUS OF OUTSIDE DIRECTORS
------------------------- --------- ----------------------------- -----------------------------
Recommendation Committee 4 Kang Won Lee, Chil Sun Hong, Hong Ryul Cheon, Kyung Ho Kim
Hong Ryul Cheon, Kyung Ho Kim
Compensation Committee 3 Chil Sun Hong, Jin Won Park, Jin Won Park, Kyung Ho Kim
Kyung Ho Kim
Risk Management Committee 3 Jin Won Park, Hyoung Tae Kim, Jin Won Park, Hyung Tae Kim,
Hong Ryul Jeon Hong Ryul Cheon
Audit Committee 3 Sung No Lee, Hyoung Tae Kim, Hyoung Tae Kim, Kyung Ho Kim
Kyung Ho Kim
B. Matters concerning audit system
(1) Matters relating to audit organization
(A) Establishment and composition of audit committee, etc.
DATE OF LATEST
CLASSIFICATION ESTABLISHED OR NOT METHOD OF ORGANIZATION APPOINTMENT REMARKS
------------------ ------------------ ---------------------------------- -------------- -------
Audit Committee Yes Standing member Sung No Lee 2004.5.28
Outside director Hyoung Tae Kim 2004.5.28
Outside director Kyung Ho Kim 2004.5.28
Compliance officer Yes Appointed by the board of director 2003.2.6
(B) Whether internal mechanisms are established for the audit
committee to have access to needed business information in
carrying out its duties
** Duties of the audit committee are stipulated in Article 43.
- Auditing of performance and accounting of the company
- Right to request convening of an extraordinary
general meeting of shareholders
- Right to request business reports from subsidiaries
- Right to appoint an independent auditor
** Rights and duties of the audit committee pursuant to Article 3
and 4 of Audit committee regulations
1) Duties of the audit committee
- To establish internal audit plans, which consist of
financial, performance, compliance, management and IT
audits; to execute the audit plans, evaluate results
thereof, implement post-audit measures and present
measures for improvement
- To evaluate the overall internal control system of
the company and present measures for improvement
- To consent to the appointment or dismissal of the
head of an internal audit division
- To approve appointment of an independent auditor
- To evaluate audit performance of an independent auditor
- To confirm whether relevant measures have been taken in
response to audit findings
- To deal with matters delegated to the committee by the
board of directors and matters specified for its action
under relevant law and regulations and the articles of
incorporation
- To carry out audits concerning other matters as directed
by a regulatory authority or as deemed necessary by the
board of directors or committees
2) Authority of audit committee
- As a matter of principal, right of access to all
information within the company (the management shall
provide all information relating to the management of
the company that are material to the committee for the
performance of its duties).
- Right to request attendance of or responses from
relevant persons
- Sealing of warehouse, safe, account book or products
- Right to request materials for investigation of related
party transactions
- Right to request other matters necessary for the
performance of its audit activities
** The performance standards and procedures that apply to the
Audit committee are stated in the audit committee regulations
** Operation of standing audit team
(C) Personal information concerning the members of the audit
committee
NAME MAJOR WORK EXPERIENCE REMARKS
-------------- --------------------------------------------------------------------------- -------
Hyoung Tae Kim University of Pennsylvania, Wharton School
Senior Research Fellow
Korea Securities Research Institute, Research Fellow
Korea Securities Research Institute, Vice-President
Sung No Lee Bank of Korea; Senior Director of Planning and Coordination,
Financial Supervisory Commission
Kyung Ho Kim Purdue University (Ph.D. in Business Management); University of California,
Los Angeles, Assistant Professor
Korea Accounting Institute, Senior Member of Accounting Standard Committee
Hongik University, Professor of Business Administration
(D) Particulars of major activities of Audit committee
DATE OF APPROVED OR
FREQUENCY MEETING DETAILS OF AGENDA NOT REMARKS
--------- ---------- -------------------------------------------------------------- ----------- -------
1 2004.05.04 1. Approval of amendments to audit committee regulations Approved
concerning the duties of the audit committee
2. Review of financial statements for the fifth fiscal term Approved
3. Review of audit committee regulation revisions - Reported
4. Reports of the contents of a financial audit carried out by
outside auditors - Reported
5. Reports of an internal accounting management system for the
2nd half of 2003 fiscal year - Reported
6. Reports of audit team performance for the 1/4 quarter of
2004
7. Reports of observer team performance for the 1/4 quarter of - Reported
2004
- Reported
2 2004.07.29 1. Report on the operation of Internal control - Reported
procedure
2. Reports of audit team performance for the 2/4 - Reported
quarter of 2004
3. Reports of observer team performance for the 2/4 - Reported
quarter of 2004
C. Matters relating to Exercise of Shareholders' Voting Rights
(1) Whether a cumulative voting system is to be adopted
Exclusion of cumulative voting system (Article 30-3)
(2) Whether a written voting or electronic voting system is to be
adopted
- In the event that the board of directors approves the
convening of the general meeting of shareholders, and
in such approval it is resolved that the voting may
be exercised in writing, then the voting right may be
exercised in writing at such meeting (Article 27-3).
(3) Exercise of Minority Shareholders' Rights
- N/A
D. Compensation for Officers, Etc.
(1) Status of compensation for directors (including outside directors)
and members of audit committee
(Unit: Million Won)
AMOUNT APPROVED AT THE
GENERAL MEETING OF AVERAGE PAID AMOUNT PER REMARKS
CLASSIFICATION TOTAL AMOUNT SHAREHOLDERS PERSON
--------------- ------------ ---------------------- ----------------------- -------
Directors 137 34
Members of audit 57 2,500 19
committee
(2) Details of Stock Options Granted to Officers
For the details, see "I. Company Overview, 4. Total Number of
Shares"
2. STATUS OF AFFILIATES
A. Status of Ratio of Investment in Affiliates and Subsidiaries
B. Performance of Affiliates and Subsidiaries
Company: Shinhan Bank
ID No.: 00137571
(Unit: 100 Million Won)
CLASSIFICATION 22ND FY 21ST FY 20TH FY
-------------------------- ------- ------- -------
[Assets]
-Cash & Due from Bank 35,478 20,477 21,179
-Marketable Securities 7,382 4,670 6,425
-Investment Securities 148,540 133,880 133,777
-Loans 477,839 405,790 338,812
-Fixed Assets 6,392 6,297 6,036
-Other Assets 25,081 17,780 27,331
Total Assets 700,712 588,894 533,560
[Liabilities]
-Deposits 419,918 351,835 318,929
-Borrowings 106,220 105,987 96,620
-Debentures 91,160 60,688 35,125
-Other Liabilities 48,260 41,779 51,177
Total Liabilities 665,558 560,289 501,851
[Capital Stock] 12,240 12,232 13,759
[Capital Surplus] 8,178 8,178 9,119
[Retained Earnings] 12,682 7,912 7,276
[Capital Adjustment] 2,053 283 1,555
Total Stockholder's Equity 35,154 28,605 31,709
Operating Revenues 48,520 48,213 46,796
Operating Expenses 41,806 38,889 42,391
Operating Income 6,714 9,324 4,405
Ordinary Income 6,858 8,430 4,957
Net Income for the Year 4,760 5,959 3,471
Company: Chohung Bank Co.,Ltd.
ID NO.:00149293
(UNIT: 100 Million Won)
CLASSIFICATION 172ND FY 171ST FY 170TH FY
-------------- ----------- ----------- -----------
[Assets]
-Cash&Due from Bank 15,506 26,988 20,379
-Marketable Securities 11,246 9,902 12,369
-Investment Securities 80,837 100,824 128,394
-Loans 427,017 453,285 344,430
-Fixed Assets 12,807 14,153 15,658
-Other Assets 44,866 56,811 39,033
Total Assets 592,279 661,963 560,263
[Liabilities]
-Deposits 400,301 451,258 389,221
-Borrowings 57,119 68,437 74,297
-Debentures 64,242 56,723 24,197
-Other Liabilities 51,230 62,621 47,189
Total Liabilities 572,892 639,040 534,905
[Capital Stock] 35,956 33,956 33,954
[Capital Surplus] - 452 -
[Retained Earnings] -18,858 -9,659 -3,796
[Capital Adjustment] 2,289 -1,826 -4,799
Total Stockholder's Equity 19,386 22,923 25,358
Operating Revenues 54,252 53,171 51,923
Operating Expenses 61,071 54,518 44,662
Operating Income -6,819 -1,347 7,261
Ordinary Income -9,158 -6,112 3,364
Net Income for the Year -9,660 -5,860 5,225
Company: Shinhan Card Co.,Ltd
ID No.: 00426998
(Unit: Million Won)
2ND FY 1ST FY
CLASSIFICATION (2003.12.31) (2002.12.31)
-------------- ----------- -----------
[Current Assets] 175,675 15,958
-Quick Assets 175,675 15,958
[Credit Card Assets] 1,057,167 2,439,076
[Fixed Assets] 545,350 18,661
-Investment Assets 535,277 7,946
-Tangible Assets 10,073 10,715
Total Assets 1,778,191 2,473,695
[Current Liabilities] 568,900 1,815,992
[Fixed Liabilities] 1,051,656 410,242
Total Liabilities 1,620,555 2,226,234
[Capital Stock] 152,847 152,847
[Capital Surplus] 94,109 94,109
[Retained Earnings] -89,320 504
[Capital Adjustment] - -
Total Stockholder's Equity 157,636 247,461
Operating Revenues 431,863 228,954
Operating Expenses 506,606 228,213
Operating Income -74,743 741
Ordinary Income -90,603 798
Net Income for the Year -89,824 504
Company: Shinhan Capital Co.,Ltd.
ID No.: 00137456
(Unit: Million Won)
13TH FY 12TH FY 11ST FY
CLASSIFICATION (2003.12.31) (2002.12.31) (2001.12.31)
-------------- ----------- ----------- -----------
[Current Assets] 85,063 58,415 80,600
[Finance Assets] 226,401 136,811 93,878
[Lease Assets] 771,062 703,227 615,715
[Investment in Venture 894 1,120 2,199
Companies]
[Fixed Assets] 70,486 60,581 65,290
Total Assets 1,153,907 960,235 857,682
[Current Liabilities] 337,511 278,420 284,173
[Fixed Liabilities] 714,172 598,131 492,323
Total Liabilities 1,051,683 876,551 776,496
[Capital Stock] 80,000 80,000 80,000
[Capital Surplus] - - -
[Retained Earnings] 22,852 7,098 3,333
[Capital Adjustment] -628 -3,414 -2,147
Total Stockholder's Equity 102,224 83,684 81,186
Operating Revenues 145,355 118,470 150,281
Operating Expenses 116,084 109,928 179,817
Operating Income 29,271 8,541 -29,536
Ordinary Income 22,565 5,565 -32,527
Net Income for the Year 15,755 3,827 -23,049
Company: Shinhan BNP Paribas Investment Trust Management Co., Ltd.
ID No. : 00243553
(Unit: Million Won)
8TH FY 7TH FY 6TH FY
CLASSIFICATION (2004.3.31) (2003.3.31) (2002.3.31)
-------------- ----------- ----------- -----------
[Current Assets] 43,296 36,374 42,972
-Cash & Due from Bank 30,904 24,201 24,182
-Marketable Securities 9,601 9,525 13,089
-Loans 255 - 106
-Other Current Assets 2,357 2,648 5,595
[Fixed Assets] 5,717 8,934 3,217
-Investment securities 694 3,005 304
-Investment Assets 4,262 4,836 1,346
-Tangible Assets 611 844 896
-Other Fixed Assets 150 249 671
Total Assets 49,013 45,308 46,189
[Current Liabilities] 2,414 1,259 4,590
[Fixed Liabilities] 500 237 245
Total Liabilities 2,914 1,496 4,835
[Capital Stock] 40,000 40,000 40,000
[Capital Surplus] - - -
[Retained Earnings] 6,063 3,887 1,428
[Capital Adjustment] 36 -74 -74
Total Stockholder's Equity 46,099 43,812 41,354
Operating Revenues 12,739 9,873 11,267
Operating Expenses 7,319 4,614 5,417
Operating Income 5,420 5,259 5,850
Ordinary Income 6,059 5,407 5,304
Net Income for the Year 4,251 3,810 3,628
Company: Jeju Bank
ID No.: 00148832
(Unit: Million Won)
44TH FY 43RD FY 42ND FY
CLASSIFICATION (2003.12.31) (2002.12.31) (2001.12.31)
-------------- ----------- ----------- -----------
[Assets]
-Cash & Due from Bank 72,532 59,508 70,685
-Marketable Securities 18,569 50,671 1,356
-Investment Securities 224,455 225,902 286,907
-Loans 1,326,103 1,317,843 961,793
-Fixed Assets 52,199 54,970 44,857
-Other Assets 92,103 91,754 79,216
Total Assets 1,785,961 1,800,648 1,444,814
[Liabilities]
-Deposits 1,438,284 1,399,105 117,312
-Borrowings 83,299 106,252 56,999
-Debentures 35,000 35,000 135,332
-Other Liabilities 125,745 155,338 1,383,664
Total Liabilities 1,682,328 1,695,695 1,074,021
[Capital Stock] 77,644 77,644 55,460
[Capital Surplus] 10,311 10,311 10,311
[Retained Earnings] 13,181 12,502 -
[Capital Adjustment] 2,496 4,496 -4,621
Total Stockholder's Equity 103,633 104,953 61,150
Operating Revenues 137,125 145,558 118,756
Operating Income 157 16,154 2,197
Net Income for the Year 4,751 12,502 1,163
Company: e-Shinhan, Inc.
ID No.: -
(Unit: Million Won)
3RD FY 2ND FY 1ST FY
CLASSIFICATION (2003.12.31) (2002.12.31) (2001.12.31)
-------------- ----------- ----------- -----------
[Current Assets] 2,706 4,210 4,311
-Quick Assets 2,706 4,210 4,311
[Fixed Assets] 1,218 1,548 2,160
-Investment Assets 412 313 293
-Tangible Assets 420 675 1,159
-Intangible Assets 386 560 708
Total Assets 3,924 5,758 6,471
[Current Liabilities] 162 427 130
[Fixed Liabilities] 63 48 -
Total Liabilities 225 475 130
[Capital Stock] 2,820 2,820 2,820
[Capital Surplus] 6,710 6,710 6,710
[Retained Earnings] -5,866 -4,282 -3,189
[Capital Adjustment] 35 35 -
Total Stockholder's Equity 3,699 5,283 6,341
Operating Revenues 1,714 2,529 -3,189
Operating Expenses 3,361 3,776 3,659
Operating Income -1,647 -1,247 -6,848
Ordinary Income -1,583 -1,094 -3,189
Net Income for the Year -1,583 -1,094 -3,189
[ ] The financial statements for the 1st FY have not been audited.
Company: Shinhan Macquarie Financial Advisory Co., Ltd.
ID No.: -
(Unit: Million Won)
3RD FY 2ND FY 1ST FY
CLASSIFICATION (2004.3.31) (2003.3.31) (2002.3.31)
-------------- ----------- ----------- -----------
[Current Assets] 17,056 4,317 6,468
-Quick Assets 17,056 4,317 6,468
[Fixed Assets] 647 703 183
-Investment Assets 479 475 71
-Tangible Assets 168 178 52
-Intangible Assets - 50 60
Total Assets 17,703 5,020 6,651
[Current Liabilities] 13,140 4,064 5,554
Total Liabilities 13,414 4,064 5,554
[Capital Stock] 1,000 1,000 1,000
[Capital Surplus] - - -
[Retained Earnings] 3,289 -44 97
[Capital Adjustment] - - -
Total Stockholder's Equity 4,289 956 1,097
Operating Revenues 16,169 2,487 5,850
Operating Expenses 10,822 2,617 4,261
Operating Income 5,347 129 1,589
Ordinary Income 5,345 -534 1,539
Net Income for the Year 3,368 -268 1,070
Company : Shinhan Credit Information Co., Ltd.
ID No. :-
(Unit:Million Won)
2ND FY 1ST FY
CLASSIFICATION (2003.12.31) (2002.12.31)
-------------- ------------ ------------
[Current Assets] 6,831 2,445
-Quick Assets 6,831 2,445
[Fixed Assets] 6,757 1,486
-Investment Assets 3,543 806
-Tangible Assets 2,519 677
-Intangible Assets 695 3
Total Assets 13,588 3,931
[Current Liabilities] 3,585 804
[Fixed Liabilities] 6,141 6
Total Liabilities 9,726 810
[Capital Stock] 3,000 3,000
[Capital Surplus] - -
[Retained Earnings] 862 121
[Capital Adjustment] - -
Total Stockholder's Equity 3,862 3,121
Operating Revenues 25,557 3,137
Operating Expenses 24,309 3,001
Operating Income 1,248 136
Ordinary Income 1,096 162
Net Income for the Year 741 121
Company: SH&C Life Insurance Co., Ltd.
ID No.: -
(Unit: Million Won)
2ND FY 1ST FY
CLASSIFICATION (2004.3.31) (2003.3.31)
-------------- ----------- -----------
[Cash & Due from Bank] 14,738 11,648
[Investment Securities] 54,547 15,197
Total Assets 140,105 29,297
[Other Liabilities] 74,324 311
Total Liabilities 113,961 311
[Capital Stock] 30,000 30,000
[Capital Surplus] - -
[Retained Earnings] - -
[Capital Adjustment] 869 576
Total Stockholder's Equity 26,143 28,986
Operating Revenues 52,100 882
Operating Expenses 55,492 2,471
Operating Income -3,392 -1,589
Ordinary Income -3,136 -1,589
Net Income for the Year -3,136 -1,589
Company: Shinhan Finance Ltd.
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Assets]
-Loans in Foreign Currency 370,131 167,667 284,730
-Due from Banks in Foreign Currency 2,247 3,586 162,775
-Bills Bought in Foreign Currency 14,577 20,235 5,078
-Securities 136,501 118,133 90,043
-Allowance for Possible Loan Losses -1,388 -3,266 -3,949
-Other Assets 1,974 2,689 3,286
-Fixed Assets for Operations 137 374 437
Total Assets 524,180 513,726 542,399
[Liabilities]
-Deposits in Foreign Currency 60,964 75,974 463,790
-Borrowings in Foreign Currency 397,313 332,996 11,935
-Other Liabilities 1,321 10,480 1,533
Total Liabilities 459,598 446,894 477,258
[Stockholder's Equity]
-Capital Stock 63,684 63,684 63,684
-Retained Earnings -277 1,837 -6,334
-Capital Adjustment 1,175 1,310 7,791
Total Stockholder's Equity 64,582 66,832 65,141
Net Sales 16,868 223,845 28,635
Operating Income -2,572 7,693 9,488
Ordinary Income -2,114 8,171 10,037
Net Income for the Year -2,114 8,171 10,037
Company: Shinhan Data System Co., Ltd.
ID No.: -
(Unit: Million Won)
13TH FY 12TH FY 11TH FY
CLASSIFICATION (2003.12.31) (2002.12.31) (2001.12.31)
-------------- ------------ ------------ ------------
[Assets]
-Current Assets 2,431 2,197 1,914
-Investments and Other Assets 198 199 194
-Fixed Assets 68 60 19
Total Assets 2,696 2,457 2,127
[Liabilities]
-Current Liabilities 204 224 79
-Fixed Liabilities 338 231 183
Total Liabilities 543 455 262
[Stockholder's Equity]
-Capital Stock 1,000 1,000 1,000
-Retained Earnings 1,154 1,002 864
Total Stockholder's Equity 2,154 2,002 1,864
Liabilities and Total Stockholder's 2,696 2,457 2,127
Equity
Net Sales 4,264 3,551 2,769
Operating Income 121 128 60
Ordinary Income 204 212 165
Net Income for the Year 152 137 119
Company: Chohung Investment Trust Management Co., Ltd.
ID No.: - 0023085
(Unit: Million Won)
CLASSIFICATION 16TH FY 15TH FY 14TH FY
-------------- ------- ------- -------
[Current Assets] 64,043 62,279 47,487
-Cash & Due from Bank 61,464 59,870 42,814
-Marketable Securities - - -
-Loans 2,579 - -
-Other Current Assets - 2,409 4,673
[Fixed Assets] 5,593 10,087 21,284
-Investment Securities 1,972 5,040 16,794
-Investment Assets 2,380 3,788 3,762
-Tangible Assets 263 281 328
-Other Fixed Assets 978 978 400
Total Assets 69,636 72,366 68,771
[Current Liabilities] 1,342 7,446 8,891
[Fixed Liabilities] 153 200 78
Total Liabilities 1,495 7,646 8,969
[Capital Stock] 45,000 45,000 45,000
[Retained Earnings] 23,141 19,720 14,878
[Capital Adjustment] - - (-)76
Total Stockholder's Equity 68,141 64,720 59,802
Net Sales 13,630 21,374 23,211
Operating Income 7,526 15,171 18,251
Ordinary Income 6,274 13,367 16,812
Net Income for the Year 4,411 9,343 11,622
Company: Chohung Finance Ltd.
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 129,414 153,378 193,874
-Cash & Due from Bank 18,914 12,322 28,759
-Marketable Securities 6,064 6,325 6,547
-Loans 104,436 134,731 175,711
-Other Current Assets - - -
[Fixed Assets] 15,294 13,827 30,075
-Investment Securities 14,470 12,677 28,333
-Tangible Assets 384 282 359
-Other Fixed Assets 440 868 1,384
Total Assets 144,708 167,205 223,949
[Current Liabilities] 109,682 120,029 172,679
[Fixed Liabilities] 265 660 6,849
Total Liabilities 109,947 120,689 179,529
[Capital Stock] 17,967 18,006 19,637
[Retained Earnings] 17,132 28,586 24,768
[Capital Adjustment] (-)338 (-)76 16
Total Stockholder's Equity 34,761 46,516 44,420
Net Sales 10,296 16,207 19,906
Operating Income (-)11,500 12,059 8,425
Ordinary Income (-)11,392 5,875 7,013
Net Income for the Year (-)11,392 5,875 7,013
Company: CHB America Bank
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 342,439 292,834 270,605
-Cash & Due from Bank 10,135 11,651 12,446
-Loans 332,304 281,183 258,159
-Other Current Assets - - -
[Fixed Assets] 44,059 49,251 51,385
-Investment Securities 29,685 34,109 34,575
-Tangible Assets 9,902 9,946 11,371
-Fixed Other Assets 4,472 5,196 5,439
Total Assets 386,498 342,085 321,990
[Current Liabilities] 322,274 253,483 225,835
[Fixed Liabilities] - - 2,650
Total Liabilities 322,274 253,483 228,485
[Capital Stock] 60,876 73,012 79,623
[Retained Earnings] 3,183 15,311 13,988
[Capital Adjustment] 165 279 (-)106
Total Stockholder's Equity 64,224 88,602 93,505
Net Sales 22,325 22,876 29,254
Operating Income 3,710 18,451 9,525
Ordinary Income 3,949 4,343 6,510
Net Income for the Year 2,280 2,497 4,329
Note) On March 24, 2003, CHB America Bank is a wholly-owned subsidiary of
Chohung Bank created through a merger of Chohung Bank of New York and
Chohung Bank of California. The closing performance before the merger is
the simple sum of the closing performances of the above two companies.
Company: Chohung Bank (Deutschland) GmbH
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 200,120 207,394 203,710
-Cash & Due from Bank 30,031 18,081 52,809
-Loans 170,089 189,313 150,901
-Other Current Assets - - -
[Fixed Assets] 3,951 4,696 10,024
-Investment Securities 2,403 2,400 8,660
-Tangible Assets 225 392 280
-Other Fixed Assets 1,323 1,904 1,084
Total Assets 204,071 212,090 213,734
[Current Liabilities] 170,795 182,001 189,717
[Fixed Liabilities] 207 1,635 2,464
Total Liabilities 171,002 183,636 192,181
[Capital Stock] 23,048 19,179 17,716
[Retained Earnings] 10,021 9,275 3,837
Total Stockholder's Equity 33,069 28,454 21,553
Net Sales 12,370 14,997 15,069
Operating Income (-)1,590 10,486 6,269
Ordinary Income (-)1,032 7,720 4,968
Net Income for the Year (-)1,130 5,024 3,097
Company: Chohung Vina Bank
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 146,730 146,261 113,501
-Cash & Due from Bank 46,422 87,596 80,917
-Loans 100,308 58,665 32,584
-Other Current Assets - - -
[Fixed Assets] 2,617 1,955 2,102
-Investment Securities 544 554 623
-Tangible Assets 1,010 356 617
-Other Fixed Assets 1,063 1,045 862
Total Assets 149,347 148,216 115,603
[Current Liabilities] 126,849 129,440 93,759
[Fixed Liabilities] - - 2,709
Total Liabilities 126,849 129,440 96,468
[Capital Stock] 23,956 24,008 26,522
[Retained Earnings] (-)1,458 (-)5,232 (-)7,387
Total Stockholder's Equity 22,498 18,776 19,135
Net Sales 8,254 6,986 6,279
Operating Income 2,610 4,851 1,811
Ordinary Income 3,762 1,516 (-)9,020
Net Income for the Year 3,762 1,516 (-)9,025
Company: CHB Valuemeet Year 2001 1st Securitization
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 2,089 2,853 4,153
-Cash & Due from Bank 1,993 1,771 3,713
-Marketable Securities - - -
-Loans - - -
-Other Current Assets 96 1,082 440
[Securitization Assets] 625 5,360 30,615
-Securitization Assets 625 5,360 30,615
[Fixed Assets] - - -
-Tangible Assets - - -
-Other Fixed Assets - - -
Total Assets 2,714 8,213 34,768
[Current Liabilities] 1,853 772 1,656
[Securitization Liabilities] 1,000 15,730 39,803
[Fixed Liabilities] - - -
Total Liabilities 2,853 16,502 41,459
[Capital Stock] 10 10 10
[Retained Earnings] (-)149 (-)8,299 (-)6,701
[Capital Adjustment] - - -
Total Stockholder's Equity (-)139 (-)8,289 (-)6,691
Operating Revenues 14,607 7,868 1,600
Operating Income 7,149 (-)1,810 (-)6,879
Ordinary Income 8,150 (-)1,598 (-)6,701
Net Income for the Year 8,150 (-)1,598 (-)6,701
Company: CHB Valuemeet Year 2001 2nd Securitization
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 220 430 922
-Cash & Due from Bank 220 398 922
-Marketable Securities - - -
-Loans - - -
-Other Current Assets - 32 -
[Securitization Assets] 1,875 4,519 12,995
-Securitization Assets 1,875 4,519 12,995
[Fixed Assets] - - -
-Tangible Assets - - -
-Other Fixed Assets - - -
Total Assets 2,095 4,949 13,917
[Current Liabilities] 260 226 344
[Securitization Liabilities] 6,068 7,678 14,431
[Fixed Liabilities] - - -
Total Liabilities 6,328 7,904 14,775
[Capital Stock] 10 10 10
[Retained Earnings] (-)4,243 (-)2,965 (-)868
[Capital Adjustment] - - -
Total Stockholder's Equity (-)4,233 (-)2,965 (-)858
Operating Revenues 179 719 424
Operating Income (-)1,341 (-)2,124 (-)868
Ordinary Income (-)1,278 (-)2,097 (-)868
Net Income for the Year (-)1,278 (-)2,097 (-)868
Company: CHB Valuemeet Year 2002 2nd Securitization
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 401 569 859
-Cash & Due from Bank 399 554 859
-Marketable Securities - - -
-Loans - - -
-Other Current Assets 2 15 -
[Securitization Assets] 11,453 15,470 19,925
-Securitization Assets 11,453 15,470 19,925
[Fixed Assets] - - -
-Tangible Assets - - -
-Other Fixed Assets - - -
Total Assets 11,854 16,039 20,784
[Current Liabilities] 342 264 379
[Securitization Liabilities] 16,411 18,433 21,581
[Fixed Liabilities] - - -
Total Liabilities 16,753 18,697 21,960
[Capital Stock] 10 10 10
[Retained Earnings] (-)4,909 (-)2,668 (-)1,186
[Capital Adjustment] - - -
Total Stockholder's Equity (-)4,899 (-)2,658 (-)1,176
Operating Revenues 298 970 569
Operating Income (-)2,302 (-)2,679 (-)1,188
Ordinary Income (-)2,240 (-)2,668 (-)1,575
Net Income for the Year (-)2,240 (-)2,668 (-)1,186
Company: Good Morning Shinhan Securities USA Inc. (New York subsidiary)
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2004.03.31 2003.03.31 2002.03.31
-------------- ---------- ---------- ----------
[Current Assets] 5,331 7,633 10,367
-Quick Assets 5,331 7,633 10,367
-Inventories 0 0
[Fixed Assets] 351 335 600
-Investment Assets 41 449
-Tangible Assets 162 88 50
-Intangible Assets 0 0
-Other Assets 189 205 101
Total Assets 5,682 7,969 10,967
[Current Liabilities] 1,070 2,021 4,336
[Fixed Liabilities] 0 0
Total Liabilities 1,070 2,021 4,336
[Capital Stock] 3,342 5,262 5,571
[Capital Surplus] 0
-Capital Reserves 0 0
-Assets Revaluations Reserves 0 0
[Retained Earnings] -21 685 1,060
[Capital Adjustment] 1,291 0 0
Total Stockholder's Equity 4,612 5,948 6,631
Operating Income -984 316 3,693
Ordinary Income -984 (-)624 3,693
Net Income for the Year -984 (-)309 2,387
Note ) The financial statements of the New York subsidiary which are prepared in
accordance with the laws and regulations of the U.S. are restructured
into the Korean language financial statements and, hence, there may be
some differences in classifying account titles.
Company: Good Morning Shinhan Securities Europe Limited. (London subsidiary)
ID No.: -
(Unit: Million Won)
CLASSIFICATION 2003.12.31 2002.12.31 2001.12.31
-------------- ---------- ---------- ----------
[Current Assets] 7,225 3,641 4,744
-Quick Assets 6,095 3,641 4,744
-Other Assets 1,130 0 0
[Fixed Assets] 139 147 97
-Investment Assets 76 70 0
-Tangible Assets 63 72 97
-Intangible Assets 5 0
-Deferred Charges 0 0
Total Assets 7,364 3,789 4,773
[Current Liabilities] 60 58 59
[Fixed Liabilities] 0 0
Total Liabilities 60 58 59
[Capital Stock] 9,669 9,857 9,478
[Capital Surplus] 0 0
-Capital Reserves 0 0
-Assets Revaluations Reserves 0 0
[Retained Earnings] -5,210 (-)6,126 (-)4,764
[Capital Adjustment] 2,846 0 0
Total Stockholder's Equity 7,305 3,731 4,715
Net Sales 2,546 993 709
Operating Income -158 (-)1,113 (-)1,354
Ordinary Income -177 (-)1,122 (-)1,096
Net Income for the Year -177 (-)1,122 (-)1,096
Note) The financial statements of the London subsidiary which are prepared in
accordance with the laws and regulations of the U.K. are restructured into
the Korean language financial statements and, hence, there may be some
differences in classifying account titles.
Company: Shinhan Financial Group Co., Ltd.
ID No.: -
(Unit: Million Won)
CLASSIFICATION 3RD FY 2ND FY 1ST FY
-------------- ------ ------ ------
[Assets]
-Cash & Due from Bank 5,353 10,613 712
-Investment Securities under the Equity
Method 6,308,538 3,990,775 3,801,572
-Available-for-sale Securities 1,089
-Loans 1,935,180 765,281 145,728
-Fixed Assets 2,020 1,754 1,471
-Other Assets 43,339 15,467 6,498
Total Assets 8,294,430 4,784,979 3,955,981
[Liabilities]
-Borrowings 165,868 36,012 20,000
-Debentures 1,980,543 732,030 146,957
-Other Liabilities 30,464 6,717 1,264
Total Liabilities 2,176,875 774,759 168,221
[Capital Stock] 1,958,530 1,461,806 1,461,721
[Capital Surplus] 3,316,380 1,976,625 1,976,650
-Paid-In Capital in Excess of Par Value 3,316,380 1,976,625 1,976,650
[Retained Earnings] 866,398 672,530 219,923
[Capital Adjustment] -23,753 -100,741 129,466
Total Stockholder's Equity 6,117,555 4,010,220 3,787,760
Operating Revenues 486,428 643,360 226,542
Operating Expenses 121,480 41,141 5,780
Operating Income 364,948 602,219 220,762
Ordinary Income 362,227 603,931 220,763
Net Income for the Year 362,227 603,931 220,763
VI. MATTERS RELATING TO STOCK
1. DISTRIBUTION OF STOCKS
A. Current Status of Largest Shareholders & Specially Related Persons
[As of June 30, 2004] (Unit: Share, %)
NUMBER OF SHARES HELD (SHAREHOLDING RATIO)
------------------------------------------------------------------------
BEGINNING INCREASE DECREASE ENDING
------------------------------------------------------------------------
TYPE OF NUMBER OF SHAREHOLDING NUMBER OF NUMBER OF NUMBER OF SHAREHOLDING CAUSE OF
NAME RELATION SHARES SHARES RATIO SHARES SHARES SHARES RATIO CHANGE
---- -------- ------ ------ ----- ------ ------ ------ ----- ------
Shinhan Financial Largest Common Share 94,084,384 60.47 - - 94,084,384 60.47
Group Shareholder
Good Morning Principal Common Share 4,795 0 - - 4,795 0
Shinhan Securities
Good Morning Principal Preferred
Shinhan Securities Share 1,042,418 27.26 - - 1,042,418 27.26
Specially
Bo Gil Baek Related Common Share 495 0 - - 495 0
Person
Total Common Share 94,089,674 60.48 - - 94,089,674 60.48
Preferred
share 1,042,418 27.26 - - 1,042,418 27.26
---------- ----- ----- ---- ---------- -----
Total 95,132,092 59.68 - - 95,132,092 59.68
Name of Largest Shareholder: Shinhan Financial Group Number of Specially Related Persons: 2
B. Current Status of Share Ownership of Shareholders holding more than 5% of
Shares
[As of June 30, 2004 ] (Unit: Share, %)
COMMON STOCK PREFERRED STOCK SUBTOTAL
------------------------ ----------------------- ------------------------
SERIAL NUMBER OF SHAREHOLDING NUMBER OF SHAREHOLDING NUMBER OF SHAREHOLDING
NO. NAME SHARES RATIO SHARES RATIO SHARES RATIO
--- ---- ------ ----- ------ ----- ------ -----
1 Shinhan Financial Group 94,084,384 60.47 - - 94,084,384 59.02
Total 94,084,384 60.47 - - 94,084,384 59.02
2. BUSINESS AFFAIRS RELATING TO SHARES
Details of Pre-emptive Rights stated in <1>The shareholders of the company shall have pre-emptive right to subscribe for new
the Articles of Incorporation shares to be issued by the company in proportion to their respective shareholdings. In
the case that any shareholder waives or loses his/her pre-emptive right to subscribe
for new shares or fractional shares that result from the allocation of new shares, the
shares which have not been subscribed and/ or allocated shall also be disposed of by a
resolution of the board of directors.
<2>Notwithstanding the provision of paragraph <1> above, the company may allocate new
shares to persons other than existing shareholders of the company in any of the
following instances:
1. If the company issues new shares through a public offering or cause underwriters to
underwrite new shares in accordance with the provisions of the Securities Exchange
Act ("SEA");
2. If the company issues new shares by way of a general public offering pursuant to
the provisions of SEA and Article 10-4 of the articles of incorporation;
3. If the company preferentially allocates new shares to members of the employee stock
ownership incorporation in accordance with the provisions of the SEA;
4. If the company issues new shares upon the exercise of stock options in accordance
with the provisions of the SEA and Article 10-3 of the articles of incorporation;
5. If the company issues new shares for the issuance of depositary receipts ("DR") in
accordance with the provisions of the SEA;
6. If the company issues new shares to foreign investors pursuant to the Foreign
Investment Promotion Act and Article 10-4 of the articles of incorporation;
7. If the company issues new shares to third parties who have provided capital,
credit, advanced financing technology or know-how or who has close strategic
business alliance with the company or has otherwise contributed to the operation
and management of the company pursuant to Article 10-4 of articles of
incorporation;
Date of Closing March 31 General shareholders meeting May 28
Period of Closing of Shareholders' One month from the date immediately preceding the last day of each fiscal year
Registry
Types of Share Certificates Common share in registered form, preferred share in registered form
8 denomination types of 1,5,10,50,100,500,1000,10000 share certificates
Agent: Kookmin Bank
Transfer Agent Agent's business office: Securities Agency Division 12-22 Yeouido-dong,
Yeongdeungpo-gu, Seoul
Special Shareholder Privileges None Newspaper for public notice The Korea Economic Daily
Maeil Business Newspaper
3. STOCK PRICE & RESULTS OF STOCK TRADING FOR THE MOST RECENT SIX (6) MONTHS
A. Korea Securities Market
(Unit: Won, Share)
TYPE AUGUST JULY JUNE MAY APRIL MARCH
------------------------- ------ ---- ---- --- ----- -----
Common Stock High 3,400 3,105 3,175 4,025 4,800 5,470
Low 2,750 2,705 2,610 2,935 3,930 4,495
Monthly Trading Volume 17,349,221 11,799,218 12,816,112 16,867,070 19,276,160 27,227,542
Preferred Stock High 1,850 1,840 2,005 2,500 2,715 3,150
Low 1,615 1,600 1,710 1,800 2,350 2,615
Monthly Trading Volume 136,863 141,833 119,601 137,678 162,118 254,870
B. Overseas Securities Market
- N/A
VII. MATTERS RELATING TO OFFICERS AND EMPLOYEES
1. STATUS OF OFFICERS
(Unit: Share)
NUMBER OF SHARES OWNED
TITLE RESPONSIBLE ----------------------
STANDING / REGISTERED DATE OF DEPARTMENT COMMON PREFERRED
NON-STANDING OR NOT NAME BIRTH EDUCATION & WORK EXPERIENCE AFFAIRS STOCK STOCK REMARKS
------------ ------ ---- ----- --------------------------- ------- ----- ----- -------
Representative Registered Woo Keun Lee 42.04.22 Korea University B.A. in Public Standing
Director / Administration Auditor - -
Vice Chairman Shinhan Securities
(Standing) Representative
Director/President
Representative Registered Kang Won Lee 50.08.08 Seoul High School Overall
Director / Seoul National University, B.A. Management - -
President in Agricultural Economics
Standing
Johns Hopkins University, PhD
in Economics
Auditor Registered Sung No Lee 48.12.20 Yonsei University B.A in Director - -
(Standing) Business
Financial Supervisory
Commission, Senior Director of
Planning and Coordination
Director Registered Chill Sun Hong 46.08.20 Dangjin Commercial High School Director - - Shinhan
Financial
(non-standing) Sungkyunkwan University, B.A. Group,
in Business Management Managing
Director
Director Completion of Executive course
in Seoul National University
Director Registered Jin Won Park 46.12.01 Seoul National University, B.A. DIRECTOR - - Shin &
(non-standing) in Business Kim, US
Legal
MA in Economics in Columbia Consultant
University
Brooklyn Law School (J.D.)
Director Registered Hong Ryul 48.10.13 Yonsei University, B.A. in Director - - Kim &
(non-standing) Cheon Public Administration Chang,
Senior
Seoul National University, M.A. Advisor
in Public Administration
Director Registered Hyoung Tae Kim 61.07.07 Seoul National University, B.A. Director - - Korea
(Outside in Business Management Securities
Director) Research
Seoul National University, M.A. Institute,
in Business Management Vice President
MIT, Post-doctorate
Director Registered Kyung Ho Kim 54.12.21 Gyeonggi High School Director - - Hongik
(Outside University,
Director) Seoul National University, B.A. Professor
in Business Management of Economics
Purdue University, Ph.D. in
Business Management
Vice President Non- Dae Seok Kang 58.06.28 Seoul National University, B.A. Head of - -
(Standing) registered in Business Management Capital
Shinhan Securities, Managing Markets
Director Group
Vice President Non- Jong Kil Park 56.06.08 Sungkyunkwan University, B.A. Head of - -
(Standing) registered in Law Cooperation,
Planning &
Ssangyong Investment Securities Operation
Group
Vice President Non- Hyun Jae Han 56.01.12 Sogang University, B.A. in Head of - -
(Standing) registered Biology Retail
Business
Good Morning Securities, Head Group
of Youngnam region
Assistant Vice Non- Chae Young Jung 59.11.15 University of Pennsylvania MBA Head of - -
President register UBS AG, Risk
(Standing) HK Director Management
Group
Sum of Quarterly Compensations: 360,522,219 Won
Average Compensation per Person: 30,043,518 Won
2. STATUS OF EMPLOYEES
As of June 30, 2004 (Unit: Number, Million Won)
NUMBER OF EMPLOYEES
------------------------------------------
ADMINISTRATION AVERAGE
& WORKING SUM OF QUARTERLY AVERAGE SALARIES
CLASSIFICATION MANAGEMENT PRODUCTION OTHERS TOTAL YEARS SALARIES PER PERSON REMARKS
-------------- ---------- ---------- ------ ----- ----- -------- ---------- -------
Male 333 917 1,250 7.1 21,093 17
Female 569 127 696 6.4 5,437 8
Total 902 1,044 1,946 6.7 26,351 25
3. STATUS OF LABOR UNIONS
CLASSIFICATION CONTENTS REMARKS
-------------- -------- -------
Subject Employees Employees ranking lower than general manager Excluding heads of
departments
Number of Employees of 1,428 persons
Labor Union
Full time Labor Union Member 9 persons
Federation to which labor union Korean Federation of Clerical & Financial Labor Unions
belongs
Others -
VIII. OTHER NECESSARY MATTERS
1. SUMMARY OF REPORTS & PUBLIC DISCLOSURES
A. Matters Reported pursuant to Section 2 of Chapter 6 of Regulation (Report
of Major Corporate Information)
DATE OF
REPORT SUBJECT REPORTED MATTERS REMARKS
---------- ------------------- ------------------------------------------------------------------- -------
2004-04-16 Increase in sales 1. Increased amount of sales volume: 590,78,150,117 Won
volume by 10/100 or - Ratio of increase in sales volume: 9.5%
more (in case of - Current year (the fifth fiscal year): 683,760,465,798 Won
large corporation - Previous year (the fourth fiscal year): 624,682,315,681 Won
by 5/100 or more) 2. Cause of increase: increase in profit of product sales and in
compared to that of FNA income
the most recent 3. The amount of total assets at the end of the latest fiscal year:
fiscal year 1,996,991,770,850 Won
4. Others
- Results of the current fiscal year are calculated based on
internal and external regulations and the company's judgment.
- After the audit by the independent auditors for the closing of
accounts, there may be a difference between the audited and
un-audited amounts in which case the company will disclose any
relevant information if any changes occur.
2004-04-16 Increase in 1. Increased amount of ordinary income: 91,663,093,349 Won
ordinary income by - Ratio of increase in ordinary income: 1,655.0 %
30/100 or more (in - Current year (the fifth fiscal year): 97,201,516,585 Won
case of large - Previous year (the fourth fiscal year): 5,538,423,236 Won
corporation by 2. Cause of increase: increase in profit of product sales and in
15/100 or more) FNA income
compared to that of 3. The amount of total assets at the end of the latest fiscal year:
the most recent 1,996,991,770,850 Won
fiscal year 4. Others
- Results of the current fiscal year are calculated based on
internal and external regulations and the company's judgment.
- After the audit by the independent auditors for the closing of
accounts, there may be a difference between the audited and
un-audited amounts in which case the company will disclose any
relevant information if any changes occur.
2004-04-16 Increase in net 1. Increased amount of net income: 69,661,436,647 Won
income by 30/100 or - Ratio of increase in net income: 640.4 %
more (in case of - Current year (the fifth fiscal year): 80,539,991,088 Won
large corporation - Previous year (the fourth fiscal year): 10,878,554,441 Won
by 15/100 or more) 2. Cause of increase: increase in profit of product sales and in
compared to that of FNA income
the most recent 3. The amount of total assets at the end of the latest fiscal year:
fiscal year 1,996,991,770,850 Won
4. Others
- Results of the current fiscal year are calculated based on
internal and external regulations and the company's judgment.
- After the audit by the independent auditors for the closing of
accounts, there may be a difference between the audited and
un-audited amounts in which case the company will disclose any
relevant information if any changes occur.
2004-05-10 Correction Report 1. Documents for public disclosure of correction: increase in
(reporting) sales volume by 10/100 or more compared to that of the most recent
fiscal year
2. First date of submission of correction documents: April 16,
2004
3. Cause of correction: final closing of profit and loss upon
completion of audit
4. Items Corrected
(Before correction)
1. Increased amount of sales volume: 59,078,150,117 Won
- Ratio of increase in sales volume: 9.5%
- Current year (the fifth fiscal year): 683,760,465,798 Won.
4. Others
- Since the above matters are being disclosed based on information
which have not been audited by the independent auditor (an
accounting firm), they are subject to change by audit. If there is
any change, the company will disclose any relevant information.
(After correction)
1. Increased amount of sales volume: 60,794,328,304 won
- Ratio of increase in sales volume: 9.7%
- Current fiscal year (the fifth fiscal year): 685,476,643,985 Won
4. Others
- The Above disclosed matters are based on final figures audited by
the independent auditor (an accounting firm).
2004-05-10 Correction Report 1. Documents for public disclosure of correction: reduction in
(reporting) ordinary income by more than 30/100 compared to that of the most
recent fiscal year.
2. First date of submission of correction documents: April 16, 2004
3. Cause of correction: final closing of profit and loss upon
completion of audit
4. Items Corrected
(Before correction)
1. Decreased amount of ordinary income: 91,663,093,349 Won
- Ratio of decrease in ordinary income: 1,655.0%
- Current fiscal year (the fifth fiscal year): 97,201,516,585 Won
4.Others
- Since the above matters are being disclosed based on
information which have not been audited by the independent
auditor (an accounting firm), they are subject to change by
audit. If there is any change, the company will disclose any
relevant information
(After correction)
1. Decreased amount of ordinary income: 91,499,881,093 Won
- Ratio of decrease in ordinary income: 1,652.0%
- Current year (for the fifth fiscal year): 97,038,304,329 Won
4. Others
- The Above disclosed matters are based on final figures audited
by the independent auditor (an accounting firm).
2004-05-10 Correction Report 1. Documents for public disclosure of correction: reduction in net
(reporting) income by more than 30/100 compared to that of the most recent
fiscal year
2. First date of submission of correction documents: April 16, 2004
3. Cause of correction: final closing of profit and loss upon
completion of audit
4. Items Corrected
(Before correction)
1. Decreased amount of net income: 69,661,436,647 Won
- Ratio of decrease in net income: 640.4%
- current fiscal year (the fifth fiscal year): 80,539,991,088 Won
4. Others
- Since the above matters are being disclosed based on
information which have not been audited by the independent
auditor (an accounting firm), they are subject to change by
audit. If there is any change, the company will disclose any
relevant information
(After correction)
1. Decreased amount of net income: 69,776,789,634 Won
- Ratio of decrease in net income: 641.4%
- Current year (the fifth fiscal year): 80,655,344,075 Won
4. Others
- The Above disclosed matters are based on final figures audited
by the independent auditor (an accounting firm).
2004-5-12 Resolution of Board 1. Date of resolution of the board of directors: May 11, 2004
of Directors for - Presence of outside directors: present (2) absent (--)
convening a - Presence of auditors: present
general 2. Determination of date, place and agenda for the fifth ordinary general
meeting of meeting of shareholders
shareholders 3. Date of Meeting: 09:00 AM, May 28, 2004
4. Place of Meeting: 23-2 Good Morning Shinhan Tower, Yeouido-dong,
Yeongdeungpo-gu, Seoul
5. Proposal and major agenda
* 1st proposal: the fifth fiscal year (April 1, 2003 - March 31, 2003)
Approval of balance sheet, statement of income, and statement of
appropriation of retained earnings
* 2nd proposal: appointment of directors
>> Director candidates who are not members of the audit committee
1. Kang Won Lee (August 8, 1950)
- Work Experience:
Executive Vice-President of LG Investment Securities
Chief Executive Officer of LG Investment Trust Management Co., Ltd.
Chief Executive Officer of Korea Exchange Bank (KEB)
Advisor of KEB (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
2. Chil Sun Hong (August 20, 1946)
- Work Experience:
Executive Vice-President of Chohung Bank
Chief Executive Officer of Chohung Bank
Managing Director of Shinhan Finance Group (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: Managing Director of Shinhan
Financial Group, the largest shareholder
- Transaction records with the company for the recent three years: None
3. Jin Won Park (December 1, 1946)
- Work Experience:
Non-standing director of Financial Supervisory Commission
Shin & Kim, US Legal Consultant (current)
Corporate Governance Improvement Committee, committee member (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
4. Hong Ryul Cheon (October 13, 1948)
- Work Experience:
Director of Securities Policy Division, Ministry of Finance and Economy
Commissioner of Regulations Review committee, Financial Supervisory
Commission
Kim & Chang, Senior Advisor (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
>> Director candidates who are members of an audit committee
> Member candidates of the audit committee who are not outside
directors
1. Sung No Lee (December 20, 1948)
- Work Experience:
Head of Credit Supervisory Dept, Financial Supervisory Service.
Head of Planning & Coordination Dept, Financial Supervisory Service
Standing member of Audit Committee of Good Morning Shinhan
Securities (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
> Member candidates of the audit committee who are outside directors
1. Hyoung Tae Kim (July 7, 1961)
- Work Experience:
Education and Work Experience: University of Pennsylvania, Wharton
School (Senior Research Fellow)
Senior Analyst, Korea Securities Research Institute (KSRI)
Vice-President of KSRI (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
2. Kyung Ho Kim (December 21, 1954)
- Work Experience:
Education and Work Experience
University of California, Los Angeles, Assistant Professor
Standing director of the Korea Accounting Standards Board
Hongik University, Professor of Business Administration (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three years: None
* 3rd proposal: approval of compensation ceiling for directors
* 4th proposal: granting of stock options
6. Details of Resolution: Proposals approved without any change in
contents
7. Others
1) Resolution concerning granting of stock options at the BOD will be
separately disclosed.
2) The word "auditor" in section 1 refers to a member of the audit committee.
2004-05-12 Resolution of BOD for 1. Number of parties to be granted option: 110 including Woo Keun Lee
granting of stock options 2. Method of granting: New share issuance and payment of cash for the difference
between the market price and the exercise price
3. Exercise price (KRW):
4. Exercise period: from May 29, 2006 to May 28, 2009
5. Type and number of shares to be granted
A. Common stock in a registered form (share): 709,000
B. Preferred stock in a registered form: N/A
6. Adjustment of exercise price: After the granting date but before the exercise
date, the stock option exercise price and the number of shares may be changed in
accordance with a resolution of the BOD in case an adjustment is deemed to be
necessary due to capital increase with consideration, bonus issue, share dividend,
merger, capital reduction, capitalization of reserves, stock split, reverse split, etc.
7. Status of stock options after being granted
A. Number of grantees: 139
B. Number of granted shares (share): 10,064,025
8. Date of general meeting of shareholders:
09:00 AM May 28, 2004
9. Place of meeting: 23-2 Good Morning Shinhan Tower, Yeouido-dong,
Yeongdeungpo-gu, Seoul
10. Date of resolution: May 11, 2004
- Presence of outside directors: present (2) absent (-- Presence of auditors:
present
11. Others
1) The company expects to receive approval for the matters described above at the
general meeting of shareholders on May 28, 2004 and their contents may change in
the course of obtaining resolution.
2) Number of grantees and granted shares did not include cancelled or exercised
stock options.
3) Exercise price is calculated based on a formula stated in Chapter 84-9 of
Presidential Decree of Securities and Exchange Act.
4) The company will adopt one of the following options depending on the
circumstances at the exercise date - issuance of new stock at the exercise price or
paying the difference between the market price and the exercise price in cash in
case all conditions and terms are met for exercising the stock options.
2004-05-20 Correction Report 1. Documents for public disclosure of correction: (correction) increase in ordinary
(reporting) income by 30/100 or more compared to that of the most recent fiscal year (in case
of large corporation, by 15/100 or more)
2. First date of submission of correction documents: May 10, 2004
3. Cause of correction: reclassification of items on statement of income
4. Items Corrected
(Before correction)
1. Increased amount of ordinary income: 91,499,881,093 Won
- Ratio of increase in ordinary income: 1,652.0%
- Current year (the fifth fiscal year): 97,038,304,329 Won
(After correction)
1. Increased amount of ordinary income: 91,202,727,053 Won
- Ratio of increase in ordinary income increase ratio: 1,646.7%
- Current year (the fifth fiscal year): 96,741,150,289 Won
2004-05-21 Submission of audit reports 1. Name of independent auditor: Samjung Accounting Corp.
2. Period of auditing: 2003.04.01 ~ 2004.03.31
3. Receipt date of audit report: May 20, 2004
4. Auditor's opinion: current fiscal year
- unqualified O
- qualified -
- qualified due to the limited scope of audit -
- adverse -
- disclaimer -
(prior fiscal year)
- unqualified O
- qualified -
- qualified due to the limited scope of audit -
- adverse -
- disclaimer -
5. Negative capital
(Current fiscal year)
- Deficit exceeding 100% of paid-in capital -
- Deficit exceeding 50% of paid-in capital -
- Deficit not exceeding 50% of paid-in capital O
- None -
(Prior fiscal year)-
- Deficit exceeding 100% of paid-in capital -
- Deficit exceeding 50% of paid-in capital -
- Deficit not exceeding 50% of paid-in capital O
- None -
6. Others: Since negative capital of the company is not caused by an accumulated loss
but caused by share issuance at a price below par value for foreign investment such as
capital increase with consideration in December 1998, deficit does not exceed paid-in
capital.
* Since financial statements in audit report submitted to the company by the
independent auditors have not been approved by the general shareholders' meeting of
the company, the contents of those statements may change during the shareholder
approval process.
2004-05-28 Resolution at the general 1. Approval of financial statements for the fifth fiscal year
meeting of shareholders - Total asset (Million Won): 2,251,44
- Sales volume (Million Won): 685,477
- Total liability (Million Won): 1,595,278
- Ordinary income (Million Won): 96,741
- Capital stock (Million Won): 796,998
- Net income (Million Won): 80,655
- Total shareholders' equity (Million Won): 656,171
* Earning per share (Million Won): 518
* Independent auditor's opinion: unqualified
2. Dividend: cash dividend: none
3. Status of officers
A. Appointment of officers
> Directors who are not members of the audit committee
- Standing director: Kang Won Lee
- Non-standing director: Chil Sun Hong
- Outside director: Jin Won Park, Hong Ryul Cheon
> Directors who are members of the audit committee
- Members who are not outside directors: Sung No Lee
- Members who are outside directors: Hyoung Tae Kim, Kyung Ho Kim
B. Outside directors
- Total number: 8
- Number of outside director: 4
- Appointment ratio of outside directors: 50%
C. Auditor (standing auditor) (number)
- Non-standing auditor (number)
D. Audit Committee, outside director (2), standing director (1)
4. Other resolved matters
> The fifth fiscal year (April 1, 2003~March 31, 2004)
- Approval of balance sheet, statement of income, and statement of appropriation of
retained earnings [ ] Approved as submitted
> Approval of director appointment [ ] Approved as submitted (as same as appointment
of 'A')
> Approval of compensation ceiling for directors [ ] Approved as submitted (25
million Won)
> Granting of stock option --> Approved as submitted
(7 members of management: 315,000 shares, 99 heads of operations and deputy heads
of branches: 318,000 shares)
5. Date of general meeting of shareholders: 2004.05.28
6. Since granting of other stock option are subject to special resolution of the
shareholders meeting, it will be separately disclosed.
2004-05-28 Special resolution of Details of issuing company
general meeting of - Name of company: Good Morning Shinhan Securities
shareholders in relation to - Representative: Woo Keun Lee
granting of stock options - Number of issued shares
* Common stock: 155,576,350 shares
* Preferred stock: 3,823,314 shares
- Details of granting
- Date of resolution: May 28, 2004
- Date of granting: May 28, 2004
- Number of grantees: 106 including Woo Keun Lee
- Granting ceiling: 23,909,949 shares
- Number of shares which were granted
* Common stock: 9,355,025 shares
* Preferred stock: N/A
- Number of granting stock:
* Common stock: 633,000 shares
* Preferred stock: N/A
- Granting method: new stock issuance or payment of cash forth difference between the
market price and the exercise price:
- Exercise terms
- Exercise period: 2006.05.29~2009.05.28
- Exercise price:
* Common stock: 5,000 Won
* Preferred stock (Won)
- Others
* See stock option granting terms: below
Among resolved matters at the BOD regarding the granting of stock option which were
disclosed on May 12, 2004, the number of management and deputy heads of branches
who would be granted such option were reduced from 9 (375,000 shares) to 7 (315,000
shares) and from 101 (334,000 shares) to 99 (318,000 shares) respectively.
Details on grantees
Common stock
Officer Woo Keun Lee 50,000
Officer Kang Won Lee 100,000
Officer Sung No Lee 35,000
Officer Dae Seok Kang 35,000
Officer Jong Gil Park 35,000
Officer Hyung Jae Han 35,000
Officer Chae Young Jeong 25,000
2 deputy heads of operations, 97 deputy heads of branches
Employees 318,000
Total 633,000
* Granting terms of stock option
1. Outline of granting terms
1) Method of granting
New share issuance and payment of cash for the difference between the market price
and the exercise price.
2) Types of share: Registered common stock
3) Exercise price: 5,000 Won (price is calculated based on a formula stated in
Article 84-6 of Presidential Decree of Securities and Exchange Act.)
4) Exercise period: 2006.05.29~2009.05.28(two years after the grant date and for
three years thereafter)
2. Conditions for exercising the stock option
1) Management
- In general, granting of stock options depends on job title and position within
the organization. Within the amount of shares granted, the number of options that
can be exercised with respect thereto depends on the results of measurement of
contributions made.
- The measurement of contributions is determined by combining the share price and
the management performance.
- Basic diagram for vesting conditions that apply to stock options
Measuring Contribution: Determination of number of options that can be exercised
depends on the share price.
Number of exercisable options: 50%
Standards for stock option vesting (necessary conditions)
2004-05-28 Cancellation of granted Details of the option grant
stock option rights Number of grantees: 140
Number of granted shares:
Common stock: 9,988,025 shares
- Preferred stock: none
Details of cancellation
Date of resolution for cancellation: May 28, 2004
Method of cancellation: BOD resolution
Parties whose stock options are subject to cancellation: Ki Kwon Do, Geun
Mo Lee, Hong Sik Kim
: Number of cancelled shares
: Common stock: 150,000 shares
: - Preferred stock: N/A
Reason for cancellation and its justification: Article 189-4 of
Securities and Exchange Act and Article 7 of contract for issuance of
stock option
Details relating to cancelled stock options:
Exercise period: May 31, 2005~May 30, 2009
Exercise price (Won): 5,000
Others:
Above stock options which are subject to cancellation were granted on May
30, 2003
[Details on parties whose stock options are subject to cancellation]
Common stock
Ki Kwon Do Director 90,000
Geun Mo Lee Vice President 35,000
Hong Sik Kim Assistant Vice President 25,000
Total 150,000
2004-05-28 Resolution for appointing 1. Profile of outside director
outside director Name: Hong Ryul Cheon
Age: 56
Education:
Seoul National University, Graduate School of Public Administration
Kim & Chang, Advisor (current)
Work Experience:
Director of Securities Policy Division, Ministry of Finance and Economy
Commissioner of Regulations Review committee, Financial Supervisory
Commission,
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Resolution appointing 1. Profiles of outside director
outside director Name: Jin Won Park
Age: 58
Education:
Brooklyn Law School (J.D.)
Shin & Kim, US Legal Consultant (current)
Work Experience:
Non-standing director, Financial Supervisory Commission,
Hyundai Heavy Industries Co., Outside Director
Corporate Governance Advancement Committee, committee member
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year
3. Reason: Reappointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Resolution appointing 1. Profiles of outside director
outside director Name: Hyoung Tae Kim
Age: 43
Education: Seoul National University, Ph.D in Business Administration
Vice-President of Korea Securities Research Institute (KSRI) (current)
Work Experience:
University of Pennsylvania, Wharton School Senior Research Fellow
Senior Analyst, Korea Securities Research Institute (KSRI)
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year
3. Reason: Reappointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Resolution appointing 1. Profiles of outside director
outside director Name: Kyung Ho Kim
Age: 50
Education:
Purdue University (Ph.D. in Business Administration)
Hongik University, Professor of Business Administration (current)
Major Work Experience:
University of California, Los Angeles, Assistant Professor
Standing Director of the Korea Accounting Standards Board
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Dismissal of member of 1. Profile of member of audit committee
audit committee Name: Jin Won Park
Age: 58
Education:
Brooklyn Law School (J.D.)
Shin & Kim, US Legal Consultant (current)
Work Experience:
Financial Supervisory Commission, Non-standing commissioner
Hyundai Heavy Industries Co., outside director
Corporate Governance Advancement Committee, committee member
2. Term of Office: By May 28, 2004
3. Reason: Expiry of term of office
4. Date of resolution: May 28, 2004 (date of dismissal)
5. Serving as outside director: currently serving
6. Others: date of resolution (date of dismissal) refers to the date his
term of office expires.
2004-05-28 Appointment of member of 1. Audit Committee
audit committee Profile of members
Name: Sung No Lee
Age: 56
Education:
Yonsei University, B.A. in Business Management
Standing member of Audit Committee of Good Morning Shinhan Securities
(current)
Head of Credit Supervisory Dept, Financial Supervisory Service
Head of Planning & Coordination Dept, Financial Supervisory Service
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2005
fiscal year
3. Reason: Reappointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying a member of audit committee: None
* Item : Yes or No
- Underage, Incompetence, quasi-incompetence -->No
- Bankruptcy and without reinstatement -->No
- After being sentenced to prison, two years has not passed from the
end of serving such sentence or from the day the execution of such
sentence was dismissed -->No
- Two years has not passed since dismissed or removed under the
Securities and Exchange Act -->No
- Major shareholder, a major shareholder's spouse or lineal ascendant
or descendent --> No
- Have worked or currently working as full time officer or employee
within the last two years, or his or her spouse or a lineal
ascendant or descendent --> No
- Have worked or currently working as full time officer or employee
within the last two years for an affiliated company --> No
6. Serving as outside director: -->Yes
2004-05-28 Appointment of member of 1. Audit Committee
audit committee Profile of members
Name: Hyoung Tae Kim
Age: 43
Education:
Seoul National University, Ph.D in Business Administration
Vice-President of Korea Securities Research Institute (current)
Work Experience:
University of Pennsylvania, Wharton School Senior Research Fellow
(Senior Research Fellow)
Senior Analyst, Korea Securities Research Institute (KSRI)
2. Term of Office: Up to close of the ordinary general meeting of
shareholders with respect to the 2005 fiscal year
3. Reason: Reappointed due to expiry of term of office
4. Date of resolution: May 28, 2004
5. Reason for disqualifying a member of audit committee: None
* Item: Yes or No
- Underage, Incompetence, quasi-incompetence -->No
- Bankruptcy and without reinstatement --> No
- After being sentenced to prison, two years has not passed from the
end of serving such sentence or from the day the execution of such
sentence was dismissed --> No
- Two years has not passed since dismissed or removed under the
Securities and Exchange Act --> No
- Major shareholder, a major shareholder's spouse, and lineal ascendant
or descendent -->No
- Have worked or currently working as full time officer or employee
within the last two years, or his or her spouse or lineal
descendent --> No
- Have worked or currently working as full time officer or employee
within the last two years for an affiliated company --> No
6. Serving as outside director -->Yes
2004-05-28 Appointment of member of 1. Profiles of outside director
audit committee Name: Kyung Ho Kim
Age: 50
Education:
Purdue University (Ph.D. in Business Administration
Hongik University, Professor of Business Administration (current)
Major Work Experience:
University of California, Los Angeles, Assistant Professor
Standing Director of the Korea Accounting Standards Board
2. Term of Office: Up to close of the ordinary general meeting of
shareholders with respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
* Item: Yes or No
- Underage, Incompetence, quasi-incompetence --> No
- Bankruptcy and without reinstatement ] --> No
- After being sentenced to prison, two years has not passed from the
end of serving such sentence or from the day the execution of such
sentence was dismissed --> No
- Two years has not passed since dismissed or terminated under the
Securities and Exchange Act --> No
- Major shareholder, major shareholder's spouse and a lineal ascendant
or descendent --> No
- Have worked or currently working as full time officer or employee
within the last two years, or his or her spouse or a lineal ascendant
or descendent --> No
- Have worked or currently working as full time officer or employee
within the last two years for an affiliated company --> No
6. Serving as outside director -->Yes
2004-05-31 Change of 1. Changed information
Representative Director A. Before change
Vice President : Woo Keun Lee
President: Ki Kwon Do
B. After change
Vice President : Woo Keun Lee
President: Kang Won Lee
2. Reason of change
- Inauguration of CEO/Representative Director
3. Date of change: May 28, 2004
2004-09-17 Share Swap with Shinhan Good Morning Shinhan Securities decided to conduct a share swap with
Financial Group Shinhan Financial Group at the BOD meeting of September 17, 2004
2004-09-17 Resolution of Board of Convening a general meeting to approve the share swap with Shinhan
Directors for convening a Financial Group
general meeting of
shareholders
2004-09-17 Resolution of Convening a general meeting of preferred shareholders
Board of to approve the Share swap with Shinhan Financial Group
Directors for
convening a
general meeting
of shareholders
B. Disclosure pursuant to Disclosure Regulations concerning Corporations
listed in Korea Stock Exchange
(1) Interim Disclosure
DATE OF
REPORT SUBJECT REPORTED MATTERS REMARKS
------------------------------------------------------------------------------------------------------------------------
2004-04-16 Increase in 1. Increased amount of sales volume: 590,78,150,117 Won
sales volume by - Ratio of increase in sales volume: 9.5%
10/100 or more - Current fiscal year (the fifth fiscal year): 683,760,465,798 Won
(in case of - Prior fiscal year (the fourth fiscal year): 624,682,315,681 Won
large
corporation by 2. Cause of increase: increase in product sales profit and FNA
5/100 or more) income
compared to that 3. The amount of total assets at the end of latest fiscal year:
of the most 1,996,991,770,850 Won
recent fiscal 4. Others
year - Results of the current fiscal year are calculated based on internal
and external regulations and the company's judgment.
After the audit by the independent auditors for the closing of
accounts, there may be a difference between the audited and un-audited
amounts in which case the company will disclose any relevant
information if any changes occur.
2004-04-16 Increase in 1. Increased amount of ordinary income: 91,663,093,349 Won
ordinary income - Ratio of increase in ordinary income: 1,655.0%
by 30/100 or - Current fiscal year (the fifth fiscal year): 97,201,516,585 Won
more (in case of - Prior fiscal year (the fourth fiscal year): 5,538,423,236 Won
large
corporation by 2. Cause of increase: increase in product sales profit and FNA income
15/100 or more)
compared to that 3. Total amount of asset at the end of latest fiscal year:
of the most 1,996,991,770,850 Won
recent fiscal 4. Others
year - Results of the current fiscal year are calculated based on internal
and external regulations and the company's judgment. After the audit
by the independent auditors for the closing of accounts, there may be
a difference between the audited and un-audited amounts in which case
the company will disclose any relevant information if any changes
occur.
2004-04-16 Increase in net 1. Increased amount of net income: 69,661,436,647 Won
income by 30/100 - Ratio of increase in net earning: 640.4 %
or more (in case - Current fiscal year (the fifth fiscal year): 80,539,991,088
of large Won
corporation by - Prior fiscal year (the fourth fiscal year): 10,878,554,441 Won
more than 2. Cause of increase: increase in product sales profit and FNA
15/100) compared income
to that of the 3. The amount of total assets at the end of the latest fiscal
most recent year: 1,996,991,770,850 Won
fiscal year 4. Others
- Results of the current fiscal year are
calculated based on internal and external
regulations and the company's judgment.
After the audit by the independent auditors for
the closing of accounts, there
may be a difference between the audited and un-audited
amounts in which case the company will disclose
any relevant information if any changes occur.
2004-05-06 Real estate 1. Name of company: Shinhan Bank
leasing with - Relation with the company: subsidiary
largest 2. Details of real estate leasing
shareholder, etc. A. Date of leasing: May 4, 2004
B. Leasing property: building 280.81 pyung
C. Address: 17th floor, 23-2 Yeouido-dong,
Yeongdeungpo-gu, Seoul
D. Details of transaction and lease period
Lease period: June 15, 2004~June 14, 2009
Total amount of payment: 1,762,363,560 Won
- Deposit money: 1,684,860,000 Won
- Annual leasing fee: 77,503, Won
- Accumulated amount of transacti560 on with largest
shareholder: 1,762,363,560 Won
- Total shareholders' equity at the end of the latest fiscal
year: 567,650,414,442 Won
- In proportion to total shareholder's equity: 0.31%
3. Objectives of transaction: office-leasing
4. Date of resolution: May 4, 2004
- Presence of outside directors: present ( - ) absent ( - )
- Presence of auditors: absent
5. Subject to the Monopoly Regulation and Fair
Trade Act- No
6. Others
- Date of resolution refers to the day of
signing a leasing contract.
2004-05-10 Correction 1. Documents for public disclosure of correction: increase in
Report sales volume by 10% or more compared to that of most recent
(reporting) year
2. First date of submission of correction documents: April 16, 2004
3. Cause of correction: final closing of profit
and loss upon completion of audit
4. Items Corrected
(Before correction)
1. Increased amount of sales volume: 59,078,150,117 Won
- Ratio of increase in sales volume: 9.5%
- Current fiscal year (the fifth fiscal year): 683,760,465,798.
4. Others
Since the above matters are being disclosed
based on information which have not been audited
by the independent auditor (an accounting firm),
they are subject to change by audit. If there is
any change the company will disclose any
relevant information. .
(After correction)
1. Increased amount of sales volume: 60,794,328,304 Won
- Ratio of increase in sales volume: 9.7%
- Current fiscal year (the fifth fiscal year): 685,476,643,985 Won
4 Others
- The Above disclosed matters are based on
final figures audited by the independent
auditor (an accounting firm).
2004-05-10 Report of
correction 1. Documents of public disclosure of correction: reduction in
(reporting) ordinary income 30/100 or more compared to that of most recent
year
2. First date of submission of correction documents: April 16, 2004
3. Cause of correction: final closing of profit and loss
with completion of audit
4. Items Corrected
(Before correction)
1. Decreased amount of ordinary income: 91,663,093,349 Won
- Ratio of decrease in ordinary income: 1,655.0%
- Current fiscal year (the fifth fiscal year): 97,201,516,585 Won
4. Others
Since the above matters are being disclosed
based on information which have not been audited
by the independent auditor (an accounting firm),
they are subject to change by audit. If there is
any change the company will disclose any
relevant information.
(After correction).
1. Decreased amount of ordinary income: 91,499,881,093 Won
- Ratio of decrease in ordinary income: 1,652.0%
- Current fiscal year (the fifth fiscal year): 97,038,304,329
4. Others
The Above disclosed matters are based on final
figures audited by the independent auditor (an accounting firm).
2004-05-10 Correction 1. Documents for public disclosure of correction: reduction in
Report net income by 30/100 or more compared to that of most
(reporting) recent fiscal year
2. First date of submission of correction documents: April 16, 2004
3. Cause of correction: final closing of profit
and loss upon completion of audit
4. Items Corrected
(Before correction)
1. Decreased amount of net income: 69,661,436,647 Won
- Ratio of decrease in net income: 640.4%
- Current fiscal year (the fifth fiscal year): 80,539,991,088 Won
4. Others
- Since the above matters are being disclosed
based on information which have not been audited
by the independent auditor (an accounting firm),
they are subject to change by audit. If there is
any change the company will disclose any
relevant information.
(After correction)
1. Decreased amount of net income: 69,776,789,634 Won
- Ratio of decrease in net income: 641.4%
- Current fiscal year (the fifth fiscal year): 80,655,344,075 Won
4. Others
- The Above disclosed matters are based on
final figures audited by the independent
auditor (an accounting firm).
2004-5-12 Resolution of 1. Date of resolution: May 11, 2004
Board of - Presence of outside directors: present (2) absent (-)
Directors for - Presence of auditors: present
convening the 2. Determination of date, place and agenda for the fifth
general meeting ordinary general meeting of shareholders
of shareholders 3. Date of shareholders meeting: 09:00 AM, May 28, 2004
4. Place of shareholders meeting:
23-2 Good Morning Shinhan Tower,
Yeouido-dong, Yeongdeungpo-gu, Seoul
5. proposal and major agenda
-1st proposal: the fifth fiscal year (2003.4.1~2004.3.31)
Approval of balance sheet, statement of income, and
statement of appropriation of retained earnings
-2nd proposal: appointment of directors
Director candidates who are not members of audit committee
1. Kang Won Lee (August 8, 1950)
- Work Experience:
Executive Vice-President of LG Investment Securities
Chief Executive Officer of LG Investment Trust Management
Co., Ltd.
Chief Executive Officer of Korea Exchange Bank(KEB)
Advisor of KEB (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three
years: None
2. Chil Sun Hong (August 20, 1946)
- Work Experience:
Executive Vice-President of Chohung Bank
Chief Executive Officer of Chohung Bank
Managing Director of Shinhan Finance Group (current)
- Recommended by a recommendation committee
- Relation with largest shareholder:
Managing Director of Shinhan Financial Group, the largest
shareholder
- Transaction records with the company for the recent three
years: None
3. Jin Won Park (December 1, 1946)
- Work Experience:
Non-standing director of Financial Supervisory Commission
Shin & Kim, US Legal Consultant (current)
Corporate Governance Improvement Committee, committee
member (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the
recent three years: None
4. Hong Ryul Cheon (October 13, 1948)
- Work Experience:
Director of Securities Policy Division, Ministry of
Finance and Economy
Commissioner of Regulations Review Committee, Financial
Supervisory Commission,
Kim & Chang, Senior Advisor (current)
- Recommended by a recommendation committee
- Relation with largest shareholder : None
- Transaction records with the company for the recent three
years: None
>> Director candidates who are members of the audit committee
> Member candidates of an audit committee who are not
outside directors
1. Sung No Lee (December 20, 1948)
- Work Experience:
Head of Credit Supervisory Dept, Financial Supervisory
service; Head of Planning & Coordination Dept,, Financial
Supervisory service, Standing member of Audit Committee of Good
Morning Shinhan Securities, (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent three
years: None
> Member candidates of an audit committee who are outside
directors
1. Hyoung Tae Kim (July 7, 1961)
- Work Experience:
University of Pennsylvania, Wharton School (Senior Research
Fellow)
Senior Analyst, Korea Securities Research Institute (KSRI)
Currently Vice-President of KSRI (current)
- Recommended by a recommendation committee
- Relation with largest shareholder: None
- Transaction records with the company for the recent
three years: None
2. Kyung Ho Kim (December 21, 1954)
- Work Experience:
University of California, Los Angeles, Assistant Professor
Standing Director of the Korea Accounting Standards Board
Hongik University, Professor of Business Administration (current)
- Recommended by a recommendation committee
- Relation with largest shareholder : None
- Transaction records with the company for the recent three years: None
- 3rd proposal: approval of compensation ceiling for directors
- 4th proposal: granting of stock options
6. Details of Resolution: Proposal approved as submitted
7. Others
- 1. Resolution of granting of stock options at the BOD will be separately
disclosed.
- 2. The word "auditor" in section 1 refers to a member of the audit
committee.
2004-05-12 Resolution of 1. Number of parties to be granted option: 110 including Woo
BOD for granting Keun Lee
of stock options 2. Method of granting option: New shares issuance or payment
of cash for the difference between the market price and the
exercise price
3. Exercise price (Won): N/A
4. Exercise period: from May 29, 2006 to May 28, 2009
5. Type and number of shares to be granted
A. Common stock in a registered form (share): 709,000
B. Preferred stock in a registered form (share): N/A
6. Adjustment of exercise price: After the granting date but before
the exercise date, the stock option exercise price and the number of
granted shares may be changed in accordance with a resolution of the
BOD in case the adjustment is deemed to be necessary due to capital
increase with consideration, bonus issue, share dividend, merger,
capital reduction, capitalization of reserves, stock split, reverse
split, etc.
7. Status of stock options after being granted
A. Number of grantees: 139
B. Number of granted shares (share): 10,064,025
8. Date of general meeting of shareholders: 09:00 AM, May 28, 2004,
9. Place of meeting:
23-2 Good Morning Shinhan Tower, Yeouido-dong, Yeongdeungpo-gu, Seou
10. Date of resolution: May 11, 2004
- Presence of outside directors: present (2) absent (-)
- Presence of auditors: present
11. Others
1) The company expects the above matters to
be approved at the general meeting of
shareholders on May 28, 2004; their contents
may change in the course of obtaining
resolutions for such proposals.
2) Number of grantees and granted shares did
not include cancelled or exercised stock
options.
3) Exercise price is calculated based on a formula stated
in Chapter 84-9 of Presidential Decree of Securities and
Exchange Act.
4) The company will adopt one of the
following options depending on the circumstances
at the exercise date: issuance of new stock at
the exercise price or paying the difference
between the market price and the exercise price
in cash in case all conditions and terms are met
for exercising stock options.
2004-05-20 Correction 1. Documents for public disclosure of correction: (correction)
Report increase in ordinary income by 30/100 or more compared to
(reporting) that of the most recent fiscal year (in case of large
corporation, by more than 15/100)
2. First date of submission of correction
documents: May 10, 2004
3. Cause of correction: reclassification of
items on statement of income
4. Items Corrected
(Before correction)
1. Increased amount of ordinary income: 91,499,881,093 Won
- Ratio of increase in ordinary income: 1,652.0%
- Current fiscal year (the fifth fiscal year): 97,038,304,329 Won
(After correction)
1. Increased amount of ordinary income: 91,202,727,053 Won
- Ratio of increase in ordinary income: 1,646.7%
- Current fiscal year (the fifth fiscal year): 96,741,150,289 Won
2004-05-21 Submission of 1. Name of independent auditor: Samjung Accounting Corp.
audit reports 2. Period of auditing: April 1, 2003~March 31, 2004
3. Receipt Date of audit report: May 20, 2004 4.
Auditor's opinion: current fiscal year
- unqualified O
- qualified -
- qualified due to the limited scope of audit -
- adverse -
- disclaimer-
(prior fiscal year)
- unqualified O
- qualified -
- qualified due to the limited scope of audit -
- adverse -
- disclaimer -
5. Negative capital
(Current fiscal year)
- Deficit exceeding 100% of paid-in capital -
- Deficit exceeding 50% of paid-in capital -
- Deficit not exceeding 50% of paid-in capital O
- None -
(Prior fiscal year)-
- Deficit exceeding 100% of paid-in capital -
- Deficit exceeding 50% of paid-in capital -
- Deficit not exceeding 50% of paid-in capital O
- None -
6. Others
- Since negative capital of the company is
not caused by an accumulated loss but caused
by share issuance at a price below par value
during the process of procuring foreign
investment such as capital increase with
consideration in December 1998, deficit does
not exceed pain-in capital.
* Since financial statements in audit report
submitted to the company by the independent
auditors have not been approved by the
general shareholders' meeting of the company,
the contents of those statements may change
during the approval process.
2004-05-28 Resolution at 1. Approval of financial statements for the fifth fiscal year
the general - Total asset (Million Won): 2,251,44
meeting of - Sales volume (Million Won): 685,477
shareholders - Total liability (Million Won): 1,595,278
- Ordinary income (Million Won): 96,741
- Capital stock (Million Won): 796,998
- Net income (Million Won): 80,655
- Total shareholders' equity (Million Won): 656,171
* Earning per share (Million Won): 518
* Independent auditor's opinion: unqualified
2. Dividend: cash dividend: None
3. Status of officers
A. Appointment of officers
>> Directors who are not members of the audit committee
- Standing director: Kang Won Lee
- Non-standing director: Chil Sun Hong
- Outside director: Jin Won Park, Hong Ryul Cheon
>> Directors who are members of the audit committee
- Members who are not outside directors : Sung No Lee
- Members who are outside directors: Hyoung Tae Kim,
Kyung Ho Kim
B. Outside directors
- Total number: 8
- Number of outside director: 4
- Appointment ratio of outside director: 50%
C. Auditor (standing auditor): N/A
- Non-standing auditor: N/A
D. Audit Committee, outside director (2),
standing director (1)
4. Other resolved matters
>> The fifth term (April 1, 2003~March 31,
2004) Approval of balance sheet, statement
of income, and
statement of appropriation of retained
earnings ==> Approved as submitted >> Approval
of director appointment ==>Approved as
submitted (as same as appointment of `A')
>> Approval of compensation ceiling for directors ==> Approved
as submitted (25 million Won)
>> Granting of stock option rights ==> Approved as submitted
(7 members of management: 315,000 shares, 99 heads of operations and
deputy heads of branches: 318,000 shares)
5. Date of general meeting of shareholders: 2004.05.28
6. Since granting of other stock option rights are subject to special
resolution, it will be separately disclosed.
2004-05-28 Special resolution Details of issuing company
of general Name of company: Good Morning Shinhan Securities
shareholders' Representative: Woo Keun Lee
meeting in Number of issued shares
relation to - Common stock: 155,576,350 shares
granting stock - Preferred stock: 3,823,314 shares
options Details of granting
Date of resolution: May 28, 2004
Date of granting: May 28, 2004 Number of grantees: 106 including Woo Keun Lee
Stock option ceiling: 23,909,949 shares
Number of shares which were granted
- Common stock: 9,355,025 shares
- Preferred stock: N/A
Number of granted stock
- Common stock: 633,000 (shares)
- Preferred stock: N/A
Granting method :
New share issuance and payment of cash for the difference between the market
price and the exercise
Exercise terms,
Exercise period: May 29, 2006~May 28, 2009
Exercise price
- Common stock: 5,000 Won
- Preferred stock: N/A
Others
* * See stock option granting terms below.
Among matters resolved at the BOD on granting stock option rights which were
disclosed on May 12, 2004, the number of management and deputy heads of
branches who would be granted options were reduced from 9 (375,000 shares) to
7 (315,000 shares) and from 101 (334,000 shares) to 99 (318,000 shares)
respectively.
Details on grantees
Common stocks
Officer Woo Keun Lee 50,000
Officer Kang Won Lee 100,000
Officer Sung No Lee 35,000
Officer Dae Seok Kang 35,000
Officer Jong Gil Park 35,000
Officer Hyung Jae Han 35,000
Officer Chae Young Jeong 25,000
2 deputy heads of operations, 97 deputy heads of branches
Employees 318,000
Total 633,000
* Granting terms of stock option rights
1. Outline of granting terms
1) Method of granting
- The company will adopt one of the following options
depending on the circumstances at the Exercise date -
issuance of new stock at a exercise price or paying the
difference between the market price and the exercise price in
cash in case all conditions and terms are met for granting
stock options.
2) Types of share: common stock in registered form
3) Exercise price: 5,000 Won (price is calculated based on
Article 84-6 of Presidential Decree of Securities and
Exchange Act)
4) Exercise period: May 29, 2006~May 28, 2009 (two years after
the grant date and for three years thereafter)
2. Conditions for exercising stock option
1) Management
- In general, granting of stock options depends on job title
and position within the organization. Within the shares
granted, the number of options that can be exercised depends
on the results of measurement of contributions made.
- The Measurement of contributions is determined by combining
the share price and the management performance.
- Basic diagram for vesting conditions that apply to stock
options
Measuring Contribution: Determination of number of options
that can be exercised depends on the share price.
Number of exercisable options: 50%
Standards for stock option vesting (necessary conditions)
[Condition 1:
- Shareholder profit rate should be higher than 80% of the rate
of increase for share price index of the securities industry.
Condition 2:
- Sum total of net earning of the two previous fiscal years
should be zero or more --> meeting both conditions 1 and 2
ROE achievement rate of the year when stock options are
granted, ROE achievement rate of the following year
Determination of number of shares depending on management
performance
- 25% ROE achievement rate of the year the shares are granted
- 25% ROE achievement rate of the following year
Note 1) ROE achievement rate = actual ROE/targeted ROE
2) Deputy head of branch, etc.
- Sum total of net earnings of two previous fiscal years is
zero or more.]
2004-05-28 Cancellation of Details of the option grant
granted stock Number of grantees: 140
option rights Number of granted shares:
- Common stock: 9,988,025 shares
- Preferred stock: none
Details of cancellation
Date of resolution for cancellation: May 28, 2004
Method of cancellation: BOD resolution
Parties whose stock options are subject to cancellation: Ki Kwon Do,
Geun Mo Lee, Hong Sik Kim
Number of cancelled shares
- Common stock: 150,000 shares
- Preferred stock: N/A
Reason for cancellation and its justification: Article 189-4 of
Securities and Exchange Act and Article 7 of contract for issuance of
stock option
Details relating to cancelled stock options
:Exercise period: May 31, 2005~May 30, 2009
Exercise price (Won): 5,000
Others:
- Above stock options which are subject to
cancellation were granted on May 30, 2003
[Details on parties whose stock options are subject to cancellation]
Common stock
Ki Kwon Do Director 90,000
Geun Mo Lee Vice President 35,000
Hong Sik Kim Assistant Vice President 25,000
Total 150,000
2004-05-28 Resolution for 1. Profile of outside director
appointing Name: Hong Ryul Cheon
outside Age: 56
director Education:
Seoul National University, Graduate School of Public Administration
Kim & Chang, Advisor (current)
Work Experience:
Director of Securities Policy Division, Ministry of Finance and
Economy Commissioner of Regulations Review committee, Financial
Supervisory Commission,
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Resolution 1. Profiles of outside director
appointing Name: Jin Won Park
outside Age: 58
director Education:
Brooklyn Law School (J.D.)
Shin & Kim, US Legal Consultant (current)
Work Experience:
Non-standing director, Financial Supervisory Commission,
Hyundai Heavy Industries Co., Outside Director
Corporate Governance Advancement Committee, committee member
Term of Office:
Up to the close of the ordinary general meeting of shareholders with
respect to the 2004 fiscal year 3. Reason: Reappointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Resolution for 1. Profile of outside director
appointing Name: Hyoung Tae Kim
outside director Age: 43
Education: Seoul National University, PhD in Business Administration
Vice-President of Korea Securities Research Institute, (current):
Work Experience: University of Pennsylvania, Wharton School
Senior Research Fellow
Senior Analyst, Korea Securities Research Institute
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with respect to the 2004 fiscal year
3. Reason: Reappointed
4. Date of resolution: May 28,2004
5..Reason for disqualifying outside director: None
2004-05-28 Resolution for 1. Profile of outside director
appointing Name: Kyung Ho Kim
outside director Age: 50
Education:
Purdue University (Ph.D. in Business Administration)
Hongik University, Professor of Business Administration (current)
Major Work Experience: University of California, Los Angeles, Assistant Professor
Standing Director of the Korea Accounting Standards Board
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
2004-05-28 Dismissal of the 1. Profile of a member the audit committee
member of audit Name: Jin Won Park
committee Age: 58
Education:
Brooklyn Law School (J.D.)
Shin & Kim, US Legal Consultant (current)
Work Experience:
Financial Supervisory Commission, Non-standing commissioner
Hyundai Heavy Industries Co., outside director
Corporate Governance Advancement Committee, committee member
2. Term of Office: by May 28, 2004
3. Reason: Expiry of term of office
4. Date of resolution: May 28, 2004 (date of dismissal)
5. Serving as outside director: Yes
6. Others: Date of resolution (date of dismissal) refers to the date when his term of office expires.
2004-05-28 Appointment of 1. Audit Committee
member of audit Profile of Members
committee Name: Sung No Lee
Age: 56
Education:
Yonsei University, B. A. in Business Management
Standing member of Audit Committee of Good Morning Shinhan Securities, (current)
Work Experience:
Head of Credit Supervisory Dept, Financial Supervisory Commission
Head of Planning & Coordination Dept, Financial Supervisory Commission,
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with respect to the 2005 fiscal year
3. Reason: Reappointed
4. Date of resolution: May 28,2004
5. Reason for disqualifying a member of the audit committee: None
* Item: Yes or No
- Underage, Incompetence, quasi-incompetence -> No
- Bankruptcy and without reinstatement ] -> No
- After being sentenced to prison, two years has not passed from the end of execution or from the
day execution was dismissed. -> No
- Two years has not passed since dismissed or removed under the Securities and Exchange Act -> No
- Major shareholder, a major shareholder's spouse or lineal ascendant or descendent -> No
- Have worked or currently working as full time officer or employee within the last two years,
or his or her spouse or lineal descendent -> No
- Have worked or currently working as full time officer or employee within the last two years for
an affiliated company -> No
6. Serving as outside director -> Yes
2004-05-2 Appointment of 1. Audit Committee
member of audit Profile of members
committee Name: Hyoung Tae Kim
Age: 43
Education:
Seoul National University, PhD in Business Administration
Vice-President of Korea Securities Research Institute, (current) Major
Work Experience:
University of Pennsylvania, Wharton School Senior Research Fellow
(Senior Research Fellow)
Senior Analyst, Korea Securities Research Institute (KSRI)
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with respect to the 2004 fiscal year
3. Reason: Reappointed due to expiry of term of office
4. Date of resolution: May 28, 2004
5. Reason for disqualifying a member of the audit committee: None
* Item: Yes or No
- Underage, Incompetence, quasi-incompetence -> No
- Bankruptcy and without reinstatement -> No
- After being sentenced to prison, two years has not passed from the end of serving such sentence
or from the day execution of such sentence was dismissed -> No
- Two years has not passed since dismissed or removed under the Securities and Exchange Act -> No
- Major shareholder, Major shareholder's spouse or lineal ascendant or descendent -> No
- Have worked or currently working as full time officer or employee within the last two years, or
his or her spouse or lineal descendent -> No
- Have worked or currently working as full time officer or employee within the last two years for an
affiliated company -> No
6. Serving as outside director -> Yes
2004-05-28 Appointment of 1. Details of outside director
member of audit Name: Kyung Ho Kim
committee Age: 50
Education:
Purdue University (Ph.D. in Business Administration)
Hongik University, Professor of Business Administration (current)
Major Work Experience: University of California, Los Angeles,
Assistant Professor
Standing Director of the Korea Accounting Standards Board
2. Term of Office:
Up to the close of the ordinary general meeting of shareholders with respect to the 2004 fiscal year
3. Reason: Newly appointed
4. Date of resolution: May 28, 2004
5. Reason for disqualifying outside director: None
* Item: Yes or No
- Underage, Incompetence, quasi-incompetence -> No
- Bankruptcy and without reinstatement -> No
- After being sentenced to prison, two years has not passed from the end of serving such sentence or
from the day execution of sentence was dismissed. -> No
- Two years has not passed since dismissed or removed under the Securities and Exchange Act -> No
- Major shareholder, a major shareholder's spouse and lineal ascendant or descendent -> No
- Have worked or currently working as full time officer or employee within the last two years, or
his or her spouse or lineal descendent -> No
- Have worked or currently working as full time officer or employee within the last two years
for an affiliated company -> No
6. Serving as outside director -> Yes
2004-05-31 Change of 1. Changed information
Representative A. Before change
Director Vice President: Woo Keun Lee
President: Ki Kwon Do
B. After change
Vice President: Woo Keun Lee
President: Kang Won Lee
2. Reason of change
Inauguration of CEO / Representative Director
3. Date of change: May 28, 2004
2004-06-14 Real estate 1. Name of company: Chohung Bank
rental from - Relation with the company: subsidiary
largest 2. Details of real estate rental
shareholder A. Date of rent: June 22, 2004
B. Rented property: building 6.2 pyung (5.36 pyung for exclusive use)
C. Address: 1st floor, 301-61 Ichon-dong, Yongsan-gu, Seoul
D. Details of transaction and rental period
Rental period: June 22, 2004 ~ June 21, 2005
Total amount of payment: 71,615,680 Won
- Deposit money: 70,000,000 Won
- Annual rental fee: 1,615,680 Won
Accumulated amount of transaction with largest shareholder: 1,057,041,160 Won
- Capital at the end of the latest fiscal year: 656,170,748,841 Won
- In proportion to own capital: 0.16%
3. Objectives of transaction: office-rental (BIB offices)
4. Date of resolution: June 11, 2004
- Presence of outside directors: present absent
- Presence of auditors: absent
5. Subject to The Monopoly Regulation and Fair Trade Act- No
6. Others
- Date of resolution refers to the day of signing a rental. contract.
