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Filed pursuant to Rule 424(b)(2)
Registration Statement No. 333-136378
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 7, 2007)
The Export-Import Bank of Korea
(A statutory juridical entity established under The Export-Import Bank of Korea Act of 1969, as amended, in the Republic of Korea)
US$1,500,000,000 5.50% Notes due 2012
Our US$1,500,000,000 aggregate principal amount of notes due 2012 (the “Notes”) will bear interest at a rate of 5.50% per annum. Interest on the Notes is payable semi-annually in arrears on April 17 and October 17 of each year, beginning on April 17, 2008. The Notes will mature on October 17, 2012.
The Notes will be issued in minimum denominations of US$100,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company, as depositary.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Note | Total | |||||
Public offering price | 99.909 | % | US$ | 1,498,635,000 | ||
Underwriting discounts | 0.100 | % | US$ | 1,500,000 | ||
Proceeds to us, before expenses | 99.809 | % | US$ | 1,497,135,000 | ||
In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including October 17, 2007.
We have applied to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for listing of the Notes. There can be no assurance that such listing will be obtained for the Notes. Currently, there is no public market for the Notes. The SGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the issuer or the Notes.
The underwriters expect to deliver the Notes to investors through the book-entry facilities of The Depository Trust Company on or about October 17, 2007.
Joint Lead Managers and Bookrunners
| ABN AMRO | BNP PARIBAS | Merrill Lynch & Co. | Morgan Stanley |
Prospectus Supplement Dated October 10, 2007
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You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted.
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CERTAIN DEFINED TERMS
All references to “we” or “us” mean The Export-Import Bank of Korea. All references to “Korea” or the “Republic” contained in this prospectus supplement mean the Republic of Korea. All references to the “Government” mean the government of Korea. References to “US$” or “U.S. dollars” are to the lawful currency of the United States. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.
In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table, is due to rounding.
Our principal financial statements are our non-consolidated financial statements. Unless specified otherwise, our financial and other information is presented on a non-consolidated basis and does not include such information with respect to our subsidiaries.
ADDITIONAL INFORMATION
The information in this prospectus supplement is in addition to the information contained in our accompanying prospectus dated May 7, 2007. The accompanying prospectus contains information regarding ourselves and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea, and the Notes in registration statement no. 333-136378, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.
WE ARE RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION IN THIS DOCUMENT
We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The address of our registered office is 16-1, Youido-dong, Yongdeungpo-ku, Seoul 150-996, The Republic of Korea. The SGX-ST takes no responsibility for the contents of this prospectus supplement and the accompanying prospectus, and makes no representation as to liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus supplement and the accompanying prospectus. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the issuer or the Notes.
NOT AN OFFER IF PROHIBITED BY LAW
The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and it is prohibited to use them to make an offer, in any state or country which prohibits the offering.
The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions” on page S-84.
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INFORMATION PRESENTED ACCURATE AS OF DATE OF DOCUMENT
This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. This prospectus supplement may only be used for the purposes for which it has been published. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.
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This summary highlights selected information from this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. To understand the terms of our Notes, you should carefully read this prospectus supplement and the accompanying prospectus.
The Notes
We are offering US$1,500,000,000 aggregate principal amount of 5.50% notes due October 17, 2012 (the “Notes”).
The Notes will bear interest at a rate of 5.50% per annum, payable semi-annually in arrears on April 17 and October 17 of each year, beginning on April 17, 2008. Interest on the Notes will accrue from October 17, 2007, and will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest.”
The Notes will be issued in minimum denominations of US$100,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company (“DTC”), as depositary.
We do not have any right to redeem the Notes prior to maturity.
Listing
We have applied to list the Notes on the SGX-ST. Settlement of the Notes is not conditioned on obtaining the listing. We cannot give assurance that the application to the SGX-ST for the Notes will be approved. The Notes will be traded on the SGX-ST in a minimum board lot size of US$200,000, for so long as the Notes are listed on the SGX-ST.
Form and settlement
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./N.V. (“Euroclear”) or Clearstream Banking,société anonyme (“Clearstream”) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream”.
Further Issues
We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as the Notes in all respects so that such further issue shall be consolidated and form a single series with the Notes.