2004-08-03 Real estate Leasing a office from Chohung Bank
rental from
largest
shareholder
2004-09-17 Share swap with Good Morning Shinhan Securities decided to conduct a share swap with
Shinhan Shinhan Financial Group at the BOD meeting of September 17, 2004
Financial
Group
2004-09-17 Resolution of Convening a general meeting to approve the share swap with Shinhan
Board of Financial Group
Directors for
convening a
general meeting
of shareholders
2004-09-17 Resolution of Convening a general meeting of preferred shareholders to approve
Board of the share swap with Shinhan Financial Group
Directors for
convening a
general meeting
of shareholders
(2)Fair Disclosure
DATE OF
REPORTING SUBJECT CONTENTS REMARKS
--------- ------- -------- -------
2004-06-01 Performance of 1. Performance
business Period: April 1, 2004~April 30, 2004(Unit: 100 million, %)
including sales
volume, Current fiscal year Prior fiscal Year Y/Y
operating income (April 1, 04~April. 30) (March 1, 04~March. 31) (April 1, 03~April. 30)
& loss, ordinary 1) Operating revenue 668 682 14.58
income & loss 2) Operating income 45 120 -32.84
and net income & 3) Ordinary income 50 177 -49.49
loss for the year 4) Net income 50 200 -49.49
2. The management planning team sends information to specific customers, designated]
employees of major securities firms who are responsible for profit/loss. Time as scheduled,
the name of event and location for delivery of information: After disclosure, relevant
information is e-mailed to each responsible employee of relevant companies.
2004-06-28 Performance of 1. Performance
business
operations Period: May 1, 2004~May 31, 2004
including sales
volume, Unit: 100 million, %
operating income Current fiscal year, Prior fiscal Year, Y/Y
& loss, ordinary (May 1, 04~May 30) (April 1 04~April. 30) (May 1,2003~May. 31)
income & loss 1) Operating revenue 865 668 64.14
and net income & 2) Operating income 58 45 28.89
loss for the year 3) Ordinary income 57 50 -22.97
4) Net income 57 50 -22.97
2. The management planning team sends information to [specific customers, designated]
employees of major securities firms who are responsible for profit/loss. Time as scheduled,
the name of event and location for delivery of information: After disclosure, relevant
information is e-mailed to each responsible employee of relevant companies.
2004-07-22 Performance of 1. Performance
business
operations Period: June 1, 2004~June 30, 2004
including sales
volume, Unit: 100 million, %
operating income Current fiscal year, Prior fiscal Year, Y/Y
& loss, ordinary (Jun. 1, 2004~Jun. 30) (May. 1 2004~May. 30) (Jun 1, 2003~Jun. 31)
income & loss 1) Operating revenue 550 865 -36.42
and net income & 2) Operating income -18 58 net loss
loss for the year 3) Ordinary income -7 57 net loss
4) Net income -24 57 net loss
2. The management planning team sends information to [specific customers, designated]
employees of major securities firms who are responsible for profit/loss. Time as scheduled,
the name of event and location for delivery of information: After disclosure, relevant
information is e-mailed to each responsible employee of relevant companies.
information: After disclosure, relevant information is e-mailed to each responsible
employee of relevant companies.
2004-08-29 Performance of 1. Performance
business
operations Period: July 1, 2004~July 30, 2004
including sales
volume, Unit: 100 million, %
operating Current fiscal year, Prior fiscal year, Y/Y
income & loss, (Jul. 1, 2004~Jul. 30) (Jun. 1 2004~Jun. 30) (Jul 1, 2003~Jul. 31)
ordinary income 1) Operating revenue 638 550 10.00
& loss and net 2) Operating income -24 -18 net loss
income & loss 3) Ordinary income -17 -7 net loss
for the year 4) Net income -17 -24 net loss
2. The management planning team sends information to [specific
customers, designated] employees of major securities firms who are
responsible for profit/loss. Time as scheduled, the name of event
and location for delivery of information: After disclosure,
relevant information is e-mailed to each responsible employee of
relevant companies.
(3) Inquired disclosure
- N/A
(4) Voluntary Disclosure
- N/A
C. Disclosure pursuant to Disclosure Regulations Concerning Corporations
registered on the KOSDAQ
(1) Interim disclosure
- N/A
(2) Fair disclosure
- N/A
(3) Inquired disclosure
- N/A
(4) Voluntary disclosure
- N/A
D. Matters Reported under Chapter 2 (Registration and Management of
Securities Issuer) of the Regulation
- N/A
E. Status of Important Matters Relating To Business Management Which Is
Previously Disclosed
- N/A
2. SUMMARY OF MINUTES OF A GENERAL MEETING OF SHAREHOLDERS
DATE OF GENERAL
MEETING OF
SHAREHOLDERS AGENDA RESOLVED MATTERS REMARKS
---------------------------------------------------------------------------------------------
4th general meeting 1st proposal: Approval of Approved as submitted
of shareholders balance sheet, statement
(May 31, 2003) of income, and statement
of appropriation of
retained earnings for the
fourth fiscal year
2nd proposal: partial - Pursuant to the Commercial Code, Securities and
amendment of articles of Exchange Act and standard form of articles of
incorporation association, relevant contents were adopted and the
wording of some clauses were amended.
- In preparation for the launch of Bankassurance, agency and
intermediation services for insurance products were
added as a business objective.
- Some articles were amended to reflect a request made by the
Financial Supervisory Commission as supplementary guidance issued
out of consideration for objective fairness in granting
of stock options and their exercise
3rd proposal: appointment - Appointment of Non-standing director : Young Hwi Choi
of director (Shinhan Financial Group, CEO/Representative Director
- Appointment of outside director: Jin Won Park (Shin &
Kim, US Legal Consultant), Hyoung Tae Kim (Korea
Securities Research Institute, Research Fellow)
4th proposal: appointment The Chairman nominated Jin Won Park and Hyoung
of member of the audit Tae Kim for member of audit committee and the
committee who is outside shareholders approved the nomination as
director submitted.
(2004. 05. 28) 1st proposal: Approval of Approved as submitted
5th general meeting balance sheet, statement
of shareholders of income, and statement
of appropriation of
retained earnings for the
fifth fiscal year
2nd proposal: appointment - Appointment of directors who are not members
of directors of the audit committee: Kang Won Lee, Chil Sun
Hong, Hong Ryul Cheon
- Appointment of member of the audit committee
who is not outside director: Sung No Lee
- Appointment of member of the audit committee
who is outside director: Hyoung Tae Kim, Kyung
Ho Kim
3rd proposal: Ceiling 2.5 billion
for directors'
compensation
4th proposal: granting 633,000 shares
stock options
Management: 315,000 shares,
Deputy heads of branches: 318,000 shares
3. CONTINGENT LIABILITIES, ETC.
A. Material Litigations, Etc.
- Material Litigations in Process
(1) Litigation against Jinro Limited (the "Jinro") for the enforcement
of payment guaranty (defendant: Jinro, Action for enforcement of
payment guaranty)
The company, based on a back-to-back payment guaranty issued by
Jinro Limited on March 31, 1993, issued a payment guarantee for
obligations under certain bonds with Jinro Coors Beer Brewing
Company (the "Jinro Coors").
On April 28, 1997, the company repaid the full outstanding principal
amount of the bonds that Jinro Coors had failed to pay, and on
December 29, 1998, after having collected a portion of such
repayment pursuant to a reorganization proceedings of Jinro Coors,
the company demanded payment under Jinro's back-to-back guarantee
with respect to the uncollected portion of its repayment. As Jinro
refused payment under its back-to-back guarantee on the ground that
it has no obligation to perform thereunder, the company brought an
action (July 25, 2000) against Jinro Ltd. to enforce the guarantee
(claim amount: 6,196 million Won), and won the first trial (judgment
on June 8, 2001) and lost in an appellate proceeding (judgment on
April 29, 2003). Currently, the case has proceeded to the Supreme
Court upon appeal by the company (on June 4, 2003).
(2) Action for return of deposit related to illegal acts (embezzlement)
committed by a former employee (plaintiff: Yongsan Credit
Cooperative Association; claim for return of deposit, etc.).
Currently, two civil actions are proceeding in connection with
illegal acts committed by the former head of Olympic branch, Sang Oh
Kim (total amount of claim: 3,983 million Won). One of such
proceedings is an action seeking return of deposit (amount of claim:
3, 623 million Won) filed by Yongsan Credit Cooperative Association
on December 17, 2002. The company won the first trial (judgment on
December 29, 2003) and with an appeal filed by the plaintiff
(appealed on January 14, 2004), the case is proceeding through an
appellate trial. The other civil case concerns an action for damages
filed by two persons including Young Hu Cho (amount of claim: 360
million Won) on October 10, 2002. The
company partially lost in the first trial (amount of loss: 29
million Won) and with an appeal filed by the plaintiff (appealed on
December 11, 2003), the case is currently proceeding through an
appellate trial.
- Status of Litigations in Process (As of June 30, 2004)
Currently, 27 litigations are in process (total amount of claims:
12.9 billion Won) and among such cases, the total amount of claims
for proceedings in which the company is a plaintiff equals 6.8
billion Won. Except Jinro case (amount of claim: 6.2 billion Won),
0.6 billion Won of such claims is attributable to proceedings
related to business such as claim for payment of receivables. Total
amount of claims for proceedings in which the company is a defendant
equals 6.1 billion Won and such claims are attributable to
proceedings related to an employee's illegal business activities.
B. Status of Notes or Checks provided as Collateral
[Classification] (Unit: Number, Won)
TO NO. OF NOTE AMOUNT REMARKS
-- ----------- ------ -------
Related with issuance of
Bank 1 blank corporate bonds
Financial Institution 1 661,550,000 Related with leasing
Corporation 3 593,577,500 Related with leasing
Others (Individual) - - -
C. Other Contingent Liabilities, Etc.
-N/A
APPENDIX 1
SHINHAN FINANCIAL GROUP CO., LTD
NON-CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FOUR-MONTH PERIOD ENDED DECEMBER 31, 2001
AND INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Shinhan Financial Group Co., Ltd.
We have audited the accompanying non-consolidated balance sheet of Shinhan
Financial Group Co., Ltd. (the "Company"), and the related non-consolidated
statements of income, appropriations of retained earnings and cash flows for the
period from September 1, 2001 (date of inception) to December 31, 2001 (the
"Period"). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the Republic of Korea. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such non-consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
2001, and the results of its operations, the appropriations of its retained
earnings and its cash flows for the Period in conformity with financial
accounting standards generally accepted in the Republic of Korea ("Korean
GAAP").
Without qualifying our opinion, we draw attention to the following:
Our audit also comprehended the translation of Korean won amounts into U.S.
dollar amounts and in our
opinion, such translation has been made in conformity with the basis stated in
Note 2 to the accompanying non-consolidated financial statements. Such U.S.
dollar amounts are presented solely for the convenience of readers outside of
Korea.
Accounting principles and auditing standards and their application in practice
vary among countries. The accompanying financial statements are not intended to
present the financial position, results of operations and cash flows in
accordance with accounting principles and practices generally accepted in
countries other than the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to audit such financial statements
may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying non-consolidated financial
statements are for use by those knowledgeable about Korean accounting procedures
and auditing standards and their application in practice.
Soon after our audit report issued originally, on Janauary 25, 2002, in related
to the matter described in Note 18 to the accompanying non-consolidated
financial statements, the Company amended its financial statements with material
disclosure regarding the dividend according to resolutions at the stockholders'
meetings, held on March 20, 2002.
We reissue our audit report on March 20, 2002, without modifying previsously
express unqualified opinion on the accompanying non-consolidated financial
statements as of and for the period ended December 31, 2001.
As discussed in Note 21 of the accompanying non-consolidated financial
statements, the operations of the Company have been affected, and may continue
to be affected for the foreseeable future, by the general unstable economic
conditions in the Republic of Korea and in the Asia pacific region. The ultimate
effect of these uncertainties of the financial position of the Company as of the
balance sheet date cannot presently be determined.
March 20, 2002
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED BALANCE SHEET
December 31, 2001
(In millions of Korean won and thousands of U.S. dollars)
Korean Won U.S. Dollars (Note 2)
------------ ----------------------
ASSETS
Cash and bank deposits (Notes 3 and 7) W 712 $ 537
Investment securities (Notes 2 and 4) 3,801,572 2,866,731
Loans (Notes 2, 5 and 7) 147,200 111,002
(Allowance for loan losses) (Note 14) (1,472) (1,110)
Fixed Assets (Note 2)
Premises and equipment 1,568 1,182
(Accumulated depreciation) (168) (127)
------------ --------------------
1,400 1,056
Intangible assets 70 53
Other assets (Note 7) 6,499 4,901
------------ --------------------
Total assets W 3,955,981 $ 2,983,169
============ ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Borrowings (Notes 6 and 8) W 20,000 $ 15,082
Debentures (Notes 2 and 6) 150,000 113,113
(Discounts on debentures) (3,042) (2,294)
------------ --------------------
146,958 110,819
Other liabilities 152,076 114,679
------------ --------------------
Total liabilities 319,034 240,580
------------ --------------------
Stockholders' Equity:
Common stock (Note 9) 1,461,721 1,102,271
Capital surplus
Additional paid in capital 1,976,650 1,490,574
Retained earnings
Legal reserve (Note 10) 22,076 16,647
Unappropriated retained earnings 47,034 35,468
Capital adjustments
Gain on valuation of investment securities (Notes 2 and 4) 129,466 97,629
------------ --------------------
Total stockholders' equity 3,636,947 2,742,589
------------ --------------------
Total liabilities and stockholders' equity W 3,955,981 $ 2,983,169
============ ====================
See accompanying notes to non-consolidated financial statements.
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENT OF INCOME
Period from September 1, 2001 (date of inception) to December 31, 2001
(In millions of Korean won and thousands of U.S. dollars,
except for income per share data)
Korean Won U.S. Dollars (Note 2)
------------ ---------------------
OPERATING REVENUE
Gain on valuation of investment securities accounted
for using the equity method of accounting (Note 4) W 225,795 $ 170,270
Interest income (Note 7) 747 563
------------ --------------------
226,542 170,833
------------ --------------------
OPERATING EXPENSE
Interest expense 1,089 821
Commissions and fees 57 43
General and administrative expenses (Note 16) 4,633 3,494
------------ --------------------
5,779 4,358
------------ --------------------
OPERATING INCOME 220,763 166,475
NON-OPERATING INCOME (EXPENSE) - -
------------ --------------------
ORDINARY INCOME 220,763 166,475
EXTRAORDINARY GAIN (LOSS) - NET - -
------------ --------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 220,763 166,475
PROVISION FOR INCOME TAXES (Note 15) - -
------------ --------------------
NET INCOME W 220,763 $ 166,475
============ ====================
INCOME PER SHARE (in Korean won and U.S. Dollars) (Note 17) W 755 $ 0.57
============ ====================
See accompanying notes to non-consolidated financial statements.
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENT OF APPROPRIATIONS OF RETAINED EARNINGS
Period from September 1, 2001 (date of inception) to December 31, 2001
(In millions of Korean won and thousands of U.S. dollars)
Korean Won U.S. Dollars (Note 2)
------------ --------------------
RETAINED EARNINGS BEFORE APPROPRIATIONS
Unappropriated retained earnings at inception W - $ -
Changes in retained earnings of subsidiaries (841) (634)
Net income for the period 220,763 166,475
------------ --------------------
Total 219,922 165,841
------------ --------------------
APPROPRIATIONS OF RETAINED EARNINGS
Legal reserve 22,076 16,647
Dividends (Note 18) 150,812 113,726
------------ --------------------
Total (172,888) (130,373)
------------ --------------------
UNAPPROPRIATED RETAINED EARNINGS TO BE
CARRIED OVER TO SUBSEQUENT YEAR W 47,034 $ 35,468
============ ====================
See accompanying notes to non-consolidated financial statements.
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENT OF CASH FLOWS
Period from September 1, 2001 (date of inception) to December 31, 2001
(In millions of Korean won and thousands of U.S. dollars)
Korean Won U.S. Dollars (Note 2)
------------ --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income W 220,763 $ 166,475
Addition of Expenses Not Involving Cash Outflows:
Interest expense 92 69
Depreciation and amortization expense 173 131
Bad debt expense 1,472 1,110
------------ --------------------
1,737 1,310
Deduction of Revenue Not Involving Cash Inflows:
Gain on valuation of investment securities accounted for
the equity method of accounting (Note 4) (225,795) (170,270)
Changes in Assets and Liabilities Resulting from
Operations:
Increase in other assets (755) (569)
Increase in other liabilities 1,264 953
------------ --------------------
509 384
------------ --------------------
Net Cash Used In Operating Activities (2,786) (2,101)
------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities (8,780) (6,621)
Increase in loans (147,200) (111,002)
Purchase of premises and equipment (1,568) (1,182)
Increase in intangible assets (75) (57)
Increase in other assets (5,745) (4,332)
------------ --------------------
Net Cash Used In Investing Activities (163,368) (123,194)
------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in borrowings 20,000 15,082
Issuance of debentures 147,535 111,255
Bonds issuance costs paid (669) (505)
------------ --------------------
Net Cash Provided By Financing Activities 166,866 125,832
------------ --------------------
NET INCREASE IN CASH AND BANK DEPOSITS 712 537
------------ --------------------
CASH AND BANK DEPOSITS AT BEGINNING OF THE PERIOD - -
------------ --------------------
CASH AND BANK DEPOSITS AT END OF THE PERIOD W 712 $ 537
============ ====================
See accompanying notes to non-consolidated financial statements.
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
Period from September 1, 2001 (date of inception) to December 31,
2001 (the "Period")
1. GENERAL
Shinhan Financial Group Co., Ltd. (the "Company") was incorporated on
September 1, 2001 by all shares of stock owned by shareholders of Shinhan
Bank, Shinhan Securities Co., Ltd., Shinhan Capital Co., Ltd. and Shinhan
Investment Trust Management Co., Ltd. being transferred to the Company.
The Company was formed for the purpose of providing management services
and financing to affiliated companies. As of December 31, 2001, the
Company has six subsidiaries including e-Shinhan Inc. and Shinhan
Macquarie Financial Advisory Co., Ltd. and has capital of W1,461,721
million. The Company's shares have been listed on the Korea Stock Exchange
since September 10, 2001.
The Company's subsidiaries are as follows:
(1) Shinhan Bank
Shinhan Bank (the "Bank") was incorporated on September 15, 1981
under the General Banking Act of Korea to engage in the commercial
banking and trust business. As of December 31, 2001, the Bank's
capital was W1,375,915 million, and the Bank has 335 branch
offices and 168 automated teller machine locations.
(2) Shinhan Securities Co., Ltd.
Shinhan Securities Co., Ltd. ("Shinhan Securities") was founded as
Dong-Hwa Securities Co., Ltd. for underwriting, dealing and
brokerage services on January 31, 1962 and changed its name to
Shinhan Securities on August 2, 1985. As of December 31, 2001,
Shinhan Securities's capital was W119,237 million, and Shinhan
Securities has 32 branch offices in Korea.
(3) Shinhan Capital Co., Ltd.
Shinhan Capital Co., Ltd. ("Shinhan Capital") was incorporated on
April 19, 1991 as a specialized leasing company under the laws of
the Republic of Korea and is engaged in the leasing business under
the Leasing Promotion Law. Shinhan Capital changed its name on May
27, 1999 from Shinhan Leasing Co., Ltd. to Shinhan Capital and its
capital was W80,000 million as of December 31, 2001.
(4) Shinhan Investment Trust Management Co., Ltd.
On August 1, 1996, Shinhan Investment Trust Management Co., Ltd.
("Shinhan ITC") was established and obtained a license to engage in
the business of investment and trust of securities and advisory
services under the Investment and Trust of Securities Law. The total
amount of assets under management is W2,815,362 million and Shinhan
ITC's capital was W40,000 million as of December 31, 2001.
(5) e-Shinhan Inc.
e-Shinhan Inc. was incorporated on February 21, 2001 to engage in
the business of internet brokerage service and comprehensive
management services on customer accounts. On September 1, 2001,
e-Shinhan became one of the subsidiaries of the Company through a
stock purchase, and its capital was W2,820 million as of December
31, 2001.
(6) Shinhan Macquarie Financial Advisory Co., Ltd.
Shinhan Macquarie Financial Advisory Co., Ltd. ("Shinhan Macquarie")
was incorporated on August 1, 2001 to engage in the business of
financial advisory services and cross border leasing. On September
1, 2001, Shinhan Macquarie became one of the subsidiaries of the
Company through a stock purchase, and its capital was W1,000 million
as of December 31, 2001.
As of December 31, 2001, the ownerships between the Company and its
subsidiaries are as follows:
Number of Percentage
Investor Investee shares of ownership
----------------------- ------------------ ----------- ------------
Shinhan Financial Group Shinhan Bank 275,182,926 100.0
Co., Ltd.
" Shinhan Securities 23,847,457 100.0
" Shinhan Capital 16,000,000 100.0
" Shinhan ITC 8,000,000 100.0
" e-Shinhan 415,495 73.7
" Shinhan Macquarie 102,000 51.0
Shinhan Bank Shinhan Financial 29,873,295 10.2
Group Co., Ltd.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Basis of presentation of financial statements
The Company maintains its official accounting records in Korean won
and prepares statutory financial statements in the Korean language
(Hangul) in conformity with 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. Certain information attached to the Korean
language financial statements, but not required for a fair
presentation of the Company's financial position, results of
operations or cash flows, is not presented in the accompanying
financial statements.
(2) Translation of financial statements
The financial statements are stated in Korean won, the currency of
the country in which the Company is incorporated and operates. The
translations of Korean won amounts into U. S. dollar amounts are
included solely for the convenience of readers outsides of Korea and
have been made at the rate of W1,326.10 to US $1, the Base Rate
announced by the Korean government as of December 31, 2001. Such
translations should not be construed as a representation that the
Korean won amounts could be converted into U. S. dollars at that or
any other rate.
(3) Allowance for loan losses
The Company provides an allowance for loan losses to cover estimated
losses on loans, based on collection experience and analysis of the
collectibility of individual outstanding loans.
For equity method investees, the Company applies the same criteria
in providing allowances for loan losses. Accordingly, an additional
allowance of W709 million for Shinhan Securities and W13,019 million
for Shinhan Capital are provided, respectively, as of December 31,
2001, as compared to the financial statements provided by those
companies.
(4) Investment securities
Investment securities are composed entirely of equity securities in
subsidiaries which the Company controls.
Investments in equity securities of the subsidiaries are reported
using the equity method of accounting. Unrealized profits arising
from transactions by the Company with equity-method investees are
fully eliminated. The Company's proportionate unrealized profit
arising from transactions with equity-method investees by the
Company or transactions between equity-method investees is also
eliminated. Under the equity method of accounting, the Company
records changes in its proportionate equity of the book value of the
investee as current operations, capital adjustments or adjustments
to retained earnings, depending on the nature of the underlying
change in the book value of the investee.
Acquisition costs of the Company's investment securities are
determined as follows: for Shinhan Bank and Shinhan Capital, net
asset value (consolidated net asset value for Shinhan Capital), and
for Shinhan Securities and Shinhan ITC, fair value using the trading
date closest to the acqusition date.
(5) Fixed assets
a. Premises and equipment
Premises and equipment are stated at acquisition cost. Depreciation
is computed using the straight-line method for vehicles and
furniture and using the declining balance method for leasehold
improvements over 5 years. Major renewals and betterments are
capitalized if there is an increase in the useful life or value of
the asset, and maintenance and repairs are charged to expense as
incurred
b. Intangible assets
Intangible assets, primarily composed of organization costs, are
stated at acquisition cost less amortization computed using the
straight-line method over 5 years.
(6) Discounts on debentures
Discounts on debentures are presented as a contra account to the
related debentures and amortized using the effective interest rate
method over the redemption period as interest expense.
3. RESTRICTED DEPOSITS
As of December 31, 2001, W 301 million of bank deposits are
restricted in use.
4. INVESTMENT SECURITIES
Changes in investment securities by applying the equity method of
accounting for the Period are as follows:
(in millions of Korean won)
Increase (decrease)
----------------------------------------------------------- Book value as
Acquisition Current Retained Capital of December
cost operations earnings adjustments Total 31, 2001
------------ ------------ ------------ ------------ ------------ -------------
Shinhan Bank W 3,240,495 W 86,902 W (840) W 119,555 W 205,617 W 3,446,112
Shinhan Securities 102,544 141,015 - 114 141,129 243,673
Shinhan Capital 54,091 (107) - 9,797 9,690 63,781
Shinhan ITC 41,241 1,316 - - 1,316 42,557
e-Shinhan 8,270 (3,597) - - (3,597) 4,673
Shinhan Macquarie 510 266 - - 266 776
------------ ------------ ------------ ------------ ------------ -------------
W 3,447,151 W 225,795 W (840) W 129,466 W 354,421 W 3,801,572
============ ============ ============ ============ ============ =============
5. LOANS
As of December 31, 2001, loans consist of the following:
(in millions of Korean won and in thousands of U.S. Dollars)
Borrower Maturity Interest rate Korean won U.S. Dollars (Note 2)
--------------- ---------- ------------- ------------ ---------------------
Shinhan Capital 04. 10. 29 6.72 % W 29,000 $ 21,869
" 04. 12. 10 7.49 % 68,200 51,429
Shinhan Bank 08. 3. 21 7.42 % 50,000 37,704
------------ ---------------------
147,200 111,002
Allowance for loan losses (1,472) (1,110)
------------ ---------------------
W 145,728 $ 109,892
============ =====================
6. BORROWINGS AND DEBENTURES
As of December 31, 2001, borrowings and debentures are as follows:
(a) Borrowings
(in millions of Korean won and thousands of U.S. Dollars)
U.S. Dollars
Maturity date Interest rate (%) Korean won (Note 2) Lender
------------- ----------------- ---------- ------------ ----------
02. 9. 01 CD + 1.10 W 7,000 $ 5,279 Koram Bank
02. 9. 01 CD + 1.10 10,000 7,541 "
02. 9. 01 CD + 1.35 1,500 1,131 "
02. 9. 01 CD + 1.35 1,000 754 "
02. 9. 01 CD + 1.35 500 377 "
---------- ------------
W 20,000 $ 15,082
========== ============
(b) Debentures
(in millions of Korean won and thousands of U.S. Dollars)
Maturity Interest U.S. Dollars
Descriptions date rate Korean won (Note 2) Lender
----------------- ---------- -------- ---------- ------------ ----------
1st non-guranteed 04. 10. 29 5.0 % W 30,000 $ 22,623 Koram Bank
2nd non-guranteed 04. 12. 10 6.0 % 70,000 52,786 "
3rd non-guranteed 06. 12. 21 7.1 % 50,000 37,704 "
---------- ------------
150,000 113,113 "
Discounts on debentures (3,042) (2,294) "
---------- ------------
W 146,958 $ 110,819
========== ============
(c) Repayment schedule
Repayment schedule on borrowings and debentures is as follows:
(in millions of Korean won)
Repayment schedule
------------------------------------------
Description Balance 2002 2004 2006
----------- ---------- ---------- ----------- ----------
Borrowings W 20,000 W 20,000 W - W -
Debentures 150,000 - 100,000 50,000
---------- ---------- ----------- ----------
W 170,000 W 20,000 W 100,000 W 50,000
========== ========== =========== ==========
7. RELATED PARTY TRANSACTIONS
Details of significant transactions and balances with its affiliated
companies as of and for the period ended December 31, 2001 consist of the
following:
(a) Details of transactions
(in millions of Korean won and thousands of U.S. Dollars)
Transaction party
------------------------------------------- U.S. Dollars
Revenue earned Expense incurred Account Korean Won (Note 2)
------------------ ------------------ ------------------- ---------- ------------
Shinhan Financial Shinhan Bank Interest income W 113 $ 85
Group Co., Ltd.
" Shinhan Capital Interest income 634 478
Shinhan Bank Shinhan Securities Interest income 359 271
" Shinhan Capital Interest income 6,820 5,143
" Shinhan Capital Commission income 1 -
" Shinhan Macquarie Commission income 46 35
Shinhan Securities Shinhan Bank Interest on deposit 191 144
Shinhan Capital Shinhan Bank Interest income 64 48
Shinhan ITC Shinhan Bank Interest income 373 281
e-Shinhan Shinhan Bank Interest income 38 29
(b) Account balances
(in millions of Korean won and thousands of U.S. Dollars)
U.S. Dollars
Creditor Debtor Account Korean Won (Note 2)
------------------ ------------------ -------------------------------- ------------ ------------
Shinhan Financial Shinhan Bank Bank deposits W 712 $ 537
Group Co., Ltd.
" " Other assets (Key money deposits) 5,331 4,020
" " Loans (Privately placed bonds) 50,000 37,705
" " Other assets (Accrued income) 103 78
" Shinhan Capital Loans 97,200 73,298
" " Other assets (Accrued income) 634 478
Shinhan Bank Shinhan Credit card loans 137 103
Securities
" Shinhan Capital Receivables in Korean won 29,249 22,056
" " Receivables in Foreign currency 59,910 45,178
" " Marketable securities 100,000 75,409
" " Credit card loans 19 14
" Shinhan ITC " 11 8
" e-Shinhan " 6 5
Shinhan Securities Shinhan Bank Cash and bank deposit 4,696 3,541
Shinhan Capital " Marketable securities 19,448 14,666
" " Cash and cash equivalents 7,451 5,619
" " Long-term financial instruments 3 2
Shinhan ITC " Bank deposits 11,858 8,942
" " Accrued income 87 66
" Shinhan Securities Key money deposits 850 641
e-Shinhan Shinhan Bank Cash and cash equivalents 4,223 3,185
" " Accrued income 27 20
Shinhan Macquarie " Key money deposits 71 54
" " Cash and cash equivalents 1,529 1,153
(c) Guarantees and acceptances
(in millions of Korean won and thousands of U.S. Dollars)
Guarantees and acceptances U.S. Dollars
Guarantor Guarantee Provided on Korean Won (Note 2)
------------ --------------- -------------------------- ---------- ------------
Shinhan Bank Shinhan Capital Borrowings in foreign W 594 $ 448
currency
" " Letter of credit 7,655 5,773
" " " 9,655 7,281
---------- ------------
W 17,904 $ 13,502
========== ============
8. CONTINGENT LIABILITY
As of December 31, 2001, the Company provided three blank notes to Koram
Bank, as collaterals related to borrowings.
9. CAPITAL STOCK
As of December 31, 2001, the Company's common stock is as follows:
Authorized shares : 1,000,000,000 shares
Par value : W5,000
Issued and outstanding shares : 292,344,192 shares
10. RESTRICTED RETAINED EARNINGS
The Korean Financial Holding Company Act requires the Company to
appropriate a minimum of 10% of annual net income as a legal reserve
whenever dividends are paid until such reserve equals its paid-in capital.
This reserve is not available for payment of cash dividends. However,
subject to stockholders' approval, it may be transferred to common stock
in connection with stock dividends or used to reduce any accumulated
deficit.
11. CONDENSED FINANCIAL STATEMENTS OF SUBSIDIARIES
As of and for the period ended December 31, 2001, condensed financial
statements of subsidiaries are as follows:
(1) Balance sheets
(in millions of Korean won)
Total
Company Total assets Total liabilities stockholders' equity
---------------------- ------------- ----------------- --------------------
Shinhan Bank W 53,356,042 W 50,185,114 W 3,170,928
Shinhan Securities (*) 630,696 387,023 243,673
Shinhan Capital (*) 842,491 778,710 63,781
Shinhan ITC 45,171 2,613 42,558
e-Shinhan 6,473 129 6,344
Shinhan Macquarie 4,237 2,716 1,521
------------- ----------------- --------------------
W 54,885,110 W 51,356,305 W 3,528,805
============= ================= ====================
(*) After reflecting additional allowances for loan losses amounting
to W709 million and W13, 019 million to Shinhan Securities and
Shinhan Capital, respectively.
(2) Income statements
(in millions of Korean won)
Operating Operating Operating Ordinary Net income
Company Revenue expense income(loss) income(loss) (loss)
---------------------- ----------- ----------- ----------- ----------- ----------
Shinhan Bank W 2,290,062 W 2,185,158 W 104,903 W 120,610 W 86,902
Shinhan Securities (*) 140,382 122,389 17,993 23,855 17,472
Shinhan Capital (*) 63,503 71,718 (8,215) (11,623) (107)
Shinhan ITC 5,696 2,567 3,130 3,129 1,316
e-Shinhan 460 3,659 (3,199) (3,187) (3,187)
Shinhan Macquarie 3,210 1,473 1,737 1,747 521
----------- ----------- ----------- ----------- ----------
W 2,503,313 W 2,386,964 W 116,349 W 134,531 W 102,917
=========== =========== =========== =========== ==========
(*) After reflecting additional provisions for loan losses,
amounting to W3,688 million and W30,074 million of Shinhan
Securities and Shinhan Capital, respectively.
12. FINANCING AND OPERATING ASSETS OF SUBSIDIARIES
As of December 31, 2001, the financing and operating assets of of the
Company and subsidiaries are as follows:
(1) Financing
(in millions of Korean won)
Deposits Borrowings Debentures Total
------------ ------------ ------------ ------------
Shinhan Financial W - W 20,000 W 146,957 W 166,957
Group Co., Ltd.
Shinhan Bank 31,892,878 9,662,034 3,512,530 45,067,442
Shinhan Securities 191,051 137,240 - 328,291
Shinhan Capital - 404,551 258,734 663,285
------------ ------------ ------------ ------------
W 32,083,929 W 10,223,825 W 3,918,221 W 46,225,975
============ ============ ============ ============
(2) Operating assets
(in millions of Korean won)
Loans (*) Securities Bank deposits Total
------------ ------------ ------------- ------------
Shinhan Financial W 145,728 W 3,801,572 W - W 3,947,300
Group Co., Ltd.
Shinhan Bank 33,881,256 14,020,180 1,265,987 49,167,423
Shinhan Securities 58,642 272,394 178,195 509,231
Shinhan Capital 633,561 68,475 - 702,036
Shinhan ITC 430 13,437 - 13,867
e-Shinhan 36 181 - 217
------------ ------------ ------------- ------------
W 34,719,653 W 18,176,239 W 1,444,182 W 54,340,074
============ ============ ============= ============
(*) Net of allowance for loan losses and present value discounts.
13. CONTRIBUTION OF SUBSIDIARIES TO THE COMPANY'S NET INCOME
(in millions of Korean won and thousands of U.S. Dollars)
Korean Won U.S. Dollars (Note 2) Ratio (%)
------------ -------------------- ---------
Shinhan Bank W 86,902 $ 65,532 38.5
Shinhan Securities 141,015 106,338 62.5
Shinhan Capital (107) (81) (-) 0.1
Shinhan ITC 1,316 992 0.6
e-Shinhan (3,597) (2,712) (-) 1.6
Shinhan Macquarie 266 201 0.1
------------ -------------------- ---------
Gain on equity method valuation 225,795 170,270 100.0
=========
Other revenue 747 564
Operating expense (5,779) (4,359)
------------ --------------------
Net income W 220,763 $ 166,475
============ ====================
14. ALLOWANCE FOR LOAN LOSSES OF SUBSIDIARIES
For the period ended December 31, 2001, changes in the allowance for loan
losses of the Company and subsidiaries are as follows:
(in millions of Korean won)
Beginning balance Increase (decrease) Ending balance
----------------- ------------------- --------------
Shinhan Financial Group Co., Ltd. W - W 1,472 W 1,472
Shinhan Bank 609,623 (42,279) 567,344
Shinhan Securities (Note 1) 30,022 (14,351) 15,671
Shinhan Capital (Note 2) 86,293 16,161 102,454
Shinhan ITC 18 7 25
Shinhan Macquarie - 21 21
----------------- ------------------- --------------
W 725,956 W (38,969) W 686,987
================= =================== ==============
(Note 1) Including additional loan loss allowances made by the
Company of W4,397 million as of September 1, 2001 and W709 million
as of December 31, 2001.
(Note 2) Including allowance for losses on disposition of lease
assets and additional loan loss allowances made by the Company of
W43,093 million as of September 1, 2001 and W13,019 million as of
December 31, 2001.
15. INCOME TAX EXPENSE
(a) Reconciliations of accounting income and taxable income for the
period ended December 31, 2001 is as follows;
(in millions of Korean won)
Temporary Permanent
differences differences Total
----------- ----------- ----------
Additions:
Deemed interest for tax purposes W - W 401 W 401
Entertainment expense in excess of limit - 120 120
Gain on valuation of investment securities - 129,466 129,466
----------- ----------- ----------
W - W 129,987 W 129,987
=========== =========== ==========
Deductions:
Investment securities W 129,466 W - W 129,466
Valuation gain using the equity method
of accounting 225,795 - 225,795
----------- ----------- ----------
W 355,261 W - W 355,261
=========== =========== ==========
(b) Changes in significant accumulated temporary differences and tax
effects is as follows:
(in millions of Korean won)
Beginning Increase Ending
Description Balance (decrease) Balance
-------------------------------------- ----------- ----------- ----------
Valuation gain using the equity method W - W (225,795) W (225,795)
of accounting
Loss carried over from prior year - 4,511 4,511
----------- ----------- ----------
Total W - W (221,284) W (221,284)
----------- ----------- ----------
Income tax effects W - W - W -
=========== =========== ==========
Dividends from subsidiaries are excluded for the Company's taxable
income according to the Korean Corporate Tax Law. Accordingly,
deferred income tax liabilities related to the gain on equity method
valuation are not recognized due to uncertainty of realization.
(c) There is no current tax obligation incurred fir the period.
16. GENERAL AND ADMINISTRATIVE EXPENSES
For the period ended December 31, 2001, general and administrative
expenses are as follows:
(in millions of Korean won and thousands of U.S. Dollars)
Accounts Korean won U.S. dollars (Note 2)
----------------------------- ------------ --------------------
Salaries W 1,742 $ 1,314
Entertainment 237 179
Depreciation and amortization 173 130
Bad debts 1,472 1,110
Commissions 602 454
Employee benefits 75 56
Taxes and dues 22 17
Other 310 234
------------ --------------------
Total W 4,633 $ 3,494
============ ====================
17. INCOME PER SHARE
The Company's income per share for the period ended December 31, 2001 is
computed as follows:
(in millions of Korean won and thousands of U.S. Dollars, except for
common shares)
Korean Won U.S. Dollars (Note 2)
------------------ ---------------------
Net income W 220,763 $ 166,475
Extraordinary income/expense - -
------------------ ---------------------
Ordinary income 220,763 166,475
Weighted average number of common
shares outstanding 292,344,192 shares 292,344,192 shares
------------------ ---------------------
Ordinary income per share W 755 $ 0.57
(Korean won and U.S. Dollar)
================== =====================
Net income per share W 755 $ 0.57
(Korean won and U.S. Dollar)
================== =====================
18. DIVIDENDS
(a) Dividends during the period ended December 31, 2001 are calculated
as follows:
Description Korean won
------------------------------------------------ ----------------------------
Dividend (rate) per share W 600 (12%)
Number of shares issued and outstanding (Note 1) 262,470,897 shares
----------------------------
Dividends W 150,812,285,352
============================
(Note 1) As of December 31, 2001, 29,873,295 shares held by Shinhan
Bank are excluded due to the no dividend bearing nature of such
shares.
(b) Payout ratio and dividend yield for the period ended December 31,
2001 is calculated as follows:
Korean won
-----------------------
A. Dividends W 150,812,285,352
B. Net income for the Period 220,762,998,627
-----------------------
C. Payout ratio (A /B) 68.31%
=======================
D. Dividend per share W 600
E. Stock price at the balance sheet date 17,550
-----------------------
F. Price-dividends yield (D /E) 3.42%
=======================
(c) The Company originally issued audit report on January 25, 2002,
which presented W750 of dividend per share and 15% of dividend rate
per share. However, the Company amended information regarding the
dividend amount to be paid and dividend rate per share, W600 and
12%, respectively, according to resolutions at the stockholders'
meetings, held on March 20, 2002. Therefore, the Company's dividend
payable and retained earnings were changed by such effects,
amounting to W37,703,071 thousands.
19. STATEMENT OF CASH FLOWS
Significant non-cash transactions during the period ended December 31,
2001 are summarized as follows:
(in millions of Korean won and thousands of U.S. Dollars)
Description Korean won U.S. Dollars (Note 2)
------------------------------------------------ ------------ ---------------------
Acquisition of investment securities by
stock transfer W 3,438,371 $ 2,592,845
Dividend payable 150,812 113,726
Valuation gain on investment securities recorded
as a capital adjustment 129,466 97,629
Changes in retained earnings of subsidiaries 840 633
Legal reserve for the Period 22,076 16,647
------------ ---------------------
Total W 3,741,565 $ 2,821,480
============ =====================
20. VALUE ADDED INFORMATION
Value added information included in general and administrative expenses
for the period ended December 31, 2001 is as follows:
(in millions of Korean won and thousands of U.S. Dollars)
Description Korean won U.S. Dollars (Note 2)
------------------------------------------------ ------------ ---------------------
Salaries W 1,743 $ 1,314
Employee benefits 75 57
Rental 2 1
Depreciation 168 127
Tax and dues 22 17
------------ ---------------------
Total W 2,010 $ 1,516
============ =====================
21. ECONOMIC UNCERTAINTIES
Beginning in 1997, Korea and other countries in the Asia Pacific region
experienced a severe contraction in substantially all aspects of their
economies. This situation is commonly referred to as the 1997 Asian
financial crisis. In response to this situation, the Korean government and
the private sector began implementing structural reforms to historical
business practices.
The Korean economy continues to experience difficulties, particularly in
the areas of restructuring private enterprises and reforming the banking
industry. The Korean government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The
banking industry is currently undergoing consolidation and uncertainty
exists with regard to the continued availability of financing. The Company
may be either directly or indirectly affected by the situation described
above.
The accompanying financial statements reflect management's current
assessment of the impact to date of the economic situation on the
financial position of the Company. Actual results may differ materially
from management's current assessment.
APPENDIX 2
SHINHAN FINANCIAL GROUP CO., LTD.
Non-Consolidated Financial Statements
December 31, 2002 and 2001
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
Based on a report originally issued in Korean
The Board of Directors and Stockholders
Shinhan Financial Group Co., Ltd.
We have audited the accompanying non-consolidated balance sheet of Shinhan
Financial Group Co., Ltd. (the "Company") as of December 31, 2002 and the
related non-consolidated statements of earnings, appropriation of retained
earnings and cash flow for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements for the four-month period then ended December 31, 2001, presented
herein for comparative purposes, were audited by other auditors, whose report
thereon dated March 20, 2002 expressed an unqualified opinion on the financial
statements.
We conducted our audit in accordance with the Auditing Standards, as established
by the Financial Supervisory Commission of the Republic of Korea. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2002, and the result of its operations, the changes in its
retained earnings, and its cash flow for the year then ended in accordance with
the Financial Accounting Standards, as established by the Financial Supervisory
Commission of the Republic of Korea.
The accompanying non-consolidated financial statements expressed in Korean Won
have been translated into United States dollars solely for the convenience of
the reader. We have audited the translation and, in our opinion, the
accompanying non-consolidated financial statements expressed in Korean Won have
been translated into United States dollars on the basis set forth in Note 2(b)
to the accompanying non-consolidated financial statements.
Without qualifying our opinion, we draw attention to the following:
As discussed in Note 2(a) to the accompanying non-consolidated financial
statements, accounting principles and auditing 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 and cash flow in accordance with accounting principles and practices
generally accepted in countries other than the Republic of Korea. In addition,
the procedures and practices utilized in the Republic of Korea to audit such
financial statements may differ from those generally accepted and applied in
other countries. Accordingly, this report and the accompanying non-consolidated
financial statements are for use by those knowledgeable about Korean accounting
procedures and auditing standards and their application in practice.
As described in Note 1 to the accompanying non-consolidated financial
statements, on April 4, 2002, the Company took over a 51% share of Jeju Bank
from Korea Deposit Insurance Corporation and its percentage of ownership
subsequently increased to 62% with the acquisition of additional common shares
at W20,177 million. In addition, on June 1, 2002, Shinhan Card Co., Ltd. was
established as 100% subsidiary of the Company through the spin-off of Shinhan
Bank's credit card division, and on July 8, 2002, Shinhan Credit Information
Co., Ltd. was established as a 100% subsidiary of the Company with W3,000
million of initial capital stock. Additionally, on June 18, 2002, the Company
acquired a 29% share of Good Morning Securities Co., Ltd. from its largest
shareholder, and on July 31, 2002, Good Morning Securities Co., Ltd. was merged
with Shinhan Securities Co., Ltd., which was one of subsidiaries of the Company,
at the exchange rate of 1.9976 Good Morning Securities Co., Ltd. shares for each
Shinhan Securities Co., Ltd. share, and renamed to Goodmorning Shinhan
Securities Co., Ltd. On October 1, 2002, SH&C Life Insurance Co., Ltd. was
established under a joint venture agreement with Cadif Assurance Vie with W30
billion of initial capital stock and the Company owns 3,000,001 shares (50% of
total outstanding shares + 1 share) of that company. In addition, on October 24,
2002, the Company sold 3,999,999 shares (50% of total outstanding shares - 1
share) of Shinhan Investment Trust Management Co., Ltd. which has been renamed
to Shinhan BNP Paribas Investment Trust Management Co., Ltd., to BNP Paribas
Asset Management.
As described in Note 4 to the accompanying non-consolidated financial
statements, for the equity method of accounting, the financial statements of
Goodmorning Shinhan Securities Co., Ltd., which were reviewed by other
accountants, and those of Jeju Bank, which were audited by other auditors, were
used. Those statements reflect total investment securities of W578,258 million
(12.1% of total assets of the Company) as of December 31, 2002 and operating
revenues of W5,934 million (1.0% of total operating revenue of the Company) for
the year then ended.
As described in Note 4 (b) to the accompanying non-consolidated financial
statements, Shinhan Bank is holding W461,867 million of loans (including
guarantees and acceptances) provided to SK Global Co., Ltd. that confirmed its
accounting fraud. Actual losses on these loans may differ materially from the
management's assessments. The accompanying non-consolidated financial statements
do not reflect the impact of the uncertainty on the financial position of the
Company, for the equity method of accounting.
As described in Note 12 to the accompanying non-consolidated financial
statements, the Company recorded W793,336 million of assets as of December 31,
2002 and W24,670 million of operating revenue for the year then ended through
its related party transactions.
As described in Note 2(k) to the accompanying non-consolidated financial
statements, the Company adopted the Statement of Korea Accounting Standards
(SKAS) No. 6, "Events Occurring after the Balance Sheet Date", in preparation
for financial statements as of and for the year ended December 31, 2002. The
adoption of SKAS No. 6 had no effects on earnings for the year ended December
31, 2002 and resulted in a decrease in liabilities and an increase in
stockholders' equity, amounting to W157,492 million, respectively. According to
the adoption of the new statement, the Company amended financial statements for
the four-month period ended December 31, 2001, presented herein for comparative
purposes, and its liabilities decreased and stockholders' equity increased,
amounting to W150,812 million, respectively.
January 24, 2003
This report is effective as of January 24, 2003, the audit report date. Certain
subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the
accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the audit report should understand that there is a
possibility that the above audit report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED BALANCE SHEETS
December 31, 2002 and 2001
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------------
2002 2001 2002 2001
------------ --------- --------------- ---------
Assets
Cash and due from bank (notes 3, 11, 12 and 25) W 10,613 712 $ 8,841 593
Investment securities (notes 4 and 25) 3,991,863 3,801,572 3,325,444 3,166,921
Loans, net (notes 5, 11, 12, 25 and 27) 765,281 145,728 637,522 121,400
Fixed assets, net (note 6) 1,754 1,469 1,461 1,224
Other assets (notes 7, 11 and 12) 15,468 6,500 12,886 5,414
------------ --------- --------------- ---------
Total assets W 4,784,979 3,955,981 $ 3,986,154 3,295,552
============ ========= =============== =========
Liabilities and Stockholders' equity
Liabilities:
Borrowings (notes 8, 11 and 25) W 36,012 20,000 $ 30,000 16,661
Debentures, net (notes 8, 11 and 25) 732,030 146,958 609,822 122,424
Retirement and severance benefits (note 9) 237 - 197 -
Other liabilities (notes 10 and 11) 6,480 1,264 5,398 1,053
------------ --------- --------------- ---------
Total liabilities 774,759 168,222 645,417 140,138
Stockholders' equity:
Common stock of W5,000 par value 1,461,806 1,461,721 1,217,766 1,217,695
Authorized - 1,000,000,000 shares
Issued - 292,361,125 shares in 2002
292,344,192 shares in 2001
Additional paid in capital 1,976,625 1,976,650 1,646,639 1,646,660
Retained earnings (note 15) 672,530 219,922 560,255 183,207
Capital adjustments (notes 16 and 17) (100,741) 129,466 (83,923) 107,852
------------ --------- --------------- ---------
Total stockholders' equity 4,010,220 3,787,759 3,340,737 3,155,414
Commitments and contingencies (note 13)
------------ --------- --------------- ---------
Total liabilities and stockholders' equity W 4,784,979 3,955,981 $ 3,986,154 3,295,552
============ ========= =============== =========
See accompanying notes to non-consolidated financial statements
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENTS OF EARNINGS
Year ended December 31, 2002 and four-month period ended December 31, 2001
(In millions of Won and thousands of U.S. dollars, except
earnings per share data)
Won U.S. dollars (note 2)
----------------------- ------------------------
2002 2001 2002 2001
---------- ------- ----------- -------
Operating revenue:
Valuation gain accounted for by the equity method
(notes 4 and 26) W 618,690 225,795 $ 515,403 188,100
Interest income (note 12) 24,670 747 20,552 622
---------- ------- ----------- -------
643,360 226,542 535,955 188,722
Operating expense:
Interest expense 21,632 1,089 18,021 907
Commission and fees 69 57 57 48
General and administrative expenses (note 18) 19,439 4,633 16,194 3,859
---------- ------- ----------- -------
41,140 5,779 34,272 4,814
---------- ------- ----------- -------
Operating income 602,220 220,763 501,683 183,908
Non-operating income (expense):
Foreign currency translation gain 3,645 - 3,036 -
Gain on disposition of investment securities 1,731 - 1,442 -
Foreign currency translation loss (3,645) - (3,036) -
Other, net (20) - (17) -
---------- ------- ----------- -------
1,711 - 1,425 -
---------- ------- ----------- -------
Earnings before income taxes 603,931 220,763 503,108 183,908
Income taxes (note 20) - - - -
---------- ------- ----------- -------
Net earnings W 603,931 220,763 $ 503,108 183,908
========== ======= =========== =======
Basic earnings per share of common stock
in Won and U.S. dollars (note 21) W 2,066 755 $ 1.721 0.629
========== ======= =========== =======
Diluted earnings per share of common stock
in Won and U.S. dollars (note 21) W 2,064 755 $ 1.719 0.629
========== ======= =========== =======
See accompanying notes to non-consolidated financial statements
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS
Year ended December 31, 2002 and four-month period ended December 31, 2001
Date of Appropriation for 2002: March 31, 2003
Date of Appropriation for 2001: March 20, 2002
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
-------------------------- -------------------------
2002 2001 2002 2001
----------- ------- ---------- -------
Unappropriated retained earnings:
Balance at beginning of year W 47,034 - $ 39,182 -
Changes in retained earnings of subsidiaries (511) (841) (426) (701)
Net earnings for year 603,931 220,763 503,108 183,908
----------- ------- ---------- -------
650,454 219,922 541,864 183,207
Appropriation of retained earnings:
Legal reserve 60,393 22,076 50,311 18,391
Dividends (note 22) 157,492 150,812 131,200 125,634
----------- ------- ---------- -------
217,885 172,888 181,511 144,025
----------- ------- ---------- -------
Unappropriated retained earnings to be carried W 432,569 47,034 $ 360,353 39,182
over to subsequent year
=========== ======= ========== =======
See accompanying notes to non-consolidated financial statements
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 2002 and four-month period ended December 31, 2001
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ ------------------------
2002 2001 2002 2001
---------- -------- ---------- --------
Cash flows from operating activities:
Net earnings W 603,931 220,763 $ 503,108 183,908
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Interest expense 1,175 92 979 76
Depreciation and amortization 512 173 426 144
Bad debt expense 2,374 1,472 1,978 1,226
Retirement and severance benefits 594 - 495 -
Valuation gain accounted for by the equity method (618,690) (225,795) (515,403) (188,100)
Stock compensation expense 643 - 536 -
Gain on disposition of investment securities (1,731) - (1,442) -
Increase in other assets (4,609) (754) (3,840) (628)
Increase in other liabilities 4,763 1,264 3,968 1,053
Retirement and severance benefits paid (24) - (20) -
Increase in due from insurer for severance benefits (332) - (277) -
---------- -------- ---------- --------
Net cash used in operating activities (11,394) (2,785) (9,492) (2,321)
Cash flows from investing activities:
Cash provided by investing activities:
Dividends received 640,771 - 533,798 -
Decrease in investment securities 23,631 - 19,686 -
Decrease in other assets 39 - 32 -
---------- -------- ---------- --------
664,441 - 553,516 -
Cash used in investing activities:
Increase in investment securities 467,962 8,781 389,838 7,315
Increase in loans 625,572 147,200 396,178 80,973
Acquisition of fixed assets (797) (1,643) (664) (1,368)
Increase in other assets (2,038) (5,745) (6,139) (4,786)
---------- -------- ---------- --------
(1,096,369) (163,369) (792,819) (94,442)
---------- -------- ---------- --------
Net cash used in investing activities (431,928) (163,369) (359,820) (136,095)
SHINHAN FINANCIAL GROUP CO., LTD.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Year ended December 31, 2002 and four-month period ended December 31, 2001
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
---------------------- ----------------------
2002 2001 2002 2001
--------- ------- --------- -------
Cash flows from financing activities:
Cash provided by financing activities:
Increase in borrowings W 39,582 20,000 $ 32,974 16,661
Increase in debentures 586,087 147,535 488,243 122,905
--------- ------- --------- -------
625,669 167,535 512,217 139,566
Cash used in financing activities:
Issuance cost on debentures paid (2,087) (669) (1,739) (557)
Decrease in borrowings (20,000) - (16,661) -
Dividends paid (150,359) - (125,257) -
--------- ------- --------- -------
(172,446) (669) (143,657) (557)
--------- ------- --------- -------
Net cash provided by financing activities 453,223 166,866 377,560 139,009
--------- ------- --------- -------
Net increase in cash and cash equivalents 9,901 712 8,248 593
Cash and cash equivalents, beginning of year 712 - 593 -
--------- ------- --------- -------
Cash and cash equivalents, end of year W 10,613 712 $ 8,841 593
========= ======= ========= =======
See accompanying notes to non-consolidated financial statements
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2002 and four-month period ended December 31, 2001
(1) Description of the Company
Shinhan Financial Group Co., Ltd. (the "Company") was incorporated on
September 1, 2001 by way of the transfer of all issued shares owned by
shareholders of Shinhan Bank, Shinhan Securities Co., Ltd., Shinhan
Capital Co., Ltd. and Shinhan Investment Trust Management Co., Ltd. to the
Company. The Company was formed for the purpose of providing management
services and financing to affiliated companies with W1,461,721 million of
initial capital stock and the Company's shares were listed on the Korea
Stock Exchange on September 10, 2001.
As of December 31, 2002, the Company has 10 subsidiaries and its capital
stock was W1,461,806 million. Details of its subsidiaries are as follows:
(a) Shinhan Bank
Shinhan Bank was incorporated on September 15, 1981 under the
General Banking Act of Korea to engage in the commercial banking and
trust business. As of December 31, 2002 Shinhan Bank's capital stock
was W1,223,153 million. Shinhan Bank has 348 branch offices and 170
automated teller machine locations.
(b) Goodmorning Shinhan Securities Co., Ltd.
Goodmorning Shinhan Securities Co., Ltd. ("Goodmorning Shinhan
Securities") was incorporated on April 2, 1973 to engage in
securities trading, underwriting and brokerage services. Its shares
were listed on the Korea Stock Exchange on December 19, 1986. On
June 18, 2002, the Company acquired a 29% share of Good Morning
Securities Co., Ltd. from its largest shareholders and on July 31,
2002, Good Morning Securities Co., Ltd. was merged with Shinhan
Securities Co., Ltd., which was one of subsidiaries of the Company,
at the exchange rate of 1.9976 Good Morning Securities Co., Ltd.
shares for each Shinhan Securities Co., Ltd. share, and renamed to
Goodmorning Shinhan Securities. As of December 31, 2002, it operates
through 95 branches and its capital stock was W796,998 million.
(c) Shinhan Card Co., Ltd.
Shinhan Card Co., Ltd. ("Shinhan Card") was established on June 1,
2002 under Credit Specialty Finance Law through the spin-off of the
credit card division of Shinhan Bank. Shinhan Card is engaged
principally in credit card services, factoring, consumer loan and
installment financing. As of December 31, 2002, Shinhan Card holds
1.55 million of franchise accounts and 2.55 million of credit card
holders, and its capital stock was W152,847 million.
(d) Shinhan Capital Co., Ltd.
Shinhan Capital Co., Ltd. ("Shinhan Capital") was incorporated on
April 19, 1991 to engage in the leasing and rental business and it
changed its name on May 27, 1999 from Shinhan Leasing Co., Ltd. to
Shinhan Capital. As of December 31, 2002, its capital stock was
W80,000 million.
2
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) Description of the Company, Continued
(e) Shinhan BNP Paribas Investment Trust Management Co., Ltd.
On August 1, 1996, Shinhan BNP Paribas Investment Trust Management
Co., Ltd. ("Shinhan BNP Paribas ITMC") was established and obtained
a license to engage in the business of investment and trust of
securities and advisory services under the Investment and Trust of
Securities Law. Shinhan BNP Paribas ITMC's capital stock was W40,000
million as of December 31, 2002. Additionally, on October 24, 2002,
the Company sold 3,999,999 shares (50% of total outstanding shares -
1 share) of Shinhan Investment Trust Management Co., Ltd., which has
been renamed to Shinhan BNP Paribas ITMC, to BNP Paribas Asset
Management.
(f) Jeju Bank
Jeju Bank was incorporated on March 18, 1969 under the General
Banking Act of Korea to engage in the commercial banking and trust
business and listed its shares on the Korea Stock Exchange on
December 28, 1972. On April 4, 2002, Jeju Bank became one of
subsidiaries of the Company through acquiring a 51% share from Korea
Deposit Insurance Corporation. Additionally, the Company's
percentage of ownership increased to 62% with the acquisition of
additional common shares at W20,177 million on July 5, 2002 and its
capital stock was W77,644 million as of December 31, 2002.
(g) SH&C Life Insurance CO., Ltd.
SH&C Life Insurance Co., Ltd. ("SH&C Life Insurance") was
established in October 1, 2002 to engage in insurance business and
other related business. As of December 31, 2002, its capital stock
was W30,000 million.
(h) e-Shinhan Inc.
e-Shinhan Inc. ("e-Shinhan") was incorporated on February 21, 2001
to engage in the business of internet brokerage service and
comprehensive management services on customer accounts. Its capital
stock was W2,820 million as of December 31, 2002.
(i) Shinhan Macquarie Financial Advisory Co., Ltd.
Shinhan Macquarie Financial Advisory Co., Ltd. ("Shinhan Macquarie")
was incorporated on August 1, 2001 to engage in the business of
financial advisory services and cross border leasing. Its capital
stock was W1,000 million as of December 31, 2002.
(j) Shinhan Credit Information Co., Ltd.
Shinhan Credit Information Co., Ltd. ("Shinhan Credit Information")
was established on July 8, 2002 as wholly owned subsidiary of the
Company to engage in the business of debt collection services and
credit research. As of December 31, 2002, its capital stock was
W3,000 million.
3
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(1) Description of the Company, Continued
Ownerships of Company's subsidiaries as of December 31, 2002 and 2001 are
as follows:
2002 2001
------------------------ ----------------------------
Ownership Ownership
Number of Percentage Number of Percentage
Investor Investee shares (%) shares (%)
----------- ------------------------------ ----------- ---------- ----------- ----------
The Company Shinhan Bank 244,630,672 100.0 275,182,926 100.0
" Goodmorning Shinhan Securities 94,084,384 (*)59.4 (**) 23,847,457 100.0
" Shinhan Card 30,569,400 100.0 - -
" Shinhan Capital 16,000,000 100.0 16,000,000 100.0
" Shinhan BNP Paribas ITMC 4,000,001 50.0 8,000,000 100.0
" Jeju Bank 9,692,369 62.4 - -
" SH&C Life Insurance 3,000,001 50.0 - -
" e-Shinhan 415,495 73.7 415,495 73.7
" Shinhan Macquarie 102,000 51.0 102,000 51.0
" Shinhan Credit Information 600,000 100.0 - -
Shinhan Bank The Company 29,873,674 10.2 29,873,295 10.2
(*) 1,041,408 shares of treasury stock considered
(**) Shares of Shinhan Securities Co., Ltd. before merger
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies
(a) Basis of Financial Statements Presentation
The Company maintains its official accounting records in Korean won
and prepares statutory financial statements in the Korean language
in conformity with generally accepted financial accounting standards
and the financial accounting standards applicable to financial
holding companies 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 only by those who are informed about Korean
accounting principles and practices. The accompanying
non-consolidated financial statements have been condensed,
restructured and translated into English (with certain expanded
descriptions) from the Korean language financial statements.
4
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(b) Basis of Financial Statements Translation
The accompanying non-consolidated financial statements are expressed
in Korean Won and, solely for the convenience of the reader, have
been translated into U.S. dollars at the rate of W1,200.40 to US$1,
the basic exchange rate on December 31, 2002. These translations
should not be construed as a representation that any or all of the
amounts shown could be converted into U.S. dollars at this or any
other rate.
(c) Allowance for Loan Losses
The Company provides an allowance for doubtful accounts to cover
estimated losses on loans, based on collection experience and
analysis of the collectibility of individual outstanding loans.
For equity method accounting, the Company applies its own criteria
in providing allowances for loan losses of its subsidiaries.
Accordingly, additional allowances of W3,679 million for Goodmorning
Shinhan Securities, W7,225 million for Shinhan Capital and W2,048
million for Jeju Bank are provided, as of December 31, 2002, for
equity method accounting.
(d) Investment Securities
The Company's investment equity securities are composed entirely of
equity securities in subsidiaries which are under significant
influence of the Company.
Investments in equity securities of subsidiaries which are under
significant influence of the Company are stated at an amount as
determined using the equity method. The difference between carrying
value and amount after adjusting investor's interest in investee's
net assets is charged or credited to current income and the
difference derived from changes in the investee's retained earnings
is presented as an increase or decrease in the investor's beginning
retained earnings. If the difference is derived from changes in
investee's capital surplus or capital adjustment, it is charged to
the capital adjustment as a component of stockholders' equity.
For debt securities presented in investments, acquisition cost is
determined by the moving average method. Investments in debt
securities categorized as held to maturity are recorded at amortized
cost, with the related amortization included in interest income.
Investments in debt securities other than those held to maturity are
recorded at fair value with unrealized loss or gain included as a
separate component of stockholders' equity. In valuing debt
securities, if the fair value declines significantly and is not
expected to recover, the difference between the book value and the
fair value is charged to current operations as an impairment loss.
Subsequent recoveries are also recorded in current operations up to
the original cost of the investment.
5
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(e) Fixed Assets
i) Tangible Assets
Tangible assets are stated at cost. Significant additions or
improvements extending value or useful lives of assets are
capitalized, where normal maintenance and repairs are charged
to expense when incurred.
The depreciation method and useful lives of tangible assets
are as follows:
Descrptions Depreciation Method Useful Lives
----------------------------- ------------------- -------------
Vehicles Declining-balance 5 years
Furniture, fixtures and other " "
Leasehold improvement Straight-line "
ii) Intangible Assets
Intangible assets are stated at acquisition cost less
amortization computed using the straight-line method over 5
years.
(e) Discounts on Debentures
Discounts on debentures issued, which represent the difference
between the face value of debentures issued and the issuance price
of debentures, are amortized on the effective interest method over
the life of the debentures. The amount amortized is included in
interest expense.
(f) Income Taxes
Income tax on the earnings for the year comprises current and
deferred tax. Income tax is recognized in the statement of earnings
except to the extent that it relates to items recognized directly to
equity, in which case it is recognized in equity.
Deferred tax is provided using the asset and liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realization or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially enacted at the balance sheet
date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against
which the unused tax losses and credits can be utilized. Deferred
tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
6
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(g) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and
length of service when they leave the Company. The Company's
estimated liability under the plan which would be payable if all
employees left on the balance sheet date is accrued in the
accompanying non-consolidated balance sheets. A portion of the
liability is covered by an employees' severance pay insurance where
the employees have a vested interest in the deposit with the
insurance company. The deposit for severance benefit insurance is,
therefore, reflected in the accompanying balance sheets as a
deduction from the liability for retirement and severance benefits.
(h) Translation of Foreign Currency Denominated Assets and Liabilities
Monetary assets and liabilities denominated in foreign currencies
are translated into Korean Won at the balance sheet date, with the
resulting gains and losses recognized in current results of
operations. As permitted by the Financial Accounting Standards,
monetary assets and liabilities denominated in foreign currencies
are translated into Korean Won at W1,200.40 and W1,326.10 to US$ 1,
the basic rates of exchange on December 31, 2002 and 2001,
respectively. Non-monetary assets and liabilities denominated in
foreign currencies, which are stated at historical cost, are
translated into Korean Won at the foreign exchange rate ruling at
the date of the transaction.
(i) Stock Options
The stock option program allows the Company's employees to acquire
shares of the Company or to be compensated for the market price
difference. In case of stock grant type, the Company values stock
options based upon an option pricing model under the fair value
method and recognizes this value as an expense and a capital
adjustment over the period in which the options vest. In case of
price compensation type, the Company recognizes the compensation
expense as an expense and a liability over the period in which the
options vest.
(j) Contingent Liabilities
Contingent losses are generally recognized as a liability when
probable and reasonably estimable.
7
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(k) Adoption of New Accounting Standard
The Company adopted the Statement of Korea Accounting Standards
(SKAS) No. 6, "Events Occurring after the Balance Sheet Date", in
preparation for financial statements as of and for the year ended
December 31, 2002. The statement requires companies not to record
dividends as liabilities in balance sheet, which are presented in
the statement of appropriation of retained earnings, resulting in
financial status presentation before appropriation of retained
earnings in balance sheet. The adoption of SKAS No. 6 had no effects
on earnings for the year ended December 31, 2002 and resulted in a
decrease in liabilities and an increase in stockholders' equity,
amounting to W157,492 million, respectively.
According to the adoption of the new statement, the Company amended
the financial statements for the four-month period ended December
31, 2001, presented herein for comparative purposes, and its
liabilities decreased and stockholders' equity increased, amounting
to W150,812 million, respectively.
On February 5, 2003, the BOD of the Company approved the
accompanying non-consolidated financial statements.
8
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(3) Cash and Due from Banks
As of December 31, 2002, W2.5 million of cash and due from banks is
restricted for guarantee deposits on bank accounts.
(4) Investment Securities
(a) Investment securities as of December 31, 2002 and 2001 consist of
the following:
Won U.S. dollars (Note 2)
-------------------------- ----------------------------
2002 2001 2002 2001
-------------- --------- -------------- ---------
Stocks W 3,990,774 3,801,572 $ 3,324,537 3,166,921
Bonds 1,089 - 907 -
-------------- --------- -------------- ---------
W 3,991,863 3,801,572 $ 3,325,444 3,166,921
============== ========= ============== =========
(b) Changes in investment equity securities accounted for by the equity
method for the year ended December 31, 2002 and for the four-month
period ended December 31, 2001 are as follows:
2002
---------------------------------------------------------------------------------------
Book value Investment/ Book value
as of Disposition/ Equity as of
December dividend, method) Retained Capital Total December
Subsidiaries 31, 2001 net gain(loss earnings adjustments changes 31, 2002
------------------- -------------- ------------ --------- -------- ----------- --------- ----------
Shinhan Bank W 3,446,112 (870,651) 595,866 (215) (127,160) (402,160) 3,043,952
Goodmorning
Shinhan Securities(*) 243,673 390,710 (749) (36) (102,032) 287,893 531,566
Shinhan Card - 246,956 504 - - 247,460 247,460
Shinhan Capital 63,781 - 13,429 (63) (689) 12,677 76,458
Shinhan BNP 42,557 (23,900) 3,961 (74) 37 (19,976) 22,581
Paribas ITMC
Jeju Bank - 42,935 6,683 (118) (2,808) 46,692 46,692
SH&C Life Insurance - 15,000 (453) - 83 14,630 14,630
e-Shinhan 4,673 - (806) (1) 26 (781) 3,892
Shinhan Macquarie 776 (484) 134 (3) - (353) 423
Shinhan Credit
Information - 3,000 121 - - 3,121 3,121
--------- -------- ------- ---- -------- ------- ---------
W 3,801,572 (196,434) 618,690 (510) (232,543) 189,203 3,990,775
========= ======== ======= ==== ======== ======= =========
(*) Equity method on Shinhan Securities before merger included
(**) The financial statements of Goodmorning Shinhan Securities reviewed by
other accountants and the financial statements of Jeju Bank audited by
other auditors were used
9
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(4) Investment Securities, Continued
2001
----------------------------------------------------------------------
Book value
Equity as of
Acquisition method Retained Capital Total December 31,
Subsidiaries cost gain(loss) earnings adjustments changes 2001
--------------------- ------------ ----------- ------------------------------- ------------
Shinhan Bank W 3,240,495 86,902 (840) 119,555 205,617 3,446,112
Shinhan Securities 102,544 141,015 - 114 141,129 243,673
Shinhan Capital 54,091 (107) - 9,797 9,690 63,781
Shinhan ITMC 41,241 1,316 - - 1,316 42,557
e-Shinhan 8,270 (3,597) - - (3,597) 4,673
Shinhan Macquarie 510 266 - - 266 776
--------- ------- ---- ------- ------- ---------
W 3,447,151 225,795 (840) 129,466 354,421 3,801,572
========= ======= ==== ======= ======= =========
Under the equity method, the Company records changes in its proportionate
equity of the book value of subsidiaries as either current earnings,
capital adjustments or adjustments to retained earnings, depending on the
nature of the underlying change in book value of subsidiaries. Differences
between the acquisition cost and fair value of subsidiaries are amortized
(reversed) over reasonable period within 20 years using the straight-line
method.
Shinhan Bank is holding W461,867 million of loans (including guarantees
and acceptances) provided to SK Global Co., Ltd. that that confirmed its
accounting fraud. Actual losses on these loans may differ materially from
the management's assessments. The accompanying non-consolidated financial
statements do not reflect the impact of the uncertainty on the financial
position of the Company, for the equity method of accounting.
The changes in goodwill (negative goodwill) for the year ended December
31, 2002 are as follows:
Beginning Increase Amortization Ending
balance (decrease) (reversal) balance
--------- ---------- ------------ --------
Goodmorning Shinhan Securities W - 170,045 8,503 161,542
Jeju Bank - (7,585) (551) (7,034)
--------- ------- ----- -------
W - 162,460 7,952 154,508
========= ======= ===== =======
(c) Investment debt securities as of December 31, 2002 are as follows:
Acquisition cost Fair value Book value
----------------- ---------- ----------
Bond with stock warrant
issued by Shinhan Bank W 1,785 1,089 1,089
================= ======== =====
10
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(5) Loans
Loans as of December 31, 2002 and 2001 consist of the following:
Won U.S. dollars (Note 2)
------------------------ ----------------------
2002 2001 2002 2001
------------- --------- ---------- ---------
Loans in Won W 497,200 97,200 $ 414,195 80,973
Loans in foreign currencies 71,927 - 59,919 -
Privately placed bonds 200,000 50,000 166,611 41,653
------------- --------- ---------- ---------
769,127 147,200 640,725 122,626
Less: Allowance for loan losses (3,846) (1,472) (3,203) (1,226)
------------- --------- ---------- ---------
W 765,281 145,728 $ 637,522 121,400
============= ========= ========== =========
(a) Details of loans as of December 31, 2002 and 2001 are as follows:
Interest
Borrower Maturity rate 2002 2001
-------------------- ---------- ----------- ------------- ---------
Loans in Won Shinhan Capital 2004.10.29 6.72% W 29,000 29,000
" " 2004.12.10 7.49% 68,200 68,200
" " 2005. 1.30 7.34% 30,000 -
" " 2007. 4. 4 8.12% 20,000 -
" " 2005. 4.29 7.49% 30,000 -
" " 2005. 6.26 6.95% 30,000 -
" " 2007. 7.29 6.65% 20,000 -
" " 2007.11.21 6.18% 20,000 -
" " 2005.12.16 5.95% 30,000 -
" " 2007.12.16 6.22% 20,000 -
" Shinhan Card 2005.11.21 5.93% 100,000 -
" 2005.12.16 5.95% 100,000 -
------------ -------
497,200 97,200
Loans in foreign Shinhan Capital 2005.03.13 Libor+1.2% 36,012 -
currencies " 2005.09.13 Libor+1.14% 35,915 -
------------ -------
71,927 -
Privately placed Shinhan Bank 2008.12.21 7.42% 50,000 50,000
bonds
" Jeju Bank 2008.05.20 8.14% 20,000 -
" Goodmorning 2004.09.26 6.23% 130,000 -
Shinhan Securities
------------ -------
200,000 50,000
------------ -------
769,127 147,200
Less: Allowance for loan losses (3,846) (1,472)
------------ -------
W 765,281 145,728
============ =======
11
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(6) Fixed Assets
Details of fixed assets as of December 31, 2002 and 2001 are summarized as
follows:
Won U.S. dollars (Note 2)
--------------------- --------------------
2002 2001 2002 2001
---------- -------- --------------------
Property and equipment:
Vehicles W 242 242 $ 202 202
Furniture and fixtures 344 286 286 238
Leasehold improvement and other 1,283 1,040 1,069 866
---------- ------- --------------------
1,869 1,568 1,557 1,306
Less: Accumulated depreciation (656) (169 (546) (140)
---------- ------- --------------------
1,213 1,399 1,011 1,166
Intangible assets:
Organization costs 20 25 16 21
Other 521 45 434 37
---------- ------- --------------------
541 70 450 58
---------- ------- --------------------
W 1,754 1,469 $ 1,461 1,224
========== ======= ====================
(7) Other Assets
Other assets as of December 31, 2002 and 2001 are as follows:
Won U.S. dollars (Note 2)
--------------------- ---------------------
2002 2001 2002 2001
---------- -------- ---------------------
Guarantee deposits W 7,069 5,331 $ 5,889 4,441
Long-term receivables 2,361 - 1,967 -
Accrued income 4,333 737 3,610 614
Prepaid expenses 48 16 40 13
Prepaid income taxes 982 2 818 1
Other 675 414 562 345
---------- ----- ---------- ------
W 15,468 6,500 $ 12,886 5,414
========== ===== ========== ======
12
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(8) Borrowings and Debentures
(a) Borrowings and debentures as of December 31, 2002 and 2001 consist
of the followings:
Won U.S. dollars (Note 2)
--------------------- ---------------------
2002 2001 2002 2001
---------- -------- ---------- -------
Borrowings in Won W - 20,000 $ - 16,661
Borrowings in foreign currencies 36,012 - 30,000 -
---------- ------- ---------- -------
W 36,012 20,000 $ 30,000 16,661
========== ======= ========== =======
Korean Won debentures W 700,000 150,000 $ 583,139 124,958
Foreign currency debentures 36,012 - 30,000 -
---------- ------- ---------- -------
736,012 150,000 613,139 124,958
Less: Discounts on debentures (3,982) (3,042) (3,317) (2,534)
---------- ------- ---------- -------
W 732,030 146,958 $ 609,822 122,424
========== ======= ========== =======
(b) Details of borrowings as of December 31, 2002 and 2001 are as
follows:
Maturity Interest rate 2002 2001 Lender
---------- ------------- ---------- ------ -------------
Borrowings in Won 2002.09.01 CD+1.1% W - 7,000 Koam Bank
" " CD+1.1% - 10,000
" " CD+1.35% - 1,500 "
" " - 1,000 "
" " - 500 "
---------- ------
- 20,000
Industrial &
Borrowings in Commercial
foreign currencies 2005.03.13 Libor+1% 36,012 - Bank of China
------- ------
W 36,012 20,000
========== ======
13
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(8) Borrowings and Debentures, Continued
(b) Details of debentures as of December 31, 2002 and 2001 are as
follows:
Maturity date Interest rate 2002 2001
-------------- ------------- ----------- -------
Korean Won debentures
1st non-guaranteed 2004.10.29 5.00% W 30,000 30,000
2nd non-guaranteed 2004.12.10 6.00% 70,000 70,000
3rd non-guaranteed 2006.12.21 7.12% 50,000 50,000
4th non-guaranteed 2005.01.30 6.69% 30,000 -
5th non-guaranteed 2007.04.04 7.47% 20,000 -
6th non-guaranteed 2005.04.29 6.84% 30,000 -
7th non-guaranteed 2007.05.20 7.25% 20,000 -
8th non-guaranteed 2005.06.26 6.30% 30,000 -
9th non-guaranteed 2007.07.29 6.30% 20,000 -
10th non-guaranteed 2004.09.26 5.50% 130,000 -
11-1st non-guaranteed 2005.11.21 5.60% 100,000 -
11-2nd non-guaranteed 2007.11.21 5.88% 20,000 -
12-1st non-guaranteed 2005.12.16 5.65% 130,000 -
12-2nd non-guaranteed 2007.12.16 5.96% 20,000 -
----------- -------
700,000 150,000
Foreign currency debentures 2005.09.13 Libor+0.85% 36,012 -
Less: Discounts on debentures (3,982) (3,042)
----------- -------
W 732,030 146,958
=========== =======
(c) The maturities of borrowings and debentures as of December 31, 2002
are as follows:
Repayment schedule
------------------------------------------------
2004.1.1~ 2005.1.1~ 2006.1.1 ~ 2007.1.1 ~
Balance 2004.12.31 2005.12.31 2006.12.31 2007.12.31
------------- ---------- ----------- ---------- ----------
Borrowings in foreign W 36,012 - 36,012 - -
currencies
Korean Won debentures 700,000 230,000 320,000 50,000 100,000
Foreign currency debentures 36,012 - 36,012 - -
------------- --------- ---------- -------- --------
W 772,024 230,000 392,024 50,000 100,000
============= ========= ========== ======== ========
14
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(9) Retirement and Severance Benefits
Changes in retirement and severance benefits for the year ended December
31, 2002 and for the four-month period ended December 31, 2001 are
summarized as follows:
Won U.S. dollars (Note 2)
--------------------- ---------------------
2002 2001 2002 2001
------------ -------- ---------- --------
Beginning balance W - - $ - -
Payment 25 - 21 -
Provision 594 - 495 -
------------ ----- ---------- ----
569 - 474 -
Due from insurer for severance benefits (332) - (277) -
------------ ----- ---------- ----
W 237 - $ 197 -
============ ===== ========== ====
(10) Other Liabilities
Other liabilities as of December 31, 2002 and 2001 consist of the
following:
Won U.S. dollars (Note 2)
-------------------- ---------------------
2002 2001 2002 2001
------------ ----- ---------- ------
Withholding taxes W 523 203 $ 436 170
Dividends payable 453 - 377 -
Accounts payable 1,542 434 1,285 362
Accrued expenses 3,962 627 3,301 522
------------ ----- ---------- ------
W 6,480 1,264 $ 5,399 1,054
============ ===== ========== ======
(11) Assets and Liabilities Denominated in Foreign Currency
Assets and liabilities denominated in foreign currency as of December 31,
2002 are summarized as follows:
Foreign currency
(U.S. dollars) Equivalent Won
---------------- ---------------
Assets:
Cash and due from banks $ 90 W 108
Loans 59,919 71,927
Other assets (accrued income) 547 657
---------------- ---------------
60,556 72,692
================ ===============
Liabilities:
Borrowings 30,000 36,012
Debentures 30,000 36,012
Discounts on debentures (79) (95)
Other liabilities (accrued expenses) 258 310
---------------- ---------------
$ 60,179 W 72,239
================ ===============
15
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(12) Related Party Transactions
Significant balances and transactions with the related parties as of and
for the year ended December 31, 2002 and as of and for the four-month
period ended December 31, 2001 are summarized as follows:
(a) Details of transactions
Revenue earned Expense incurred Account 2002 2001
-------------------------- -------------------- --------------------- -------- --------
The Company Shinhan Bank Interest income W 5,581 113
" Goodmorning Interest income 2,158 -
Shinhan Securities
" Shinhan Capital " 15,006 634
" Jeju Bank " 1,000 -
" Shinhan Card " 925 -
-------- ------
24,670 747
-------- ------
Shinhan Bank The Company Rental income 2 -
" Shinhan Capital Interest income 6,055 6,820
" " Rental income 271 -
" Gain on derivatives 64 -
transactions
" " Commission income - 1
" Jeju Bank Interest income 238 -
" Goodmorning " 1,414 359
Shinhan Securities
" " Rental income 21 -
" Shinhan Card Interest income 786 -
" " Commission income 55,271 -
" " Rental income 468 -
" Shinhan Macquarie Rental income 100 -
" " Commission income - 46
Goodmorning Shinhan Bank Interest income 257 191
Shinhan Securities
" Shinhan Card Rental income 5 -
Shinhan Card Shinhan Bank Interest income 491 -
" Goodmorning Interest income 106 -
Shinhan Securities
Shinhan Capital Shinhan Bank Interest income 150 64
" " Gain on derivative 2,468 -
transactions
Shinhan BNP Shinhan Bank Interest income 380 373
Paribas ITMC
" " Commission income 41 -
Jeju Bank " Interest income 83 -
SH&C Life Insurance Shinhan Bank Interest income 180 -
Shinhan Credit Information Shinhan Card Commission income 2,289 -
" Shinhan Bank " 772 -
e-Shinhan " Interest income - 38
Shinhan Macquarie " Interest income 15 -
16
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(12) Related Party Transactions, Continued
(b) Account balances
Creditor Debtor Account 2002 2001
------------------- -------------------- ------------------------------------- ----------- -------
The Company Shinhan Bank Cash and due from banks W 10,613 712
" " Other assets (Guarantee deposits) 6,902 5,331
" " Loans (Privately placed bonds) 50,000 50,000
" " Other assets (Long-term receivables) 2,171 -
" " Other assets (Accrued income) 123 103
" Goodmorning Loans (Privately placed bonds) 130,000 -
Shinhan Securities
" " Other assets (Accrued income) 134 -
" Shinhan Card Loans 200,000 -
" " Other assets (Accrued income) 925 -
" Shinhan Capital Loans 369,127 97,200
" " Other assets (Long-term receivables) 190 -
" " Other assets (Accrued income) 2,965 634
" Jeju Bank Loans (Privately placed bonds) 20,000 -
" " Other assets (Accrued income) 186 -
---------- -------
793,336 153,980
---------- -------
Shinhan Bank Shinhan Capital Loans 37,959 89,159
" " Trading securities - 100,000
" " Other assets (Accrued income) 133 -
" Goodmorning Loans (Privately placed bonds) 70,000 -
Shinhan Securities
" " Other assets (Accrued income) 1,047 -
" " Other assets (Guarantee deposits) 530 -
" Shinhan Card Call loans 7,500 -
" Jeju Bank Loans (Privately placed bonds) 3,140 -
Goodmorning Shinhan Bank Due from banks 11,908 4,696
Shinhan Securities
" " Other assets (Guarantee deposits) 5,526 -
" " Other assets (Accrued income) 252 -
Shinhan Card " Other assets (Guarantee deposits) 387 -
" Goodmorning Other assets (Guarantee deposits) 3,289 -
Shinhan Securities
Shinhan Capital Shinhan Bank Short-term financial instruments 16,666 7,454
" " Trading securities - 19,448
" " Currency swap 2,000 -
" " Other assets (Guarantee deposits) 418 -
Shinhan BNP " Due from banks 8,985 11,858
Paribas ITMC
" Other assets (Accrued income) - 87
" Goodmorning Other assets (Guarantee deposits) 850 850
Shinhan Securities
Jeju Bank Shinhan Bank Call loans 4,922 -
SH&C Life Insurance " Cash and cash equivalents 12,327 -
e-shinhan " Due from banks 3,718 4,223
" " Other assets (Accrued income) - 27
Shinhan Macquarie " Due from banks 168 1,529
" " Other assets (Guarantee deposits) - 71
Shinhan Credit
Information " Cash and cash equivalents 1,395 -
17
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(12) Related Party Transactions, Continued
(c) Guarantees and acceptances
The guarantees and acceptances provided between the related parties as
of December 31, 2002 are as follows:
Creditor Debtor Account Amount guaranteed
------------ --------------- ---------------- -----------------
Shinhan Bank Shinhan Capital Letter of credit W 13,480
=================
(13) Commitments and Contingencies
As of December 31, 2002, the Company has provided a blank note to Koram
Bank, as collateral related to bank overdrafts.
(14) Insurance
As of December 31, 2002, the Company maintains insurance policies covering
loss and liability arising from automobile accidents.
(15) Retained Earnings
Retained earnings as of December 31, 2002 and 2001 are summarized as
follows:
Won U.S. dollars (Note 2)
---------------------- -----------------------
2002 2001 2002 2001
---------- --------- ------------- -------
Legal reserves W 22,076 - $ 18,391 -
Unappropriated retained earnings 650,454 219,922 541,864 183,207
---------- --------- ------------- -------
672,530 219,922 560,255 183,207
========== ========= ============= =======
The Korean Financial Holding Company Act requires the Company to
appropriate a minimum of 10% of annual net earnings as a legal reserve
whenever dividends are paid until such reserve equals its paid-in capital.
This reserve is not available for payment of cash dividends. However,
subject to the stockholders' approval, it may be transferred to common
stock in connection with stock dividends or used to reduce any accumulated
deficit.
(16) Capital Adjustment
Capital adjustments as of December 31, 2002 and 2001 consist of the
following:
Won U.S. dollars (Note 2)
----------------------- ----------------------
2002 2001 2002 2001
------------ ------- ------------ -------
Valuation gain (loss) on investment securities W (103,745) 129,466 $ (86,425) 107,852
Stock option 3,004 - 2,502 -
------------ ------- ------------ -------
W (100,741) 129,466 $ (83,923) 107,852
============ ======= ============ =======
18
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(17) Stock Options
Stock options are recorded as a capital adjustment on the balance sheets
and the related compensation expense is recorded as a current expense over
certain periods in accordance with Korean GAAP. Details of stock options
in effects as of December 31, 2002 are as follows:
(a) Details of stock options
Personnel of the Company Personnel of subsidiaries
------------------------------ ----------------------------
Grant date 2002.05.22 2002.05.22
Shares granted 213,500 shares 790,700 shares
Share expired to date - 6,500 shares
Shares outstanding 213,500 shares 784,200 shares
Type of stock options Stock grant or Stock grant or
price compensation price compensation
Exercise price (Won) W 18,910 W 18,910
Exercise period Within 4 years after 2 Within 4 years after 2 years
years from grant date from grant date
Forfeited period after 6 years from grant date after 6 years from grant date
(b) Changes in stock compensation expense
Personnel of Personnel of
the Company subsidiaries
----------- ------------
Compensation expense recorded as of December 31, 2002 W 643 2,361
Compensation expense to be recorded in subsequent years 1,452 5,333
(c) The Company calculated the compensation expenses using the fair
value method for stock grant and details are as follows:
Personnel Personnel
of the Company of subsidiaries
---------------- ---------------
Risk-free interest rate 6.43% 6.43%
Expected exercise period 4 years 4 years
Expected stock price volatility 27.13% 27.13%
Expected dividend yield 0% 0%
Expected ratios of no-exercise 0% 0%
Weighted average exercise price (Won) W 18,910 W 18,910
Weighted average fair value (Won) 9,812 9,812
For stock options, which were granted to the personnel of the
subsidiaries, the difference between the exercise price and the fair value
on the date of exercise would be assumed by the subsidiaries of the
Company. Therefore, in relation to those stock options, the subsidiaries
have recorded compensation expense as long-term payables, and the Company
has accounted for as long-term receivables.
19
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(18) General and Administrative Expenses
Details of general and administrative expenses for the year ended December
31, 2002 and for the four-month period ended December 31, 2001 are as
follows:
Won U.S. dollars (Note 2)
------------------ ----------------------
2002 2001 2002 2001
--------- ------ ---------- -----
Salaries and wages W 7,008 1,743 $ 5,838 1,452
Retirement benefits 594 - 495 -
Other employee benefits 370 75 308 63
Entertainment 1,903 237 1,585 198
Depreciation and amortization 512 173 427 144
Bad debts 2,374 1,472 1,978 1,226
Taxes and dues 125 22 105 18
Commissions and fees 5,748 602 4,788 502
Other 805 309 670 256
--------- ----- --------- -----
W 19,439 4,633 $ 16,194 3,859
========= ===== ========= =====
(19) Value Added Information
Value added information included in general and administrative expenses
for the year ended December 31, 2002 and for the four-month period ended
December 31, 2001 are as follows:
Won U.S. dollars (Note 2)
------------------- ---------------------
2002 2001 2002 2001
--------- ------ --------- ------
Salaries and wages W 7,008 1,743 $ 5,838 1,452
Retirement benefits 594 - 495 -
Other employee benefits 370 75 308 63
Rent 46 2 38 1
Depreciation 489 168 407 140
Taxes and dues 125 22 105 18
--------- ------ --------- ------
W 8,632 2,010 $ 7,191 1,674
========= ====== ========= ======
20
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(20) Income Taxes
(a) The Company is subject to income taxes based on taxable earnings,
which results in the normal tax rate of 29.7%.
The components of income taxes for the year ended December 31, 2002
and for the four-month period ended December 31, 2001 are summarized
as follows:
Won U.S. dollars (Note 2)
----------------------- ---------------------
2002 2001 2002 2001
---------- --------- ------- -----
Current income taxed W - - $ - -
Deferred taxes - - - -
---------- ---- ------- -----
W - - $ - -
========== ==== ======= =====
(b) Reconciliation of accounting income and taxable income for the year
ended December 31, 2002 and for the four-month period ended December
31, 2001 is as follows:
Temporary difference Permanent difference
--------------------- --------------------
Description 2002 2001 2002 2001
--------------------------------------------------- ----------- -------- ----------- --------
Addition:
Dividend received W 640,771 - - -
Deemed interest - - - 401
Accrued income earned in prior period 737 - - -
Investment securities 510 - - -
Retirement and severance benefits 342 - - -
Stock compensation expense 643 - -
Entertainment expense in excess of tax limit - 1,843 - -
---------- -------- --------- ---
642,360 2,486 - 401
---------- -------- --------- ---
Deduction:
Dividend received - (640,578) - -
Retained earnings - (510) - -
Accrued income earned in current year (period) (4,332) - - -
Due from insurer for severance benefits (332) - - -
Valuation gain accounted for by the equity method (618,690) - (225,795) -
---------- -------- --------- ---
(623,354) (641,088) (225,795) -
---------- -------- --------- ---
W 19,006 (638,602) (225,795) 401
========== ======== ========= ===
21
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(20) Income Taxes, Continued
(c) Changes in significant accumulated temporary differences and tax
effects for the year ended December 31, 2002 and for the four-month
period ended December 31, 2001 are as follows:
2002
--------------------------------------------
Beginning Ending
balance Increase Decrease balance
------------ -------- -------- ---------
Deductible temporary differences:
Investment securities W - 1,351 - 1,351
Retirement and severance benefits - 342 - 342
------------ -------- -------- ---------
W - 1,693 - 1,693
============ ======== ======== =========
Taxable temporary differences:
Valuation gain accounted for by the equity method W 225,795 618,690 640,771 203,714
Accrued income - 5,069 737 4,332
Due from insurer for severance benefits - 332 - 332
Organization costs - 4 - 4
------------ -------- -------- ---------
W 225,795 624,095 641,508 208,382
============ ======== ======== =========
Tax effects of temporary differences:
Deferred tax assets W - 503 - 503
Deferred tax liabilities (*) - (5,341) (219) (5,122)
Tax effects of tax loss carryforwards:
Deferred tax assets - 6,295 - 6,295
------------ -------- -------- ---------
Net deferred tax assets (liabilities) - 1,457 (219) 1,676
============ ======== ======== =========
Tax effects recorded in financial statements (**) W - - - -
============ ======== ======== =========
(*) W 12,579 million of tax effects on valuation gain accounted for by
the equity method are recognized taking into account the considering
certainty of realization of deferred income taxes for each
subsidiary.
(**) Tax effects on temporary differences and tax loss carryforwards are
not recognized due to uncertainty of realization. Accordingly, the
total amount of tax effects on tax loss carryforwards, which are not
recognized as deferred taxes, is W21,195 million, with the tax
benefit maturity of W5,553 million in 2006 and W 15,642 million in
2007.
2001
---------------------------------------------
Beginning Increase Decrease Ending
balance balance
----------- -------- ----- --------
Valuation gain accounted for by the equity method W - (225,795) - (225,795)
Tax loss caryfowards (before tax return) - 4,511 - 4,511
----------- -------- - --------
- (221,284) - (221,284)
=========== ======== = ========
Tax effects recorded in the financial statements(*) W - - - -
=========== ======== = ========
(*) Dividends from subsidiaries are excluded for the Company's taxable
income according to the Korean Corporate Tax Law. Therefore,
deferred tax liabilities related to valuation gain accounted for by
the equity method are not recognized due to uncertainty of
realization.
22
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Won and U.S. dollars)
(21) Earnings Per Share
(a) Basic earnings per share
Basic earnings per common share is calculated by dividing net
earnings by the weighted average number of shares of common stock
outstanding. The Company's basic earnings per share for the year
ended December 31, 2002 and for the four-month period ended December
31, 2001 are computed as follows:
Won U.S. dollars (Note 2)
------------------------------------ -----------------------------
2002 2001 2002 2001
------------------ --------------- -------------- -----------
Net earnings for year / period W 603,930,621,631 220,762,998,627 $ 503,107,815 183,907,863
Weighted average number of
common shares outstanding 292,353,444 292,344,192 292,353,444 292,344,192
------------------ --------------- -------------- -----------
Basic earnings per share W 2,066 755 $ 1.721 0.629
================== =============== ============== ===========
(b) Diluted earnings per share
Diluted earnings per common share is computed using the weighted
average number of shares outstanding during the period plus the
dilutive effect of stock options outstanding during the period. If
stock options were exercised, 997,700 share of common stock would be
issued. If stock options were exercised and converted into common
stock on grant date, the weighted average number of common shares
outstanding is 292,962,997. Details of computation of diluted
earnings per share are as follows:
Won U.S. dollars (Note 2)
------------------------------------ -----------------------------
2002 2001 2002 2001
------------------ --------------- -------------- ------------
Net earnings for year / period W 603,930,621,631 220,762,998,627 $ 503,107,815 183,907,863
Add: Compensation expense
(net of income taxes) 642,776,9244 - 535,469 -
------------------ --------------- ------------- -----------
Diluted net earnings 604,573,398,555 220,762,998,627 503,643,284 183,907,863
Weighted average number of
common shares outstanding 292,962,997 292,344,192 292,962,997 292,344,192
------------------ --------------- ------------- -----------
Diluted earnings per share W 2,064 755 $ 1.719 0.629
================== =============== ============= ===========
23
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In Won)
(22) Dividends
(a) Dividends for the year ended December 31, 2002 and for the four-month
period ended December 31, 2001 are calculated as follows:
2002 2001
------------------- ---------------
Number of share issued and outstanding 292,361,125 292,344,192
Number of share issued and outstanding
available for dividends (*) 262,487,451 262,470,897
Face value per share W 5,000 5,000
Dividend per share (dividend rate per par value) 600(12%) 600(12%)
------------------- ---------------
Dividends W 157,492,470,600 150,812,285,352
=================== ===============
(*) Shares owned by subsidiaries excluded
(b) Payout ratios and dividend yields as of December 31, 2002 and 2001
are calculated as follows:
2002 2001
------------------ ---------------
A. Dividends W 157,492,470,600 150,812,285,352
B. Net earnings 603,930,621,631 220,762,998,627
C. Payout ratios (A / B) 26.08% 68.31%
D. Dividend per share 600 600
E. Stock price 13,813 16,350
F. Price-dividends yields (D / E) 4.34% 3.67%
24
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won and thousands of U.S. dollars)
(23) Statements of Cash Flows
(a) Significant transactions not involving cash inflows or outflows are
as follows:
Won U.S. dollars (Note 2)
---------------------- ----------------------
2002 2001 2002 2001
---------- --------- ---------- ---------
Acquisition of investment securities by
stock transfer W - 3,438,371 $ - 2,864,354
Valuation gain on investment securities recorded
as a capital adjustment 233,211 129,466 194,278 107,852
Changes in retained earnings of subsidiaries 510 840 425 700
Stock option recorded as long-term receivables 2,361 - 1,967 -
Stock exchanges 85 - 71 -
(24) Condensed Financial Statements of Subsidiaries
Condensed financial statements of subsidiaries as of and for the years
ended December 31, 2002 and 2001 are as follows:
(a) Balance sheets
2002
-------------------------------------------------------
Total Total stockholders'
Subsidiaries Total assets liabilities equity
------------------------------ ------------------- ----------- -------------------
Shinhan Bank W 58,889,402 56,028,923 2,860,479
Goodmorning Shinhan Securities 1,570,244 982,268 587,976
Shinhan Card 2,473,694 2,226,234 247,460
Shinhan Capital 960,234 876,551 83,683
Shinhan BNP Paribas ITMC 47,081 1,918 45,163
Jeju Bank 1,800,648 1,699,577 101,071
SH&C Life Insurance 29,738 478 29,260
e-Shinhan 5,758 475 5,283
Shinhan Macquarie 3,503 2,675 828
Shinhan Credit Information 3,931 810 3,121
------------------ ---------- ---------
W 65,784,233 61,819,909 3,964,324
================== ========== =========
2001
-------------------------------------------------------
Total Total stockholders'
Subsidiaries Total assets liabilities equity
------------------------------- ------------------- ----------- -------------------
Shinhan Bank W 53,356,042 50,185,114 3,170,928
Shinhan Securities 630,696 387,023 243,673
Shinhan Capital 842,491 778,710 63,781
Shinhan ITMC 45,171 2,613 42,558
e-Shinhan 6,473 129 6,344
Shinhan Macquarie 4,237 2,716 1,521
------------------- ---------- ---------
W 54,885,110 51,356,305 3,528,805
=================== ========== =========
25
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(24) Condensed Financial Statements of Subsidiaries, Continued
(b) Statements of Earnings
2002
------------------------------------------------------------------
Operating
Operating Operating income Ordinary Net earnings
Subsidiaries revenue expense (loss) income (loss) (loss)
--------------------------------- ------------ --------- --------- ------------- ------------
Shinhan Bank W 4,821,339 3,888,932 932,407 842,993 595,866
Goodmorning Shinhan Securities (*) 482,873 474,722 8,151 11,845 31,624
Shinhan Card 228,954 228,213 741 798 504
Shinhan Capital 152,314 139,302 13,012 10,988 7,635
Shinhan BNP Paribas ITMC 12,773 6,312 6,461 6,066 4,605
Jeju Bank 145,558 129,404 16,154 12,502 12,502
SH&Clife Insurance 338 1,243 (905) (905) (905)
e-Shinhan 2,529 3,776 (1,247) (1,094) (1,094)
Shinhan Macquarie 5,127 5,405 (278) (742) 281
Shinhan Credit Information 3,136 3,001 135 162 121
------------ --------- --------- ------- -------
W 5,854,941 4,880,310 974,631 882,613 651,139
============ ========= ========= ======= =======
(*) For the period from April 1, 2002 to December 31, 2002
2001
----------------------------------------------------------------
Operating Ordinary
Operating Operating income income Net earnings
Subsidiaries revenue expense (loss) (loss) (loss)
--------------------------------- ------------ --------- --------- --------- ------------
Shinhan Bank W 2,290,062 2,185,158 104,903 120,610 86,902
Shinhan Securities 140,382 122,389 17,993 23,855 17,472
Shinhan Capital 63,503 71,718 (8,215) (11,623) (107)
Shinhan ITMC 5,696 2,567 3,130 3,129 1,316
e-Shinhan 460 3,659 (3,199) (3,187) (3,187)
Shinhan Macquarie 3,210 1,473 1,737 1,747 521
------------ --------- --------- -------- -------
W 2,503,313 2,386,964 116,349 134,531 102,917
============ ========= ========= ======== =======
26
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(25) Financing and Operating Status of the Company and Subsidiaries
The financing and operating status of the Company and its subsidiaries as
of December 31, 2002 and 2001 are as follows:
(a) Financing
2002
-----------------------------------------------------------
Subsidiaries Deposits Borrowings Debentures (*) Total
------------------------------ -------------- ----------- ------------- ----------
The Company W - 36,012 732,030 768,042
Shinhan Bank 35,183,537 10,598,668 6,068,826 51,851,031
Goodmorning Shinhan Securities 540,521 147,876 200,000 888,397
Shinhan Card - 613,743 1,559,776 2,173,519
Shinhan Capital - 702,570 72,912 775,482
Jeju Bank 1,414,150 106,252 35,000 1,555,402
-------------- ---------- --------- ----------
W 37,138,208 12,205,121 8,668,544 58,011,873
============== ========== ========= ==========
(*) Net of discounts on debentures
2001
-------------------------------------------------------------
Subsidiaries Deposits Borrowings Debentures (*) Total
------------------------------ -------------- ----------- ---------------- ----------
The Company W - 20,000 146,957 166,957
Shinhan Bank 31,892,878 9,662,034 3,512,530 45,067,442
Shinhan Securities 191,051 137,240 - 328,291
Shinhan Capital - 404,551 258,734 663,285
------------ ----------- --------- ----------
W 32,083,929 10,223,825 3,918,221 46,225,975
============ =========== ========= ==========
(*) Net of discounts on debentures
27
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(25) Financing and Operating Status of the Company and Subsidiaries, Continued
(b) Operating assets
2002
--------------------------------------------------------------
Cash and due from
Subsidiaries Loans (*) Securities bank Total
------------------------------ --------------- ---------- ------------------ ----------
The Company W 765,281 3,991,863 10,613 4,767,757
Shinhan Bank 40,579,006 13,855,009 1,138,414 55,572,429
Goodmorning Shinhan Securities 122,057 456,500 575,506 1,154,063
Shinhan Card 2,439,076 - 15 2,439,091
Shinhan Capital 739,518 57,947 16,668 814,133
Shinhan BNP Paribas ITMC 443 12,981 29,813 43,237
Jeju Bank 1,317,051 276,867 9,673 1,603,591
SH&C Life Insurance - 14,728 13,327 28,055
e-Shinhan 51 382 3,718 4,151
Shinhan Macquarie - - 169 169
Shinhan Credit Information - - 1,398 1,398
--------------- ---------- --------- ----------
W 45,962,483 18,666,277 1,799,314 66,428,074
=============== ========== ========= ==========
(*) - Net of allowance for loan losses and present value discounts
- After reflecting additional provisions for loan losses,
amounting to W3,679 million, W7,225 million and W2,048 million
of Goodmorning Shinhan Securities, Shinhan Capital and Jeju
Bank, respectively, in order to apply the same criteria in
providing allowances for loan losses
2001
--------------------------------------------------------------
Cash and due from
Subsidiaries Loans (*) Securities bank Total
------------------------------ --------------- ---------- ------------------ ----------
The Company W 145,728 3,801,572 - 3,947,300
Shinhan Bank 33,881,256 14,020,180 1,265,987 49,167,423
Shinha Securities 58,642 272,394 178,195 509,231
Shinhan Capital 633,561 68,475 - 702,036
Shinhan ITMC 430 13,437 - 13,867
e-Shinhan 36 181 - 217
--------------- ---------- --------- ----------
W 34,719,653 18,176,239 1,444,182 54,340,074
=============== ========== ========= ==========
(*) Net of allowance for loan losses and present value discounts
28
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(In millions of Won)
(26) Contribution of Subsidiaries to the Company's Net Earning
Effects under the equity method on the Company's net earnings are as
follows:
2002 2001
------------------------- --------------------------
Amount Ratio (%) Amount Ratio (%)
------------ --------- ---------------- ---------
Valuation gain accounted for by the equity method on:
Shinhan Bank W 595,866 96.31 W 86,902 38.5
Goodmorning Shinhan Securities(*) (749) (0.12) 141,015 62.5
Shinhan Card 504 0.08 - -
Shinhan Capital 13,429 2.17 (107) (0.1)
Shinhan BNP Paribas ITMC 3,961 0.64 1,316 0.6
Jeju Bank 6,683 1.08 - -
SH&C Life Insurance (453) (0.07) -
e-Shinhan (804) (0.13) (3,597) (1.6)
Shinhan Macquarie 134 0.02 266 0.1
Shinhan Credit Information 121 0.02 - -
------------ ------ ---------------- ------
618,690 100.00 225,795 100.00
====== ======
Other income 30,050 748
Other expense (44,809) (5,780)
------------ ----------------
Net earnings W 603,931 220,763
============ ================
(*) Valuation gain accounted for by the equity method on Shinhan Securities
before merger for 2001
(27) Allowance for Loan Losses of the Company and its Subsidiaries
For the year ended December 31, 2002 and for the four-month period ended
December 31, 2001, the changes in allowance for loan losses of the Company
and its subsidiaries are as follows:
2002 2001
---------------------------------- -------------------------------
Beginning Increase Ending Beginning Increase Ending
balance (decrease) balance balance (decrease) balance
----------- ---------- -------- --------- ---------- --------
The Company W 1,472 2,374 3,846 - 1,472 1,472
Shinhan Bank 567,344 (1,500) 565,844 609,623 (42,279) 567,344
Goodmorning Shinhan Securities (*) 82,609 4,833 87,442 30,022 (14,351) 15,671
Shinhan Card - 96,074 96,074 - - -
Shinhan Capital (**) 102,454 (68,667) 33,787 86,293 16,161 102,454
Shinhan BNP Paribas ITMC 25 (17) 8 18 7 25
Jeju Bank (***) 26,952 2,366 29,318 - - -
e-Shinhan - 1 1 - - -
Shinhan Macquarie 21 1 22 - 21 21
------------ ------- ------- ------- ------- -------
W 780,877 35,465 816,342 725,956 (38,969) 686,987
============ ======= ======= ======= ======= =======
(*) Including additional allowance for loan losses made by the Company
of W3,679 million as of December 31, 2002 / Shinhan Securities'
ending balance for 2001 and Good Morning Securities' beginning
balance (as of March 31, 2002) for 2002 considered
(**) Including additional allowance for loan losses made by the Company
of W7,225 million and W13,019 million as of December 31, 2002 and
2001, respectively
(***) Including additional allowance for loan losses made by the Company
of W2,048 million as of December 31, 2002
29
SHINHAN FINANCIAL GROUP CO., LTD.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(28) Economic Environment
In response to general unstable economic conditions, the Korean government
and the private sector have been implementing structural reforms to
historical business practices. Implementation of these reforms is
progressing slowly, particularly in the areas of restructuring private
enterprises and reforming the banking industry. The Korean government
continues to apply pressure to Korean companies to restructure into more
efficient and profitable firms. The Company may be either directly or
indirectly affected by these general unstable economic conditions and the
reform program described above. The accompanying non-consolidated financial
statements reflect management's assessment of the impact to date of the
economic situation on the financial position of the Company. Actual results
may differ materially from management's current assessments.
APPENDIX 3
SHINHAN FINANCIAL GROUP CO., LTD
Non-Consolidated Financial Statements
December 31, 2003 and 2002
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
Based on a report originally issued in Korean
To the Board of Directors and Stockholders
Shinhan Financial Group Co., Ltd.:
We have audited the accompanying non-consolidated balance sheets of Shinhan
Financial Group Co., Ltd. (the "Company") as of December 31, 2003, and 2002, and
the related statements of earnings, appropriation of retained earnings and cash
flows for the years then ended. These non-consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these non-consolidated financial statements based on our audits.
The financial statements of Chohung Bank were audited by other auditors, and
effects of that subsidiary on the Company's securities as of and net loss for
the year ended December 31, 2003 are W1,887,328 million (representing 22.8% of
the non-consolidated total assets) and W43,545 million, respectively. In
addition, the financial statements of Goodmorning Shinhan Securities Co., Ltd.
and Jeju Bank were reviewed by other accountants and audited by other auditors,
respectively, and effects of those subsidiaries on the Company's securities as
of and net earnings for the year ended December 31, 2002 are W578,258 million
(representing 12.1% of non-consolidated total assets) and W5,934 million,
respectively. Our opinion, in connection with the amounts included for these
subsidiaries, is based solely on the reports of other accountants and auditors.
We conducted our audits in accordance with the Auditing Standards, as
established by the Financial Supervisory Commission of the Republic of Korea.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates used by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, reviews by other accountants and audits by other
auditors provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2003 and 2002, and the results of its operations, the changes
in its retained earnings, and its cash flows for the years then ended in
accordance with the Financial Accounting Standards, as established by the
Financial Supervisory Commission of the Republic of Korea.
The accompanying non-consolidated financial statements as of and for the year
ended December 31, 2003 and 2002 have been translated into United States dollars
solely for the convenience of the reader and on the basis set forth in Note 2(b)
to the non-consolidated financial statements.
Without qualifying our opinion, we draw attention to the following:
As described in Note 1 and 5 to the non-consolidated financial statements, on
July 9, 2003, the Company made an agreement with the Korea Deposit Insurance
Corporation (the "KDIC") to acquire 80.04% (543,570,144 shares) of total
outstanding shares in Chohung Bank. In accordance with the agreement, the
Company purchased 266,349,371 shares in exchange for the Company's shares on
August 18, 2003 and 277,220,773 shares in cash on August 19, 2003. The
acquisition of the shares was accounted for using the purchase method, and the
acquisition cost of the shares and goodwill were W1,857,983 million and W840,244
million, respectively. Additionally, pursuant to the acquisition agreement, the
Company would be required to pay contingent consideration to the KDIC at the
maximum amount of W652,284 million related to Asset Indemnity Payment, W166,516
million related to General Indemnity Payment and additional Earn Out Payment
based on earnings of Chohung Bank in future periods. These contingent
considerations are not included in the acquisition cost on the date of
acquisition, for the amount is not determinable. On December 30, 2003, its
percentage of ownership subsequently increased to 81.15% through additional
equity acquisition at W200,000 million. In addition, on June 18, 2003, the
Company sold 49% (294,000 shares) of total outstanding shares in Shinhan Credit
Information Co., Ltd. to LSH Holdings LLC.
As described in Note 1 to the non-consolidated financial statements, the
Company's American depository shares were listed on the New York Stock Exchange
on September 16, 2003.
As described in Note 1 to the non-consolidated financial statements, on March 3,
2004, Shinhan Bank sold 10.2% (29,873,295 shares) of total outstanding shares in
the Company at W627,339 million (W21,000 per share), through after-hour block
trading.
As discussed in note 2(a) to the non-consolidated financial statements,
accounting principles and auditing 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 and cash
flows in accordance with accounting principles and practices generally accepted
in countries other than the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to audit such financial statements
may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying non-consolidated financial
statements are for use by those knowledgeable about Korean accounting procedures
and auditing standards and their application in practice.
As described in Note 2(n) to the non-consolidated financial statements, the
Company adopted Statements of Korea Accounting Standards ("SKAS") No. 2 through
No. 9, effective from the first fiscal year beginning after December 31, 2002,
while, SKAS No. 6, "Events Occurring after the Balance Sheet Date" has been
adopted since the year ended December 31, 2002 with encouraged earlier
application.
As described in Note 4 to the non-consolidated financial statements, Shinhan
Bank and Chohung Bank are holding loans (including guarantees and acceptances)
provided to and securities issued by SK Networks Co., Ltd. (formerly SK Global
Co., Ltd.), amounting to W396,058 million and W303,011 million, respectively. As
regards to those loans and securities, Shinhan Bank provides W110,982 million of
allowance for loan losses and recorded W1,178 million of impairment loss on
available-for-sale securities, and Chohung Bank provides W93,784 million of
allowance for loan losses, as of December 31, 2003. Actual losses on these loans
and securities may differ materially from the management's assessments. The
accompanying non-consolidated financial statements do not reflect the impact of
the uncertainty on the financial position of the Company for the equity method.
As described in Note 4 to the non-consolidated financial statements, Shinhan
Bank, Chohung Bank and Goodmorning Shinhan Securities Co., Ltd. are holding
loans provided to and securities issued by LG Card Co., Ltd., which has been
controlled by creditor banks due to its liquidity crisis, amounting to W189.3
billion, W172.9 billion and W22.6 billion, respectively. Actual losses on these
loans and securities may differ materially from the management's assessments and
the accompanying non-consolidated financial statements do not reflect the impact
of the uncertainty on the financial position of the Company for the equity
method. Additionally, Shinhan Bank and Chohung Bank have agreed with creditor
banks to provide additional capital, amounting to W81.3 billion and W73.4
billion, respectively.
As described in Note 12 to the non-consolidated financial statements, the
Company recorded W1,976,841 million of assets (representing 23.8% of
non-consolidated total assets) as of December 31, 2003 and W97,787 million of
operating revenue (representing 20.1% of non-consolidated total operating
revenue) for the year ended December 31, 2003 through its related party
transactions.
KPMG Samjong Accounting Corp.
Seoul, Korea
January 30, 2004
This report is effective as of January 30, 2004, the audit report date. Certain
subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the
accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the audit report should understand that there is a
possibility that the above audit report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------
2003 2002 2003 2002
---------- ----------- ----------- -----------
Assets
Cash and due from bank (notes 3, 12 and 13) W 5,353 10,613 $ 4,469 8,860
Securities (note 4) 6,308,538 3,991,864 5,266,771 3,332,663
Loans (notes 6, 12 and 13) 1,935,180 765,281 1,615,612 638,905
Fixed assets (notes 7 and 15) 2,020 1,754 1,686 1,464
Other assets (notes 8, 12 and 13) 43,339 15,467 36,182 12,914
----------- ----------- ----------- -----------
W 8,294,430 4,784,979 $ 6,924,720 3,994,806
=========== =========== =========== ===========
Liabilities and Stockholders' equity
Liabilities:
Borrowings (notes 9 and 13) W 165,868 36,012 $ 138,477 30,065
Debentures (notes 9 and 13) 1,980,543 732,030 1,653,484 611,146
Retirement and severance benefits (note 10) - 238 - 199
Other liabilities (notes 11 and 13) 30,464 6,479 25,434 5,409
----------- ----------- ----------- -----------
Total liabilities 2,176,875 774,759 1,817,395 646,819
----------- ----------- ----------- -----------
Stockholders' equity:
Capital stock of W5,000 par value (note 16)
Common stock 1,472,007 1,461,806 1,228,926 1,220,409
Authorized - 1,000,000,000 shares
Issued - 294,401,300 shares in 2003
292,361,125 shares in 2002
Preferred stock 486,523 - 406,180 -
Issued - 97,304,564 shares in 2003
Capital surplus (note 16) 3,316,380 1,976,625 2,768,726 1,650,212
Retained earnings (note 17) 866,398 672,530 723,324 561,471
Capital adjustments (notes 5, 18 and 19) (23,753) (100,741) (19,831) (84,105)
----------- ----------- ----------- -----------
Total stockholders' equity 6,117,555 4,010,220 5,107,325 3,347,987
Commitments and contingencies (note 14)
----------- ----------- ----------- -----------
W 8,294,430 4,784,979 $ 6,924,720 3,994,806
=========== =========== =========== ===========
See accompanying notes to non-consolidated financial statements.
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars, except earnings per share)
Won U.S. dollars (note 2)
----------------------- -----------------------
2003 2002 2003 2002
--------- ---------- ---------- ----------
Operating revenue:
Valuation gain using the equity method
(notes 4 and 26) W 388,641 618,690 $ 324,462 516,522
Interest income (note 12) 97,787 24,670 81,639 20,596
---------- ---------- ---------- ----------
486,428 643,360 406,101 537,118
Operating expense:
Interest expense 92,616 21,632 77,322 18,060
Fees and commission 4,962 68 4,143 57
General and administrative expenses (note 20) 23,902 19,440 19,955 16,230
---------- ---------- ---------- ----------
121,480 41,140 101,420 34,347
---------- ---------- ---------- ----------
Operating income 364,948 602,220 304,681 502,771
Non-operating income (expense):
Gain (loss) from sale of investment securities
accounted for by the equity method, net (166) 1,731 (139) 1,445
Loss from sale of available-for-sale securities (1,725) - (1,440) -
Gain (loss) on foreign currency transactions, net 1 (1) 1 (1)
Donation (34) (23) (28) (19)
Other, net (797) 4 (665) 3
---------- ---------- ---------- ----------
(2,721) 1,711 (2,271) 1,428
---------- ---------- ---------- ----------
Earnings before income taxes 362,227 603,931 302,410 504,199
Income taxes (note 21) - - - -
---------- ---------- ---------- ----------
Net earnings W 362,227 603,931 $ 302,410 504,199
========== ========== ========== ==========
Ordinary income and net earnings
per share in Won and U.S. dollars (note 22) 952 2,066 0.79 1.72
========== ========== ========== ==========
Diluted ordinary income and net earnings per share
in Won and U.S. dollars (note 22) 921 2,064 0.77 1.72
========== ========== ========== ==========
See accompanying notes to non-consolidated financial statements.
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF APPROPRIATION OF RETAINED EARNINGS
For the years ended December 31, 2003 and 2002
Date of Appropriation for 2003: March 25, 2004
Date of Appropriation for 2002: March 31, 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Unappropriated retained earnings:
Balance at beginning of year W 432,569 47,034 $ 361,136 39,267
Changes in retained earnings of subsidiaries (10,848) (510) (9,057) (426)
Cumulative effect of accounting changes (20) -- (17) --
Net earnings 362,227 603,931 302,410 504,200
---------- ---------- ---------- ----------
783,928 650,455 654,472 543,041
Appropriation of retained earnings:
Legal reserve 36,223 60,393 30,241 50,420
Dividends (note 23) 242,114 157,493 202,132 131,485
---------- ---------- ---------- ----------
278,337 217,886 232,373 181,905
---------- ---------- ---------- ----------
Unappropriated retained earnings to be carried
over to subsequent year W 505,591 432,569 $ 422,099 361,136
========== ========== ========== ==========
See accompanying notes to non-consolidated financial statements.
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ---------- -----------
Cash flows from operating activities:
Net earnings W 362,227 603,931 $ 302,410 504,199
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Provision for retirement and severance benefit 140 594 117 496
Stock compensation costs 1,381 643 1,153 537
Interest expense 2,492 1,175 2,080 981
Depreciation 568 489 474 408
Amortization 109 24 91 20
Bad debts 5,879 2,374 4,908 1,982
Loss (gain) from sale of investment securities
accounted for by the equity method, net 166 (1,731) 139 (1,445)
Loss from sale of available-for-sale securities 1,725 -- 1,440 --
Valuation gain using the equity method (388,641) (618,690) (324,462) (516,522)
Increase in other assets (21,526) (4,610) (17,971) (3,849)
Increase in other liabilities 23,510 4,764 19,628 3,977
Retirement and severance benefit paid (180) (24) (150) (20)
Increase in deposit for severance benefit insurance (198) (332) (165) (277)
----------- ----------- ----------- -----------
Net cash used in operating activities (12,347) (11,393) (10,308) (9,512)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Cash provided by investing activities:
Dividends received 186,896 640,771 156,033 534,956
Proceeds from sale of investment securities
accounted for by the equity method 1,529 23,631 1,277 19,729
Proceeds from sale of available-for-sale
securities 2 - 1 -
Proceeds from disposition of fixed assets 29 - 24 -
Decrease in other assets - 39 - 33
----------- ----------- ----------- -----------
188,456 664,441 157,335 554,718
Cash used in investing activities:
Purchases of investment securities accounted
for by the equity method (1,128,423) (467,962) (942,080) (390,685)
Increase in loans (1,176,009) (625,572) (981,807) (522,268)
Purchases of fixed assets (993) (798) (828) (666)
Increase in other assets (1,105) (2,038) (923) (1,701)
----------- ----------- ----------- -----------
(2,306,530) (1,096,370) (1,925,638) (915,320)
----------- ----------- ----------- -----------
Net cash used in investing activities (2,118,074) (431,929) (1,768,303) (360,602)
----------- ----------- ----------- -----------
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the years ended December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
----------------------- -----------------------
2003 2002 2003 2002
--------- ---------- ---------- ----------
Cash flows from financing activities:
Cash provided by financing activities:
Increase in borrowings 130,009 39,582 108,540 33,045
Increase in debentures 1,250,000 586,087 1,043,580 489,303
Issuance of additional shares 927,648 - 774,460 -
---------- ---------- ---------- ----------
2,307,657 625,669 1,926,580 522,348
Cash used in financing activities:
Redemption of borrowings - (20,000) - (16,697)
Dividends paid (157,017) (150,359) (131,088) (125,529)
Issuance cost on debentures paid (3,871) (2,087) (3,232) (1,742)
Issuance cost on additional shares paid (21,608) - (18,040) -
---------- ---------- ---------- ----------
(182,496) (172,446) (152,360) (143,968)
---------- ---------- ---------- ----------
Net cash provided by financing activities 2,125,161 453,223 1,774,220 378,380
---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (5,260) 9,901 (4,391) 8,266
Cash and cash equivalents at beginning of year 10,613 712 8,860 594
---------- ---------- ---------- ----------
Cash and cash equivalents at end of year W 5,353 10,613 4,469 8,860
========== ========== ========== ==========
See accompanying notes to non-consolidated financial statements.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
(1) General Description of the Company
Shinhan Financial Group Co., Ltd. (the "Company") was incorporated on
September 1, 2001 by way of the transfer of all issued shares owned by
shareholders of Shinhan Bank, Shinhan Securities Co., Ltd., Shinhan Capital
Co., Ltd. and Shinhan Investment Trust Management Co., Ltd. to the Company.
The Company was formed for the purpose of providing management services and
financing to affiliated companies with W1,461,721 million of initial
capital stock and the Company's shares were listed on the Korea Stock
Exchange on September 10, 2001.
On September 16, 2003, the Company's American depository shares were listed
on the New York Stock Exchange.
As of December 31, 2003, the Company has 11 subsidiaries and its capital
stock consists of W1,472,007 million in common stock and W486,523 million
in preferred stock. Details of its subsidiaries are as follows:
(a) Shinhan Bank
Shinhan Bank was established on September 15, 1981 under the General
Banking Act of the Republic of Korea to engage in the commercial
banking and trust operations. Shinhan Bank operates through 362
branches and 174 automated teller machine locations and its capital
stock amounts to W1,224,034 million as of December 31, 2003.
(b) Chohung Bank
Chohung Bank was established on October 1, 1943 under the General
Banking Act of the Republic of Korea through the merger of Han Sung
Bank, which was established on February 19, 1897, and Dong Il Bank,
which was established on August 8, 1906, to engage in commercial
banking and trust operations. The shares of Chohung Bank were listed
on the Korea Stock Exchange on June 3, 1956, and Chohung Bank operates
through 470 domestic branches, 87 depositary offices and 6 overseas
branches and its capital stock amounts to W3,595,592 million as of
December 31, 2003.
On July 9, 2003, the Company made an agreement with the Korea Deposit
Insurance Corporation (the "KDIC") to acquire 80.04% (543,570,144
shares) of total outstanding shares in Chohung Bank. In accordance
with the agreement, the Company purchased 266,349,371 shares in
exchange for the Company's shares on August 18, 2003 and 277,220,773
shares in cash on August 19, 2003.
Additionally, the Company's percentage of ownership increased to
81.15% through additional equity acquisition at W200,000 million on
December 30, 2003.
(c) Goodmorning Shinhan Securities Co., Ltd.
Goodmorning Shinhan Securities Co., Ltd. ("Goodmorning Shinhan
Securities") was incorporated on April 2, 1973 to engage in securities
trading, underwriting and brokerage services. Its shares were listed
on the Korea Stock Exchange on December 19, 1986. On June 18, 2002,
the Company acquired a 29% share of Good Morning Securities Co., Ltd.
from its largest shareholders and on July 31, 2002, Good Morning
Securities Co., Ltd. was merged with Shinhan Securities Co., Ltd.,
which was one of subsidiaries of the Company, and renamed to
Goodmorning Shinhan Securities. As of December 31, 2003, it operates
through 83 branches and its capital stock amounts to W796,998 million.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(1) General Description of the Company, Continued
(d) Shinhan Card Co., Ltd.
Shinhan Card Co., Ltd. ("Shinhan Card") was established on June 1,
2002 under the Credit Specialty Finance Law through the spin-off of
the credit card division of Shinhan Bank. Shinhan Card is engaged
principally in credit card services, factoring, consumer loan and
installment financing. As of December 31, 2003, Shinhan Card holds
2.11 million of franchise accounts and 2.77 million of credit card
holders, and its capital stock amounts to W152,847 million.
(e) Shinhan Capital Co., Ltd.
Shinhan Capital Co., Ltd. ("Shinhan Capital") was incorporated on
April 19, 1991 to engage in the leasing and rental business and it
changed its name on May 27, 1999 from Shinhan Leasing Co., Ltd. to
Shinhan Capital. Its capital stock as of December 31, 2003 amounts to
W80,000 million.
(f) Shinhan BNP Paribas Investment Trust Management Co., Ltd.
On August 1, 1996, Shinhan BNP Paribas Investment Trust Management
Co., Ltd. ("Shinhan BNP Paribas ITMC") was established and obtained a
license to engage in the business of investment and trust of
securities and advisory services under the Investment and Trust of
Securities Law. Additionally, on October 24, 2002, the Company sold
3,999,999 shares (50% of total outstanding shares - 1 share) of
Shinhan Investment Trust Management Co., Ltd., which has been renamed
to Shinhan BNP Paribas ITMC, to BNP Paribas Asset Management Group.
Its capital stock as of December 31, 2003 amounts to W40,000 million.
(g) Jeju Bank
Jeju Bank was incorporated on March 18, 1969 under the General Banking
Act of the Republic of Korea to engage in the commercial banking and
trust business and listed its shares on the Korea Stock Exchange on
December 28, 1972. On April 4, 2002, Jeju Bank became one of
subsidiaries of the Company through acquiring a 51% share from the
KDIC. Additionally, the Company's percentage of ownership increased to
62% with the acquisition of additional common shares at W20,177
million on July 5, 2002 and its capital stock as of December 31, 2003
amounts to W77,644 million.
(h) SH&C Life Insurance Co., Ltd.
SH&C Life Insurance Co., Ltd. ("SH&C Life Insurance") was established
in October 1, 2002 to engage in insurance business and other related
business. Its capital stock as of December 31, 2003 amounts to W30,000
million.
(i) e-Shinhan Inc.
e-Shinhan Inc. ("e-Shinhan") was incorporated on February 21, 2001 to
engage in the business of internet brokerage service and comprehensive
management services on customer accounts. Its capital stock as of
December 31, 2003 amounts to W2,820 million.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(1) General Description of the Company, Continued
(j) Shinhan Macquarie Financial Advisory Co., Ltd.
Shinhan Macquarie Financial Advisory Co., Ltd. ("Shinhan Macquarie")
was incorporated on August 1, 2001 to engage in the business of
financial advisory services and cross border leasing. Its capital
stock as of December 31, 2003 amounts to W1,000 million.
(k) Shinhan Credit Information Co., Ltd.
Shinhan Credit Information Co., Ltd. ("Shinhan Credit Information")
was established on July 8, 2002 as wholly owned subsidiary of the
Company to engage in the business of debt collection services and
credit research. Additionally, the Company sold 294,000 shares (49% of
total outstanding shares) of Shinhan Credit Information to LSH
Holdings LLC on June 18, 2003. Its capital stock as of December 31,
2003 amounts to W3,000 million.
Ownerships of the Company's subsidiaries as of December 31, 2003 and 2002 are as
follows:
2003 2002
----------------------- ---------------------------
Ownership Ownership
Number of Percentage Number of Percentage
Investor Investee shares (%) shares (%)
------------ ------------------------------ ----------- ---------- ----------- ----------
The Company Shinhan Bank 244,806,782 100.0 244,630,672 100.0
Chohung Bank 583,570,144 81.2 - -
Goodmorning Shinhan Securities 94,084,384 (*) 59.4 94,084,384 59.4
Shinhan Card 30,569,400 100.0 30,569,400 100.0
Shinhan Capital 16,000,000 100.0 16,000,000 100.0
Shinhan BNP Paribas ITMC 4,000,001 50.0 4,000,001 50.0
Jeju Bank 9,692,369 62.4 9,692,369 62.4
SH&C Life Insurance 3,000,001 50.0 3,000,001 50.0
e-Shinhan 415,495 73.7 415,495 73.7
Shinhan Macquarie 102,000 51.0 102,000 51.0
Shinhan Credit Information 306,000 51.0 600,000 100.0
Shinhan Bank The Company 29,873,359 (**) 10.2 29,873,674 10.2
(*) 1,047,213 shares of treasury stock were considered.
(**) Preferred stocks were excluded and 10.2% (29,873,295 shares) of shares in
the Company were sold at W627,339 million (W21,000 per share) on March 3,
2004 through after-hour block trading.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies
(a) Basis of Financial Statements Presentation
The Company maintains its accounting records in Korean Won and
prepares statutory non-consolidated 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 non-consolidated financial
statements are intended for use only by those who are informed about
Korean accounting principles and practices. The accompanying
non-consolidated financial statements have been condensed,
restructured and translated into English (with certain expanded
descriptions) from the Korean language financial statements.
The accompanying non-consolidated financial statements include only
the accounts of the Company, and do not include the accounts of any of
its subsidiaries.
Certain accounts of prior year's non-consolidated financial statements
were reclassified to conform to the current year's presentation. These
reclassifications did not result in any material change to reported
net earnings or stockholders' equity.
(b) Basis of Financial Statements Translation
The non-consolidated financial statements are expressed in Korean Won
and, solely for the convenience of the reader, have been translated
into U.S. dollars at the rate of W1,197.80 to US$1, the basic exchange
rate on December 31, 2003. These translations should not be construed
as a representation that any or all of the amounts shown could be
converted into U.S. dollars at this or any other rate.
(c) Allowance for Loan Losses
Allowance for loan losses is provided to cover estimated losses on
loans, based on past experience of collection and analysis of the
collectibility of individual outstanding loans.
(d) Investments in Securities
Effective January 1, 2003, the Company adopted Statement of Korea
Accounting Standards ("SKAS") No. 8, "Investments in Securities." In
accordance with SKAS No. 8, certain debt and equity securities should
be classified into one of the three categories of held-to-maturity,
available-for-sale, or trading securities at the time of acquisition
and such determination should be reassessed at each balance sheet
date. Investments in debt securities that the Company has the positive
intent and ability to hold to maturity are classified as
held-to-maturity. Securities that are bought and held principally for
the purpose of selling them in the near term (thus held for only a
short period of time) are classified as trading securities. Trading
generally reflects active and frequent buying and selling, and trading
securities are generally used to generate profit on short-term
differences in price. Investments not classified as either
held-to-maturity or trading securities are classified as
available-for-sale securities.
Trading securities are carried at fair value, with unrealized holding
gains and losses included in earnings. Available-for-sale securities
are carried at fair value, with unrealized holding gains and losses
reported as a capital adjustment. Investments in equity that do not
have readily determinable fair values are stated at cost. Declines in
value judged to be other-than-temporary on available-for-sale
securities are charged to current results of operations. Investments
in debt securities that are classified into held-to-maturity are
reported at amortized cost at the balance sheet date and such
amortization is included in interest income.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
Marketable securities are at the quoted market prices as of the period
end. Non-marketable debt securities are recorded at the fair values
derived from the discounted cash flows by using an interest rate
deemed to approximate the market interest rate. The market interest
rate is determined by the issuers' credit rate announced by the
accredited credit rating agencies in Korea. Money market funds are
recorded at the fair value determined by the investment management
companies.
(e) Investment Securities under the Equity Method
Investments in affiliated companies with the Company's ownership of
20% or more or over which the Company has significant management
control are stated at an amount as determined using the equity method.
Under the equity method, the Company's initial investment is recorded
at cost and is subsequently increased to reflect the Company's share
of the investee income and reduced to reflect the Company's share of
the investee losses or dividends received. Any excess in the Company's
acquisition cost over the Company's share of the investee's
identifiable net assets is generally recorded as goodwill or other
intangibles. Goodwill (negative goodwill) is amortized by the
straight-line method over a reasonable period, generally less than 20
years. When events or circumstances indicate that carrying amount may
not be recoverable, the Company reviews goodwill for any impairment.
Under the equity method, the Company does not record its share of
losses of affiliate companies when such losses would make the
Company's investment in such entity less than zero.
For the equity method, the Company applies its own criteria in
providing allowances for loan losses of its affiliated companies.
Accordingly, additional allowances provided for the year ended
December 31, 2003 for Chohung and Jeju Bank amount to W27,431 million
and W739 million, respectively, by the equity method.
(f) Fixed Assets
i) Tangible Assets
Tangible assets are stated at cost. Significant additions or
improvements extending value or useful lives of assets are
capitalized, where normal maintenance and repairs are charged to
expense when incurred.
The depreciation method and useful lives of tangible assets are
as follows:
Descriptions Depreciation Method Useful Lives
----------------------------- ------------------- ------------
Vehicles Declining-balance 5 years
Furniture, fixtures and other " "
Leasehold improvement Straight-line "
ii) Intangible Assets
Intangible assets are stated at acquisition cost less
amortization computed using the straight-line method over 5
years.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(g) Discounts on Debentures
Discounts on debentures issued, which represent the difference between
the face value of debentures issued and the issuance price of
debentures, are amortized on the effective interest method over the
life of the debentures. The amount amortized is included in interest
expense.
(h) Income Taxes
Income tax on the earnings or loss for the year comprises current and
deferred tax. Income tax is recognized in the statement of earnings
except to the extent that it relates to items recognized directly to
equity, in which case it is recognized in equity.
Deferred tax is provided using the asset and liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realization or settlement
of the carrying amount of assets and liabilities, using tax rates
enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against which
the unused tax losses and credits can be utilized. Deferred tax assets
are reduced to the extent that it is no longer probable that the
related tax benefit will be realized.
(i) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length
of service when they leave the Company. The Company's estimated
liability under the plan which would be payable if all employees left
on the balance sheet date is accrued in the accompanying
non-consolidated balance sheets. A portion of the liability is covered
by an employees' severance pay insurance where the employees have a
vested interest in the deposit with the insurance company. The deposit
for severance benefit insurance is, therefore, reflected in the
accompanying balance sheets as a deduction from the liability for
retirement and severance benefits.
(j) Translation of Foreign Currency Denominated Assets and Liabilities
Monetary assets and liabilities denominated in foreign currencies are
translated into Korean Won at the balance sheet date, with the
resulting gains and losses recognized in current results of
operations. Monetary assets and liabilities denominated in foreign
currencies are translated into Korean Won at W1,197.80 and W1,200.40
to US$1, the rate of exchange on December 31, 2003 and 2002,
respectively, that is permitted by the Financial Accounting Standards.
Non-monetary assets and liabilities denominated in foreign currencies,
which are stated at historical cost, are translated into Korean Won at
the foreign exchange rate ruling at the date of the transaction.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(k) Stock Options
The stock option program allows the Company's employees to acquire
shares of the Company or to be compensated for the market price
difference. In case of stock grant type, the Company values stock
options based upon an option pricing model under the fair value method
and recognizes this value as an expense and a capital adjustment over
the period in which the options vest. In case of price compensation
type, the Company recognizes the compensation expense as an expense
and a liability over the period in which the options vest.
(l) Contingent Liabilities
Contingent losses are generally recognized as a liability when
probable and reasonably estimable.
(m) Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the Republic of Korea requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and related notes to financial
statements. Actual results could differ from those estimates.
(n) Adoption of New Accounting Standard
The Company adopted SKAS No. 2 through No. 9, effective from the first
fiscal year beginning after December 31, 2002, while, SKAS No. 6,
"Events Occurring after the Balance Sheet Date" has been adopted since
the year ended December 31, 2002 with encouraged earlier application.
The cumulative effect of change in accounting principles is offset
directly against beginning balance of the stockholders' equity, while
the Company reports financial statements of the current year in
accordance with the new method as regards to change in estimate,
prospectively.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(3) Cash and Due from Banks
As of December 31, 2003 and 2002, W2.5 million of cash and due from banks
is restricted for guarantee deposits on bank accounts.
(4) Securities
Securities as of December 31, 2003 and 2002 are as follows:
Won U.S. dollars (Note 2)
------------------------ -----------------------
2003 2002 2003 2002
----------- ---------- ---------- ----------
Investment securities accounted for
by the equity method W 6,308,538 3,990,775 $5,266,771 3,331,754
Available-for-sale securities - 1,089 - 909
----------- ---------- ---------- ----------
W 6,308,538 3,991,864 $5,266,771 3,332,663
=========== ========== ========== ==========
(a) Investment Securities accounted for by the Equity Method
(i) Details of investment securities accounted for by the equity method as
of December 31, 2003 and 2002 are as follows:
2003
-------------------------------------------------------------------------------
Acquisition
and Equity
Beginning dividend, method Retained Capital Ending
Subsidiaries balance net gain (loss) earnings adjustments balance
--------------------------- ---------- ----------- ----------- ----------- ----------- -----------
Shinhan Bank W3,043,952 (182,592) 476,273 937 177,048 3,515,618
Chohung Bank (*) - 2,057,983 (43,545) 621 (127,731) 1,887,328
Goodmorning
Shinhan Securities 531,566 - 8,787 (12,342) 18,861 546,872
Shinhan Card 247,460 - (84,324) - - 163,136
Shinhan Capital 76,458 - 26,204 - 2,786 105,448
Shinhan
BNP Paribas ITMC 22,581 (1,000) 917 (37) 25 22,486
Jeju Bank 46,692 (2,423) 5,189 - (1,366) 48,092
SH&C Life Insurance 14,630 - (1,684) - 75 13,021
e-Shinhan 3,892 - (1,166) (1) - 2,725
Shinhan Macquarie 423 - 1,446 (26) - 1,843
Shinhan Credit Information 3,121 (1,696) 544 - - 1,969
---------- ----------- ----------- ----------- ----------- -----------
W3,990,775 1,870,272 388,641 (10,848) 69,698 6,308,538
========== =========== =========== =========== =========== ===========
Shinhan Bank and Chohung Bank are holding loans (including guarantees and
acceptances) provided to and securities issued by SK Networks Co., Ltd.
(formerly SK Global Co., Ltd.), amounting to W396,058 million and W303,011
million, respectively. As regards to those loans and securities, Shinhan
Bank provides W110,982 million of allowance for loan losses and recorded
W1,178 million of impairment loss on available-for-sale securities, and
Chohung Bank provides W93,784 million of allowance for loan losses, as of
December 31, 2003. Actual losses on these loans and securities may differ
materially from the management's assessments. The accompanying
non-consolidated financial statements do not reflect the impact of the
uncertainty on the financial position of the Company for the equity method.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(4) Securities, Continued
Additionally, Shinhan Bank, Chohung Bank and Goodmorning Shinhan Securities
are holding loans provided to and securities issued by LG Card Co., Ltd.,
which has been controlled by creditor banks due to its liquidity crisis,
amounting to W189.3 billion, W172.9 billion and W22.6 billion,
respectively. Actual losses on these loans and securities may differ
materially from the management's assessments and the accompanying
non-consolidated financial statements do not reflect the impact of the
uncertainty on the financial position of the Company for the equity method.
Additionally, Shinhan Bank and Chohung Bank have agreed with creditor banks
to provide additional capital, amounting to W81.3 billion and W73.4
billion, respectively.
The changes in goodwill (negative goodwill) for the year ended December 31,
2003 are as follows:
Beginning Increase Amortization Ending
balance (decrease) (reversal) balance
--------------- ----------- ------------ ---------
Chohung Bank W - (*) 866,757 20,006 846,751
Goodmorning Shinhan Securities 161,542 - 17,004 144,538
Jeju Bank (7,034) - (758) (6,276)
--------------- ----------- ------------ ---------
W 154,508 866,757 36,252 985,013
=============== =========== ============ =========
(*) W26,513 million of additional goodwill through additional equity
acquisition were included.
2002
-------------------------------------------------------------------------------
Acquisition
and Equity
Beginning dividend, method Retained Capital Ending
Subsidiaries balance net gain (loss) earnings adjustments balance
---------------------------- ----------- ----------- ---------- ---------- ----------- ----------
Shinhan Bank W 3,446,112 (870,651) 595,866 (215) (127,160) 3,043,952
Goodmorning
Shinhan Securities 243,673 390,710 (749) (36) (102,032) 531,566
Shinhan Card - 246,956 504 - - 247,460
Shinhan Capital 63,781 - 13,429 (63) (689) 76,458
Shinhan
BNP Paribas ITMC 42,557 (23,900) 3,961 (74) 37 22,581
Jeju Bank - 42,935 6,683 (118) (2,808) 46,692
SH&C Life Insurance - 15,000 (453) - 83 14,630
e-Shinhan 4,673 - (806) (1) 26 3,892
Shinhan Macquarie 776 (484) 134 (3) - 423
Shinhan Credit Information - 3,000 121 - - 3,121
----------- ----------- ---------- ---------- ----------- ----------
W 3,801,572 (196,434) 618,690 (510) (232,543) 3,990,775
=========== =========== ========== ========== =========== ==========
The changes in goodwill (negative goodwill) for the year ended December 31,
2002 are as follows:
Beginning Increase Amortization Ending
balance (decrease) (reversal) balance
-------------- ------------ ------------- --------
Goodmorning Shinhan Securities W - 170,045 8,503 161,542
Jeju Bank - (7,585) (551) (7,034)
-------------- ------------ ------------- --------
W - 162,460 7,952 154,508
============== ============ ============= ========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(4) Securities, Continued
(b) Available-for-Sale Securities
Available-for-sale securities as of December 31, 2003 and 2002 are as
follows:
Fair value (book value)
Acquisition -----------------------
cost 2003 2002
----------- ------- --------
Bond with stock warrant issued by Shinhan Bank W 1,785 - 1,089
In addition, changes in unrealized gain (loss) on available-for-sale
securities for the years ended December 31, 2003 and 2002 are as follows:
2003 2002
-------- -----
Beginning balance of unrealized gain (loss) W (668) -
Realized gain (loss) 173 -
Other changes 495 (668)
-------- -----
Ending balance of unrealized gain (loss) W - (668)
======== =====
(5) Acquisition of Chohung Bank
On July 9, 2003, the Company made an agreement with the KDIC to acquire
80.04% (543,570,144 shares) of total outstanding shares in Chohung Bank. In
accordance with the agreement, the Company purchased 266,349,371 shares in
exchange for the Company's shares on August 18, 2003 and 277,220,773 shares
in cash on August 19, 2003.
As regards to the acquisition, the Company recognized identifiable assets
and liabilities of Chohung Bank as fair value on the date of acquisition
using the purchase method.
Condensed balance sheets as of December 31, 2002 and August 31, 2003 and
statements of earnings for the year ended December 31, 2002 and the eight
months ended August 31, 2003 of Chohung Bank are as follows:
August 31, 2003
December 31, 2002 (Acquisition date)
----------------- ------------------
Condensed balance sheets:
Total assets W 66,196,288 65,297,366
Total liabilities 63,903,990 63,153,224
----------------- ------------------
Total stockholders' equity W 2,292,298 2,144,142
================= ==================
Condensed statements of earnings:
Operating revenue W 5,317,063 3,666,283
Operating expense 5,451,812 4,335,577
----------------- ------------------
Operating income (losses) (134,749) (669,293)
Ordinary income (losses) (611,160) (694,949)
Net earnings (losses) W (586,045) (720,293)
================= ==================
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(5) Acquisition of Chohung Bank, Continued
Goodwill incurred in relation to the acquisition of Chohung Bank is as
follows:
Acquisition cost W 1,857,983
Net asset value (fair value) 1,017,739
---------------
Goodwill W 840,244
===============
Additionally, the Company would be required to pay contingent consideration
to the KDIC in relation to the earnings in the future and changes in fair
value of assets and liabilities of Chohung Bank and the details are as
follows:
- Asset Indemnity Payment
Amount : W652,284 million - asset indemnity amount for
corporate loans, returned KAMCO loans and
credit card loans
Payment date : earlier of 60 days after the date asset
indemnity is determined as of June 30, 2005 or
the date as agreed on
Interest : 4.3% per annum
- General Indemnity Payment
Amount : W166,516 million (deductible any amounts due
and payable by the KDIC to the Company in
connection with the breach of representation
or warranty)
Payment date : the second anniversary date of cash portion
closing date
Interest : 4.3% per annum
- Earn Out Payment
Amount : 20% of the total excess amount, which means
net earnings of Chohung Bank for fiscal years
of 2004, 2005 and 2006 in excess of W1,800
billion
Payment date : within 30 days after the date excess amount is
determined for the fiscal year of 2006
These contingent considerations are not included in the acquisition cost on
the date of acquisition, for the amount is not determinable.
(6) Loans
(a) Loans as of December 31, 2003 and 2002 consist of the following:
Won U.S. dollars (Note 2)
----------------------------- -------------------------
2003 2002 2003 2002
--------------- ----------- ----------- -----------
Loans in Won W 1,637,200 497,200 $ 1,366,839 415,094
Loans in foreign currencies 107,705 71,927 89,919 60,049
Privately placed bonds 200,000 200,000 166,973 166,973
--------------- ----------- ----------- -----------
1,944,905 769,127 1,623,731 642,116
Less: allowance for loan losses (9,725) (3,846) (8,119) (3,211)
--------------- ----------- ----------- -----------
W 1,935,180 765,281 $ 1,615,612 638,905
=============== =========== =========== ===========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(6) Loans, Continued
(b) Details of loans as of December 31, 2003 and 2002 are as follows:
Borrower Interest rate (%) 2003 2002
-------------------- ----------------- -------------- -----------
Loans in Won Shinhan Card 4.83 ~ 6.28 W 1,100,000 200,000
" Shinhan Capital 4.83 ~ 8.12 537,200 297,200
-------------- -----------
1,637,200 497,200
Loans in foreign currencies Shinhan Capital Libor+0.9 ~ 1.2 107,705 71,927
Privately placed bonds Shinhan Bank 7.42 50,000 50,000
" Goodmorning
Shinhan Securities 6.23 130,000 130,000
" Jeju Bank 8.14 20,000 20,000
-------------- -----------
200,000 200,000
-------------- -----------
1,944,905 769,127
Less: allowance for loan losses (9,725) (3,846)
-------------- -----------
W 1,935,180 765,281
============== ===========
(c) The maturities of loans by remaining period as of December 31, 2003
and 2002 are as follows:
Loans
Loans in foreign Privately
At December 31, 2003 in Won currencies placed bonds Total
------------------------------------- --------------- ---------- ------------ ---------
Due in 6 months or less W 90,000 - - 90,000
Due after 6 months through 12 months 97,200 - 130,000 227,200
Due after 1 years through 3 years 1,220,000 107,705 - 1,327,705
Thereafter 230,000 - 70,000 300,000
--------------- ---------- ------------ ---------
W 1,637,200 107,705 200,000 1,944,905
=============== ========== ============ =========
Loans
Loans in foreign Privately
At December 31, 2002 in Won currencies placed bonds Total
------------------------------------- --------------- ---------- ------------ ---------
Due in 6 months or less W - - - -
Due after 6 months through 12 months - - - -
Due after 1 years through 3 years 417,200 71,927 130,000 619,127
Thereafter 80,000 - 70,000 150,000
--------------- ---------- ---------- ---------
W 497,200 71,927 200,000 769,127
=============== ========== ========== =========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(7) Fixed Assets
Fixed assets as of December 31, 2003 and 2002 consist of the following:
Won U.S. dollars (Note 2)
--------------------- -----------------------
2003 2002 2003 2002
----------- ------ ---------- ------
Property and equipment:
Vehicles W 391 242 $ 326 202
Furniture and fixtures 993 344 829 287
Leasehold improvement and other 1,404 1,283 1,172 1,071
------------- ----- ------------ -----
2,788 1,869 2,327 1,560
Less: Accumulated depreciation (1,182) (656) (987) (548)
------------- ----- ------------ -----
1,606 1,213 1,340 1,012
Intangible assets:
Organization costs - 20 - 17
Other 414 521 346 435
------------- ----- ------------ -----
414 541 346 452
------------- ----- ------------ -----
W 2,020 1,754 $ 1,686 1,464
============= ===== ============ =====
(8) Other Assets
Other assets as of December 31, 2003 and 2002 consist of the following:
Won U.S. dollars (Note 2)
-------------------- ------------------------
2003 2002 2003 2002
----------- ------ ---------- ------
Guarantee deposits paid W 7,840 7,069 $ 6,545 5,902
Accounts receivable 7,612 2,361 6,355 1,971
Accrued income 11,334 4,332 9,463 3,617
Advance payments 10 - 8 -
Prepaid expenses 1,667 48 1,392 40
Prepaid income taxes 13,867 982 11,577 820
Other 1,009 675 842 564
----------- ------ ---------- ------
W 43,339 15,467 $ 36,182 12,914
=========== ====== ========== ======
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(9) Borrowings and Debentures
(a) Borrowings and debentures as of December 31, 2003 and 2002 consist of
the following:
Won U.S. dollars (Note 2)
Interest rate -------------------- --------------------------
(%) 2003 2002 2003 2002
-------------- ---------- ------- ------------ ---------
Borrowings:
Borrowings in Won 4.63 ~ 5.56 W 94,000 - $ 78,477 -
Borrowings in
foreign currencies Libor+0.7 ~ 1 71,868 36,012 60,000 30,065
---------- ------- ------------ ---------
W 165,868 36,012 $ 138,477 30,065
========== ======= ============ =========
Debentures:
Korean Won debentures 4.76 ~ 7.47 W1,950,000 700,000 $ 1,627,985 584,405
Foreign currency debentures Libor+0.85 35,934 36,012 30,000 30,065
---------- ------- ------------ ---------
1,985,934 736,012 1,657,985 614,470
Less: discounts on debentures (5,391) (3,982) (4,501) (3,324)
---------- ------- ------------ ---------
W1,980,543 732,030 $ 1,653,484 611,146
========== ======= ============ =========
(b) The maturities of borrowings and debentures as of December 31, 2003
and 2002 are as follows:
Borrowings Korean Foreign
Borrowings in foreign Won currency
At December 31, 2003 in Won currencies debentures debentures Total
------------------------------------ -------------- ----------- ---------- ---------- ---------
Due in 6 months or less W 90,000 - - - 90,000
Due after 6 months through 12 months 4,000 - 230,000 - 234,000
Due after 1 years through 3 years - 71,868 1,590,000 35,934 1,697,802
Thereafter - - 130,000 - 130,000
-------------- ----------- ---------- ---------- ---------
W 94,000 71,868 1,950,000 35,934 2,151,802
============== =========== ========== ========== =========
Borrowings Korean Foreign
Borrowings in foreign Won currency
At December 31, 2002 in Won currencies debentures debentures Total
------------------------------------ -------------- ----------- ---------- ---------- ---------
Due in 6 months or less W - - - - -
Due after 6 months through 12 months - - - - -
Due after 1 years through 3 years - 36,012 570,000 36,012 642,024
Thereafter - - 130,000 - 130,000
-------------- ----------- ---------- ---------- ---------
W 497,200 36,012 700,000 36,012 772,024
============== =========== ========== ========== =========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(10) Retirement and Severance Benefits
Changes in retirement and severance benefits for the years ended December
31, 2003 and 2002 are as follows:
Won U.S. dollars (Note 2)
-------------------- ---------------------
2003 2002 2003 2002
----------- ------ ---------- --------
Estimated severance liability at beginning of year W 570 - $ 476 -
Provision (180) (24) (150) (20)
Payment 140 594 117 496
----------- ------ ---------- --------
Estimated severance liability at end of year 530 570 442 476
Less: deposits for severance benefit insurance (530) (332) (442) (277)
----------- ------ ---------- --------
Net balance at end of year W - 238 $ - 199
=========== ====== ========== ========
(11) Other Liabilities
Other liabilities as of December 31, 2003 and 2002 consist of the
following:
Won U.S. dollars (Note 2)
----------------------- ------------------------
2003 2002 2003 2002
----------- ----- ------------ ------
Withholding taxes W 1,176 523 $ 982 437
Dividends payable 928 453 775 378
Accounts payable 14,492 1,541 12,099 1,286
Accrued expenses 12,189 3,962 10,176 3,308
Unearned revenue 1,679 - 1,402 -
----------- ----- ------------ ------
W 30,464 6,479 $ 25,434 5,409
=========== ===== ============ ======
(12) Related Party Transactions
(a) Details of transactions
Significant transactions with the related parties for the years ended
December 31, 2003 and 2002 are as follows:
Revenue earned Expense incurred Account 2003 2002
----------------- ------------------- ------------------- -------- ------
The Company Shinhan Bank Interest income W 4,340 5,581
" Goodmorning Shinhan
Securities Interest income 8,099 2,158
" Shinhan Card Interest income 54,006 925
" Shinhan Capital Interest income 29,714 15,006
" Jeju Bank Interest income 1,628 1,000
-------- ------
97,787 24,670
-------- ------
Shinhan Bank Chohung Bank Gain on derivatives 1,838 -
" Goodmorning Shinhan
Securities Interest income 3,121 1,414
" " Rental income 29 21
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(12) Related Party Transactions, Continued
Revenue earned Expense incurred Account 2003 2002
-------------------------- ------------------------ -------------------- ---------- -------
Shinhan Bank Shinhan Card Interest income 4,445 786
" " Fees and commission 57,941 55,271
" " Rental income 859 468
" Shinhan Capital Interest income 3,136 6,055
" " Gain on derivatives 361 64
" " Rental income 309 271
" Jeju Bank Interest income 237 258
" SH&C Life Insurance Fees and commission 2,723 -
" Shinhan Macquarie Rental income - 100
Chohung Bank Shinhan Bank Interest income 996 -
" " Gain on derivatives 139 -
" Goodmorning Shinhan
Securities Interest income 26 -
" SH&C Life Insurance Fees and commission 744 -
Goodmorning Shinhan
Securities Shinhan Bank Interest income 1,391 257
" " Fees and commission 466 -
" Chohung Bank Interest income 136 -
" Shinhan Card Rental income 242 5
" Shinhan BNP Paribas ITMC Rental income 201 -
Shinhan Card Shinhan Bank Interest income 7 491
" " Fees and commission 29 -
" Goodmorning Shinhan
Securities Interest income - 106
" Jeju Bank Fees and commission 81 -
" SH&C Life Insurance Fees and commission 338 -
Shinhan Capital Shinhan Bank Interest income 437 150
" " Gain on derivatives 1,111 2,468
" Chohung Bank Interest income 690 -
Shinhan BNP Paribas ITMC Shinhan Bank Interest income 393 380
" " Fees and commission - 41
Jeju Bank Shinhan Bank Interest income 99 83
SH&C Life Insurance Shinhan Bank Interest income 498 180
" " Insurance income 514 -
e-Shinhan Shinhan Bank Interest income 132 -
" Shinhan Card Fees and commission 22 -
" The Company Fees and commission 62 -
Shinhan Macquarie Shinhan Bank Interest income - 15
Shinhan Credit Information Shinhan Bank Fees and commission 2,614 772
" " Interest income 35 -
" Goodmorning Shinhan
Securities Fees and commission 31 -
" Shinhan Card Fees and commission 8,646 2,289
" Shinhan Capital Fees and commission 61 -
" Jeju Bank Fees and commission 623 42
---------- -------
95,763 71,987
---------- -------
W 193,550 96,657
========== =======
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(12) Related Party Transactions, Continued
(b) Account balances
Significant balances with the related parties as of December 31, 2003
and 2002 are as follows:
Creditor Debtor Account 2003 2002
------------------- ------------------- ----------------------------------- ------------ --------
The Company Shinhan Bank Due from banks W 5,327 10,613
" " Other assets (Guarantee deposits
paid) 7,673 6,902
" " Loans (Privately placed bonds) 50,000 50,000
" " Other assets (Accounts receivable) 6,786 2,171
" " Other assets (Accrued income) 185 123
" Goodmorning
Shinhan Securities Loans (Privately placed bonds) 130,000 130,000
" " Other assets (Accrued income) 134 134
" Shinhan Card Loans 1,100,000 200,000
" " Other assets (Accounts receivable) 154 -
" " Other assets (Accrued income) 6,387 925
" Shinhan Capital iLoans 644,905 369,127
" " Other assets (Accounts receivable) 624 190
" " Other assets (Accrued income) 4,442 2,965
" Jeju Bank Loans (Privately placed bonds) 20,000 20,000
" " Other assets (Accrued income) 186 186
" Shinhan Credit
Information Other assets (Accounts receivable) 38 -
------------ --------
1,976,841 793,336
------------ --------
Shinhan Bank Chohung Bank Securities 132,708 -
" " Derivative assets 797 -
" Goodmorning Shinhan
Securities Loans (Privately placed bonds) 30,000 70,000
" " Other assets (Accrued income) 350 1,047
" " Other assets (Guarantee deposits
paid) 4,068 530
" Shinhan Card Call loans 28,500 7,500
" " Other assets (Accrued income) 87 -
" Shinhan Capital Loans 75,933 37,959
" " Derivative assets 97 -
" " Other assets (Accrued income) 136 133
" Jeju Bank Loans (Privately placed bonds) 3,140 3,140
" " Other assets (Accounts receivable) 561 -
" SH&C Life Insurance Other assets (Accounts receivable) 1,455 -
Chohung Bank Shinhan Bank Securities 96,515 -
" " Derivative assets 4,324 -
" Shinhan Capital Loans 392 -
Goodmorning Shinhan
Securities Shinhan Bank Due from banks 53,064 11,908
" " Other assets (Guarantee deposits
paid) 6,637 5,526
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(12) Related Party Transactions, Continued
Creditor Debtor Account 2003 2002
------------------- ------------------- -------------------------------------- ----------- --------
Goodmorning Shinhan
Securities Shinhan Bank Other assets (Accrued income) 154 252
" Chohung Bank Due from banks 2,011 -
" " Other assets (Accrued income) 8 -
Shinhan Card The Company Other assets (Prepaid expense) 906 -
" Shinhan Bank Cash and due from banks 102 -
" Other assets (Guarantee deposits paid) 1,189 387
" Goodmorning Shinhan
Securities Other assets (Guarantee deposits paid) 4,635 3,289
" SH&C Life Insurance Other assets (Accounts receivable) 338 -
Shinhan Capital The Company Other assets (Prepaid expense) 773 -
" Shinhan Bank Short-term financial instruments 58,231 16,666
" " Other assets (Prepaid expense) 39 -
" " Other assets (Accrued income) 69 -
" " Currency swap 1,941 2,000
" " Other assets (Guarantee deposits paid) 292 418
" Chohung Bank Securities 6,714 -
" " Other assets (Accrued income) 173 -
Shinhan BNP
Paribas ITMC Shinhan Bank Cash and due from banks 4,436 8,985
" " Other assets (Accrued income) 105 -
" Goodmorning Shinhan
Securities Other assets (Guarantee deposits paid) 3,496 850
Jeju Bank Shinhan Bank Call loans - 4,922
" " other assets (Accounts receivable) 561 -
SH&C Life Insurance Shinhan Bank Cash and cash equivalents 33,563 12,327
" " Other assets (Accrued income) 46 -
e-Shinhan Shinhan Bank Cash and cash equivalents 2,158 3,718
Shinhan Macquarie " Cash and cash equivalents 1,187 168
Shinhan Credit
Information Shinhan Bank Cash and cash equivalents 1,686 1,395
" " Other assets (Accounts receivable) 280 -
" " Other assets (Guarantee deposits paid) 866 -
" Shinhan Card Other assets (Accounts receivable) 892 -
" Jeju Bank Other assets (Accrued income) 101 -
" " Other assets (Guarantee deposits paid) 60 -
----------- --------
565,776 193,120
----------- --------
W 2,542,617 986,456
=========== ========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(12) Related Party Transactions, Continued
(c) Guarantees and acceptances
The guarantees and acceptances provided between the related parties
as of December 31, 2003 are as follows:
Amount
Creditor Debtor Account guaranteed
------------ ------------------------------ ------------------------- ----------
The Company Goodmorning Shinhan Securities Lease guarantee W 50,000
Shinhan Bank Shinhan Capital Letter of credit 30,547
,, Shinhan Finance Guarantees for loans 11,025
Shinhan Bank Good Morning USA Guarantees for operations 14,374
----------
W 105,946
==========
(13) Assets and Liabilities Denominated in Foreign Currency
Assets and liabilities denominated in foreign currency as of December 31,
2003 and 2002 are as follows:
Foreign currency Equivalent Won
---------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
Assets:
Cash and due from banks $ - 90 W - 108
Loans 89,919 59,919 107,705 71,927
Other assets (accrued income) 426 547 510 657
--------- ------ ---------- ------
Total $ 90,345 60,556 W 108,215 72,692
========= ====== ========== ======
Liabilities:
Borrowings $ 60,000 30,000 W 71,868 36,012
Debentures 30,000 30,000 35,934 36,012
Discounts on debentures (51) (79) (60) (95)
Other liabilities (accrued expenses) 382 503 457 604
--------- ------ ---------- ------
Total $ 90,331 60,424 W 108,199 72,533
========= ====== ========== ======
(14) Commitments and Contingencies
(a) Indemnification on contingent loss
Pursuant to the sale agreement of 50% shares in Shinhan ITMC,
entered into between BNP Paribas Asset Management Group and the
Company, the Company agreed to compensate BNP Paribas Asset
Management Group for contingent loss arising from following pending
lawsuits filed against Shinhan BNP Paribas ITMC:
Amount to
Plaintiff Claimed for be claimed
---------------------------------------------------------- ------------------ ------------
Bumin Mutual Savings Bank Indemnity for loses W 100
Fine Capital Co., Ltd. (formerly Kookmin leasing Co., Ltd.) ,, 2,800
------------
W 2,900
============
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(14) Commitments and Contingencies, Continued
According to the settlement of the lawsuit by Fine Capital Co.,
Ltd., the Company recorded W987 million of loss for the year ended
December 31, 2003. However, the ultimate outcome of other lawsuits
cannot be presently determined.
(b) As of December 31, 2003, the Company has provided a blank note to
Koram Bank, as collateral related to bank overdrafts.
(15) Insurance
As of December 31, 2003, the Company maintains insurance policies covering
loss and liability arising from automobile accidents.
(16) Capital Stock
(a) The Company issued new preferred stock for the year ended December
31, 2003, and the details are as follows:
Predetermined
Number of dividend rate
shares (%) Redeemable period
---------- ----------------- ----------------------------------
Redeemable preferred stock:
Series 1 9,316,792 4.04 August 19, 2004 ~ August 18, 2006
Series 2 9,316,792 4.04 August 19, 2005 ~ August 18, 2007
Series 3 9,316,792 4.04 August 19, 2006 ~ August 18, 2008
Series 4 9,316,792 4.04 August 19, 2007 ~ August 18, 2009
Series 5 9,316,793 4.04 August 19, 2008 ~ August 18, 2010
Series 6 3,500,000 7.00 July 19, 2006 ~ August 18, 2006
Series 7 2,433,334 7.46 July 19, 2008 ~ August 18, 2008
Series 8 66,666 7.86 July 19, 2010 ~ August 18, 2010
----------
52,583,961
Redeemable convertible preferred stock:
Series 9 (*) 44,720,603 2.02 August 19, 2006 ~ August 18, 2008
----------
97,304,564
==========
(*) Convertible period : August 19, 2004 ~ August 18, 2007
Conversion ratio : 1 common share to 1 preferred share
Conversion price in Won : W 18,086
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(16) Capital Stock, Continued
(b) Details of changes in capital stock for the years ended December 31,
2003 and 2002 are as follows:
2003
-----------------------------------------------------
Number of shares Capital stock Capital surplus
---------------- ------------- ---------------
Balance at beginning of the year 292,361,125 1,461,806 1,976,625
Redeemable preferred stock issued:
Series 1 to 5 46,583,961 232,920 237,784
Series 6 to 8 6,000,000 30,000 855,530
Redeemable convertible preferred stock issued:
Series 9 44,720,603 223,603 228,271
Common stock issued 1,864,065 9,320 18,183
Stock exchange 176,110 881 (13)
----------- --------- ---------
Balance at end of the year 391,705,864 1,958,530 3,316,380
=========== ========= =========
2002
-----------------------------------------------------
Number of shares Capital stock Capital surplus
---------------- ------------- ---------------
Balance at beginning of the year 292,344,192 1,461,721 1,976,650
Stock exchange 16,933 85 (25)
----------- --------- ---------
Balance at end of the year 292,361,125 1,461,806 1,976,625
=========== ========= =========
(17) Retained Earnings
Retained earnings as of December 31, 2003 and 2002 consist of the
following:
Won U.S. dollars (Note 2)
----------------------- ---------------------
2003 2002 2003 2002
----------- ------- ---------- -------
Legal reserves W 82,469 22,076 $ 68,850 18,430
Retained earnings before appropriations 783,929 650,454 654,474 543,041
----------- ------- ---------- -------
W 866,398 672,530 $ 723,324 561,471
=========== ======= ========== =======
The Korean Financial Holding Company Act requires the Company to
appropriate a minimum of 10% of annual net earnings as a legal reserve
whenever dividends are paid until such reserve equals its paid-in capital.
This reserve is not available for payment of cash dividends. However,
subject to the stockholders' approval, it may be transferred to common
stock in connection with stock dividends or used to reduce any accumulated
deficit.
(18) Capital Adjustment
Capital adjustments as of December 31, 2003 and 2002 consist of the
following:
Won U.S. dollars (Note 2)
---------------------- -----------------------
2003 2002 2003 2002
---------- -------- --------- -------
Unrealized loss on investment securities
accounted for by the equity method W (33,379) (103,077) $ (27,867) (86,055)
Unrealized loss on available-for-sale securities - (668) - (558)
Stock options (note 19) 9,626 3,004 8,036 2,508
---------- ------- --------- ------
W (23,753) (100,741) $ (19,831) (84,105)
========== ======= ========= ======
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(19) Stock Options
(a) Details of stock options
Grant date May 22, 2002 May 15, 2003
---------------------------- ----------------------------
Shares granted 1,004,200 shares 1,156,300 shares
Share expired to date 40,081 shares 8,055 shares
------------ -----------
Shares outstanding 964,119 shares 1,148,245 shares
Type of stock options Stock grant or Stock grant or
price compensation price compensation
Exercise price (Won) W18,910 W11,800
Exercise period Within 4 years after 2 years Within 4 years after 2 years
from grant date from grant date
Forfeited period after 6 years from grant date after 6 years from grant date
(b) The Company calculated the compensation cost using the fair value
method for stock grant and details are as follows:
Grant date May 22, 2002 May 15, 2003
------------ ------------
Risk-free interest rate 6.43% 4.25%
Expected exercise period 4 years 4 years
Expected stock price volatility 27.13% 22.11%
Expected dividend yield 0% 0%
Expected ratios of no-exercise 0% 0%
Weighted average fair value (Won) W 9,812 W 5,292
(c) Changes in stock compensation expense for the year ended December
31, 2003 are as follows:
Personnel of
Grant date Stock compensation cost the Company subsidiaries Total
------------ ---------------------------------- ----------- ------------ -----
May 22, 2002 Recorded at beginning of the year W 643 2,361 3,004
Incurred during the year 938 3,752 4,690
To be recorded in subsequent years 347 1,337 1,684
May 15, 2003 Recorded at beginning of the year - - -
Incurred during the year 443 1,489 1,932
To be recorded in subsequent years 958 3,187 4,145
For stock options, which were granted to the personnel of the
subsidiaries, the difference between the exercise price and the fair value
on the date of exercise would be assumed by the subsidiaries of the
Company. Therefore, in relation to those stock options, the subsidiaries
have recorded compensation expense as long-term payables, and the Company
has accounted for as accounts receivable.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won and thousands of U.S. dollars)
(20) General and Administrative Expenses
Details of general and administrative expenses for the years ended
December 31, 2003 and 2002 are as follows:
Won U.S. dollars (Note 2)
--------------------- ---------------------
2003 2002 2003 2002
--------- ----- --------- -----
Salaries and wages W 9,821 7,008 $ 8,199 5,851
Provision for retirement and severance benefits 140 594 117 496
Other employees benefits 601 370 502 309
Rental 142 46 119 38
Entertainment 1,455 1,903 1,215 1,589
Depreciation 568 489 474 408
Amortization 109 24 91 20
Bad debts 5,879 2,374 4,908 1,982
Taxes and dues 361 125 301 104
Advertising 22 72 18 60
Fees and commission 1,374 5,748 1,147 4,799
Other 3,430 687 2,864 574
--------- ------ --------- ------
W 23,902 19,440 $ 19,955 16,230
========= ====== ========= ======
(21) Income Taxes
(a) The Company is subject to income taxes based on taxable earnings,
which results in the normal tax rate of 29.7%.
The components of income taxes for the years ended December 31, 2003
and 2002 are as follows:
Won U.S. dollars (Note 2)
---------------- --------------------
2003 2002 2003 2002
---- ---- ---- ----
Current income taxes W - - $ - -
Deferred taxes - - - -
---- ---- ------ ----
W - - $ - -
==== ==== ====== ====
(b) Reconciliation of accounting income and taxable income for the years
ended December 31, 2003 and 2002 is as follows:
Temporary difference Permanent difference
-------------------- --------------------
Description 2003 2002 2003 2002
--------------------------------------------- ---------- ------ ------ -----
Addition:
Dividends received W 186,896 640,771 - -
Accrued income earned in prior year 4,332 737 - -
Securities 10,848 510 - -
Retirement and severance benefits - 342 - -
Stock compensation cost - - 1,381 643
Entertainment expense in excess of tax limit - - 1,434 1,843
Other 20 - 34 -
------- ------- ----- -----
202,096 642,360 2,849 2,486
======= ======= ===== =====
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(21) Income Taxes, Continued
Temporary difference Permanent difference
-------------------- --------------------
Description 2003 2002 2003 2002
---------------------------------------------- ------- ------- ------- -------
Deduction:
Dividends received - - 186,058 640,578
Retained earnings - - 10,868 510
Accrued income earned in current year 11,334 4,332 - -
Deposit for retirement and severance benefits
insurance 198 332 - -
Valuation gain using the equity method 388,641 618,690 - -
------- ------- ------- -------
400,173 623,354 196,926 641,088
---------- ------- -------- --------
W (198,077) 19,006 (194,077) (638,602)
========== ======= ======== ========
(c) Changes in significant accumulated temporary differences and tax effects
for the years ended December 31, 2003 and 2002 are as follows:
2003
-----------------------------------------------
Beginning Ending
balance Increase Decrease balance
--------- -------- -------- -------
Deductible temporary differences:
Securities W 1,351 10,848 - 12,199
Retirement and severance benefits 342 - - 342
-------- -------- -------- --------
1,693 10,848 - 12,541
-------- -------- -------- --------
Taxable temporary differences:
Valuation gain using the equity method (203,714) (388,641) (186,896) (405,459)
Accrued income (4,332) (11,334) (4,332) (11,334)
Deposit for severance benefit insurance (332) (198) - (530)
Other (4) - (20) (16)
-------- -------- -------- --------
(208,382) (400,173) (191,248) (417,307)
-------- -------- -------- --------
Net (206,689) (404,766)
Unrealizable temporary differences on valuation
gain using the equity method 191,135 386,200
-------- --------
Net temporary differences (15,554) (18,566)
Tax effects of temporary differences (4,619) (5,106)
Tax effects of tax loss carryforwards 6,295 13,706
-------- --------
Net tax effects 1,676 8,600
======== ========
Tax effects recorded in financial statements (*) W - -
======== ========
(*) Tax effects on temporary differences and tax loss carryforwards are not
recognized due to uncertainty of realization. Total amount of tax loss
carryforwards, which are not recognized as deferred taxes, is W49,842
million, with the tax benefit maturity of W5,553 million in 2006, W14,363
million in 2007 and W29,926 million in 2008.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(21) Income Taxes, Continued
2002
-----------------------------------------------
Beginning Ending
balance Increase Decrease balance
--------- -------- -------- --------
Deductible temporary differences:
Investment securities accounted for
by the equity method W - 1,351 - 1,351
Retirement and severance benefit - 342 - 342
-------- ------- ------- --------
- 1,693 - 1,693
-------- ------- ------- --------
Taxable temporary differences:
Valuation gain using the equity method 225,795 618,690 640,771 203,714
Accrued income - 5,069 737 4,332
Deposit for severance benefit insurance - 332 - 332
Organization costs - 4 - 4
-------- ------- ------- --------
225,795 624,095 641,508 208,382
-------- ------- ------- --------
Net (225,795) (206,689)
Unrealizable temporary differences on valuation
gain using the equity method 225,195 191,135
-------- --------
Net temporary differences - (15,554)
Tax effects of temporary differences - (4,619)
Tax effects of tax loss carryforwards 1,340 6,295
----- --------
Net tax effects 1,340 1,676
======== ========
Tax effects recorded in financial statements (*) W - -
======== ========
(*) Tax effects on temporary differences and tax loss carryforwards are not
recognized due to uncertainty of realization. Total amount of tax loss
carryforwards, which are not recognized as deferred taxes, is W21,195
million, with the tax benefit maturity of W5,553 million in 2006 and
W15,642 million in 2007.
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won, except earnings per share)
(22) Earnings Per Share
(a) Earnings per share
Earnings per common share is calculated by dividing net earnings by
the weighted average number of shares of common stock outstanding.
The Company's ordinary income and net earnings per share for the
years ended December 31, 2003 and 2002 are computed as follows:
2003 2002
------------- -----------
Net earnings for year W 362,227 603,931
Extraordinary loss (gain) - -
Dividends on preferred stock 83,397 -
------------- -----------
Ordinary income available for common stock 278,830 603,931
Weighted average number of common shares outstanding (share) 292,856,507 292,353,944
------------- -----------
Ordinary income per share in Won W 952 2,066
============= ===========
Net earnings per share in Won W 952 2,066
============= ===========
(b) Diluted earnings per share
For the year ended December 31, 2003, if convertible preferred stock
and stock options exercised, 46,832,967 share of common stocks would
be issued, and if preferred stock converted into common stock on
issue date, weighted average number of common shares outstanding is
309,397,004. Additionally, for the year ended December 31, 2002, if
stock options exercised on grant date, 977,700 share of common
stocks would be issued and weighted average number of common shares
outstanding is 292,962,997.
Details of diluted ordinary / net earnings per share due to dilutive
effect for the years ended December 31, 2003 and 2002 are as
follows:
2003 2002
-------------- -----------
Ordinary income available for common stock W 278,830 603,931
Add: Dividends on convertible preferred stock 6,043 -
Stock compensation expense - 643
-------------- -----------
Diluted ordinary income / net earnings 284,873 604,574
Weighted average number of common shares outstanding (share) 309,397,004 292,962,997
-------------- -----------
Diluted ordinary income per share in Won W 921 2,064
============== ===========
Diluted net earnings per share in Won W 921 2,064
============== ===========
(c) Securities applicable to common shares
Number of shares
Convertible period to be issued
---------------------------------- ----------------
Redeemable convertible preferred stock August 19, 2004 ~ August 18, 2007 44,720,603
Stock options May 22, 2004 ~ May 22, 2008 964,119
Stock options May 15, 2005 ~ June 15, 2009 1,148,245
----------
46,832,967
==========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won, except earnings per share and dividends)
(22) Earnings Per Share, Continued
(d) (Diluted) earnings per share for each quarters in 2003 are as
follows:
Quarter ended
-----------------------------------------------------------
March 31, June 30, September 30, December 31,
2003 2003 2003 2003
--------- -------- ------------- ------------
Earnings per share in Won W 193 157 436 166
Diluted earnings per share in Won 193 157 415 156
(23) Dividends
(a) Dividends for the years ended December 31, 2003 and 2000 are
calculated as follow:
2003 2002
-------------------------------------- -----------
Common Preferred Common
shares shares Total shares
----------- ---------- ----------- -----------
Total number of share issued and
outstanding 294,401,300 97,304,564 391,705,864 292,361,125
Shares excluded (*) (29,873,359) - (29,873,359) (29,873,674)
------------ ---------- ----------- -----------
64,527,941 97,304,564 361,832,505 262,487,451
Face value per share 5,000 5,000 5,000 5,000
Dividend per share in Won
(rate per share) (**) W 600 (12%) 857(17.14%) 669 (13.38%) 600 (12%)
------------ ---------- ----------- -----------
Dividends in Won W 158,717 83,397 242,114 157,492
============ ========== =========== ===========
(*) Dividends on shares held by subsidiaries as of December 31, 2003 and
2002 are not paid.
(**) Dividends per share on preferred stock are weighted average amount
and details are as follows:
Number of Dividends per Dividend rate
shares share in Won per share (%) Dividends
---------- ------------- ------------- ---------
Redeemable preferred stock:
Series 1 9,316,792 270 5.40 2,518
Series 2 9,316,792 270 5.40 2,518
Series 3 9,316,792 270 5.40 2,518
Series 4 9,316,792 270 5.40 2,518
Series 5 9,316,793 270 5.40 2,518
Series 6 3,500,000 10,500 210.0 36,750
Series 7 2,433,334 11,190 223.8 27,229
Series 8 66,666 11,790 235.8 786
---------- -------
52,583,961 77,355
Redeemable convertible preferred stock:
Series 9 44,720,603 135 2.70 6,042
---------- ------
97,304,564 83,397
========== ======
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(23) Dividends, Continued
(b) Payout ratios for the years ended December 31, 2003 and 2002 are
calculated as follows:
2003 2002
--------------------------------------------- -------------
Preferred
Common shares shares Total Common shares
------------- --------- ------- -------------
Dividends in Won W 158,717 83,397 242,114 157,492
Net earning in Won W 278,830 83,397 362,227 603,931
------------- ------- -------
Payout ratios (%) 56.92 66.84 26.08
============= ======= =======
(c) Dividend yields on common shares for the years ended December 31,
2003 and 2002 are calculated as follows:
2003 2002
---------- ------
Dividends per share in Won W 600 600
Stock price in Won at the balance sheet date 18,513 13,813
---------- ------
Dividends yields (%) W 3.24 4.34
========== ======
(24) Statements of Cash Flows
Significant transactions not involving cash inflows or outflows for the
years ended December 31, 2003 and 2002 are as follows:
2003 2002
---------- -------
Acquisition of investment securities accounted for by the equity method
in exchange for the Company's shares W 929,559 -
Changes in capital adjustments due to the equity method 69,698 232,543
Changes in retained earnings due to the equity method 10,848 510
Changes in unrealized gain on available-for-sale securities 668 668
Stock options recorded as accounts receivable 5,241 2,361
Stock exchange 881 85
Amortization offseted to retained earnings due to accounting change 20 -
(25) Financial Performance
Financial performance for the quarters ended December 31, 2003 and 2002
are as follows:
Quarter ended December
Quarter ended 31, 2002
December 31, 2003 (Unaudited)
----------------- ----------------------
Operating revenue W 142,131 164,132
Operating income 107,347 151,499
Net earnings 105,681 170,403
Net earnings per share in Won 166 583
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(26) Condensed Financial Statements of Subsidiaries
(a) Balance sheets
Condensed balance sheets of subsidiaries as of December 31, 2003 and
2002 are as follows:
2003
--------------------------------------------------------------
Total stockholders'
Subsidiaries Total assets Total liabilities equity
------------------------------ --------------- ----------------- -------------------
Shinhan Bank W 70,066,189 66,550,821 3,515,368
Chohung Bank 59,227,864 57,289,224 1,938,640
Goodmorning Shinhan Securities 2,928,017 2,290,044 637,973
Shinhan Card 1,778,191 1,620,555 157,636
Shinhan Capital 1,153,907 1,051,683 102,224
Shinhan BNP Paribas ITMC 47,461 2,489 44,972
Jeju Bank 1,785,961 1,682,328 103,633
SH&C Life Insurance 114,012 87,970 26,042
e-Shinhan 3,924 225 3,699
Shinhan Macquarie 11,255 7,642 3,613
Shinhan Credit Information 13,588 9,726 3,862
--------------- ----------- ---------
W 137,130,369 130,592,707 6,537,662
=============== =========== =========
2002
---------------------------------------------------------------
Total stockholders'
Subsidiaries Total assets Total liabilities equity
------------------------------ -------------- ----------------- -------------------
Shinhan Bank W 58,889,402 56,028,923 2,860,479
Goodmorning Shinhan Securities 1,570,244 982,268 587,976
Shinhan Card 2,473,694 2,226,234 247,460
Shinhan Capital 960,234 876,551 83,683
Shinhan BNP Paribas ITMC 47,081 1,918 45,163
Jeju Bank 1,800,648 1,699,577 101,071
SH&C Life Insurance 29,738 478 29,260
e-Shinhan 5,758 475 5,283
Shinhan Macquarie 3,503 2,675 828
Shinhan Credit Information 3,931 810 3,121
-------------- ---------- ---------
W 65,784,233 61,819,909 3,964,324
============== ========== =========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(26) Condensed Financial Statements of Subsidiaries, Continued
(b) Statements of Earnings
Condensed statements of earnings of subsidiaries for the years ended
December 31, 2003 and 2002 are as follows:
2003
-------------------------------------------------------------------------------
Subsidiaries Operating Operating Operating Ordinary Net earnings
revenue expense income (loss) income (loss) (loss)
-------------- ---------- ------------- ------------ -------------
Shinhan Bank W 4,851,995 4,180,640 671,355 685,756 476,023
Chohung Bank 5,425,189 6,107,050 (681,861) (915,775) (965,951)
Goodmorning Shinhan
Securities (*) 649,701 619,693 30,008 68,616 35,813
Shinhan Card 431,863 506,606 (74,743) (90,063) (89,824)
Shinhan Capital 145,355 116,084 29,271 22,565 15,755
Shinhan BNP
Paribas ITMC (*) 12,728 10,604 2,124 2,629 1,834
Jeju Bank 137,162 137,005 157 727 4,751
SH&C life Insurance (*) 44,986 47,478 (2,492) (3,369) (3,369)
e-Shinhan 1,714 3,361 (1,647) (1,583) (1,583)
Shinhan Macquarie (*) 11,454 7,816 3,638 3,804 2,559
Shinhan Credit Information 25,557 24,309 1,248 1,096 741
-------------- ---------- ------- -------- --------
W 11,737,704 11,760,646 (22,942) (225,597) (523,251)
============== ========== ======= ======== ========
(*) For the period from January 1, 2003 to December 31, 2003 reflected
2002
-------------------------------------------------------------------------------
Operating Operating Operating Ordinary Net earnings
Subsidiaries revenue expense income (loss) income (loss) (loss)
------------------------- -------------- ---------- ------------- ------------ -------------
Shinhan Bank W 4,821,339 3,888,932 932,407 842,993 595,866
Goodmorning Shinhan
Securities (*) 482,873 474,722 8,151 11,845 31,624
Shinhan Card (**) 228,954 228,213 741 798 504
Shinhan Capital 152,314 139,302 13,012 10,988 7,635
Shinhan BNP
Paribas ITMC (***) 12,773 6,312 6,461 6,066 4,605
Jeju Bank 145,558 129,404 16,154 12,502 12,502
SH&C life Insurance (**) 338 1,243 (905) (905) (905)
e-Shinhan 2,529 3,776 (1,247) (1,094) (1,094)
Shinhan Macquarie (***) 5,127 5,405 (278) (742) 281
Shinhan Credit
Information (**) 3,136 3,001 135 162 121
-------------- --------- ------- ------- --------
W 5,854,941 4,880,310 974,631 882,613 651,139
============== ========= ======= ======= =======
(*) For the period from April 1, 2002 to December 31, 2002
(**) For the period from date of inception to December 31, 2002
(***) For the period from January 1, 2002 to December 31, 2002
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(27) Financing and Operating Status of the Company and Subsidiaries
The financing and operating status of the Company and its subsidiaries as
of December 31, 2003 and 2002 are as follows:
(a) Financing
2003
-----------------------------------------------------------------
Deposits Borrowings Debentures (*) Total
--------------- ----------- -------------- ----------
The Company W - 165,868 1,980,543 2,146,411
Shinhan Bank 41,991,839 10,621,963 9,115,997 61,729,799
Chohung Bank 40,030,091 5,711,922 6,424,165 52,166,178
Goodmorning Shinhan Securities 1,032,769 657,838 161,000 1,851,607
Shinhan Card - 1,318,182 259,991 1,578,173
Shinhan Capital - 787,433 114,814 902,247
Jeju Bank 1,438,284 83,299 35,000 1,556,583
--------------- ---------- ---------- -----------
W 84,492,983 19,346,505 18,091,510 121,930,998
=============== ========== ========== ===========
(*) Net of discounts on debentures
2002
----------------------------------------------------------------
Deposits Borrowings Debentures (*) Total
-------------- ----------- -------------- ----------
The Company W - 36,012 732,030 768,042
Shinhan Bank 35,183,537 10,598,668 6,068,826 51,851,031
Goodmorning Shinhan Securities 540,521 147,876 200,000 888,397
Shinhan Card - 613,743 1,559,776 2,173,519
Shinhan Capital - 702,570 72,912 775,482
Jeju Bank 1,414,150 106,252 35,000 1,555,402
-------------- ---------- --------- ----------
W 37,138,208 12,205,121 8,668,544 58,011,873
============== ========== ========= ==========
(*) Net of discounts on debentures
(b) Operating
2003
-----------------------------------------------------------------
Cash and due
Loans (*) Securities from bank Total
--------------- ------------ ------------ ----------
The Company W 1,935,180 6,308,538 5,353 8,249,071
Shinhan Bank 47,783,925 15,592,202 2,697,780 66,073,907
Chohung Bank 42,701,666 9,208,341 548,249 52,458,256
Goodmorning Shinhan Securities 397,354 1,020,131 1,154,647 2,572,132
Shinhan Card 1,058,667 682,841 3,886 1,745,394
Shinhan Capital 899,140 54,388 58,232 1,011,760
Shinhan BNP Paribas ITMC 176 680 29,498 30,354
Jeju Bank 1,326,103 243,024 21,122 1,590,249
SH&C Life Insurance 44 38,650 38,511 77,205
e-Shinhan 36 107 2,160 2,303
Shinhan Macquarie - - 1,187 1,187
Shinhan Credit Information - - 1,691 1,691
--------------- ---------- --------- -----------
W 96,102,291 33,148,902 4,562,316 133,813,509
=============== ========== ========= ===========
(*) Net of allowance for loan losses and discounts
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(27) Financing and Operating Status of the Company and Subsidiaries, Continued
2002
----------------------------------------------------------------
Cash and due from
Loans (*) Securities bank Total
--------------- ----------- ----------------- ----------
The Company W 765,281 3,991,863 10,613 4,767,757
Shinhan Bank 40,579,006 13,855,009 1,138,414 55,572,429
Goodmorning Shinhan Securities 125,736 456,500 575,506 1,157,742
Shinhan Card 2,439,076 - 15 2,439,091
Shinhan Capital 746,743 57,947 16,668 821,358
Shinhan BNP Paribas ITMC 443 12,981 29,813 43,237
Jeju Bank 1,319,099 276,867 9,673 1,605,639
SH&C Life Insurance - 14,728 13,327 28,055
e-Shinhan 51 382 3,718 4,151
Shinhan Macquarie - - 169 169
Shinhan Credit Information - - 1,398 1,398
--------------- ---------- --------- ----------
W 45,975,435 18,666,277 1,799,314 66,441,026
=============== ========== ========= ==========
(*) Net of allowance for loan losses and discounts
(28) Contribution of Subsidiaries to the Company's Net Earning
Effects under the equity method on the Company's net earnings for the
years ended December 31, 2003 and 2002 are as follows:
2003 2002
----------------------- -----------------------
Amount Ratio (%) Amount Ratio (%)
--------- -------- ---------- ---------
Valuation gain accounted for by the equity method on:
Shinhan Bank W 476,273 122.55 W 595,866 96.31
Chohung Bank (43,545) (11.20) - -
Goodmorning Shinhan Securities 8,787 2.26 (749) (0.12)
Shinhan Card (84,324) (21.70) 504 0.08
Shinhan Capital 26,204 6.74 13,429 2.17
Shinhan BNP Paribas ITMC 917 0.24 3,961 0.64
Jeju Bank 5,189 1.33 6,683 1.08
SH&C Life Insurance (1,684) (0.43) (453) (0.07)
e-Shinhan (1,166) (0.30) (806) (0.13)
Shinhan Macquarie 1,446 0.37 134 0.02
Shinhan Credit Information 544 0.14 121 0.02
------- ------ ------- -------
388,641 100.00 618,690 100.00
====== ======
Other income 98,210 30,050
Other expense (124,624) (44,809)
--------- ----------
Net earnings for year W 362,227 W 603,931
========= ==========
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 31, 2003 and 2002
(In millions of Won)
(29) Allowance for Loan Losses of the Company and its Subsidiaries
Changes in allowance for loan losses of the Company and its subsidiaries
for the years ended December 31, 2003 and 2002 are as follows:
2003 2002
------------------------------------- -------------------------------------
Beginning Increase Ending Beginning Increase Ending
balance (decrease) balance balance (decrease) balance
---------- ---------- --------- ---------- --------- --------
The Company W 3,846 5,879 9,725 1,472 2,374 3,846
Shinhan Bank 565,844 300,584 866,428 567,344 (1,500) 565,844
Chohung Bank 1,604,607 81,743 1,686,350 82,609 4,833 87,442
Goodmorning Shinhan Securities
(*) (**) 87,442 (44,394) 43,048 - 96,074 96,074
Shinhan Card 96,074 22,535 118,609 102,454 (68,667) 33,787
Shinhan Capital (*) 33,787 (15,888) 17,899 25 (17) 8
Shinhan BNP Paribas ITMC 8 6 14 26,952 2,366 29,318
Jeju Bank (*) 29,318 5,952 35,270 1,472 2,374 3,846
SH&C Life Insurance - 1 1 - - -
e-Shinhan 1 7 8 - 1 1
Shinhan Macquarie 22 76 98 21 1 22
Shinhan Credit Information - 36 36 - - -
----------- ------- --------- ------- ------ -------
W 2,420,949 356,537 2,777,486 780,877 35,465 816,342
=========== ======= ========= ======= ====== =======
(*) Amounts include additional allowance for loan losses of W12,952
million and W13,019 million as of December 31, 2003 and December 31,
2002, respectively.