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Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about October 17, 2007, which we expect will be the fifth business day following the date of this prospectus supplement, referred to as “T+5”. You should note that initial trading of the Notes may be affected by the T+5 settlement. See “Underwriting—Delivery of the Notes.”
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We will use the net proceeds from the sale of the Notes for our general operations, including repayment of our maturing debt and other obligations.
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This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated May 7, 2007. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.
THE EXPORT-IMPORT BANK OF KOREA
Overview
As of June 30, 2007, we had (Won)17,379.7 billion of outstanding loans, including (Won)11,528.6 billion of outstanding export credits, (Won)3,559.2 billion of outstanding overseas investment credits and (Won)1,571.4 billion of outstanding import credits, as compared to (Won)15,051 billion of outstanding loans, including (Won)9,818 billion of outstanding export credits, (Won)3,212 billion of outstanding overseas investment credits and (Won)1,300 billion of outstanding import credits as of December 31, 2006.
Capitalization
As of June 30, 2007, our authorized capital was (Won)4,000 billion and our capitalization was as follows:
| June 30, 2007(1) | |||
| (billions of Won) | |||
| (unaudited) | |||
Long-Term Debt(2)(3)(4): | |||
Borrowings in Korean Won | (Won) | — | |
Borrowings in Foreign Currencies | — | ||
Export-Import Financing Debentures | 9,066.4 | ||
The Notes offered hereby | — | ||
Total Long-Term Debt | 9,066.4 | ||
Capital and Reserves: | |||
Paid-in Capital(5) | 3,305.8 | ||
Legal Reserve(6) | 210.3 | ||
Voluntary Reserve(6) | 614.5 | ||
Unappropriated Retained Earnings | 88.5 | ||
Accumulated Other Comprehensive Income(7) | 651.5 | ||
Total Capital and Reserves | (Won) | 4,870.5 | |
Total Capitalization(6) | (Won) | 13,936.9 | |
| (1) | Except as described in this prospectus supplement, there has been no material adverse change in our capitalization since June 30, 2007. |
| (2) | We have translated borrowings in foreign currencies into Won at the rate of (Won)926.8 to US$1.00, which was the market average exchange rate, as announced by the Seoul Monetary Brokerage Services Ltd., on June 30, 2007. |
| (3) | As of June 30, 2007, we had contingent liabilities totaling (Won)52,916.8 billion, which consisted of (Won)25,691.1 billion under outstanding guarantees and acceptances and (Won)27,225.7 billion under contingent guarantees and acceptances issued on behalf of our clients. As of June 30, 2007, we had entered into 56 interest rate related derivative contracts with a notional amount of (Won)6,045.5 billion and 67 currency related derivative contracts with a notional amount of (Won)4,129.4 billion in accordance with our policy to hedge interest rate and currency risks. |
| (4) | All our borrowings, whether domestic or international, are unsecured and unguaranteed. |
| (5) | Authorized ordinary share capital is (Won)4,000 billion and issued fully-paid ordinary share capital is (Won)3,305.8 billion. See “Government Support and Supervision” in this prospectus supplement and the accompanying prospectus. |
| (6) | See “Government Support and Supervision” in the accompanying prospectus for a description of the manner in which annual net income is transferred to the legal reserve and may be transferred to the voluntary reserve. |
| (7) | Previously classified as capital adjustments. Effective January 1, 2007, we adopted a set of new accounting standards issued by the Korea Accounting Standard Board and reclassified certain components of our balance sheet, income statement and cash flow statement. See “Notes to Non-Consolidated Financial Statements of June 30, 2007—Note 2”. |
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Selected Financial Statement Data
The following tables present financial information for the six months ended June 30, 2006 and 2007 and as of December 31, 2006 and June 30, 2007:
Six Months Ended June 30, | ||||||||
| 2007 | 2006 | |||||||
| (billions of won) | ||||||||
| (unaudited) | ||||||||
Income Statement Data | ||||||||
Total Interest Income | (Won) | 466.0 | (Won) | 320.7 | ||||
Total Interest Expenses | 326.5 | 217.9 | ||||||
Net Interest Income | 139.5 | 102.8 | ||||||
Total Revenues | 938.1 | 789.7 | ||||||
Total Expenses | 821.9 | 583.0 | ||||||
Income before Income Taxes | 116.2 | 206.7 | ||||||
Income Tax Benefit (expense) | (27.7 | ) | (56.8 | ) | ||||
Net Income | 88.5 | 149.9 | ||||||
As of June 30, 2007 (unaudited) | As of December 2006 | |||||||
| (billions of won) | ||||||||
Balance Sheet Data | ||||||||
Total Loans(1) | (Won) | 17,379.7 | (Won) | 15,050.5 | ||||
Total Borrowings(2) | 13,682.9 | 11,798.7 | ||||||
Total Assets | 19,831.8 | 17,448.5 | ||||||
Total Liabilities | 14,961.3 | 12,688.5 | ||||||
Total Shareholders’ Equity(3) | 4,870.5 | 4,759.9 | ||||||
| (1) | Includes bills bought, foreign exchange bought and others without present value discounts. |
| (2) | Includes debentures. |
| (3) | Includes unappropriated retained earnings. |
For the six months ended June 30, 2007, we had net income of (Won)88.5 billion compared to net income of (Won)149.9 billion for the six months ended June 30, 2006.
The principal factors for the decrease in net income for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 included:
| • | a decrease in gain on disposal of available-for-sale securities to (Won)55.6 billion for the six months ended June 30, 2007 from (Won)184.4 billion in the same period of 2006; the (Won)55.6 billion gain in the six months ended June 30, 2007 reflected principally the sale of our equity interest in SK Networks and the (Won)184.4 billion gain in the six months ended June 30, 2006 reflected principally the sale of our equity interest in Korea Exchange Bank; |
| • | an increase in net foreign exchange trading losses to (Won)110.7 billion in the six months ended June 30, 2007 from (Won)44.8 billion in the same period of 2006, primarily due to losses on Euro-denominated liability transactions resulting from the appreciation of the Euro against the Won and losses on Dollar-denominated asset transactions resulting from the depreciation of the Dollar against the Won; and |
| • | an increase in provision for acceptance and guarantee losses to (Won)84.0 billion in the six months ended June 30, 2007 from (Won)28.2 billion in the same period of 2006, primarily due to an increase in guarantees. |
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The above factors were partially offset by (1) net gain on derivative instruments of (Won)99.3 billion in the six months ended June 30, 2007 compared to net loss on derivative instruments of (Won)28.3 billion in the same period of 2006 and (2) an increase in net interest income to (Won)139.5 billion in the six months ended June 30, 2007 from (Won)102.8 billion in the same period of 2006.
As of June 30, 2007, our total assets increased by 13.7% to (Won)19,831.8 billion from (Won)17,448.5 billion as of December 31, 2006, primarily due to a 15.5% increase in loans to (Won)17,379.7 billion as of June 30, 2007 from (Won)15,050.5 billion as of December 31, 2006.
As of June 30, 2007, our total liabilities increased by 17.9% to (Won)14,961.3 billion from (Won)12,688.5 billion as of December 31, 2006. The increase in liabilities was primarily due to a 21.7% increase in debentures to (Won)12,182.3 billion as of June 30, 2007 from (Won)10,011.8 billion as of December 31, 2006.
The increase in assets and liabilities was primarily due to an increase in the volume of loans and debt, respectively. The appreciation of the Won against the Dollar for the six months ended June 30, 2007 compared to the same period of 2006 partially offset the effect of the increase in the volume of loans and debt, as a majority of our assets and liabilities consisted of foreign currency loans and debt, respectively.
As of June 30, 2007, our total shareholders’ equity increased by 2.3% to (Won)4,870.5 billion from (Won)4,759.9 billion as of December 31, 2006 primarily due to an increase in retained earnings by (Won)71.7 billion.
Operations
Loan Operations
In the first half of 2007, we provided total loans of (Won)10,508.3 billion, an increase of 19.7% from the same period of 2006.