(**) Beginning balance in 2002 was Good Morning Securities' allowance for
loan losses as of March 31, 2002.
(30) Effective Date for Financial Statements
The accompanying non-consolidated financial statements are to be approved
at the Board of Directors' meeting on February 24, 2004.
(31) Economic Environment
In common with other Asian countries, 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
non-consolidated 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.
APPENDIX 4
SHINHAN FINANCIAL GROUP CO., LTD.
Non-Consolidated Financial Statements
(Unaudited)
June 30, 2004
(With Independent Accountants' Review Report Thereon)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Based on a report originally issued in Korean
To the Board of Directors and Stockholders
Shinhan Financial Group Co., Ltd.:
We have reviewed the non-consolidated balance sheet of Shinhan Financial Group
Co., Ltd. (the "Company") as of June 30, 2004, the related non-consolidated
statements of earnings and cash flows for the quarters and six months ended June
30, 2004 and 2003. These non-consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to issue a
report on these financial statements based on our review.
We conducted our review in accordance with the Review Standards for Semiannual
Financial Statements established by the Securities and Futures Commission of 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 consists principally of 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 review, nothing has come to our attention that causes us to believe
that the non-consolidated financial statements referred to above are not
presented fairly, in all material respects, in accordance with the Financial
Accounting Standards, as established by the Financial Supervisory Commission of
the Republic of Korea.
The non-consolidated balance sheet of the Company as of December 31, 2003 and
the related non-consolidated statements of earnings, appropriation of retained
earnings and cash flows for the year then ended, which are not accompanying this
report, were audited by us and our report thereon, dated January 30, 2004,
expressed an unqualified opinion. The accompanying non-consolidated balance
sheet of the Company as of December 31, 2003, presented for comparative
purposes, is not different from that audited by us in all material respects.
The accompanying non-consolidated financial statements expressed in Korea Won
have been translated into United States dollars solely for the convenience of
the reader, on the basis set forth in Note 2(b) to the non-consolidated
financial statements.
The following matters may be helpful to the readers in their understanding of
the non-consolidated financial statements:
As discussed in Note 2(a) to the non-consolidated financial statements,
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 and cash
flows in accordance with accounting principles and practices generally accepted
in countries other than the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to review such financial statements
may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying non-consolidated financial
statements are for use by those knowledgeable about Korean accounting procedures
and review standards and their application in practice.
F-1
As described in Note 1(a) to the non-consolidated financial statements, on March
3, 2004, Shinhan Bank sold 10.2% (29,873,295 shares) of total outstanding shares
in the Company at W627,339 million (W21,000 per share), through after-hour block
trading.
As described in Note 1(b) to the non-consolidated financial statements, the
Company decided to acquire 18.85% of minority shares in Chohung Bank through
tender offer and share exchange, at the Board of Directors' Meeting held on
April 12, 2004, and provided a tender offer for 3.77% of shares in Chohung Bank
at W3,500 per share from April 26, 2004 to May 17, 2004. With respect to share
exchange for 15.08% of shares in Chohung Bank, the shareholders, who were
against the share exchange, were entitled for a right to sell their shares at
W3,067 per share from May 25, 2004 to June 3, 2004, with the resolution of
extraordinary shareholders' meeting of Chohung Bank to be held on May 24, 2004,
and the remaining shares were subject to share exchange, at the exchange ratio
of 0.1354 share in the Company to each Chohung Bank share, on June 22, 2004. As
a result, the Company's percentage of ownership was increased to 100% and
Chohung Bank became wholly owned subsidiary of the Company. Upon the acquisition
of 66,363,126 shares in Chohung Bank from shareholders, who were against the
share exchange, Chohung Bank became the shareholder of the Company, with
8,985,567 shares of common stock in the Company.
As described in Note 1(k) to the non-consolidated financial statements, on April
29, 2004, the Company decided to acquire 49% of total outstanding shares in
Shinhan Credit Information Co., Ltd. from LSH Holdings LLC. As a result, the
Company's percentage of ownership was increased to 100% and Shinhan Credit
Information Co., Ltd. became wholly owned subsidiary of the Company.
As described in Note 4 to the non-consolidated financial statements, as of June
30, 2004, Shinhan Bank and Chohung Bank were holding loans (including securities
and guarantees and acceptances) provided to SK Networks Co., Ltd., which has
been controlled by creditor banks in accordance with the Corporate Restructuring
Promotion Act of the Republic of Korea, amounting to W367,257 million and
W306,031 million, respectively. As regards to those loans, Shinhan Bank and
Chohung Bank provided W43,636 million and W42,319 million of allowance for loan
losses, respectively, as of June 30, 2004. Actual losses on those loans might
differ materially from the management's assessments. The accompanying
non-consolidated financial statements did not reflect the impact of the
uncertainty on the financial position of the Company for the equity method.
As described in Note 4 to the non-consolidated financial statements, as of June
30, 2004, Shinhan Bank and Chohung Bank were holding loans (including
securities) provided to LG Card Co., Ltd., which has been controlled by creditor
banks due to its liquidity crisis, in total amount of W273,517 million and
W235,408 million, respectively. Actual losses on these loans and securities
might differ materially from the management's assessments and the accompanying
non-consolidated financial statements did not reflect the impact of the
uncertainty on the financial position of the Company for the equity method. In
addition, Shinhan Bank and Chohung Bank provided W81,000 million and W73,400
million of additional capital, respectively, for the six months ended June 30,
2004, and converted W121,650 million and W110,250 million of loans,
respectively, to equity shares on July 28, 2004.
As described in Note 12 to the non-consolidated financial statements, the
Company recorded W2,088,179 million of assets (representing 23.1% of
non-consolidated total assets) as of June 30, 2004 and W58,502 million of
operating revenue (representing 10.6% of non-consolidated total operating
revenue) for the six months ended June 30, 2004 through its related party
transactions.
As described in Note 14(a) to the non-consolidated financial statements, on July
9, 2003, the Company made an agreement with the Korea Deposit Insurance
Corporation (the "KDIC") to acquire 80.04% (543,570,144 shares) of total
outstanding shares in Chohung Bank. In accordance with the agreement, the
Company purchased 266,349,371 shares in exchange for the Company's shares on
August 18, 2003 and 277,220,773 shares in cash on August 19, 2003. The
acquisition of the shares was accounted for using the purchase method, and the
acquisition cost of the shares and goodwill were W1,857,983 million and W840,244
million, respectively. Additionally, pursuant to the acquisition agreement, the
Company would be required to pay contingent consideration to the KDIC at the
maximum amount of W652,284 million related to Asset Indemnity Payment, W166,516
million related to General Indemnity Payment and additional Earn Out Payment
based on earnings of Chohung Bank in future periods. These contingent
considerations are not included in the acquisition cost on the date of
acquisition, for the amount is not determinable.
F-2
As described in Note 2(n) to the non-consolidated financial statements, the
Company adopted Statements of Korea Accounting Standards (the "SKAS") No. 10, 12
and 13, effective from the first fiscal year beginning after December 31, 2003,
while SKAS No. 15, "Equity Method of Accounting", has been adopted as of and for
the six months ended June 30, 2004 with encouraged earlier application. Certain
accounts of prior year's financial statements were reclassified to conform to
the current year's presentation and these reclassifications did not result in
any material change to reported net earnings or stockholders' equity.
/s/ KPMG Samjong Accounting Corp.
KPMG Samjong Accounting Corp.
Seoul, Korea
July 23, 2004
This report is effective as of July 23, 2004, the review report date. Certain
subsequent events or circumstances, which may occur between the review report
date and the time of reading this report, could have a material impact on the
accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the review report should understand that there is a
possibility that the above review report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
F-3
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS
June 30, 2004 and December 31, 2003
(In millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
---------------------------- ----------------------------
2004 2003 2004 2003
------------ --------- ------------ ---------
Assets
Cash and due from bank (notes 3 and 12) W 7,983 5,353 $ 6,927 4,645
Securities (note 4) 6,962,491 6,308,538 6,041,207 5,473,786
Loans (notes 5, 12 and 13) 2,043,702 1,935,180 1,773,277 1,679,115
Fixed assets (note 6) 1,891 2,020 1,641 1,752
Other assets (notes 7, 12 and 13) 30,720 43,339 26,655 37,604
------------- --------- ------------ ---------
W 9,046,787 8,294,430 $ 7,849,707 7,196,902
============= ========= ============ =========
Liabilities and Stockholders' equity
Liabilities:
Borrowings (notes 8 and 13) W 274,150 165,868 $ 237,874 143,920
Debentures (notes 9 and 13) 2,080,227 1,980,543 1,804,969 1,718,475
Retirement and severance benefits (note 10) 102 - 88 -
Other liabilities (notes 11 and 13) 26,499 30,464 22,993 26,433
------------- --------- ------------ ---------
Total liabilities 2,380,978 2,176,875 2,065,924 1,888,828
Stockholders' equity:
Capital stock of W5,000 par value (note 15) 2,031,942 1,958,530 1,763,074 1,699,375
Common stock
Authorized - 1,000,000,000 shares
Issued - 309,083,890 shares in 2004
294,401,300 shares in 2003
Preferred stock
Issued - 97,304,564 shares
Capital surplus 3,537,940 3,316,380 3,069,796 2,877,553
Retained earnings (note 16) 1,041,145 866,398 903,380 751,755
Capital adjustments (notes 4 and 17) 54,782 (23,753) 47,533 (20,609)
------------- --------- ------------ ---------
Total stockholders' equity 6,665,809 6,117,555 5,783,783 5,308,074
Commitments and contingencies (note 14) ------------- --------- ------------ ---------
W 9,046,787 8,294,430 $ 7,849,707 7,196,902
============= ========= ============ =========
See accompanying notes to non-consolidated financial statements.
F-4
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS
For the quarters and six months ended June 30, 2004 and 2003
(In millions of Won and thousands of U.S. dollars, except earnings per share)
(Unaudited)
Won U.S. dollars (note 2)
-------------------------------------------------- -------------------------
Quarter ended Six months ended Quarter Six months
June 30, June 30, ended ended
----------------------- --------------------- June 30, June 30,
2004 2003 2004 2003 2004 2004
--------- ------- -------- ------- ----------- ---------
Operating revenue:
Gain from equity method W 332,749 88,280 491,697 182,870 $ 288,719 426,635
(notes 4 and 25)
Interest income (note 12) 29,569 27,023 58,502 42,280 25,656 50,761
Other 185 - - - 161 -
----------- ------- ------- ------- ----------- -------
362,503 115,303 550,199 225,150 314,536 477,396
Operating expense:
Loss from equity method 629 39,229 4,049 69,097 546 3,513
(notes 4 and 25)
Interest expense 31,305 25,349 61,671 39,635 27,163 53,510
Fees and commission 19 27 71 29 16 62
General and administrative expenses 6,804 5,865 15,404 12,981 5,903 13,366
----------- ------- ------- ------- ----------- -------
38,757 70,470 81,195 121,742 33,628 70,451
----------- ------- ------- ------- ----------- -------
Operating income 323,746 44,833 469,004 103,408 280,908 406,945
Non-operating income (expense):
Foreign currency related gain (loss), net (1) - - 3 (1) -
Loss from disposition of securities
accounted for by equity method - (166) - (166) - -
Donation (9) (16) (12) (19) (8) (10)
Other, net 106 1,338 466 (803) 92 404
----------- ------- ------- ------- ----------- -------
96 1,156 454 (985) 83 394
----------- ------- ------- ------- ----------- -------
Earnings before income taxes 323,842 45,989 469,458 102,423 280,991 407,339
Income taxes (note 20) - - - - - -
----------- ------- ------- ------- ----------- -------
Net earnings W 323,842 45,989 469,458 102,423 $ 280,991 407,339
=========== ======= ======= ======= =========== =======
Ordinary income and net earnings
per share in Won and U.S. dollars
(note 21) W 998 157 1,397 350 $ 0.87 1.21
=========== ======= ======= ======= =========== =======
Diluted ordinary income and
net earnings per share
in Won and U.S. dollars (note 21) W 878 - 1,236 - $ 0.76 1.07
=========== ======= ======= ======= =========== =======
See accompanying notes to non-consolidated financial statements.
F-5
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters and six months ended June 30, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
------------------------------------------------- -------------------------
Quarter ended Six months ended Quarter Six months
June 30, June 30, ended ended
----------------------- --------------------- June 30, June 30,
2004 2003 2004 2003 2004 2004
--------- ------- -------- -------- ---------- ----------
Cash flows from operating activities:
Net earnings W 323,842 45,989 469,458 102,423 $ 280,991 407,339
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Gain from equity method, net (332,120) (49,051) (487,648) (113,773) (288,173) (423,122)
Provision for retirement and severance 53 - 106 - 46 92
benefit
Depreciation expense 160 126 310 232 139 269
Amortization expense 28 27 55 54 24 48
Bad debt expense (185) 2,032 545 6,148 (160) 473
Interest expense 798 601 1,570 1,084 692 1,362
Loss from disposition of securities - 166 - 166 - -
accounted for by equity method
Stock compensation cost (1,292) 315 (937) 570 (1,121) (813)
Decrease (increase) in other assets 9,702 (4,909) 9,401 (12,690) 8,418 8,157
Increase (decrease) in other liabilities (5,467) (282) (4,335) 6,911 (4,744) (3,762)
Retirement and severance benefit paid - - (90) (35) - (78)
Decrease in deposit for severance - 3 86 25 - 75
benefit insurance
Other, net - (336) (2) (70) - (2)
--------- ------- -------- -------- -------- --------
Net cash used in operating activities (4,481) (5,319) (11,481) (8,955) (3,888) (9,962)
Cash flows from investing activities:
Cash provided by investing activities:
Dividends received 3,730 - 256,536 185,896 3,237 222,591
Disposition of securities accounted - 1,529 - 1,529 - -
for by the equity method
Decrease in loans 40,000 - - - 34,707 -
Disposition of fixed assets - 29 - 29 - -
--------- ------- -------- -------- -------- --------
43,730 1,558 256,536 187,454 37,944 222,591
F-6
Shinhan Financial Group Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the quarters and six months ended June 30, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
------------------------------------------------- -----------------------
Quarter ended Six months ended Quarter Six months
June 30, June 30, ended ended
---------------------- ---------------------- June 30, June 30,
2004 2003 2004 2003 2004 2004
-------- ------- -------- --------- ---------- ----------
Cash used in investing activities:
Purchase of securities accounted
for by the equity method (96,979) - (96,979) - (84,147) (84,147)
Increase in loans (3,140) (410,000) (113,140) (1,230,000) (2,725) (98,169)
Purchases of fixed assets (123) (609) (235) (651) (107) (204)
Increase in other assets (83) (4,614) (797) (4,703) (72) (691)
---------- -------- -------- ---------- ------- --------
(100,325) (415,223) (211,151) (1,235,354) (87,051) (183,211)
---------- -------- -------- ---------- ------- --------
Net cash provided by (used in)
investing activities (56,595) (413,665) 45,385 (1,047,900) (49,106) 39,380
Cash flows from financing activities:
Cash provided by financing activities:
Increase in borrowings 15,000 30,000 111,000 330,000 13,015 96,312
Increase in debentures 50,000 480,000 100,000 900,000 43,384 86,768
---------- -------- -------- ---------- ------- --------
65,000 510,000 211,000 1,230,000 56,399 183,080
Cash used in financing activities:
Issuance cost on debentures paid (230) (1,451) (528) (2,781) (200) (458)
Dividends paid (212,793) (126,365) (241,746) (156,873) (184,636) (209,758)
---------- -------- -------- ---------- ------- --------
(213,023) (127,816) (242,274) (159,654) (184,836) (210,216)
---------- -------- -------- ---------- ------- --------
Net cash provided by
(used in) financing activities (148,023) 382,184 (31,274) 1,070,346 (128,437) (27,136)
---------- -------- -------- ---------- ------- --------
Net increase(decrease) in cash and cash
equivalents (209,099) (36,800) 2,630 13,491 (181,431) 2,282
Cash and cash equivalents
at beginning of period 217,082 60,904 5,353 10,613 188,358 4,645
---------- -------- -------- ---------- ------- --------
Cash and cash equivalents
at end of period W 7,983 24,104 7,983 24,104 6,927 6,927
========== ======== ======== ========== ======= ========
See accompanying notes to non-consolidated financial statements.
F-7
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(1) General Description of the Company
Shinhan Financial Group Co., Ltd. (the "Company") was incorporated on
September 1, 2001 by way of the transfer of all issued shares owned by
shareholders of Shinhan Bank, Shinhan Securities Co., Ltd., Shinhan Capital
Co., Ltd. and Shinhan Investment Trust Management Co., Ltd. to the Company.
The Company was formed for the purpose of providing management services and
financing to affiliated companies with W1,461,721 million of initial capital
stock and the Company's shares were listed on the Korea Stock Exchange on
September 10, 2001.
On September 16, 2003, the Company's American depository shares were listed
on the New York Stock Exchange.
As of June 30, 2004, the Company has 11 subsidiaries and its capital stock
consists of W1,545,419 million in common stock and W486,523 million in
preferred stock. Details of its subsidiaries are as follows:
(a) Shinhan Bank
Shinhan Bank was established on September 15, 1981 under the General
Banking Act of the Republic of Korea to engage in the commercial banking
and trust operations. Shinhan Bank operates through 369 branches and 169
automated teller machine locations and its capital stock amounts to
W1,224,034 million as of June 30, 2004.
Additionally, on March 3, 2004, Shinhan Bank sold 10.2% (29,873,295
shares) of total outstanding shares in the Company at W627,339 million
(W21,000 per share), through after-hour block trading.
(b) Chohung Bank
Chohung Bank was established on October 1, 1943 under the General
Banking Act of the Republic of Korea through the merger of Han Sung
Bank, which was established on February 19, 1897, and Dong Il Bank,
which was established on August 8, 1906, to engage in commercial banking
and trust operations. The shares of Chohung Bank were listed on the
Korea Stock Exchange on June 3, 1956, and Chohung Bank operates through
450 domestic branches, 82 depositary offices and 6 overseas branches and
its capital stock amounts to W3,595,592 million as of June 30, 2004.
On July 9, 2003, the Company made an agreement with the Korea Deposit
Insurance Corporation (the "KDIC") to acquire 80.04% (543,570,144
shares) of total outstanding shares in Chohung Bank. Additionally, the
Company's percentage of ownership increased to 81.15% through additional
equity acquisition at W200,000 million on December 30, 2003.
Additionally, the Company decided to acquire 18.85% of minority shares
in Chohung Bank through tender offer and share exchange, at the Board of
Directors' Meeting held on April 12, 2004, and provided a tender offer
for 3.77% of shares in Chohung Bank at W3,500 per share from April 26,
2004 to May 17, 2004. With respect to share exchange for 15.08% of
shares in Chohung Bank, the shareholders, who were against the share
exchange, were entitled for a right to sell their shares at W3,067 per
share from May 25, 2004 to June 3, 2004, with the resolution of
extraordinary shareholders' meeting of Chohung Bank to be held on May
24, 2004, and the remaining shares were subject to share exchange, at
the exchange ratio of 0.1354 share in the Company to each Chohung Bank
share, on June 22, 2004. As a result, the Company's percentage of
ownership was increased to 100% and Chohung Bank became wholly owned
subsidiary of the Company. Upon the acquisition of 66,363,126 shares in
Chohung Bank from shareholders, who were against the share exchange,
Chohung Bank became the shareholder of the Company, with 8,985,567
shares of common stock in the Company.
F-8
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(1) General Description of the Company, Continued
(c) Goodmorning Shinhan Securities Co., Ltd.
Goodmorning Shinhan Securities Co., Ltd. ("Goodmorning Shinhan
Securities") was incorporated on April 2, 1973 to engage in securities
trading, underwriting and brokerage services. Its shares were listed on
the Korea Stock Exchange on December 19, 1986. On June 18, 2002, the
Company acquired a 29% share of Good Morning Securities Co., Ltd. from
its largest shareholders and on July 31, 2002, Good Morning Securities
Co., Ltd. was merged with Shinhan Securities Co., Ltd., which was one of
subsidiaries of the Company, and renamed to Goodmorning Shinhan
Securities. As of June 30, 2004, it operates through 79 branches and its
capital stock amounts to W796,998 million (including W19,117 million of
preferred stocks).
(d) Shinhan Card Co., Ltd.
Shinhan Card Co., Ltd. ("Shinhan Card") was established on June 1, 2002
under the Credit Specialty Finance Law through the spin-off of the
credit card division of Shinhan Bank. Shinhan Card is engaged
principally in credit card services, factoring, consumer loan and
installment financing. As of June 30, 2004, Shinhan Card holds 2.88
million of franchise accounts and 2.31 million of credit card holders,
and its capital stock amounts to W152,847 million.
(e) Shinhan Capital Co., Ltd.
Shinhan Capital Co., Ltd. ("Shinhan Capital") was incorporated on April
19, 1991 to engage in the leasing and rental business and it changed its
name on May 27, 1999 from Shinhan Leasing Co., Ltd. to Shinhan Capital.
Its capital stock as of June 30, 2004 amounts to W80,000 million.
(f) Shinhan BNP Paribas Investment Trust Management Co., Ltd.
On August 1, 1996, Shinhan BNP Paribas Investment Trust Management Co.,
Ltd. ("Shinhan BNP Paribas ITMC") was established and obtained a license
to engage in the business of investment and trust of securities and
advisory services under the Investment and Trust of Securities Law.
Additionally, on October 24, 2002, the Company sold 3,999,999 shares
(50% of total outstanding shares - 1 share) of Shinhan Investment Trust
Management Co., Ltd., which has been renamed to Shinhan BNP Paribas
ITMC, to BNP Paribas Asset Management Group. Its capital stock as of
June 30, 2004 amounts to W40,000 million.
(g) Jeju Bank
Jeju Bank was incorporated on March 18, 1969 under the General Banking
Act of the Republic of Korea to engage in the commercial banking and
trust business and listed its shares on the Korea Stock Exchange on
December 28, 1972. On April 4, 2002, Jeju Bank became one of
subsidiaries of the Company through acquiring a 51% share from the KDIC.
Additionally, the Company's percentage of ownership increased to 62%
with the acquisition of additional common shares at W20,177 million on
July 5, 2002 and its capital stock as of June 30, 2004 amounts to
W77,644 million.
(h) SH&C Life Insurance Co., Ltd.
SH&C Life Insurance Co., Ltd. ("SH&C Life Insurance") was established in
October 1, 2002 to engage in insurance business and other related
business. Its capital stock as of June 30, 2004 amounts to W30,000
million.
F-9
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(1) General Description of the Company, Continued
(i) e-Shinhan Inc.
e-Shinhan Inc. ("e-Shinhan") was incorporated on February 21, 2001 to
engage in the business of internet brokerage service and comprehensive
management services on customer accounts. Its capital stock as of June
30, 2004 amounts to W2,820 million.
(j) Shinhan Macquarie Financial Advisory Co., Ltd.
Shinhan Macquarie Financial Advisory Co., Ltd. ("Shinhan Macquarie") was
incorporated on August 1, 2001 to engage in the business of financial
advisory services and cross border leasing. Its capital stock as of June
30, 2004 amounts to W1,000 million.
(k) Shinhan Credit Information Co., Ltd.
Shinhan Credit Information Co., Ltd. ("Shinhan Credit Information") was
established on July 8, 2002 as wholly owned subsidiary of the Company to
engage in the business of debt collection services and credit research.
Its capital stock as of June 30, 2004 amounts to W3,000 million.
On April 29, 2004, the Company decided to acquire 49% of total
outstanding shares in Shinhan Credit Information from LSH Holdings LLC.
As a result, the Company's percentage of ownership was increased to 100%
and Shinhan Credit Information will become wholly owned subsidiary of
the Company.
Ownerships of the Company's subsidiaries as of June 30, 2004 and December
31, 2003 are as follows:
2004 2003
--------------------------- ---------------------------
Ownership Ownership
Number of Percentage Number of Percentage
Investor Investee shares (%) shares (%)
----------- ------------------------------ ----------- ---------- ----------- ----------
The Company Shinhan Bank 244,806,782 100.0 244,806,782 100.0
Chohung Bank 719,118,429 100.0 583,570,144 81.2
Goodmorning Shinhan Securities 94,084,384 (*) 59.4 94,084,384 (*) 59.4
Shinhan Card 30,569,400 100.0 30,569,400 100.0
Shinhan Capital 16,000,000 100.0 16,000,000 100.0
Shinhan BNP Paribas ITMC 4,000,001 50.0 4,000,001 50.0
Jeju Bank 9,692,369 62.4 9,692,369 62.4
SH&C Life Insurance 3,000,001 50.0 3,000,001 50.0
e-Shinhan 415,495 73.7 415,495 73.7
Shinhan Macquarie 102,000 51.0 102,000 51.0
Shinhan Credit Information 600,000 100.0 306,000 51.0
Shinhan Bank The Company - - 29,873,359 (**) 10.2
Chohung Bank The Company 8,985,567 2.9 - -
(*) 1,047,213 shares of treasury stock were considered.
(**) Preferred stocks are excluded and 10.2% (29,873,295 shares) of shares in
Shinhan Bank were sold at W627,339 million (W21,000 per share) on March 3,
2004 through after-hour block trading.
F-10
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies
(a) Basis of Financial Statements Presentation
The Company maintains its accounting records in Korean Won and prepares
statutory non-consolidated 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
non-consolidated financial statements are intended for use only by those
who are informed about Korean accounting principles and practices. The
accompanying non-consolidated financial statements have been condensed,
restructured and translated into English (with certain expanded
descriptions) from the Korean language financial statements.
The accompanying non-consolidated financial statements include only the
accounts of the Company, and do not include the accounts of any of its
subsidiaries.
(b) Basis of Financial Statements Translation
The non-consolidated financial statements are expressed in Korean Won
and, solely for the convenience of the reader, have been translated into
U.S. dollars at the rate of W1,152.50 to US$1, the basic exchange rate
on June 30, 2004. These translations should not be construed as a
representation that any or all of the amounts shown could be converted
into U.S. dollars at this or any other rate.
(c) Allowance for Loan Losses
Allowance for loan losses is provided to cover estimated losses on
loans, based on past experience of collection and analysis of the
collectibility of individual outstanding loans.
(d) Investments in Securities
Debt and equity securities should be classified into one of the three
categories of held-to-maturity, available-for-sale, or trading
securities at the time of acquisition and such determination should be
reassessed at each balance sheet date. Investments in debt securities
that the Bank has the positive intent and ability to hold to maturity
are classified as held-to-maturity. Securities that are bought and held
principally for the purpose of selling them in the near term (thus held
for only a short period of time) are classified as trading securities.
Trading generally reflects active and frequent buying and selling, and
trading securities are generally used to generate profit on short-term
differences in price. Investments not classified as either
held-to-maturity or trading securities are classified as
available-for-sale securities.
Trading securities are carried at fair value, with unrealized holding
gains and losses included in earnings. Available-for-sale securities are
carried at fair value, with unrealized holding gains and losses reported
as a capital adjustment. Investments in equity that do not have readily
determinable fair values are stated at cost. Declines in value judged to
be other-than-temporary on available-for-sale securities are charged to
current results of operations. Investments in debt securities that are
classified into held-to-maturity are reported at amortized cost at the
balance sheet date and such amortization is included in interest income.
F-11
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
Marketable securities are at the quoted market prices as of the period end.
Non-marketable debt securities are recorded at the fair values derived from
the discounted cash flows by using an interest rate deemed to approximate
the market interest rate. The market interest rate is determined by the
issuers' credit rate announced by the accredited credit rating agencies in
Korea. Money market funds are recorded at the fair value determined by the
investment management companies.
(e) Investment Securities Accounted for by the Equity Method
Investments in affiliated companies with the Company's ownership of 20%
or more or over which the Company has significant management control are
stated at an amount as determined using the equity method.
Under the equity method, the Company's initial investment is recorded at
cost and is subsequently increased to reflect the Company's share of the
investee income and reduced to reflect the Company's share of the
investee losses or dividends received. Any excess in the Company's
acquisition cost over the Company's share of the investee's identifiable
net assets is generally recorded as goodwill or other intangibles.
Goodwill (negative goodwill) is amortized by the straight-line method
over a reasonable period, generally less than 20 years. When events or
circumstances indicate that carrying amount may not be recoverable, the
Company reviews goodwill for any impairment.
Under the equity method, the Company does not record its share of losses
of affiliate companies when such losses would make the Company's
investment in such entity less than zero.
For the equity method, the Company applies its own criteria in providing
allowances for loan losses of its affiliated companies. Accordingly,
additional allowances provided for the quarter ended June 30, 2004 for
Chohung Bank and Jeju Bank amount to W32,390 million and W1,143 million,
respectively, by the equity method.
(f) Fixed Assets
i) Tangible Assets
Tangible assets are stated at cost. Significant additions or
improvements extending value or useful lives of assets are
capitalized, where normal maintenance and repairs are charged to
expense when incurred.
The depreciation method and useful lives of tangible assets are as
follows:
Descriptions Depreciation Method Useful Lives
------------ ------------------- ------------
Vehicles Declining-balance 5 years
Furniture, fixtures and other " "
Leasehold improvement Straight-line "
ii) Intangible Assets
Intangible assets are stated at acquisition cost less amortization
computed using the straight-line method over five years.
F-12
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(g) Discounts on Debentures
Discounts on debentures issued, which represent the difference between
the face value of debentures issued and the issuance price of
debentures, are amortized on the effective interest method over the life
of the debentures. The amount amortized is included in interest expense.
(h) Income Taxes
Income tax on the earnings or loss for the year comprises current and
deferred tax. Income tax is recognized in the statement of earnings
except to the extent that it relates to items recognized directly to
equity, in which case it is recognized in equity.
Deferred tax is provided using the asset and liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes. The amount of deferred tax provided is based on the
expected manner of realization or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantially enacted
at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against which
the unused tax losses and credits can be utilized. Deferred tax assets
are reduced to the extent that it is no longer probable that the related
tax benefit will be realized.
(i) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length
of service when they leave the Company. The Company's estimated
liability under the plan which would be payable if all employees left on
the balance sheet date is accrued in the accompanying non-consolidated
balance sheets. A portion of the liability is covered by an employees'
severance pay insurance where the employees have a vested interest in
the deposit with the insurance company. The deposit for severance
benefit insurance is, therefore, reflected in the accompanying balance
sheets as a deduction from the liability for retirement and severance
benefits.
(j) Translation of Foreign Currency Denominated Assets and Liabilities
Monetary assets and liabilities denominated in foreign currencies are
translated into Korean Won at the balance sheet date, with the resulting
gains and losses recognized in current results of operations. Monetary
assets and liabilities denominated in foreign currencies are translated
into Korean Won at W1,152.50 and W1,197.80 to US$1, the rate of exchange
on June 30, 2004 and December 31, 2003, respectively, that is permitted
by the Financial Accounting Standards. Non-monetary assets and
liabilities denominated in foreign currencies, which are stated at
historical cost, are translated into Korean Won at the foreign exchange
rate ruling at the date of the transaction.
F-13
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(k) Stock Options
The stock option program allows the Company's employees to acquire
shares of the Company or to be compensated for the market price
difference. In case of stock grant type, the Company values stock
options based upon an option pricing model under the fair value method
and recognizes this value as an expense and a capital adjustment over
the period in which the options vest. In case of price compensation
type, the Company recognizes the compensation expense as an expense and
a liability over the period in which the options vest.
(l) Contingent Liabilities
Contingent losses are generally recognized as a liability when probable
and reasonably estimable.
(m) Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the Republic of Korea requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and related notes to financial
statements. Actual results could differ from those estimates.
(n) Adoption of New Accounting Standards
The Company has adopted Statements of Korea Accounting Standards (the
"SKAS") No. 10, 12 and 13, effective from the first fiscal year
beginning after December 31, 2003, while SKAS No. 15, "Equity Method of
Accounting", has been adopted as of and for the six months ended June
30, 2004 with encouraged earlier application. Certain accounts of prior
year's financial statements were reclassified to conform to the current
year's presentation and these reclassifications did not result in any
material change to reported net earnings or stockholders' equity.
F-14
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(3) Cash and Due from Banks
As of June 30, 2004 and December 31, 2003, W2.5 million of cash and due from
banks is restricted for guarantee deposits on bank accounts.
(4) Securities
Securities as of June 30, 2004 and December 31, 2003 solely consists of
investment securities accounted for by the equity method and details are as
follows:
(in millions of Won)
2004
----------------------------------------------------------------------------
Acquisition
and Equity
Subsidiaries Beginning dividend, method Retaind Capital Ending
balance net gain (loss) earninges adjustments balance
------------------------------ ------------ --------- ---------- --------- ---------- ---------
Shinhan Bank W 3,515,618 (244,807) 316,781 (618) 30,512 3,617,486
Chohung Bank 1,887,328 (138,409) 147,403 1,851 251,373 2,426,364
Goodmorning Shinhan Securities 546,872 - 10,692 (53,800) 50,725 554,489
Shinhan Card 163,136 - (3,629) - - 159,507
Shinhan Capital 105,448 (8,000) 13,547 - 1,073 112,068
Shinhan BNP Paribas ITMC 22,486 (2,000) 1,105 - 40 21,631
Jeju Bank 48,092 - 956 (38) (246) 48,764
SH&C Life Insurance 13,021 - (142) - 506 13,385
e-Shinhan 2,725 - (278) - - 2,447
Shinhan Macquarie 1,843 (1,730) 11 8 - 132
Shinhan Credit Information 1,969 1,529 1,202 - 1,518 6,218
------------ -------- ------- ------- ------- ---------
W 6,308,538 (116,599) 487,648 (52,597) 335,501 6,962,491
============ ======== ======= ======= ======= =========
As of June 30, 2004, Shinhan Bank and Chohung Bank were holding loans
(including securities and guarantees and acceptances) provided to SK
Networks Co., Ltd., which has been controlled by creditor banks in
accordance with the Corporate Restructuring Promotion Act of the Republic of
Korea, amounting to W367,257 million and W306,031 million, respectively. As
regards to those loans, Shinhan Bank and Chohung Bank provide W43,636
million and W42,319 million of allowance for loan losses, respectively, as
of June 30, 2004. Actual losses on those loans may differ materially from
the management's assessments. The accompanying non-consolidated financial
statements do not reflect the impact of the uncertainty on the financial
position of the Company for the equity method.
Additionally, as of June 30, 2004, Shinhan Bank and Chohung Bank are holding
loans (including securities) provided to LG Card Co., Ltd., which has been
controlled by creditor banks due to its liquidity crisis, in total amount of
W273,517 million and W235,408 million, respectively. Actual losses on these
loans and securities may differ materially from the management's assessments
and the accompanying non-consolidated financial statements do not reflect
the impact of the uncertainty on the financial position of the Company for
the equity method. In addition, Shinhan Bank and Chohung Bank provided
W81,000 million and W73,400 million of additional capital, respectively, for
the six months ended June 30, 2004, and converted W121,650 million and
W110,250 million of loans, respectively, to equity shares on July 28, 2004.
F-15
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(4) Securities, Continued
The changes in goodwill (negative goodwill) for the six months ended June
30, 2004 are as follows:
(in millions of Won)
Beginning Increase Amortization Ending
balance (decrease) (reversal) balance
------------- --------- ------------- -------
Chohung Bank W 846,751 - 30,956 815,795
Goodmorning Shinhan Securities 144,538 - 8,502 136,036
Jeju Bank (6,276) - (379) (5,897)
------------- --------- ------ -------
W 985,013 - 39,079 945,934
============= ========= ====== =======
The market values of the shares of Goodmorning Shinhan Securities and Jeju
Bank owned by the Company are W277,549 million and W 30,046 million,
respectively, as of June 30, 2004(W2,950 and W3,100 per share,
respectively).
(in millions of Won)
2003
---------------------------------------------------------------------------------
Acquisition
and Equity
Beginning dividend, method Retained Capital Ending
Subsidiaries balance net gain (loss) earnings adjustments balance
------------------------------ -------------- ----------- ---------- -------- ----------- ---------
Shinhan Bank W 3,043,952 (182,592) 476,273 937 177,048 3,515,618
Chohung Bank (*) - 2,057,983 (43,545) 621 (127,731) 1,887,328
Goodmorning Shinhan Securities 531,566 - 8,787 (12,342) 18,861 546,872
Shinhan Card 247,460 - (84,324) - - 163,136
Shinhan Capital 76,458 - 26,204 - 2,786 105,448
Shinhan BNP Paribas ITMC 22,581 (1,000) 917 (37) 25 22,486
Jeju Bank 46,692 (2,423) 5,189 - (1,366) 48,092
SH&C Life Insurance 14,630 - (1,684) - 75 13,021
e-Shinhan 3,892 - (1,166) (1) - 2,725
Shinhan Macquarie 423 - 1,446 (26) - 1,843
Shinhan Credit Information 3,121 (1,696) 544 - - 1,969
--------------- --------- ------- ------- ------ ---------
W 3,990,775 1,870,272 388,641 (10,848) 69,698 6,308,538
=============== ========= ======= ======= ====== =========
The changes in goodwill (negative goodwill) for the year ended December
31, 2003 are as follows:
(in millions of Won)
Beginning Increase Amortization Ending
balance (decrease) (reversal) balance
------------- ----------- ---------- -------
Chohung Bank W - (*) 866,757 20,006 846,751
Goodmorning Shinhan Securities 161,542 - 17,004 144,538
Jeju Bank (7,034) - (758) (6,276)
------------- ----------- ------ -------
W 154,508 866,757 36,252 985,013
============= =========== ====== =======
(*) W26,513 million of additional goodwill through additional equity
acquisition were included.
F-16
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(5) Loans
(a) Loans as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
--------------------------------- ------------------------------
2004 2003 2004 2003
----------------- --------- -------------- ---------
Loans in Won W 1,747,200 1,637,200 $ 1,516,009 1,420,564
Loans in foreign currencies 103,632 107,705 89,919 93,453
Privately placed bonds 203,140 200,000 176,260 173,536
----------------- --------- -------------- ---------
2,053,972 1,944,905 1,782,188 1,687,553
Less: allowance for loan losses (10,270) (9,725) (8,911) (8,438)
----------------- --------- -------------- ---------
W 2,043,702 1,935,180 $ 1,773,277 1,679,115
================= ========= ============== =========
(b) Details of loans as of June 30, 2004 and December 31, 2003 are as
follows:
(in millions of Won)
Borrower Interest rate (%) 2004 2003
-------- ----------------- --------------- ---------
Loans in Won Shinhan Card 4.83~6.28 W 1,150,000 1,100,000
" Shinhan Capital 4.83~8.12 597,200 537,200
--------------- ---------
1,747,200 1,637,200
Loans in foreign currencies Shinhan Capital Libor+0.9~1.2 103,632 107,705
Privately placed bonds Shinhan Bank 7.42 50,000 50,000
" Goodmorning 6.23 130,000 130,000
Shinhan Securities
" Jeju Bank 8.14 23,140 20,000
--------------- ---------
203,140 200,000
--------------- ---------
2,053,972 1,944,905
Less: allowance for loan losses (10,270) (9,725)
--------------- ---------
W 2,043,702 1,935,180
=============== =========
F-17
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(5) Loans, Continued
(c) The maturities of loans as of June 30, 2004 and December 31, 2003 are as
follows:
(in millions of Won)
Loans
Loans in foreign Privately
At June 30, 2004 in Won currencies placed bonds Total
------------------------------------ -------------- ---------- ------------ ---------
Due in 3 months or less W 100,000 - 130,000 230,000
Due in 6 months or less 97,200 - - 97,200
Due after 6 months through 12 months 340,000 34,575 - 374,575
Due after 1 years through 3 years 930,000 69,057 3,140 1,002,197
Thereafter 280,000 - 70,000 350,000
-------------- ------- ------- ---------
W 1,747,200 103,632 203,140 2,053,972
============== ======= ======= =========
(in millions of Won)
Loans
Loans in foreign Privately
At December 31, 2003 in Won currencies placed bonds Total
------------------------------------ -------------- ---------- ------------ ---------
Due in 3 months or less W - - - -
Due in 6 months or less 90,000 - - 90,000
Due after 6 months through 12 months 97,200 - 130,000 227,200
Due after 1 years through 3 years 1,220,000 107,705 - 1,327,705
Thereafter 230,000 - 70,000 300,000
-------------- ------- ------- ---------
W 1,637,200 107,705 200,000 1,944,905
============== ======= ======= =========
F-18
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(6) Fixed Assets
Fixed assets as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ --------------------
2004 2003 2004 2003
------------ ------ ------- ------
Property and equipment:
Vehicles W 405 391 $ 351 339
Furniture and fixtures 1,126 993 977 862
Leasehold improvement and other 1,479 1,404 1,283 1,218
------------ ------ ------- ------
3,010 2,788 2,611 2,419
Less: accumulated depreciation (1,493) (1,182) (1,295) (1,026)
------------ ------ ------- ------
1,517 1,606 1,316 1,393
Intangible assets:
Other 374 414 325 359
------------ ------ ------- ------
W 1,891 2,020 $ 1,641 1,752
============ ====== ======= ======
As of June 30, 2004, the Company maintains insurance policies covering
loss and liability arising from automobile accidents.
(7) Other Assets
Other assets as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ --------------------
2004 2003 2004 2003
------------ ------ ------- ------
Guarantee deposits paid W 7,840 7,840 $ 6,803 6,803
Accounts receivable 7,317 7,612 6,349 6,605
Accrued income 11,234 11,334 9,747 9,834
Advance payments 10 10 9 9
Prepaid expenses 1,506 1,667 1,307 1,446
Prepaid income taxes 1,008 13,867 874 12,032
Other 1,805 1,009 1,566 875
------------ ------ ------- ------
W 30,720 43,339 $26,655 37,604
============ ====== ======= ======
F-19
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(8) Borrowings
(a) Borrowings as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ --------------------
2004 2003 2004 2003
------------ ------ ------- ------
Borrowings in Won W 205,000 94,000 $177,874 81,562
Borrowings in foreign currencies 69,150 71,868 60,000 62,358
------------ ------- -------- -------
W 274,150 165,868 $237,874 143,920
============ ======= ======== =======
(b) The maturities of borrowings as of June 30, 2004 and December 31, 2003
are as follows:
(in millions of Won)
Borrowings
Borrowings in foreign
At June 30, 2004 in Won currencies Total
----------------------------------- ------------ ---------- -------
Due in 3 months or less W 100,000 - 100,000
Due in 6 months or less 105,000 - 105,000
Due after 6 months through 12 months - 34,575 34,575
Due after 1 years through 3 years - 34,575 34,575
Thereafter - - -
------------ ------ -------
W 205,000 69,150 274,150
============ ====== =======
(in millions of Won)
Borrowings
Borrowings in foreign
At December 31, 2004 in Won currencies Total
----------------------------------- ------------ ---------- -------
Due in 3 months or less W - - -
Due in 6 months or less 90,000 - 90,000
Due after 6 months through 12 months 4,000 - 4,000
Due after 1 years through 3 years - 71,868 71,868
Thereafter - - -
------------ ------ -------
W 94,000 71,868 165,868
============ ====== =======
F-20
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(9) Debentures
(a) Debentures as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------------ --------------------------
2004 2003 2004 2003
------------ --------- ------------- ---------
Korean Won debentures W 2,050,000 1,950,000 $ 1,778,742 1,691,974
Foreign currency debentures 34,575 35,934 30,000 31,179
------------ --------- ------------- ---------
2,084,575 1,985,934 1,808,742 1,723,153
Less: discounts on debentures (4,348) (5,391) (3,773) (4,678)
------------ --------- ------------- ---------
W 2,080,227 1,980,543 $ 1,804,969 1,718,475
============ ========= ============= =========
(b) The maturities of debentures as of June 30, 2004 and December 31, 2003
are as follows:
(in millions of Won)
Korean Won Foreign currency
At June 30, 2004 debentures debentures Total
------------------------------------ ------------ --------------- ---------
Due in 3 months or less 130,000 - 130,000
Due in 6 months or less W 100,000 - 100,000
Due after 6 months through 12 months 340,000 - 340,000
Due after 1 years through 3 years 1,300,000 34,575 1,334,575
Thereafter 180,000 - 180,000
------------ ------ ---------
W 2,050,000 34,575 2,084,575
============ ====== =========
(in millions of Won)
Korean Won Foreign currency
At December 30, 2004 debentures debentures Total
------------------------------------ ------------ --------------- ---------
Due in 3 months or less W - - -
Due in 6 months or less - - -
Due after 6 months through 12 months 230,000 - 230,000
Due after 1 years through 3 years 1,590,000 35,934 1,625,934
Thereafter 130,000 - 130,000
------------ ------ ---------
W 1,950,000 35,934 1,985,934
============ ====== =========
F-21
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(10) Retirement and Severance Benefits
Changes in retirement and severance benefits for the six months ended June
30, 2004 and the year ended December 31, 2003 are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ -------------------
2004 2003 2004 2003
--------- ---- --------- ----
Estimated severance liability at beginning of period W 530 570 $ 460 495
Provision 106 140 92 121
Payment (90) (180) (78) (156)
--------- ---- --------- ----
Estimated severance liability at end of period 546 530 474 460
Less: deposits for severance benefit insurance (444) (530) (386) (460)
--------- ---- --------- ----
Net balance at end of period W 102 - $ 88 -
========= ==== ========= ====
(11) Other Liabilities
Other liabilities as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ -------------------
2004 2003 2004 2003
--------- ---- --------- ----
Withholding taxes W 230 1,176 $ 199 1,021
Dividends payable 1,296 928 1,125 805
Accounts payable 14,097 14,492 12,232 12,574
Accrued expenses 10,782 12,189 9,355 10,576
Unearned revenue 94 1,679 82 1,457
--------- ------ --------- ------
W 26,499 30,464 $ 22,993 26,433
========= ====== ========= ======
F-22
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(12) Related Party Transactions
(a) Details of transactions
Significant transactions with the related parties for the quarters
ended six months ended June 30, 2004 and 2003 are as follows:
(in millions of Won)
Quarter Six months
ended June 30, ended June 30,
------------- -------------
Revenue earned Expense incurred Account 2004 2003 2004 2003
-------------------- ------------------- ------------------- ------- ------ ------ -----
The Company Shinhan Bank Interest income W 1,341 1,148 2,351 2,163
Goodmorning
" Shinhan
Securities Interest income 2,003 2,003 4,026 4,026
" Shinhan Card Interest income 16,118 16,700 32,422 22,557
" Shinhan Capital Interest income 9,669 6,762 18,858 12,720
" Jeju Bank Interest income 438 410 845 814
------- ------ ------ ------
29,569 27,023 58,502 42,280
------- ------ ------ ------
Shinhan Bank The Company Rental income - - 9 -
" Chohung Bank Interest income 1 - 30 -
" " Gain on derivatives - - 1,460 -
Goodmorning
Shinhan
Securities Interest income 481 487 1,032 873
" " Rental income - 60 8 61
" Shinhan Card Interest income 421 1,616 800 2,629
" " Fees and commission
income 9,893 15,932 18,122 36,605
" " Rental income 210 190 431 408
" Shinhan Capital Interest income 709 895 1,452 1,508
" " Rental income - 71 68 154
" " Gain on derivatives 477 - 530 -
" Jeju Bank Interest income 22 60 75 119
" Shinhan Credit Rental income 67 52 128 113
Information
Fees and
" SH&C Life commission
Insurance income - - 1 -
Chohung Bank Shinhan Bank Interest income 16 - 51 -
" " Gain on derivatives 2,295 - 3,743 -
" " Interest income 53 - 64 -
" " Gain on derivatives 24 - 259 -
" Shinhan Card Interest income 312 - 535 -
" Goodmorning
Shinhan
Securities Interest income 20 - 20 -
" " Fees and
commission
income 8 - 8 -
Goodmorning
Shinhan
Securities Shinhan Bank Interest income 80 121 322 321
" " Rental income - 9 - 9
" Chohung Bank Interest income 132 - 193 -
" Shinhan Card Rental income 73 53 146 105
F-23
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(12) Related Party Transactions, Continued
(in millions of Won)
Quarter Six months
ended June 30, ended June 30,
------------- ---------------
Revenue earned Expense incurred Account 2004 2003 2004 2003
------------------- ----------------- ------------------ ------ ----- ------- -------
Goodmorning Shinhan Shinhan Card Fees and
Securities commission
income 1 - 117 -
" Shinhan BNP Rental income 51 - 102 -
Paribas ITMC
Shinhan Card Shinhan Bank Interest income 16 5 66 5
Fees and
" " commission
income 41 15 45 15
Goodmorning Fees and
Shinhan Card Shinhan commission
Securities income 11 - 11 -
Fees and
" SH&C Life commission
Insurance income 1,274 - 1,348 -
Shinhan Capital Shinhan Bank Interest income 299 117 549 192
Gain on
" " derivatives - 1,024 959 551
" Chohung Bank Interest income 7 - 344 -
Gain on
" " derivatives 91 - 91 -
Shinhan BNP Shinhan Bank Interest income 69 107 74 179
Paribas ITMC
Jeju Bank Shinhan Bank Interest income - 31 - 46
Fees and
" SH&C Life commission
Insurance income 52 - 58 -
SH&C Life Insurance Shinhan Bank Interest income - 123 86 257
" " Insurance income 222 - 488 -
" Chohung Bank Insurance income 3,877 - 3,877 -
e-Shinhan Shinhan Bank Interest income 18 36 38 78
Fees and
" " commission
income 4 3 35 8
" Shinhan Card Fees and
commission
income 1 - 4 -
" The Company Fees and
commission
income 51 - 84 -
Shinhan Macquarie Shinhan Bank Interest income - - 1 -
Shinhan Credit Shinhan Bank Fees and
Information commission
income 685 673 1,261 1,232
" " Interest income 14 7 24 20
" Chohung Bank Fees and
commission income 821 - 1,408 -
" Goodmorning Fees and
Shinhan commission
Securities income 2 7 6 7
" Shinhan Card Fees and
commission income 3,402 2,152 4,660 3,576
" Shinhan Capital Fees and
commission income 52 37 82 37
" Jeju Bank Fees and
commission income 72 150 141 284
------ ------ ------- ------
26,427 24,033 45,446 49,392
------ ------ ------- ------
W 55,996 51,056 103,948 91,672
====== ====== ======= ======
F-24
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(12) Related Party Transactions, Continued
(b) Account balances
Significant balances with the related parties as of June 30, 2004 and
December 31, 2003 are as follows:
(in millions of Won)
Creditor Debtor Account 2004 2003
--------------------------------------------- --------------------- --------- ---------
The Company Shinhan Bank Due from banks W 7,980 5,327
" " Other assets 10,811 14,644
" " Loans 50,000 50,000
" Goodmorning
Shinhan Securities Loans 130,000 130,000
" " Other assets 110 134
" Shinhan Card Loans 1,150,000 1,100,000
" " Other assets 6,550 6,541
" Shinhan Capital Loans 700,832 644,905
" " Other assets 4,788 5,066
" Shinhan BNP Paribas Other assets 2,000 -
ITMC
" Jeju Bank Loans 23,140 20,000
" " Other assets 186 186
" Shinhan Macquarie Other assets 1,730 -
" Shinhan Credit
Information Other assets 52 38
---------- ---------
2,088,179 1,976,841
---------- ---------
Shinhan Bank Chohung Bank Securities 34,360 132,708
" " Other assets 110,629 -
Shinhan Bank Chohung Bank Derivative assets 836 797
" Goodmorning Loans 30,000 30,000
Shinhan Securities
" " Other assets 4,756 4,418
" Shinhan Card Loans 13,400 28,500
" " Other assets 265 87
" Shinhan Capital Loans 77,398 75,933
" " Derivative assets 57 97
" " Other assets 255 136
" Jeju Bank Loans - 3,140
" " Other assets - 561
" SH&C Life Insurance Other assets 1,087 1,455
Chohung Bank Shinhan Bank Due from banks 75,000 -
" " Loans 110,629 -
" " Securities - 96,515
" " Derivative assets 5,213 4,324
" Shinhan Capital Loans - 392
" " Derivative assets 288 -
F-25
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(12) Related Party Transactions, Continued
(in millions of Won)
Creditor Debtor Account 2004 2003
--------------------------------------------- -------------------- ----------- ---------
Goodmorning Shinhan Bank Due from banks 7,250 53,064
Shinhan Securities
" " Other assets 9,325 6,791
" Chohung Bank Due from banks 12,386 2,011
" " Other assets 200 8
" Shinhan Card Other assets 24 -
Shinhan Card The Company Other assets 94 906
" Shinhan Bank Cash and due from 139 102
banks
" " Loans 4,000 -
" " Other assets 1,189 1,189
Goodmorning
" Shinhan
Securities Other assets 4,635 4,635
" Shinhan Capital Loans 14 -
" SH&C Life Insurance Other assets 176 338
Shinhan Capital The Company Other assets - 773
" Shinhan Bank Short-term
financial 62,858 58,231
instruments
" " Other assets 87 108
" " Derivative assets 1,844 1,941
" " Other assets 292 292
" Chohung Bank Securities 6,363 6,714
" " Other assets 166 173
Shinhan BNP Paribas Shinhan Bank Cash and due from 12,644 4,436
ITMC banks
" " Other assets 111 105
" Goodmorning
Shinhan
Securities Other assets 3,496 3,496
Jeju Bank Shinhan Bank Due from banks 16 -
" " Other assets - 561
SH&C Life Insurance SH&C Life Insurance Other assets 16 -
" Shinhan Bank Cash and cash 4,449 33,563
equivalents
" " Other assets 40 46
e-Shinhan Shinhan Bank Cash and cash - 2,158
equivalents
" " Other assets 39 -
Shinhan Macquarie Shinhan Bank Cash and cash 2,071 1,187
equivalents
Shinhan Credit Shinhan Bank Cash and cash 2,575 1,686
Information equivalents
" " Other assets 1,416 1,146
" Shinhan Card Other assets - 892
" Jeju Bank Other assets 89 161
----------- ---------
602,177 565,776
----------- ---------
W 2,690,356 2,542,617
=========== =========
F-26
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(12) Related Party Transactions, Continued
(c) Guarantees and acceptances
The guarantees and acceptances provided between the related parties as
of June 30, 2004 are as follows:
(in millions of Won)
Amount
Creditor Debtor Account guaranteed
-------- ------ ------- -----------
The Company Goodmorning Shinhan Lease guarantee W 50,000
Securities
Shinhan Bank Shinhan Capital Letter of credit 11,039
" Shinhan Finance Guarantees for loans 10,791
Chohung Bank Chohung Finance Guarantees for letter of credit 807
----------
W 72,637
==========
(13) Assets and Liabilities Denominated in Foreign Currency
Assets and liabilities denominated in foreign currency as of
June 30, 2004 and December 31, 2003 are as follows:
(in millions of Won and thousands of U.S. dollars)
Foreign currency Equivalent Won
-------------------- --------------------
2004 2003 2004 2003
---------- ------- --------- -------
Assets:
Loans $ 89,919 89,919 W 103,632 107,705
Other assets 419 426 482 510
---------- ------- ---------- -------
$ 90,338 90,345 W 104,114 108,215
========== ======= ========== =======
Liabilities:
Borrowings $ 60,000 60,000 W 69,150 71,868
Debentures 30,000 30,000 34,575 35,934
Discounts on debentures (36) (50) (42) (60)
Other liabilities 381 382 439 457
---------- ------- ---------- -------
$ 90,345 90,332 W 104,122 108,199
========== ======= ========== =======
F-27
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(14) Commitments and Contingencies
(a) Acquisition of Chohung Bank
On July 9, 2003, the Company made an agreement with the KDIC to
acquire 80.04% (543,570,144 shares) of total outstanding shares in
Chohung Bank. Additionally, in accordance with the agreement, the
Company would be required to pay contingent consideration to the
KDIC in relation to the earnings in the future and changes in fair
value of assets and liabilities of Chohung Bank and the details are
as follows:
- Asset Indemnity Payment
Amount : W652,284 million - asset indemnity amount
for corporate loans, returned KAMCO loans and
credit card loans
Payment date : earlier of 60 days after the date asset
indemnity is determined as of June 30, 2005 or
the date as agreed on
Interest : 4.3% per annum
- General Indemnity Payment
Amount : W166,516 million (deductible any amounts due
and payable by the KDIC to the Company in
connection with the breach of representation
or warranty)
Payment date : the second anniversary date of cash portion
closing date
Interest : 4.3% per annum
- Earn Out Payment
Amount : 20% of the total excess amount, which means
net earnings of Chohung Bank for fiscal years
of 2004, 2005 and 2006 in excess of W1,800
billion
Payment date : within 30 days after the date excess amount is
determined for the fiscal year of 2006
These contingent considerations are not included in the acquisition
cost on the date of acquisition, for the amount is not determinable.
(b) Indemnification on contingent loss
Pursuant to the sale agreement of 50% shares in Shinhan ITMC,
entered into between BNP Paribas Asset Management Group and the
Company, the Company agreed to compensate BNP Paribas Asset
Management Group for contingent loss arising from following pending
lawsuit filed against Shinihan BNP Paribas ITMC:
(in millions of Won)
Amount to be
Plaintiff Claimed for claimed
---------- ------------------- --------------------
Bumin Mutual Savings Bank Indemnity for loses W 100
However, with regard to above pending lawsuit, the ultimate outcome
of other lawsuits cannot be presently determined.
(c) As of June 30, 2004, the Company has provided a blank note to Koram
Bank, as collateral related to bank overdrafts.
F-28
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(15) Capital Stock
(a) The Company issued new preferred stock for the year ended December
31, 2003, and the details are as follows:
Number of Predetermined
shares dividend rate (%) Redeemable period
---------- ----------------- ------------------------------------
Redeemable preferred stock:
Series 1 9,316,792 4.04 August 19, 2004 ~ August 18, 2006
Series 2 9,316,792 4.04 August 19, 2005 ~ August 18, 2007
Series 3 9,316,792 4.04 August 19, 2006 ~ August 18, 2008
Series 4 9,316,792 4.04 August 19, 2007 ~ August 18, 2009
Series 5 9,316,793 4.04 August 19, 2008 ~ August 18, 2010
Series 6 3,500,000 7.00 July 19, 2006 ~ August 18, 2006
Series 7 2,433,334 7.46 July 19, 2008 ~ August 18, 2008
Series 8 66,666 7.86 July 19, 2010 ~ August 18, 2010
----------
52,583,961
Redeemable convertible preferred stock:
Series 9 (*) 44,720,603 2.02 August 19, 2006 ~ August 18, 2008
----------
97,304,564
==========
(*) Convertible period : August 19, 2004 ~ August 18, 2007
Conversion ratio : 1 common share to 1 preferred share
Conversion price in Won : W18,086
(b) Details of changes in capital stock for the six months ended June
30, 2004 and the year ended December 31, 2003 are as follows:
(in millions of Won)
---------------------------------------------------------
2004
---------------------------------------------------------
Number of shares Capital stock Capital surplus
---------------- ------------- ---------------
Balance at beginning of the period 391,705,864 1,958,530 3,316,380
Stock exchange 14,682,590 73,412 221,560
----------- --------- ---------
Balance at end of the year 406,388,454 2,031,942 3,537,940
=========== ========= =========
(in millions of Won)
---------------------------------------------------------
2003
---------------------------------------------------------
Number of shares Capital stock Capital surplus
---------------- ------------- ---------------
Balance at beginning of the year 292,361,125 1,461,806 1,976,625
Redeemable preferred stock issued:
Series 1 to 5 46,583,961 232,920 237,784
Series 6 to 8 6,000,000 30,000 855,530
Redeemable convertible preferred stock issued:
Series 9 44,720,603 223,603 228,271
Common stock issued 1,864,065 9,320 18,183
Stock exchange 176,110 881 (13)
----------- --------- ---------
Balance at end of the year 391,705,864 1,958,530 3,316,380
=========== ========= =========
F-29
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(16) Retained Earnings
Retained earnings as of June 30, 2004 and December 31, 2003 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
--------------------------------------------------------
Won U.S. dollars (Note 2)
--------------------------- -------------------------
2004 2003 2004 2003
----------- ------- --------- -------
Legal reserves W 118,692 82,469 $ 102,987 71,556
Retained earnings before appropriations 922,453 783,929 800,393 680,199
----------- ------- --------- -------
W 1,041,145 866,398 $ 903,380 751,755
=========== ======= ========= =======
The Korean Financial Holding Company Act requires the Company to
appropriate a minimum of 10% of annual net earnings as a legal reserve
whenever dividends are paid until such reserve equals its paid-in capital.
This reserve is not available for payment of cash dividends. However,
subject to the stockholders' approval, it may be transferred to common
stock in connection with stock dividends or used to reduce any accumulated
deficit.
(17) Capital Adjustment
Capital adjustments as of June 30, 2004 and December 31, 2003 consist of
the following:
(in millions of Won and thousands of U.S. dollars)
--------------------------------------------------------
Won U.S. dollars (Note 2)
--------------------------- ------------------------
2004 2003 2004 2003
----------- -------- --------- -------
Gain on equity method valuation W 215,232 181,583 $ 186,752 157,556
Loss on equity method valuation (165,123) (214,962) (143,274) (186,518)
Stock options (note 18) 4,673 9,626 4,055 8,353
----------- ------- --------- -------
W 54,782 (23,753) $ 47,533 (20,609)
=========== ======= ========= =======
F-30
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(18) Stock Options
(a) Details of stock options as of June 30, 2004 and December 31, 2003
are as follows:
(in Won)
Grant date March 25, 2004 May 15, 2003 May 22, 2002
---------------------- ----------------------- ----------------------- -----------------------
Shares granted 1,301,600 shares 1,156,300 shares 1,004,200 shares
Share expired to date 5,200 shares 41,227 shares 133,979 shares
----------------------- ----------------------- ------------------------
Shares outstanding 1,296,400 shares 1,115,073 shares 870,221 shares
Stock grant or Stock grant or
Type of stock options price compensation price compensation Price compensation
Exercise price W21,595 W11,800 W18,910
Within 3 years after Within 4 years after Within 4 years after
Exercise period 2 years from grant date 2 years from grant date 2 years from grant date
After 5 years After 6 years After 6 years
Forfeited period from grant date from grant date from grant date
Assumptions used to determine the fair value of options:
Risk-free interest rate 4.39% 4.25% -
Expected exercise period 3.5 years 4 years -
Expected stock price volatility 19.85% 22.11% -
Expected dividend yield 0% 0% -
Expected ratios of no-exercise 0% 0% -
Weighted average fair value W7,696 W5,292 -
With respect to the stock options granted on May 22, 2002, the
Company decided to pay the difference between the market price and
the exercise price in cash for the six months ended June 30, 2004.
As a result, the Company determined to apply intrinsic value method
to those stock options, and W7,694 million of stock options, W6,113
million of accounts receivable and W1,581 million of stock
compensation costs decreased for the six months ended June 30, 2004.
F-31
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(18) Stock Options, Continued
(b) Changes in stock compensation costs for the six months ended June
30, 2004 are as follows:
(in millions of Won)
Personnel of
Grant date Stock compensation cost the Company subsidiaries Total
-------------- ------------------------------------ ----------- ------------ -------
March 25, 2004 Recorded at beginning of the period W - - -
Incurred during the period 324 1,015 1,339
To be recorded in subsequent periods 2,091 6,546 8,637
May 15, 2003 Recorded at beginning of the period 442 1,489 1,931
Incurred during the period 319 1,083 1,402
To be recorded in subsequent periods 587 1,980 2,567
May 22, 2002 Recorded at beginning of the period 1,581 6,113 7,694
Incurred during the period (1,581) (6,113) (7,694)
To be recorded in subsequent periods - - -
For stock options, which were granted to the personnel of the
subsidiaries, the difference between the exercise price and the fair
value on the date of exercise would be assumed by the subsidiaries
of the Company. Therefore, in relation to those stock options, the
subsidiaries have recorded stock compensation costs as long-term
payables, and the Company has accounted for as accounts receivable.
F-32
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(19) General and Administrative Expenses
Details of general and administrative expenses for the quarters and six
months ended June 30, 2004 and 2003 are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
---------------------------------------------- -------------------------
Quarter ended Six months ended Quarter Six months
June 30, June 30, ended ended
---------------------- ------------------ June 30, June 30,
2004 2003 2004 2003 2004 2004
----------- ----- ------ ------ ----------- ----------
Salaries and wages W 673 2,343 4,461 3,974 $ 584 3,871
Provision for retirement and
severance benefits 53 - 106 - 46 92
Other employees benefits 222 101 448 268 193 389
Rental 147 24 254 40 127 220
Entertainment 138 47 299 312 120 259
Depreciation 160 126 310 232 139 269
Amortization 28 27 55 54 24 48
Bad debts - 2,032 545 6,148 - 473
Taxes and dues 24 13 92 66 21 80
Advertising 1 3 8 4 1 7
Fees and commission 2,407 389 5,368 938 2,088 4,658
Other 2,951 760 3,458 945 2,560 3,000
----------- ----- ------ ------ ----------- ------
W 6,804 5,865 15,404 12,981 $ 5,903 13,366
=========== ===== ====== ====== =========== ======
(20) Income Taxes
(a) The Company is subject to income taxes based on taxable earnings,
which results in the normal tax rate of 29.7%.
The Korean government reduced the corporate income tax rate
beginning in 2005. Specifically, effective from January 1, 2005, the
income tax rate will be reduced from 29.7% to 27.5%. As result, the
statutory income tax rate of 29.7% is applied for deferred income
tax assets (liabilities) that will be realized before 2005 and
statutory income tax rate of 27.5% is applied for deferred income
tax assets (liabilities) that will be realized after 2005,
reflecting the corporate tax rate cut from 2005.
The components of income taxes for the quarters and six months ended
June 30, 2004 and 2003 are as follows:
(in millions of Won)
Quarter ended June 30, Six months ended June 30,
------------------------------ --------------------------
2004 2003 2004 2003
-------------- ---- ---- ----
Current income taxes W - - - -
Changes in deferred taxes:
temporary differences - - - -
-------------- --- --- ---
W - - - -
============== === === ===
F-33
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(20) Income Taxes, Continued
(b) Reconciliation of accounting income and taxable income for the six
months ended June 30, 2004 and the year ended December 31, 2003 is
as follows:
(in millions of Won)
Temporary difference Permanent difference
-------------------------- ---------------------
Description 2004 2003 2004 2003
------------------------------------------------ ------------ --------- --------- ---------
Addition:
Dividends received W 256,536 186,896 - -
Accrued income earned in prior year 11,334 4,332 - -
Investment securities accounted for by the
equity method 52,597 10,848 - -
Retirement and severance benefits 76 - - -
Stock compensation cost - - 355 1,381
Entertainment expense in excess of tax limit - - 284 1,434
Other - 20 11 34
------------ -------- -------- --------
320,543 202,096 650 2,849
------------ -------- -------- --------
Deduction:
Dividends received - - 250,351 186,058
Investment securities accounted for by the
equity method - - - 10,848
Retained earnings - - 52,597 20
Accrued income earned in current period 11,234 11,334 - -
Deposit for retirement and severance benefits
insurance 578 198 - -
Valuation gain using the equity method 487,648 388,641 - -
Other 3 - - -
------------ -------- -------- --------
499,463 400,173 302,948 196,926
------------ -------- -------- --------
W (178,920) (198,077) (302,298) (194,077)
============ ======== ======== ========
F-34
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(20) Income Taxes, Continued
(c) Changes in significant accumulated temporary differences and tax
effects for the six months ended June 30, 2004 and the year ended
December 31, 2003 are as follows:
(in millions of Won)
2004
----------------------------------------------------
Beginning Ending
balance (*) Increase Decrease balance
-------------- --------- --------- ---------
Temporary differences:
Securities W 12,198 52,597 - 64,795
Retirement and severance benefits 251 76 - 327
Valuation gain using the equity method (268,310) (487,648) (256,536) (499,422)
Accrued income (11,334) (11,234) (11,334) (11,234)
Deposit for severance benefit insurance (251) (578) - (829)
Other 11 - 3 8
------------- -------- -------- --------
(267,435) (446,787) (267,867) (446,355)
------------- -------- -------- --------
Unrealizable temporary differences on valuation gain
using the equity method 263,171 418,330
------------- --------
Net temporary differences (4,264) (28,025)
Tax effects of temporary differences (1,172) (7,707)
Tax effects of tax loss carryforwards 13,706 16,689
------------- --------
Net tax effects 12,534 8,982
============= ========
Tax effects recorded in financial statements (**) W - -
============= ========
(*) Amount resulting from prior year tax return is reflected in the current
period.
(**) Tax effects on temporary differences and tax loss carryforwards are not
recognized due to uncertainty of realization. Total amount of tax loss
carryforwards, which are not recognized as deferred taxes, is W60,688
million, with the tax benefit maturity of W5,553 million in 2006, W14,363
million in 2007, W29,014 million in 2008 and W11,758 million in 2009.
F-35
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(20) Income Taxes, Continued
(in millions of Won)
2003
---------------------------------------------------
Beginning Ending
balance Increase Decrease balance
------------- -------- -------- --------
Deductible temporary differences:
Securities W 1,351 10,848 - 12,199
Retirement and severance benefits 342 - - 342
------------- -------- -------- --------
1,693 10,848 - 12,541
------------- -------- -------- --------
Taxable temporary differences:
Valuation gain using the equity method (203,714) (388,641) (186,896) (405,459)
Accrued income (4,332) (11,334) (4,332) (11,334)
Deposit for severance benefit insurance (332) (198) - (530)
Other (4) - (20) (16)
------------- -------- -------- --------
(208,382) (400,173) (191,248) (417,307)
------------- -------- -------- --------
Net (206,689) (404,766)
Unrealizable temporary differences on valuation gain
using the equity method 191,135 386,200
------------- --------
Net temporary differences (15,554) (18,566)
Tax effects of temporary differences (4,619) (5,106)
Tax effects of tax loss carryforwards 6,295 13,706
------------- --------
Net tax effects 1,676 8,600
============= ========
Tax effects recorded in financial statements (*) W - -
============= ========
(*) Tax effects on temporary differences and tax loss carryforwards are not
recognized due to uncertainty of realization. Total amount of tax loss
carryforwards, which are not recognized as deferred taxes, is W49,842
million, with the tax benefit maturity of W5,553 million in 2006, W14,363
million in 2007 and W29,926 million in 2008.
F-36
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(21) Earnings Per Share
(a) Earnings per share
Earnings per common share is calculated by dividing net earnings by
the weighted average number of shares of common stock outstanding.
The Company's ordinary income and net earnings per share for the
quarters and six months ended June 30, 2004 and 2003 are computed as
follows:
(in millions of Won, except per share)
Quarter ended June 30, Six months ended June 30,
----------------------------- ----------------------------
2004 2003 2004 2003
-------------- ----------- ----------- -----------
Net earnings for period W 323,842 45,989 469,458 102,423
Extraordinary loss (gain) - - - -
Dividends on preferred stock 28,628 - 57,256 -
-------------- ----------- ----------- -----------
Ordinary income available for common stock 295,214 45,989 412,202 102,423
Weighted average number of common shares
outstanding 295,692,077 292,361,125 295,046,689 292,361,125
-------------- ----------- ----------- -----------
Ordinary income per share in Won 998 157 1,397 350
Net earnings per share in Won W 998 157 1,397 350
============== =========== =========== ===========
(b) Diluted earnings per share
For the six months ended June 30, 2004, if convertible preferred
stock and stock options exercised, 47,132,076 shares of common
stocks would be issued, and if preferred stock converted into common
stock on issue date, weighted average number of common shares
outstanding is 340,427,353. However, diluted earnings per share for
the six months ended June 30, 2004 are not computed because stock
options have no dilutive effect.
Details of diluted ordinary / net earnings per share due to dilutive
effect for the quarters and six months ended June 30, 2004 are as
follows:
(in millions of Won, except per share)
Quarter Six months
ended June ended June
30, 2004 30, 2004
------------- -----------
Ordinary income available for common stock W 295,214 412,202
Add: dividends on convertible preferred stock 4,062 8,124
Add: stock compensation costs 193 319
------------- -----------
Diluted ordinary income / net earnings 299,469 420,646
Weighted average number of common shares outstanding in share 341,093,897 340,427,353
------------- -----------
Diluted ordinary income per share in Won W 878 1,236
============= ===========
Diluted net earnings per share in Won W 878 1,236
============= ===========
F-37
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(21) Earnings Per Share, Continued
(c) Securities applicable to common shares
Number of shares
Convertible period to be issued
--------------------------------- ----------------
Redeemable convertible preferred stock August 19, 2004 i- August 18, 2007 44,720,603
Stock options May 15, 2005 i- June 15, 2009 1,115,073
Stock options March 26, 2006 i- March 25, 2009 1,296,400
-----------
47,132,076
===========
(22) Statements of Cash Flows
Significant transactions not involving cash inflows or outflows for the
quarters and six months ended June 30, 2004 and 2003 are as follows:
(in millions of Won, except per share)
Quarter ended Six months ended
June 30, June 30,
---------------------- --------------------
2004 2003 2004 2003
----------- ------ -------- --------
Acquisition of investment securities accounted for
by the equity method through shares exchange W 294,973 - 294,973 -
Changes in capital adjustments due to the equity method 1,424 82,789 335,501 5,891
Changes in retained earnings due to the equity method (54,515) 60 (52,597) 12,536
Stock options recorded as accounts receivable 720 1,234 2,098 2,179
Changes in unrealized gain on available-for-sale securities - 325 - 24
Amortization offseted to retained earnings due to
accounting change - - - 20
Appropriations of retained earnings as legal reserve - - 36,223 60,393
F-38
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(23) Condensed Financial Statements of Subsidiaries
(a) Balance sheets
Condensed balance sheets of subsidiaries as of June 30, 2004 and
December 31, 2003 are as follows:
(in millions of Won)
2004
---------------------------------------------------------------------
Total stockholders'
Subsidiaries Total assets Total liabilities equity
------------------------------ ------------------- ----------------- ------------------
Shinhan Bank W 72,521,022 68,903,786 3,617,236
Chohung Bank 64,620,519 62,294,908 2,325,611
Goodmorning Shinhan Securities 2,554,251 1,888,942 665,309
Shinhan Card 1,436,967 1,283,211 153,756
Shinhan Capital 1,348,949 1,240,385 108,564
Shinhan BNP Paribas ITMC 51,435 8,173 43,262
Jeju Bank 1,761,718 1,657,317 104,401
SH&C Life Insurance 188,844 162,073 26,771
e-Shinhan 3,993 672 3,321
Shinhan Macquarie 12,422 12,163 259
Shinhan Credit Information 8,605 2,387 6,218
------------------- ----------- ---------
W 144,508,725 137,454,017 7,054,708
=================== =========== =========
(in millions of Won)
2003
---------------------------------------------------------------------
Total stockholders'
Subsidiaries Total assets Total liabilities equity
---------------------------- ------------------- ----------------- -------------------
Shinhan Bank W 70,066,189 66,550,821 3,515,368
Chohung Bank 59,227,864 57,289,224 1,938,640
Goodmorning Shinhan Securities 2,928,017 2,290,044 637,973
Shinhan Card 1,778,191 1,620,555 157,636
Shinhan Capital 1,153,907 1,051,683 102,224
Shinhan BNP Paribas ITMC 47,461 2,489 44,972
Jeju Bank 1,785,961 1,682,328 103,633
SH&C Life Insurance 114,012 87,970 26,042
e-Shinhan 3,924 225 3,699
Shinhan Macquarie 11,255 7,642 3,613
Shinhan Credit Information 13,588 9,726 3,862
------------------- ----------- ---------
W 137,130,369 130,592,707 6,537,662
=================== =========== =========
F-39
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(23) Condensed Financial Statements of Subsidiaries, Continued
(b) Statements of Earnings
Condensed statements of earnings of subsidiaries for the quarters
and six months ended June 30, 2004 and 2003 are as follows:
(in millions of Won)
Six months ended June 30, 2004
--------------------------------------------------------------------------------
Operating Operating Operating Ordinary Net earnings
Subsidiaries revenue expense income (loss) income (loss) (loss)
-------------------------- -------------- --------- ------------ ------------- ------------
Shinhan Bank W 2,722,973 2,204,060 518,913 677,175 477,208
Chohung Bank 2,810,913 2,645,046 165,867 129,118 127,508
Goodmorning Shinhan
Securities 401,694 378,775 22,919 32,234 32,511
Shinhan Card 214,350 218,127 (3,777) (3,879) (3,879)
Shinhan Capital 98,098 78,586 19,512 19,009 13,267
Shinhan BNP
Paribas ITMC 6,624 3,446 3,178 3,183 2,209
Jeju Bank 65,663 65,144 519 1,223 1,223
SH&C life Insurance 16,741 17,447 (706) (282) (282)
e-Shinhan 1,300 1,694 (394) (378) (378)
Shinhan Macquarie 7,817 7,618 199 324 90
Shinhan Credit Information 19,078 19,506 (428) (269) 2,356
-------------- --------- ------- ------- -------
W 6,365,251 5,639,449 725,802 857,458 651,833
============== ========= ======= ======= =======
(in millions of Won)
Six months ended June 30, 2003
--------------------------------------------------------------------------------
Operating Operating Operating Ordinary Net earnings
Subsidiaries revenue expense income (loss) income (loss) (loss)
--------------------------- -------------- --------- ------------- ------------- ------------
Shinhan Bank W 2,340,516 2,103,162 237,354 219,388 151,701
Goodmorning Shinhan
Securities 307,973 296,229 11,744 46,272 23,609
Shinhan Card 206,966 280,862 (73,896) (73,921) (73,683)
Shinhan Capital 69,695 56,215 13,480 12,190 8,598
Shinhan BNP
Paribas ITMC 6,270 6,875 (605) (163) (120)
Jeju Bank 70,486 72,529 (2,043) (972) 1,057
SH&C life Insurance 1,382 2,030 (648) (1,619) (1,619)
e-Shinhan 1,081 1,814 (733) (709) (709)
Shinhan Macquarie 3,082 4,295 (1,213) (1,003) (1,352)
Shinhan Credit Information 5,882 4,813 1,069 1,089 772
-------------- --------- ------- ------- -------
W 3,013,333 2,828,824 184,509 200,552 108,254
============== ========= ======= ======= =======
F-40
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(23) Condensed Financial Statements of Subsidiaries, Continued
(in millions of Won)
Quarter ended June 30, 2004
-------------------------------------------------------------------------------
Operating Operating Operating Ordinary Net earnings
Subsidiaries revenue expense income (loss) income (loss) (loss)
-------------------------- -------------- --------- ------------- ------------- ------------
Shinhan Bank W 1,282,101 1,007,223 274,878 311,610 223,800
Chohung Bank 1,331,800 1,206,886 124,914 92,378 91,388
Goodmorning Shinhan
Securities (*) 208,309 199,847 8,462 10,118 8,413
Shinhan Card 105,455 104,047 1,408 1,311 1,311
Shinhan Capital 41,853 35,151 6,702 6,868 4,958
Shinhan BNP
Paribas ITMC (*) 3,394 1,731 1,663 1,663 1,143
Jeju Bank 33,124 28,616 4,508 5,542 5,542
SH&C life Insurance (*) 8,861 8,915 (54) 370 370
e-Shinhan 662 1,070 (408) (412) (412)
Shinhan Macquarie (*) 130 1,431 (1,301) (1,193) (571)
Shinhan Credit Information 9,830 9,357 473 446 3,071
-------------- --------- ------- ------- -------
W 3,025,519 2,604,274 421,245 428,701 339,013
============== ========= ======= ======= =======
(in millions of Won)
Quarter ended June 30, 2003
--------------------------------------------------------------------------------
Operating Operating Operating Ordinary Net earnings
Subsidiaries revenue expense income (loss) income (loss) (loss)
--------------------------- -------------- --------- ------------- ------------- ------------
Shinhan Bank W 1,133,716 1,059,326 74,390 85,376 57,741
Goodmorning Shinhan
Securities (*) 166,164 144,905 21,259 52,578 44,354
Shinhan Card 108,238 147,774 (39,536) (39,532) (39,532)
Shinhan Capital 47,100 38,910 8,190 7,139 5,070
Shinhan BNP
Paribas ITMC (*) 3,052 1,876 1,176 1,747 1,231
Jeju Bank 35,014 36,335 (1,321) (1,528) 501
SH&C life Insurance (*) 837 1,772 (935) (935) (935)
e-Shinhan 509 874 (365) (385) (385)
Shinhan Macquarie (*) 110 1,114 (1,004) (999) (1,204)
Shinhan Credit Information 3,652 2,908 744 751 434
-------------- --------- ------- ------- -------
W 1,498,392 1,435,794 62,598 104,212 67,275
============== ========= ======= ======= =======
F-41
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(24) Financing and Operating Status of the Company and Subsidiaries
(a) The financing status of the Company and its subsidiaries as of June
30, 2004 and December 31, 2003 are as follows:
(in millions of Won)
2004
-------------------------------------------------------------------
Deposits Borrowings Debentures (*) Total
--------------- ---------- -------------- ----------
The Company W - 274,150 2,080,227 2,354,377
Shinhan Bank 41,347,008 11,338,715 9,961,600 62,647,323
Chohung Bank 42,921,346 5,826,597 5,027,403 53,775,346
Goodmorning Shinhan Securities 690,559 353,282 161,000 1,204,841
Shinhan Card - 1,223,400 - 1,223,400
Shinhan Capital - 913,588 144,746 1,058,334
Jeju Bank 1,385,883 85,740 35,000 1,506,623
Shinhan Macquarie - 6,075 - 6,075
--------------- ---------- ---------- -----------
W 86,344,796 20,021,547 17,409,976 123,776,319
=============== ========== ========== ===========
(*) Net of discounts on debentures
(in millions of Won)
2003
---------------------------------------------------------------
Deposits Borrowings Debentures (*) Total
--------------- ----------- -------------- -----------
The Company W - 165,868 1,980,543 2,146,411
Shinhan Bank 41,991,839 10,621,963 9,115,997 61,729,799
Chohung Bank 40,030,091 5,711,922 6,424,165 52,166,178
Goodmorning Shinhan Securities 1,032,769 657,838 161,000 1,851,607
Shinhan Card - 1,318,182 259,991 1,578,173
Shinhan Capital - 787,433 114,814 902,247
Jeju Bank 1,438,284 83,299 35,000 1,556,583
--------------- ---------- ---------- -----------
W 84,492,983 19,346,505 18,091,510 121,930,998
=============== ========== ========== ===========
(*) Net of discounts on debentures
F-42
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(24) Financing and Operating Status of the Company and Subsidiaries, Continued
(b) The operating status of the Company and its subsidiaries as of June
30, 2004 and December 31, 2003 are as follows:
(in millions of Won)
2004
------------------------------------------------------------------
Cash and due
Loans (*) Securities from bank Total
--------------- ---------- ------------- ----------
The Company W 2,043,702 6,962,491 7,983 9,014,176
Shinhan Bank 51,592,633 13,640,398 1,438,915 66,671,946
Chohung Bank 42,291,560 11,035,762 1,563,563 54,890,885
Goodmorning Shinhan Securities 143,491 1,222,910 843,364 2,209,765
Shinhan Card 922,057 482,896 3,970 1,408,923
Shinhan Capital 1,052,114 65,616 79,558 1,197,288
Shinhan BNP Paribas ITMC 355 18,318 25,073 43,746
Jeju Bank 1,228,384 343,312 18,753 1,590,449
SH&C Life Insurance 124 54,726 13,343 68,193
e-Shinhan 36 86 2,063 2,185
Shinhan Macquarie - - 2,072 2,072
Shinhan Credit Information - - 1,402 1,402
--------------- ---------- --------- -----------
W 99,274,456 33,826,515 4,000,059 137,101,030
=============== ========== ========= ===========
(*) Net of allowance for loan losses and present value discounts
(in millions of Won)
2003
-----------------------------------------------------------------
Cash and due
Loans (*) Securities from bank Total
--------------- ---------- ------------- -----------
The Company W 1,935,180 6,308,538 5,353 8,249,071
Shinhan Bank 47,783,925 15,592,202 2,697,780 66,073,907
Chohung Bank 42,701,666 9,208,341 548,249 52,458,256
Goodmorning Shinhan Securities 397,354 1,020,131 1,154,647 2,572,132
Shinhan Card 1,058,667 682,841 3,886 1,745,394
Shinhan Capital 899,140 54,388 58,232 1,011,760
Shinhan BNP Paribas ITMC 176 680 29,498 30,354
Jeju Bank 1,326,103 243,024 21,122 1,590,249
SH&C Life Insurance 44 38,650 38,511 77,205
e-Shinhan 36 107 2,160 2,303
Shinhan Macquarie - - 1,187 1,187
Shinhan Credit Information - - 1,691 1,691
--------------- ---------- --------- -----------
W 96,102,291 33,148,902 4,562,316 133,813,509
=============== ========== ========= ===========
(*) Net of allowance for loan losses and present value discounts
F-43
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(25) Contribution of Subsidiaries to the Company's Net Earning
Effects under the equity method on the Company's net earnings for the
quarters and six months ended June 30, 2004 and 2003 are as follows:
(in millions of Won)
Six months ended Six months ended
June 30, 2004 June 30, 2003
------------------------- ---------------------------
Amount Ratio (%) Amount Ratio (%)
----------- --------- ------------- ---------
Valuation gain accounted for by the equity method on:
Shinhan Bank W 316,781 64.96 W 151,951 133.55
Chohung Bank 147,403 30.23
Goodmorning Shinhan Securities 10,692 2.19 10,160 8.93
Shinhan Card (3,629) (0.74) (67,283) (59.14)
Shinhan Capital 13,547 2.78 18,416 16.19
Shinhan BNP Paribas ITMC 1,105 0.23 (60) (0.05)
Jeju Bank 956 0.20 1,783 1.57
SH&C Life Insurance (142) (0.03) (809) (0.71)
e-Shinhan (278) (0.06) (523) (0.46)
Shinhan Macquarie 11 - (423) (0.37)
Shinhan Credit Information 1,202 0.25 560 0.49
----------- ------ ------------ ------
487,648 100.00 113,773 100.00
====== ======
Other income 63,045 42,906
Other expense (81,235) (54,256)
----------- ------------
Net earnings for period W 469,458 W 102,423
=========== ============
(in millions of Won)
Quarters ended Quarters ended
June 30, 2004 June 30, 2003
------------------------- ---------------------------
Amount Ratio (%) Amount Ratio (%)
----------- --------- ------------- ---------
Valuation gain accounted for by the equity method on:
Shinhan Bank W 223,799 67.38 W 58,229 118.72
Chohung Bank 96,060 28.92
Goodmorning Shinhan Securities 687 0.21 23,829 48.58
Shinhan Card 1,061 0.32 (38,133) (77.74)
Shinhan Capital 5,008 1.51 2,349 4.79
Shinhan BNP Paribas ITMC 572 0.17 615 1.25
Jeju Bank 3,811 1.15 3,307 6.19
SH&C Life Insurance 184 0.06 (467) (0.95)
e-Shinhan (303) (0.09) (284) (0.58)
Shinhan Macquarie (326) (0.10) (347) (0.71)
Shinhan Credit Information 1,567 0.47 222 0.45
----------- ------ ------------ ------
332,120 100.00 49,051 100.00
====== ======
Other income 29,959 24,381
Other expense (38,237) (27,443)
----------- ------------
Net earnings for period W 323,842 W 45,989
=========== ============
F-44
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(26) Allowance for Loan Losses of the Company and its Subsidiaries
Changes in allowance for loan losses of the Company and its subsidiaries
for the six months ended June 30, 2004 and the year ended December 31,
2003 are as follows:
(in millions of Won)
2004
-------------------------------------------------------------------
Beginning balance Increase (decrease) Ending balance
----------------- ------------------- --------------
The Company W 9,725 545 10,270
Shinhan Bank 866,428 36,745 903,173
Chohung Bank (*) 1,686,350 (144,343) 1,542,007
Goodmorning Shinhan Securities 43,048 (9,276) 33,772
Shinhan Card 118,609 (17,995) 100,614
Shinhan Capital 17,899 3,927 21,826
Shinhan BNP Paribas ITMC 14 2 16
Jeju Bank (*) 35,270 8,795 44,065
SH&C Life Insurance 1 7 8
e-Shinhan 8 6 14
Shinhan Macquarie 98 (14) 84
Shinhan Credit Information 36 (36) -
------------------ -------- ---------
W 2,777,486 (121,637) 2,655,849
================== ======== =========
(*) W33,533 million of additional allowance for loan losses is included in
ending balance.