The following table sets out the total amounts of our outstanding loans, categorized by type of credit, as of June 30, 2007:
| June 30, 2007 | As % of June 30, 2007 Total | |||||
| (billions of Won) | ||||||
Export Credits(1) | ||||||
Ships | (Won) | 4,088.7 | 23.5 | % | ||
Industrial Plants | 2,516.6 | 14.5 | ||||
Machinery | 473.0 | 2.7 | ||||
Foreign Exchange Bought | 664.7 | 3.8 | ||||
Trade Bill Rediscount | 956.4 | 5.5 | ||||
Others(2) | 2,829.2 | 16.3 | ||||
Sub-total | 11,528.6 | 66.3 | ||||
Overseas Investment Credits | 3,559.2 | 20.5 | ||||
Import Credits | 1,571.4 | 9.1 | ||||
Others(3) | 354.2 | 2.0 | ||||
Call Loans and Inter-bank Loans in Foreign Currency | 366.3 | 2.1 | ||||
Total | (Won) | 17,379.7 | 100.0 | % | ||
| (1) | Includes bills bought. |
| (2) | Includes interbank export loans, offshore loans, and miscellaneous other items. |
| (3) | Includes domestic usance, loans for debt-equity swap, advances for customers, and miscellaneous other items. |
| Source: | Internal accounting records |
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Export Credits
As of June 30, 2007, export credits in the amount of (Won)11,528.6 billion represented 66.3% of our total outstanding loans. Our disbursements of export credits amounted to (Won)7,957.8 billion in the first half of 2007, an increase of 17.1% over the same period of 2006, which was mainly due to an increase in demand for loan financing from both domestic exporters and foreign importers.
Overseas Investment Credits
As of June 30, 2007, overseas investment credits amounted to (Won)3,559.2 billion, representing 20.5% of our total outstanding loans. Our disbursements of overseas investment credits in the first half 2007 increased by 25.8% to (Won)1,044.2 billion over the same period of 2006, primarily due to an increase in natural resources development projects undertaken by Korean companies in the first half of 2007.
Import Credits
As of June 30, 2007, import credits in the amount of (Won)1,571.4 billion represented 9.1% of our total outstanding loans. Our disbursements of import credits amounted to (Won)1,488.3 billion in the first half of 2007, an increase of 41.0% over the same period of 2006, which was mainly due to an increase in demand for financing for raw materials used for export and domestic consumption.
Guarantee Operations
Guarantee commitments as of June 30, 2007 increased to (Won)52,916.8 billion from (Won)45,707.8 billion as of December 31, 2006. Guarantees we had confirmed as of June 30, 2007 increased to (Won)25,691.1 billion from (Won)22,313.6 billion as of December 31, 2006.
In the first half of 2007, we issued project related confirmed guarantees in the amount of (Won)9,739.0 billion, an increase of 50.1% over the same period of 2006, which was mainly due to increased demand for advance payment guarantees arising from the increasingly active shipbuilding sector.
For further information regarding our guarantee and letter of credit operations, see “Notes to Non-Consolidated Financial Statements of June 30, 2007—Note 11”.
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Description of Assets and Liabilities
Total Credit Exposure
The following table sets out our Credit Exposure as of June 30, 2007, categorized by type of exposure extended:
| June 30, 2007 | |||||||
(billions of Won, except for percentages) | |||||||
A Loans in Won | (Won) | 3,648 | 8.6 | % | |||
B Loans in Foreign Currencies | 12,605 | 29.7 | |||||
C Loans (A+B) | 16,253 | 38.3 | |||||
D Other Loans | 761 | 1.8 | |||||
E Call Loans and Inter-bank Loans in Foreign Currency | 366 | 0.9 | |||||
F Loan Credits (C+D+E) | 17,380 | 41.0 | |||||
G Allowances for Possible Loan Losses | (646 | ) | (1.5 | ) | |||
H Present Value Discount (PVD) | (41 | ) | (0.1 | ) | |||
I Loan Credits including PVD (F-G-H) | 16,693 | 39.4 | |||||
J Guarantees | 25,691 | 60.6 | |||||
K Credit Exposure (I+J) | 42,384 | 100.0 | |||||
Loan Credits by Geographic Area
The following table sets out the total amount of our outstanding Loan Credits (excluding call loans and inter-bank loans in foreign currency) as of June 30, 2007, categorized by geographic area(1)(2):
| June 30, 2007 | As % of June 30, 2007 Total | |||||
| (billions of Won, except for percentages) | ||||||
Asia | (Won) | 6,585.0 | 38.7 | % | ||
Europe | 4,543.2 | 26.7 | ||||
Middle East | 2,571.7 | 15.1 | ||||
Central and South America | 666.2 | 3.9 | ||||
North America | 2,109.7 | 12.4 | ||||
Africa | 45.4 | 0.3 | ||||
Others | 492.2 | 2.9 | ||||
Total | (Won) | 17,013.4 | 100.0 | % | ||
| (1) | For purposes of this table, export credits have been allocated to the geographic areas in which the foreign buyers of Korean exports are located; overseas investment credits have been allocated to the geographic areas in which the overseas investments being financed are located; and import credits have been allocated to the geographic areas in which the sellers of the imported goods are located. |
| (2) | Excludes call loans, inter-bank loans in foreign currency, and loan value adjustments. |
| Source: | Internal accounting records. |
Individual Exposure
As of June 30, 2007, our largest Credit Exposure was to Hyundai Heavy Industries Group companies in the amount of (Won)9,434 billion.