(in millions of Won)
2003
--------------------------------------------------------------------
Beginning balance Increase (decrease) Ending balance
-------------------- ------------------- --------------
The Company W 3,846 5,879 9,725
Shinhan Bank 565,844 300,584 866,428
Chohung Bank (**) 1,604,607 81,743 1,686,350
Goodmorning Shinhan Securities (*) 87,442 (44,394) 43,048
Shinhan Card 96,074 22,535 118,609
Shinhan Capital (*) 33,787 (15,888) 17,899
Shinhan BNP Paribas ITMC 8 6 14
Jeju Bank (*) (**) 29,318 5,952 35,270
SH&C Life Insurance - 1 1
e-Shinhan 1 7 8
Shinhan Macquarie 22 76 98
Shinhan Credit Information - 36 36
-------------------- ------- ---------
W 2,420,949 356,537 2,777,486
==================== ======= =========
(*) W12,952 million of additional allowance for loan losses is included in
beginning balance.
(**) W28,170 million of additional allowance for loan losses is included in
ending balance.
F-45
Shinhan Financial Group Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
June 30, 2004
(Unaudited)
(27) Economic Environment
In common with other Asian countries, 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
non-consolidated 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.
F-46
THE INDEPENDENT ACCOUNTANT'S AUDIT REPORT (UNDER KOREAN GAAP) TO THE
NON-CONSOLIDATED FINANCIAL STATEMENTS OF GOOD MORNING SHINHAN SECURITIES AS OF
AND FOR THE YEAR ENDED MARCH 31, 2002
1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Good Morning Securities Co., Ltd.
We have audited the accompanying balance sheets of Good Morning Securities Co.,
Ltd. (the "Company") as of March 31, 2002 and 2001, and the related statements
of income, appropriations of retained earnings and cash flows for the years then
ended, expressed in Korean Won. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the Republic of Korea. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of March 31,
2002 and 2001, and the results of its operations, the changes in its retained
earnings and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the Republic of Korea.
The following matters do not affect our audit opinion but will be helpful to the
readers in reasonable decision making.
As discussed in Note 26 to the financial statements, on April 8, 2002, Shinhan
Financial Holding Co.(the "SFHC") made a contract with Asia Pacific Growth Fund
(Y)+/-, LP and a shareholder("the major shareholders") to acquire the Company's
shares held by the major shareholders and to become the largest shareholders, by
holding 28.87% ownership in the Company. The Company plans to hold a
shareholders' meeting on June 27, 2002 for the resolution of the merger between
the Company and Shinhan Securities Co., Ltd. as of July 31, 2002. The Company
will issue 1.9976 shares of common stock for each outstanding common stock of
Shinhan Securities Co., Ltd. A total of 47,637,680 shares of the Company's
common stock will be issued as a result of the merger.
Continued;
2
REPORT OF INDEPENDENT ACCOUNTANTS, Continued
As discussed in Note 18 to the financial statements, the Company sold its
troubled loans related to insolvent companies to Korea Asset Management
Corporation ("KAMCO"), in accordance with a contract made on November 6, 1998
and a supplementary contract made on December 12, 1998. According to the
contracts, if KAMCO fails to exercise its security rights or if the insolvent
companies fail to obtain approval from the court for receivership, KAMCO can
exercise a put option on W65,600 million of the troubled loans. The insolvent
companies obtained approval from the court for the receivership and above
mentioned W65,600 million of troubled loans have been determined to be W61,600
million. Accordingly, on April 25, 2000, the Company entered into a settlement
agreement with KAMCO in the amount of W61,600 million. However, KAMCO can
exercise a put option or require resettlement, if the debt reorganization plans
approved by the court are changed or debts are not collected as scheduled.
During the year ended March 31, 2002, the Company reacquired W32,400 million of
the troubled loans of the companies which failed to make required payments
within due dates. As of March 31, 2002, the potential amounts of put option or
resettlement, which KAMCO can exercise, were estimated to be W29,200 million.
As discussed in Note 18 to the financial statements, the operations of the
Company have been affected, and may continue to be affected for the foreseeable
future, by the general unstable economic conditions in the Republic of Korea and
in the Asia Pacific region. The ultimate effect of these uncertainties of the
financial position of the Company as of the balance sheet date cannot presently
be determined.
The amounts expressed in U.S. dollars, provided solely for the convenience of
the reader, have been translated on the basis set forth in Note 3 to the
accompanying financial statements.
The accompanying financial statements are not intended to present the financial
position, results of operations and cash flows in accordance with accounting
principles and practices generally accepted in countries and jurisdictions other
than the Republic of Korea. The procedures and practices utilized in the
Republic of Korea to audit such financial statements may differ from those
generally accepted and applied in other countries and jurisdictions.
Accordingly, this report and the accompanying financial statements are not
intended for use by those who are not informed about Korean accounting
principles or auditing standards and their application in practice.
Seoul, Korea
April 22, 2002
3
GOOD MORNING SECURITIES CO., LTD.
BALANCE SHEETS
As of March 31, 2002 and 2001
In Thousands of
-----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 2 and 4) W 5,608,060 W 12,033,950 $ 4,228 $ 9,073
Short-term financial instruments (Note 5) 242,170,835 290,102,005 182,578 218,714
Deposits segregated under regulation (Note 6) 677,233,985 437,737,753 510,581 330,020
Marketable securities (Note 7) 187,524,753 247,373,333 141,379 186,500
Loans to customers, less allowance for
doubtful accounts of W475,226 thousand
in 2002 and W45,657 thousand in 2001 47,047,389 4,520,029 35,470 3,408
Accounts receivable from customers,
less allowance for doubtful accounts
of W1,315,332 thousand in 2002
and W157,445 thousand in 2001 72,729,835 15,587,104 54,832 11,751
Other accounts receivable, less
allowance for doubtful accounts
of W96,927 thousand in 2002
and W1,194,058 thousand in 2001 3,523,576 4,391,037 2,656 3,310
Accrued revenue (Note 2) 11,819,054 10,227,357 8,911 7,711
Advance payments 487,563 680,573 367 513
Prepaid expenses 772,220 751,063 582 566
Prepaid income tax 2,024,380 1,775,102 1,526 1,338
Other 150,929 960,477 114 724
-------------- -------------- -------------- --------------
TOTAL CURRENT ASSETS 1,251,092,579 1,026,139,783 943,224 773,628
Investment securities (Notes 2 and 9) 100,974,734 88,741,317 76,127 66,904
Long-term financial instruments (Note 5) 290,491 342,991 219 259
Long-term loans, less allowance for doubtful
accounts of W148,874 thousand in 2002 and
W152,919 thousand in 2001 10,747,731 10,803,480 8,103 8,145
Guarantee deposits 45,853,600 53,256,445 34,570 40,151
Troubled loans, less discount on present value
of W10,271,247 thousand in 2002 and W20,537,739
thousand in 2001, less allowance for doubtful
accounts of W77,073,877 thousand in 2002 and
W86,920,709 thousand
in 2001 (Notes 2 and 10) 45,921,668 24,227,818 34,621 18,266
The accompanying notes are an integral part of these financial statements.
Continued;
4
GOOD MORNING SECURITIES CO., LTD.
AS OF BALANCE SHEETS, Continued
March 31, 2002 and 2001
In Thousands of
-----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
ASSETS, Continued
Collective fund for default loss (Note 11) W 4,950,384 W 3,936,107 $ 3,732 $ 2,968
Property and equipment, net of
accumulated depreciation (Note 12) 168,482,996 176,737,496 127,023 133,246
Intangible assets 8,146,017 4,902,670 6,142 3,696
Deferred income tax assets (Note 23) 16,073,646 26,268,432 12,118 19,804
Other 4,750,076 4,306,246 3,581 3,247
-------------- -------------- -------------- --------------
TOTAL ASSETS W1,657,283,922 W1,419,662,785 $ 1,249,460 $ 1,070,314
============== ============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 13) 121,921,871 135,146,803 91,919 101,890
Securities sold under repurchase agreements
(Note 7) 37,222,780 30,889,000 28,063 23,288
Deposits from customers (Note 14) 639,389,837 389,889,640 482,049 293,946
Other accounts payable 6,202,990 913,912 4,676 689
Securities sold 1,866,040 857,073 1,407 646
Accrued expenses 50,008,797 30,403,645 37,702 22,922
Guarantee deposits received 15,594,802 36,802,390 11,757 27,746
Current maturities of long-term debt
(Notes 15,16 and 17) 40,000,000 97,420,000 30,157 73,447
Other 18,958,436 16,725,875 14,293 12,610
-------------- -------------- -------------- --------------
TOTAL CURRENT LIABILITIES 931,165,553 739,048,338 702,023 557,184
Long-term debt (Note 15) 30,000,000 40,000,000 22,618 30,157
Accrued severance benefits, less retirement
trust of W8,290,668 thousand in 2002 and
W5,995,317 thousand in 2001, less contributions
to the national pension fund of W617,150
thousand in 2002 and
W768,417 thousand in 2001 6,558,547 4,122,270 4,945 3,108
Subordinated bonds (Note 16) - 6,250,000 - 4,712
-------------- -------------- -------------- --------------
TOTAL LIABILITIES 967,724,100 789,420,608 729,586 595,161
-------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements.
Continued;
5
GOOD MORNING SECURITIES CO., LTD.
BALANCE SHEETS, Continued
As of March 31, 2002 and 2001
In Thousands of
------------------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
---------------------------------- ----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS' EQUITY
Capital stock (Note 1);
Common stock W 898,528,235 W 873,528,235 $ 677,419 $ 658,571
Preferred stock 35,100,000 35,100,000 26,463 26,463
Retained earnings (Note 19)
(Net income : W51,105,605 thousand
in 2002 and W71,128,896 thousand
in 2001)
Appropriated 19,788,503 29,682,754 14,919 22,378
Capital adjustments:
Discount on stock issuance (Note 20) (259,397,080) (301,508,275) (195,565) (227,313)
Treasury stock (Note 21) (16,176,736) (16,176,736) (12,196) (12,196)
Gain on valuation of investment
securities (Note 9) 3,075,452 2,674,287 2,319 2,016
Stock purchase option (Note 22) 8,641,448 6,941,912 6,515 5,234
--------------- --------------- --------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 689,559,822 630,242,177 519,874 475,153
--------------- --------------- --------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY W 1,657,283,922 W 1,419,662,785 $ 1,249,460 $ 1,070,314
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
6
GOOD MORNING SECURITIES CO., LTD.
INCOME STATEMENTS
For the years ended March 31, 2002 and 2001
In Thousands of
----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------ ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
OPERATING REVENUE (Note 25)
Commission income W 265,468,373 W 268,933,861 $ 200,142 $ 202,755
Interest and dividends 60,483,989 80,233,297 45,600 60,490
Gain on trading of securities 29,206,427 51,224,164 22,019 38,619
Gain on trading of stock index futures 41,547,117 35,009,556 31,323 26,395
Gain on trading of stock index options 65,653,713 43,913,618 49,498 33,107
Gain on valuation of securities 3,609,474 2,559,688 2,721 1,930
Other - 3,815,249 - 2,876
------------- ------------- ------------- -------------
465,969,093 485,689,433 351,303 366,172
------------- ------------- ------------- -------------
OPERATING EXPENSES (Note 25)
Commission expense 43,560,494 41,392,690 32,841 31,207
Interest expense 28,111,229 44,039,971 21,193 33,203
Loss on trading of securities 32,811,560 56,709,653 24,737 42,754
Loss on trading of stock index futures 33,246,012 29,992,135 25,065 22,612
Loss on trading of stock index options 78,453,353 38,822,010 59,147 29,269
Loss on valuation of securities 9,551,033 7,848,132 7,201 5,917
General and administrative expenses 220,373,721 201,294,452 166,144 151,760
------------- ------------- ------------- -------------
446,107,402 420,099,043 336,328 316,722
------------- ------------- ------------- -------------
OPERATING INCOME 19,861,691 65,590,390 14,975 49,450
OTHER INCOME (EXPENSE)
Office rental income 8,019,899 4,469,064 6,047 3,369
Gain (loss) on foreign currency transaction, net 387,070 (1,217,518) 292 (917)
Gain (loss) on foreign currency translation, net 9,028 (2,147,493) 7 (1,619)
Loss on disposal of investment securities, net (80,502) (3,463,337) (61) (2,611)
Gain (loss) on valuation of investment in
Market Stabilization Fund (Note 9) 32,329,533 (8,751,323) 24,374 (6,598)
Investment securities reduction loss (Note 9) (150,706) (10,000) (114) (8)
Gain (loss) on equity method valuation (Note 9) 1,064,206 (2,461,988) 802 (1,856)
Loss on disposal of property and
equipment, net (144,305) (277,088) (109) (209)
Gain on disposal of investment assets, net 76,217 112,776 57 85
Other, net (71,740) (45,887) (54) (35)
------------- ------------- ------------- -------------
41,438,700 (13,792,794) 31,241 (10,399)
------------- ------------- ------------- -------------
The accompanying notes are an integral part of these financial statements.
Continued;
7
GOOD MORNING SECURITIES CO., LTD.
INCOME STATEMENTS, Continued
For the years ended March 31, 2002 and 2001
In Thousands of
-----------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
ORDINARY INCOME W61,300,391 W51,797,596 $ 46,216 $ 39,051
Extraordinary item
Gain on settlement of troubled
loans sold - 30,000,777 - 22,618
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSES 61,300,391 81,798,373 46,216 61,669
INCOME TAX EXPENSES (Note 23) 10,194,786 10,669,477 7,686 8,044
----------- ----------- ----------- -----------
NET INCOME W51,105,605 W71,128,896 $ 38,530 $ 53,625
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE (Note 24) W 284 W 407 $ 0.21 $ 0.31
(in Korean Won and U.S. Dollars) =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
8
GOOD MORNING SECURITIES CO., LTD.
STATEMENTS OF APPROPRIATIONS OF
RETAINED EARNINGS
For the years ended March 31, 2002 and 2001
Dates of appropriations : May 26, 2001 for 2001
May 25, 2002 for 2002
In Thousands of
-----------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------- -------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
RETAINED EARNINGS BEFORE APPROPRIATIONS
Unappropriated retained earnings
carried over from the prior year W - W - $ - $ -
Net income 51,105,605 71,128,896 38,530 53,625
----------- ----------- ----------- -----------
51,105,605 71,128,896 38,530 53,625
----------- ----------- ----------- -----------
TRANSFER FROM VOLUNTARY RESERVES
Reserve for losses on securities transactions 9,894,251 3,006,741 7,459 2,267
----------- ----------- ----------- -----------
APPROPRIATIONS OF RETAINED EARNINGS
Reserve for losses on securities transactions - 1,762,905 - 1,329
Amortization of discount on stock issuance 60,999,856 72,372,732 45,989 54,563
----------- ----------- ----------- -----------
60,999,856 74,135,637 45,989 55,892
----------- ----------- ----------- -----------
UNAPPROPRIATED RETAINED EARNINGS
CARRIED OVER TO THE SUBSEQUENT YEAR W - W - $ - $ -
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
9
GOOD MORNING SECURITIES CO., LTD.
STATEMENTS OF CASH FLOWS
For the years ended March 31, 2002 and 2001
In Thousands of
----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------ ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income W 51,105,605 W 71,128,896 $ 38,530 $ 53,625
------------- ------------- ------------- -------------
Items to reconcile net income to net cash
provided by operating activities:
Interest income (1,213,115) (2,721,055) (915) (2,051)
Reversal of reserve for losses on guarantees - (3,815,250) - (2,876)
Loss on valuation of securities, net 5,941,559 5,288,445 4,479 3,987
Loss on valuation of options, net (278,983) (21,596) (210) (16)
Depreciation and amortization 20,314,314 18,932,834 15,315 14,274
Provision for severance benefits 6,690,380 6,406,792 5,044 4,830
Bad debt expenses 24,401,901 7,494,663 18,397 5,650
Compensation cost for stock option 1,699,536 3,663,972 1,281 2,762
Loss on foreign currency translation, net - 2,721,689 - 2,052
Loss on disposal of property and
equipment, net 144,305 277,088 109 209
Gain on disposal of investment assets, net (76,217) (112,776) (57) (85)
Loss on disposal of investment securities, net 80,502 3,463,337 61 2,611
Investment securities reduction loss 150,706 10,000 114 8
Loss (gain) on equity method valuation (1,064,206) 2,461,988 (802) 1,856
Loss (gain) on valuation of investment in
Market Stabilization Fund (32,329,533) 8,751,323 (24,374) 6,598
Other, net (840,283) (44,313) (634) (34)
------------- ------------- ------------- -------------
23,620,866 52,757,141 17,808 39,775
------------- ------------- ------------- -------------
Changes in operating assets and liabilities:
Decrease in marketable securities 31,202,250 89,687,442 23,524 67,617
Decrease (increase) in accounts receivable
from customers (58,419,857) 19,451,324 (44,044) 14,665
Decrease (increase) in deposits segregated
under regulation (239,496,232) 132,205,247 (180,561) 99,672
Decrease (increase) in deposits from customers 249,500,197 (205,123,596) 188,103 (154,647)
Decrease (increase) in accrued revenue (1,257,529) 434,226 (948) 327
Decrease in advance payments 193,010 156,663 146 118
Decrease (increase) in prepaid expenses (21,157) 1,516,348 (16) 1,143
Decrease (increase) in prepaid income tax (249,278) 550,539 (188) 415
The accompanying notes are an integral part of these financial statements.
Continued;
10
GOOD MORNING SECURITIES CO., LTD.
STATEMENTS OF CASH FLOWS, Continued
For the years ended March 31, 2002 and 2001
In Thousands of
------------------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
---------------------------------- ----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES, Continued:
Changes in operating assets and liabilities, Continued:
Decrease in deferred income tax assets W 10,194,787 W 10,669,477 $ 7,686 $ 8,044
Increase (decrease) in securities sold 980,427 (404,654) 739 (305)
Increase (decrease) in accrued expenses 19,605,152 (27,016,532) 14,781 (20,368)
Payment of severance benefits (2,056,020) (2,933,565) (1,550) (2,212)
Increase in retirement trust (2,295,351) (1,692,699) (1,731) (1,276)
Refund of contribution to national
pension fund 97,268 168,535 73 127
Other (113,584) 226,800 (85) 171
--------------- --------------- --------------- ---------------
7,864,083 17,895,555 5,929 13,491
--------------- --------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 82,590,554 141,781,592 62,267 106,891
--------------- --------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH INFLOWS FROM INVESTING ACTIVITIES
Decrease in short-term financial instruments 107,189,618 24,584,372 80,813 18,535
Decrease in call loans 775,800,000 574,500,000 584,891 433,127
Decrease in loans to customers 116,244,567 137,813,178 87,639 103,900
Decrease in other accounts receivable 32,586,153 39,710,438 24,567 29,939
Decrease in investment securities 23,496,832 60,124,301 17,715 45,329
Decrease in long-term financial instruments 105,000 160,475 79 121
Decrease in long-term loans 3,963,299 5,387,423 2,988 4,062
Decrease in guarantee deposits 18,320,468 9,766,576 13,812 7,363
Decrease in troubled loans 19,534,548 15,257,118 14,728 11,503
Decrease in collective fund for default loss 207,178 845,720 156 637
Disposal of property and equipment 980,592 263,792 739 199
Other 1,519,465 871,501 1,146 657
--------------- --------------- --------------- ---------------
1,099,947,720 869,284,894 829,273 655,372
--------------- --------------- --------------- ---------------
The accompanying notes are an integral part of these financial statements.
Continued;
11
GOOD MORNING SECURITIES CO., LTD.
STATEMENTS OF CASH FLOWS, Continued
For the years ended March 31, 2002 and 2001
In Thousands of
-----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES, Continued:
CASH OUTFLOWS FROM INVESTING ACTIVITIES
Increase in short-term financial instruments W 59,258,449 W - $ 44,676 $ -
Increase in call loans 775,800,000 454,500,000 584,891 342,657
Increase in loans to customers 159,201,496 130,154,569 120,025 98,126
Increase in other accounts receivable 30,210,399 26,754,353 22,776 20,171
Acquisition of investment securities 7,060,316 39,049,241 5,323 29,440
Increase in long-term financial instruments 52,500 55,500 40 42
Increase in long-term loans 3,903,504 3,806,521 2,943 2,870
Increase in troubled loans 33,468,344 13,140,887 25,233 9,907
Increase in guarantee deposits 10,917,623 7,800,987 8,231 5,881
Increase in collective fund for default loss 1,221,455 792,645 921 597
Acquisition of property and equipment 10,426,824 21,615,527 7,861 16,296
Increase in intangible assets 6,032,186 3,365,629 4,548 2,538
Other 1,042,746 412,841 786 311
-------------- -------------- -------------- --------------
1,098,595,842 701,448,700 828,254 528,836
-------------- -------------- -------------- --------------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 1,351,878 167,836,194 1,019 126,536
-------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH INFLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings 68,243,469 - 51,450 -
Increase in securities sold under
repurchase agreements 6,333,780 - 4,775 -
Increase in other accounts payable 6,060,496 43,371,783 4,569 32,699
Increase in long-term debt 30,000,000 40,000,000 22,617 30,157
Increase in guarantee deposits received 4,520,162 9,379,494 3,408 7,071
-------------- -------------- -------------- --------------
115,157,907 92,751,277 86,819 69,927
-------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements.
Continued;
12
GOOD MORNING SECURITIES CO., LTD.
STATEMENTS OF CASH FLOWS, Continued
For the years ended March 31, 2002 and 2001
In Thousands of
----------------------------------------------------------------
Korean Won U.S. Dollars (Note 3)
------------------------------ ------------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES, Continued:
CASH OUTFLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings W 81,468,401 W 344,196,742 $ 61,421 $ 259,497
Decrease in securities sold under
repurchase agreements - 866,000 - 653
Decrease in current maturities
of long-term debt 97,420,000 - 73,447 -
Decrease in other accounts payable 771,418 65,044,324 581 49,038
Decrease in guarantee deposits received 25,727,750 6,419,124 19,397 4,839
Other 138,660 22,964 104 17
------------- ------------- ------------- -------------
205,526,229 416,549,154 154,950 314,044
------------- ------------- ------------- -------------
NET CASH USED IN FINANCING
ACTIVITIES (90,368,322) (323,797,877) (68,131) (244,117)
------------- ------------- ------------- -------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (6,425,890) (14,180,091) (4,845) (10,690)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR 12,033,950 26,214,041 9,073 19,763
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT
END OF THE YEAR W 5,608,060 W 12,033,950 $ 4,228 $ 9,073
============= ============= ============= =============
The accompanying notes are an integral part of these financial statements.
13
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 2002 and 2001
1. The Company:
Good Morning Securities Co., Ltd. (the "Company") was incorporated in 1973
under the name of HyoSeong Securities Co., Ltd. and was organized pursuant
to the laws of the Republic of Korea to engage in securities trading. The
Company changed its name to Ssangyong Investment & Securities Co., Ltd. in
1983 and to Good Morning Securities Co., Ltd. in 1999. In 1986, the
Company's shares were listed on the Korean Stock Exchange and as of March
31, 2002, all issued and outstanding shares are publicly traded.
In accordance with its articles of incorporation, the Company is
authorized to issue up to 450 million common shares and 150 million
preferred shares. As of March 31, 2002, 179,705,647 shares of common stock
(par value: W5,000 per share) and 7,020,000 shares of preferred stock
(par value: W5,000 per share) were issuED ANd outstanding.
Preferred stocks issued before June 1, 1998 are non-participating,
non-cumulative and non-voting, but may receive an additional dividend of
1% over those paid to common shareholders. Preferred stocks issued after
June 1, 1998 are participating, cumulative and non-voting and may receive
dividends of over 3% as determined by board of directors at issuance.
Preferred stocks are given the right to vote if dividends on preferred
stocks are not paid until such time as dividends on preferred stock are
paid. At March 31, 2002, total outstanding shares of preferred stock
issued before June 1, 1998 are 7,020,000 shares. No preferred stocks were
issued after June 1, 1998.
In accordance with its articles of incorporation, the Company is
authorized to issue up to 50 million shares of preferred stock which can
be converted into common stock during certain periods, and up to 50
million shares of preferred stock which can be redeemed after certain
periods. No such preferred stock has been issued as of March 31, 2002.
In accordance with its articles of incorporation, the Company is
authorized to issue convertible bonds and debentures with stock purchase
options up to W1,000,000 million each. No convertible bonds and
debentures WITh stock purchase options have been issued as of March 31,
2002.
In accordance with its articles of incorporation, the Company may grant
stock purchase options to its employees and directors up to 15% of the
total issued and outstanding shares through a resolution of the
shareholders. As of March 31, 2002, stock purchase options of 8,719,850
shares have been granted and none of stock purchase options have been
exercised (see Note 22).
Continued;
14
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
1. The Company, Continued:
The Company is required to maintain a Capital Adequacy Ratio ("CAR") of
more than 100% pursuant to the Regulation on Securities Industry
prescribed by the Korean Securities and Exchange Law. A CAR is a ratio of
net operating capital to total risks exposed, which include market risk,
counter party risk, fundamental risk, credit concentration risk and risk
adjustments.
2. Summary of Significant Accounting Policies:
The significant accounting policies followed by the Company in the
preparation of its financial statements in accordance with the Financial
Accounting Standards and Financial Accounting Standards for Securities
Industry of the Republic of Korea are summarized below:
Basis of Financial Statement Presentation -
The Company maintains its official accounting records in Korean Won and
prepares statutory financial statements in the Korean language 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 condensed, restructured and translated into English (with
certain expanded descriptions) from the Korean language financial
statements. Some information attached to the Korean language financial
statements, but not required for a fair presentation of the Company's
financial position, results of operations or cash flows, is not presented
in the accompanying financial statements.
Use of Estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported therein. Due to the
inherent uncertainty involved in making estimates, actual results reported
in future periods may differ from those estimates.
Revenue Recognition -
The Company recognizes commissions and trading gains and losses on the
contract date.
Continued;
15
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
Cash and Cash Equivalents -
Checking accounts, passbook accounts, marketable securities and short-term
financial instruments are recorded as cash equivalents if readily
convertible into cash without material transaction cost, and whose risk of
value fluctuation arising from changes in interest rate is not material,
and have maturity of three months or less at the time of acquisition.
Financial Instruments -
Time deposits, installment deposits, restricted bank deposits and other
standardized financial instruments issued by financial institutions are
recorded as financial instruments.
Marketable Securities -
Marketable securities and derivatives (comprising primarily the short
positions on securities) are stated at market value and resulting gain
(loss) is recognized currently.
Allowance for Doubtful Accounts -
The Company provides an allowance for doubtful accounts based on the
aggregate estimated collectibility of amount receivable.
The Regulation on Securities Industry prescribed by the Korean Securities
and Exchange Law provides guidelines for calculating the allowance for
doubtful accounts. These guidelines are meant to represent the minimum
level of allowances that securities firms should maintain. These
guidelines require that all loans and receivables should be classified
based on a number of factors including the financial position of the
debtors, the repayment history, the Company's past relationship and
dealings with the debtors and the value of any security interest. In
accordance with these guidelines, loans and receivables have been
classified as of March 31, 2002 as normal, special attention, substandard,
doubtful or estimated loss.
Continued;
16
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
Allowance for Doubtful Accounts, Continued -
Loans and receivables at March 31, 2002 and 2001 by risk classification
and percentages of loss applied in order to determine the allowance for
doubtful accounts are as follows :
Millions of Won
-------------------
Classification 2002 2001 Percentages of Loss
-------------------- -------- -------- -------------------
Normal W147,308 W 45,562 0.5%
Special attention 2,613 18,650 2%
Substandard 43,611 2,264 20%
Doubtful 34,021 27,887 75%
Estimated loss (*) 57,119 88,251 100%
-------- --------
W284,672 W182,614
======== ========
(*) The amounts include a W 10,271 million and W 20,538 million of the
difference between the book vALUE and the present value of restructured
loans as of March 31, 2002 and 2001, respectively.
Discount on Present Value -
The Company recorded the difference between the previous book value and
the present value discounted at effective interest rate of troubled loans
restructured by a reorganization plan approved by the court or agreed to
by creditors as a discount on present value account. A discount on present
value is amortized over the reorganized maturity periods using the
effective interest rate method.
Investment Securities -
Investments in non-marketable securities excluding subsidiaries and
affiliated companies are stated at cost, except when fair value declines
significantly compared to acquisition cost and is not expected to recover.
If the investment is reduced to the fair value, the reduction loss is
recognized currently. If the fair value recovers, a valuation gain is
recognized currently up to acquisition cost.
Continued;
17
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
Investment Securities, Continued -
Investments in publicly traded companies excluding subsidiaries and
affiliated companies, classified as non-current assets, are stated at
market value. The temporary difference between the market value and the
acquisition cost is treated as a loss or gain on valuation of investment
securities, a component of shareholders' equity. This valuation loss
(gain) is offset against future valuation gain (loss) or netted against
the gain (loss) on disposal of investments. If market value declines
significantly and is not expected to recover, the valuation loss is
recognized currently.
The investment in the Securities Market Stabilization Fund is stated at
market value and the valuation loss (gain) is recognized currently.
Investments in subsidiaries and affiliated companies over which the
Company has management control are stated using the equity method of
accounting. Differences between the initial acquisition cost and the
Company's initial proportionate ownership of the net equity of the
investees ("Adjustment on Investment") are amortized over 5 years using
the straight-line method. Under the equity method, the Company records
changes in its proportionate ownership of the net equity of the investees
as current gain (loss), adjustment to retained earnings or capital
adjustments, depending on the nature of the underlying changes in the net
equity of the investees.
Investments in debt securities are recorded at market value. The
difference between acquisition cost and par value is amortized over the
maturity period using the effective interest rate method. The difference
between the market value and the book value is treated as gain (loss) on
valuation of investment securities, a component of shareholders' equity.
However, investments in debt securities intended to be held to maturity
are stated at cost.
Property, Equipment and Related Depreciation -
Property and equipment are recorded at cost and depreciation is computed
using the straight-line method based on the estimated useful lives of the
assets as described below.
Estimated Useful Lives (years)
------------------------------
Buildings 40 - 60
Vehicles 4
Furniture and fixtures 4
Other 15
Continued;
18
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
Maintenance and Repairs -
Routine maintenance and repairs are charged to expense as incurred.
Expenditures that enhance the value or extend the useful lives of the
related assets are capitalized.
Intangible Assets -
Intangible assets are stated at cost less accumulated amortization.
Amortization is computed using the straight-line method over periods
ranging from 4 to 5 years.
Securities Sold under Repurchase Agreements -
Securities sold under repurchase agreements are stated at their sales
price as liability.
Foreign Currency Translation -
Monetary assets and liabilities denominated in foreign currencies are
translated into Korean Won at exchange rates prevailing at the balance
sheet date (in case of U.S. Dollars at March 31, 2002,
US$1=W1,326.4). Resulting exchange gains or losses are recognized
currently.
Monetary assets and liabilities denominated in foreign currencies at March
31, 2002, comprise the following:
Thousands of Won
------------------------------------------------
Foreign Currency Foreign Currency Foreign Currency
Accounts Amount Korean Won Translation Gain Translation Loss
-------- ---------------- ---------- ---------------- ----------------
Cash and cash equivalents US$2,270,749 W3,011,922 W 9,028 W -
============ ========== ========== ========
Continued;
19
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
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 employment, based on
their length of service and rate of pay at the time of termination.
Accrued severance benefits represent the amount which would be payable
assuming all eligible employees and directors were to terminate their
employment as of the balance sheet date.
Actual payments of severance benefits (including National Pension Fund
remittances) for the years ended March 31, 2002 and 2001 amounted to
W2,056,020 thousand and W2,933,565 thousand, respectively.
The Company deposited a portion of accrued severance benefits with a
retirement trust, which shall only be withdrawn by employees and directors
on their retirement. Deposits made with this retirement trust are deducted
from severance benefits liability. Also, in accordance with the National
Pension Act, a certain portion of accrued severance benefits is remitted
to the National Pension Fund and deducted from the severance benefits
liability. The contributed amount shall be refunded from the National
Pension Fund to employees on their retirement.
Reserve for Losses on Securities Transactions -
In accordance with the revised Korean Securities and Exchange Law as of
January 26, 2002, the Company reverses the reserve for losses on
securities transactions equally over 3 year periods from the year ended
March 31, 2002. The reversed amounts will be added to the unappropriated
retained earnings.
Treasury Stock -
Treasury stock is stated at cost. Gain on disposal of treasury stock is
charged to capital surplus. Loss on disposal of treasury stock is first
offset against gain on disposal of treasury stock, if any, and the
remainder is charged to capital adjustment, a component of shareholders'
equity.
Continued;
20
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
2. Summary of Significant Accounting Policies, Continued:
Discount on Stock Issuance -
When cash inflows (less stock issuance cost) are less than par value of
stock issued, the difference is charged to additional paid-in capital or
capital adjustment, a component of shareholders' equity and amortized
equally over 3 years. Such amortization is charged to unappropriated
retained earnings. However, if there is not sufficient unappropriated
retained earnings, the amortization is deferred to the subsequent year.
Stock Purchase Options -
Compensation cost related stock purchase options is calculated using the
minimum value method which estimates the fair value of the stock purchase
option assuming the volatility of the future stock price is zero. The
compensation cost is allocated over required service periods and charged
to general and administrative expenses.
Accounting for Derivatives -
The Company recorded assets and liabilities related to derivatives in the
accompanying balance sheet and stated them at market value.
Income Tax expense -
The Company applies the deferred method of accounting for income taxes.
Under this method, the future tax effects of temporary differences between
the financial and tax bases of assets and liabilities are reflected in the
balance sheet.
Deferred income tax assets and liabilities are determined using enacted
tax rates in effect for the year in which the differences are expected to
reverse. Current income taxes comprise corporate tax, resident tax and
agriculture and fishery development special surtax.
Earnings Per Share -
Earnings per share are computed based on earnings available to common
shareholders, using the weighted average number of common share
outstanding during the period.
21
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
3. United States Dollar Amounts:
The Company operates primarily in Korean Won and its official accounting
records are maintained in Korean Won. The U.S. Dollar amounts are provided
herein as supplementary information solely for the convenience of the
reader. Won amounts are expressed in U.S. Dollars at the rate of
W1,326.4:US$1, the rate in effect on March 31, 2002. This presentation is
not in accordance with accounting principles generally accepted in either
the Republic of Korea or the United States, and should not be construed as
a representation that the Won amounts shown could be converted, realized
or settled in U.S. Dollars at this rate.
The 2001 U.S. Dollar amounts, which were previously expressed at
W1,328.0:US$1, the rate prevailing on March 31, 2001, have been restated
to reflect the exchange rate in effect on March 31, 2002.
4. Cash and cash equivalents:
Cash and cash equivalents at March 31, 2002 and 2001 comprise the
following:
Annual
Interest Rate (%) Thousands of Won
----------------- -------------------------
2002 2002 2001
----------------- ----------- -----------
Cash on hand and
in checking accounts - W 673,108 W 150,197
Passbook accounts 1 1,923,030 1,176,384
Foreign currency passbook
accounts 0.6-3.9 3,011,922 10,707,369
----------- -----------
W 5,608,060 W12,033,950
=========== ===========
U.S. Dollars equivalent in thousands $ 4,228 $ 9,073
=========== ===========
22
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
5. Financial Instruments:
Financial instruments at March 31, 2002 and 2001 comprise the following:
Annual
Interest Rate (%) Thousands of Won
----------------- ------------------------------
2002 2002 2001
----------------- ------------- -------------
Certificates of deposits 4.6-5.0 W 59,258,449 W -
Time deposits 4.2-4.6 14,434,991 4,809,992
Money market deposit accounts 3.8-8.0 168,727,386 285,592,004
Other deposits - 40,500 43,000
------------- -------------
242,461,326 290,444,996
Long-term financial instruments (290,491) (342,991)
------------- -------------
W 242,170,835 W 290,102,005
============= =============
U.S. Dollars equivalent in thousands $ 182,578 $ 218,714
============= =============
At March 31, 2002, W10,385,000 thousand of time deposit is pledged as
collateral by Franklin Templeton Investment Trust Management Co., Ltd.
("FTITMC") in relation to the sales of beneficiary certificates managed by
FTITMC. (See Notes 7 and 18). Other deposits represent guarantee deposits
for the Company's checking accounts.
23
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
6. Deposits Segregated under Regulation:
Deposits segregated under regulation at March 31, 2002 and 2001 comprise
the following:
Annual
Interest Rate (%) Thousands of Won
----------------- -------------------------------
2002 2002 2001
---- ------------ ------------
Subscription deposits (*) W134,145,499 W 30,240
Deposits for withdrawal of customer deposits (*) 507,100,000 369,400,000
Deposits for withdrawal of customer deposits
for futures and options (*) 15,347,700 28,000,000
Guarantee deposits for futures
and options proprietary trading (*) 3,398,660 7,472,813
Guarantee deposits for futures
and options agency trading (*) 17,242,126 32,834,700
------------ ------------
W677,233,985 W437,737,753
============ ============
U.S. Dollar equivalent in thousands $ 510,581 $ 330,020
============ ============
(*) Annual interest rate was not determined at March 31, 2002, because
depository will pay an interest based on their operating results.
According to the Regulation on Securities Industry prescribed by the Korean
Securities and Exchange Law, the Company is to deposit with the Korean
Securities Finance Corporation ("KSFC") or other banks the amount of deposits
from customers for the customer's claims. Also, the Company is to deposit cash
or securities with Korean Stock Exchange as a guarantee deposit for the
Company's agency and proprietary trading.
24
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
7. Marketable Securities:
Marketable securities at March 31, 2002 and 2001 comprise the following:
Thousands of Won
---------------------------
2002 2001
------------ ------------
Stock W 43,675,954 W 6,686,135
Government and public bonds 106,457,310 39,303,308
Corporate bonds 2,020,260 10,732,053
Beneficiary certificates 33,699,746 190,003,852
Long positions on stock index options 641,294 252,641
Stocks in foreign currency 1,030,189 395,344
------------ ------------
W187,524,753 W247,373,333
============ ============
U.S. Dollar equivalent in thousands $ 141,379 $ 186,500
============ ============
At March 31, 2002, W 7,684,623 thousand of marketable securities is
pledged as collateral for contractual obligations.
Debt securities at March 31, 2002 and 2001 comprise the following:
Thousands of Won
---------------------------------------------------------------------------
2002 2001
------------------------------------------------------------ ------------
Par Acquisition Fair Book Book
Value Cost Value Value Value
-------------- ------------- ------------ ------------ ------------
Government and
public bonds W 105,289,631 W 105,005,637 W106,457,310 W106,457,310 W 39,303,308
Corporate bonds 1,836,600 1,992,934 2,020,260 2,020,260 10,732,053
-------------- ------------- ------------ ------------ ------------
W 107,126,231 W 106,998,571 W108,477,570 W108,477,570 W 50,035,361
============== ============= ============ ============ ============
U.S. Dollar equivalent
in thousands $ 80,765 $ 80,668 $ 81,783 $ 81,783 $ 37,723
============== ============= ============ ============ ============
Continued;
25
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
7. Marketable Securities, Continued:
At March 31, 2002 and 2001, W37,599,328 thousand and W33,006,546
thousand of the above debt securities are secured against securities sold
under repurchase agreements.
As of March 31, 2002, the Company holds beneficiary certificates of
W33,826 million which include W10,869 million of guaranteed bonds issued
by financially troubled companies, including the Daewoo group of
companies. Also, the Company sold beneficiary certificates to customers of
W4,429,310 million which include W8,357 million of the guaranteed bonds
of the above-mentioned companies. The guaranteed bonds may not be repaid
at the book value. The details of the guaranteed bonds of those companies
included in the beneficiary certificates held or sold by the Company are
as follows:
Millions of Won
---------------------------------------------------
Daewoo guaranteed
bonds and
Seoul Guarantee Hynix Semiconductor
Insurance bonds and etc. Total
--------------- -------- -----
Held by the Company W 2,808 W 7,863 W10,671
Sold to customers 8,319 38 8,357
------- ------- -------
W11,127 W 7,901 W19,028
======= ======= =======
U.S. Dollar equivalent in
thousands W 8,389 W 5,957 W14,346
======= ======= =======
The Company made a contract with Franklin Templeton Investment Trust
Management Co., Ltd. to guarantee against the contingent losses that may
result from the beneficiary certificates that include guaranteed bonds
issued by financially troubled companies, such as the Dawoo group
companies. Accordingly, the Company's time deposit of W10,385 million is
held as collateral by Franklin Templeton Investment Trust Management Co.,
Ltd (See Note 5 and 18).
26
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
8. Securities in Custody:
Securities in custody, deposited by customers as collateral for margin
transactions, represent an offset to the customer securities in custody
account. As of March 31, 2002 and 2001, securities in custody comprise the
following:
Thousands of Won
-------------------------
2002 2001
------------ -----------
Equity securities W151,084,023 W83,538,770
Debt securities 154,114 450,140
------------ -----------
W151,238,137 W83,988,910
============ ===========
U.S. Dollar equivalent in thousands $ 114,022 $ 63,321
============ ===========
9. Investment Securities:
Investment securities at March 31, 2002 and 2001 comprise the folloWing:
Thousands of Won
---------------------------------------------------------
2002 2001
------------------------------------------ ------------
Book Percentage of Acquisition Market Value Book
Shares OWnership (%) Cost or Net Equity Value Value
--------- ------------- ------------ ------------ ------------- ------------
(A) Investments in subsidiaries
and affiliated companies
Good Morning Investment
Trust Management
Co., Ltd. 3,000,000 100.0 W 16,481,886 W 14,245,073 W 15,381,185 W 15,583,218
Good Morning Securities
Europe Limited 5,000,000 100.0 6,498,268 4,703,111 4,703,111 5,766,000
Good Morning Securities
USA Inc. 15,000 100.0 3,341,884 6,631,149 6,631,149 4,249,113
Korea Asia Fund
Management Co., Ltd. - - - - - 32,767
Strategic Portfolio
Management (L) Ltd. - - - - - 7,459,193
Venture Gate II
Partnership 800,000 20.0 800,000 786,790 800,000 800,000
------------ ------------ ------------- ------------
27,122,038 26,366,123 27,515,445 33,890,291
------------ ------------ ------------- ------------
Continued;
27
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
9. Investment Securities, Continued:
Thousands of Won
---------------------------------------------------------
2002 2001
------------------------------------------ ------------
Book Percentage of Acquisition Market Value Book
Shares Ownership (%) Cost or Net Equity Value Value
--------- ------------- ------------ ------------- ------------- ------------
(B) Investments in partnerships
Securities Market
Stabilization Fund - 7.7 31,162,927 47,984,873 47,984,873 27,595,758
Korean Stock Exchange - 3.2 2,612,076 19,000,291 2,612,076 2,612,076
Good-KDB 2nd SPC - 6.0 3,000,000 3,114,750 3,000,000 -
Others - 1.0 150 - - 100
----------- ------------ ------------- ------------
36,775,153 70,099,914 53,596,949 30,207,934
----------- ------------ ------------- ------------
(C) Investments in foreign
equity securities
Korea Schroder Fund
Management Limited
- Common Stock 18,375 8.8 43,848 27,026 43,848 43,848
- Preferred Stock 12,833 6.1 25,732 18,949 25,732 25,732
----------- ------------ ------------- ------------
69,580 45,975 69,580 69,580
----------- ------------ ------------- ------------
(D) Investments in equity securities - - 27,177,151 24,741,742 19,792,760 16,117,983
(E) Investments in debt securities - - 3,187,508 - - 2,410,177
(F) Investments in foreign debt
securities - - - - - 6,045,352
----------- ------------ ------------- ------------
W94,331,430 W121,253,754 W 100,974,734 W 88,741,317
=========== ============ ============= ============
U.S. Dollar equivalent in thousands $ 71,118 $ 91,416 $ 76,127 $ 66,904
=========== ============ ============= ============
In accordance With accounting principles generally accepted in the
Republic of Korea, the Company's investments in Venture Gate II
Partnership Was stated at acquisition cost due to the size of their assets
being below the threshold for applying the equity method of accounting.
Continued;
28
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
9. Investment Securities, Continued:
Investment in subsidiaries and affiliated companies are stated using the
equity method and the accumulated net gains as of March 31, 2002 comprise
the folloWing (In thousand Won):
Loss from Capital Current year Adjustment
prior year adjustment gain (loss) Total on investment
----------- ------------- ------------ ------------- -------------
Good Morning Investment
Trust Management
Co., Ltd. W (898,668) W - W (202,033) W (1,100,701) W 1,136,112
Good Morning Securities
USA Inc. (1,169,613) 2,114,700 2,344,178 3,289,265 -
Good Morning Securities
Europe Limited. (3,105,901) 2,388,683 (1,077,939) (1,795,157) -
----------- ------------- ------------ ------------- -------------
W(5,174,182) W 4,503,383 W 1,064,206 W 393,407 W 1,136,112
=========== ============= ============ ============= =============
U.S.Dollar equivalent
in thousands $ (3,901) $ 3,395 $ 802 $ 296 $ 857
=========== ============= ============ ============= =============
As of March 31, 2002, the Company has recorded W1,427,931 thousand of loss
on valuation of investments in publicly traded companies as a capital
adjustment. During the year ended March 31, 2002, the Company currently
recognized W32,329,533 thousand of gain on the valuation of investments in
the Securities Market Stabilization Fund Which are included in the
investments in partnership.
During the year ended March 31, 2002, the Company recorded W150,706
thousand of investments securities reduction loss for investments in
partnerships and debt securities Whose net equity declined significantly
and is not expected to recover.
During the year ended March 31, 2002, the Company is in the process of
liquidating its offshore fund, Strategic Portfolio Management (L) Ltd.,
Which had been recorded at W7,459,193 thousand as investments in foreign
equity securities and collected W13,196,430 thousand. In connection With
this transaction, the Company recognzied W5,737,237 thousand of gain on
disposal of investment securities.
At March 31, 2002, W50,596,949 thousand of investment securities is
pledged as collateral for contractual obligations and borroWings (see Note
13)
29
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
10. Troubled Loans:
Troubled loans at March 31, 2002 and 2001 comprise the folloWing:
Thousands of Won
--------------------------------
2002 2001
--------------- --------------
Receivables for substitution payment W 82,639,056 W 82,742,727
Dishonored bonds 46,400,804 39,230,122
Dishonored notes receivable 4,226,932 9,713,417
--------------- --------------
133,266,792 131,686,266
Less : discount on present value (10,271,247) (20,537,739)
alloWance for doubtful accounts (77,073,877) (86,920,709)
--------------- --------------
W 45,921,668 W 24,227,818
=============== ==============
U.S. Dollar equivalent in thousands $ 34,621 $ 18,266
=============== ==============
At March 31, 2002, troubled loans, Which Were restructured by
reorganization plans, approved by the court or agreed to by creditors
comprise the folloWing:
Millions of Won
--------------------------------------
Date of Discount Book Present Discount on
Approval Maturity Rate(%) Value Value Present Value
----------- ------------ ---------- ----------- ---------- -------------
Receivables for substitution
payment 1997.9.1 2009.11.30
~2002.3.21 ~2013.12.31 11.6~17.5 W 47,373 W 41,053 W 6,320
Dishonored bond 1998.8.27 2010.12.30
~2000.10.20 ~2013.12.30 12.5~14.2 5,969 2,273 3,696
Dishonored notes receivable 2000.9.15 2004.12.31 9.5 1,157 902 255
----------- ---------- ----------
W 54,499 W 44,228 W 10,271
=========== ========== ==========
30
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
11. Collective Fund for Default Loss:
In accordance With the Korean Securities and Exchange LaW, the Company has
deposited With the Korean Stock Exchange and the Korea Securities Dealers
Association an amount equal to 0.001% of its total trading value during
the year related to potential losses on unsettled trading.
12. Property and Equipment:
Property and equipment at March 31, 2002 and 2001 comprise the folloWing:
Thousands of Won
-----------------------------
2002 2001
------------- -------------
Buildings W 140,802,833 W 139,552,125
Vehicles 199,652 213,411
Furniture and fixtures 96,530,121 101,188,828
Other 8,690 8,690
------------- -------------
237,541,296 240,963,054
Less: accumulated depreciation (91,468,562) (87,674,904)
------------- -------------
146,072,734 153,288,150
Land 22,410,262 22,410,262
Construction in progress - 1,039,084
------------- -------------
W 168,482,996 W 176,737,496
============= =============
U.S. Dollar equivalent in thousands $ 127,023 $ 133,246
============= =============
At March 31, 2002, buildings, furniture and fixtures are insured against
fire and other casualty losses of up to W187,746,024 thousand and certain
property has been pledged as collateral up to a maximum of W100,751,112
thousand for several borroWings and leasehold agreements (see Note 15).
As March 31, 2002, land, recorded at cost at W22,410,262 thousand, had a
posted land price issued by the Korean tax authority of W34,782,730
thousand.
31
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
13. Short-Term BorroWings:
Short-term borroWings at March 31, 2002 and 2001 comprise the folloWing:
Annual Interest
Rate (%) Thousands of Won
--------------- ----------------------------
2002 2002 2001
--------------- ------------ ------------
Call money - W - W 81,000,000
Bank overdrafts - - 468,401
General term loans 0.5 50,000,000 -
BorroWings from KSFC 3.0-4.3 61,921,871 53,678,402
Other 7.03 10,000,000 -
------------ ------------
W121,921,871 W135,146,803
============ ============
U.S. Dollar equivalent in thousands $ 91,919 $ 101,890
============ ============
As an authorized member of the Korean Stock Exchange, the Company is
entitled to borroW funds or securities from the KSFC based on the amounts
of deposits segregated under the regulation (see Note 6)
At March 31, 2002, certain securities are pledged as collateral for the
above borroWings (see Note 9).
14. Deposits from Customers:
Deposits from customers at March 31, 2002 and 2001 comprise the folloWing:
Thousands of Won
----------------------------
2002 2001
------------ ------------
Cash deposits received from
customers for securities
brokerage transactions W633,951,190 W386,260,944
Guarantee deposits received
in cash from customers
for margin transactions 5,438,647 3,628,696
------------ ------------
W639,389,837 W389,889,640
============ ============
U.S. Dollar equivalent in thousands $ 482,049 $ 293,946
============ ============
32
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
15. Long-term debt:
Long-term debt at March 31, 2002 and 2001 comprises the folloWing:
Annual
Interest Rate(%) Thousands of Won
----------------------------------------------
2002 2002 2001
------------ ------------ -----------
Debentures 6.86 ~ 8.49 W 70,000,000 W70,000,000
Less: current maturities (40,000,000) (30,000,000)
------------ -----------
W 30,000,000 W40,000,000
============ ===========
U.S. Dollar equivalent in thousands $ 22,618 $ 30,157
============ ===========
The principal portion of debentures matures in 2~3 years and interest is
payable quarterly. Certain property and a blank note are pledged as
collateral for the above debentures (see Notes 12 and 18).
16. Subordinated Bonds:
Subordinated bonds at March 31, 2002 and 2001 comprise the folloWing:
Annual
Interest Rate(%) Thousands of Won
---------------- ----------------------------
Description 2002 Maturity 2002 2001
------------------------ ---------------- -------------- -------- --------------
Subordinated bonds - 2001. 12. 30 W - W 47,500,000
~2002. 01. 13
Subordinated convertible
bonds - 2003. 12. 22 - 6,250,000
-------- --------------
- 53,750,000
Less: Current maturities (-) (47,500,000)
-------- --------------
W - W 6,250,000
======== ==============
U.S. Dollar equivalent in thousands $ - $ 4,712
======== ==============
Continued;
33
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
16. Subordinated Bonds, Continued:
In February 1999, the Company issued convertible bonds of W6,250,000
thousand bearing no interest. The bonds are convertible into common stock
during the period from February 12, 2000, through December 21, 2003, at
the conversion price of W1,250 per share. All convertible bonds issued in
February 1999 Were converted into common stock on July 30, 2001.
17. Subordinated BorroWings:
Subordinated borroWings at March 31, 2002 and 2001 comprise the folloWing:
Annual
Interest Rate(%) Thousands of Won
---------------- -----------------------------------
Creditor 2002 Maturity 2001 2000
----------------------------------- ---------------- ---------- ---- ------------
International Finance
Corporation - 2001.12.15 W - W 19,920,000
Less: current maturities (-) (19,920,000)
---- ------------
W - W -
==== ============
U.S. Dollar equivalent in thousands $ - $ -
==== ============
18. Commitments and Contingencies:
As of March 31, 2002, the Company has entered into overdraft borroWing
agreements up to W346,000 million With seventeen Korean commercial banks.
As of March 31, 2002, the Company has provided blank checks and notes to
certain financial institutions as collateral for borroWings and
contractual obligations.
As of March 31, 2002, the Company is contingently liable for guarantees of
indebtedness of Good Morning Securities USA Inc. amounting to W15,916,800
thousand.
Continued;
34
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
18. Commitments and Contingencies, Continued:
The Company made a contract With Franklin Templeton Investment Trust
Management Co., Ltd. to guarantee against the contingent losses that may
result from the beneficiary certificates that include guaranteed bonds
issued by financially troubled companies, such as the DaWoo group
companies. Accordingly, the Company's time deposit of W10,385 million is
held as collateral by Franklin Templeton Investment Trust Management Co.,
Ltd (See Note 5 and 7).
In the normal course of business, the Company has been named as the
defendant in several legal actions. As of March 31, 2002, 21 laWsuits
claiming an aggregate W4,134 million have been filed against the Company.
As of March 31, 2002, the ultimate outcomes of these matters cannot be
reasonably determined. Accordingly, no adjustments have been made in the
accompanying financial statements in relation to these matters.
The Company sold its troubled loans related to insolvent companies to
Korea Asset Management Corporation ("KAMCO"), in accordance With a
contract made on November 6, 1998 and a supplementary contract made on
December 12, 1998. According to the contracts, if KAMCO fails to exercise
its security rights or if the insolvent companies fail to obtain approval
from the court for receivership, KAMCO can exercise a put option on
W65,600 million of the troubled loans. The insolvent companies obtained
approval from the court for the receivership and above mentioned W65,600
million of troubled loans have been determined to be W61,600 million.
Accordingly, on April 25, 2000, the Company entered into a settlement
agreement With KAMCO in the amount of W61,600 million. HoWever, KAMCO can
exercise a put option or require resettlement, if the debt reorganization
plans approved by the court are changed or debts are not collected as
scheduled. During the year ended March 31, 2002, the Company reacquired
W32,400 million of the troubled loans of the companies Which failed to
make required payments Within due dates. As of March 31, 2002, the
potential amounts of put option or resettlement, Which KAMCO can exercise,
Were estimated to be W29,200 million.
Beginning in 1997, Korea and other countries in the Asia Pacific region
experienced a severe contraction in substantially all aspects of their
economies. This situation is commonly referred to as the 1997 Asian
financial crisis. In response to this situation, the Korean government and
the private sector began implementing structural reforms to historical
business practices.
The Korea economy continues to experience difficulties, particularly in
the areas of restructuring private enterprises and reforming the banking
industry. The Korea government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The
banking industry is currently undergoing consolidation and uncertainty
exists With regard to the continued availability of financing. The Company
may be either directly or indirectly affected by the situation described
above.
35
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
19. Retained Earnings:
Retained earnings at March 31, 2002 and 2001 comprise the folloWing:
Thousands of Won
--------------------------
2002 2001
----------- -----------
Appropriated:
Reserve for losses on
securities transactions W19,788,503 W29,682,754
Unappropriated: - -
----------- -----------
W19,788,503 W29,682,754
=========== ===========
U.S. Dollar equivalent in thousands $ 14,919 $ 22,378
=========== ===========
The deficit of the Company Was offset by the paid-in capital in excess of
par value that amount to W86,980,274 thousand at May 29, 1999 in
accordance With shareholder's resolution.
20. Discount on Stock Issuance:
On December 21, 1998, the Company issued 104,000,000 shares of common
stock at W1,250 per share amounting to W130,000,000 thousand and recorded
W390,000,000 thousand of amount paid less than par value as a discount on
stock issuance. The Company also recorded W132,173,483 thousand of
discount on stock issuance in relation to conversion of subordinated
convertible bonds into common stock during the period from January 18,
2000 to January 30, 2001 and W18,888,661 thousand of discount on stock
issuance in relation to conversion of subordinated convertible bonds into
common stock as of July 30, 2001 (see Note 16). The discount on stock
issuance is to be amortized over 3 years using the straight-line method
through appropriations of retained earnings. W148,292,476 thousand,
W72,372,732 thousand and W60,999,856 thousand of discount on stock
issuance have been amortized in accordance With the shareholders'
resolution on May 27, 2000, May 26, 2001 and May 25, 2002, respectively.
21. Treasury Stock:
In accordance With the Korean Securities and Exchange LaW, the Company has
acquired 1,157,120 shares of preferred stock as of March 31, 2002. The
treasury stocks Will be sold at the discretion of management.
36
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
22. Stock Purchase Options:
In accordance With a resolution of shareholders, the Company granted stock
purchase options to certain employees and directors.
Details of the stock purchase options outstanding as of March 31, 2002 are
as follows:
Stock Purchase Options Granted
---------------------------------------------------------------------------------------
1 2 3 4 5 6
------------ ------------ ------------ ----------- ----------- -----------
- Granted common shares 2,875,950 1,593,900 2,200,000 450,000 1,500,000 100,000
- Grant date 1999.2.4 1999.2.4 1999.12.17 2000.5.27 2001.5.26 2002.1.31
- Exercizable period 2002.2.4 2002.2.4 2002.12.17 2003.5.27 2004.5.26 2005.1.31
~2009.2.3 ~2009.2.3 ~2007.12.16 ~2008.5.26 ~2009.5.25 ~2010.1.30
- Required service periods 3 years 3 years 3 years 3 years 3 years 3 years
- Exercise price per share W 7,640 W 7,085 W 7,590 W 5,000 W 5,850 W 6,040
- Compensation cost per share W 1,254 W 1,707 W 1,042 W - W 1,147 W 664
The compensation cost for stock options recognized using the minimum value
method Was W1,699,536 thousand for the year ended March 31, 2002 and Will
be W1,765,081 thousand for the periods thereafter.
If the Company had adopted the fair value method, the following
assumptions Would have been used.
Stock Purchase Options Granted
----------------------------------------------------------------------------
1 2 3 4 5 6
---------- ---------- ---------- --------- --------- ---------
- Risk-free interest rate 7.00% 7.00% 8.89% 8.99% 6.42% 6.03%
- Expected exercise periods 3 years 3 years 3 years 3 years 3 years 3 years
- Expected volatility 116.87% 116.87% 137.35% 137.82% 118.09% 86.35%
- Expected dividend yield 0% 0% 0% 0% 0% 0%
- Stock price at grant date W 7,490 W 7,490 W 6,920 W 3,175 W 6,000 W 5,730
- Compensation cost per share W 5,374 W 5,546 W 5,437 W 2,372 W 4,498 W 3,291
The Company's net income (loss) and earnings (loss) per share which the
Company would have been disclosed under the fair value method are as shown
below.
For the year ended
------------------------------------------------
2001. 3.31 2000. 3.31 1999. 3.31
----------- ---------------- ---------------
Net income (loss) (in thousand of) W61,638,264 W 208,298,572 W (130,705,615)
Earnings (loss) per share 353 1,198 (2,036)
37
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
23. Income Tax Expenses:
The statutory income tax rate applicable to the Company, including
resident tax surcharges is 30.8%. The income tax expenses for the years
ended March 31, 2002 and 2001 consist of the folloWing:
Thousands of Won
--------------------------
2002 2001
----------- -----------
Current income tax expenses W - W -
Deferred income tax expenses 10,194,786 10,669,477
----------- -----------
W10,194,786 W10,669,477
=========== ===========
U.S. Dollar equivalent in thousands $ 7,686 $ 8,044
=========== ===========
The folloWing table reconciles the expected amount of income tax expenses
based on statutory rates to the actual amount of income tax expenses
recorded by the Company:
Thousands of Won
------------------------------
2002 2001
------------ ------------
Income before income tax expenses W 61,300,391 W 81,798,373
Statutory tax rate 30.8% 30.8%
------------ ------------
Expected tax expenses at statutory tax rate 18,880,520 25,193,899
Income tax on permanent differences (9,281,054) (14,524,422)
Other 595,320 -
------------ ------------
Income tax expenses W 10,194,786 W 10,669,477
============ ============
Effective tax rate 16.63% 13.04%
============ ============
Continued;
38
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
23. Income Tax Expenses, Continued:
Changes in temporary differences betWeen amounts reported for financial
accounting and income tax purposes for the year ended March 31, 2002 and
deferred income tax asset (liability) as of March 31, 2002 and 2001 are as
folloWs:
Thousands of Won
--------------------------------------------------------------------------------
2002 2001
--------------------------------------------------------------- ------------
Income Deferred Income Deferred
Beginning Increase Ending Tax Asset Tax Asset
Balance (Decrease) Balance (Liability) (Liability)
------------ ------------ ------------ ------------ ------------
Marketable securities W 2,845,515 W (7,250,706) W (4,405,191) W (1,308,342) W 876,419
Accrued revenue (1,443,042) 558,748 (884,294) (262,635) (444,457)
AlloWance for doubtful accounts 11,110,678 23,409,043 34,519,721 10,252,357 3,422,089
Investment securities 45,284,490 (31,018,505) 14,265,985 4,236,998 13,947,623
Property and equipment 12,425 6,886 19,311 5,735 3,827
Intangible assets 6,831 1,162 7,993 2,374 2,104
Discount on present value 20,537,739 (11,113,098) 9,424,641 2,799,118 6,325,624
Securities sold (14,940) 43,480 28,540 8,477 (4,602)
Accrued severance benefits 154,226 196,175 350,401 104,069 47,502
Other 6,793,195 (6,000,283) 792,912 235,495 2,092,303
------------ ------------ ------------ ------------ ------------
W 85,287,117 W(31,167,098) W 54,120,019 W 16,073,646 W 26,268,432
============ ============ ============ ============ ============
U.S. Dollar equivalent in thousands $ 64,300 $ (23,498) $ 40,802 $ 12,118 $ 19,804
============ ============ ============ ============ ============
In accordance With change in the statutory tax rate form 30.8% to 29.7%,
the Company recognized W595,320 thousand of its deferred income tax assets
as income tax expense.
The Company periodically assesses its ability to recover deferred tax
assets. In the event of significant uncertainty regarding the Company's
ultimate ability to recover such assets, a valuation alloWance is recorded
to reduce the asset to its estimated net realizable value.
At March 31, 2002, the amount of tax loss carried forWard is W81,552,566
thousand. As the realizability of tax loss carried forWard cannot be
assured, the Company has not recognized deferred tax assets for tax loss
carried forWard as of March 31, 2002 and 2001.
39
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
24. Earnings Per Share:
Earnings per share and diluted earnings per share are calculated as
folloWs:
(1) Earnings per share -
Thousands of Won
----------------------------
2002 2001
------------ ------------
Net income W 51,105,605 W 71,128,896
Weighted average number of common shares 179,705,647 174,705,647
------------ ------------
Earnings per share in Korean Won W 284 W 407
============ ============
U.S. Dollar equivalent $ 0.21 $ 0.31
============ ============
(2) Diluted earnings per share -
Thousands of Won
----------------------------
2002 2001
------------ ------------
Net income W 51,105,605 W 71,128,896
Weighted average number of common shares &
common equivalent shares 179,714,730 179,705,647
------------ ------------
Diluted earnings per share in Korean Won W 284 W 396
============ ============
U.S. Dollar equivalent $ 0.21 $ 0.30
============ ============
40
GOOD MORNING SECURITIES CO., LTD.
NOTES TO FINANCIAL STATEMENTS, Continued
March 31, 2002 and 2001
25. Related Party Transactions:
Significant transactions With related parties for the years ended March
31, 2002 and 2001 and the related receivables and payables as of March 31,
2002 and 2001 are as folloWs:
Thousands of Won
-------------------------
2002 2001
----------- ----------
Revenue W18,887,117 W5,647,766
Expenses 13,091,603 3,184,118
Receivables 1,153 -
Payable 8,728,540 3,036,422
26. Subsequent Events:
On April 8, 2002, Shinhan Financial Holding Co.(the "SFHC") made a
contract With Asia Pacific GroWth Fund (Y)+/-, LP and a shareholder("the
major shareholders") to acquire the Company's shares held by the major
shareholders and to become the largest shareholders, by holding 28.87%
oWnership in the Company. The Company plans to hold a shareholders'
meeting on June 27, 2002 for the resolution of the merger betWeen the
Company and Shinhan Securities Co., Ltd. as of July 31, 2002. The Company
Will issue 1.9976 shares of common stock for each outstanding common stock
of Shinhan Securities Co., Ltd. A total of 47,637,680 shares of the
Company's common stock Will be issued as a result of the merger.
27. Reclassification of 2001 amounts:
Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation. These reclassifications have no effect
on previously reported net income or shareholders' equity.
41
THE INDEPENDENT ACCOUNTANT'S AUDIT REPORT (UNDER KOREAN GAAP) TO THE
NON-CONSOLIDATED FINANCIAL STATEMENTS OF GOOD MORNING SHINHAN SECURITIES AS OF
AND FOR THE YEAR ENDED MARCH 31, 2003
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
Good Morning Shinhan Securities Co., Ltd.
(formerly, Good Morning Securities Co., Ltd.)
We have audited the accompanying non-consolidated balance sheets of Good Morning
Shinhan Securities Co., Ltd. (formerly, Good Morning Securities Co., Ltd.) as of
March 31, 2003 and 2002, and the related non-consolidated statements of income,
appropriations of retained earnings and cash flows for the years then ended,
expressed in Korean Won. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the Republic of Korea. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the non-consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Good Morning
Shinhan Securities Co., Ltd. (formerly, Good Morning Securities Co., Ltd.) as of
March 31, 2003 and 2002, and the results of its operations, the changes in its
retained earnings and its cash flows for the years then ended, in conformity
with financial accounting standards generally accepted in the Republic of Korea.
The following matters will be helpful to the readers in reasonable decision
making:
Continued;
1
INDEPENDENT AUDITOR'S REPORT, Continued
As discussed in Note 3 to the financial statements, on April 8, 2002, Shinhan
Financial Group Co., Ltd. entered into a contract with Asia Pacific Growth Fund
II, LP and H&Q KGRF Investment Ltd. (the major shareholders) to acquire the
Company's shares and to become the largest shareholders, by holding 28.87%
ownership in the Company. The Company held a shareholders' meeting on June 27,
2002 for the resolution of the merger between the Company and Shinhan Securities
Co., Ltd. as of July 31, 2002. The Company issued 1.9976 shares of common stock
for each outstanding common stock of Shinhan Securities Co., Ltd. A total of
47,637,680 shares of the Company's common stock has been issued as a result of
the merger. The Company paid $13,293 million to employees as bonus and
compensation of $11,882 million to those who settled the accumulated retirement
pay as a lump sum in relation to the above merger.
As discussed in Note 20 and 21 to the financial statements, following the
resolution from the board of directors meeting held on October 25, 2002 and the
shareholders' meeting held on December 12, 2002, the Company extinguished
54,480,716 shares of treasury common stock and 2,771,874 shares of treasury
preferred stock which were purchased to comply with dissenting shareholders'
exercise of claims for stock purchase in relation to merger with Shinhan
Securities Co., Ltd. Also, the Company reduced outstanding shares by the ratio
of 1:0.9 as of December 24, 2002.
As discussed in Note 23 to the financial statements, the Company did not
recognized deferred tax assets for tax loss carried forward until March 31,
2002. However, as the Company's ordinary income for the past three years has
been positive and the future average income is expected to surpass the tax loss
carried forward as of March 31, 2003, the Company recorded $9,622 million of
deferred income tax assets in relation to the tax loss carried forward.
As discussed in Note 17 to the financial statements, the Company sold its
troubled loans related to insolvent companies to Korea Asset Management
Corporation ("KAMCO"), in accordance with a contract made on November 6, 1998
and a supplementary contract made on December 12, 1998. According to the
contracts, if KAMCO fails to exercise its security rights or if the insolvent
companies fail to obtain approval from the court for receivership, KAMCO can
exercise a put option on $65,600 million of the troubled loans. The insolvent
companies obtained approval from the court for the receivership and above
mentioned $65,600 million of troubled loans have been determined to be $61,600
million. Accordingly, on April 25, 2000, the Company entered into a settlement
agreement with KAMCO in the amount of $61,600 million. However, KAMCO can
exercise a put option or require resettlement, if the debt reorganization plans
approved by the court are changed or debts are not collected as scheduled. As of
March 31, 2003, the potential amounts of put option or resettlement, which KAMCO
can exercise, were estimated to be $29,200 million.
Continued;
2
INDEPENDENT AUDITOR'S REPORT, Continued
As discussed in Note 7 to the financial statements, as of March 31, 2003, the
Company holds marketable securities of $6,338 billion, which include $1,808
billion of corporate bonds issued by credit card companies and capital
companies. As of March 31, 2003, the credit card companies and capital companies
are experiencing financial difficulties and the corporate bonds issued by the
above companies are suffering from liquidity problem. The accompanying financial
statements do not reflect any uncertainties as the ultimate result cannot
presently be estimated.
As discussed in Note 25 to the financial statements, the Company had revenue of
$12,498 million and expenses of $13,983 million with related parties for the
year ended March 31, 2003 and a receivables and payables as of March 31, 2003
were $45,714 million and $188,611 million, respectively.
As discussed in Note 26 to the financial statements, on March 27, 2003, the
Company signed a contract with Global Korea Investment I Limited to sell its
troubled loans of Hunex Co., Ltd. (book value as of March 31, 2003: $41,806
million) at $48,900 million, which will come into force on April 25, 2003.
Accounting principles and auditing standards and their application in practice
vary among countries. The accompanying financial statements are not intended to
present the financial position, results of operations and cash flows in
conformity with accounting principles and practices generally accepted in
countries and jurisdictions other than the Republic of Korea. In addition, the
procedures and practices utilized in the Republic of Korea to audit such
financial statements may differ from those generally accepted and applied in
other countries. Accordingly, this report and the accompanying financial
statements are for use by those who are knowledgeable about Korean accounting
principles or auditing standards and their application in practice.
Seoul, Korea
April 16, 2003
This report is effective as of April 16, 2003, the audit report date. Certain
subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the
accompanying financial statements and notes thereto. Accordingly, the readers of
the audit report should understand that there is a possibility that the above
audit report may have to be revised to reflect the impact of such subsequent
events or circumstances, if any.
3
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED BALANCE SHEETS
March 31, 2003 and 2002
In Thousands of Korean Won
------------------------------
2003 2002
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 2 and 4) W 2,305,069 W 5,608,060
Short-term financial instruments (Note 5) 88,811,027 242,170,835
Deposits segregated under regulation (Note 6) 699,933,548 677,233,985
Marketable securities (Note 7) 633,768,190 183,929,609
Loans to customers, less allowance for
doubtful accounts of W296,975 thousand
in 2003 and W475,226 thousand in 2002 61,297,112 47,047,389
Accounts receivable from customers,
less allowance for doubtful accounts
of W3,117,303 thousand in 2003
and W1,315,332 thousand in 2002 27,654,135 72,729,835
Other accounts receivable, less
allowance for doubtful accounts
of W427,133 thousand in 2003
and W96,927 thousand in 2002 18,164,240 3,523,576
Accrued revenue (Note 2) 7,811,054 11,819,054
Advance payments 6,483,645 3,441,413
Prepaid expenses 920,526 772,220
Prepaid income tax 1,686,189 2,024,380
Other 682,903 792,223
------------- -------------
TOTAL CURRENT ASSETS 1,549,517,638 1,251,092,579
Investment securities (Notes 2 and 9) 71,140,207 100,974,734
Long-term financial instruments (Note 5) 69,600 290,491
Long-term loans, less allowance for doubtful
accounts of W1,069,408 thousand in 2003 and
W148,874 thousand in 2002 16,155,266 10,747,731
Guarantee deposits 59,955,642 45,853,600
Troubled loans, less discount on present value
of W1,163,407 thousand in 2003 and W10,271,247 thousand in 2002, less allowance
for doubtful accounts of W28,578,208 thousand in 2003 and W77,073,877 thousand
in 2002 (Notes 2 and 10) 44,218,886 45,921,668
The accompanying notes are an integral part of these non-consolidated
financial statements.
Continued;
4
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED BALANCE SHEETS, Continued
March 31, 2003 and 2002
In Thousands of Korean Won
--------------------------------
2003 2002
-------------- --------------
ASSETS, Continued
Collective fund for default loss (Note 11) W 5,631,420 W 4,950,384
Property and equipment, net of
accumulated depreciation (Note 12) 205,993,365 168,482,996
Intangible assets 10,638,777 8,146,017
Deferred income tax assets (Note 23) 27,460,755 16,073,646
Other 6,210,215 4,750,076
-------------- --------------
TOTAL ASSETS W1,996,991,771 W1,657,283,922
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings (Note 13) 312,200,000 121,921,871
Securities sold under repurchase agreements (Note 7) 151,723,270 37,222,780
Deposits from customers (Note 14) 721,484,743 639,389,837
Other accounts payable 1,057,488 6,202,990
Securities sold 4,968,234 1,866,040
Accrued expenses 25,292,474 50,008,797
Guarantee deposits received 22,072,160 15,594,802
Current maturities of long-term debt - 40,000,000
Other 27,125,288 18,958,436
-------------- --------------
TOTAL CURRENT LIABILITIES 1,265,923,657 931,165,553
Long-term debt (Note 15) 30,000,000 30,000,000
Accrued severance benefits, less retirement
trust of W5,838,296 thousand in 2003 and W8,290,668 thousand in 2002, less
contributions to the national pension fund of W38,658 thousand in 2003 and
W617,150 thousand in 2002 3,417,699 6,558,547
Subordinated bonds (Note 16) 130,000,000 -
-------------- --------------
TOTAL LIABILITIES 1,429,341,356 967,724,100
-------------- --------------
The accompanying notes are an integral part of these non-consolidated
financial statements.
Continued;
5
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED BALANCE SHEETS, Continued
March 31, 2003 and 2002
In Thousands of Korean Won
----------------------------------
2003 2002
---------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY, Continued
COMMITMENTS AND CONTINGENCIES (Note 17)
SHAREHOLDERS' EQUITY
Capital stock (Notes 1, 3 and 21)
Common stock W 777,881,750 W 898,528,235
Preferred stock 19,116,570 35,100,000
Capital surplus
Gain on capital reduction 14,750 -
Retained earnings (Note 18)
(Net income : W10,878,554 thousand
in 2003 and W51,105,605 thousand
in 2002)
Appropriated 9,894,251 19,788,503
Capital adjustments:
Discount on stock issuance (Note 19) (238,313,741) (259,397,080)
Treasury stock (Note 20) (14,584,127) (16,176,736)
Gain on valuation of investment securities (Note 9) 3,264,201 3,075,452
Stock purchase option (Note 22) 10,376,761 8,641,448
---------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 567,650,415 689,559,822
---------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY W 1,996,991,771 W 1,657,283,922
================ ===============
The accompanying notes are an integral part of these non-consolidated financial
statements.
6
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED INCOME STATEMENTS
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
------------------------------
2003 2002
-------------- --------------
OPERATING REVENUE (Note 25)
Commission income W 248,188,794 W 265,468,373
Interest and dividends 67,423,175 60,483,989
Gain on trading of securities 44,193,155 29,206,427
Gain on trading of stock index futures 120,055,865 41,547,117
Gain on trading of stock index options 130,184,044 65,653,713
Gain on trading of OTC derivatives 2,753,473 -
Gain on valuation of securities 1,241,275 3,609,474
Other 10,642,535 -
-------------- --------------
624,682,316 465,969,093
-------------- --------------
OPERATING EXPENSES (Note 25)
Commission expense 34,958,577 43,560,494
Interest expense 26,177,245 28,111,229
Loss on trading of securities 54,996,099 32,811,560
Loss on trading of stock index futures 107,704,785 33,246,012
Loss on trading of stock index options 118,292,957 78,453,353
Loss on trading of OTC derivatives 2,561,235 -
Loss on valuation of securities 6,034,181 9,551,033
General and administrative expenses 275,320,949 220,373,721
-------------- --------------
626,046,028 446,107,402
-------------- --------------
OPERATING INCOME (LOSS) (1,363,712) 19,861,691
OTHER INCOME (EXPENSE)
Office rental income 7,940,497 8,019,899
Gain (loss) on foreign currency transaction, net (241,090) 387,070
Gain (loss) on foreign currency translation, net 477 9,028
Loss on disposal of investment securities, net 6,450,810 (80,502)
Gain (loss) on valuation of investment in
Market Stabilization Fund (Note 9) (4,958,900) 32,329,533
Investment securities reduction loss (Note 9) (1,014,020) (150,706)
Gain (loss) on equity method valuation (Note 9) (1,413,398) 1,064,206
Loss on disposal of property and equipment, net (113,755) (144,305)
Gain on disposal of investment assets, net - 76,217
Other, net 251,514 (71,740)
-------------- --------------
6,902,135 41,438,700
-------------- --------------
The accompanying notes are an integral part of these non-consolidated financial
statements.
Continued;
7
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED INCOME STATEMENTS, Continued
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
------------------------------
2003 2002
------------- --------------
ORDINARY INCOME W 5,538,423 W 61,300,391
Extraordinary gain (loss) - -
------------- --------------
INCOME BEFORE INCOME TAX EXPENSES 5,538,423 61,300,391
Income tax expenses (Note 23) (5,340,131) 10,194,786
------------- --------------
NET INCOME W 10,878,554 W 51,105,605
============= ==============
EARNINGS PER COMMON SHARE (Note 24) W 68 W 316
(in Korean Won) ============= ==============
The accompanying notes are an integral part of these non-consolidated financial
statements.
8
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED STATEMENTS OF APPROPRIATION OF
RETAINED EARNINGS
for the years ended March 31, 2003 and 2002
Dates of appropriations : May 30, 2003 and Mary 25, 2002
for the years ended March 31, 2003 and
2002, respectively
In Thousands of Korean Won
------------------------------
2003 2002
-------------- -------------
RETAINED EARNINGS BEFORE APPROPRIATION
Unappropriated retained earnings
carried over from the prior year W - W -
Net income 10,878,554 51,105,605
-------------- -------------
10,878,554 51,105,605
-------------- -------------
TRANSFER FROM VOLUNTARY RESERVES
Reserve for losses on securities transactions 9,894,252 9,894,251
-------------- -------------
APPROPRIATIONS OF RETAINED EARNINGS
Amortization of discount on stock issuance 20,772,806 60,999,856
-------------- -------------
20,772,806 60,999,856
-------------- -------------
UNAPPROPRIATED RETAINED EARNINGS
CARRIED OVER TO THE SUBSEQUENT YEAR W - W -
============== =============
The accompanying notes are an integral part of these non-consolidated financial
statements.
9
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
-----------------------------------
2003 2002
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income W 10,878,554 W 51,105,605
---------------- ----------------
Items not involving operating cash flows:
Interest income (2,329,379) (1,213,115)
Loss on valuation of securities, net 4,792,906 5,941,559
Loss on valuation of options, net (7,150) (278,983)
Depreciation and amortization 28,492,054 20,314,314
Provision for severance benefits 23,832,980 6,690,380
Bad debt expenses - 24,401,901
Reversal of allowance for doubtful accounts (10,599,805) -
Compensation cost for stock option 1,735,312 1,699,536
Loss on disposal of property and equipment, net 113,755 144,305
Gain on disposal of investment assets, net - (76,217)
Loss on disposal of investment securities, net (6,450,810) 80,502
Investment securities reduction loss 1,014,020 150,706
Loss (gain) on equity method valuation 1,413,398 (1,064,206)
Loss (gain) on valuation of investment in
Market Stabilization Fund 4,958,900 (32,329,533)
Other, net 423,185 (840,283)
---------------- ----------------
47,389,366 23,620,866
---------------- ----------------
Changes in operating assets and liabilities:
Decrease (increase) in marketable securities (292,681,447) 31,202,250
Decrease (increase) in accounts receivable
from customers 57,913,491 (58,419,857)
Decrease (increase) in deposits segregated
under regulation 139,143,315 (239,496,232)
Decrease (increase) in deposits from customers (92,951,315) 249,500,197
Decrease (increase) in accrued revenue 7,335,666 (1,257,529)
Decrease (increase) in advance payments (1,881,660) 193,010
Increase in prepaid expenses (147,025) (21,157)
Decrease (increase) in prepaid income tax 338,192 (249,278)
The accompanying notes are an integral part of these non-consolidated financial
statements.
Continued;
10
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
------------------------------------
2003 2002
--------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES, Continued:
Changes in operating assets and liabilities, Continued:
Decrease (increase) in deferred income tax assets W (5,494,301) W 10,194,787
Increase in securities sold 4,182,987 980,427
Increase (decrease) in accrued expenses (36,575,136) 19,605,152
Payment of severance benefits (30,266,575) (2,056,020)
Decrease (increase) in retirement trust 2,469,825 (2,295,351)
Refund of contribution to national pension fund 633,093 97,268
Other (3,645,797) (113,584)
--------------- -----------------
(251,626,687) 7,864,083
--------------- -----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (193,358,767) 82,590,554
--------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH INFLOWS FROM INVESTING ACTIVITIES
Decrease in short-term financial instruments 156,479,808 107,189,618
Decrease in call loans 1,662,500,000 775,800,000
Decrease in loans to customers 240,009,340 116,244,567
Decrease in other accounts receivable 82,653,793 32,586,153
Decrease in investment securities 54,834,638 23,496,832
Decrease in long-term financial instruments 262,991 105,000
Decrease in long-term loans 3,994,371 3,963,299
Decrease in guarantee deposits 43,121,900 18,320,468
Decrease in troubled loans 14,124,158 19,534,548
Decrease in collective fund for default loss 1,049,896 207,178
Disposal of property and equipment 298,954 980,592
Cash inflows from business combination 506,276 -
Other 250,240 1,519,465
--------------- -----------------
2,260,086,365 1,099,947,720
--------------- -----------------
The accompanying notes are an integral part of these non-consolidated financial
statements.
Continued;
11
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
------------------------------------
2003 2002
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES, Continued:
CASH OUTFLOWS FROM INVESTING ACTIVITIES
Increase in short-term financial instruments W - W 59,258,449
Increase in call loans 1,667,500,000 775,800,000
Increase in loans to customers 247,026,744 159,201,496
Increase in other accounts receivable 61,074,690 30,210,399
Acquisition of investment securities 6,611,510 7,060,316
Increase in long-term financial instruments - 52,500
Increase in long-term loans 5,590,579 3,903,504
Increase in troubled loans 1,096,913 33,468,344
Increase in guarantee deposits 41,662,835 10,917,623
Increase in collective fund for default loss 1,047,829 1,221,455
Acquisition of property and equipment 14,869,330 10,426,824
Increase in intangible assets 4,096,287 6,032,186
Other 416,993 1,042,746
----------------- ----------------
2,050,993,710 1,098,595,842
----------------- ----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 209,092,655 1,351,878
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH INFLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings 187,328,129 68,243,469
Increase in securities sold under repurchase agreements 95,049,150 6,333,780
Increase in other accounts payable - 6,060,496
Increase in long-term debt - 30,000,000
Increase in guarantee deposits received 8,937,836 4,520,162
Increase in subordinated bonds 130,000,000 -
----------------- ----------------
421,315,115 115,157,907
----------------- ----------------
The accompanying notes are an integral part of these non-consolidated financial
statements.
Continued;
12
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
for the years ended March 31, 2003 and 2002
In Thousands of Korean Won
----------------------------------
2003 2002
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES, Continued:
CASH OUTFLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings W - W 81,468,401
Decrease in current maturities of long-term debt 40,000,000 97,420,000
Decrease in other accounts payable 23,699,248 771,418
Decrease in guarantee deposits received 3,399,478 25,727,750
Increase in treasury stock 373,205,286 -
Other 47,982 138,660
--------------- ----------------
440,351,994 205,526,229
--------------- ----------------
NET CASH USED IN FINANCING ACTIVITIES (19,036,879) (90,368,322)
--------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,302,991) (6,425,890)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 5,608,060 12,033,950
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR W 2,305,069 W 5,608,060
=============== ================
The accompanying notes are an integral part of these non-consolidated financial
statements.
13
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003 and 2002
1. The Company:
Good Morning Shinhan Securities Co., Ltd. (the "Company") was incorporated in
1973 under the name of HyoSeong Securities Co., Ltd. and was organized
pursuant to the laws of the Republic of Korea to engage in securities
trading. The Company changed its name to Ssangyong Investment & Securities
Co., Ltd. in 1983 and to Good Morning Securities Co., Ltd. in 1999. The
Company merged with Shinhan Securities Co., Ltd. as of July 31, 2002 changed
its name to Good Morning Shinhan Securities Co., Ltd. In 1986, the Company's
shares were listed on the Korean Stock Exchange and as of March 31, 2003, all
issued and outstanding shares are publicly traded.
In accordance with its articles of incorporation, the Company is authorized
to issue up to 450 million common shares and 150 million preferred shares. As
of March 31, 2003, 155,576,350 shares of common stock (par value: W5,000 per
share) and 3,823,314 shares of preferred stock (par value: W5,000 per share)
were issued anD outstanding.
Preferred stocks issued before June 1, 1998 are non-participating,
non-cumulative and non-voting, but may receive an additional dividend of 1%
over those paid to common shareholders. Preferred stocks issued after June 1,
1998 are participating, cumulative and non-voting and may receive dividends
of over 3% as determined by board of directors at issuance. Preferred stocks
are given the right to vote if dividends on preferred stocks are not paid
until such time as dividends on preferred stocks are paid. At March 31, 2003,
total outstanding shares of preferred stock issued before June 1, 1998 are
3,823,314 shares. No preferred stocks were issued after June 1, 1998.
In accordance with its articles of incorporation, the Company is authorized
to issue up to 50 million shares of preferred stock which can be converted
into common stock during certain periods, and up to 50 million shares of
preferred stock which can be redeemed after certain periods. No such
preferred stock has been issued as of March 31, 2003.
In accordance with its articles of incorporation, the Company is authorized
to issue convertible bonds and debentures with stock purchase options up to
W1,000,000 million each. No convertible bonds and debentures witH
stock purchase options have been issued as of March 31, 2003.
In accordance with its articles of incorporation, the Company may grant stock
purchase options to its employees and directors up to 15% of the total issued
and outstanding shares through a resolution of the shareholders. As of March
31, 2003, stock purchase options of 9,016,992 shares have been granted and
none of stock purchase options have been exercised (see Note 22).
Continued;
14
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
1. The Company, Continued:
The Company is required to maintain a Capital Adequacy Ratio ("CAR") of more
than 100% pursuant to the Regulation on Securities Industry prescribed by the
Korean Securities and Exchange Law. A CAR is a ratio of net operating capital
to total risks exposed, which include market risk, counter party risk,
fundamental risk, credit concentration risk and risk adjustments.
2. Summary of Significant Accounting Policies:
The significant accounting policies followed by the Company in the
preparation of its non-consolidated financial statements in accordance with
the Financial Accounting Standards and Financial Accounting Standards for
Securities Industry of the Republic of Korea are summarized below:
Basis of Financial Statement Presentation -
The Company maintains its official accounting records in Korean Won and
prepares statutory financial statements in the Korean language in conformity
with financial accounting standards generally accepted in the Republic of
Korea. The accompanying financial statements have been condensed,
restructured and translated into English from the Korean language
non-consolidated financial statements. 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. Certain information attached to
the Korean language financial statements, that are not required for a fair
presentation of the Company's financial position, results of operations or
cash flows, are not presented in the accompanying financial statements.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may differ from those estimates.
Revenue Recognition -
The Company recognizes commissions and trading gains and losses on the
contract date.
Continued;
15
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
Cash and Cash Equivalents -
Checking accounts, passbook accounts, marketable securities and short-term
financial instruments are recorded as cash equivalents if readily convertible
into cash without material transaction cost, and whose risk of value
fluctuation arising from changes in interest rate is not material, and have
maturity of three months or less at the time of acquisition.
Financial Instruments -
Time deposits, installment deposits, restricted bank deposits and other
standardized financial instruments issued by financial institutions are
recorded as financial instruments.
Marketable Securities -
Marketable securities and derivatives (comprising primarily the short
positions on securities) are stated at market value and resulting gain (loss)
is recognized currently.
Allowance for Doubtful Accounts -
The Company provides an allowance for doubtful accounts based on the
aggregate estimated collectibility of amount receivable.
The Regulation on Securities Industry prescribed by the Korean Securities and
Exchange Law provides guidelines for calculating the allowance for doubtful
accounts. These guidelines are meant to represent the minimum level of
allowances that securities firms should maintain. These guidelines require
that all loans and receivables should be classified based on a number of
factors including the financial position of the debtors, the repayment
history, the Company's past relationship and dealings with the debtors and
the value of any security interest. In accordance with these guidelines,
loans and receivables have been classified as of March 31, 2003 as normal,
special attention, substandard, doubtful or estimated loss.
Continued;
16
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
Allowance for Doubtful Accounts, Continued -
Loans and receivables at March 31, 2003 and 2002 by risk classification and
percentages of loss applied in order to determine the allowance for doubtful
accounts are as follows :
Millions of Won
-------------------------
Classification 2003 2002 Percentages of Loss
-------------------- ---------- ------------ -------------------
Normal W 174,939 W 147,308 0.5%
Special attention - 2,613 2%
Substandard 3,464 43,611 20%
Doubtful 129 34,021 75%
Estimated loss (*) 37,354 57,119 100%
---------- ------------
W 215,886 W 284,672
========== ============
(*) The amounts include a W1,163 million and W10,271 million of the difference
between the book value AND the present value of restructured loans as of
March 31, 2003 and 2002, respectively.
Discount on Present Value -
The Company recorded the difference between the previous book value and the
present value discounted at effective interest rate of troubled loans
restructured by a reorganization plan approved by the court or agreed to by
creditors as a discount on present value account. A discount on present value
is amortized over the reorganized maturity periods using the effective
interest rate method.
Investment Securities -
Investments in non-marketable securities excluding subsidiaries and
affiliated companies are stated at cost, except when fair value declines
significantly compared to acquisition cost and is not expected to recover. If
the investment is reduced to the fair value, the reduction loss is recognized
currently. If the fair value recovers, a valuation gain is recognized
currently up to acquisition cost.
Continued;
17
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
Investment Securities, Continued -
Investments in publicly traded companies excluding subsidiaries and
affiliated companies, classified as non-current assets, are stated at market
value. The temporary difference between the market value and the acquisition
cost is treated as a loss or gain on valuation of investment securities, a
component of shareholders' equity. This valuation loss (gain) is offset
against future valuation gain (loss) or netted against the gain (loss) on
disposal of investments. If market value declines significantly and is not
expected to recover, the valuation loss is recognized currently.
The investment in the Securities Market Stabilization Fund is stated at
market value and the valuation loss (gain) is recognized currently.
Investments in subsidiaries and affiliated companies over which the Company
has management control are stated using the equity method of accounting.