As of June 30, 2007, our second largest and third largest Credit Exposures respectively were to Samsung Group companies in the amount of (Won)6,799 billion and to Daewoo Shipbuilding & Marine Engineering in the amount of (Won)3,612 billion.
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The following table sets out our five largest Credit Exposures as of June 30, 2007(1):
| Rank | Name of Borrower | Loans | Guarantees | Total | |||||||
| (billions of Won) | |||||||||||
| 1 | Hyundai Heavy Industries | (Won) | 50.9 | (Won) | 9,382.7 | (Won) | 9,433.5 | ||||
| 2 | Samsung | 53.1 | 6,746.1 | 6,799.2 | |||||||
| 3 | Daewoo Shipbuilding & Marine Engineering | — | 3,611.9 | 3,611.9 | |||||||
| 4 | Hyundai Motor Co. | 801.0 | 399.9 | 1,200.9 | |||||||
| 5 | SK | 625.5 | 503.3 | 1,128.8 | |||||||
| (1) | Includes loans and guarantees extended to affiliates. |
Source: Internal accounting records.
As of June 30, 2007, our Credit Exposure to SK Networks and its subsidiaries amounted to (Won)213.3 billion and was classified as normal. Provisioning for such Credit Exposure was at 2.4% as of June 30, 2007.
Asset Quality
Asset Classifications
The following table provides information on our asset quality and loan loss reserves as of June 30, 2007:
| As of June 30, 2007 | |||||||||
| Loan Amount(1) | Minimum Reserve Ratio | Loan Loss Reserve(2) | |||||||
| (in billions of Won, except percentages) | |||||||||
Normal | (Won) | 69,481.3 | 0.7 | % | (Won) | 871.6 | |||
Precautionary | 360.9 | 7.0 | % | 57.6 | |||||
Sub-standard | 58.1 | 20.0 | % | 25.0 | |||||
Doubtful | 15.7 | 50.0 | % | 13.9 | |||||
Estimated Loss | 14.3 | 100.0 | % | 14.3 | |||||
Total | (Won) | 69,930.3 | (Won) | 982.4 | |||||
| (1) | These figures include loans (excluding interbank loans and call loans), domestic usance, bills bought, foreign exchange bought, advances for customers, and confirmed and unconfirmed acceptances and guarantees. |
| (2) | These figures include present value discount. |
Reserves for Credit Losses
The following table sets out our 10 largest non-performing assets as of June 30, 2007.
Borrower | Loans | Guarantees | Total | |||||
| (billions of Won) | ||||||||
Banco Santos S.A. | (Won) | 3.9 | — | (Won) | 3.9 | |||
I-Texfil Ltd | 3.7 | — | 3.7 | |||||
Choongnam Vietnam Textile Co., Ltd | 3.5 | — | 3.5 | |||||
Pioneer (Cayman) Co., Ltd. | 2.0 | — | 2.0 | |||||
Dongjin Global Textile Corp. | 1.7 | — | 1.7 | |||||
Ajin Paper & Packing Co. | 1.7 | — | 1.7 | |||||
Daewoo Electronics DE Mexico S.A. | 1.1 | — | 1.1 | |||||
Choongnam Spinning Co., Ltd. | 1.1 | — | 1.1 | |||||
Hyun Yang Co., Ltd. | 1.0 | — | 1.0 | |||||
Government of the Russian Federation. | 1.0 | — | 1.0 | |||||
Total | (Won) | 20.6 | — | (Won) | 20.6 | |||
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As of June 30, 2007, our exposure to the government of the Russian Federation amounted to (Won)149.4 billion and we had established a 19% provisioning level for that credit exposure.