Differences between the initial acquisition cost and the Company's initial
proportionate ownership of the net equity of the investees ("Adjustment on
Investment") are amortized over 5 years using the straight-line method. Under
the equity method, the Company records changes in its proportionate ownership
of the net equity of the investees as current gain (loss), adjustment to
retained earnings or capital adjustments, depending on the nature of the
underlying changes in the net equity of the investees.
Investments in debt securities are recorded at market value. The difference
between acquisition cost and par value is amortized over the maturity period
using the effective interest rate method. The difference between the market
value and the book value is treated as gain (loss) on valuation of investment
securities, a component of shareholders' equity. However, investments in debt
securities intended to be held to maturity are stated at cost.
Property, Equipment and Related Depreciation -
Property and equipment are recorded at cost and depreciation is computed
using the straight-line method based on the estimated useful lives of the
assets as described below.
Estimated Useful Lives (years)
------------------------------
Buildings 40 - 60
Vehicles 4
Furniture and fixtures 4
Other 15
Continued;
18
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
Maintenance and Repairs -
Routine maintenance and repairs are charged to expense as incurred.
Expenditures that enhance the value or extend the useful lives of the related
assets are capitalized.
Intangible Assets -
Intangible assets are stated at cost less accumulated amortization.
Amortization is computed using the straight-line method over periods ranging
from 4 to 5 years.
Securities Sold under Repurchase Agreements -
Securities sold under repurchase agreements are stated at their sales price
as liability.
Foreign Currency Translation -
Monetary assets denominated in foreign currencies are translated into Korean
won at the basic rates in effect at the balance sheet date (in the case of
U.S.Dollars, W1,252.9:US$1 as of March 31, 2003) and resulting exchange
losses and gains recognized currently.
Monetary assets denominated in foreign currencies at March 31, 2003, comprise
the following:
Thousands of Won
----------------------------------------------
Foreign Currency Foreign Currency Foreign Currency
Accounts Amount Korean Won Translation Gain Translation Loss
------------------------- ---------------- ---------- ---------------- ----------------
Cash and cash equivalents US$ 39,437.08 W 49,411 W 600 W 123
================ ========== ================ ================
Continued;
19
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
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 employment, based on
their length of service and rate of pay at the time of termination. Accrued
severance benefits represent the amount which would be payable assuming all
eligible employees and directors were to terminate their employment as of the
balance sheet date.
Actual payments of severance benefits (including National Pension Fund
remittances and retirement trust remittances) for the years ended March 31,
2003 and 2002 amounted to W30,266,575 thousand and W2,056,020 thousand,
respectively. The amount W30,266,575 thousand includes the compensation of
W11,882,154 thousANd to those who settled the accumulated retirement pay as a
lump sum in relation to the merger with Shinhan Securities Co., Ltd.
The Company deposited a portion of accrued severance benefits with a
retirement trust, which shall only be withdrawn by employees and directors on
their retirement. Deposits made with this retirement trust are deducted from
severance benefits liability. Also, in accordance with the National Pension
Act, a certain portion of accrued severance benefits is remitted to the
National Pension Fund and deducted from the severance benefits liability. The
contributed amount shall be refunded from the National Pension Fund to
employees on their retirement.
Reserve for Losses on Securities Transactions -
In accordance with the revised Korean Securities and Exchange Law as of
January 26, 2002, the Company reverses the reserve for losses on securities
transactions equally over 3 year periods from the year ended March 31, 2002.
The reversed amounts will be added to the unappropriated retained earnings.
Treasury Stock -
Treasury stock is stated at cost. Gain on disposal of treasury stock is
charged to capital surplus. Loss on disposal of treasury stock is first
offset against gain on disposal of treasury stock, if any, and the remainder
is charged to capital adjustment, a component of shareholders' equity.
Continued;
20
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
2. Summary of Significant Accounting Policies, Continued:
Discount on Stock Issuance -
When cash inflows (less stock issuance cost) are less than par value of
stock issued, the difference is charged to additional paid-in capital or
capital adjustment, a component of shareholders' equity and amortized
equally over 3 years. Such amortization is charged to unappropriated
retained earnings. However, if there is not sufficient unappropriated
retained earnings, the amortization is deferred to the subsequent year.
Stock Purchase Options -
Compensation cost related stock purchase options is calculated using the
minimum value method which estimates the fair value of the stock purchase
options assuming the volatility of the future stock price is zero. The
compensation cost is allocated over required service periods and charged
to general and administrative expenses.
Accounting for Derivatives -
The Company recorded assets and liabilities related to derivatives in the
accompanying balance sheet and stated them at market value.
Income Tax expense -
The Company applies the deferred method of accounting for income taxes.
Under this method, the future tax effects of temporary differences between
the financial and tax bases of assets and liabilities are reflected in the
balance sheet.
Deferred income tax assets and liabilities are determined using enacted
tax rates in effect for the year in which the differences are expected to
reverse. Current income taxes comprise corporate tax, resident tax and
agriculture and fishery development special surtax.
Earnings Per Share -
Earnings per share are computed based on earnings available to common
shareholders, using the weighted average number of common share
outstanding during the period.
21
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
3. Business Combination:
On April 8, 2002, Shinhan Financial Group Co. Ltd. entered into a contract
with Asia Pacific Growth Fund II, LP and H&Q KGRF Investment Ltd. (the
major shareholders) to acquire the Company's shares and to become the
largest shareholders, by holding 28.87% ownership in the Company. The
Company held a shareholders' meeting on June 27, 2002 for the resolution
of the merger between the Company and Shinhan Securities Co., Ltd. as of
July 31, 2002. The Company issued 1.9976 shares of common stock for each
outstanding common stock of Shinhan Securities Co., Ltd. A total of
47,637,680 shares of the Company's common stock has been issued as a
result of the merger.
The Company applied the method of Merger Between Subsidiaries specified in
the Accounting Standard for Business Combination. The aggregate
acquisition price was W238,541,052 thousand, which is same as the
net asset value acquired. The fair value of the stock was determined based
on the net asset value in the consolidated financial statements of the
Shinhan Financial Group Co., Ltd. (see Note 19). Following is a condensed
balance sheet showing the fair values of the assets acquired and the
liabilities assumed as of the date of acquisition:
Thousands of Won
--------------------------
Assets W 480,342,699
Liabilities (241,801,647)
--------------------------
Net assets acquired W 238,541,052
--------------------------
Acquisition costs W 238,541,052
--------------------------
The condensed financial statements of Shinhan Securities Co., Ltd. as of
March 31, 2002 and July 31, 2002 comprise the following:
Thousands of Won
----------------------------------------
2002.3.31 2002.7.31
---------------- -----------------
Current assets W 522,518,660 W 382,467,779
Non-current assets 100,694,249 97,874,920
---------------- -----------------
Total assets W 623,212,909 W 480,342,699
================ =================
Current liabilities W 387,000,695 W 241,611,816
Long-term liabilities - 189,831
---------------- -----------------
Total liabilities 387,000,695 241,801,647
Total shareholders' equity 236,212,214 238,541,052
---------------- -----------------
Total liabilities and shareholders' equity W 623,212,909 W 480,342,699
================ =================
Continued;
22
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
3. Business Combination, Continued:
Thousands of Won
---------------------------------------
2001.4.1-2002.3.31 2002.4.1-2002.7.31
----------------- ------------------
Operating revenue W 288,526,399 W 140,311,149
Operating expenses 247,141,645 154,425,857
Other income 15,997,111 19,990,596
Other expenses 11,410,857 2,904,144
Extraordinary gain - -
Extraordinary loss 159,077 30,716
Income tax expenses 14,139,101 1,236,437
----------------- -----------------
Net income W 31,672,830 W 1,704,591
================= =================
The Company paid W13,293 million to employees as bonus and
compensation of W11,882 million to those who settled the
accumulated retirement pay as a lump sum. These expenses are recorded as
general and administrative expenses.
4. Cash and cash equivalents:
Cash and cash equivalents at March 31, 2003 and 2002 comprise the
following:
Annual
Interest Rate (%) Thousands of Won
------------------ ------------------------------------------------
2003 2003 2002
------------------ ----------------------- ----------------------
Cash on hand and in checking accounts - W 641,927 W 673,108
Passbook accounts 0.1-0.5 1,613,731 1,923,030
Foreign currency passbook accounts 0.5 49,411 3,011,922
----------------------- ----------------------
W 2,305,069 W 5,608,060
======================= ======================
23
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
5. Financial Instruments:
Financial instruments at March 31, 2003 and 2002 comprise the following:
Annual
Interest Rate (%) Thousands of Won
------------------ ----------------------------------------------
2003 2003 2002
------------------ -------------------- --------------------
Certificates of deposits 4.45 W 989,027 W 59,258,449
Time deposits 4.3-5.2 13,622,000 14,434,991
Money market deposit accounts 3.7-4.0 74,200,000 168,727,386
Other deposits - 69,600 40,500
------------------- ----------------
88,880,627 242,461,326
Long-term financial instruments (69,600) (290,491)
------------------- ----------------
W 88,811,027 W 242,170,835
=================== ================
At March 31, 2003, W7,702,000 thousand of time deposit is pledged
as collateral by Franklin Templeton Investment Trust Management Co., Ltd.
("FTITMC") in relation to the sales of beneficiary certificates managed by
FTITMC. (see Notes 7 and 17). Other deposits represent guarantee deposits
for the Company's checking accounts.
24
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
6. Deposits Segregated under Regulation:
Deposits segregated under regulation at March 31, 2003 and 2002 comprise
the following:
Annual
Interest Rate (%) Thousands of Won
----------------- -------------------------------------
2003 2003 2002
----------------- --------------- ---------------
Subscription deposits (*) W 8,922,500 W 134,145,499
Deposits for withdrawal of customer deposits (*) 658,900,000 522,447,700
Guarantee deposits for securities borrowed 3.3 7,326,000 -
Guarantee deposits for futures and options trading (*) 24,785,048 20,640,786
--------------- ---------------
W 699,933,548 W 677,233,985
=============== ===============
(*) Annual interest rate was not determined at March 31, 2003, because
depository will pay an interest based on their operating results.
According to the Regulation on Securities Industry prescribed by the
Korean Securities and Exchange Law, the Company is to deposit with the
Korean Securities Finance Corporation ("KSFC") or other banks the amount
of deposits from customers for the customer's claims. Also, the Company is
to deposit cash or securities with Korean Stock Exchange as a guarantee
deposit for the Company's agency and proprietary trading.
25
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
7. Marketable Securities:
Marketable securities at March 31, 2003 and 2002 comprise the following:
Thousands of Won
------------------------------------
2003 2002
-------------- -----------------
Stock W 2,370,873 W 43,675,954
Government and public bonds 292,289,338 103,503,460
Corporate bonds 16,954,597 2,020,260
Beneficiary certificates 273,358,942 33,699,746
Negotiable commerical papers 48,794,440 -
Stocks in foreign currency - 1,030,189
-------------- -----------------
W 633,768,190 W 183,929,609
============== =================
At March 31, 2003, W68,060,957 thousand of marketable securities is
pledged as collateral for contractual obligations.
Debt securities at March 31, 2003 and 2002 comprise the following:
Thousands of Won
---------------------------------------------------------------------------------
2003 2002
---------------------------------------------------------------- ------------
Par Acquisition Fair Book Book
Value Cost Value Value Value
------------- ------------- ------------ ------------ ------------
Government and public bonds W 296,426,023 W 291,851,769 W292,289,338 W292,289,338 W103,503,460
Corporate bonds 17,000,000 16,998,854 16,954,597 16,954,597 2,020,260
------------- ------------- ------------ ------------ ------------
W 313,426,023 W 308,850,623 W309,243,935 W309,243,935 W105,523,720
============= ============= ============ ============ ============
Continued;
26
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
7. Marketable Securities, Continued:
At March 31, 2003 and 2002, W149,234,947 thousand and W37,599,328 thousand
of the above debt securities are secured against securities sold under
repurchase agreements.
As of March 31, 2003, the Company holds beneficiary certificates of
W275,591 million which include W13,910 million of guaranteed bonds issued
by financially troubled companies, including the Daewoo group of
companies. Also, the Company sold beneficiary certificates to customers of
W3,834,670 million, which include W4,097 million of the guaranteed bonds
of the above-mentioned companies. The guaranteed bonds may not be repaid
at the book value. The details of the guaranteed bonds of those companies
included in the beneficiary certificates held or sold by the Company are
as follows:
Millions of Won
---------------------------------------------------------------
Daewoo guaranteed
bonds and
Seoul Guarantee Hynix Semiconductor
Insurance bonds and etc. Total
------------------- ------------------- -----------
Held by the Company W 5,544 W 8,366 W 13,910
Sold to customers 4,097 - 4,097
------------------- ------------------- -----------
W 9,641 W 8,366 W 18,007
=================== =================== ===========
The Company made a contract with Franklin Templeton Investment Trust
Management Co., Ltd. to guarantee against the contingent losses that may
result from the beneficiary certificates that include guaranteed bonds
issued by financially troubled companies, such as the Dawoo group
companies. Accordingly, the Company's time deposit of W7,702 million is
held as collateral by Franklin Templeton Investment Trust Management Co.,
Ltd (see Notes 5 and 17).
As of March 31, 2003, the Company holds marketable securities of W6,338
billion, which include W1,808 billion of corporate bonds issued by credit
card companies and capital companies. As of March 31, 2003, the credit
card companies and capital companies are experiencing financial
difficulties and the corporate bonds issued by the above companies are
suffering form liquidity problem. The accompanying financial statements do
not reflect any uncertainties as the ultimate result cannot presently be
estimated.
27
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
8. Securities in Custody:
Securities in custody, deposited by customers as collateral for margin
transactions, represent an offset to the customer securities in custody
account. As of March 31, 2003 and 2002, securities in custody comprise the
following:
Thousands of Won
---------------------------------------
2003 2002
------------------- -------------
Equity securities W 155,032,036 W151,084,0230
Debt securities 128,347 154,114
------------------- -------------
W 155,160,383 W 151,238,137
=================== =============
9. Investment Securities:
Investment securities at March 31, 2003 and 2002 comprise the following:
Thousands of Won
------------------------------------------------------
2003 2002
----------------------------------------- -----------
Percentage of Acquisition Market Value Book Book
Shares Ownership (%) Cost or Net Equity Value Value
--------- ------------- ------------- ------------- ---------- -----------
(A) Investments in subsidiaries and affiliated
companies
Shinhan Financial Group
Co., Ltd. 388 0.00 W 6,518 W 3,996 W 3,996 W -
Good Morning Investment
Trust Management
Co., Ltd. - - - - - 15,381,185
Good Morning Securities
Europe Limited 5,000,000 100.00 6,498,268 3,730,679 3,730,679 4,703,111
Good Morning Securities
USA Inc. 15,000 100.00 3,341,884 5,947,516 5,947,516 6,631,149
Venture Gate(Y)+/-
Partnership 800,000 20.00 800,000 - - 800,000
------------ ------------- ---------- -----------
10,646,670 9,682,191 9,682,191 27,515,445
------------ ------------- ---------- -----------
Continued;
28
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
9. Investment Securities, Continued:
Thousands of Won
----------------------------------------------------------
2003 2002
------------------------------------------- ------------
Percentage of Acquisition Market Value Book Book
Shares Ownership (%) Cost or Net Equity Value Value
------------- ------------- ------------ ------------- ------------ ------------
(B) Investments in partnerships
Securities Market
Stabilization Fund - 10.28 W 23,320,751 W 29,557,052 W 29,557,052 W 47,984,873
Korean Stock Exchange - 3.40 2,612,076 21,133,652 2,612,076 2,612,076
Good-KDB 2nd SPC - 6.0 3,000,000 3,109,551 3,000,000 3,000,000
Other - - 890 740 740 -
------------ ------------ ------------ ------------
28,933,717 53,800,995 35,169,868 53,596,949
------------ ------------ ------------ ------------
(C) Investments in foreign equity
securities
Korea Schroder Fund
Management Limited
- Common Stock - - - - - 43,848
- Preferred Stock - - - - - 25,732
------------ ------------ ------------ ------------
- - - 69,580
(D) Investments in equity securities - 31,004,893 28,776,587 19,721,148 19,792,760
(E) Investments in debt securities 9,791,008 6,567,000 6,567,000 -
------------ ------------ ------------ ------------
W 80,376,288 W 98,826,773 W 71,140,207 W100,974,734
============ ============ ============ ============
Continued;
29
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
9. Investment Securities, Continued:
Investment in subsidiaries and affiliated companies are stated using the
equity method and the accumulated net gains as of March 31, 2003 and 2002
comprise the following (In thousand won):
2003
----------------------------------------------------------------
Gain (loss) from Capital Current year
prior year adjustment gain (loss) Total
---------------- ------------- ------------ -------------
Good Morning Securities
USA Inc. W 1,174,565 W 1,739,573 W (308,506) W 2,605,632
Good Morning Securities
Europe Limited (4,183,840) 2,538,713 (1,122,462) (2,767,589)
---------------- ------------- ------------ -------------
W (3,009,275) W 4,278,286 W (1,430,968) W (161,957)
================ ============= ============ =============
2002
----------------------------------------------------------------------------------
Loss from Capital Current year Adjustment
prior year adjustment gain (loss) Total on investment
---------------- ------------- ------------ ------------- --------------
Good Morning Investment
Trust Management
Co., Ltd. W (898,668) W - W (202,033) W (1,100,701) W 1,136,112
Good Morning Securities
USA Inc. (1,169,613) 2,114,700 2,344,178 3,289,265 -
Good Morning Securities
Europe Limited (3,105,901) 2,388,683 (1,077,939) (1,795,157) -
---------------- ------------- ------------ ------------- --------------
W (5,174,182) W 4,503,383 W 1,064,206 W 393,407 W 1,136,112
================ ============= ============ ============= ==============
As of March 31, 2003, the Company has recorded W1,014,084 thousand
of loss on valuation of investments in publicly traded companies as a
capital adjustment. During the year ended March 31, 2003, the Company
currently recognized W4,958,000 thousand of loss on the valuation
of investments in the Securities Market Stabilization Fund which are
included in the investments in partnership.
During the year ended March 31, 2003, the Company recorded
W1,014,020 thousand of investments securities reduction loss for
investments in affiliated companies and equity securities, whose net
equity declined significantly and is not expected to recover.
On October 22, 2002, the Company sold 100% ownership of Good Morning
Investment Trust Management Co., Ltd. (book value of W15,398,755
thousand, to Prudential Corporation Holdings Ltd. at W25,000,000
thousand.
During the year ended March 31, 2003, the Company sold 1,500,000 shares of
Shinhan Life Insurance Co., Ltd. (book value of Nil) to 5 individuals
at W7,500,000 thousand.
At March 31, 2003, W32,169,128 thousand of investment securities is
pledged as collateral for the contractual obligations and borrowings (see
Note 13).
30
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
10. Troubled Loans:
Troubled loans at March 31, 2003 and 2002 comprise the following:
Thousands of Won
--------------------------------
2003 2002
---------------- -------------
Advance payments for the customers W 62,032,223 W 82,639,056
Dishonored bonds 11,928,278 46,400,804
Dishonored notes receivable - 4,226,932
---------------- -------------
73,960,501 133,266,792
Less : discount on present value (1,163,407) (10,271,247)
allowance for doubtful accounts (28,578,208) (77,073,877)
---------------- -------------
W 44,218,886 W 45,921,668
================ =============
At March 31, 2003, troubled loans, which were restructured by
reorganization plans, approved by the court or agreed by creditors
comprise the following:
Millions of Won
---------------------------------------
Date of Discount Book Present Discount on
Approval Maturity Rate(%) Value Value Present Value
----------- ------------ ----------- -------- --------- -------------
Dishonored bonds 2000.10.20 2010.12.30 14.2 W 2,158 W 995 W 1,163
======== ========= =============
31
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
11. Collective Fund for Default Loss:
In accordance with the Korean Securities and Exchange Law, the Company has
deposited with the Korean Stock Exchange and the Korea Securities Dealers
Association an amount equal to 0.001% of its total trading value during
the year related to potential losses on unsettled trading.
12. Property and Equipment:
Property and equipment at March 31, 2003 and 2002 comprise the following:
Thousands of Won
------------------------------------
2003 2002
--------------- ---------------
Buildings W 159,597,647 W 140,802,833
Vehicles 113,444 199,652
Furniture and fixtures 139,682,110 96,530,121
Other 8,690 8,690
--------------- ---------------
299,401,891 237,541,296
Less: accumulated depreciation (135,617,692) (91,468,562)
--------------- ---------------
163,784,199 146,072,734
Land 42,209,166 22,410,262
--------------- ---------------
W 205,993,365 W 168,482,996
=============== ===============
At March 31, 2003, buildings, furniture and fixtures are insured against
fire and other casualty losses of up to W165,216,000 thousand and
certain property has been pledged as collateral up to a maximum of
W101,988,122 thousand for several borrowings and leasehold
agreements (see Note 15).
At March 31, 2003, land, recorded at cost at W42,209,166 thousand,
had a posted land price issued by the Korean tax authority of
W43,918,336 thousand.
32
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
13. Short-Term Borrowings:
Short-term borrowings at March 31, 2003 and 2002 comprise the following:
Annual Interest
Rate (%) Thousands of Won
--------------- ----------------------------------
2003 2003 2002
--------------- --------------- ---------------
Call money 4.35-4.60 W 135,000,000 W -
General term loans 6.71 20,000,000 50,000,000
Borrowings from KSFC 1.26-4.35 157,200,000 61,921,871
Other - - 10,000,000
--------------- ---------------
W 312,200,000 W 121,921,871
=============== ===============
As an authorized member of the Korean Stock Exchange, the Company is
entitled to borrow funds or securities from the KSFC based on the amounts
of deposits segregated under the regulation (see Note 6)
At March 31, 2003, certain securities are pledged as collateral for the
above borrowings (see Note 9).
14. Deposits from Customers:
Deposits from customers at March 31, 2003 and 2002 comprise the following:
Thousands of Won
----------------------------------
2003 2002
--------------- --------------
Cash deposits received from
customers for securities
brokerage transactions W 717,435,919 W 633,951,190
Guarantee deposits received
in cash from customers
for margin transactions 4,048,824 5,438,647
--------------- --------------
W 721,484,743 W 639,389,837
=============== ==============
33
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
15. Long-term debt:
Long-term debt at March 31, 2003 and 2002 comprises the following:
Annual
Interest Rate(%) Thousands of Won
-------------- ---------------------------------
2003 2003 2002
-------------- ------------- ----------------
Debentures 6.86 W 30,000,000 W 70,000,000
Less: current maturities - (40,000,000)
------------- ----------------
W 30,000,000 W 30,000,000
============= ================
The principal portion of debentures matures in 2 years and interest is
payable quarterly. Certain property and a blank note are pledged as
collateral for the above debentures (see Notes 12 and 17).
16. Subordinated Bonds:
Subordinated bonds at March 31, 2003 and 2002 comprise the following:
Annual
Interest Rate(%) Thousands of Won
---------------- -----------------------------
Description 2003 Maturity 2003 2002
------------------ ---------------- ------------- -------------- ------------
Subordinated bonds 6.23 2002. 09. 26 W 130,000,000 W -
~2004. 09. 26
-------------- ------------
W 130,000,000 W -
============== ============
Continued;
34
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
16. Subordinated Bonds, Continued:
In connection with the subordinated bonds from Shinhan Financial Group
Co., Ltd., the Company shall repay the bonds upon maturity, in one lump
sum, but the Company shall not repay the bonds on maturity if the CAR of
the Company, as defined in the Regulation on Securities Industry
prescribed by the Korean Securities and Exchange Law, becomes less than or
equal to 100% as a result of the repayment of the principal of the bonds.
If any principal of the bonds is not paid at the scheduled maturity, 7.23%
default interest per annum shall be applied to the bonds.
17. Commitments and Contingencies:
As of March 31, 2003, the Company has entered into overdraft borrowing
agreements up to W356,000 million with thirteen Korean commercial
banks and the Company also has entered into agreements with Shinhan bank
to discount notes up to W20,000 million.
As of March 31, 2003, the Company has provided two blank notes and 1,917
million of several notes to certain financial institutions as collateral
for borrowings and contractual obligations.
As of March 31, 2003, the Company is contingently liable for guarantees of
indebtedness of Good Morning Securities USA Inc. amounting to
W15,034,800 thousand.
As of March 31, 2003, the Company made a contract with Franklin Templeton
Investment Trust Management Co., Ltd. to guarantee against the contingent
losses that may result from the beneficiary certificates that include
guaranteed bonds issued by financially troubled companies, such as the
Dawoo group companies. Accordingly, the Company's time deposit of
W7,702 million is held as collateral by Franklin Templeton
Investment Trust Management Co., Ltd. (see Notes 5 and 7).
In the normal course of business, the Company has been named as the
defendant in several legal actions. As of March 31, 2003, 23 lawsuits
claiming an aggregate W9,769 million have been filed against the
Company. As of March 31, 2003, the ultimate outcomes of these matters
cannot be reasonably determined. Accordingly, no adjustments have been
made in the accompanying financial statements in relation to these
matters.
Continued;
35
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
17. Commitments and Contingencies, Continued:
During the year ended March 31, 2003, the unrealized gains and unrealized
losses recognized from the valuation of stock index futures contracts
amount to W750 thousand and 80,347 thousand, respectively, and the
unrealized gains recognized from the valuation of stock index options
contracts amount to W7,150 thousand.
The Company sold its troubled loans related to insolvent companies to
Korea Asset Management Corporation ("KAMCO"), in accordance with a
contract made on November 6, 1998 and a supplementary contract made on
December 12, 1998. According to the contracts, if KAMCO fails to exercise
its security rights or if the insolvent companies fail to obtain approval
from the court for receivership, KAMCO can exercise a put option on
W65,600 million of the troubled loans. The insolvent companies obtained
approval from the court for the receivership and above mentioned W65,600
million of troubled loans have been determined to be W61,600 million.
Accordingly, on April 25, 2000, the Company entered into a settlement
agreement with KAMCO in the amount of W61,600 million. However, KAMCO can
exercise a put option or require resettlement, if the debt reorganization
plans approved by the court are changed or debts are not collected as
scheduled. As of March 31, 2003, the potential amounts of put option or
resettlement, which KAMCO can exercise, were estimated to be W29,200
million.
In response to general unstable economic conditions, the Korean government
and the private sector have been implementing structural reforms to
historical business practices. Implementation of these reforms is
progressing slowly, particularly in the areas of restructuring private
enterprises and reforming the banking industry. The Korean government
continues to apply pressure to Korean companies to restructure into more
efficient and profitable firms. The Company may be either directly or
indirectly affected by these general unstable economic conditions and the
reform program described above. The accompanying financial statements
reflect management's assessment of the impact to date of the economic
situation on the financial position of the Company. Actual results may
differ materially from management's current assessment.
36
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
18. Retained Earnings:
Retained earnings at March 31, 2003 and 2002 comprise the following:
Thousands of Won
----------------------------
2003 2002
----------- ------------
Appropriated:
Reserve for losses on
securities transactions W 9,894,251 W 19,788,503
Unappropriated: - -
----------- ------------
W 9,894,251 W 19,788,503
=========== ============
19. Discount on Stock Issuance:
On December 21, 1998, the Company issued 104,000,000 shares of common
stock at W1,250 per share amounting to W130,000,000 thousand and recorded
W390,000,000 thousand of amount paid less than par value as a discount on
stock issuance. The Company also recorded W151,062,144 thousand of
discount on stock issuance in relation to conversion of subordinated
convertible bonds into common stock before March 31, 2002. During the year
ended March 31, 2003, the Company issued 47,637,680 shares of common stock
(par value: W5,000 per share) at W238,541,052 thousand to compensate the
cost of the acquisition and W352,652 thousand of amount paid less the
direct expense of W42,119 thousand was offset by the discount on stock
issuance (see Note 3). The discount on stock issuance is to be amortized
over 3 years using the straight-line method through appropriation of
retained earnings. W148,292,476 thousand, W72,372,732 thousand,
W60,999,856 thousand and 22,772,806 thousand of discount on stock issuance
have been amortized in accordance with the shareholders' resolution on May
27, 2000, May 26, 2001, May 25, 2002 and May 30, 2003, respectively.
20. Treasury Stock:
Before March 31, 2003, the Company acquired 1,157,120 shares of its
preferred stock in accordance with Korea Securities and Exchange Law, and
54,480,716 shares of its common stock and 2,771,874 shares of its
preferred stock to comply with dissenting shareholders' exercise of claims
for stock purchase in regard to merger with Shinhan Securities Co., Ltd.
The Company extinguished all treasury stocks, which were bought during the
year ended March 31, 2003. Following a shareholders' meeting held on
December 12, 2002 for the reduction in capital, the Company reduced the
capital by the ratio of 1:0.9 as of December 24, 2002, and as a result,
the Company reduced 115,712 shares of its treasury preferred stock, which
were bought in prior years and acquired 4,795 shares of its common stock
and 1,010 shares of its preferred stock.
The treasury stocks (4,795 shares of its common stock, 1,042,418 shares of
its preferred stock) will be sold in the future at the discretion of
management.
37
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
21. Capital Reduction:
Following a shareholders' meeting held on December 12, 2002 for the
reduction in capital, the Company reduced the capital by the ratio of
1:0.9 as of December 24, 2002 and recorded net gain of W14,750 thousand as
a gain on capital reduction.
22. Stock Purchase Options:
In accordance with a resolution of shareholders, the Company granted stock
purchase options to certain employees and directors.
Stock Purchase Options Granted
------------------------------------------------------------------------------------------------------------
1 2 3 4 5 6 7 8 9
----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
- Granted common shares 2,588,355 1,434,510 1,980,000 405,000 1,260,000 90,000 540,000 375,744 343,383
- Grant date 1999.2.4 1999.2.4 1999.12.17 2000.5.27 2001.5.26 2002.1.31 2002.5.25 2002.6.27 2002.6.27
- Exercizable period 2002.2.4 2002.2.4 2002.12.17 2003.5.27 2004.5.26 2005.1.31 2004.5.25 2003.5.26 2004.5.27
~ 2009.2.3 ~ 2009.2.3 ~ 2007.12.16 ~ 2008.5.26 ~ 2009.5.25 ~ 2010.1.30 ~ 2012.5.24 ~ 2006.5.25 ~ 2007.5.26
- Required service
periods 3 years 3 years 3 years 3 years 3 years 3 years 2 years 2 years 2 years
- Exercise price
per share W 7,640 W 7,085 W 7,590 W 5,000 W 5,850 W 6,040 W 6,370 W 5,000 W 5,837
- Compensation cost
per share W 1,254 W 1,707 W 1,042 W 311 W 1,147 W 664 W 2,025 W 1,157 W 589
The Company succeeded No. 8 and No. 9 of the stock purchase options from
the former Shinhan Securities Co., Ltd. as of June 27, 2002 according to
the resolution of shareholders for merger approval. The Shinhan Securities
Co., Ltd. had granted the stock purchase options on May 25, 2000 and May
26, 2001, respectively.
The Compensation cost for stock options recognized using the minimum value
method was W1,735,312 thousand for the year ended March 31, 2003 and will
be W1,336,203 thousand for the periods thereafter.
Continued;
38
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
22. Stock Purchase Options, Continued:
If the Company had adopted the fair value method, the following
assumptions would have been used.
Stock Purchase Options Granted
------- ------- ------- ------- ------- ------- ------- ------- ----------
1 2 3 4 5 6 7 8 9
------- ------- ------- ------- ------- ------- ------- ------- ----------
- Risk-free interest rate 7.00% 7.00% 8.89% 5.24% 6.42% 6.03% 6.87% 5.13% 5.62%
- Expected exercise periods 3 years 3 years 3 years 3 years 3 years 3 years 6 years 2 years 2.5 years
- Expected volatility 116.87% 116.87% 137.35% 137.82% 118.09% 86.35% 101.94% 84.82% 94.38%
- Expected dividend yield 0% 0% 0% 0% 0% 0% 0% 0% 0%
- Stock price at grant date W 7,490 W 7,490 W 6,920 W 4,600 W 6,000 W 5,730 W 6,300 W 4,600 W 5,680
- Compensation cost
per share W 5,374 W 5,456 W 5,437 W 2,372 W 4,498 W 3,291 W 5,216 W 2,621 W 3,238
The Company's net income and earnings per share which the Company would
have been disclosed under the fair value method are as shown below.
For the year ended
-----------------------------------------
2002.3.31 2001.3.31 2000.3.31
------------ ------------ -------------
Net income (in thousand of) W 42,118,736 W 61,638,264 W 208,298,572
Earnings per share 260 353 1,198
39
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
23. Income Tax Expenses:
The statutory income tax rate applicable to the Company, including resident
tax surcharges is 29.7%. The income tax expenses for the years ended March
31, 2003 and 2002 consist of the following:
Thousands of Won
---------------------------
2003 2002
------------ ------------
Current income tax expenses W 154,170 W -
Deferred income tax expenses (5,494,301) 10,194,786
------------ ------------
W (5,340,131) W 10,194,786
============ ============
The following table reconciles the expected amount of income tax expenses
based on statutory rates to the actual amount of income tax expenses
recorded by the Company:
Thousands of Won
---------------------------
2003 2002
------------ ------------
Income before income tax expenses W 5,538,423 W 61,300,391
Statutory tax rate 29.7% 30.8%
------------ ------------
Expected tax expenses at statutory tax rate 1,644,912 18,880,520
Income tax on permanent differences 2,483,002 (9,281,054)
Income tax on recognized deferred
tax asset for tax loss carried forward (9,622,215) -
Other 154,170 595,320
------------ ------------
Income tax expenses W (5,340,131) W 10,194,786
============ ============
Effective tax rate - 16.63%
============ ============
Continued;
40
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
23. Income Tax Expenses, Continued:
Changes in temporary differences between amounts reported for financial
accounting and income tax purposes for the year ended March 31, 2003 and
deferred income tax asset (liability) as of March 31, 2003 and 2002 are as
follows:
Thousands of Won
--------------------------------------------------------------------------------
2003 2002
-------------------------------------------------------------- ---------------
Deferred Income Deferred Income
Beginning Increase(*) Ending Tax Asset Tax Asset
Balance (Decrease) Balance (Liability) (Liability)
------------- ------------ ------------- ------------ ------------
Marketable securities W (4,405,191) W 9,506,546 W 5,101,355 W 1,515,102 W (1,308,342)
Accrued revenue (884,294) (1,551,059) (2,435,353) (723,300) (262,635)
Allowance for doubtful accounts 34,519,721 (6,964,008) 27,555,713 8,184,047 10,252,357
Investment securities 14,265,985 14,199,480 28,465,465 8,454,243 4,236,998
Property and equipment 19,311 (7,397) 11,914 3,539 5,735
Intangible assets 7,993 (2,620) 5,373 1,596 2,374
Discount on present value 9,424,641 (8,261,234) 1,163,407 345,532 2,799,118
Securities sold 28,540 (264,542) (236,002) (70,093) 8,477
Accrued severance benefits 350,401 (350,401) - - 104,069
Tax loss carried forward 81,552,566 4,814,173 86,366,739 9,622,215 -
Other 792,912 (362,360) 430,552 127,874 235,495
------------- ------------ ------------- ------------ ------------
W 135,672,585 W 10,756,578 W 146,429,163 W 27,460,755 W 16,073,646
============= ============ ============= ============ ============
(*) Temporary differences of W19,841,106 thousand succeeded from the merger are
included above.
The Company periodically assesses its ability to recover deferred tax
assets. In the event of significant uncertainty regarding the Company's
ultimate ability to recover such assets, a valuation allowance is recorded
to reduce the asset to its estimated net realizable value.
The Company had not recognized deferred tax assets for tax loss carried
forward until March 31, 2002. However, as the Company's ordinary income
for the past three years has been positive and the future average income
is expected to surpass the tax loss carried forward, as of March 31, 2003,
the Company recorded W9,622 million of deferred income tax assets in
relation to the tax loss carried forward.
41
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
24. Earnings Per Share:
Earnings per share and diluted earnings per share are calculated as
follows:
(1) Earnings per share -
Thousands of Won
----------------------------
2003 2002
------------- -------------
Net income W 10,878,554 W 51,105,605
Weighted average number of common shares 159,124,497 161,735,083
------------- -------------
Earnings per share in Korean Won W 68 W 316
============= =============
(2) Diluted earnings per share -
Thousands of Won
----------------------------
2003 2002
------------- -------------
Net income W 10,878,554 W 51,105,605
Weighted average number of common shares &
common equivalent shares 159,124,497 161,744,166
------------- -------------
Diluted earnings per share in Korean Won W 68 W 316
============= =============
42
GOOD MORNING SHINHAN SECURITIES CO., LTD.
(FORMERLY, GOOD MORNING SECURITIES CO., LTD.)
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, Continued
March 31, 2003 and 2002
25. Related Party Transactions:
Significant transactions with related parties for the years ended March
31, 2003 and 2002 and the related receivables and payables as of March 31,
2003 and 2002 are as follows:
Millions of Won
---------------------------------------------
Revenue Expenses Receivables Payables
-------- -------- ----------- ---------
Good Morning Securities
Europe Limited W 1,222 W 839 W - W 524
Good Morning Securities USA Inc. 10,819 7,411 - 853
Shinhan Bank 457 1,800 45,714 50,338
Shinhan Financial Group Co., Ltd. - 3,933 - 130,111
Shinhan BNP Parivas Investment Trust
Management Co., Ltd. - - - 3,496
Shinhan Card Co. Ltd. - - - 3,289
-------- -------- ----------- ---------
2003 W 12,498 W 13,983 W 45,714 W 188,611
======== ======== =========== =========
2002 W 18,887 W 13,092 W 1 W 8,729
======== ======== =========== =========
26. Subsequent Events:
On March 27, 2003, the Company signed a contract with Global Korea
Investment I Limited to sell its troubled loans of Hunex Co., Ltd. (book
value as of March 31, 2003: W41,806 million) at W48,900 million, which
will come into force on April 25, 2003.
27. Reclassification of 2002 amounts:
Certain amounts in the 2002 financial statements have been reclassified to
conform to the 2003 presentation. These reclassifications have no effect
on previously reported net income or shareholders' equity.
43
THE INDEPENDENT ACCOUNTANT'S AUDIT REPORT (UNDER KOREAN GAAP) TO THE
NON-CONSOLIDATED FINANCIAL STATEMENTS OF GOOD MORNING SHINHAN SECURITIES AS OF
AND FOR THE YEAR ENDED MARCH 31, 2004
INDEPENDENT AUDITORS' REPORT
Based on a report originally issued in Korean
To the Board of Directors and Stockholders
Goodmorning Shinhan Securities Co., Ltd.:
We have audited the accompanying non-consolidated balance sheets of Goodmorning
Shinhan Securities Co., Ltd. (the "Company") as of March 31, 2004 and the
related statements of earnings, appropriation of retained earnings and cash
flows for the year then ended. These non-consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these non-consolidated financial statements based on our audit.
The financial statements for the year ended March 31, 2003, presented herein for
comparative purposes, were audited by Samil Accounting Corp., whose report
thereon dated April 16, 2003 expressed an unqualified opinion on the financial
statements.
We conducted our audit in accordance with the Auditing Standards, as established
by the Financial Supervisory Commission of the Republic of Korea. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates used by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of March 31, 2004 and the results of its operations, the changes in its
retained earnings and its cash flows for the year then ended in accordance with
the Financial Accounting Standards, as established by the Financial Supervisory
Commission of the Republic of Korea.
The accompanying non-consolidated financial statements expressed in Korean Won
have been translated into United States dollars solely for the convenience of
the reader and on the basis set forth in Note 2(b) to the non-consolidated
financial statements.
Without qualifying our opinion, we draw attention to the following:
As discussed in Note 2(a) to the non-consolidated financial statements,
accounting principles and auditing 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 and cash
flows in accordance with accounting principles and practices generally accepted
in countries other than the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to audit such financial statements
may differ from those generally accepted and applied in other countries.
Accordingly, this report and the accompanying non-consolidated financial
statements are for use by those knowledgeable about Korean accounting procedures
and auditing standards and their application in practice.
As described in Note 2(a) to the non-consolidated financial statements, the
Company adopted Statements of Korea Accounting Standards No. 2 through No. 9,
effective from the first fiscal year beginning after December 31, 2002.
1
As described in Note 26 to the non-consolidated financial statements, the
Company recorded W12,709 million of revenue earned from and W31,078 million of
expense incurred to Shinhan Financial Group Co., Ltd. and other related parties
for the year ended March 31, 2004. In addition, the Company has recorded
receivables from and payables to related parties as of March 31, 2004 of W29,437
million and W174,628 million, respectively.
As described in Note 32(f) to the non-consolidated financial statements, as of
March 31, 2004, the Company is holding W4,879 million of debt securities issued
by LG Card Co., Ltd., which are classified as short-term investment in
securities. Actual losses on these securities may differ materially from the
management's assessments and the accompanying non-consolidated financial
statements do not reflect the impact of the uncertainty on the financial
position of the Company.
KPMG Samjong Accounting Corp.
Seoul, Korea
April 16, 2004
This report is effective as of April 16, 2004, the audit report date. Certain
subsequent events or circumstances, which may occur between the audit report
date and the time of reading this report, could have a material impact on the
accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the audit report should understand that there is a
possibility that the above audit report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
2
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ --------------------------
2004 2003 2004 2003
---------- --------- ----------- ---------
Assets
Current assets:
Cash and bank deposits (notes 3, 21, 26, 31 and 32) W 28,001 91,116 $ 24,273 78,984
Deposit segregated under the regulation (note 4) 731,084 699,933 633,741 606,738
Short-term investment in securities (notes 5 and 32) 550,580 633,768 477,271 549,383
Hybrid securities bought (note 6) 238,732 - 206,945 -
Options bought - 117 - 101
Loans (note 7) 240,307 61,298 208,311 53,136
Other current assets (notes 8 and 26) 125,085 63,286 108,430 54,860
---------- --------- ----------- ---------
1,913,789 1,549,518 1,658,971 1,343,202
Long-term investment in securities (notes 9 and 26) 46,012 71,140 39,886 61,668
Investments (note 10) 77,905 82,391 67,532 71,421
Property and equipment (notes 11 and 14) 182,234 205,993 157,970 178,565
Intangible assets (note 12) 11,848 10,639 10,270 9,223
Other assets (note 13) 19,661 77,311 17,043 67,017
---------- --------- ----------- ---------
W2,251,449 1,996,992 $ 1,951,672 1,731,096
========== ========= =========== =========
Liabilities and Stockholders' equity
Current liabilities:
Call money W - 135,000 $ - 117,025
Short-term borrowings (note 15) 30,000 177,200 26,005 153,606
Bonds sold with repurchase agreements 175,394 151,723 152,041 131,521
Deposits from customers 665,469 717,436 576,863 621,911
Securities sold but not yet purchased 14,781 4,968 12,813 4,307
Hybrid securities issued (note 16) 466,373 - 404,276 -
Other current liabilities (notes 17 and 26) 80,009 79,596 69,356 68,998
---------- --------- ----------- ---------
1,432,026 1,265,923 1,241,354 1,097,368
Debentures (notes 11, 18 and 26) 161,000 160,000 139,563 138,696
Retirement and severance benefit (note 19) 2,252 3,418 1,952 2,963
---------- --------- ----------- ---------
Total liabilities 1,595,278 1,429,341 1,382,869 1,239,027
---------- --------- ----------- ---------
3
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars, except share data)
Won U.S. dollars (note 2)
------------------------ --------------------------
2004 2003 2004 2003
---------- --------- ----------- ---------
Stockholders' equity:
Capital stock of W5,000 par value 796,998 796,998 690,879 690,879
Authorized:
Common stock 450,000,000 shares
Preferred stock 150,000,000 shares
Issued:
Common stock 155,576,350 shares
Preferred stock 3,823,314 shares
Capital surplus (note 22) 15 15 13 13
Retained earnings (note 23) 90,549 30,667 78,493 26,584
Capital adjustments (notes 24 and 25) (231,391) (260,029) (200,582) (225,407)
---------- --------- ----------- ---------
Total stockholders' equity 656,171 567,651 568,803 492,069
Commitments and contingencies (note 32)
---------- --------- ----------- ---------
W2,251,449 1,996,992 $ 1,951,672 1,731,096
========== ========= =========== =========
See accompanying notes to non-consolidated financial statements.
4
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
---------------------- ----------------------
2004 2003 2004 2003
--------- ------- --------- -------
Operating revenues:
Commission income (note 26) W 278,018 248,189 $ 241,000 215,143
Interest income (note 26) 75,130 60,713 65,126 52,629
Dividend income 8,156 1,634 7,070 1,416
Distribution income 2,016 5,076 1,748 4,400
Realized gain from sale of trading securities 82,821 44,193 71,794 38,309
Unrealized gain on trading securities 3,996 1,001 3,464 868
Gain related to hybrid securities bought 48,917 -- 42,404 --
Unrealized gain on securities sold but not yet purchased 300 240 260 208
Gain related to hybrid securities issued 5,869 -- 5,087 --
Valuation gain on deposit segregated under the regulation 3,643 -- 3,158 --
Gain on derivatives transactions 176,611 252,993 153,096 219,307
Other -- 10,643 -- 9,226
--------- ------- --------- -------
685,477 624,682 594,207 541,506
Operating expenses:
Commission expense (note 26) 43,616 34,959 37,809 30,304
Interest expense 33,402 26,177 28,954 22,692
Realized loss from sales of trading securities 62,054 54,996 53,792 47,673
Unrealized loss on trading securities 4,948 6,030 4,289 5,227
Unrealized loss on securities sold but not yet purchased 107 4 93 3
Loss related to hybrid securities issued 80,611 -- 69,878 --
Loss on derivatives transactions 135,059 228,559 117,076 198,127
General and administrative expenses (note 28) 271,700 275,321 235,523 238,662
--------- ------- --------- -------
631,497 626,046 547,414 542,688
--------- ------- --------- -------
Operating income 53,980 (1,364) 46,793 (1,182)
Non-operating income (expenses):
Gain (loss) from disposition of property and equipment, net 27,363 (113) 23,719 (98)
Unrealized loss on available-for-sale securities, net -- (4,959) -- (4,299)
Realized gain from sale of available-for-sale securities, net 7,016 6,450 6,082 5,592
Valuation loss using the equity method, net (772) (1,413) (669) (1,225)
Impairment loss on available-for-sale securities (1) (1,437) (1) (1,246)
Gain (loss) from foreign currency transactions, net 488 (241) 423 (209)
Gain from foreign currency translation, net 91 1 79 1
Rental income 6,087 7,940 5,277 6,883
Donation (336) (386) (291) (335)
Other, net 2,825 1,060 2,448 919
--------- ------- --------- -------
42,761 6,902 37,067 5,983
--------- ------- --------- -------
Ordinary income 96,741 5,538 83,860 4,801
5
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS, CONTINUED
For the years ended March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars, except earnings per share)
Won U.S. dollars (note 2)
-------------------- ------------------------
2004 2003 2004 2003
------- ------ ----------- ------
Extraordinary loss 2 - 1 -
------- ------ ----------- ------
Earnings before income taxes 96,739 5,538 83,859 4,801
Income tax expense (benefit) (note 29) 16,084 (5,340) 13,943 (4,629)
------- ------ ----------- ------
Net earnings W80,655 10,878 $ 69,916 9,430
======= ====== =========== ======
Ordinary income and net earnings per share W 518 68 $ 0.45 0.06
in Won and U.S. dollars (note 30) ======= ====== =========== ======
See accompanying notes to non-consolidated financial statements.
6
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF APPROPRIATION OF RETAINED EARNINGS
For the years ended March 31, 2004 and 2003
Date of Appropriation for 2004: May 28, 2004
Date of Appropriation for 2003: May 30, 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
-------------------- ------------------------
2004 2003 2004 2003
------- ------ ----------- ------
Unappropriated retained earnings:
Balance at beginning of year W - - $ - -
Net earnings 80,655 10,878 69,916 9,430
------- ------ ----------- ------
80,655 10,878 69,916 9,430
Transfer from voluntary reserves 9,894 9,894 8,577 8,577
Appropriation of retained earnings:
Amortization of discounts on stock issuance costs 90,549 20,772 78,493 18,007
------- ------ ----------- ------
Unappropriated retained earnings to be carried W - - $ - -
over to subsequent year ======= ====== =========== ======
See accompanying notes to non-consolidated financial statements.
7
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ -------------------------
2004 2003 2004 2003
---------- ---------- ----------- ----------
Cash flows from operating activities:
Net earnings W 80,655 10,878 $ 69,916 9,430
Adjustments to reconcile net earnings to net cash used in
by operating activities:
Valuation gain on deposit segregated under the regulation (3,643) - (3,158) -
Unrealized loss on trading securities, net 952 5,029 825 4,359
Impairment loss on available-for-sale securities 1 1,014 1 879
Realized gain from sale of available-for-sale securities, net (7,016) (6,450) (6,082) (5,592)
Valuation loss using the equity method, net 772 1,413 669 1,225
Gain related to hybrid securities bought (48,035) - (41,639) -
Unrealized gain on securities sold but not yet purchased (193) (236) (167) (205)
Loss related to hybrid securities issued 58,602 - 50,800 -
Unrealized gain on derivatives transactions, net (11,247) (7) (9,749) (6)
Loss (gain) from disposition of property and equipment, net (27,363) 113 (23,719) 98
Depreciation expense 13,849 24,075 12,005 20,869
Amortization expense 5,630 4,417 4,880 3,829
Bad debt expense 3,774 - 3,271 -
Provision for retirement and severance benefit 9,984 23,833 8,655 20,660
Decrease (increase) in trading securities 93,581 (292,681) 81,121 (253,711)
Decrease in options bought 117 531 101 460
Decrease (increase) in other current assets (50,374) 84,724 (43,668) 73,443
Decrease (increase) in other assets 16,084 (5,494) 13,942 (4,762)
Increase in securities sold but not yet purchased 10,006 4,183 8,674 3,626
Increase in hybrid securities issued 407,772 - 353,478 -
Decrease in options sold - (845) - (732)
Decrease in other current liabilities (2,755) (63,607) (2,388) (55,137)
Retirement and severance benefits paid (12,373) (30,266) (10,726) (26,236)
Decrease in National Pension Fund 2 633 1 549
Decrease in retirement trust 1,221 2,470 1,059 2,141
Others, net (12,499) (5,812) (10,835) (5,039)
---------- ---------- ----------- ----------
Net cash provided by (used in) operating activities 527,504 (242,085) 457,267 (209,852)
Cash flows from investing activities:
Cash provided by investing activities:
Decrease in bank deposits 65,672 156,480 56,927 135,645
Decrease in deposit segregated under the regulation - 2 - 1
Decrease in available-for-sale securities 40,994 54,835 35,536 47,534
Decrease in loans 6,651,422 1,666,354 5,765,796 1,444,482
Decrease in investments 21,895 47,629 18,980 41,287
Decrease in property and equipment 46,531 299 40,335 259
Decrease in intangible assets 1,090 - 945 -
Decrease in other assets 48,888 153,267 42,379 132,860
Increase in other current liabilities 8,588 8,938 7,445 7,748
- 506 - 439
---------- ---------- ----------- ----------
6,885,080 2,088,310 5,968,343 1,810,255
8
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the years ended March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
-------------------------- -------------------------
2004 2003 2004 2003
----------- ----------- ------------ ----------
Cash used in investing activities:
Increase in deposit segregated (26,173) - (22,688) -
under the regulation
Increase in available-for-sale securities (11,245) (6,612) (9,748) (5,732)
Increase in investment securities (3,167) - (2,745) -
accounted for by the equity method
Increase in hybrid securities bought (190,696) - (165,305) -
Increase in loans (6,829,574) (1,678,371) (5,920,228) (1,454,898)
Increase in investments (16,054) (47,256) (13,916) (40,965)
Increase in property and equipment (9,257) (14,869) (8,024) (12,889)
Increase in intangible assets (7,292) (4,096) (6,321) (3,551)
Increase in other assets (3,597) (1,097) (3,118) (951)
Decrease in other current liabilities (5,420) (5,830) (4,698) (5,053)
----------- ----------- ------------ ----------
(7,102,475) (1,758,131) (6,156,791) (1,524,039)
----------- ----------- ------------ ----------
Net cash provided by (used in) (217,395) 330,179 (188,448) 286,216
investing activities
Cash flows from financing activities:
Cash provided by financing activities:
Increase in call money 5,704,000 134,000 4,944,521 116,158
Increase in short-term borrowings 3,530,000 53,328 3,059,986 46,228
Increase in bonds sold with 5,089,993 95,049 4,412,269
repurchase agreement 82,393
Proceeds from issuance of debentures 1,000 130,000 867 112,691
----------- ----------- ------------ ----------
14,324,993 412,377 12,417,643 357,470
Cash used in financing activities:
Decrease in call money (5,839,000) - (5,061,546) -
Decrease in short-term borrowings (3,677,200) - (3,187,587) -
Decrease in bonds sold with
repurchase agreement (5,066,323) - (4,391,750) -
Decrease in deposits from customers (51,966) (90,521) (45,047) (78,468)
Decrease in current portion of long-term debts - (40,000) - (34,674)
Discounts on stock issuance costs - (48) - (42)
Acquisition of treasury stocks - (373,205) - (323,513)
----------- ----------- ------------ ----------
(14,634,489) (503,774) (12,685,930) (436,697)
----------- ----------- ------------ ----------
Net cash used in financing activities (309,496) (91,397) (268,287) (79,227)
----------- ----------- ------------ ----------
Net increase (decrease) in cash 613 (3,303) 532 (2,863)
Cash at beginning of year (note 31) 2,305 5,608 1,998 4,861
----------- ----------- ------------ ----------
Cash at end of year (note 31) W 2,918 2,305 $ 2,530 1,998
=========== =========== ============ ==========
See accompanying notes to non-consolidated financial statements.
9
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2004 and 2003
(1) General Description
Goodmorning Shinhan Securities Co., Ltd. ("the Company") was originally
incorporated on April 2, 1973 under the name of HyoSeong Securities Co.,
Ltd. to engage in securities trading, underwriting and brokerage services.
The Company changed its name to Ssangyong Investment & Securities Co.,
Ltd. in 1983 and to Good Morning Securities Co., Ltd. in 1999. On July 31,
2002, the Company merged with Shinhan Securities Co., Ltd., which was one
of subsidiaries of Shinhan Financial Group Co., Ltd., and changed its name
to Goodmorning Shinhan Securities Co., Ltd. On December 19, 1986, the
Company's shares were listed on the Korean Stock Exchange and, as of March
31, 2004, its major shareholder is Shinhan Financial Group Co., Ltd.
(60.47%) and it operates through 79 branches.
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies
(a) Basis of Financial Statements Presentation
The Company maintains its accounting records in Korean Won and
prepares statutory non-consolidated 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 non-consolidated
financial statements are intended for use only by those who are
informed about Korean accounting principles and practices. The
accompanying non-consolidated financial statements have been
condensed, restructured and translated into English (with certain
expanded descriptions) from the Korean language financial
statements.
The accompanying non-consolidated financial statements include only
the accounts of the Company, and do not include the accounts of any
of its subsidiaries.
Additionally, the Company adopted Statements of Korea Accounting
Standards (the "SKAS") No. 2 through No. 9, effective from the first
fiscal year beginning after December 31, 2002. Certain accounts of
prior year's non-consolidated financial statements were reclassified
to conform to the current year's presentation.
(b) Basis of Financial Statements Translation
The non-consolidated financial statements are expressed in Korean
Won and, solely for the convenience of the reader, have been
translated into U.S. dollars at the rate of W1,153.60 to US$1, the
basic exchange rate on March 31, 2004. These translations should not
be construed as a representation that any or all of the amounts
shown could be converted into U.S. dollars at this or any other
rate.
(c) Revenue Recognition
Gains and losses from securities transactions and commission fee
relating to brokerage are recorded on the trade date.
Interest income on loans is recognized on an accrual basis, however,
interest income on delinquent and dishonored loans, other than those
subject to security deposits and guaranteed by financial
institutions, is recognized on a cash basis.
10
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(d) Investments in Securities
Debt and equity securities should be classified into one of the
three categories of held-to-maturity, available-for-sale, or trading
securities at the time of acquisition and such determination should
be reassessed at each balance sheet date. Investments in debt
securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity. Securities that
are bought and held principally for the purpose of selling them in
the near term (thus held for only a short period of time) are
classified as trading securities. Trading generally reflects active
and frequent buying and selling, and trading securities are
generally used to generate profit on short-term differences in
price. Investments not classified as either held-to-maturity or
trading securities are classified as available-for-sale securities.
Trading securities are carried at fair value, with unrealized
holding gains and losses included in earnings. Available-for-sale
securities are carried at fair value, with unrealized holding gains
and losses reported as a capital adjustment. Investments in equity
that do not have readily determinable fair values are stated at
cost. Declines in value judged to be other-than-temporary on
available-for-sale securities are charged to current results of
operations. Investments in debt securities that are classified into
held-to-maturity are reported at amortized cost at the balance sheet
date and such amortization is included in interest income.
Marketable securities are at the quoted market prices as of the
period end. Non-marketable debt securities are recorded at the fair
values derived from the discounted cash flows by using an interest
rate deemed to approximate the market interest rate. The market
interest rate is determined by the issuers' credit rate announced by
the accredited credit rating agencies in Korea. Money market funds
are recorded at the fair value determined by the investment
management companies.
Trading securities are classified as current assets, whereas
available-for-sale securities and held-to-maturity securities are
classified as investments. However, available-for-sale securities,
whose maturity dates are due within one year from the balance sheet
date or whose likelihood of being disposed of within one year from
the balance sheet date is probable, are classified as current
assets. Likewise, held-to-maturity securities whose maturity dates
are due within one year from the balance sheet date are classified
as current assets.
(e) Investment Securities Accounted for by the Equity Method
Investments in affiliated companies owned 20% or more or over which
the Company has significant management control are stated at an
amount as determined using the equity method.
Under the equity method, the Company's initial investment is
recorded at cost and is subsequently increased to reflect the
Company's share of the investee income and reduced to reflect the
Company 's share of the investee losses or dividends received. Any
excess in the Company's acquisition cost over the Company's share of
the investee's identifiable net assets is generally recorded as
goodwill or other intangibles and amortized by the straight-line
method over the estimated useful life. When events or circumstances
indicate that carrying amount may not be recoverable, the Company
reviews goodwill for any impairment.
Under the equity method, the Company does not record its share of
losses of affiliate companies when such losses would make the
Company's investment in such entity less than zero.
In case of translating financial statements denominated in foreign
currencies, where the balances are determined by the equity method,
assets and liabilities are translated at current rate as of the
balance sheet date and capital accounts at historical rate. Any
differences resulting from such foreign currency translation are
accounted for as unrealized gains (losses) from valuation on
investment securities accounted for by the equity method, a
component of capital adjustments in the stockholders' equity.
11
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(f) Hybrid Securities
Equity-linked securities purchased or issued are presented as
combining interest-bearing debt securities with a series of option
contracts. The embedded option contracts should not be separated
from debt securities, and the liability components and the equity
conversion options of securities are recorded at the fair value with
unrealized holding gains and losses reported in the current
operations. Additionally, in relation to the equity-linked
securities issued, premium paid at the issue date should be
separated from these instruments and accounted for as commission
income.
(g) Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts on
outstanding loans (brokers' loans and sort-term loans) and other
receivables (accrued income, accounts receivable from customers,
long-term loans, advances for customers and dishonored bonds) at the
end of the period based on the collectibility of individual
receivables and in accordance with the Regulation on Supervision of
Securities Business. These standards require that all loans be
classified as normal, precautionary, sub-standard, doubtful, or
estimated loss based on a number of factors, including the financial
position of the borrower, the repayment ability of the borrower and
past-due history. An allowance for doubtful accounts is then
calculated, as of the balance sheet date, on the loan balances using
the prescribed percentages of 0.5%, 2%, 20%, 75% and 100%,
respectively.
The details of classification of allowance for doubtful accounts as
of March 31, 2004 and 2003 are as follows:
2004
-----------------------------------------------------------------------------------------
Book Estimated
value Normal Precautionary Substandard Doubtful Loss Allowance
----- ------ ------------- ----------- -------- --------- ---------
Loans:
Brokers' loan W 130,945 130,945 - - - - 655
Short-term loans and other 27 17 - - - 10 10
Other current assets:
Accounts receivable 57,313 54,867 - - 201 2,245 2,670
Accrued income 10,947 9,151 - - 11 1,785 1,839
Investments:
Long-term loans 16,211 15,579 - - - 632 710
Other assets:
Advances from customers 17,047 - - 1,124 - 15,923 16,147
Dishonored bonds (*) 10,044 - - 1,286 - 8,758 9,016
--------- ------- ----- ----- ------ ------ ------
242,534 210,559 - 2,410 212 29,353 31,047
--------- ------- ----- ----- ------ ------ ------
Allowance W 31,047 1,053 - 482 159 29,353 31,047
========= ======= ===== ===== ====== ====== ======
(*) Net of present value discounts
12
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
2003
------------------------------------------------------------------------------------
Book Estimated
value Normal Precautionary Substandard Doubtful Loss Allowance
----- ------ ------------- ----------- -------- --------- ---------
Loans:
Brokers' loan W 56,432 56,432 - - - - 282
Short-term loans and other 162 148 - - - 14 14
Other current assets:
Accounts receivable 49,363 45,866 - 187 127 3,182 3,544
Accrued income 8,953 7,850 - - - 1,102 1,142
Long-term investments in securities:
Corporate bonds 9,791 6,600 - - - 3,191 3,224
Investments:
Long-term loans 17,225 16,236 - - - 988 1,069
Other assets:
Advances from customers 62,032 41,806 - 2,283 - 17,944 18,610
Dishonored bonds (*) 10,765 - - 995 - 9,770 9,969
--------- ------- ------ ----- ----- ------ ------
214,723 174,939 - 3,465 128 36,192 37,854
--------- ------- ------ ----- ----- ------ ------
Allowance W 37,855 875 - 693 96 36,192 37,854
========= ======= ====== ===== ===== ====== ======
(*) Net of present value discounts
The percentages of the allowance for doubtful accounts to applicable
assets as of March 31, 2004, 2003 and 2002 are as follows:
2004 2003 2002
--------- ------- -------
Total amount of assets applicable to allowance for doubtful W 242,533 214,723 274,398
accounts, net of present value discounts
Allowance for doubtful accounts 31,047 37,855 82,609
Ratio (%) 12.80 17.63 30.11
(h) Property and Equipment
Property and equipment are stated at cost, except for the case of
revaluation made in accordance with the Asset Revaluation Law.
Significant additions or improvements extending value or useful
lives of assets are capitalized, while, normal maintenance and
repairs are charged to expense when incurred.
The depreciation method and useful lives of property and equipment
are as follows:
Descriptions Depreciation Method Useful Lives
---------------------------- ------------------- ------------
Buildings Straight-line 40~60 years
Vehicles " 4 years
Furniture and fixtures " 4 years
Office equipment and other " 15 years
13
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(i) Intangible Assets
Intangible assets are amortized using the straight-line method over
a reasonable period based on the nature of the asset, four years for
computer software and five years for other intangible assets.
(j) Impairment on Assets
The Company reviews for the impairment of assets, whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would be recognized
when estimated net cash flows expected to result from the use of the
asset and its disposition are less than its carrying amount. If such
assets are considered to be impaired, the impairment loss to be
recognized is accounted for the amount by which the carrying amount
of the assets exceeds the fair value of the assets.
(k) Income Taxes
Income tax on the earnings or loss for the year comprises current
and deferred tax. Income tax is recognized in the statement of
earnings except to the extent that it relates to items recognized
directly to equity, in which case it is recognized in equity.
Deferred tax is provided using the asset and liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realization or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially enacted at the balance sheet
date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against
which the unused tax losses and credits can be utilized. Deferred
tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realized.
(l) Bonds Sold (purchased) with Repurchase (Resale) Agreements
Bonds purchased with resale agreements are recorded as current asset
and bonds sold with repurchase agreements are recorded as current
liabilities when the Company purchases or sells securities under
resale or repurchase agreements.
(m) Securities Sold But Not Yet Purchased
Marketable securities borrowed from Korea Securities Depository are
not presented as securities sold in the balance sheets. When the
borrowed securities are sold, the market value of such securities at
the time of sale is recorded as a current liability. Differences
between the market value at the time of sale and the market value at
the time of the borrowing are accounted for as unrealized gains
(losses) on those securities in current operations.
14
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(n) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and
length of service when they leave the Company. The Company's
estimated liability under the plan which would be payable if all
employees left on the balance sheet date is accrued in the
accompanying balance sheets. A portion of the liability is covered
by trust for employees' severance benefit, and that amount is
reflected in the accompanying balance sheets as a deduction from the
liability for retirement and severance benefits.
Through March 1999, under the National Pension Scheme of Korea, the
Company transferred a certain portion of retirement allowances of
employees to the National Pension Fund. The amount transferred will
reduce the retirement and severance benefit amount to be payable to
the employees when they leave the Company and is accordingly
reflected in the accompanying financial statements as a reduction
from the retirement and severance benefit liability. Since April
1999, however, a new regulation applies and such transfers to the
National Pension Fund are no longer required.
(o) Translation of Foreign Currency Denominated Assets and Liabilities
Monetary assets and liabilities denominated in foreign currencies
are translated into Korean Won at the balance sheet date, with the
resulting gains and losses recognized in current results of
operations. Monetary assets and liabilities denominated in foreign
currencies are translated into Korean Won at W1,153.60 and W1,252.90
to US$1, the rate of exchange on March 31, 2004 and 2003,
respectively. Non-monetary assets and liabilities denominated in
foreign currencies, which are stated at historical cost, are
translated into Korean Won at the foreign exchange rate ruling at
the date of the transaction.
Foreign currency assets and liabilities of foreign-based operations
and companies accounted for using the equity method are translated
at current rate of exchange at the balance sheet date while profit
and loss items in the statement of earnings are translated at
average rate and capital account at historical rate. The translation
gains and losses arising from collective translation of the foreign
currency financial statements of foreign-based operations are offset
and the balance is accumulated as capital adjustment.
(p) Derivatives
Derivative instruments are presented as assets or liabilities valued
principally at the fair value of rights or obligations associated
with the derivative contracts. The unrealized gain or loss from
derivative transactions is recognized in current operations.
However, for derivative instruments for the purpose of hedging the
exposure to the variability of cash flows of a forecasted
transaction, the hedge-effective portion of the derivative's gain or
loss is deferred as a capital adjustment, a component of
stockholder's equity. The ineffective portion of the gain or loss is
charged or credited to current results of operations.
Forward foreign exchange contracts, which have been made to hedge
foreign exchange receivables and payables in future, are classified
as forward foreign exchange contracts for hedging purposes.
Unrealized gain or loss on forward foreign exchange contracts for
hedging purposes is deferred as capital adjustment. The deferred
gain or loss will be credited or charged to income when related
foreign exchange receivables and payables are settled.
15
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(q) Reserve for Losses on Securities Transactions
In accordance with the revised Korean Securities and Exchange Law as
of January 26, 2002, the Company reverses the reserve for losses on
securities transactions equally over three years from the year ended
March 31, 2002. The reversed amounts will be added to the
unappropriated retained earnings.
(r) Stock Options
The stock option program allows the Company's employees to acquire
shares of the Company. The option exercise price is generally fixed
at below the market price of underlying shares at the date of the
grant. The Company values stock options based upon an option pricing
model under the minimum value method and recognizes this value as an
expense over the period in which the options vest. When the options
are exercised, equity is increased by the amount of the proceeds
received, and the difference between the exercise price and market
price is included in compensation cost and credited to the capital
adjustment account.
(s) Contingent Liabilities
Contingent losses are generally recognized as a liability when
probable and reasonably estimable.
(t) Adoption of New Accounting Standards
The Company has adopted SKAS No. 6, "Events Occurring after the
Balance Sheet Date", effective from the first fiscal year beginning
after December 31, 2002, in preparing the accompanying
non-consolidated balance sheets as of and for the year ended March
31, 2004. Under the SKAS No. 6, dividends included in the statement
of appropriations of retained earnings are not recognized as a
liability and the financial position prior to the appropriations of
retained earnings is presented in the balance sheet.
Effective from the first fiscal year after December 31, 2002, the
Company has adopted SKAS No. 8, "Investments in Securities", and
such accounting change has not resulted in any material change to
reported net earnings or stockholders' equity.
(u) Use of Estimates
The preparation of financial statements in accordance with
accounting principles generally accepted in the Republic of Korea
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and related notes
to financial statements. Actual results could differ from those
estimates.
16
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(3) Cash and Bank Deposits
Cash and bank deposits as of March 31, 2004 and 2003 consist of the
following:
Won U.S. dollars (Note 2)
--------------------- ---------------------
2004 2003 2004 2003
-------- ------- -------- -------
Checking accounts W 492 642 $ 427 557
Deposit in foreign currencies 1,767 49 1,532 42
Negotiable certificate of deposits - 989 - 857
Other:
Demand deposits 659 1,614 571 1,399
Time deposits 10,267 13,622 8,900 11,808
Money market deposit account 14,816 74,200 12,843 64,321
-------- ------ -------- ------
W 28,001 91,116 $ 24,273 78,984
======== ====== ======== ======
With respect to sale of beneficiary certificates, W2,267 million and
W6,254 million of time deposit are pledged as collateral by Franklin
Templeton Investment Trust Management Co., Ltd., as of March 31, 2004 and
2003, respectively.
(4) Deposits Segregated under the Regulation
Deposits segregated under the regulation as of March 31, 2004 and 2003
consist of the following:
Won U.S. dollars (Note 2)
--------------------- ----------------------
2004 2003 2004 2003
--------- ------- --------- --------
Subscription deposits W - 8,922 $ - 7,734
Reserve for claims of customers' deposits 707,742 658,900 613,507 571,168
Guarantee deposits for securities borrowed - 7,326 - 6,351
Guarantee deposits for futures and options trading 23,342 24,785 20,234 21,485
--------- ------- --------- -------
W 731,084 699,933 $ 633,741 606,738
========= ======= ========= =======
Pursuant to the Regulation on Securities Industry prescribed by the Korean
Securities and Exchange Law, the Company is required to deposit with the
Korean Securities Finance Corporation ("KSFC") or banks for the payment of
the customers' deposits and those amount should not be pledged as
collateral.
17
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(5) Short-term Investment in Securities
Short-term investment in securities as of March 31, 2004 and 2003 consist
of the following:
Won U.S. dollars (Note 2)
----------------------- ----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Trading securities:
Stocks W 28,245 2,371 $ 24,484 2,056
Government and public bonds 442,974 292,289 383,993 253,371
Corporate bonds 44,265 16,955 38,371 14,697
Beneficiary certificates 23,754 273,359 20,591 236,962
Negotiable commercial papers - 48,794 - 42,297
Securities in foreign currencies 97 - 84 -
---------- ---------- ---------- ----------
539,335 633,768 467,523 549,383
Available-for-sale securities:
Beneficiary certificates 11,245 - 9,748 -
---------- ---------- ---------- ----------
W 550,580 633,768 $ 477,271 549,383
========== ========== ========== ==========
(a) Trading securities
(i) Equity securities
2004 2003
---------------------------------- --------
Acquisition Fair Book Book
cost value value value
------------ -------- -------- --------
Stocks W 29,371 28,245 28,245 2,371
(ii) Debt securities
2004 2003
----------------------------------------------------- -----------
Face Acquisition Fair Book Book
value cost value (*) value value
----------- ----------- ----------- ----------- -----------
Government and public bonds W 450,211 4 442,974 442,974 292,289
Corporate bonds 49,662 46,592 44,265 44,265 16,955
----------- ----------- ----------- ----------- -----------
W 499,873 488,703 487,239 487,239 309,244
=========== =========== =========== =========== ===========
(*) Debt securities are recorded at fair value using the market
yield of bonds provided by the bond credit rating and pricing
associations.
(iii) Beneficiary certificates
2004 2003
------------------------------------ ----------
Acquisition Fair Book Book
cost value value value
----------- ---------- ---------- ----------
Unsold beneficiary certificates W 16,646 17,590 17,590 271,879
Other 5,479 6,164 6,164 1,480
---------- ---------- ---------- ----------
W 22,125 23,754 23,754 273,359
========== ========== ========== ==========
(iv) Securities in foreign currencies
2004 2003
------------------------------------ ----------
Acquisition Fair Book Book
cost value value value
----------- ------- ---------- ----------
Stocks W 87 97 97 -
18
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(5) Short-term Investments in Securities, Continued
(b) Available-for-sale securities
2004 2003
------------------------------------------ ---------
Acquisition Fair Book Book
cost value value value
------------- ------- ------- ---------
Unsold beneficiary certificates W 8,485 11,245 11,245 -
(6) Hybrid Securities Bought
Details of hybrid securities bought as of March 31, 2004 are as follows:
Face Acquisition Book Unrealized
value cost value gain (loss)
---------- ----------- ---------- -----------
Equity linked securities W 193,468 190,697 238,732 48,035
========== =========== ========== ===========
(7) Loans
Loans as of March 31, 2004 and 2003 consist of the following:
Won U.S. dollars (Note 2)
---------------------- --------------------
2004 2003 2004 2003
--------- --------- --------- -------
Call loans W 110,000 5,000 $ 95,354 4,334
Brokers' loans 130,945 56,432 113,510 48,918
Less: allowance for doubtful accounts (655) (282) (568) (245)
--------- --------- --------- -------
130,290 56,150 112,942 48,673
Short-term loans 17 24 15 21
Other 10 138 9 120
Less: allowance for doubtful accounts (10) (14) (9) (12)
--------- --------- --------- -------
- 124 - 108
--------- --------- --------- -------
W 240,307 61,298 $ 208,311 53,136
========= ========= ========= =======
The Company extends loans to its customers from funds borrowed from KSFC or
from its own funds and requires customers to provide cash or securities as
collaterals, equivalent to 170% of loan balance.
19
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(8) Other Current Assets
Other current assets as of March 31, 2004 and 2003 consist of the
following:
Won U.S. dollars (Note 2)
---------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- --------
Accounts receivables from customers W 57,313 49,363 $ 49,682 42,790
Less: allowance for doubtful accounts (2,670) (3,544) (2,314) (3,072)
--------- --------- --------- -------
54,643 45,819 47,368 39,718
Accrued income 10,947 8,953 9,489 7,760
Less: allowance for doubtful accounts (1,839) (1,142) (1,594) (990)
--------- --------- --------- -------
9,108 7,811 7,895 6,770
Advance payments 18,336 6,484 15,895 5,621
Prepaid expense 2,215 920 1,920 798
Prepaid income taxes 4,129 1,686 3,579 1,462
Derivative assets 32,135 - 27,856 -
Other 4,519 566 3,917 491
--------- --------- --------- -------
W 125,085 63,286 $ 108,430 54,860
========= ========= ========= =======
(9) Long-term Investment in Securities
Long-term investment in securities as of March 31, 2004 and 2003 consist
of the following:
Won U.S. dollars (Note 2)
------------------ --------------------
2004 2003 2004 2003
-------- -------- -------- ---------
Available-for-sale securities:
Stocks W 19,685 19,725 $17,064 17,099
Investments in special funds 14,447 35,170 12,524 30,487
Corporate bonds - 9,791 - 8,488
Less: allowance for doubtful accounts - (3,224) - (2,795)
-------- -------- ------- -------
- 6,567 - 5,693
-------- -------- ------- -------
34,132 61,462 29,588 53,279
Investment securities accounted for by the equity method 11,880 9,678 10,298 8,389
-------- -------- ------- -------
W 46,012 71,140 $39,886 61,668
======== ======== ======= =======
20
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(9) Long-term Investment in Securities, Continued
(a) Available-for-sale securities
(i) Equity securities
Details of equity securities classified as available-for-sale
securities as of March 31, 2004 and 2003 are as follows:
2004 2003
---------------------------------- -------
Ownership
percentage Acquisition Fair Book Book
(%) cost value value value
------------ ---------- -------- --------- -------
Stocks:
Marketable stocks:
Saehan Co., Ltd. 0.15 W 1,841 497 497 793
Shinhan Financial Co., Ltd. - - - - 4
Korea Securities Deposit Co., Ltd. - - - - 44
--------- -------- -------- ------
1,841 497 497 841
Non-marketable stocks:
Korea Securities Computer Co., Ltd. 0.16 44 198 44 44
The Korea Securities Finance Co., Ltd. 3.39 11,573 15,537 11,573 11,573
Korea Securities Depository 1.60 843 5,500 844 843
Kihyup Technology Banking Corp. 1.72 500 574 500 500
The Kosdaq Stock Market Inc. 2.19 460 2,909 460 460
Hanwha Investment Trust
Management Co., Ltd. 4.50 1,350 1,433 1,350 1,350
Korea Money Broker Co. Ltd 1.00 100 421 100 100
Korea ECN Securities Co., Ltd. 6.25 1,600 1,206 1,600 1,600
Daehan Investment & Securities Co., Ltd. 0.05 1,900 - - -
Korea Investment & Securities Co., Ltd. 0.03 2,801 - - -
Shinhan Life Insurance Co., Ltd. 1.16 2,324 - - -
Other 2,942 1,640 2,717 2,414
--------- -------- -------- ------
26,437 29,418 19,190 18,884
--------- --------- -------- ------
W 28,278 29,915 19,685 19,725
========= ======== ======== ======
Investment in special funds:
Korea Stock Exchange 3.40 W 2,612 24,015 2,612 2,612
Securities Market Stabilization Fund 10.30 4,612 8,834 8,834 29,557
Good-KDB 2nd Specialty Co., Ltd. 6.00 3,000 3,088 3,000 3,000
Other 1 22 1 1
---------- --------- -------- ------
W 10,225 35,959 14,447 35,170
========== ========= ======== ======
21
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(9) Long-term Investment in Securities, Continued
(ii) Debt securities
Details of debt securities classified as available-for-sale
securities as of March 31, 2003 are as follows:
Face Acquisition Fair Book
value cost value value
---------- ---------- ---------- ----------
Corporate bonds:
E.ONE Co., Ltd. (*) W 978 978 - 978
Expert ABS Specialty Co., Ltd. (*) 2,210 2,210 - 2,210
Dream Pool ABS Specialty Co., Ltd. (*) 3 3 - 3
Realty Advisors Korea (**) 6,600 6,600 6,600 6,600
---------- ---------- ---------- ----------
W 9,791 9,791 6,600 9,791
========== ========== ========== ==========
(*) The Company recorded 100% of an allowance for doubtful
accounts as of March 31, 2003 and the amount was written off
during the year ended March 31, 2004.
(**) The corporate bond is stated at acquisition cost as of March
31, 2003 and was sold at W6,600 million during the year ended
March 31, 2004.
(b) Investment securities accounted for by the equity method
Details of investment securities in subsidiaries and affiliates accounted
for by the equity method as of March 31, 2004 and 2003 are as follows:
2004
---------------------------------------------------------
Equity
Ownership Beginning method Other Ending
Subsidiaries and affiliates percentage(%) balance gain changes balance
------------------------------------------- ------------ ------------ ------------ ------------ ------------
Good Morning Securities USA Inc. (*) 100.0 W 5,947 (887) (448) 4,612
Good Morning Securities Europe Limited (**) 100.0 3,731 115 3,422 7,268
------------ ------------ ------------ ------------
W 9,678 (772) 2,974 11,880
============ ============ ============ ============
2003
---------------------------------------------------------
Equity
Ownership Beginning method Other Ending
Subsidiaries and affiliates percentage(%) balance gain (loss) changes balance
------------------------------------------- ------------ ------------ ------------ ------------ ------------
Good Morning Investment Trust Management - W 15,381 17 (15,398) -
Co., Ltd.
Good Morning Securities USA Inc. (*) 100.0 6,631 (309) (375) 5,947
Good Morning Securities Europe Limited (**) 100.0 4,703 (1,122) 150 3,731
------------ ------------ ------------ ------------
W 26,715 (1,414) (15,623) 9,678
============ ============ ============ ============
(*) Unaudited financial statements as of March 31, 2004 and 2003 were
used, respectively.
(*) Most recent available audited financial statements as of December
31, 2003 and 2002 were used, (**) respectively.
22
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(10) Investments
Investments as of March 31, 2004 and 2003 consist of the following:
Won U.S. dollars (Note 2)
-------------------- ---------------------
2004 2003 2004 2003
-------- -------- --------- --------
Long-term bank deposits W 58 70 $ 50 61
Long-term loans 16,211 17,225 14,052 14,932
Less: allowance for doubtful accounts (710) (1,069) (615) (927)
-------- -------- -------- -------
15,501 16,156 13,437 14,005
Guarantee deposits paid 57,288 59,955 49,660 51,972
Other 5,058 6,210 4,385 5,383
-------- -------- -------- -------
W 77,905 82,391 $ 67,532 71,421
======== ======== ======== =======
As of March 31, 2004, above long-term bank deposits consist solely of
guarantee deposits for checking account and are restricted for use.
(11) Property and Equipment
Property and equipment as of March 31, 2004 and 2003 consist of the
following:
Won U.S. dollars (Note 2)
---------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- --------
Land W 42,142 42,209 $ 36,531 36,589
Buildings 159,689 159,598 138,427 138,348
Vehicles 34 113 29 98
Furniture and fixtures 64,501 139,682 55,913 121,083
Office equipment and other 9 9 8 8
--------- --------- --------- --------
266,375 341,611 230,908 296,126
Less: accumulated depreciation (84,141) (135,618) (72,938) (117,561)
--------- --------- --------- --------
W 182,234 205,993 $ 157,970 178,565
========= ========= ========= ========
The officially declared value of land used in domestic branches at March
31, 2004 and 2003, as announced by the Minister of Construction and
Transportation, is as follows:
Book value Declared value
------------------- ---------------
2004 2003 2004 2003
---------- ------ ------ ------
Land (Domestic only) W 42,142 42,209 47,045 43,918
The officially declared value, which is used for government purposes, does
not represent the fair value.
As of March 31, 2004, the Company has provided certain land and buildings
with a book value of W167,190 million to Shinhan Bank and others up to
W102,531 million of collateral given against its 14th privately placed
debentures issued.
23
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(12) Intangible Assets
Intangible assets as of March 31, 2004 and 2003 consist of the following:
Won U.S. dollars (Note 2)
----------------- ---------------------
2004 2003 2004 2003
------- ------- ------- -----
Computer software W11,589 10,109 $10,045 8,763
Other 259 530 225 460
------- ------- ------- -----
W11,848 10,639 $10,270 9,223
======= ======= ======= =====
(13) Other Assets
Other assets as of March 31, 2004 and 2003 consist of the following:
Won U.S. dollars (Note 2)
-------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- -------
Advances for customers W 17,047 62,032 $ 14,778 53,772
Less: allowance for doubtful accounts (16,147) (18,610) (13,997) (16,132)
-------- -------- -------- -------
900 43,422 781 37,640
Collective fund for default losses 6,356 5,632 5,510 4,882
Default loans 10,917 11,928 9,463 10,340
Less: allowance for doubtful accounts (9,016) (9,969) (7,816) (8,642)
present value discounts (873) (1,163) (757) (1,008)
-------- -------- -------- -------
1,028 796 890 690
Deferred tax assets 11,377 27,461 9,862 23,805
-------- -------- -------- -------
W 19,661 77,311 $ 17,043 67,017
======== ======== ======== =======
In accordance with the provision of the Korean Securities and Exchange Law
and related laws and working rule, the Company has deposited special reserves
with the Korean Stock Exchange, Korea Securities Dealers Association and
Korea Securities Depository, an amount equal to 0.001% of its total trading
value of transactions for any potential losses on unsettled trading, and
accounted for collective fund for default losses.
(14) Insured assets
Details of insured assets as of March 31, 2004 are as follows:
Amount to be
Type of insurance Assets insured Book value insured
---------------------- ---------------------- --------------- -------------
Fire insurance Buildings W 125,048 163,462
Furniture and fixtures 15,030 97,286
--------------- -------------
W 140,078 260,748
=============== =============
In addition, the Company maintains key employees' indemnity insurance and
other insurance policies covering loss and liability arising from
accidents.
24
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(15) Short-term Borrowings
Details of short-term borrowings as of March 31, 2004 and 2003 are as
follows:
Won U.S. dollars (Note 2)
Interest rate --------------------- ----------------------
(%) 2004 2003 2004 2003
------------- ---------- ---------- ---------- ----------
Borrowings from:
Shinhan Bank 6.71 W - 20,000 $ - 17,337
Korea Securities Finance Co., Ltd. 1.26~4.50 - 157,200 - 136,269
SK Securities Co., Ltd. 5.79 30,000 - 26,005 -
---------- ---------- ---------- ----------
W 30,000 177,200 $ 26,005 153,606
========== ========== ========== ==========
(16) Hybrid Securities Issued
Details of hybrid securities issued as of March 31, 2004 are as follows:
Number of Issue Unrealized
securities issued Face value amount (*) Book value gain (loss)
----------------- ---------------- ---------------- ---------------- ----------------
Equity linked securities 52,160,131 W 521,601 377,513 427,494 (49,981)
Securities on stock warrants 3,499,502 585,999 30,258 38,879 (8,621)
---------------- ---------------- ---------------- ----------------
W 1,107,600 407,771 466,373 (58,602)
================ ================ ================ ================
(*) Premium at the date of issue are not included.
(17) Other Current Liabilities
Other current liabilities as of March 31, 2004 and 2003 are as follows:
Won U.S. dollars (Note 2)
--------------------- -----------------------
2004 2003 2004 2003
--------- ---------- ---------- ---------
Dividends payable W 717 717 $ 622 622
Accounts payable 505 1,057 438 916
Accrued expense 36,735 25,292 31,844 21,924
Deposits for opening a margin account 5,070 4,049 4,395 3,510
Taxes withheld 8,271 9,708 7,170 8,415
Rental deposits received 24,219 22,072 20,994 19,133
Unearned revenues 15 297 13 258
Derivatives liabilities 672 - 582 -
Other 3,805 16,404 3,298 14,220
--------- --------- --------- ---------
W 80,009 79,596 $ 69,356 68,998
========= ========= ========= =========
25
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(18) Debentures
Debentures as of March 31, 2004 and 2003 consist of the following:
Maturity Interest rate (%) 2004 2003
---------------------- ----------------- --------- --------
14th privately placed debentures October 30, 2001 ~ 6.86 W 30,000 30,000
October 30, 2004
September 26, 2002 ~
15th subordinated debentures September 26, 2004 6.23 130,000 130,000
July 01, 2003 ~
16th privately placed debentures July 01, 2005 6.20 1,000 -
--------- --------
W 161,000 160,000
========= ========
In relation to the 14th privately placed debentures, certain land and
buildings with a book value of W167,190 million and a blank note are
pledged as collateral as of March 31, 2004.
With regards to the 15th subordinated debentures issued to Shinhan
Financial Group Co., Ltd., the Company will not repay upon maturity if the
Net Capital Ratio of the Company becomes less than or equal to 100% as a
result of the repayment of the principal of these debenture. If any
principal of the debentures is not paid at the scheduled maturity, 7.23%
default interest per annum will be applied to the debenture.
(19) Retirement and Severance Benefits
Changes in retirement and severance benefits for the yearns ended March
31, 2004 and 2003 are as follows:
Won U.S. dollars (Note 2)
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- --------- --------
Estimated balance at beginning of year W 9,295 15,520 $ 8,057 13,453
Payment (12,373) (30,266) (10,726) (26,236)
Provision 9,984 23,833 8,655 20,660
Adjustment due to merger - 208 - 180
---------- -------- --------- -------
Estimated balance at end of year 6,906 9,295 5,986 8,057
Less: trust for severance benefit (4,617) (5,838) (4,002) (5,060)
contribution to National Pension Fund (37) (39) (32) (34)
---------- -------- --------- -------
W 2,252 3,418 $ 1,952 2,963
========== ======== ========= ======
26
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(20) Sale-Lease Back Transactions
During the yearn ended March 31, 2004, the Company disposed of certain
computer equipment and software, included in property and equipment and
intangible assets to Macquarie Capital Korea Co., Ltd., at W47,000 million
under the terms of sale-lease back transactions. Those transaction is
classified as operating lease, and the Company recorded W29,043 million of
gain from the disposition for the year ended March 31, 2004.
The collection schedule of future lease payables as of March 31, 2004 is
as follows:
Annual lease
payment
------------
April 1, 2004 ~ March 31, 2005 W 16,635
April 1, 2005 ~ March 31, 2006 16,635
Thereafter 4,159
----------
W 37,429
==========
(21) Foreign Currency Denominated Assets and Liabilities
Assets denominated in foreign currency as of March 31, 2004 and 2003
consist of the following:
Foreign currency Equivalent Won
---------------------- ----------------------
2004 2003 2004 2003
---------- ---------- --------- -----------
Bank deposit $ 1,532 39 W 1,767 49
======== == ======== ==
(22) Capital Surplus
The Company reduced its capital by the ratio of 1:0.9 as of December 24,
2002, in accordance with the resolution of shareholders' meeting. As a
result of capital reduction, the Company recorded W15 million of net gain
from capital reduction.
27
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(23) Retained Earnings
Retained earnings as of March 31, 2004 and 2003 consist of the following:
Won U.S. dollars (Note 2)
---------------------- ----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Reserve for loss on securities transactions W 9,894 19,789 $ 8,577 17,154
Unappropriated retained earnings 80,655 10,878 69,916 9,430
-------- ------ ------- ------
W 90,549 30,667 $78,493 26,584
======== ====== ======= ======
(24) Capital Adjustments
Capital adjustments as of March 31, 2004 and 2003 consist of the
following:
Won U.S. dollars (Note 2)
---------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- --------
Discount on stock issuance $(238,314) (259,086) $(206,583) (224,589)
Treasury stock (14,584) (14,584) (12,642) (12,642)
Stock options (Note 25) 11,787 10,377 10,218 8,995
Unrealized gain (loss) on available-for-sale securities 5,638 (1,014) 4,887 (879)
Unrealized gain on investment securities
accounted for by the equity method 4,082 4,278 3,538 3,708
--------- --------- --------- --------
$(231,391) (260,029) $(200,582) (225,407)
========= ========= ========= =========
The Company's own stocks repurchased as of March 31, 2004 are 4,795 shares
of common stock and 1,042,418 shares of preferred stock and those are
planned to be disposed of in the near future.
Discount on stock issuance are to be amortized over three years using the
straight-line method through appropriation of retained earnings.
28
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In Won, except earnings per share)
(25) Stock Options
In accordance with the resolution of the board of directors and
shareholders' meeting, the Company granted stock options to certain
employees and details of stock options as of March 31, 2004 are as
follows:
Stock options Shares Exercise price Compensation
granted Grant date granted Exercisable period per share cost per share
------------- ----------------- ---------- --------------------- -------------- --------------
1st February 4, 1999 2,588,355 February 4, 2002 ~ W 5,374 1,254
February 3, 2009
2nd February 4, 1999 1,434,510 February 4, 2002 ~ 5,456 1,707
February 3, 2009
3rd December 17, 1999 1,980,000 December 17, 2002 ~ 5,437 1,042
December 16, 2007
4th May 27, 2000 405,000 May 27, 2003 ~ 2,372 -
May 26, 2008
5th May 26, 2001 1,260,000 May 26, 2004 ~ 4,498 1,147
May 25, 2009
6th January 31, 2002 90,000 May 31, 2005 ~ 3,291 664
May 31, 2010
7th May 25, 2002 540,000 May 25, 2004 ~ 5,216 2,025
May 24, 2012
8th June 27, 2002 348,777 May 26, 2003 ~ 2,621 1,081
May 25, 2006
9th June 27, 2002 343,383 May 27, 2004 ~ 3,238 589
May 26, 2007
10th May 30, 2003 365,000 May 30, 2005 ~ 1,383 78
May 29, 2009
The Compensation cost for stock options recognized using the minimum value
method is W1,442 million for the year ended March 31, 2004 and will be
W393 million for periods thereafter.
If the Company had adopted the fair value method, the following
assumptions would have been used.
Fair value
Stock Options Risk-free Expected Expected stock Expected at grant
granted interest rate(%) exercise period price volatility (%) dividend yield (%) date
-------------- ---------------- --------------- -------------------- ------------------ ----------
1st 7.00 3 years 116.87 - W 7,490
2nd 7.00 3 years 116.87 - 7,490
3rd 8.89 3 years 137.35 - 6,920
4th 5.24 3 years 137.82 - 3,175
5th 6.42 3 years 118.09 - 6,000
6th 6.03 3 years 86.35 - 5,730
7th 6.87 6 years 101.94 - 6,300
8th 5.13 1.5 years 84.82 - 5,680
9th 5.62 2.5 years 94.38 - 5,680
10th 4.10 4 years 67.00 - 4,335
29
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(26) Related Party Transactions
(a) Significant transactions with related parties for the years ended
March 31, 2004 and 2003 are as follows:
Related party 2004 2003
------------------------------------------------- ----------- ----
Revenue earned:
Fees and commissions Good Morning Securities USA Inc. W 6,415 10,819
Fees and commissions Good Morning Securities Europe Limited 4,058 1,222
Interest Shinhan Bank 1,633 457
Rent Shinhan Bank 64 -
Interest Chohung Bank 198 -
Rent Shinhan Card Co., Ltd. 151 -
Rent Shinhan Credit Information Co., Ltd. 21 -
Fees and commissions Shinhan Credit Information Co., Ltd. 2 -
Interest Shinhan Life Insurance Co., Ltd. 8 -
Rent Shinhan BNP Investment Trust Management Co., Ltd. 158 -
Fees and commissions SH&C Life Insurance Co., Ltd. 1 -
----------- ------
W 12,709 12,498
=========== ======
Expense incurred:
Fees and commissions Good Morning Securities USA Inc. W 4,422 7,411
Fees and commissions Good Morning Securities Europe Limited 3,024 839
Interest Shinhan Bank 4,007 1,800
Rent Shinhan Bank 103 -
Interest Chohung Bank 36 -
Rent Shinhan Macquarie Financial Advisory Co., Ltd. 9,362 -
Interest Shinhan Financial Group Co., Ltd. 10,124 3,933
----------- ------
W 31,078 13,983
=========== ======
(b) Significant account balances with related parties as of March 31, 2004 and
2003 are as follows:
Related party 2004 2003
-------------------------------------- -------- -------
Assets:
Bank deposits Shinhan Bank W 14,733 -
Bank deposits Chohung Bank 7,866 -
Other current assets Shinhan Bank 6,792 45,715
Other current assets Chohung Bank 46 -
--------- -------
W 29,437 45,715
========= =======
Liabilities:
Debentures Shinhan Bank W 30,000 -
Debentures Shinhan Financial Group Co., Ltd. 130,000 -
Other current liabilities Good Morning Securities USA Inc. 1,111 853
Other current liabilities Good Morning Securities Europe Limited 841 524
Other current liabilities Shinhan Bank 4,412 50,338
Other current liabilities Shinhan Financial Group Co., Ltd. 134 130,111
Other current liabilities Shinhan BNP ITMC Co., Ltd. 3,496 3,496
Other current liabilities Shinhan Card Co., Ltd. 4,634 3,289
--------- -------
W 174,628 188,611
========= =======
30
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(26) Related Party Transactions, Continued
(c) Equity securities issued by related parties as of March 31, 2004 and
2003 are as follows:
2004
--------------------------------------------
Ownership Acquisition Fair Book
Subsidiaries and affiliates percentage(%) cost value value
--------------------------- ------------- ---- ----- -----
Good Morning Securities USA Inc. 100.00 W 3,342 4,612 4,612
Good Morning Securities Europe Limited 100.00 9,669 7,268 7,268
------- ------ ------
W13,011 11,880 11,880
======= ====== ======
2003
--------------------------------------------
Ownership Acquisition Fair Book
Subsidiaries and affiliates percentage(%) cost value value
--------------------------- ------------- ---- ----- -----
Shinhan Financial Group Co., Ltd. - W 7 4 4
Good Morning Securities USA Inc. 100.00 3,342 5,947 5,947
Good Morning Securities Europe Limited 100.00 6,498 3,731 3,731
------ ----- -----
W9,847 9,682 9,682
====== ===== =====
(d) As of March 31, 2004, the Company has provided W50,000 million of
guarantees from Shinhan Financial Group Co., Ltd., with respect to
lease contract of furniture and fixtures.
(27) Derivatives
Details of unsettled derivative instruments with trading purposes as of
March 31, 2004 are as follows:
Unsettled Valuation
amount gain (loss)
------------ -----------
Interest rate related Futures W 16,528 28
Swap 110,000 (617)
------------ ------
126,528 (589)
Stock price Index related Futures 94,001 1,546
Currency related Forwards 37,502 70
Stock related Swap 2,381 -
Options 420,742 11,794
------------ ------
423,123 11,794
------------ ------
W 681,154 12,821
============ ======
31
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars)
(28) General and Administrative Expenses
General and administrative expenses for the years ended March 31, 2004 and
2003 are as follows:
Won U.S. dollars (Note 2)
------------------- ---------------------
2004 2003 2004 2003
---- ---- ---- ----
Salaries and wages W117,055 117,386 $101,469 101,756
Provision for retirement and severance benefits 9,984 23,833 8,655 20,660
Other employees benefits 24,573 21,998 21,301 19,069
Depreciation 13,849 24,075 12,005 20,869
Amortization 5,630 4,417 4,880 3,829
Bad debts 3,774 - 3,271 -
Advertising 17,732 19,064 15,371 16,526
Rent 6,237 6,575 5,407 5,699
Commissions 3,847 4,171 3,335 3,616
Computer system operation 26,556 15,238 23,020 13,209
Tax and dues 14,468 11,120 12,542 9,639
Other 27,995 27,444 24,267 23,790
-------- ------- -------- -------
W271,700 275,321 $235,523 238,662
======== ======= ======== =======
(29) Income Taxes
(a) The Company is subject to income taxes based on taxable earnings,
which result in the normal tax rate of 29.7%. The components of
income tax expense for the year ended March 31, 2004 are as follows:
U.S. dollars
Won (Note 2)
--- -------
Current income tax exp W - $ -
Changes in deferred taxes:
temporary differences 6,462 5,602
tax loss carryforwards 9,622 8,341
------- ------
W16,084 13,943
======= ======
(b) Reconciliation of accounting income and taxable income for the year
ended March 31, 2004 is as follows:
Temporary Permanent
Description difference difference
----------- ---------- ----------
Addition:
Investment in securities W 12,957 6,456
Other current assets 2,435 -
Allowance for doubtful accounts 4,137 -
Securities sold but not yet purchased 348 -
Hybrid securities issued 63,602 -
Other current liabilities 4,766 -
Derivatives 2,429 -
Other 113 4,783
---------- ------
W 90,787 11,239
========== ======
32
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(29) Income Taxes, Continued
Temporary Permanent
Description difference difference
------------------------------------------- ----------- ----------
Deduction:
Deposit segregated under the regulation W 3,642 -
Investment in securities 19,743 -
Hybrid securities bought 48,035 -
Other current assets 4,142 -
Allowance for doubtful accounts 2,282 -
Securities sold but not yet purchased 305 -
Hybrid securities issued 5,000 -
Other current liabilities 6,199 -
Derivatives 15,322 -
Debt for equity swap 18,415 -
Other 352 5,459
----------- -----
W 123,437 5,459
=========== =====
(c) Changes in significant accumulated temporary differences and tax
effects for the year ended March 31, 2004 are as follows:
Beginning Ending Tax
balance Increase Decrease balance effects
------- -------- -------- ------- -------
Deductible temporary differences:
Investment in securities W 36,945 4,949 9,291 32,603 9,074
Allowance for doubtful accounts 2,232 716 2,232 716 213
Accumulated depreciation 8 - 7 1 -
Securities sold but not yet purchased 4 107 4 107 32
Hybrid securities issued - 63,602 - 63,602 18,890
Other current liabilities 13,115 4,766 6,199 11,682 3,212
Derivatives 80 2,421 80 2,421 719
Valuation gain using the equity method 4,440 772 - 5,212 1,433
Debt for equity swap 19,862 - 18,415 1,447 398
Other 1,341 3,421 395 4,367 1,202
-------- ------ ------ ------- -------
78,027 80,754 36,623 122,158 35,173
======== ====== ====== ======= =======
Taxable temporary differences:
Deposit segregated under the regulation - (3,642) - (3,642) (1,082)
Investment in securities (1,001) (3,996) (1,001) (3,996) (1,187)
Other current assets (2,435) (4,142) (2,435) (4,142) (1,230)
Hybrid securities bought - (48,035) - (48,035) (14,267)
Securities sold but not yet purchased (241) (300) (241) (300) (89)
Hybrid securities issued - (5,000) - (5,000) (1,485)
Derivatives (8) (15,242) (8) (15,242) (4,526)
Other (549) - (112) (437) (121)
-------- ------- ------ ------- -------
(4,234) (80,357) (3,797) (80,794) (23,987)
-------- ------- ------ ------- -------
73,793 397 32,826 41,364 11,186
Tax effects of tax loss carryforwards 71,316 - 71,316 - -
Amount in excess of tax limit for statutory donation 642 191
--------- -------
W 42,006 11,377
========= =======
33
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won and thousands of U.S. dollars, except earnings per share)
(29) Income Taxes, Continued
(d) Effective tax rate for the year ended March 31, 2004 is 16.63%.
(30) Earnings Per Share
(a) Ordinary income and net earnings per share
Earnings per common share is calculated by dividing net earnings by the
weighted average number of shares of common stock outstanding. Earnings
per share for the years ended March 31, 2004 and 2003 are computed as
follows:
Ordinary income per share in Won:
2004 2003
---- ----
Ordinary income in Won w80,656,901,993 10,878,554,441
Weighted average number of common shares outstanding 155,571,555 159,124,497
--------------- --------------
Ordinary income per share in Won w 518 68
=============== ==============
Net earnings per share in Won:
2004 2003
---- ----
Net earnings in Won W80,655,344,075 10,878,554,441
Weighted average number of common shares outstanding 155,571,555 159,124,497
--------------- --------------
Net earnings per share in Won W 518 68
=============== ==============
Additionally, diluted earnings per share are not computed because the
stock options have no dilutive effect.
(b) As of March 31, 2004, securities available to be converted into common
stock solely consist of stock options and total number of shares to be
issued is 9,355,025 shares.
(31) Statements of Cash Flows
(a) Cash in the cash flow statements consist of cash and cash equivalents and
the reconciliation between cash and cash equivalents and cash and bank
deposits as of March 31, 2004 and 2003 is as follows:
2004 2003
---- ----
Demand deposits W 659 1,614
Checking accounts 492 642
Deposit in foreign currencies 1,767 49
---------- ------
W 2,918 2,305
========== =====
34
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won)
(31) Statements of Cash Flows, Continued
(b) Significant transactions not involving cash inflows or outflows for
the year ended March 31, 2004 are as follows:
Default loans written off W 5,252
Increase in unrealized gain on available-for-sale securities 6,652
Increase in unrealized gain on investment securities accounted for by the equity method 196
(32) Commitments and Contingencies
(a) As of March 31, 2004, the Company committed with five banks
including Chohung Bank for an overdraft account with a limit of
W14,000 million and with 13 banks including Shinhan Bank for daily
revolving account with a limit of W329,000 million.
(b) As of March 31, 2004, the Company provided one blank note and four
notes with W1,412 million of face value to financial institutions as
collateral for borrowings and office rental obligations.
(c) As of March 31, 2004, the Company made a contract with Franklin
Templeton Investment Trust Management Co., Ltd. to guarantee against
the contingent losses that may result from the beneficiary
certificates that include guaranteed bonds issued by financially
troubled companies, such as the DAEWOO Group and its affiliates. In
addition, the Company's time deposit of W2,267 million was pledged
as collateral by Franklin Templeton Investment Trust Management Co.,
Ltd.
(d) Pursuant to the contract made with Global Korea Investment I
Limited, the Company sold W41,806 million of non-performing assets
in Freya World, which had been included in other assets, at W48,900
million and recorded a gain on sale of these non-performing assets
in the current operation. With regards to the contract, the Company
is subject to the put option or resettlement, which Global Korea
Investment I Limited can exercise, within 18 months upon balance
payment.
(e) As of March 31, 2004, the Company has 28 pending lawsuits as a
defendant of W18,209 million. The ultimate outcomes of such pending
litigation cannot presently be determined.
(f) As of March 31, 2004, the Company is holding W4,879 million of debt
securities issued by LG Card Co., Ltd., which are classified as
short-term investment in securities. Actual losses on these
securities may differ materially from the management's assessments
and the accompanying non-consolidated financial statements do not
reflect the impact of the uncertainty on the financial position of
the Company.
(g) As of March 31, 2004, the Company is holding beneficiary
certificates issued by SK Networks Co., Ltd. (formerly SK Global
Co., Ltd.), and Hynix Semiconductor Inc., amounting to W5,887
million and W386 million, respectively, and recorded W6,917 million
and W900 million of unrealized loss for the year ended March 31,
2004, respectively. With regards to the redemption of these
beneficiary certificates, the Company may incur additional losses
the actual amount of which cannot presently be determined.
35
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31, 2004 and 2003
(In millions of Won, except net earnings per share)
(33) Employee Welfare and Contributions to Society
For employee welfare, the Company maintains a refectory, an infirmary and
other employees benefits program, and additionally, the Company has
donated to scholarship funds and others, amounting to W336 million for the
year ended March 31, 2004.
(34) Financial Performance
Financial performance for the quarter ended March 31, 2004 is as follows:
Operating revenue W 193,385
Operating income 14,457
Net earnings 24,098
Net earnings per share in Won 155
(35) Economic Environment
In common with other Asian countries, 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
non-consolidated 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.
(36) Effective Date for Financial Statements
The accompanying non-consolidated financial statements are to be approved
at the Board of Directors' meeting on May 11, 2004.
36
APPENDIX 8
(GOODMORNING SHINHAN SECURITIES CO., LTD. LOGO)
Non-Consolidated Financial Statements
(Unaudited)
June 30, 2004
(With Independent Accountants' Review Report Thereon)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Based on a report originally issued in Korean
To the Board of Directors and Stockholders
Goodmorning Shinhan Securities Co., Ltd.:
We have reviewed the non-consolidated balance sheet of Goodmorning Shinhan
Securities Co., Ltd. (the "Company") as of June 30, 2004, and the related
non-consolidated statements of earnings and cash flows for the quarters ended
June 30, 2004 and 2003. These non-consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to issue a
report on these financial statements based on our review.
We conducted our review in accordance with the Review Standards for Semiannual
Financial Statements established by the Securities and Futures Commission of 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 consists principally of 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 review, nothing has come to our attention that causes us to believe
that the non-consolidated financial statements referred to above are not
presented fairly, in all material respects, in accordance with the Financial
Accounting Standards, as established by the Financial Supervisory Commission of
the Republic of Korea.
The non-consolidated balance sheet of the Company as of March 31, 2004 and the
related statements of earnings, appropriations of retained earnings and cash
flows for the year then ended, which are not accompanying this report, were
audited by us and our report thereon, dated April 16, 2004, expressed an
unqualified opinion. The accompanying non-consolidated balance sheet of the
Company as of March 31, 2004, presented for comparative purposes, is not
different from that audited by us in all material respects.
The following matters may be helpful to the readers in their understanding of
the non-consolidated financial statements:
The non-consolidated financial statements expressed in Korean Won have been
translated into United States dollars solely for the convenience of the readers,
on the basis set forth in Note 2(b) to the non-consolidated financial
statements.
As discussed in Note 2(a) to the non-consolidated financial statements,
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 and cash
flows in accordance with accounting principles and practices generally accepted
in countries other than the Republic of Korea. In addition, the procedures and
practices utilized in the Republic of Korea to review such non-consolidated
financial statements may differ from those generally accepted and applied in
other countries. Accordingly, this report and the accompanying non-consolidated
financial statements are for use by those knowledgeable about Korean accounting
procedures and review standards and their application in practice.
As described in Note 2(a) to the non-consolidated financial statements, the
Company adopted Statements of Korea Accounting Standards No. 13, effective from
the first fiscal year beginning after December 31, 2003. Such accounting change
did not result in any change to prior year's net earnings or stockholders'
equity.
As described in Note 26 to the non-consolidated financial statements, the
Company recorded W2,536 million of revenue earned from and W4,455 million of
expense incurred to Shinhan Financial Group Co., Ltd. and other related parties
for quarter ended June 30, 2004. In addition, as of June 30, 2004, the Company
recorded W27,909 million of receivables from and W174,505 million of payables to
related parties.
KPMG Samjong Accounting Corp.
Seoul, Korea
July 16, 2004
--------------------------------------------------------------------------------
This report is effective as of July 16, 2004, the review report date. Certain
subsequent events or circumstances, which may occur between the review report
date and the time of reading this report, could have a material impact on the
accompanying non-consolidated financial statements and notes thereto.
Accordingly, the readers of the review report should understand that there is a
possibility that the above review report may have to be revised to reflect the
impact of such subsequent events or circumstances, if any.
--------------------------------------------------------------------------------
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS
June 30 and March 31, 2004
(in millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
June 30 March 31 June 30 March 31
----------- ----------- ----------- ------------
Assets
Current assets:
Cash and bank deposits (notes 3, 21, 26 and 32) W 78,582 28,001 $ 68,184 24,296
Deposits segregated under the regulation (note 4) 748,425 731,084 649,393 634,346
Short-term investments in securities (note 5) 842,082 550,580 730,656 477,727
Hybrid securities bought (note 6) 343,799 238,732 298,307 207,143
Options bought 124 - 107 -
Loans (note 7) 128,706 240,307 111,675 208,509
Other current assets (notes 8 and 26) 72,296 125,085 62,731 108,533
----------- ----------- ------------ ------------
2,214,014 1,913,789 1,921,053 1,660,554
Long-term investments in securities (notes 9 and 26) 47,383 46,012 41,113 39,923
Investments (note 10) 80,358 77,905 69,725 67,596
Property and equipment (notes 11, 14, 18 and 20) 184,201 182,234 159,827 158,122
Intangible assets (notes 12 and 20) 11,091 11,848 9,624 10,280
Other assets (note 13) 18,292 19,661 15,872 17,060
----------- ----------- ------------ ------------
W 2,555,339 2,251,449 $ 2,217,214 1,953,535
=========== =========== ============ ============
Liabilities and Stockholders' equity
Current liabilities:
Call money W 127,500 - $ 110,629 -
Short-term borrowings (note 15) - 30,000 - 26,030
Bonds sold with repurchase agreements 225,782 175,394 195,906 152,186
Deposits from customers 690,558 665,469 599,183 577,413
Securities sold but not yet repurchased 20,220 14,781 17,544 12,825
Hybrid securities issued (note 16) 569,117 466,373 493,811 404,662
Options sold 22 - 20 -
Current portion of debentures 160,000 - 138,828 -
Other current liabilities (notes 17 and 26) 91,223 80,009 79,152 69,423
----------- ----------- ------------ ------------
1,884,422 1,432,026 1,635,073 1,242,539
Debentures (notes 11, 18 and 26) 1,000 161,000 868 139,696
Retirement and severance benefits (note 19) 4,608 2,252 3,999 1,954
----------- ----------- ------------ ------------
Total liabilities 1,890,030 1,595,278 1,639,940 1,384,189
=========== =========== ============ ============
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED BALANCE SHEETS. CONTINUED
June 30 and March 31, 2004
(in millions of Won and thousands of U.S. dollars, except share data)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
June 30 March 31 June 30 March 31
----------- ----------- ----------- ------------
Stockholders' equity:
Capital stock of W 5,000 par value 796,998 796,998 691,538 691,538
Authorized:
Common stock 450,000,000 shares
Preferred stock 150,000,000 shares
Issued:
Common stock 155,576,350 shares
Preferred stock 3,823,314 shares
Capital surplus (note 22) 15 15 13 13
Retained earnings (note 23) 8,413 90,549 7,300 78,568
Capital adjustments (notes 24 and 25) (140,117) (231,391) (121,577) (200,773)
----------- ----------- ----------- -----------
Total stockholders' equity 665,309 656,171 577,274 569,346
Commitments and contingencies (note 30)
----------- ----------- ----------- -----------
W 2,555,339 2,251,449 $ 2,217,214 1,953,535
=========== =========== =========== ===========
See accompanying notes to non-consolidated financial statements
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS
For the quarters ended June 30, 2004 and 2003
(in millions of Won and thousands of U.S. dollars, except earnings per share)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
2004 2003 2004 2003
------------ ----------- ----------- ------------
Operating revenues:
Commission income (note 26) W 63,814 74,369 $ 55,370 64,529
Interest income (note 26) 17,886 16,022 15,521 13,902
Dividend income 1,109 2,256 962 1,958
Distribution income 155 1,089 134 945
Realized gain from sale of trading securities 6,526 20,560 5,662 17,839
Unrealized gain on trading securities 1,792 1,767 1,555 1,533
Gain related to hybrid securities bought 231 6,769 200 5,873
Unrealized gain on securities sold but not yet repurchased 806 4 699 3
Gain related to hybrid securities issued 66,996 3,032 58,131 2,631
Valuation gain on deposit segregated under the regulation 2,549 2,318 2,212 2,011
Gain on derivatives transactions 46,445 37,978 40,299 32,953
----------- ----------- ------------ ------------
208,309 166,164 180,745 144,177
Operating expenses:
Commission expense (note 26) 13,226 11,122 11,476 9,650
Interest expense (note 26) 7,010 9,559 6,082 8,294
Realized loss from sale of trading securities 14,797 15,063 12,839 13,069
Unrealized loss on trading securities 5,734 2,706 4,975 2,348
Loss related to hybrid securities bought 37,840 30 32,833 27
Unrealized loss on securities sold but not yet repurchased 302 106 262 92
Loss related to hybrid securities issued 11,084 3,693 9,617 3,204
Loss on derivatives transactions 44,812 33,589 38,883 29,145
General and administrative expenses (note 27) 65,041 69,037 56,435 59,902
----------- ----------- ------------ ------------
199,846 144,905 173,402 125,731
----------- ----------- ------------ ------------
Operating income 8,463 21,259 7,343 18,446
Non-operating income (expenses):
Gain (loss) from disposition of property and equipment, net (4) 27,782 (3) 24,106
Realized gain from sale of available-for-sale securities - 62 - 54
Impairment loss on available-for-sale securities (1,337) - (1,160) -
Reversal of loss on available-for-sale securities 1,638 - 1,421 -
Valuation gain using the equity method 937 195 813 169
Loss from foreign currency transactions, net (163) - (141) -
Loss from foreign currency translation, net (16) (2) (14) (2)
Other, net 600 3,282 520 2,848
----------- ----------- ------------ ------------
1,655 31,319 1,436 27,175
----------- ----------- ------------ ------------
Ordinary income 10,118 52,578 8,779 45,621
----------- ----------- ------------ ------------
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF EARNINGS, CONTINUED
For the quarters ended June 30, 2004 and 2003
(in millions of Won and thousands of U.S. dollars, except earnings per share)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
2004 2003 2004 2003
------------ ----------- ----------- ------------
Earnings before income taxes 10,118 52,578 8,779 45,621
Income taxes (note 28) 1,705 8,224 1,479 7,136
----------- ----------- ------------ ------------
Net earnings W 8,413 44,354 $ 7,300 38,485
=========== =========== ============ ===========
Ordinary income and net earnings per share
in Won and U.S. dollars (note 29) W 54 285 $ 0.05 0.25
=========== =========== ============ ===========
See accompanying notes to non-consolidated financial statements
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended June 30, 2004 and 2003
(in millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
2004 2003 2004 2003
------------ ----------- ----------- ------------
Cash flows from operating activities:
Net earnings W 8,413 44,354 $ 7,300 38,485
Adjustments to reconcile net earnings to net cash
provided by (used in) by operating activities:
Unrealized loss on trading securities, net 3,942 939 3,420 815
Unrealized loss (gain) on securities sold but not yet
repurchased (504) 102 (437) 89
Impairment loss on available-for-sale securities 1,337 - 1,160 -
Reversal of impairment loss on available-for-sale securities (1,638) - (1,421) -
Realized gain from sale of available-for-sale securities, net - (62) - (54)
Valuation gain using the equity method (937) (195) (813) (169)
Loss (gain) related to hybrid securities bought, net 37,555 (6,738) 32,586 (5,846)
Unrealized loss on securities sold but not yet repurchased (2,549) (2,318) (2,212) (2,011)
Loss (gain) related to hybrid securities issued (54,921) 663 (47,654) 575
Loss (gain) related to derivatives transactions, net 8,391 (315) 7,281 (273)
Loss (gain) from disposition of property and equipment, net 4 (27,782) 3 (24,106)
Depreciation expense 2,428 5,849 2,107 5,075
Amortization expense 1,335 1,408 1,158 1,222
Bad debt expense 2,099 416 1,821 361
Provision for retirement and severance benefits 2,499 3,003 2,168 2,606
Increase in trading securities (295,369) (64,334) (256,286) (55,821)
Increase in options bought (191) (1,122) (166) (974)
Decrease (increase) in other current assets 46,412 (67,960) 40,271 (58,967)
Decrease in other assets 959 8,224 832 7,136
Increase (decrease) in securities sold but not yet
repurchased 5,942 (4,180) 5,156 (3,627)
Increase in hybrid securities issued 157,666 230,909 136,803 200,354
Increase in options sold 32 720 28 625
Increase in other current liabilities 9,449 7,199 8,199 6,245
Retirement and severance benefits paid (167) (231) (145) (201)
Decrease in National Pension Fund - - - -
Decrease in retirement trust 24 138 21 120
Other, net 247 (8,308) 215 (7,209)
----------- ----------- ------------ ------------
Net cash provided by (used in) operating activities (67,542) 120,379 (58,605) 104,450
----------- ----------- ------------ ------------
Cash flows from investing activities:
Cash provided by investing activities:
Decrease in bank deposits - 8,061 - 6,995
Decrease in deposit segregated under the regulation - 73,865 - 64,091
Decrease in hybrid securities bought - 30 - 26
Decrease in available-for-sale securities 312 25,451 271 22,083
Decrease in investment securities accounted for
by the equity method - 294 - 255
Decrease in loans 1,935,602 214,965 1,679,480 186,521
Goodmorning Shinhan Securities Co., Ltd.
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended June 30, 2004 and 2003
(in millions of Won and thousands of U.S. dollars)
(Unaudited)
Won U.S. dollars (note 2)
------------------------- --------------------------
2004 2003 2004 2003
------------ ----------- ----------- ------------
Decrease in investments 3,153 9,884 2,736 8,576
Decrease in property and equipment 3 46,508 3 40,354
Decrease in intangible assets - 1,038 - 901
Decrease in other assets - 50,216 - 43,571
Increase in other current liabilities 2,201 39,913 1,910 34,632
----------- ----------- ------------ ------------
1,941,271 470,225 1,684,400 408,005
Cash used in investing activities:
Increase in bank deposits (49,542) - (42,987) -
Increase in deposit segregated under the regulation (14,792) - (12,835) -
Increase in hybrid securities bought (142,623) (158,570) (123,751) (137,588)
Increase in available-for-sale securities (74) (33,467) (64) (29,039)
Increase in loans (1,823,992) (238,844) (1,582,639) (207,240)
Increase in investments (5,659) (3,689) (4,910) (3,201)
Increase in property and equipment (4,402) (1,599) (3,819) (1,387)
Increase in intangible assets (581) (2,798) (504) (2,428)
Increase in other assets (1,386) (527) (1,203) (457)
Decrease in other current liabilities (2,617) (13,325) (2,271) (11,562)
----------- ----------- ------------ ------------
(2,045,668) (452,819) (1,774,983) (392,902)
----------- ----------- ------------ ------------
Net cash provided by (used in) investing activities (104,397) 17,406 (90,583) 15,103
----------- ----------- ------------ ------------
Cash flows from financing activities:
Cash provided by financing activities:
Increase in call money 127,500 - 110,629 -
Increase in bonds sold with repurchase agreement 50,388 102,030 43,720 88,529
Increase in deposits from customers 25,090 - 21,770 -
----------- ----------- ------------ ------------
202,978 102,030 176,119 88,529
Cash used in financing activities:
Decrease in call money - (40,000) - (34,707)
Decrease in short-term debts (30,000) (107,200) (26,030) (93,015)
Decrease in deposits from customers - (93,459) - (81,092)
----------- ----------- ------------ ------------
(30,000) (240,659) (26,030) (208,814)
----------- ----------- ------------ ------------
Net cash provided by (used in) financing activities 172,978 (138,629) 150,089 (120,285)
----------- ----------- ------------ ------------
Net increase (decrease) in cash 1,039 (844) 901 (732)
Cash at beginning of period (note 32) 2,918 2,305 2,532 2,000
----------- ----------- ------------ ------------
Cash at end of period (note 32) W 3,957 1,461 $ 3,433 1,268
=========== =========== ============ ============
See accompanying notes to non-consolidated financial statements
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(1) General Description
Goodmorning Shinhan Securities Co., Ltd. (the "Company") was originally
incorporated on April 2, 1973 under the name of HyoSeong Securities Co.,
Ltd. to engage in securities trading, underwriting and brokerage services.
The Company changed its name to Ssangyong Investment & Securities Co., Ltd.
in 1983 and to Good Morning Securities Co., Ltd. in 1999. On July 31, 2002,
the Company merged with Shinhan Securities Co., Ltd., which was one of
subsidiaries of Shinhan Financial Group Co., Ltd., and changed its name to
Goodmorning Shinhan Securities Co., Ltd. On December 19, 1986, the Company's
shares were listed on the Korea Stock Exchange and, as of June 30, 2004, its
major shareholder is Shinhan Financial Group Co., Ltd. (60.47%) and it
operates through 79 branches.
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies
(a) Basis of Financial Statements Presentation
The Company maintains its official accounting records in Korean won and
prepares statutory non-consolidated 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 non-consolidated financial statements are intended
for use only by those who are informed about Korean accounting
principles and practices. The accompanying non-consolidated financial
statements have been condensed, restructured and translated into English
(with certain expanded descriptions) from the Korean language
non-consolidated financial statements.
The accompanying non-consolidated financial statements include only the
accounts of the Company, and do not include the accounts of any of its
subsidiaries.
Additionally, the Company adopted Statements of Korea Accounting
Standards (the "SKAS") No. 13, "Troubled Debt Structuring", effective
from the first fiscal year beginning after December 31, 2003. Certain
accounts of prior year's non-consolidated financial statements were
reclassified to conform to the current period's presentation.
(b) Basis of Financial Statements Translation
The non-consolidated financial statements are expressed in Korean Won
and, solely for the convenience of the readers, have been translated
into U.S. dollars at the rate of W1,152.50 to US$1, the basic exchange
rate on June 30, 2004. These translations should not be construed as a
representation that any or all of the amounts shown could be converted
into U.S. dollars at this or any other rate.
(c) Revenue Recognition
Gains and losses from securities transactions and commission fee derived
from brokerage are recorded at the trade date.
Interest income on loans is recognized on an accrual basis; however,
interest income on delinquent and dishonored loans, other than those
subject to security deposits and guaranteed by financial institutions,
is recognized on a cash basis.
2
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(d) Troubled Loans Structuring
The Company adopted Statements of Korea Accounting Standards (the
"SKAS") No. 13, "Troubled Debt Structuring," effective from the first
fiscal year beginning after December 31, 2003. In accordance with SKAS
No. 13, a loan of which the contractual term is modified in a troubled
debt structuring program is accounted for at present value of future
cash flows in the modified contract discounted using the effective
interest rate in the original contract. If the present value differs
from the face value of the loans, the difference is recorded as an
allowance or provision for loan losses in the current period as
necessary. The present value discounts are recorded in allowance for
loan losses, which is shown as a deduction from nominal value of loans.
Allowance for loan losses is amortized using the effective interest
method and is recognized as interest income.
Under SKAS No. 13, W788 million of unamortized present value discounts
as of the beginning of the current period is reclassified into allowance
for loan losses.
(e) Investments in Securities
Debt and equity securities should be classified into one of the three
categories of held-to-maturity, available-for-sale, or trading
securities at the time of acquisition and such determination should be
reassessed at each balance sheet date. Investments in debt securities
that the Company has the positive intent and ability to hold to maturity
are classified as held-to-maturity. Securities that are bought and held
principally for the purpose of selling them in the near term (thus held
for only a short period of time) are classified as trading securities.
Trading generally reflects active and frequent buying and selling, and
trading securities are generally used to generate profit on short-term
differences in price. Investments not classified as either
held-to-maturity or trading securities are classified as
available-for-sale securities.
Trading securities are carried at fair value, with unrealized holding
gains and losses included in earnings. Available-for-sale securities are
carried at fair value, with unrealized holding gains and losses reported
as a capital adjustment. Investments in equity that do not have readily
determinable fair values are stated at cost. Declines in value judged to
be other-than-temporary on available-for-sale securities are charged to
current results of operations. Investments in debt securities that are
classified into held-to-maturity are reported at amortized cost at the
balance sheet date and such amortization is included in interest income.
Marketable securities are at the quoted market prices as of the period
end. Non-marketable debt securities are recorded at the fair values
derived from the discounted cash flows by using an interest rate deemed
to approximate the market interest rate. The market interest rate is
determined by the issuers' credit rate announced by the accredited
credit rating agencies in Korea. Money market funds are recorded at the
fair value determined by the investment management companies.
Trading securities are classified as current assets, whereas
available-for-sale securities and held-to-maturity securities are
classified as investments. However, available-for-sale securities, whose
maturity dates are due within one year from the balance sheet date or
whose likelihood of being disposed of within one year from the balance
sheet date is probable, are classified as current assets. Likewise,
held-to-maturity securities whose maturity dates are due within one year
from the balance sheet date are classified as current assets.
3
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(f) Investment Securities Accounted for by the Equity Method
Investments in affiliated companies owned 20% or more or over which the
Company has significant management control are stated at an amount as
determined using the equity method.
Under the equity method, the Company's initial investment is recorded at
cost and is subsequently increased to reflect the Company's share of the
investee income and reduced to reflect the Company 's share of the
investee losses or dividends received. Any excess in the Company's
acquisition cost over the Company's share of the investee's identifiable
net assets is generally recorded as goodwill or other intangibles and
amortized by the straight-line method over the estimated useful life.
When events or circumstances indicate that carrying amount may not be
recoverable, the Company reviews goodwill for any impairment.
Under the equity method, the Company does not record its share of losses
of affiliate companies when such losses would make the Company's
investment in such entity less than zero.
In case of translating financial statements denominated in foreign
currencies, where the balances are determined by the equity method,
assets and liabilities are translated at current rate as of the balance
sheet date and capital accounts at historical rate. Any differences
resulting from such foreign currency translation are accounted for as
unrealized gains (losses) from valuation on investment securities
accounted for by the equity method, a component of capital adjustments
in the stockholders' equity.
(g) Hybrid Securities
Equity-linked securities purchased or issued are presented as combining
interest-bearing debt securities with a series of option contracts. The
embedded option contracts should not be separated from debt securities,
and the liability components and the equity conversion options of
securities are recorded at the fair value with unrealized holding gains
and losses reported in the current operations. Additionally, in relation
to the equity-linked securities issued, premium paid at the issue date
should be separated from these instruments and accounted for as
commission income.
(h) Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts on outstanding
loans (brokers' loans and sort-term loans) and other receivables
(accrued income, accounts receivable from customers, long-term loans,
advances for customers and dishonored bonds) at the end of the period
based on the collectibility of individual receivables and in accordance
with the Regulation on Supervision of Securities Business. These
standards require that all loans be classified as normal, precautionary,
sub-standard, doubtful, or estimated loss based on a number of factors,
including the financial position of the borrower, the repayment ability
of the borrower and past-due history. An allowance for doubtful accounts
is then calculated, as of the balance sheet date, on the loan balances
using the prescribed percentages of 0.5%, 2%, 20%, 75% and 100%,
respectively.
4
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
The details of classification of allowance for doubtful accounts as of
June 30 and March 31, 2004 are as follows:
(in millions of Won)
June 30
--------------------------------------------------------------------------------------------
Estimated
Book value Normal Precautionary Substandard Doubtful Loss Allowance
----------- -------- ------------- ----------- -------- --------- ---------
Loans:
Brokers' loan W 129,142 129,142 - - - - 646
Short-term loans and other 20 10 - - - 10 10
Other current assets:
Accounts receivable 32,245 29,723 - - 28 2,494 2,662
Accrued income 10,393 8,373 - - 7 2,013 2,060
Investments:
Long-term loans 16,008 15,322 - - - 686 762
Other assets:
Advances from customers 18,148 - - 463 - 17,685 17,778
Dishonored bonds (*) 10,917 - - 2,158 - 8,759 9,855
----------- -------- ----------- --------- -------- --------- ---------
216,873 182,570 - 2,621 35 31,647 33,773
----------- -------- ----------- --------- -------- --------- ---------
Allowance W 33,773 912 - 1,188 26 31,647
=========== ======== =========== ========= ======== =========
-------------
(*) Net of discount on debentures
(in millions of Won)
March 31
--------------------------------------------------------------------------------------------
Estimated
Book value Normal Precautionary Substandard Doubtful Loss Allowance
----------- -------- ------------- ----------- -------- --------- ---------
Loans:
Brokers' loan W 130,945 130,945 - - - - 655
Short-term loans and other 27 17 - - - 10 10
Other current assets:
Accounts receivable 57,313 54,867 - - 201 2,245 2,670
Accrued income 10,947 9,151 - - 11 1,785 1,839
Investments:
Long-term loans 16,211 15,579 - - - 632 710
Other assets:
Advances from customers 17,047 - - 1,124 - 15,923 16,147
Dishonored bonds (*) 10,917 - - 2,158 - 8,759 9,889
----------- --------- ----------- -------- ------- -------- -------
243,407 210,559 - 3,282 212 29,354 31,920
----------- --------- ----------- -------- ------- -------- -------
Allowance W 31,920 1,053 - 1,354 159 29,354
=========== ========= =========== ======== ======= ========
------------
(*) Net of discount on debentures
5
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
The percentages of the allowance for doubtful accounts to applicable
assets as of June 30 and March 31, 2004 and March 31, 2003 are as
follows:
(in millions of Won, except ratio)
June 30, 2004 March 31, 2004 March 31, 2003
------------- --------------- --------------
Total amount of assets applicable to allowance W 216,873 243,407 214,723
for doubtful accounts
Allowance for doubtful accounts 33,773 31,920 39,018
Ratio (%) 15.57 13.11 18.17
(i) Property and Equipment
Property and equipment are stated at cost, except for the case of
revaluation made in accordance with the Asset Revaluation Law.
Significant additions or improvements extending value or useful lives of
assets are capitalized, while normal maintenance and repairs are charged
to expense when incurred.
The depreciation method and useful lives of property and equipment are
as follows:
Description Depreciation Method Useful Lives
----------------------------------------------- -------------------------- ------------------
Buildings Straight-line 40 - 60 years
Vehicles " Four years
Furniture and fixtures " Four years
Office equipment and other " 15 years
(j) Intangible Assets
Intangible assets are amortized using the straight-line method over a
reasonable period based on the nature of the asset, four years for
computer software and five years for other intangible assets.
(k) Income Taxes
Income tax on the earnings or loss for the year comprises current and
deferred tax. Income tax is recognized in the statement of earnings
except to the extent that it relates to items recognized directly to
equity, in which case it is recognized in equity.
Deferred tax is provided using the asset and liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes. The amount of deferred tax provided is based on the
expected manner of realization or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantially enacted
at the balance sheet date.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable earnings will be available against which
the unused tax losses and credits can be utilized. Deferred tax assets
are reduced to the extent that it is no longer probable that the related
tax benefit will be realized.
6
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(l) Bonds Sold (Purchased) with Repurchase (Resale) Agreements
Bonds purchased with resale agreements are recorded as current asset and
bonds sold with repurchase agreements are recorded as current
liabilities when the Company purchases or sells securities under resale
or repurchase agreements.
(m) Securities Sold But Not Yet Repurchased
Marketable securities borrowed from the Korea Securities Depository are
not presented as securities sold in the balance sheets. When the
borrowed securities are sold, the market value of such securities at the
time of sale is recorded as a current liability. Differences between the
market value at the time of sale and the market value at the time of the
borrowing are accounted for as unrealized gains (losses) on those
securities in current operations.
(n) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length
of service when they leave the Company. The Company's estimated
liability under the plan which would be payable if all employees left on
the balance sheet date is accrued in the accompanying balance sheets. A
portion of the liability is covered by an employees' severance pay
insurance where the employees have a vested interest in the deposit with
the insurance company. The deposit for severance benefit insurance is,
therefore, reflected in the accompanying balance sheets as a deduction
from the liability for retirement and severance benefits.
Through March 1999, under the National Pension Scheme of Korea, the
Company transferred a certain portion of retirement allowances of
employees to the National Pension Fund. The amount transferred will
reduce the retirement and severance benefit amount to be payable to the
employees when they leave the Company and is accordingly reflected in
the accompanying financial statements as a reduction from the retirement
and severance benefit liability. Since April 1999, however, a new
regulation applies and such transfers to the National Pension Fund are
no longer required.
(o) Translation of Foreign Currency Denominated Assets and Liabilities
Monetary assets and liabilities denominated in foreign currencies are
translated into Korean Won at the balance sheet date, with the resulting
gains and losses recognized in current results of operations. As
permitted by the Financial Accounting Standards, monetary assets and
liabilities denominated in foreign currencies are translated into Korean
Won at W 1,152.50 and W 1,153.60 to US$ 1, the basic rates of exchange
on June 30, 2004 and March 31, 2004, respectively. Non-monetary assets
and liabilities denominated in foreign currencies, which are stated at
historical cost, are translated into Korean Won at the foreign exchange
rate ruling at the date of the transaction. The financial statements of
overseas branches are also translated into Korean Won at the above base
rates on the balance sheet dates.
7
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(2) Basis of Financial Statements Presentation and Summary of Significant
Accounting Policies, Continued
(p) Derivatives
Derivative instruments are presented as assets or liabilities valued
principally at the fair value of rights or obligations associated with
the derivative contracts. The unrealized gain or loss from derivative
transactions is recognized in current operations.
However, for derivative instruments for the purpose of hedging the
exposure to the variability of cash flows of a forecasted transaction,
the hedge -effective portion of the derivative's gain or loss is
deferred as a capital adjustment, a component of stockholder's equity.
The ineffective portion of the gain or loss is charged or credited to
current results of operations.
Forward foreign exchange contracts, which have been made to hedge
foreign exchange receivables and payables in future, are classified as
forward foreign exchange contracts for hedging purposes. Unrealized gain
or loss on forward foreign exchange contracts for hedging purposes are
deferred as capital adjustment. The deferred gain or loss will be
credited or charged to income when related foreign exchange receivables
and payables are settled.
(q) Reserve for Losses on Securities Transactions
In accordance with the Korean Securities and Exchange Law, as last
revised as of January 26, 2002, the Company reverses the reserve for
losses on securities transactions equally over 3 years from the year
ended March 31, 2002.
(r) Stock Options
The stock option program allows the Company's employees to acquire
shares of the Company. The option exercise price is generally fixed at
below the market price of underlying shares at the date of the grant.
The Company values stock options based upon an option pricing model and
recognizes this value as an expense over the period in which the options
vest. When the options are exercised, equity is increased by the amount
of the proceeds received, and the difference between the exercise price
and market price is included in compensation cost and credited to the
capital adjustment account.
(s) Contingent Liabilities
Contingent losses are generally recognized as a liability when probable
and reasonably estimable.
(t) Reclassification of Prior Year Financial Statements
Certain accounts of the non-consolidated financial statements as of and
for the year ended March 31, 2004 and June 30, 2003, respectively, were
reclassified to conform to the current period's presentation. These
reclassifications did not result in any change to reported net earnings
or stockholders' equity.
(u) Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the Republic of Korea requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and related notes to financial
statements. Actual results could differ from those estimates.
8
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(3) Cash and Bank Deposits
Cash and bank deposits as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- ------------------------
June 30 March 31 June 30 March 31
------------ ---------- ------------ ---------
Checking accounts W 434 492 $ 377 427
Deposit in foreign currencies 2,269 1,767 1,969 1,533
Negotiable certificates of deposit 49,025 - 42,538 -
------------ ---------- ------------ ---------
51,728 2,259 44,884 1,960
------------ ---------- ------------ ---------
Other:
Demand deposits 1,254 659 1,088 572
Time deposits 10,267 10,267 8,908 8,908
Money Market Deposit Account 15,333 14,816 13,304 12,856
------------ ---------- ------------ ---------
26,854 25,742 23,300 22,336
------------ ---------- ------------ ---------
W 78,582 28,001 $ 68,184 24,296
============ ========== ============ =========
As of June 30 and March 31, 2004, W2,267 million of time deposit was pledged
as collateral to Franklin Templeton Investment Trust Management Co., Ltd. in
relation to the sales of beneficiary certificates.
(4) Deposits Segregated under the Regulation
Deposits segregated under the regulation as of June 30 and March 31, 2004
are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -----------------------
June 30 March 31 June 30 March 31
---------- ---------- --------- -----------
Subscription deposits W - - - -
Reserve for claims of customers' deposits 715,048 707,742 $ 620,432 614,093
Guarantee deposits for securities borrowed - - - -
Guarantee deposits for futures and options trading 33,377 23,342 28,961 20,253
----------- ---------- ---------- ----------
W 748,425 731,084 $ 649,393 634,346
=========== ========== ========== ==========
Pursuant to the Regulation on Securities Industry related to the Korean
Securities and Exchange Law, the Company is required to deposit with the
Korean Securities Finance Corporation ("KSFC") or banks for the payment of
the customers' deposits and those amounts may not be pledged as collateral.
9
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(5) Short-term Investments in Securities
Short-term investment securities as of June 30 and March 31, 2004 consist of
the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (Note 2)
------------------------ ------------------------
June 30 March 31 June 30 March 31
----------- ----------- ----------- ----------
Trading securities:
Stocks W 82,481 28,245 $ 71,567 24,508
Government and public bonds 701,209 442,974 608,424 384,359
Corporate bonds 31,172 44,265 27,047 38,408
Beneficiary certificates 15,869 23,754 13,769 20,611
Securities in foreign currencies 32 97 28 84
----------- ----------- ----------- ----------
830,763 539,335 720,835 467,970
Available-for-sale securities:
Beneficiary certificates 11,319 11,245 9,821 9,757
----------- ----------- ----------- ----------
W 842,082 550,580 $ 730,656 477,727
=========== =========== =========== ==========
(a) Trading securities
(i) Equity securities
(in millions of Won)
June 30 March 31
------------------------------------ ---------
Acquisition Fair Book Book
cost value value value
------------ ---------- -------- --------
Stocks W 86,531 82,481 82,481 28,245
============ ========== ======== ========
(ii) Debt securities
(in millions of Won)
June 30 March 31
------------------------------------------------ ---------
Face Acquisition Fair Book Book
value cost value value value
----------- ----------- -------- -------- ----------
Government and public bonds W 711,724 701,348 701,209 701,209 442,974
Corporate bonds 31,000 31,273 31,172 31,172 44,265
----------- ----------- -------- -------- ----------
W 742,724 732,621 732,381 732,381 487,239
=========== =========== ======== ======== ==========
Debt securities are recorded at fair value using the market yield of bonds
provided by the bond credit rating and pricing associations.
(iii) Beneficiary certificates
(in millions of Won)
June 30 March 31
------------------------------------- ---------
Acquisition Fair Book Book
cost value value value
------------ --------- --------- ---------
Unsold beneficiary certificates W 15,520 15,869 15,869 17,591
Other - - - 6,163
------------ --------- --------- ---------
W 15,520 15,869 15,869 23,754
============ ========= ========= =========
10
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(5) Short-term Investments in Securities, Continued
(iv) Securities in foreign currencies
(in millions of Won)
June 30 March 31
---------------------------------- --------
Acquisition Fair Book Book
cost value value value
----------- ------ ------ --------
Stocks W 32 32 32 97
=========== ====== ===== ========
(b) Available-for-sale securities
(in millions of Won)
June 30 March 31
------------------------------------- ----------
Acquisition Fair Book Book
cost value value value
------------ -------- --------- ---------
Unsold beneficiary certificates W 8,247 11,319 11,319 11,245
============ ======== ========= =========
(6) Hybrid Securities Bought
Details of hybrid securities bought as of June 30 and March 31, 2004 are
as follows:
(in millions of Won)
June 30
--------------------------------------------------
Acquisition Face Book Unrealized
cost value value gain (loss)
----------- --------- --------- -----------
Equity linked securities W 333,716 333,716 343,799 10,083
=========== ========= ========= ===========
(in millions of Won)
March 31
--------------------------------------------------
Acquisition Face Book Unrealized
cost value value gain (loss)
----------- ---------- --------- -----------
Equity linked securities W 190,697 193,468 238,732 48,035
=========== ========== ========= ===========
11
Goodmorning Shinhan Securities Co., Ltd.
Notes to Non-Consolidated Financial Statements
June 30, 2004
(Unaudited)
(7) Loans
Loans as of June 30 and March 31, 2004 consist of the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
----------------------- -----------------------
June 30 March 31 June 30 March 31
---------- -------- ---------- ---------
Call loans W 200 110,000 $ 173 95,445
Brokers' loans 129,142 130,945 112,054 113,618
Less: allowance for doubtful accounts (646) (655) (561) (569)
---------- -------- ---------- --------
128,496 130,290 111,493 113,049
Short-term loans 10 17 9 15
Other 10 10 9 9
Less: allowance for doubtful accounts (10) (10) (9) (9)
---------- -------- ---------- --------
W 128,706 240,307 $ 111,675 208,509
========== ======== ========== ========
The Company extends loans to its customers from funds borrowed from KSFC or
from its own funds and requires customers to provide cash or securities as
collateral equivalent to 170% of loan balance.
(8) Other Current Assets
Other current assets as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- ----------------------
June 30 March 31 June 30 March 31
---------- -------- -------- --------
Accounts receivable from customers W 32,245 57,313 $ 27,979 49,729
Less: allowance for doubtful accounts (2,662) (2,670) (2,310) (2,317)
--------- ------- -------- --------
29,583 54,643 25,669 47,412
Accrued income 10,393 10,947 9,017 9,498
Less: allowance for doubtful accounts (2,060) (1,839) (1,787) (1,596)
--------- ------- -------- --------
8,333 9,108 7,230 7,902
Advance payments 8,784 18,336 7,622 15,910
Prepaid expenses 1,296 2,215 1,125 1,922
Prepaid income taxes 3,772 4,129 3,273 3,583
Derivative assets 16,137 32,135 14,002 27,883
Other 4,391 4,519 3,810 3,921
--------- ------- -------- --------
W 72,296 125,085 $ 62,731 108,533
========= ======= ======== ========
12
Goodmorning Shinhan Securities Co., Ltd.
Notes to Non-Consolidated Financial Statements
June 30, 2004
(Unaudited)
(9) Long-term Investments in Securities
Long-term investment securities as of June 30 and March 31, 2004 consist of
the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ -----------------------
June 30 March 31 June 30 March 31
------------ ---------- ---------- ----------
Available-for-sale securities:
Stocks W 19,770 19,685 $ 17,154 17,080
Investments in partnership 14,887 14,447 12,917 12,535
----------- ---------- ---------- ----------
34,657 34,132 30,071 29,615
Investment securities accounted for 12,726 11,880 11,042 10,308
by the equity method
------------ ---------- ---------- ----------
W 47,383 46,012 $ 41,113 39,923
============ ========== ========== ==========
(a) Available-for-sale securities
The Company's available-for-sale securities consist solely of equity
securities and details are as follows:
(in millions of Won)
June 30 March 31
Ownership ----------------------------------- --------
percentage Acquisition Fair Book Book
(%) cost value value value
---------- ----------- ------- -------- --------
Marketable stocks:
Saehan Co., Ltd. 0.15 W 1,841 281 281 497
Non-marketable stocks:
Korea Securities Computer Co., Ltd. 0.16 44 198 44 44
The Korea Securities Finance Co., Ltd. 3.39 11,573 17,227 11,573 11,573
Korea Securities Depository 1.60 843 5,500 843 843
Kihyup Technology Banking Corp. 1.72 500 574 500 500
The Kosdaq Stock Market Inc. 2.19 460 3,132 460 460
Hanwha Investment Trust 4.50 1,350 1,318 1,350 1,350
Management Co., Ltd.
Korea Money Broker Co. Ltd. 1.00 100 421 100 100
Korea ECN Securities Co., Ltd. 6.25 1,600 954 972 1,600
Daehan Investment & Securities Co., Ltd. 0.05 1,900 - - -
Korea Investment & Securities Co., Ltd. 0.03 2,801 - - -
Shinhan Life Insurance Co., Ltd. 1.16 2,324 1,638 1,638 -
Other 2,942 1,468 2,009 2,009
-------- ------- ------ --------
26,437 32,430 19,489 19,189
-------- ------- ------ -------
W 28,278 32,711 19,770 19,685
======== ====== ====== ======
13
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(9) Long-term Investments in Securities, Continued
(in millions of Won)
June 30 March 31
-------------------------------- --------
Ownership
percentage Acquisition Fair Book Book
(%) cost value value value
---------- ----------- -------- -------- --------
Investment in partnership:
Korea Stock Exchange 3.40 W 2,612 24,015 2,612 2,612
Securities Market Stabilization Fund 10.30 4,612 9,275 9,275 8,834
Good-KDB 2nd Specialty Co., Ltd. 6.00 3,000 2,646 3,000 3,000
Other 1 - - 1
-------- -------- -------- --------
W 10,225 35,936 14,887 14,447
======== ======== ======== ========
(b) Investment securities accounted for by the equity method
Details of investment securities in subsidiaries and affiliates
accounted for by the equity method as of June 30 and March 31, 2004
are as follows:
(in millions of Won)
June 30
----------------------------------------------
Ownership Equity
percentage Beginning method Other Ending
Subsidiaries and affiliates (%) balance gain (loss) changes balance
-------------------------------------- ---------- --------- ----------- ------- -------
Good Morning Securities USA Inc. 100.0 W 4,612 758 (11) 5,359
Good Morning Securities Europe Limited 100.0 7,268 179 (80) 7,367
-------- ---- ------ ------
W 11,880 937 (91) 12,726
======== ==== ====== ======
(in millions of Won)
March 31
----------------------------------------------
Ownership Equity
percentage Beginning method Other Ending
Subsidiaries and affiliates (%) balance gain (loss) changes balance
-------------------------------------- ---------- --------- ----------- ------- -------
Good Morning Securities USA Inc. 100.0 W 5,948 (887) (448) 4,612
Good Morning Securities Europe Limited 100.0 3,730 115 3,422 7,268
-------- ---- ------ ------
W 9,678 (772) 2,974 11,880
======== ==== ====== ======
Where the equity method was applied above, financial statements as of June
30 and March 31, 2004, which had been neither audited nor reviewed by
independent auditors, were used.
14
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(10) Investments
Investments as of June 30 and March 31, 2004 consist of the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
--------------------- --------- ------------
June 30 March 31 June 30 March 31
--------- --------- --------- ----------
Long-term bank deposits W 58 58 $ 50 50
Long-term loans 16,008 16,211 13,890 14,066
Less: allowance for doubtful accounts (762) (710) (661) (616)
--------- --------- --------- ----------
15,246 15,501 13,229 13,450
Guarantee deposits paid 60,002 57,288 52,062 49,707
Other 5,052 5,058 4,384 4,389
--------- --------- --------- ----------
W 80,358 77,905 $ 69,725 67,596
======== ========= ========= ==========
As of June 30, 2004, the above long-term deposits consist solely of
guarantee deposits for checking accounts and are restricted in use.
(11) Property and Equipment
Property and equipment as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- ------------ ---------
June 30 March 31 June 30 March 31
--------- -------- --------- ---------
Land W 42,654 42,142 $ 37,010 36,566
Buildings 161,571 159,689 140,192 138,559
Vehicles 34 34 29 30
Furniture and fixtures 66,099 64,501 57,353 55,966
Office equipment and other 9 9 8 8
--------- -------- --------- ---------
270,367 266,375 234,592 231,129
Less: accumulated depreciation (86,166) (84,141) (74,765) (73,007)
--------- -------- --------- ---------
W 184,201 182,234 $ 159,827 158,122
========= ======== ========= =========
The officially declared value of land at June 30 and March 31, 2004, as
announced by the Minister of Construction and Transportation, is as
follows:
(in millions of Won)
Book value Declared value
------------------------ -----------------------
June 30 March 31 June 30 March 31
---------- --------- --------- ---------
Land (domestic only) W 42,654 42,142 49,780 47,045
========= ========= ========= =========
The officially declared value, which is used for government purposes, does
not represent fair value.
Additionally, as of June 30, 2004, the Company has provided certain land
and buildings with an aggregate book value of W168,581 million and
collateralized amount of W102,447 million to Shinhan Bank and others as
collateral against its 14th privately placed debentures.
15
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(12) Intangible Assets
Intangible assets as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- ------------ ------------
June 30 March 31 June 30 March 31
------------ ------------ ------------ ------------
Computer software W 10,862 11,589 $ 9,425 10,055
Other 229 259 199 225
-------- -------- ------- --------
W 11,091 11,848 $ 9,624 10,280
======== ======== ======= ========
(13) Other Assets
Other assets as of June 30 and March 31, 2004 consist of the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
---------------------- ----------------------
June 30 March 31 June 30 March 31
--------- --------- --------- ---------
Advances to customers W 18,148 17,047 $ 15,747 14,792
Less: allowance for doubtful accounts (17,778) (16,147) (15,425) (14,010)
--------- --------- --------- ---------
370 900 322 782
Collective fund for default losses 6,441 6,356 5,588 5,515
Dishonored bonds 10,917 10,917 9,472 9,472
Less: allowance for doubtful accounts (8,982) (9,016) (7,793) (7,823)
present value discounts (873) (873) (757) (757)
--------- --------- --------- ---------
1,062 1,028 922 892
Deferred tax assets 10,419 11,377 9,040 9,871
--------- --------- --------- ---------
W 18,292 19,661 $ 15,872 17,060
========= ========= ========= =========
In accordance with the provisions of the Korean Securities and Exchange Law
and related regulations and working rule, the Company has deposited special
reserves with the Korean Stock Exchange, Korea Securities Dealers
Association and Korea Securities Depository an aggregate amount equal to
0.001% of its total trading value of transactions for any potential losses
on unsettled trading, which is accounted for as collective fund for default
losses.
(14) Insured Assets
Details of insured assets as of June 30, 2004 are as follows:
(in millions of Won)
Amount to be
Type of insurance Assets insured Book value insured
----------------- ---------------------- ---------- ------------
Fire insurance Buildings W 125,927 211,836
Furniture and fixtures 15,608 72,611
--------- -------
W 141,535 284,447
========= =======
In addition, the Company maintains key employees' indemnity insurance and
other insurance policies covering loss and liability arising from
accidents.
16
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(15) Short-term Borrowings
Short-term borrowings as of June 30 and March 31, 2004 are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
Interest ------------------------- -------------------------
rate (%) June 30 March 31 June 30 March 31
-------------- ------------ ------------ ------------ ------------
Borrowings from:
SK Securities Co., Ltd. 5.79 W - 30,000 $ - 26,030
(16) Hybrid Securities Issued
Details of hybrid securities issued as of June 30 and March 31, 2004 are as
follows:
(in millions of Won, except shares)
June 30
Number of
securities Face Issue Book Unrealized
issued value amount (*) value gain
--------------- ------------- ------------- ------------- -------------
Equity linked securities 56,714,482 W 565,318 556,625 550,484 6,141
Securities on stock warrants 270,391 439,687 24,762 18,633 6,129
------------- ------------- ------------- ------------
W 1,005,005 581,387 569,117 12,270
============= ============= ============= ============
(*) Premium at the date of issue are not included.
(in millions of Won, except shares)
March 31
Number of
securities Issue Unrealized
issued Face value amount (*) Book value loss
--------------- ------------- ------------- ------------- -------------
Equity linked securities 52,160,131 W 521,601 377,513 427,494 (49,981)
Securities on stock warrants 3,499,502 585,999 30,258 38,879 (8,621)
------------- ------------- ------------- -------------
W 1,005,005 407,771 466,373 (58,602)
============= ============= ============= =============
(*) Premium at the date of issue are not included.
17
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(17) Other Current Liabilities
Other current liabilities as of June 30 and March 31, 2004 are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ ------------------------
June 30 March 31 June 30 March 31
----------- ----------- ----------- -----------
Dividends payable W 717 717 $ 622 622
Accounts payable 10,473 505 9,087 438
Accrued expenses 35,403 36,735 30,718 31,874
Deposits for opening a margin account 4,935 5,070 4,282 4,399
Taxes withheld 4,308 8,271 3,738 7,177
Rental deposits received 23,937 24,219 20,770 21,014
Unearned revenues 48 15 42 14
Derivatives liabilities 7,604 672 6,598 583
Other 3,798 3,805 3,295 3,302
----------- ----------- ----------- ----------
W 91,223 80,009 $ 79,152 69,423
=========== =========== =========== ==========
(18) Debentures
Details of debentures as of June 30 and March 31, 2004 are as follows:
(in millions of Won, except ratio)
Maturity Interest rate June 30 March 31
(%)
----------------------------- ------------- ------------ ------------
14th privately placed debentures October 30, 2001 - 6.86 W 30,000 30,000
October 30, 2004
15th subordinated debentures September 26, 2002 - 6.23 130,000 130,000
September 26, 2004
16th publicly placed debentures July 11, 2003 - 6.20 1,000 1,000
July 11, 2005
------------ ------------
W 161,000 160,000
============ ============
In relation to the 14th privately placed debentures issued to Shinhan Bank
and the 16th publicly placed debentures issued to Hyundai Marine & Fire
Insurance Co., Ltd., certain land, buildings and a blank note were pledged
as collateral as of June 30, 2004. The principals are scheduled to be
repaid at maturity and the yields are to be paid on a quarterly basis.
With regards to the 15th subordinated debentures issued to Shinhan
Financial Group Co., Ltd., the Company will not repay the principal upon
maturity if the Net Capital Ratio of the Company becomes less than or equal
to 100% as a result of the repayment of the principal of these debentures.
If any principal of the debentures is not paid at the scheduled maturity,
7.23% default interest per annum will be applied to the debentures.
18
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(19) Retirement and Severance Benefit
Changes in retirement and severance benefit for the quarter ended June 30,
2004 and the year ended March 31, 2004 are as follows:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------
June 30 March 31 June 30 March 31
------------ ------------ ------------ ------------
Estimated balance at beginning of the period W 6,906 9,295 $ 5,992 8,065
Payment (167) (12,373) (144) (10,735)
Provision 2,499 9,984 2,168 8,662
------------ ------------ ------------ ------------
Estimated balance at ending of period 9,238 6,906 8,016 5,992
Less: contribution to National Pension Fund (37) (37) (32) (32)
deposit for severance benefit trust (4,593) (4,617) (3,985) (4,006)
------------ ------------ ------------ ------------
Net balance W 4,608 2,252 $ 3,999 1,954
============ ============ ============ ============
(20) Sale-Leaseback Transactions
During the quarter ended June 30, 2004, the Company disposed of certain
computer equipment and software, included in property and equipment and
intangible assets, respectively, to Macquarie Capital Korea Co., Ltd., for
W47,000 million under the terms of a sale-leaseback transaction. The
transaction is classified as an operating lease and the Company recorded
W29,043 million of gain from the disposition for the quarter ended June 30,
2003..
The collection schedule for future lease payables as of June 30, 2004 is as
follows:
(in millions of Won)
Annual
lease payment
-------------------
July 1, 2004 - June 30, 2005 W 16,635
July 1, 2005 - June 30, 2006 16,635
-------------------
W 33,270
===================
(21) Foreign Currency Denominated Assets and Liabilities
Details of assets and liabilities denominated in foreign currency as of
June 30 and March 31, 2004 are as follows:
(in millions of Won and thousands of U.S. dollars)
Foreign currency Won Equivalent
------------------------- -----------------------
June 30 March 31 June 30 March 31
------------ ----------- ---------- ------------
Assets:
Bank deposit USD 1,969 1,532 W 2,269 1,767
Investment in securities USD 27,480 - 32 -
Liabilities:
Securities sold but not yet repurchased and other USD 6,889 - W 7,940 -
19
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(22) Capital Surplus
The Company reduced its capital by the ratio of 1:0.9 as of December 24,
2002, in accordance with a resolution of a shareholders' meeting. As a
result, the Company recorded W15 million of net gain from capital reduction
as capital surplus.
(23) Retained Earnings
Retained earnings as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------
June 30 March 31 June 30 March 31
------------ ------------ ------------ ------------
Reserve for loss on securities transactions W - 9,894 $ - 8,585
Unappropriated retained earnings 8,413 80,655 7,300 69,983
------------ ------------ ------------ ------------
W 8,413 90,549 $ 7,300 78,568
============ ============ ============ ============
(24) Capital Adjustments
Capital adjustments as of June 30 and March 31, 2004 consist of the
following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------- -------------------------
June 30 March 31 June 30 March 31
------------ ------------ ------------ ------------
Discount on stock issuance W (147,764) (238,314) $ (128,212) (206,780)
Treasury stock (14,584) (14,584) (12,654) (12,654)
Stock options (Note 25) 12,066 11,787 10,469 10,227
Unrealized gain (loss) on available-for-sale securities 6,174 5,638 5,357 4,892
Unrealized gain on investment securities accounted for
by the equity method 3,991 4,082 3,463 3,542
------------ ------------ ------------ ------------
W (140,117) (231,391) $ (121,577) (200,773)
============ ============ ============ ============
The Company's treasury shares as of June 30, 2004 comprise 4,795 shares of
common stock and 1,042,418 shares of preferred stock. Treasury shares are
intended to be reissued in the near future.
Discount on stock issuance is to be amortized over three years using the
straight-line method by way of an appropriation of retained earnings.
20
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(25) Stock Options
In accordance with a resolution of a shareholders' meeting, the Company
granted stock purchase options to certain employees and directors and
details of stock options as of June 30, 2004 are as follows:
(in Won, except shares)
Stock options Shares Exercise price Compensation
granted Grant date granted Exercisable period per share cost per share
------------- ----------------- ---------- ------------------- -------------- --------------
1st February 4, 1999 2,588,355 February 4, 2002 ~ W 5,374 1,254
February 3, 2009
2nd February 4, 1999 1,434,510 February 4, 2002 ~ 5,456 1,707
February 3, 2009
3rd December 17, 1999 1,980,000 December 17, 2002 ~ 5,437 1,042
December 16, 2007
4th May 27, 2000 405,000 May 27, 2003 ~ 2,372 --
May 26, 2008
5th May 26, 2001 1,260,000 May 26, 2004 ~ 4,498 1,147
May 25, 2009
6th January 31, 2002 90,000 May 31, 2005 ~ 3,291 664
May 31, 2010
7th May 25, 2002 540,000 May 25, 2004 ~ 5,216 2,025
May 24, 2012
8th June 27, 2002 348,777 May 26, 2003 ~ 2,621 1,081
May 25, 2006
9th June 27, 2002 343,383 May 27, 2004 ~ 3,238 589
May 26, 2007
10th May 30, 2003 365,000 May 30, 2005 ~ 1,383 78
May 29, 2009
11th May 30, 2004 633,000 May 29, 2006 ~ 1,701 --
May 28, 2009
The compensation cost for the stock options grant numbers 1 through 10 is
calculated using the minimum value method while the stock option grant
number 11 is calculated using the Black-Scholes fair value method. Such
cost is recognized as other selling and administration expense in the
amount of W 280 million in the quarter ended June 30, 2004, and will be W
779 million for periods thereafter.
If the Company adopted the fair value method, the following assumptions
would be used.
(in Won, except shares)
Expected stock
Stock options Risk-free Expected price volatility Expected Fair value
granted interest rate (%) exercise period (%) dividend yield (%) at grant date
------------- ----------------- --------------- ---------------- ------------------ -------------
1st 7.00 3 years 116.87 -- W 7,490
2nd 7.00 3 years 116.87 -- 7,490
3rd 8.89 3 years 137.35 -- 6,920
4th 5.24 3 years 137.82 -- 3,175
5th 6.42 3 years 118.09 -- 6,000
6th 6.03 3 years 86.35 -- 5,730
7th 6.87 6 years 101.94 -- 6,300
8th 5.13 1.5 years 84.82 -- 5,680
9th 5.62 2.5 years 94.38 -- 5,680
10th 4.10 4 years 67.00 -- 4,335
11th 4.23 3.5 years 60.70 -- 3,140
21
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(26) Related Party Transactions
(a) Significant transactions with related parties for the quarters ended
June 30, 2004 and 2003 are as follows:
(in millions of Won)
Related party 2004 2003
--------------------------------------- ----------- ----------
Revenue earned:
Fees and commissions Good Morning Securities USA Inc. W 1,539 --
Fees and commissions Good Morning Securities Europe Limited 786 --
Interest Shinhan Bank 79 121
Interest Chohung Bank 132 --
----------- ----------
W 2,536 121
=========== ==========
Expenses incurred:
Fees and commissions Good Morning Securities USA Inc. W 1.033 2,755
Fees and commissions Good Morning Securities Europe Limited 841 1,082
Interest Shinhan Bank 543 487
Interest Chohung Bank 9 --
Fees and commissions Shinhan Credit Information Co., Ltd. 2,025 2,003
Interest Shinhan Financial Group Co., Ltd. 4 7
----------- ----------
W 4,455 6,394
=========== ==========
(b) Significant account balances with related parties as of June 30 and
March 31, 2004 are as follows:
(in millions of Won)
Related party June 30 March 31
-------------------------------------- ---------- ----------
Assets:
Bank deposits Shinhan Bank W 6,097 14,733
Bank deposits Chohung Bank 12,386 7,866
Other current assets Shinhan Bank 9,271 6,792
Other current assets Chohung Bank 155 46
----------- ----------
W 27,909 29,437
=========== ==========
Liabilities:
Debentures Shinhan Bank W 30,000 30,000
Debentures Shinhan Financial Group Co., Ltd. 130,000 130,000
Other current liabilities Good Morning Securities USA Inc. 1,033 1,111
Other current liabilities Good Morning Securities Europe Limited 841 841
Other current liabilities Shinhan Bank 4,411 4,412
Other current liabilities Shinhan Financial Group Co., Ltd. 89 134
Other current liabilities Shinhan BNP ITMC Co., Ltd. 3,496 3,496
Other current liabilities Shinhan Card Co., Ltd. 4,635 4,635
----------- ----------
W 174,505 174,629
=========== ==========
22
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(26) Related Party Transactions, Continued
(c) Equity securities issued by related parties as of June 30 and March
31, 2004 are as follows:
(in millions of Won)
June 30
--------------------------------------------------------
Ownership Acquisition Fair Book
Subsidiaries and affiliates percentage (%) cost value value
-------------------------------------- -------------- ----------- --------- ---------
Good Morning Securities USA Inc. 100.00 W 3,342 5,359 5,359
Good Morning Securities Europe Limited 100.00 9,669 7,367 7,367
--------- --------- ---------
W 13,011 12,726 12,726
========= ========= =========
(in millions of Won)
March 31
--------------------------------------------------------
Ownership Acquisition Fair Book
Subsidiaries and affiliates percentage (%) cost value value
-------------------------------------- -------------- ----------- --------- ---------
Good Morning Securities USA Inc. 100.00 W 3,342 4,612 4,612
Good Morning Securities Europe Limited 100.00 9,669 7,268 7,268
--------- --------- ---------
W 13,011 11,880 11,880
========= ========= =========
23
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(27) General and Administrative Expenses
General and administrative expenses for the quarters ended June 30, 2004
and 2003 consist of the following:
(in millions of Won and thousands of U.S. dollars)
Won U.S. dollars (note 2)
------------------------ -----------------------
2004 2003 2004 2003
----------- ---------- --------- ----------
Salaries and wages W 28,611 29,488 $ 24,825 25,586
Provision for retirement and severance benefits 2,499 3,003 2,168 2,606
Other employees benefits 6,039 7,432 5,240 6,449
Depreciation 2,428 5,849 2,107 5,075
Amortization 1,335 1,408 1,158 1,222
Bad debts 2,099 416 1,821 361
Advertising 3,152 5,283 2,735 4,584
Rent 1,577 1,511 1,368 1,311
Commissions 873 689 757 598
Computer system operation 8,663 3,119 7,517 2,706
Tax and dues 1,795 3,973 1,558 3,447
Other 5,970 6,866 5,181 5,957
----------- ---------- --------- ----------
W 65,041 69,037 $ 56,435 59,902
=========== ========== ========= ==========
(28) Income Taxes
(a) The Company is subject to income taxes based on taxable earnings which
result in the normal tax rate of 29.7%.
The Korean government reduced the corporate income tax rate beginning
in 2005. Specifically, effective from January 1, 2005, the income tax
rate will be reduced from 29.7% to 27.5%. As a result, the statutory
income tax rate of 29.7% is applied to deferred income tax assets
(liabilities) that will be realized before 2005 and that of 27.5% is
applied to deferred income tax assets (liabilities) that will be
realized after 2004.
The components of income tax expenses for the quarter ended June 30,
2004 are as follows:
(in millions of Won and thousands of U.S. dollars)
U.S. dollars
Won (note 2)
------- ------------
Current income tax expense W 747 $ 648
Deferred income tax expense:
Temporary differences 958 832
Tax loss carryforwards -- --
------- -------
W 1,705 $ 1,480
======= =======
24
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(28) Income Taxes, Continued
(b) The reconciliation of accounting income and taxable income for the
quarter ended June 30, 2004 is as follows:
(in millions of Won)
Temporary Permanent
Description difference difference
------------------------------------------------------- ---------- ----------
Additions:
Accrued income W 4,142 --
Allowance for doubtful accounts 701 --
Trading securities 9,730 --
Available-for-sale securities 1,337 --
Equity linked securities 37,786 --
Hybrid securities sold 10,785 --
Derivatives 27,167 --
Securities sold but not yet repurchased 602 --
Hybrid securities bought 48,035 --
Interest -- 145
Excess over entertainment expense limit -- 482
Stock options -- 280
Gain on valuation of available-for-sale securities -- 445
Other current liability 12,195 --
Other 75 626
--------- --------
W 152,555 1,978
========= ========
Deductions:
Accrued income W 5,969 --
Allowance for doubtful accounts 672 --
Trading securities 6,740 --
Hybrid securities bought 231 --
Hybrid securities sold 124,308 --
Derivatives 5,535 --
Securities sold but not yet repurchased 913 --
Available-for-sale securities 1,638 --
Investment securities accounted for by equity method 937 --
Present value discount 43 --
Other current liabilities 11,681 --
Interest on national tax return -- 378
Other 2 401
--------- --------
W 158,669 779
========= ========
25
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(28) Income Taxes, Continued
(c) Changes in significant accumulated temporary differences and tax
effects for the quarter ended June 30, 2004 are as follows:
(in millions of Won)
Beginning Ending Tax
balance Increase Decrease balance effects
---------- -------- --------- ------- ---------
Deductible temporary differences:
Allowance for doubtful accounts W 672 701 672 701 208
Trading securities 4,948 5,735 4,947 5,734 1,703
Available-for-sale securities 27,460 1,337 1,638 27,160 7,469
Investment securities accounted for by equity method 5,213 - 937 4,276 1,176
Hybrid securities sold 63,602 5,785 63,602 5,785 1,718
Derivatives 2,404 10,600 2,404 10,600 3,148
Accrued expenses 10,950 11,444 10,950 11,444 3,147
Hybrid securities issued - 37,786 - 37,786 11,222
Other 10,589 2,452 900 12,141 3,468
--------- -------- -------- -------- --------
125,838 75,840 86,050 115,627 33,259
--------- -------- -------- -------- --------
Taxable temporary differences:
Accrued income (4,142) (5,969) (4,142) 5,969) (1,759)
Derivatives (1,591) (849) (1,591) (849) (252)
Trading securities (3,996) (1,793) (3,996) (1,793) (532)
Hybrid securities sold (5,000) (60,706) (5,000) (60,706) (18,030)
Deposit for severance benefit insurance (4,107) - - (4,107) (1,220)
Hybrid securities bought (48,035) (231) (48,035) (231) (68)
Derivatives (13,651) (2,265) (13,651) (2,265) (673)
Securities sold but not yet repurchased (300) (806) (300) (806) (222)
Other (549) - - (549) (151)
--------- -------- -------- -------- --------
(81,371) (72,619) (76,715) (77,275) (22,907)
--------- -------- -------- -------- --------
44,467 3,221 9,335 38,352 10,352
--------- -------- -------- -------- --------
Amount in excess of tax limit for statutory donation 517 - 291 226 67
-------- --------
W 38,578 10,419
======== ========
(d) The effective tax rate for the quarter ended June 30, 2004 is as follows:
(in millions of Won and thousands of U.S. dollars, except tax rate)
Won U.S. dollars
(note 2)
--------------- ---------------
Income taxes W 1,705 $ 1,479
Earnings before income taxes 10,118 8,779
--------------- ---------------
Effective income tax rate (%) 16.85 16.85
=============== ===============
26
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(29) Earnings Per Share
(a) Ordinary income and net earnings per share
Earnings per common share is calculated by dividing net earnings by the
weighted average number of shares of common stock outstanding. Earnings
per share for the quarters ended June 30, 2004 and 2003 are computed as
follows:
Ordinary income per share in Won:
(in Won)
2004 2003
----------------- -----------------
Ordinary income in Won W 8,413,105,749 44,353,611,367
Weighted-average number of common shares outstanding 155,576,350 155,576,350
----------------- -----------------
Ordinary income per share in Won W 54 285
================= =================
Net earnings per share in Won:
(in Won)
2004 2003
----------------- -----------------
Net earnings in Won W 8,413,105,749 44,353,611,367
Weighted average number of common shares outstanding 155,576,350 155,576,350
----------------- -----------------
Net earnings per share in Won W 54 285
================= =================
Additionally, diluted earnings per share are not computed because there
are no items with any dilutive effect, including stock options. In
addition, both ordinary income per share and net earnings per share of the
Company as of March 31, 2004, are W518.
(b) As of June 30, 2004, securities available for conversion into common stock
consist solely of stock options and the total number of shares to be
issued is 9,988,025 shares.
(30) Commitments and Contingencies
(a) As of June 30, 2004, the Company committed with five banks, including
Chohung Bank, for an overdraft account with an aggregate limit of W14,000
million and with 13 banks, including Shinhan Bank, for a daily revolving
account with an aggregate limit of W329,000 million.
(b) As of June 30, 2004, the Company provided one blank note and three notes
with W925 million of face value to financial institutions as collateral
for borrowings and office rental obligations.
(c) As of June 30, 2004, the Company made a contract with Franklin Templeton
Investment Trust Management Co., Ltd. to guarantee against the contingent
losses that may result from the beneficiary certificates that include
guaranteed bonds issued by financially troubled companies, such as the
Daewoo Group and its affiliates. In addition, the Company's time deposit
of W2,267 million was pledged as collateral to Franklin Templeton
Investment Trust Management Co., Ltd.
27
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(30) Commitments and Contingencies, Continued
(d) Pursuant to the contract made with Global Korea Investment I Limited on
March 28, 2003, the Company sold W41,806 million of non-performing assets
in Freya World, which had been included in other assets, for W48,900
million and recorded a gain on sale of these non-performing assets in the
year ended March 31, 2003. With regards to the contract, the Company is
subject to the put option or resettlement, which Global Korea Investment I
Limited can exercise, within 18 months upon balance payment.
(e) As of June 30, 2004, the Company has 27 pending lawsuits of W12,893
million. The ultimate outcomes of such pending litigation cannot presently
be determined.
(f) As of June 30, 2004, the Company is holding beneficiary certificates
issued by SK Networks Co., Ltd. (formerly SK Global Co., Ltd.), amounting
to W6,257 million, and recorded W6,323 million of unrealized loss.
With regards to the redemption of these beneficiary certificates, the
Company may incur additional losses of which the actual amount cannot
presently be determined.
(31) Derivatives
Details of unsettled derivative instruments with trading purposes as of
June 30, 2004 are as follows:
(in millions of Won)
Unsettled Valuation
amount gain (loss)
------------ -------------
Interest rate related Futures W 69,651 (240)
Swap 160,000 (300)
------------ -------------
229,651 (540)
Stock price Index related Futures 22,097 (254)
Options 15,347 (56)
------------ -------------
37,444 (310)
Currency related Forwards 16,941 59
Stock related Swap 2,262 (35)
Options 358,495 (8,059)
------------ -------------
360,757 (8,094)
------------ -------------
W 644,793 (8,885)
============ =============
28
Goodmorning Shinhan Securities Co., Ltd.
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004
(Unaudited)
(32) Statements of Cash Flows
(a) Cash in the cash flow statements consist of cash and cash equivalents and
the reconciliation between cash and cash equivalents and cash and bank
deposits as of June 30 and March 31, 2004 is as follows:
(in millions of Won)
June 30 March 31
------------- --------------
Demand deposits W 1,254 659
Checking accounts 434 492
Deposit in foreign currencies 2,269 1,767
------------- --------------
W 3,957 2,918
============= ==============
(b) Significant transactions not involving cash inflows or outflows for the
quarter ended June 30, 2004 are as follows:
(in millions of Won)
Dishonored bonds offset against allowance for doubtful accounts W 211
Increase in unrealized gain on available-for-sale securities 536
Decrease in unrealized gain on investment securities accounted for by equity method 91
(33) Employee Welfare and Contributions to Society
For employee welfare, the Company maintains a refectory, an infirmary and
other employees benefits program and, additionally, the Company has donated
to scholarship funds and others, amounting to W64 million for the quarter
ended June 30, 2004.
(34) Economic Environment
In common with other Asian countries, 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
non-consolidated 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.
APPENDIX 9
[Translation]
ARTICLES OF INCORPORATION
CHAPTER I
GENERAL PROVISIONS
ARTICLE 1 (CORPORATE NAME)
The name of this company shall be "Chusik Hoesa Shinhan-Kumyoong-Jijoo-Hoesa"
(the "Company"), which shall be "Shinhan Financial Group Co., Ltd." in English.
ARTICLE 2 (OBJECTIVE)
The objective of the Company shall be to engage in the following business
activities:
(1) To control or manage a financial company or a company having close
relation with the financial business;
(2) To provide the financial support to its subsidiary, etc. (which expression
shall include the subsidiary, sub-subsidiary, and the company under the
control of sub-subsidiary; hereinafter the same shall apply);
(3) To invest in the subsidiary or to raise the fund for financial support to
its subsidiary, etc.;
(4) To develop and sell the products jointly with its subsidiary, etc., and to
provide the business support for joint use of facility, computer system,
etc. with its subsidiary, etc.; and
(5) To engage in the other business incidental or related to the foregoing.
ARTICLE 3 (LOCATION OF HEAD OFFICE AND ESTABLISHMENT OF BRANCH, ETC.)
(1) The Company shall have its head office in Seoul.
(2) The Company may establish branches, liaison offices, representative
offices or subsidiaries within or outside Korea, by the resolution of the
Board of Directors, when it deems necessary.
ARTICLE 4 (METHOD OF PUBLIC NOTICES)
Public notices of the Company shall be made in Hankuk Kyongje Shinmun and Maeil
Kyongje Shinmun, daily newspapers published in Seoul.
CHAPTER II
SHARES OF STOCK
ARTICLE 5 (TOTAL NUMBER OF AUTHORIZED SHARES)
The total number of shares to be issued by the Company shall be 1,000,000,000
shares.
ARTICLE 6 (PAR VALUE PER SHARE)
The par value per share to be issued by the Company shall be five thousand
(5,000) Won.
ARTICLE 7 (NUMBER OF SHARES ISSUED AT THE TIME OF INCORPORATION)
The total number of shares issued at the time of incorporation of the Company
shall be _284,453,152 shares of common stock in registered form plus the number
of common shares in registered form to be issued and delivered upon the exercise
of warrant by the holders of the bonds with warrants issued by Shinhan Bank on
December 2, 1998 during the period from July 15, 2001 to August 31, 2001.
ARTICLE 8 (KIND OF SHARES)
(1) The shares to be issued by the Company shall be common shares in
registered form and preferred shares in registered form.
(2) Registered preferred shares shall have preference over common shares in
dividend distribution and liquidation of assets of the Company. The amount
of distribution upon liquidation of the Company to preferred shares with
liquidation preference shall be no greater than the sum of their initial
issue price and accrued but unpaid dividend.
ARTICLE 9 (NUMBER AND DESCRIPTION OF PREFERRED SHARES)
(1) Preferred shares to be issued by the Company shall be non-voting, and the
number thereof shall not exceed one half (1/2) of the total number of
issued and outstanding shares.
(2) The dividends on non-voting preferred shares shall be no less than 1% per
annum of the par value and the rate thereof shall be determined by the
Board of Directors at the time of issuance.
(3) Preferred shares to be issued by the Company may be participating or non-
participating, and accumulating or non-accumulating by the resolution of
the Board of Directors.
(4) If a resolution not to distribute dividends on preferred shares is
adopted, then the
preferred shares shall be deemed to have voting rights from the next
general meeting of shareholders immediately following the general meeting
at which such resolution not to distribute dividends on preferred shares
is adopted to the end of the general meeting of the shareholders at which
a resolution to distribute dividends on such preferred shares is adopted.
(5) In case the Company issues new shares by rights offering or bonus issue,
then the new shares issued with respect to the preferred shares shall be
(i) common shares in the case of rights offering and (ii) the shares of
the same type in the case of bonus issue.
(6) Whether or not to specify the duration of preferred shares shall be
determined by the resolution of the Board of Directors. If there is any
duration of preferred shares, such duration shall be no less than 1 year
and no more than 10 years from the date of issuance, and such duration
period shall be determined by the Board of Directors at the time of
issuance. Preferred shares shall be converted into the common shares upon
the expiration of the duration period. However, if the holders of the
preferred shares do not receive dividends entitled to them during the
duration period, then the duration period shall be extended until such
holders receive dividends entitled to them in full. In such a case,
Article 15 shall apply mutatis mutandis with respect to the distribution
of dividends for new shares issued upon conversion.
ARTICLE 10 (TYPES OF SHARE CERTIFICATES)
The share certificates of the Company shall be issued in the following eight (8)
denominations: one (1), five (5), ten (10), fifty (50), one hundred (100), five
hundred (500), one thousand (1,000) and ten thousand (10,000) shares.
ARTICLE 11 (CONVERTIBLE STOCK)
(1) The Company may issue the stock which can be converted into the common
stock or preferred stock, by the resolution of the Board of Directors.
(2) Issue price of new shares to be issued upon conversion shall be the issue
price of share prior to such conversion, and the number of shares to be
issued upon conversion shall be the same number as that of common shares
or preferred shares prior to such conversion.
(3) The conversion period shall be no less than 1 year and no more than 10
years from the date of issuance, and such conversion period shall be
determined by the Board of Directors.
(4) For the purpose of any distribution of dividends on the shares issued upon
conversion, Article 15 hereof shall apply mutatis mutandis.
ARTICLE 12 (REDEEMABLE STOCK)
(1) In case of issuance of preferred stock, the Company may, by the resolution
of the Board of Directors, issue the redeemable one which can be redeemed
with the profits at the discretion of the Company.
(2) Redemption price of redeemable stock shall be calculated in accordance
with the following formula: `issue price + issue price x number of days
that have elapsed from the first day of the fiscal year, during which the
redemption is made, to the redemption date iA365 x applicable interest
rate'. The applicable interest rate shall be that announced by the
Commissioner of National Tax Service pursuant to Article 17, Paragraph (1)
of the Enforcement Rules of the Inheritance Tax and Gift Tax Act, or, to
the extent not exceeding more or less than 50% of such interest rate,
shall be determined by the Board of Directors at the time of issuance.
(3) Redemption period shall be determined by the Board of Directors within the
period from the date immediately following the end of the Ordinary General
Meeting of Shareholders convened in respect of the fiscal year, during
which the shares are issued, to the date of 1 month following the end of
the Ordinary General Meeting of Shareholders convened in respect of the
fiscal year of the 10th anniversary of the issue date. However, in any of
the following cases, the redemption period shall be extended until such
case is terminated.
1. If the holders of the redeemable shares do not receive dividends
entitled to them; or
2. If the redemption is not made within the redemption period due to
insufficient profits of the Company.
(4) The Company may redeem all of redeemable shares in lump sum or any portion
thereof. Provided that, in case of partial redemption, the Company may
determine the shares to be redeemed, by means of lottery or proportional
allotment. Any fractional shares resulting from the proportional allotment
shall not be redeemed.
(5) If the Company intends to redeem the redeemable shares, the Company shall
give the public notice of such intention, subject shares and the fact that
the subject stock certificates must be submitted to the Company during the
specified period, which shall be determined by the Company to the extent
not less than one month. The Company shall give separate notice to the
shareholders and pledgees recorded in the shareholders' registry and upon
the expiry of such period, the subject shares shall be redeemed
compulsorily.
(6) The redeemable shares may, by the Board of Directors at the time of
issuance, be issued as the convertible shares as set forth in Article 11.
ARTICLE 13 (PREEMPTIVE RIGHTS)
(1) The shareholders of the Company shall have pre-emptive rights to subscribe
for new shares to be issued by the Company in proportion to their
respective
shareholdings.
(2) Notwithstanding the provision of Paragraph (1) above, the Company may
allocate new shares to persons other than existing shareholders of the
Company, in any of the following instances:
1. If the Company issues new shares by way of general public offering,
to the extent not exceeding 50/100 of the total number of issued and
outstanding shares of the Company, by a resolution of the Board of
Directors in accordance with the provisions of the Securities
Exchange Act ("SEA").
2. If the Company preferentially allocates new shares to members of the
Employee Stock Ownership Association in accordance with the
provisions of the SEA;
3. If the Company issues new shares for the issuance of depositary
receipts ("DR"s), to the extent not exceeding 50/100 of the total
number of issued and outstanding shares of the Company, in
accordance with the provisions of the SEA;
4. If the Company issues new shares upon the exercise of stock options
in accordance with the provisions of the SEA;
5. If the Company issues new shares to the securities investment
company that runs exclusively the banking business, as set forth in
the Finance Holding Company Act (the "FHCA"); or
6. If the Company issues new shares to foreign investors, foreign or
domestic financial institutions, allied companies, etc. for the
necessity of management, such as introduction of advanced
technology, improvement of financial structure of or financial
support to the Company or its subsidiary, strategic business
alliance, etc., to the extent not exceeding 50/100 of the total
number of issued and outstanding shares of the Company.
(3) In case new shares are issued pursuant to Paragraph (2), type, number,
issue price, etc. of shares to be issued shall be determined by a
resolution of the Board of Directors, to the extent permitted by the
relevant laws, such as the SEA, etc.
(4) In the case of abandonment or loss of the pre-emptive right to subscribe
for new shares by any shareholder, the forfeited shares resulting from
such abandonment or loss of the pre-emptive right shall be disposed by a
resolution of the Board of Directors. If fractional shares result from the
allocation of new shares, such shares shall also be disposed of by a
resolution of the Board of Directors.
ARTICLE 14 (STOCK OPTIONS)
(1) The Company may grant stock options to its officers and employees pursuant
to the provisions of the SEA, by a special resolution of the General
Meeting of
Shareholders, to the extent not exceeding 20/100 of the total number of
issued and outstanding shares of the Company; provided that the Company
may grant stock options by a resolution of the Board of Directors, to an
extent permitted by the relevant laws, such as the SEA, etc.
(2) The Company may impose the condition of achievement of detailed
performance for the exercise of stock options, and may postpone or cancel
the exercise of stock options if such condition is not satisfied.
(3) The persons who are entitled to receive such stock options shall be
officers and employees of the Company or its subsidiaries or
sub-subsidiaries as prescribed in the relevant laws and ordinances
including the SEA, etc. who have contributed, or is capable of
contributing, to the establishment, management or technical innovation of
the Company, except for officers or employees in any of the following
cases:
1. The largest shareholder of the Company and Specially Related Persons
thereof (as defined in the SEA and the Enforcement Decree of the
SEA; hereinafter the same shall apply), except for such persons who
have been regarded as Specially Related Persons by becoming officers
of the Company (including an officer who is the non-executive
officer of the affiliate);
2. Major Shareholders of the Company (as defined in the SEA;
hereinafter the same shall apply), and Specially Related Persons
thereof, except for such persons who have been regarded as Specially
Related Persons by becoming officers of the Company (including an
officer who is the non-executive officer of the affiliate); and
3. The persons who become the Major Shareholders of the Company by the
exercise of stock option.
(4) The shares to be issued upon the exercise of stock options (in case the
Company pays the difference between the exercise price of stock options
and the market price of such shares in cash or treasury shares, the shares
which shall be the basis of the calculation of such differences) shall be
common shares in registered form.
(5) The total number of shares to be given to one (1) officer or employee
pursuant to the stock option shall not exceed 1/100 of the total number of
shares issued and outstanding.
(6) The exercise price per share for the stock option shall be determined in
accordance with the relevant laws, such as the SEA, etc.
(7) Stock options may be exercised within seven (7) years commencing from two
(2) years after the date specified in Paragraph (1) above at which a
resolution to grant such stock options was adopted.
(8) Stock option is exercisable by a person who has served for the Company two
(2) years or more from the date specified in Paragraph (1) above at which
a resolution to grant such stock option was adopted. If the grantee's
continuous service
terminates by reason of the grantee's death, attainment of mandatory
retirement age, or for reasons other than by the fault of the grantee
within two (2) years from the said date of resolution, the option may be
exercisable within the exercise period.
(9) Article 15 shall apply mutatis mutandis with respect to the distribution
of dividends for new shares issued upon the exercise of stock options.
(10) In the following instances, the Company may, by a resolution of the Board
of Directors, cancel the stock options granted to an officer or an
employee:
1. When the relevant officer or employee voluntarily resigns or is
removed from his or her position at the Company after receiving the
stock option;
2. When the relevant officer or employee inflicts material damages or
losses on the Company due to the willful conduct or negligence of
such person;
3. When the Company cannot respond to the exercise of stock options due
to its bankruptcy, dissolution, etc.; or
4. When there occurs any other event for cancellation of the stock
option pursuant to the stock option agreement.
ARTICLE 15 (ISSUANCE DATE OF NEW SHARES FOR THE PURPOSE OF DIVIDENDS)
In case the Company issues new shares through rights offering, bonus issue and
stock dividend, the new shares shall be deemed to have been issued at the end of
the fiscal year immediately prior to the fiscal year during which the new shares
are issued for purpose of distribution of dividends for such new shares.
ARTICLE 16 (TRANSFER AGENT)
(1) The Company may designate a transfer agent for its shares.
(2) The transfer agent, its office and its duties shall be determined by a
resolution of the Board of Directors of the Company and shall be notified
to the public.
(3) The Company's registry of shareholders or a copy of it shall be kept at
the office of the transfer agent. The transfer agent shall handle the
entries of alternations in the registry of shareholders, registering the
creation and cancellation of pledges over shares, indication of trust
assets and cancellation thereof with respect to shares, issuance of share
certificates, receipt of reports and other related activities.
(4) The relevant procedures for conducting activities referred to in Paragraph
(3) above shall be carried out in accordance with the Regulation on the
Securities Transfer Agency Business and other Regulations generally
applicable to transfer agents.
ARTICLE 17 (REPORT OF ADDRESSES, NAMES AND SEALS OR SIGNATURES OF SHAREHOLDERS
AND
OTHERS)
(1) Shareholders, registered pledgees and their respective representatives
shall file their names, addresses, and seals or signatures with the
transfer agent of Article 16.
(2) A person referred to Paragraph (1) who reside in a foreign country should
report to the Company appointed agents and the addresses in Korea to which
notices are to be sent.
(3) The same shall apply in case of any changes in the matters referred to in
Paragraphs (1) and (2) above.
ARTICLE 18 (CLOSE OF SHAREHOLDERS' REGISTRY AND RECORD DATE)
(1) The Company shall suspend entries of alteration with respect to its
rights, from the 1st day of January of each year up to the closing date of
the Ordinary General Meeting of Shareholders for the relevant fiscal year.
(2) The shareholders registered in the shareholders' registry as of December
31 of each fiscal year shall be entitled to exercise the rights as
shareholders at the Ordinary General Meeting of Shareholders convened for
such fiscal year.
(3) The Company may, if necessary for convening of an Extraordinary General
Meeting of Shareholders or any other necessary cases, suspend any entry
into the shareholders' registry with respect to shareholders' rights for a
period not exceeding three (3) months as determined by a resolution of the
Board of Directors, or cause the shareholders whose names appear in the
shareholders' registry on a record date set by a resolution of the Board
of Directors to exercise the rights as shareholders. If the Board of
Directors deems it necessary, the Company may suspend any entry into the
shareholders' registry and set the record date at the same time. The
Company shall give at least two (2) weeks prior notice to the public.
(4) Notwithstanding the provision of Paragraph (3), if otherwise set forth in
the FHCA or other relevant laws, the Company may follow such different
provisions.
CHAPTER III
BONDS
ARTICLE 19 (ISSUANCE OF CONVERTIBLE BONDS)
(1) The Company may issue to persons other than existing shareholders of the
Company convertible bonds, by the resolution of the Board of Directors, to
the extent that the total face value of the bonds shall not exceed 1
trillion Won, in any of the following cases:
1. If the convertible bonds are issued through general public offering;
2. If the Company issues convertible bonds to the securities investment
company that runs exclusively the banking business, as set forth in
the FHCA;
3. If the Company issues convertible bonds to foreign investors,
foreign or domestic financial institutions, allied companies, etc.
for the necessity of management, such as introduction of advanced
technology, improvement of financial structure of or financial
support to the Company or its subsidiary, strategic business
alliance, etc.; or
4. If the Company issues convertible bonds in foreign country, in
accordance with the SEA.
(2) The Board of Directors may determine that the convertible bonds referred
to in Paragraph (1) may be issued on the condition that conversion rights
will be attached to only a portion of the convertible bonds.
(3) The shares to be issued upon conversion shall be common shares. The
conversion price, which shall be equal to or more than the face value of
the shares, shall be determined by the Board of Directors at the time of
issuance of convertible bonds.
(4) The conversion period shall commence on the date following three (3)
months from the issue date of the convertible bonds and end on the date
immediately preceding the redemption date thereof. However, the conversion
period may be adjusted within the above period by a resolution of the
Board of Directors.
(5) For the purpose of any distribution of dividends on the shares issued upon
conversion, and any payment of accrued interest on the convertible bonds,
Article 15 hereof shall apply mutatis mutandis.
ARTICLE 20 (BONDS WITH WARRANTS)
(1) The Company may issue to persons other than existing shareholders of the
Company bonds with warrants, by the resolution of the Board of Directors,
to the extent that the total face value of the bonds shall not exceed 1
trillion Won, in any of the following cases:
1. If the bonds with warrants are issued through general public
offering;
2. If the Company issues bonds with warrants to the securities
investment company that runs exclusively the banking business, as
set forth in the FHCA;
3. If the Company issues bonds with warrants to foreign investors,
foreign or domestic financial institutions, allied companies, etc.
for the necessity of management, such as introduction of advanced
technology, improvement of financial structure of or financial
support to the Company or its subsidiary, strategic business
alliance, etc.; or
4. If the Company issues bonds with warrants in foreign country, in
accordance with the SEA.
(2) The amount of new shares which can be subscribed for by the holders of the
bonds with warrants shall be determined by the Board of Directors to the
extent that the maximum amount of such new shares shall not exceed the
face value of the bonds with warrants.
(3) The shares to be issued upon exercise of warrants shall be common shares.
The issue price, which shall be equal to or more than the face value of
the shares, shall be determined by the Board of Directors at the time of
issuance of bonds with warrants.
(4) The warrant exercise period shall commence on the date following three (3)
months from the issue date of the relevant bonds and end on the date
immediately preceding the redemption date thereof. However, the warrant
period may be adjusted within the above period by a resolution of the
Board of Directors.
(5) For the purpose of any distribution of dividends on the shares issued upon
exercise of warrants, Article 15 hereof shall apply mutatis mutandis.
ARTICLE 21 (ISSUANCE OF PARTICIPATING BONDS)
(1) The Company may issue to persons other than existing shareholders of the
Company participating bonds, by the resolution of the Board of Directors,
to the extent that the total face value of the bonds shall not exceed 1
trillion Won, in any of the following cases:
1. If the participating bonds are issued through general public
offering;
2. If the Company issues participating bonds to foreign investors,
foreign or domestic financial institutions, allied companies, etc.
for the necessity of management, such as introduction of advanced
technology, improvement of financial structure of or financial
support to the Company or its subsidiary, strategic business
alliance, etc.; or
3. If the Company issues participating bonds in foreign country, in
accordance with the SEA.
(2) Matters regarding the dividend participation of bonds issued pursuant to
Paragraph (1) shall be determined by the resolution of the Board of
Directors at the time of issuance, based on the dividend on common stock.
ARTICLE 22 (APPLICABLE PROVISIONS FOR THE ISSUANCE OF BONDS)
The provisions of Articles 16 and 17 hereof shall be applicable to the issuance
of bonds.
CHAPTER IV
GENERAL MEETINGS OF SHAREHOLDERS
ARTICLE 23 (CONVENING OF GENERAL MEETINGS OF SHAREHOLDERS)
(1) General Meetings of Shareholders of the Company shall be of two types: (i)
Ordinary and (ii) Extraordinary.
(2) The Ordinary General Meeting of Shareholders shall be held within three
(3) months after the end of each fiscal year and the Extraordinary General
Meeting of Shareholders may be convened whenever deemed to be necessary.
ARTICLE 24 (AUTHORITY TO CONVENE)
(1) The Representative Director-President of the Company shall convene the
General Meeting of Shareholders in accordance with a resolution of the
Board of Directors, unless otherwise prescribed by other laws and
ordinances.
(2) If the Representative Director-President is unable to perform his/her
duties, the General Meeting of Shareholders shall be convened by a
Director designated by the Board of Directors.
ARTICLE 25 (PERSONAL OR PUBLIC NOTICES FOR CONVENING)
(1) Written notice of the General Meeting of Shareholders of the Company shall
state the date, time, place of the Meeting, the purposes for which the
Meeting has been called, and other matters set forth in the relevant laws.
The written notice shall be sent to all shareholders at least two (2)
weeks prior to the date set for the Meeting.
(2) The written notice of a General Meeting of Shareholders to be given to
shareholders holding one-hundredth (1/100) or less of the total issued and
outstanding voting shares may be substituted by giving public notice of
the convening of the General Meeting of Shareholders in Hankuk Kyongje
Shinmun and Maeil Kyongje Shinmun which are published in the city of
Seoul, at least two (2) notices are made in the said publications two (2)
weeks prior to the date set for such Meeting.
(3) Notwithstanding the provisions of Paragraphs (1) and (2), if otherwise set
forth in the FHCA or other relevant laws, the Company may follow such
different provisions.
ARTICLE 26 (PLACE OF MEETING)
The General Meeting of Shareholders shall be held in the city where the head
office is located, or any other places adjacent thereto as required.
ARTICLE 27 (CHAIRMAN OF THE GENERAL MEETING OF SHAREHOLDERS)
The Chairman of the General Meetings of Shareholders shall be the person
entitled to convene the Meeting pursuant to Article 24.
ARTICLE 28 (CHAIRMAN'S AUTHORITY TO MAINTAIN ORDER)
(1) The Chairman may order persons who purposely speaks or acts in a manner to
prevent or disrupt the deliberations of the General Meeting of
Shareholders or who disturb the public order of the General Meeting of
Shareholders to stop or retract his/her remarks or to leave the place of
meeting.
(2) The Chairman may restrict the length and frequency of the speech of
shareholders if it is necessary for the smooth deliberations of the
General Meeting of Shareholders.
ARTICLE 29 (VOTING RIGHTS)
Each shareholder shall have one (1) vote for each share he/she owns.
ARTICLE 30 (SPLIT VOTING)
(1) If any shareholder who holds two (2) or more votes wishes to split his/her
votes, he/she shall notify in writing the Company of such intent and the
reasons therefor no later than three (3) days before the date set for the
General Meeting of Shareholders.
(2) The Company may refuse to allow the shareholder to split his/her votes
unless the shareholder acquired the shares in trust or otherwise holds the
shares for and on behalf of some other person.
ARTICLE 31 (VOTING BY PROXY)
(1) A shareholder may exercise his/her vote through a proxy.
(2) In the case of Paragraph (1) above, the proxy holder shall file with the
Company the documents evidencing the authority to act as a proxy before
the General Meeting of Shareholders.
ARTICLE 32 (METHOD OF RESOLUTION)
Except as otherwise provided in the applicable laws and regulations or these
Articles of Incorporation, all resolutions of the General Meeting of
Shareholders shall be adopted by
the affirmative vote of a majority of the shareholders present; provided that
such votes shall, in any event, represent not less than one-fourth (1/4) of the
total number of issued and outstanding shares.
ARTICLE 33 (EXERCISE OF VOTING RIGHT IN WRITING)
(1) If the method of resolution in writing at the General Meeting of
Shareholders is adopted by the resolution of the Board of Directors, the
shareholders may exercise their voting rights without participating the
meeting.
(2) In case of Paragraph (1), the Company shall attach the documents and
references necessary for exercise of voting rights to the convening
notice.
(3) If a shareholder intends to exercise his/her voting rights in writing, the
shareholder shall fill in and submit to the Company the documents referred
to in Paragraph (2) by the date preceding the date set for the General
Meeting of Shareholders.
ARTICLE 34 (MINUTES OF THE GENERAL MEETINGS OF SHAREHOLDERS)
The substance of the course of the proceedings of the General Meeting of
Shareholders and the results thereof shall be recorded in the minutes and shall
be preserved at the head office and branches of the Company, after being affixed
with the names and seal impressions or signatures of the Chairman and the
Directors present.
CHAPTER V
OFFICERS AND BOARD OF DIRECTORS
ARTICLE 35 (OFFICERS)
The Company shall have not less than three (3) but not more than fifteen (15)
Directors, of which the number of the Outside Directors shall not be less than 3
persons and 50/100 of the total number of Directors.
ARTICLE 36 (ELECTION OF DIRECTOR)
(1) The Directors shall be elected at the General Meeting of Shareholders.
(2) The Outside Directors shall be recommended by the Outside Director
Recommendation Committee pursuant to Article 46 and elected at the General
Meeting of Shareholders.
ARTICLE 37 (TERM OF DIRECTOR)
(1) The term of office of the Director shall be determined at the General
Meeting of
Shareholders to the extent not exceeding three years, and the Director may
be re-appointed. Provided that, the term of office of the Outside Director
appointed as specialist at the General Meeting of Shareholders shall be
one year.
(2) If the term of office expires after the end of a fiscal year but before
the Ordinary General Meeting of Shareholders convened in respect of such
fiscal year, the term of office shall be extended up to the close of such
General Meeting of Shareholders.
ARTICLE 38 (BY-ELECTION OF DIRECTORS)
(1) In the event of any interim vacancy in the office of the Director, a
substitute Director shall be elected at the General Meeting of
Shareholders; provided, however, that the foregoing shall not apply if the
number of remaining Directors satisfies the requirement of Article 35
hereof and such vacancy does not cause any difficulties in the business
operation of the Company.
(2) If the number of Outside Directors does not satisfy the requirement
referred to in Article 35 due to the death or resignation of Outside
Directors or any other reason, the Outside Directors shall be elected to
fill the vacancy at the Ordinary General Meeting of Shareholders to be
held first after such cause so as for the number of Outside Directors to
be such prescribed number.
(3) The term of office of the Director appointed pursuant to Paragraphs (1)
and (2) shall commence from the date of taking office.
ARTICLE 39 (APPOINTMENT OF REPRESENTATIVE DIRECTOR, ET AL.)
The Company may appoint one Representative Director-Chairman and one
Representative Director-President, by a resolution of the Board of
Directors.
ARTICLE 40 (DUTIES OF DIRECTORS)
(1) The Representative Director-Chairman shall represent the Company and shall
oversee the business operation of the Company.
(2) The Representative Director-Presidents shall also represent the Company
and shall perform the matters resolved by the Board of Directors and
oversee the business of the Company as determined by the Board of
Directors.
(3) Directors shall assist the Representative Director, and perform their
respective duties as may be delegated to them by the Board of Directors.
ARTICLE 41 (DIRECTOR'S OBLIGATIONS)
(1) The Directors shall perform their respective duties faithfully for the
benefits of
the Company, in accordance with the laws and these Articles of
Incorporation.
(2) If any Director finds any facts which may cause substantial losses to the
Company, such Director shall promptly report to the Audit Committee
thereof.
ARTICLE 42 (COMPOSITION AND CONVENING OF THE MEETING OF BOARD OF DIRECTORS)
(1) The Board of Directors shall consist of Directors, and shall resolve
important matters regarding the business affairs of the Company.
(2) The Meeting of the Board of Directors shall be of two types: (i) Ordinary
and (ii) Extraordinary. The Ordinary Meeting of the Board of Directors
shall be held at least once per fiscal quarter and the Extraordinary
Meeting of the Board of Directors may be convened whenever deemed to be
necessary.
(3) The Meeting of the Board of Directors shall be convened by the
Representative Director-Chairman of the Director designated by the Board
of Directors (if any) by giving notice to each Director at least seven (7)
days prior to the scheduled date of such Meeting. However, such period may
be reduced upon occurrence of urgent events, and the said procedures may
be omitted with the consent thereon of all Directors.
ARTICLE 43 (CHAIRMAN OF THE MEETING OF THE BOARD OF DIRECTORS)
The Chairman of the Meeting of the Board of Directors shall be the person
entitled to convene the Meeting pursuant to Article 42.
ARTICLE 44 (METHOD OF RESOLUTION)
(1) The quorum for the Board of Directors shall be the presence of at least
more than one half (1/2) of the Directors, and all resolutions of the
Board of Directors shall require the affirmative votes of a majority of
the Directors present at the meeting of the Board of Directors.
(2) The Board meetings may be held by means of a video conference or other
similar arrangement whereby all or part of the Directors may participate
in the meeting and vote on matters at the same time. In such case, a
Director participating in the meeting by such arrangement shall be
considered present at the meeting.
(3) Any Director who has a particular interest in the matters to be resolved
at the Meeting of the Board of Directors shall not be entitled to vote at
such Meeting.
ARTICLE 45 (MINUTES OF THE MEETING OF BOARD OF DIRECTORS)
(1) The proceedings of a Board meeting shall be recorded in the minutes.
(2) The agenda, proceedings, resolutions, dissenting director (if any) and
his/her reasons for dissenting of a Board meeting shall be recorded in the
minutes on which the names and seals of the Directors present at the
meeting.
ARTICLE 46 (COMMITTEES)
(1) The Company may have the following committees within the Board of
Directors.
1. Board Steering Committee;
2. Audit Committee;
3. Outside Director Recommendation Committee ;
4. Risk Management Committee; and
5. Compensation Committee.
(2) Details regarding composition, power, operation, etc. of each committee
shall be determined by the resolution of the Board of Directors.
(3) Articles 42, 44 and 45 shall apply mutatis mutandis with respect to the
committees.
ARTICLE 47 (REMUNERATION FOR DIRECTORS)
The remuneration for the Directors shall be determined by a resolution of the
General Meeting of Shareholders.
ARTICLE 48 (CONSULTANTS)
By a resolution of the Board of Directors, the Company may retain several
consultants, honorary directors and advisors.
CHAPTER VI
AUDIT COMMITTEE
ARTICLE 49 (Constitution of Audit Committee)
(1) The Company shall have the Audit Committee, as prescribed by the
Commercial Code, the SEA and other laws, in stead of the Auditor.
(2) The Audit Committee of the Company shall consist of three (3) or more
Directors; provided that two-thirds (2/3) of the members of the Audit
Committee shall be elected from the Outside Directors.
(3) The chairman of the Audit Committee shall be elected among the outside
directors by a resolution of the Audit Committee.
ARTICLE 50 (DUTIES OF AUDIT COMMITTEE)
(1) The Audit Committee shall examine the operation and accounting of the
Company.
(2) The Audit Committee may request the Board of Directors to convene the
Extraordinary General Meeting of Shareholders by submitting documents
stating the agenda and reasons for convening such meeting.
(3) The Audit Committee may request business reports from any subsidiary of
the Company when it is necessary to perform its duties. In this case, if
such subsidiary does not report to the Audit Committee immediately or the
Audit Committee needs to verify the contents of the reports, it may
investigate the status of business and the financial condition of the
subsidiary.
(4) The Audit Committee shall approve the appointment of the external auditor.
(5) In addition to the matters referred to in Paragraphs (1) through (4), the
Audit Committee shall dispose of the matters delegated by the Board of
Directors.
ARTICLE 51 (AUDIT COMMITTEE'S RECORD)
The Audit Committee shall record the substance and results of its audit in the
Audit Committee's record, on which the name and seal of the Audit Committee(s)
who has performed such audit shall be affixed or shall be signed by such Audit
Committee.
CHAPTER VII
ACCOUNTING
ARTICLE 52 (FISCAL YEAR)
The fiscal year of the Company shall begin on January 1 and end on December 31
of each year.
ARTICLE 53 (PREPARATION AND MAINTENANCE OF FINANCIAL STATEMENTS AND BUSINESS
REPORT)
(1) The Representative Director-President of the Company shall prepare the
following documents to be submitted to the Ordinary General Meeting of
Shareholders, together with supplementary data and business reports, and
have such documents audited by the Audit Committee no later than six (6)
weeks before the date of the Ordinary General Meeting of Shareholders:
(a) balance sheet;
(b) statements of profit and loss; and
(c) statement of appropriation of retained earnings or statement of
disposition of deficit.
(2) The Audit Committee shall submit an audit report to the Representative
Director-President no later than one (1) week before the date of the
Ordinary General Meeting of Shareholders.
(3) The Representative Director-President shall keep on file copies of the
documents described in Paragraph (1) above, together with the business
report and Audit Committee's audit report thereon, at the head office of
the Company for five (5) years, and certified copies of all of such
documents at the branches of the Company for three (3) years, beginning
from one (1) week before the date of the Ordinary General Meeting of
Shareholders.
(4) Immediately upon obtaining approval for the documents mentioned in
Paragraph (1) above from the General Meeting of Shareholders, the
Representative Director-President shall make a public notice of the
balance sheet, income statement, consolidated financial statements
pursuant to the Act on External Audit of Stock Companies and the opinion
of an external auditor. In doing so, notwithstanding the provisions of
Article 4, the Company may use the means of electronic document as
prescribed by Article 55.2 of the Financial Holding Company Act.
ARTICLE 54 (APPOINTMENT OF EXTERNAL AUDITOR)
The Company shall appoint the external auditor with the approval of the Audit
Committee, and shall report such fact to the Ordinary General Meeting of
Shareholders to be held first after such appointment.
ARTICLE 55 (DISPOSAL OF PROFITS)
The Company shall dispose of the unappropriated retained earnings as of the end
of each fiscal year as follows:
1. earned surplus reserves;
2. other statutory reserves;
3. dividends;
4. temporary reserves; and
5. other appropriation of earned surplus.
ARTICLE 56 (Retirement of Shares)
(1) The Company may retire the shares within the scope of profits attributable
to the shareholders, by the resolution of the Board of Directors.
(2) In order to retire the shares pursuant to Paragraph (1), the Board of
Directors shall adopt the following resolutions:
1. Types and the total number of shares to be retired;
2. The total amount of shares to be acquired for retirement; and
3. Acquisition period or retirement date (the acquisition period or
retirement date shall be before the Ordinary General Meeting of
Shareholders to be held first after the resolution of such
retirement).
(3) When the shares are retired pursuant to Paragraph (1), it shall be in
accordance with the following criteria:
1. In case of acquisition of shares for the purpose of retirement, such
acquisition shall be made in accordance with the acquisition method
and criteria as prescribed in the relevant laws, such as the SEA,
etc.
2. Total price of the shares to be acquired for the purpose of
retirement shall be not more than the amount as prescribed in the
relevant laws, such as the SEA, etc., within the scope available for
dividend as at the end of such fiscal year pursuant to Article 462,
Paragraph (1) of the Commercial Code.
(4) When the shares are retired pursuant to Paragraph (1), the matters
referred to in each Subparagraph of Paragraph (2) and the purpose of
retirement shall be reported to the Ordinary General Meeting of
Shareholders to be held first after the resolution of such retirement.
ARTICLE 57 (DIVIDENDS)
(1) Dividends may be distributed in cash or stock.
(2) In case the dividends are to be distributed in stock and the Company has
several classes of shares, the stock dividend distribution may be made in
shares of different classes by a resolution of the General Meeting of
Shareholders.
(3) Dividends of Paragraph (1) above shall be paid to the shareholders
registered in the Company's registry of shareholders or the registered
pledgees as of the last day of each fiscal year.
ARTICLE 57-2 (INTERIM DIVIDENDS)
(1) The Company may distribute interim dividends to its shareholders as of
00:00, July 1 in accordance with the relevant laws including the SEA. Such
interim dividends shall be made in cash.
(2) Interim dividends provided under Paragraph (1) shall be decided by
resolution of the Board of Directors, which resolution shall be made
within forty-five (45) days from the date specified in Paragraph (1).
(3) The maximum amount to be paid as interim dividends shall be calculated by
deducting the following amounts from the net asset amounts recorded in the
balance sheet of the fiscal year immediately prior to the fiscal year
concerned:
1. Capital of the company for the fiscal year immediately prior to the
fiscal year concerned;
2. The aggregate amount of capital reserves and legal reserves which
had been accumulated up until the fiscal year immediately prior to
the fiscal year concerned;
3. The amount which was resolved to be distributed as dividends at an
ordinary general meeting of shareholders of the fiscal year
immediately prior to the fiscal year concerned;
4. Voluntary reserves which had been accumulated for specific purposes
in accordance with the relevant provisions of the Articles of
Incorporation or by resolution of a general meeting of shareholders
until the fiscal year immediately prior to the fiscal year
concerned;
5. Eared surplus reserves to be accumulated for the fiscal year
concerned as a result of the interim dividends.
(4) In the event the Company has issued new shares (including those shares
issued by way of conversion of reserves into capital stock, stock
dividends, request of conversion of convertible bonds or exercise of
warrants) prior to the date set forth in Paragraph (1) above, but after
the commencement date of the fiscal year concerned, the new shares shall
be deemed to have been issued at the end of the fiscal year immediately
prior to the fiscal year for the purpose of interim dividends.
(5) When distributing interim dividends the same dividend rate as that of the
common shares of the Company shall be applied to the preferred shares.
However, if the Board of Directors had decided otherwise at the time of
the issuance of such preferred shares, the dividend rate shall be in
accordance with such decision by the Board of Directors.
ARTICLE 58 (EXPIRATION OF RIGHT TO PAYMENT OF DIVIDENDS)
(1) The right to demand payment of dividends shall extinguish by prescription
if not exercised within five (5) years.
(2) The dividends, of which the right has been extinguished under Paragraph
(1) above, shall be kept by the Company.
ARTICLE 59 (SUPPLEMENTARY PROVISION)
Matters not specified in these Articles of Incorporation shall be determined by
the resolution of the Board of Directors or the General Meeting of Shareholders,
or in accordance with the Commercial Code or other laws.
ADDENDUM
ARTICLE 1 (EFFECTIVE DATE)
These Articles of Incorporation shall become effective from the date of
registration of incorporation.
ARTICLE 2 (INITIAL FISCAL YEAR AFTER INCORPORATION)
Notwithstanding the provisions of Article 52, the initial fiscal year of the
Company after incorporation shall be from the date of incorporation to December
31, 2001.
ARTICLE 3 (INITIAL TRANSFER AGENT AFTER INCORPORATION)
Notwithstanding the provisions of Article 16, Paragraph (2), the initial
transfer agent of the Company after incorporation shall be Korea Securities
Depository.
ARTICLE 4 (APPOINTMENT OF INITIAL REPRESENTATIVE DIRECTOR, ET AL. AFTER
INCORPORATION)
Notwithstanding the provisions of Article 39, the initial Representative
Director-Chairman and the initial Representative Director-Chairman of the
Company after incorporation shall be one person appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted.
ARTICLE 5 (APPOINTMENT OF INITIAL OUTSIDE DIRECTOR AFTER INCORPORATION)
Notwithstanding the provisions of Article 36, Paragraph (2), the initial Outside
Director of the Company after incorporation shall be appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted, without recommendation of
the Operation Committee.
ARTICLE 6 (APPOINTMENT OF INITIAL MEMBERS OF AUDIT COMMITTEE AFTER
INCORPORATION)
The initial members of Audit Committee shall be appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted.
ARTICLE 7 (REMUNERATION OF DIRECTORS IN INITIAL FISCAL YEAR AFTER INCORPORATION)
Notwithstanding the provisions of Article 47, the remuneration of Directors in
initial fiscal year after incorporation shall be determined at the Board of
Directors to be held first after
incorporation, to the extent not exceeding 1 billion Won.
ARTICLE 8 (SHARE TRANSFERRING COMPANIES)
In order to incorporate the Company, the following share transferring companies
prepare these Articles of Incorporation and affix their respective names and
seals hereon on August 10, 2001.
Shinhan Bank
120, Taepyongro 2ga, Jung-gu, Seoul
Representative Director, President In Ho Lee
Shinhan Securities Co., Ltd.
24-4, Yoido-dong, Youngdeungpo-gu, Seoul
Representative Director, President Yang Sang Yoo
Shinhan Capital Co., Ltd.
526-3, Kojan-dong, Ansan, Kyonggido
Representative Director, President Shin Jung Kang
Shinhan Investment Trust Management Co., Ltd.
24-4, Yoido-dong, Youngdeungpo-gu, Seoul
Representative Director, President Bo Gil Baek
ADDENDA (1)
ARTICLE 1 (EFFECTIVE DATE)
These Articles of Incorporation shall become effective as of March 20, 2002.
ADDENDA (2)
ARTICLE 1 (EFFECTIVE DATE)
These Articles of Incorporation shall become effective as of March 31, 2003.
ADDENDA (3)
ARTICLE 1 (EFFECTIVE DATE)
These Articles of Incorporation shall become effective as of March 25, 2004.
Appendix 10
ARTICLES OF INCORPORATION OF
GOOD MORNING SHINHAN SECURITIES CO., LTD
Enacted on May 31, 1973
Amended on July 20, 1974
Amended on July 16, 1975
Amended on March 27, 1976
Amended on April 28, 1976
Amended on May 25, 1976
Amended on June 29, 1976
Amended on July 20, 1976
Amended on November 17, 1977
Amended on March 11, 1978
Amended on February 28, 1980
Amended on February 23, 1981
Amended on September 15, 1981
Amended on February 17, 1982
Amended on October 20, 1983
Amended on October 22, 1983
Amended on November 8, 1983
Amended on April 28, 1984
Amended on May 31, 1984
Amended on June 5, 1984
Amended on October 8, 1984
Amended on May 17, 1985
Amended on September 23, 1986
Amended on May 20, 1988
Amended on May 27, 1989
Amended on May 26, 1990
Amended on May 25, 1991
Amended on May 22, 1993
Amended on May 25, 1996
Amended on May 31, 1997
Amended on April 9, 1998
Amended on May 30, 1998
Amended on September 29, 1998
Amended on February 4, 1999
Amended on April 13, 1999
Amended on May 29, 1999
Amended on May 27, 2000
Amended on May 26, 2001
Amended on May 25, 2002
Amended on August 5, 2002
Amended on May 30, 2003
1
Disclaimer: This copy is an English translation of the Articles of Incorporation
of Good Morning Shinhan Securities Co., Ltd. written in Korean. While reasonable
efforts have been made, the translation may be imprecise and inaccurate. The
translator or the Company shall assume no liability and no responsibility for
any errors, omissions, or ambiguities.
2
CHAPTER I. GENERAL PROVISIONS
ARTICLE 1. (NAME)
The name of the Company is GOOD MORNING SHINHAN CHEUNG KWON CHUSIGHOESA (the
"Company"). And in English, GOOD MORNING SHINHAN SECURITIES CO., LTD
ARTICLE 2. (PURPOSE)
(1) The purpose of the Company is to engage in the following business
activities:
1. To buy and sell securities;
2. To buy and sell securities on consignment;
3. To act as an intermediary or an agent with respect to purchase and
sale of securities;
4. To act as an intermediary, arranger or agent with respect to
entrustment of purchase and sale transactions to be executed on the
securities market, KOSDAQ market or a similar market in foreign
countries.
5. To underwrite securities;
6. To make a public offering of outstanding securities;
7. To arrange for a public offering of new or outstanding securities;
8. To act as an intermediary or an agent with respect to transactions to
be executed on the Korea ECN Securities and to buy and sell securities
necessary for the relevant intermediary business;
9. To extend credit relating to securities transactions;
10. To extend credit against securities as collateral;
11. To engage in securities savings business;
12. To engage in futures business relating to stocks and stock index;
13. To engage in over-the-counter derivatives transaction and
intermediate, arrange or act as an agent with respect thereto;
14. To engage in investment advisory business and discretionary investment
business;
15. To appraise the value of securities or equity;
16. To act as an intermediary, an arranger or an agent with respect to
M& A;
17. To buy and sell Certificates of Deposit (CDs) and to act as an
intermediary with respect thereto;
18. To act as a trustee for publicly offered bonds;
3
19. To act as an agent with respect to securities transactions;
20. To provide advice and assistance for corporate management,
restructuring and financing;
21. To lend and borrow securities and intermediate, arrange or act as an
agent with respect thereto;
22. To underwrite securities other than publicly offered securities and
intermediate, arrange or act as an agent with respect thereto;
23. To engage in purchase and sale of loans and in transactions related
thereto, and intermediate or arrange or to act as an agent for
transactions related thereto;
24. To engaged in safeguard deposit of securities;
25. To engage in the business of leasing real property;
26. To provide rental services of safety deposit boxes;
27. To lend proprietary securities to Institutional Investors;
28. To distribute and sell lottery and entrance tickets on consignment
basis, and engage in other similar businesses;
29. To provide training and education in relation to securities;
30. To publish, distribute and sell periodicals and books;
31. To lease or sell Electronic Data Processing System (E.D.P.S.) and
software with respect to securities business;
32. To provide service as an asset manager and as a Special Purpose
Company for Asset-Backed Security as provided in Asset-Backed
Securitization Act;
33. To buy and sell the futures and options on consignment basis and to
act as an intermediary or an agent with respect to purchase and sale
of futures and options and to act as an intermediary, arranger or
agent with respect to the consignment of purchase and sale futures and
options;
34. To provide guarantee for the payment of principal and interest in
connection with corporate bonds;
35. To engage in the securities business overseas;
36. To discount and buy and sell Commercial Paper (CP);
37. To act as an intermediary with respect to purchase and sale of
Commercial Paper (CP);
38. To sell Investment Trust beneficiary certificate on consignment basis;
39. To sell Mutual Fund on consignment basis;
40. To provide comprehensive asset management services (wrap account
business);
41. To act an agent or a broker with respect to the sale of the insurance
products; and
42. To engage in any and all businesses incidental to any of the foregoing
purposes.
4
(2) The Company may engage in the following business, subject to license or
authorization from the relevant administrative authorities
1. To issue promissory notes and other instruments of indebtedness;
2. To underwrite and provide guarantee for a promissory note;
3. To provide services in connection with promissory notes and bond
management accounts;
4. To provide services in connection with trust-type securities savings;
5. To provide services in connection with beneficiary certificates
savings and securities investment trust business;
6. To provide services in connection with international investment trust
business;
7. To buy and sell derivative products on proprietary and consignment
basis and to act as an intermediary or an agent with respect to
purchase and sale of derivative products and to act as an
intermediary, arranger or agent with respect to the consignment of
purchase and sales transaction to be executed on the derivative
products;
8. To act as a intermediary in call money transactions;
9. To engage in factoring businesses;
10. To engage in leasing businesses;
11. To engage in foreign exchange businesses;
12. To act as an intermediary for foreign investments and overseas
investments;
13. To engage in real estate investment trust and Reits business;
14. To engage in venture investment and any business with respect thereto;
15. To sell information relating to securities investment opportunities;
16. To provide services in connection with computer technology;
17. To provide services in connection with research and assessment of
corporate credit standing and any business with respect thereto;
18. To act as an intermediary for exchange of information and
communication facility provided by other companies;
19. To be engaged in alliance business with credit card company, insurance
company, bank and other financial company;
20. To be engaged in trade of commodity, product via electronic commerce
and settlement thereof;
21. To engage in corporate public relations and advertising business via
Internet;
22. To engage in any and all businesses which are incidental to any of the
foregoing purposes;
5
(3) The Company may engage in business other than set forth in Paragraphs 1 and
2 above; provided that such business is not prohibited by applicable laws
or regulations, subject to license or authorization from the relevant
administrative authorities.
ARTICLE 3. (LOCATION OF THE HEAD OFFICE AND BRANCH)
(1) The head office of the Company shall be located at 23-2, Youido-Dong,
Youngdeungpo-Gu, Seoul, Korea (the "Head Office").
(2) The Company, if necessary, may establish domestic and foreign branches,
offices, branch office and overseas subsidiaries by the resolutions of the
Board of Directors (the "BOD") or of the committee designated by BOD.
ARTICLE 4. (METHOD OF PUBLIC NOTICE)
Public notices by the Company shall be given by publication in "The Korea
Economic Daily" a daily newspaper published in Seoul, Korea. In case The Korean
Economic Daily is not available due to some unavoidable circumstances, public
notices shall be given in "The Maeil Economy Newspaper" a daily newspaper
published in Seoul, Korea.
CHAPTER II. SHARES
ARTICLE 5. (TOTAL NUMBER OF SHARES TO BE ISSUED)
The total number of shares to be issued by the Company shall be Six Hundred
Million (600,000,000).
ARTICLE 6. (PAR VALUE)
The par value of the share issued by the Company shall be Five Thousand (5,000)
Won.
ARTICLE 7. (TOTAL NUMBER OF SHARES TO BE ISSUED AT THE TIME OF INCORPORATION)
The total number of shares to be issued by the Company at the time of
incorporation shall be Five Hundred Thousand (500,000).
ARTICLE 8. (CLASSES OF SHARES)
The shares to be issued by the Company shall be Common Shares in registered form
and Preferred Shares in registered form.
6
ARTICLE 8-2. (NUMBER AND CHARACTERISTICS OF PREFERRED SHARES)
(1) Preferred Shares to be issued by the Company shall be non-voting and the
total number of Preferred Shares shall be One Hundred Fifty Million
(150,000,000).
(2) The non-voting Preferred Shares issued on or before May 31, 1998 shall be
entitled to dividends at the rate that is one percent (1%) p.a., based on
the par value of such shares, higher than the dividend rate of Common
Share; provided, however, that the foregoing shall not apply in the event
where no dividend is declared for Common Shares or the dividend is paid in
shares.
(3) The non-voting Preferred Shares issued on or after June 1, 1998 shall be
entitled to the dividend amount as determined by the BOD at the time of
issuance; provided that the dividend amount shall not be less than three
percent (3%) of the par value of the share per annum. In case the dividend
ratio of the Common Shares exceeds that of the Preferred Shares as
prescribed in this paragraph, Preferred Shares shall participate in the
distribution of such excess dividend amount at the same rate as the Common
Shares. If Preferred Shares are not paid the dividend amount as defined in
this paragraph for a fiscal year, such unpaid dividend amount shall be paid
cumulatively on the Preferred Shares prior to the dividends on the Common
Shares at time of payment of dividends in the next fiscal year.
(4) If there is a resolution not to pay any prescribed dividends on the
Preferred Shares, the non-voting Preferred Shares shall have voting rights
from General Meeting of Shareholders following General Meeting of
Shareholders which adopted such resolution until the close of any General
Meeting of Shareholders at which a resolution is adopted to distribute
preferential dividends on the Preferred Shares.
(5) In case the Company issues new shares by rights issue or bonus issue,
unless otherwise determined by a resolution of BOD, new Common Shares will
be issued to the existing Common Shares and new Preferred Shares with the
same terms and conditions as the existing Preferred Shares will be issued
to the existing Preferred Shares. Provided, however, that the Company may
issue new Preferred Shares as defined in Paragraph 3 above for the
Preferred Shares issued on or before May 31, 1998 by the resolution of BOD.
(6) In case of liquidation of the Company, the Preferred Shares referred in
Paragraph 3 shall receive, in preference over the Common Shares, an amount
up to the cumulative dividend amount and any residual assets shall be
distributed to both to Preferred Shares and Common Shares in proportion to
the number of shares.
(7) The Company may issue Preferred Shares which are convertible into Common
7
Shares ("Convertible Preferred Shares") or redeemable with profit
("Redeemable Preferred Shares") or both convertible and redeemable
("Convertible Redeemable Preferred Shares") pursuant to Articles 8-3 and
8-4.
ARTICLE 8-3 (NUMBER AND CHARACTERISTICS OF CONVERTIBLE PREFERRED SHARES)
(1) The total number of Convertible Preferred Shares to be issued by the
Company shall be Fifty Million (50,000,000).
(2) A Convertible Preferred Share will be converted into a Common Share upon
the request of the holder of the Convertible Preferred Share. The
conversion period of Convertible Preferred Share shall be decided by the
resolution of the BOD at the time of issuance to be within ten (10) years
from the date of issuance.
(3) Events such as stock split or consolidation of Common Shares which trigger
adjustment of conversion ratio shall be determined by the BOD prior to the
issuance thereof, and other terms and conditions of conversion shall be
determined by the resolution of BOD.
(4) Article 10-2 shall be applied mutatis mutandis in connection with the
payment of dividends on the Common Shares issued pursuant to conversion.
ARTICLE 8-4 (NUMBER AND CHARACTERISTICS OF REDEEMABLE PREFERRED SHARES)
(1) The total number of Redeemable Preferred Shares to be issued by the Company
shall be Fifty Million (50,000,000).
(2) The redemption period of Redeemable Preferred Shares shall be determined by
the resolution of the BOD at the time of issuance to be one (1) year or
more. Redeemable Preferred Shares shall be redeemed at the end of the
redemption period, only if the Company has profit, at the redemption price
which shall be determined by the BOD at the time of issuance and which
shall be higher than the issue price.
(3) In the case the Redeemable Preferred Shares are not redeemed in full at the
end of the redemption period due to the lack of profit, Redeemable
Preferred Shares shall be redeemed on a pro rata basis according to the
number of such shares held by each shareholder. The redemption period of
Redeemable Preferred Shares which are not redeemed shall be extended until
the Redeemable Preferred Shares are fully redeemed.
(4) Other terms and conditions of redemption of Redeemable Preferred Shares
shall be determined by the BOD resolution at the time of issuance.
ARTICLE 9. (TYPES OF SHARE CERTIFICATES)
8
Share certificates of the Company shall be issued in eight (8) denominations;
denomination of one (1), five (5), ten (10), fifty (50), one hundred (100), five
hundred (500), one thousand (1,000) and ten thousand (10,000) share(s).
ARTICLE 10. (PREEMPTIVE RIGHT FOR NEW SHARES)
(1) The Company's shareholders shall have the preemptive right to subscribe for
new shares in proportion to their respective shareholding ratios, unless
otherwise provided in the Articles of Incorporation. However, if any
shareholder abandons or forfeits his preemptive rights or if fractional
shares result from the allocation of new shares, BOD shall determine the
disposal of such shares.
(2) Notwithstanding the provision of Paragraph 1, the Company may allocate new
shares to persons other than existing shareholders in the following cases:
1. If the Company issues new shares by public offering or cause
underwriters to underwrite new shares in accordance with the
provisions of the Securities and Exchange Act ("SEA");
2. If the Company issues new shares by general public offering pursuant
to SEA and Article 10-4 of the Articles of Incorporation;
3. If the Company allocates new shares preferentially to members of the
Employee Stock Ownership Association in accordance with SEA;
4. If the Company issues new shares by the exercise of stock options in
accordance with SEA and Article 10-3 of the Articles of Incorporation;
5. If the Company issues new shares for the issuance of depositary
receipts (DR) in accordance with SEA;
6. If the Company issues new shares to a foreign investor as defined in
the Foreign Investment Promotion Act in accordance with Article 10-4
of the Articles of Incorporation;
7. If the Company issues new shares to a third party who has provided a
funds, credit lines, advance financial technique and know-how to the
Company, who is in close business alliance with the Company or who
contributes to the management of the Company in accordance with the
Article 10-4 of the Articles of Incorporation.
ARTICLE 10-2. (COMMENCEMENT DATE FOR DIVIDENDS ON NEW SHARES)
If the Company issues new shares by capital increase with consideration or
without consideration, exercise of stock option or stock dividend, with respect
to the dividends on the new shares, the new shares shall be deemed to have been
issued at the end of the
9
fiscal year immediately preceding the fiscal year during which such new shares
were issued.
ARTICLE 10-3. (STOCK OPTIONS)
(1) The Company may grant stock options to its officers and employees
(including officers and employees of the related companies as defined in
the relevant laws and regulations, hereinafter the same shall apply) by a
special resolution of the General Meetings of Shareholders not exceeding
fifteen percent (15%) of the total number of issued and outstanding shares.
Provided, however, the Company may grant stock options by the BOD
Resolution pursuant to the relevant laws and regulations.
(2) The Company may grant stock options with the condition that the grantees
can exercise the options only after satisfying certain management or
performance targets, and in case the conditions are not fulfilled, the
Company may defer or cancel such options.
(3) If the stock options are granted by the BOD resolution pursuant to
Paragraph 1 above, the Company shall report such grant to the next General
Meeting of Shareholders.
(4) The person eligible for receiving the stock options are such officers and
employees who contributed, or are capable of contributing, to the
establishment, management, overseas sales and technical improvement of the
Company; provided, however, that those who fall under any of the following
shall be excluded:
1. The largest shareholder (as defined in Sub-paragraph 2, Paragraph 4 of
Article 54-5 of SEA, hereinafter the same shall apply) of the Company
and any specially related persons (as defined in Paragraph 2 of
Article 10-3 of Enforcement Decree of SEA, hereinafter the same shall
apply); provided however that any person who becomes a specially
related person by becoming an officer (including non-standing officers
of the related company) of the Company is excluded.
2. Major shareholders (as defined in Article 188 of SEA, hereinafter the
same shall apply) and any specially related persons; any person who
becomes a specially related person by becoming an officer (including
non-standing officers of the related company) of the Company is
excluded.
3. Any person who becomes a major shareholder of the Company by
exercising his/her stock options.
(5) The shares (in the case where the Company pays, in either cash or treasury
shares, the difference between the exercise price of stock options and the
market price, the
10
shares price of which shall be the basis for such calculation) to be issued
upon the exercise of stock options shall be Common Shares in registered
form or Preferred Shares in registered form.
(6) The number of officers and employees of the Company who may be granted
stock options shall not exceed ninety percent (90%) of the total number of
officers and employees in office and stock options granted to one single
officer or employee shall not exceed ten percent (10%) of the total number
of issued and outstanding shares.
(7) The exercise price of stock option shall be determined pursuant to SEA and
other relevant laws and regulations.
(8) The exercise period shall be determined by the General Meeting of
Shareholders or BOD to be within seven (7) years from the date on which two
(2) years have elapsed from the date of the General Meeting of Shareholders
or BOD at which the resolution granting the stock option was adopted unless
provided otherwise in relevant laws and regulations.
(9) Anyone to whom the stock option is granted may exercise his/her stock
options only after having served the Company for two (2) years or more from
the date of resolution referred in the Paragraph 1 above. Provided,
however, that in the case of any grantee's death, mandatory retirement or
retirement for causes not attributable to such grantee within two (2) years
from the date of the resolution referred in Paragraph 1, such grantee may
exercise the stock option within the exercise period.
(10) The grant of stock options may be cancelled in part or in whole by a
resolution of the BOD in any of the following cases:
4. The grantee of the stock option retires or resigns voluntarily after
the grant of the stock option;
5. The grantee of the stock option incurs substantial damages to the
Company due to his/her willful misconduct or negligence;
6. The Company cannot act upon the exercise of a stock option due to due
to such reasons as bankruptcy or dissolution of the Company;
7. Any event of cancellation specified in the Stock Option Agreement
occurs.
ARTICLE 10-4. (GENERAL PUBLIC OFFERING AND OTHERS)
(1) The Company may issue new shares by general public offering up to fifty
percent (50%) of the total number of issued and outstanding shares by a
resolution of the BOD and in accordance with the Article 189-3 of the SEA
(2) The Company may issue new shares to foreign investors, as defined in the
Foreign
11
Investment Promotion Act, up to thirty percent (30%) of the total number of
issued and outstanding shares by a resolution of the BOD.
(3) The Company may, with a resolution of the BOD, issue new shares up to
thirty percent (30%) of the total number of issued and outstanding shares
to a third party who has provided funds, credit lines, advance financial
technique and know-how to the Company, who is in close alliance with the
Company or who contributes to management of the Company.
(4) If the Company issues new shares in such manners as specified in Paragraphs
1, 2 and 3 above, the class, number, and issue price of shares to be newly
issued shall be determined by a resolution of the BOD. Provided, however,
that the issue price of such new shares shall be greater than the issue
price calculated in a manner prescribed in Article 84-5 of the Enforcement
Decree of SEA, except where the Company issues new shares at the price
below par value.
ARTICLE 11. (TRANSFER AGENT)
(1) The Company shall retain a transfer agent for shares ("Transfer Agent").
(2) The Transfer Agent, its place of business and the scope of its agency
business shall be determined by a resolution of the BOD of the Company and
shall be publicly notified.
(3) The Company shall keep the shareholders registry or a duplicate thereof, at
the place of business of Transfer Agent and the Company shall authorize the
Transfer Agent to perform share-related services such as making entries in
the shareholders registry, registering the creation and cancellation of
pledges over shares, indication of trust assets and cancellation thereof
with respect to shares, issuing share certificates, receipt of relevant
reports.
(4) Those activities by the transfer agent described in Paragraph 3 shall be
regulated in accordance with the Regulations on Securities Agency Business
of the Transfer Agent.
ARTICLE 12. (REPORT OF ADDRESS, NAME AND SEAL OR SIGNATURES OF SHAREHOLDERS AND
OTHERS)
(1) Shareholders and registered pledgees shall report their names, addresses
and seals or signatures to the Transfer Agent referred to in Article 11.
(2) Shareholders and registered pledgees who reside in a foreign country shall
report an agent and the addresses in Korea to which notices may be given.
12
ARTICLE 13. (CLOSING OF SHAREHOLDERS REGISTRY AND RECORD DATE)
(1) The Company shall suspend altering the entry in the shareholders registry
such as making entries into the shareholders registry, registration or
cancellation of pledges and declaration or cancellation of trust assets for
a period of one (1) month from the date immediately following the last day
of each fiscal year.
(2) The Company shall allow shareholders who are registered in the shareholders
registry on the last day of each fiscal year to exercise their rights.
(3) For purposes of convening an Extraordinary General Meeting of Shareholders
or as otherwise becomes necessary, the Company may suspend any entry of
alterations into the shareholders registry for a specific period not
exceeding three (3) months or set a record date by a resolution of the BOD
which shall be publicly notified two (2) weeks in advance. If the BOD deems
it necessary, the Company may suspend any entry into the shareholders
registry and set the record date at the same time.
CHAPTER III. BONDS
ARTICLE 14. (ISSUANCE OF CONVERTIBLE BONDS)
(1) The Company may issue convertible bonds to persons other than shareholders
provided that the total face value of such bonds does not exceed one
trillion (1,000,000,000,000) Won.
(2) The BOD may issue convertible bonds referred to in Paragraph 1 with partial
conversion rights under which the right of the bondholders to demand
conversion may be limited to a certain percentage of the total amount of
convertible bonds.
(3) The class of shares to be issued upon conversion shall be one of the
classes of shares described in Article 8; the conversion price and other
related terms and conditions of conversion right shall be determined by the
BOD at the time of issuance of the convertible bonds subject to relevant
laws and regulations.
(4) The period during which conversion right may be exercised shall begin from
the date following the date of the issuance of the relevant convertible
bonds and end on the date immediately prior to the maturity date of the
bonds; provided, however, that the BOD may, by its resolution, shorten the
conversion period within the above period.
(5) With respect to the interest on convertible bonds and the dividends on
shares to be issued upon conversion, the provision of Article 10-2 shall
apply mutatis mutandis.
13
ARTICLE 15. (ISSUANCE OF BONDS WITH WARRANTS)
(1) The Company may issue bonds with warrants to persons other than
shareholders provided that the total face value does not exceed one
trillion (1,000,000,000,000) Won.
(2) The amount to which warrants may be exercised shall be determined by the
resolution of BOD in an amount not exceeding the total face value of the
bonds.
(3) The class of shares to be issued upon the exercise of warrants shall be one
of the classes of shares described in Article 8. The exercise price and
other terms and conditions of warrants shall be decided by the BOD at the
time of issuance of bonds subject to the relevant laws and regulations.
(4) The period during which warrants may be exercised shall begin from the date
following the date of the issuance of relevant bonds and end on the date
immediately prior to the maturity date. Provided, however, that the BOD by
its resolution may shorten the warrant exercise period within the above
period.
(5) With respect to the distribution of dividends on shares to be issued upon
exercise of warrants, the provision of Article 10-2 shall apply mutatis
mutandis.
ARTICLE 16. (PROVISIONS APPLICABLE TO ISSUANCE OF BONDS)
The provisions of Articles 11 and 12 shall apply mutatis mutandis to the
issuance of bonds.
CHAPTER IV. GENERAL MEETING OF SHAREHOLDERS
ARTICLE 17. (CONVENING OF MEETING)
(1) General Meetings of Shareholders of the Company shall be Ordinary General
Meeting of Shareholders and Extraordinary General Meetings of Shareholders.
(2) Ordinary General Meetings of Shareholders shall be convened within three
(3) months after the end of each fiscal year and Extraordinary General
Meetings of Shareholders shall be convened when necessary.
ARTICLE 18. (PERSONS AUTHORIZED TO CONVENE MEETING)
(1) Unless otherwise provided in laws and regulations, the Representative
Director/President shall convene General Meeting of Shareholders in
accordance with a resolution of the BOD.
(2) In the absence of the Representative Director/President, the decision of
the BOD
14
shall be adhered to.
ARTICLE 19. (NOTICE AND PUBLIC NOTICE OF CONVENING A MEETING)
(1) In convening a General Meeting of Shareholders, a written or electronic
notice thereof, which sets forth the time, place and purpose of the
meeting, shall be sent to each shareholder at least two (2) weeks prior to
the date of such meeting.
(2) The written or electronic notice to shareholders holding not more than one
percent (1%) of the total number of issued and outstanding shares with
voting rights may be replaced by two or more public notices made in "The
Korea Economic Daily" and "The Maeil Economic Newspaper", published in
Korea at least two (2) weeks prior to the date of meeting.
ARTICLE 20. (PLACE OF MEETING)
General Meetings of Shareholders shall be held at the Head Office of the Company
or, if necessary, another place nearby.
ARTICLE 21. (CHAIRMAN)
(1) The Representative Director/President shall be the chairman of General
Meetings of Shareholders.
(2) In the absence of the Representative Director/President, the decision of
the BOD shall be adhered to.
ARTICLE 22. (MAINTENANCE OF ORDER BY THE CHAIRMAN)
The chairman of a General Meeting of Shareholders may order any person who
conduct or speak with the intent to hinder the proceedings of the meeting or to
disturb the order thereof, to cease and desist from such conduct or speech or to
leave the place of the meeting, and such person shall comply with his/her order.
ARTICLE 22-2. (ADJOURNMENT)
(1) Except as otherwise provided in relevant laws and regulations, a General
Meeting of Shareholders may be postponed or adjourned by the resolution of
General Meeting of Shareholders for maximum of fourteen (14) days.
(2) The agenda at the postponed or adjourned General Meeting of Shareholders
shall be the agenda of the original General Meeting of Shareholders.
(3) With regard to postponed or adjourned meeting held within fourteen (14)
days from the date of the original General Meeting of Shareholders, Article
13 and Article 19
15
shall not apply.
ARTICLE 23. (VOTING RIGHT)
Every shareholder shall have one vote for each share he/she owns.
ARTICLE 24. (LIMITATION TO VOTING RIGHTS OF CROSS-HELD SHARES)
In case Company, its parent company and its subsidiary company together or its
subsidiary company alone holds more than 10% of the total issued and outstanding
shares in another company, the shares of the Company held by such another
company shall not be entitled to vote.
ARTICLE 25. (DISPARATE EXERCISE OF VOTING RIGHTS)
(1) If a shareholder holding two or more voting rights wishes to exercise
voting rights disparately, he/she shall give at least three (3) days' prior
written notice to the Company of such intention and the reason therefor.
(2) The Company may disallow the shareholder's disparate exercise of voting
rights except in the cases where such shareholder holds shares as a trustee
or otherwise holds shares for or on behalf of other persons.
ARTICLE 26. (VOTING BY PROXY)
(1) A shareholder may exercise his/her vote by proxy.
(2) In case of Paragraph 1 above, the proxy shall present documents evidencing
his/her power of representation (a power of attorney) before commencement
of the General Meeting of Shareholders.
ARTICLE 27. (METHOD OF RESOLUTION)
Except as otherwise provided in laws and regulations, all resolutions of General
Meetings of Shareholders shall be adopted by the affirmative votes of the
majority of share present at the meeting; provided, that, such votes shall
represent at least one fourth (1/4) of total number of issued and outstanding
shares of the Company.
ARTICLE 27-2. (VOTE BY BALLOTS)
(1) Except as otherwise provided in laws and regulations, no vote by ballots
shall be taken unless the Chairman of the General Meeting of Shareholders
shall determine that it shall be by ballots or the majority of the
shareholders present in person or represented by proxy with voting rights
shall so demand.
16
(2) In a vote by ballots, each ballot shall bear the name of the shareholders
and the number of shares held by such shareholders and in case of proxy,
name of proxy and the number of shares represented by such proxy.
ARTICLE 27-3. (EXERCISE OF VOTING IN WRITING)
(1) In case the BOD, at which it is resolved to convene General Meeting of
Shareholders, decides to allow the voting by writing, a shareholder may
exercise his/her voting right in writing without being present at the
General Meeting of Shareholders.
(2) In case of Paragraph 1 above, the Company shall attach to the convening
notice of the General Meeting of Shareholders the reference document and
the document necessary for the exercise of voting right.
(3) The shareholders who desire to vote in writing shall submit such written
document provided by the Company pursuant to Paragraph 2 above with full
description of the relevant matters one (1) day prior to the date of
General Meeting of Shareholders.
ARTICLE 28. (MINUTES OF GENERAL MEETING OF SHAREHOLDERS)
The substance of the course and proceedings of a General Meeting of Shareholders
and the results thereof shall be recorded in minutes which shall bear the names
and seals or signature of the chairman and the Directors present at the meeting
and shall be kept at the Head Office and branches of the Company.
CHAPTER V. DIRECTORS, BOARD OF DIRECTORS AND AUDITORS
ARTICLE 29. (NUMBER OF DIRECTORS)
The Company shall have at least three (3) and no more than twelve (12) Directors
and it shall have Outside Directors in accordance with the relevant laws and
regulations.
ARTICLE 30. (ELECTION OF DIRECTORS)
(1) Directors shall be elected at General Meeting of Shareholders. Provided,
however, that the Outside Directors shall be elected from the candidates
nominated by the Outside Director Nominating Committee.
(2) A resolution for the election of Directors shall be adopted by the
affirmative votes of the majority of shares present and representing at
least one fourth (1/4) of the total number of issued and outstanding shares
with voting rights.
17
(3) The cumulative voting system as recognized under Article 382-2 of the
Korean Commercial Code shall not apply to electing two (2) or more
Directors of the Company.
ARTICLE 31. (TERM OF DIRECTORS)
(1) The term of Directors shall be decided by General Meeting of Shareholders;
provided, however, that the term shall not exceed three (3) years. Director
may be reappointed to the office. However, the term of an Outside Director
who is elected specifically as an outside specialist at the General Meeting
of Shareholders shall be one (1) year.
(2) If the term of Directors expires after the end of a fiscal year but prior
to the General Meeting of Shareholders to be convened with respect to such
fiscal year, the term of Director shall be extended until the end of such
General Meeting of Shareholders.
ARTICLE 32. (FILLING OF VACANCY OF DIRECTOR)
(1) In the case of any vacancy in the office of Directors, General Meeting of
Shareholders may not elect Director to fill such vacancy if the minimum
number of directors required by relevant laws and regulations and Article
29 is met.
(2) If the number of Outside Directors required by Article 29 is not met due to
resignation, death or other reasons, the Company shall appoint Outside
Director to meet the number of Outside Director as required at the first
General Meeting of Shareholders convened after the such vacancies.
ARTICLE 33. (REPRESENTATIVE DIRECTOR)
(1) The Company may elect one or more Representative Director among the
Directors by resolution of the BOD.
(2) The Representative Director(s) shall represent the Company and manage all
affairs of the Company.
(3) In case the Representative Director(s) is(are) unable to perform his(their)
duty as Representative Director, the decision of the BOD shall be adhered
to in regard to carrying out the duties of the Representative Director.
ARTICLE 34. (NON-DIRECTOR MANAGEMENT)
(1) The Company may appoint non-director management to aid and assist the
Representative Director/President.
(2) The Representative Director/President shall appoint the non-director
management
18
personnel with the consent from BOD. BOD shall separately decide on the
regulations regarding the operation of management personnel.
ARTICLE 35. (DIRECTOR'S OBLIGATION TO REPORT)
If any Director becomes aware of any facts, which may cause substantial losses
to the Company, such Director shall immediately report them to the Audit
Committee.
ARTICLE 36. (COMPOSITION AND CONVENING OF BOARD OF DIRECTORS)
(1) The BOD shall consist of Directors and shall have the right and
responsibility to resolve all-important matters relating to the Company and
its operations.
(2) The Chairman of the BOD or any Representative Director or any Director who
has been authorized by the BOD shall convene the meeting of the BOD.
(3) The BOD of the Company shall be classified into a regular meeting of BOD
and a special meeting of BOD. A regular meeting of BOD shall be held
quarterly and the Representative Director/President shall report management
performance to the BOD and a special meeting of BOD shall be called
whenever necessary.
(4) A meeting of BOD shall be convened by providing a written notice stating
the purpose of the meeting seven (7) days prior to the date of the meeting
to each Director; provide, however, that such notice period may be
shortened if there is any urgent reason and the notice may be omitted with
the consent of all Directors.
ARTICLE 37. (CHAIRMAN OF BOARD OF DIRECTORS)
(1) The BOD shall elect chairman of the BOD.
(2) In case the chairman of BOD is absent or is unable to perform his/her duty
as the Chairman of Board, Director who shall be appointed by the BOD shall
perform the duty of Chairman.
ARTICLE 38. (RESOLUTIONS OF THE BOARD OF DIRECTORS)
(1) Resolutions of the BOD shall be adopted by the affirmative vote of a
majority of the Directors present at the meeting at which majority of the
Directors of the Company are present unless otherwise provided by laws and
regulations.
(2) The BOD may permit any or all of Directors to participate in the meeting of
the BOD, through a means of instantaneous communication device (video and
audio simultaneously), without the Directors' being physically present at
said meeting. In such event, any of the Directors who have chosen to
participate in the meeting in the aforementioned manner is deemed to be
present at the meeting of the BOD in
19
person.
(3) A Director who has a special interest in the resolution of meeting of BOD
may not exercise his/her vote upon such matter.
ARTICLE 39. (MINUTES OF MEETING OF THE BOD)
The agenda, progress, result of meeting of BOD as well as dissenting opinions
and reasons thereof shall be recorded in the minutes on which the names and
seals of Chairman of Board and all Directors present shall be affixed or which
shall be signed by such persons, and shall be kept at the Head Office of the
Company.
ARTICLE 40. (COMPENSATION AND SEVERANCE PAY FOR DIRECTORS)
The amount of compensation for the Directors shall be determined by a resolution
of the General Meeting of Shareholders.
ARTICLE 41. (COMMITTEES UNDER THE BOARD OF DIRECTORS)
(1) The Company may, by BOD resolution, organize committees such as, but not
limited to, Executive Committee, Audit Committee, Nominating Committee,
Compensation Committee, Risk Management Committee.
(2) BOD shall determine the composition, authority, operation and details with
respect to each committee unless otherwise provided in relevant laws and
regulations. Provided, however, the Nominating Committee referred in
Paragraph 1 above shall meet the legal requirements for Outside Director
Nominating Committee as provided in relevant laws and regulations and shall
be authorized to nominate the candidates for Outside Director who shall be
elected at the General Meeting of Shareholders.
(3) With respect to committee, the provisions of Article 36, 38, and 39 shall
apply mutatis mutandis.
CHAPTER VI. AUDIT COMMITTEE
ARTICLE 42. (COMPOSITION OF AUDIT COMMITTEE)
(1) The Company shall organize Audit Committee as provided in the Commercial
Code, Securities & Exchange Act and other relevant laws and regulations as
substitute for a statutory auditor.
(2) The Audit Committee shall be composed of more than three (3) Directors;
provided
20
that the two thirds (2/3) or more of the Audit Committee members shall be
Outside Directors.
(3) The Audit Committee shall, by its resolution, appoint a person to represent
the Audit Committee among the members of the Audit Committee who is Outside
Directors.
ARTICLE 43. (DUTY OF AUDIT COMMITTEE)
(1) The Audit Committee shall audit the accounting and operation of the
Company.
(2) The Audit Committee may request BOD to convene an Extraordinary General
Meeting of Shareholders by submitting the documents stating the purposes of
and reasons for convening Extraordinary General Meeting of Shareholders.
(3) If the Audit Committee deems it necessary in performing its duty, the Audit
Committee may request a subsidiary of the Company to provide its financial
and operational report. The Audit Committee may investigate the business
and financial status of the subsidiary of the Company, if the subsidiary
does not submit the above requested reports or if the Audit Committee deems
it necessary to verify the truth of the reports submitted by the subsidiary
of the Company.
(4) External Auditor shall be appointed with an approval from the Audit
Committee.
(5) The Audit Committee shall perform duties delegated by the BOD as well as
those specified in Paragraphs 1 ~ 4 above.
ARTICLE 44. (MINUTES OF AUDIT)
The Audit Committee shall keep records of audit together with the substance and
results thereof in the audit book which shall bear names and the seal impression
or signature of the members of Auditor Committee who conducted the audit.
CHAPTER VII. ACCOUNTING
ARTICLE 45. (FISCAL YEAR)
The fiscal year of the Company shall commence on April 1 of each year and end on
March 31 of next year.
ARTICLE 46. (PREPARATION AND MAINTENANCE OF FINANCIAL STATEMENTS AND BUSINESS
REPORT)
(1) The Representative Director/President of the Company shall prepare the
following documents, supplementary documents thereto and the business
report six (6) weeks prior to the date of Ordinary General Meeting of
Shareholders, and submit such
21
documents to Ordinary General Meeting of Shareholders after obtaining audit
from the Audit Committee;
1. Balance sheet;
2. Profit and loss statement; and
3. Statement of appropriation of retained earnings or statement of
disposition of deficit.
(2) The Audit Committee shall submit the auditors' report to the Representative
Director/President one (1) week prior to the date set for the ordinary
General Meeting of Shareholders.
(3) The Representative Director/President shall keep the documents described in
Paragraph 1 above and supplementary documents thereof together with the
business report and the auditors' report at the Head Office of the Company
for five (5) years starting from one (1) week before the date of the
Ordinary General Meeting of Shareholders and certified copies of all of
such documents at the branches of the Company for three (3) years starting
from one (1) week before the date of the Ordinary General Meeting of
Shareholders.
(4) Upon obtaining an approval from the General Meeting of Shareholders with
respect to the documents referred to in Paragraph 1 above, the
Representative Director/President shall give public notice of the balance
sheet and the opinion of External auditors without delay.
ARTICLE 46-2. (APPOINTMENT OF EXTERNAL AUDITOR)
The Company shall appoint an External Auditor with an approval from the Audit
Committee pursuant to the Act on External Audit of Companies and shall report to
the first General Meeting of Shareholders convened after such appointment.
ARTICLE 47. (DISPOSITION OF EARNINGS)
The Company shall dispose of retained earnings (including carried-over earned
surplus) of each fiscal year as follows:
1. Profit reserve;
2. Other statutory reserves;
3. Dividends;
4. Discretionary reserve;
5. Other appropriation of retained earnings; and
6. Retained earnings to be carried forward.
22
ARTICLE 47-2. (RETIREMENT OF SHARES)
(1) The Company may retire its shares by the BOD resolution out of profits to
be distributed to shareholders.
(2) In case the Company intends to retire shares pursuant to Paragraph 1, the
BOD shall resolve upon the following matters:
1. The class and total number of shares to be retired.
2. Aggregate amount of shares to be acquired for retirement
3. The period during which to acquire shares. In such case, the Company
shall complete the acquisition of the shares before the first General
Meeting of Shareholders convened after BOD resolution thereof.
(3) When acquiring treasury shares for the purpose of retiring its shares
pursuant to Paragraph 1 above, the Company shall follow the principles
prescribed by the relevant laws and regulations.
(4) When retiring treasury shares in accordance with Paragraph 1 above, the
Company shall report matters prescribed in Paragraph 2 and the fact that
the shares are retired at the first General Meeting of Shareholders
convened after BOD resolution.
ARTICLE 48. (DIVIDENDS)
(1) Dividends may be paid in either cash or shares.
(2) Dividends referred to in Paragraph 1 above shall be paid to the
shareholders or pledgees registered in the shareholders registry of the
Company as of the end of each fiscal year.
(3) In the case dividends are distributed in shares and if the Company has
issued several classes of shares, such dividend may be distributed in
shares which is different in class from those of the issued shares pursuant
to a resolution of the General Meeting of Shareholders.
ARTICLE 48-2. (INTERIM DIVIDENDS)
(1) The Company may pay Interim dividends to the shareholders registered as of
October 1, 12 a.m. pursuant to the Article 192-3 of Securities & Exchange
Act. In this case, dividends shall be paid in cash.
(2) The Interim dividends referred to in Paragraph 1 shall be determined by the
BOD and the resolution thereof shall be made not more than forty-five (45)
days from the given date referred to in Paragraph 1.
(3) The Interim Dividends shall be the amount not exceeding the amount
calculated by deducting following amounts from net asset in the balance
sheet for the immediately
23
preceding fiscal year:
1. The amount of capital as of the end of the immediately preceding
fiscal year;
2. The total amount of capital surplus reserve and earned surplus reserve
accumulated until the end of the immediately preceding fiscal year;
3. The amount determined to be paid as dividend at the Ordinary General
Meeting of Shareholders for the immediately preceding fiscal year;
4. The total amount of discretionary reserve reserved for the specific
purpose pursuant to the provisions of Articles of Incorporation or the
General Meeting of Shareholders until the immediately preceding fiscal
year; and
5. Earned surplus reserve required to be reserved as a result of interim
dividends in the fiscal year.
(4) If the Company issues new shares during the period which begins from the
first date of each fiscal year and ends on the given date referred to in
Paragraph 1 (including by capitalization of reserve, stock dividend,
exercise of conversion rights, exercise of warrants and other cases), with
regard to interim dividends the new shares shall be deemed to have been
issued at the end of the fiscal year immediately preceding the fiscal year.
ARTICLE 49. (PRESCRIPTION OF THE RIGHT FOR PAYMENT OF DIVIDENDS)
(1) The right to dividends shall be extinguished by prescription if the right
is not exercised for five (5) years.
(2) After the expiration of the prescription period set forth in Paragraph 1,
unclaimed dividends shall revert to the Company.
24
ADDENDUM
1. Items not stipulated in the AOI shall be subject to the resolution of the
BOD or of the General Meeting of Shareholders and the relevant laws and
regulations.
2. (Effective date of Enforcement) These Articles of Incorporation shall be
effective as of May 23, 1993.
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 25, 1996. Provided, however, that the amendments in
Articles 10-2, 12, 14, 15, 27, 28, 30, 31, 34-2, 35, 36, and 39 shall be
effective as of October 1, 1996.
2. (Application of the Articles concerning issuance of CB and BW) The
amendments in Article 14 and 15 shall be applied for those which shall be
issued after the effective date of this Articles of Incorporation.
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 31, 1997
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of April 9, 1998
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 30, 1998
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of September 29, 1998
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of February 4, 1999
25
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 10,1999
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 29, 1999. Provided, however, that the amendment to
Article 30-3 shall be effective as of June 29, 1999
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 27, 2000
2. (Interim Measures) The employees, officers and directors who have been
granted option in accordance with the previous Articles of Incorporation
are deemed to have granted in accordance with amended Articles of
Incorporation. In such case, the latter part of Paragraph 6 of Article 10-3
shall not be applicable.
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 26, 2001
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 25, 2002. Provided, however, that the amendment of item
28, Paragraph 1 of Article 2 shall be effective as of July 1, 2002.
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall
become
26
effective as of August 5, 2002.
2. (Exception for number of directors) Notwithstanding Article 29, the Company
may have one (1) or more Outside Directors comprising one forth (1/4) of
the Directors in office until the end of Ordinary General Meeting of
Shareholders for the fiscal year 2002.
3. (Exception for term of Outside Directors) Notwithstanding Paragraph 1 of
Article 31, the term of office for Directors elected at the General Meeting
of Shareholders convened on June 27, 2002, which was convened to approve
the Merger Agreement entered into with Shinhan Securities Co., Ltd., shall
be until the end of the Ordinary General Meeting of Shareholders for the
fiscal year 2003.
ADDENDUM
1. (Effective Date of Enforcement) These Articles of Incorporation shall be
effective as of May 30, 2003.
27
[Translation]
2004
THE MINUTES OF 3RD GENERAL MEETING OF THE BOARD OF DIRECTORS
(SEPTEMBER 17, 2004)
Shinhan Finance Group Co., Ltd.
TABLE OF CONTENTS
1. Declaration of Opening of Meeting
2. Report on Constitution of Quorum
3. Consideration of Agenda Submitted
Agenda No. 1: Matters concerning implementation of a small-scale share
swap and to incorporate Good Morning Shinhan Securities
as a wholly-owned subsidiary
4. Closing
- 1 -
The general meeting of the Board of Directors (the "Board") was held on
September 17, 2004 in the conference room of New York Stock Exchange and
preceded and closed as follows from 03:00 to 04:00 (New York Local time 14:00 to
15:00).
The Chairman of the Board Eung Chan Ra (the "Chairman") opened the meeting,
confirmed the number of directors present, and declared that the meeting was
lawfully constituted with a quorum present under the Article 44 of the articles
of incorporation of the Company as 14 directors were present out of the total
number of 15 directors, showing the percentage of attendance of 93%, and
therefore the following agenda was submitted, considered and resolved.
AGENDA NO. 1: MATTERS CONCERNING IMPLEMENTATION OF A SMALL-SCALE SHARE
SWAP TO INCORPORATE GOOD MORNING SHINHAN SECURITIES AS A
WHOLLY-OWNED SUBSIDIARY
The Chairman proposed the foregoing and requested Managing Director Byung Jae
Cho to explain thereof, and Managing Director Cho informed the small-scale share
swap under the Article 360-10 of the Commercial Code (In case where total number
of new shares issued for a share swap by the company is not in excess of 5/100
of total number of shares issued by the relevant company, an approval of the
board of directors may substitute for an approval of the shareholders' general
meeting).
In order to prevent potential conflicts of interests between shareholders and to
maximize equity profits as well as effectively implement strategies and allocate
resources in respect to Good Morning Shinhan Securities ("GMS"), partially owned
by the Company, GMS is required to become a wholly-owned subsidiary as soon as
possible, and the Company intends to incorporate GMS as necessary by way of a
share swap to the extent permitted by the Commercial Code, etc., as described in
the following major contents and [Attachment 1] Share Swap Agreement (Draft) and
[Attachment 2] Schedule for Small-scale Share Swap below.
1. Matters concerning Share Swap Agreement
A. Major Contents of Share Swap Agreement
CLASSIFICATION CONTENTS REMARKS
----------------------- ------------------------------------------------------ -----------------------
Purpose New shares issued by the Company will be allocated in
(Outline of Share Swap) consideration for assignment of shares in GMS owned by
any shareholder of GMS other than the Company
("Shareholders subject to Share Swap") to Shareholders
subject to Share Swap on the date of share swap.
Share Allocation 1) Allocated to: "any Shareholder subject to Share The share swap ratio is
(Exchange Ratio Swap" as of 17:00 of the date immediately calculated at market
for Share Swap) preceding the date of share swap (expiration date price pursuant to the
of submitting share certificates) Securities and Exchange
Act (Article 190-2)
- 2 -
CLASSIFICATION CONTENTS REMARKS
----------------------- ------------------------------------------------------ -------------------------
2) Share Swap Ratio: 0.1633 common share and 0.0977
common share of the Company per 1 common share and
I preferred share of GMS, respectively
* Any fractional share accruing from the share swap
shall be compensated in cash, which amount
will be calculated based on the closing market
price of the new shares on the first date of
their listing.
Issuance of New 1) Type of Shares: common shares in registered As the maximum number of
Shares form of the Company shares does not exceed
(Number of Issued 5/100 of the total number
Shares) 2) The Total Number of Shares: calculated by of shares issued and
multiplying the number of shares of GMS held outstanding, the small-
by any Shareholders subject to Share Swap by an . scale share swap is
applicable swap rate, on the date immediately possible.
preceding the date of share swap; provided, not
in excess of 11,868,549 shares
Date of Shareholders' A general meeting of shareholders and a class *In case of the
Meeting meeting of preferred shareholders of GMS for an small-scale share swap to
approval of the small-scale share swap agreement become a wholly-owned
are scheduled on November 26, 2004 (Friday). subsidiary, a special
approval in the
shareholders' meeting is
necessary for a
subsidiary while it is
not for a parent company.
* If there are preferred
shares, approval from the
class meeting of
preferred shareholders is
also needed.
Date of Share Swap The date of share swap is scheduled on December
23, 2004 (Thursday).
Others The term of any director and member of audit * Pursuant to Article
committee of the Company who were inaugurated before 360-3 and 360-13 of the
the share swap remains the same. Commercial Code, it shall
be prescribed in the
agreement that the term
of any director and
member of audit committee
of a wholly-owned
subsidiary after the
share swap remains the
same.
- 3 -
B. Share Swap Ratio (Article 190-2 of the Securities and Exchange Act)
* Based on closing market prior to the date of resolution of the
Board, the lower between [1] or [2] is applied for exchange ratio
calculation.
[1] Arithmetic mean of two trading volume-weighted averages for
one (1) month and one (1) week, and most recent closing market
price
[2] Most recent closing market price
* As a result, each price for the swap ratio of the Company and GMS is
respectively 20,492 Won and 3,345 Won for common share and 2,002 Won
for preferred share of GMS.
C. Number of Shares to be Newly Issued
* The maximum number of shares of 11,868,549 shares is calculated by
multiplying the sum of the number of shares of GMS held by other
shareholders of GMS other than the Company, and those shares
available to exercise stock option by the share swap ratio (2.9% of
shares issued and outstanding of the Company, 3.8% of common shares)
- Common share (61,491,966 shares + 8,900,025 shares) * 0.1633 +
preferred share 3,823,314 shares * 0.0977
- In case of excluding stock option, 10,415,175 shares (2.6% of
shares issued and outstanding of the Company, 3.4% of common
shares)
D. Dissenting Shareholders of Share Swap
* No appraisal right is granted to share of the Company in case of the
small-scale share swap done by the Company; provided, the share swap
cannot be implemented if any shareholder holding 20/100 or more of
the total issued and outstanding shares of the Company (26.3% on the
basis of common shares) oppose thereto.
- Shareholders eligible for appraisal rights: a shareholder
whose name is registered in the shareholders' registry as of
17:00, September 30, 2004 (Thursday)
- Closing period of the shareholders' registry of the Company:
October 1, 2004 (Friday) ~ October 8, 2004 (Friday)
- 4 -
- Closing date of dissenting to share swap: October 6, 2004
(Wednesday) (for shareholder protection, 3 business days
(equivalent to a period of Chu-seok holidays) are added)
* For GMS, it is required to grant any shareholder opposing to the
share swap an appraisal right
- Purchase price per share: 3,330 Won for common share
1,933 Won for preferred share.
- Arithmetic mean of three trading volume-weighted averages for
two (2) months, one (1) month and one (1) week closing market
price as of the date immediately preceding the meeting date of
the board of directors pursuant to the Securities and Exchange
Act
E. Others
- Other details, including schedule for the share swap such as
filing of share swap report and issuance and listing of new
shares etc. shall be authorized to representative director and
president.
- Time schedule related with share swap is subject to
negotiation with competent authorities.
- Tender offer for preservation of rights (dividend rate of
common share + 1%) of preferred shareholders whose rights are
to be dismissed upon share swap
* Shares subject to the tender offer: 1,529,326 preferred
shares of GMS (40% of issued and outstanding preferred
shares) in a registered form
* Purchase price: 2,500 Won per share (24% Premium over
the closing market price of the date immediately
preceding the meeting date of the board of directors the
preceding day) (in case of tender offer of all amount:
38 Won billion)
* Officers of the Company and its affiliates (including
officers thereof) are not allowed to purchase GMS
preferred shares until closing of the tender offer.
- 5 -
The Chairman proposed to deliberate and the directors discussed the agenda and
approved by a unanimous vote of all directors and the Chairman confirmed no
further businesses remained and closed all consideration for the day.
The Chairman reported all resolutions in the meeting were completed and declared
the meeting was closed.
IN WITNESS WHEREOF, the Chairman and directors present have prepared these
minutes and subscribed their names and seals thereon.
- 6 -
[Translation]
MINUTES OF THE 6TH GENERAL MEETING OF BOARD OF DIRECTORS
Time and Date: 09:00 ~ 10:40 September 17, 2004 (Friday)
Place: Main Conference Room for the Board on the 28th Floor of Good Morning
Shinhan Securities, 23-2 Yoeuido-dong, Youngdeungpo-gu, Seoul
Director Present: Total Number of Directors Eight (8)
Number of Directors Present Eight (8)
Woo Keun Lee, Kang Won Lee, Sung No Lee, Chil Sun Hong,
Jin Won Park, Hong Ryul Cheon, Hyoung Tae Kim, Kyung Ho Kim
Number of Directors Absent Zero (0)
PROCEEDINGS
Chairman Woo Keun Lee ("Chairman") took a seat of chairman, confirmed the number
of directors present, and declared that the meeting was lawfully held in
pursuant to the Commercial Code and Articles of Association of the Company. Six
matters were submitted to the meeting of the Board of Directors of the Company
as follows:
1. Share Swap and Transfer for the Company to become a wholly owned
subsidiary of Shinhan Financial Group Co.
2. Convening of extraordinary general meeting of shareholders of the
Company
3. Convening of the class meeting of shareholders for preferred shares
of the Company
4. ~ 6. Omitted
Before deliberating on the proposed agenda for the meeting, Senior Manager of
Business Planning reported the proceedings and results of the latest meeting of
Board of Directors held on July 29. Thereafter, the Chairman declared the 6th
Meeting of Board of Directors open.
Agenda 1: Share Swap and Transfer for the Company to become a wholly owned
subsidiary of Shinhan Financial Group Co.
The Chairman presented the first agenda for share swap for the Company to become
a wholly owned subsidiary of Shinhan Financial Group Co., (the "SFG") to the
Board of Directors.
The Chairman explained that a small-scale share swap, which would be carried out
in pursuant to Article 360-10 of the Commercial Code, was to prevent
possibilities of potential conflict between shareholders, improve efficiency of
resource allocation and realize synergy effects of core business lines between
the two companies.
In addition, the Chairman described the time schedule and major contents of the
share swap as stated below, and referenced Attachment 1: Share Swap Agreement,
and asked the opinion of those directors who were present at the meeting. Then
after confirming there was no disagreement on share swap, the Chairman declared
the share swap approved as follows.
1. MATTERS CONCERNING SHARE SWAP AND TRANSFER
A. Major contents of Share Swap Agreement
CLASSIFICATION CONTENTS REMARKS
-------------- -------- -------
New shares issued by SFG will be allocated in
consideration for assignment of shares in the
Purpose Company owned by any shareholder of the Company
(Outline of Share other than the SFG ("Shareholders subject to Share
Swap) Swap") to Shareholders subject to Share Swap on the
date of share swap.
1) Allocated to: "any Shareholder subject to Share
Swap" as of 17:00 of the date immediately
preceding the date of share swap (expiration date
of submitting share certificates)
2) Share Swap Ratio: 0.1633 common share and 0.0977 The share swap ratio is
Share Allocation (Swap registered form of SFG per 1 common share in calculated at
Ratio for Share Swap) common share or 1 preferred share in registered market price pursuant to the
form of the Company, respectively Securities and Exchange Act
(Article 190-2)
* Any fractional share accruing from the share swap
shall be compensated in cash,
which amount will be calculated based on the
closing market price of the new shares on the
first date of their listing.
1) Type of Shares: common shares in registered form
of SFG
Issuance of New Shares 2) The Total Number of Shares to be Newly Issued:
(Number of Shares to be calculated by multiplying the total number of
Newly Issued) shares of the Company held by any Shareholders
subject to Share Swap by an applicable swap
rate, on the date immediately preceding the date
of share
CLASSIFICATION CONTENTS REMARKS
-------------- -------- -------
swap; provided, not in excess of
11,868,549 shares.
Pursuant to Article
360-3 and Article 460
of Commercial Code
respectively, both
A general meeting of shareholders of the Company and approvals from the
a class meeting of preferred shareholders of the general meeting of
Date of Shareholders' Company for an approval of the small-scale share shareholders for
Meeting swap agreement are scheduled on November 26, 2004 shareholders
(Friday). and the class
meeting of
preferred shareholders
are required.
The date of share swap is scheduled on
Date of Share Swap December 23, 2004 (Thursday).
B. Share Swap Ratio (Article 190-2 of the Securities and Exchange Act)
1) Based on closing market price on the date immediately
preceding the date of resolution of the board of directors
(filing date of share swap report), the lower between [1] or
[2] will be applied for swap ratio calculation.
[1] Arithmetic mean of two trading volume-weighted averages
for one month and one week, and most recent closing
market price
[2] Most recent closing market price
2) The share swap price will be KRW 3,345 for the common stock
and KRW 2,002 for the preferred stock of the Company, and
20,492 for the stock of SFG.
C. Number of Shares to be Newly Issued
The maximum number of shares (11,868,549 shares) is calculated by
multiplying the number of common shares of the Company held by
shareholders of the Company, other than SFG, including exercisable
stock options by the applicable swap rate.
D. Dissenting Shareholders' Appraisal Right
1) Purchase price per share: KRW 3,330 per common stock, KRW
1,933 per preferred stock
* Pursuant to the Securities and Exchange Act, the price
shall be the arithmetic mean of (i) the volume-weighted
averages for the past two (2) months, one (1) month, and
one (1) week based on the date immediately preceding the
date of the resolution of the board of directors.
2) Exercise Period: November 26, 2004 ~ December 6, 2004
3) Shareholders Eligible for Appraisal Rights
- a shareholder whose name is registered in the
shareholders' registry as of the record date (17:00,
October 27, 2004) (only shareholders who held his/her
shares continuously during the period from the closing
date for the shareholders' registry)
E. Miscellaneous
1) Record date for determination of the shareholders eligible to
exercise appraisal rights: October 27, 2004 (period of
shareholders' registry closing October 28, 2004 ~ November 4)
2) Other matters such as filing of share swap reports, public
notice for submitting share certificates, etc. shall be
delegated to the Representative Director /President.
3) Time schedule of share swap is subject to change depending on
negotiations with competent authorities.
2. Time schedule for share swap
CONTENTS
-----------------------------------------------
SHINHAN FINANCIAL GOOD MORNING
DATE GROUP SHINHAN SECURITIES REMARKS
--------- ----------------- ------------------ -------
September 17 (Friday) * Resolution of the * Resolution of the * Approval of share swap
board of directors and board of directors and agreement
disclosure disclosure
* Filing share swap * Filling share swap * Filing the report by the date immediately
report report preceding date of public
notice
September 18 (Saturday) * Public notice of * Public notice of the
record date for record date and period
determining for closing
shareholders' rights shareholders' registry
and reporting
September 24 (Friday) Public notice of the Public notice within
small-scale share swap seven days from the date
of executing share swap
contract
September 30 (Thursday) Record date for Right to express dissent
determining shareholders to share swap
eligible to
exercise
shareholders' rights
October 6 (Wednesday) Closing date for
expressing dissent on
share swap
October 27 (Wednesday) Record date for * Determining
determining shareholders who will
shareholders eligible exercise voting rights
to exercise and appraisal rights
shareholders' rights
* Closing period of the
shareholders' registry
(October 28, 2004 ~
November 4, 2004)
November 11 (Thursday) Public notice of Up to two weeks before
convening of the the date of convening of
general meeting of general meeting of
shareholders and the shareholders
class meeting of
preferred shareholders
November 25 (Thursday) Closing date for
shareholders to submit
dissent on share swap
November 26 (Friday) *General meeting of * General meeting of
shareholders and class shareholders and class
meeting of preferred meeting of preferred
shareholders stockholders
* Commencement of share * For ten days from the
purchase from date of the general
shareholders who meeting of shareholders
exercised their
appraisal rights
December 6 (Monday) * Closing of share
purchase from
shareholders who
exercised their
appraisal rights
December 23 (Thursday) * Date of share swap * Suspension of
transaction (from
December 21, 2004)
* Listing date for new shares: January 7, 2005 (Friday)
AGENDA 2: CONVENING OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
Chairman proposed the second agenda, convening of extraordinary general meeting
of shareholders.
Since the Chairman needs to prepare the swap contract and get an approval from
the general meeting of shareholders for the share swap between the shares of SFG
and those of the Company in pursuant to Article 360-3 of Commercial Code, he
explained why the general meeting of shareholders should be convened in
accordance with Article 11 of the articles of association of the Company.
In addition, the Chairman explained the following implementation procedures as
provided below for share swap and asked for approval from directors who are
present. Then, the Chairman declared the Agenda 2 of convening the general
meeting of shareholders resolved as submitted, as follows:
1. Matters concerning the record date for determination of exercising voting
rights and appraisal rights and closing period of shareholder registry
A. Record date for determining the shareholders who are eligible to
exercise voting rights and appraisal rights: October 27, 2004
(Wednesday)
B. Closing period of shareholder registry: October 28, 2004 (Thursday)
~ November 4, 2004 (Thursday)
2. Matters for convening an extraordinary general meeting of shareholders
A. Date: November 26, 2004 (Friday) 10:30AM
B. Place: Good Morning Shinhan Tower, 23-2 Yoeuido-dong,
Youngdeungpo-gu, Seoul
C. Purpose of convening an extraordinary general meeting of
shareholders
Agenda 1: Approval of share swap contract
AGENDA 3: CONVENING OF THE CLASS MEETING OF PREFERRED SHAREHOLDERS
Chairman presented the third agenda, convening of the class meeting of preferred
shareholders.
The Chairman stated that this third agenda is related with the first and second
agenda. Since the Chairman needs to prepare the swap contract and get an
approval from the class meeting of preferred shareholders for the share swap
between the shares of SFG and those of the Company in pursuant to Article 360-3
of Commercial Code, he explained why the class meeting of preferred shareholders
should be convened in accordance with Article 11 of Regulation for Board of
Directors.
In addition, the Chairman explained the following implementation procedures as
provided below for share swap, and since preferred stock's renouncement of +1%
right of common stock will be a loss to the preferred shareholders under the
share swap, he explained the need to convene a class meeting of preferred
shareholders Thereafter, the Chairman asked for approval from directors who are
present. All directors who were present agreed with the agenda and the Chairman
declared Agenda 3 of convening the class meeting of preferred shareholders
resolved as submitted, as follows:
1. Matters concerning the record date for determination of exercising voting
rights and closing period of shareholder registry
A. Record date for determination of the shareholders eligible to
exercise voting rights: October 27, 2004 (Wednesday)
B. Closing period of shareholder registry: October 28, 2004 (Thursday)
~ November 4, 2004 (Thursday)
2. Matters for convening the class meeting of preferred shareholders
A. Date: November 26, 2004 (Friday) 09:00AM
B. Place: Good Morning Shinhan Tower, 23-2 Yoeuido-dong, Youngdeungpo-gu,
Seoul
C. Purpose of convening the class meeting of preferred shareholders
Agenda 1: Approval of share swap contract
AGENDA 4. ~ AGENDA 6. (Omitted)
The Chairman closed all consideration for the day.
The Chairman reported all resolutions in the meeting were completed and declared
the meeting was closed.
IN WITNESS WHEREOF, the Chairman and directors present have prepared these
minutes and subscribed their names and seals thereon.
September 17, 2004
GOOD MORNING SHINHAN SECURITIES CO., LTD.
23-2 Yoeuido-dong, Youngdeungpo-gu, Seoul
Representative Director Woo Keun Lee
Representative Director Kang Won Lee
Director Sung No Lee
Director Chil Sun Hong
Director Jin Won Park
Director Hyoung Tae Kim
Director Hong Ryul Cheon
Director Kyung Ho Kim
* Jin Won Park, Hyoung Tae Kim, Hong Ryul Cheon, and Director Kyung Ho Kim are
outside directors.