We cannot provide any assurance that our current level of exposure to non-performing assets will continue in the future or that any of our borrowers (including our largest borrowers as described above) is not currently facing, or in the future will not face, material financial difficulties.
As of June 30, 2007, the amount of our non-performing assets was (Won)27.6 billion, a decrease of 37.3% from (Won)43.8 billion as of December 31, 2006, which was mainly due to the enhanced overall asset quality of our assets.
The following table sets forth information regarding our loan loss reserves as of June 30, 2007:
| June 30, 2007 | ||||
(billions of Won, except for percentages) | ||||
Loan Loss Reserve (A) | (Won) | 982.4 | ||
NPA (B)(1) | 27.6 | |||
Total Equity (C) | 4,870.5 | |||
Reserve to NPA (A/B) | 3,559.4 | % | ||
Equity at Risk [(B-A)/C] | — | |||
| (1) | Non-performing assets, which are defined as (a) assets classified as doubtful and estimated loss, (b) assets for which principal or interest payments are delinquent by more than 3 months or (c) assets exempted from interest payments due to restructuring or rescheduling. |
Source: Internal accounting records.
Investments
As of June 30, 2007, our total investment in securities amounted to (Won)2,589.2 billion, representing 13.1% of our total assets.
The following table sets out the composition of our investment securities as of June 30, 2007:
Type of Investment Securities | Amount | % | ||||
| (billions of Won) | ||||||
Available-for-Sale Securities | (Won) | 2,496.9 | 96.4 | % | ||
Securities Held-to-Maturity | — | — | ||||
Investments in Associates | 92.2 | 3.6 | % | |||
Total | (Won) | 2,589.2 | 100.0 | % | ||
For further information relating to the classification guidelines and methods of valuation for unrealized gains and losses on our securities, see “Notes to Non-Consolidated Financial Statements of June 30, 2007—Note 2”.
Guarantees and Acceptances and Contingent Liabilities
As of June 30, 2007, we had issued a total amount of (Won)25,691.1 billion in confirmed guarantees and acceptances, of which (Won)25,688.9 billion, representing 99.99% of the total amount, was classified as normal and (Won)2.2 billion, representing 0.01% of the total amount, was classified as precautionary.
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Derivatives
As of June 30, 2007, our outstanding loans made at floating rates of interest totaled approximately (Won)11,279 billion, whereas our outstanding borrowings made at floating rates of interest totaled approximately (Won)7,712 billion, including those raised in Singapore dollars, Hong Kong dollars, and Euros and swapped into U.S. dollar floating rate borrowings. As of June 30, 2007, we had entered into 67 currency related derivative contracts with a notional amount of (Won)4,129.4 billion and valuation for BIS capital ratio purposes of (Won)21 billion and had entered into 56 interest rate related derivative contracts with a notional amount of (Won)6,045.5 billion and valuation for BIS capital ratio purposes of (Won)33 billion. See “Notes to Non-Consolidated Financial Statements of June 30, 2007—Note 14”.
Sources of Funding
We raised a net total of (Won)10,876 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during the first half of 2007, an increase of 21.0% from (Won)8,986 billion in the same period of 2006. The total loan repayments, including prepayments by our clients, during the first half of 2007 amounted to (Won)825.1 billion, an increase of 22.1% from (Won)675.6 billion during the same period of 2006.
As of June 30, 2007, we had no outstanding borrowings from the Government. We issued Won-denominated domestic bonds in the aggregate amount of (Won)920 billion during the first half of 2007.
During the first half of 2007, we issued eurobonds in the aggregate principal amount of US$1,630.5 million in various types of currencies under our existing Euro medium term notes program (the “EMTN Program”), a 227.0% increase from US$498.6 million in the same period of 2006. These bond issues consisted of offerings of US$150 million, CHF 350 million, HK$2,063 million, Singapore $60 million, and Brazilian Real 1,827 million. In addition, we issued global bonds during the first half 2007 in the aggregate amount of US$300 million and Euro 750 million under our U.S. shelf registration statement (the “U.S. Shelf Program”) compared with US$600 million and Euro 325 million in the same period of 2006. As of June 30, 2007, the outstanding amounts of our notes and debentures were US$7,695 million, JPY 35,000 million, CHF 350 million, Euro 1,375 million, British Pound 15 million, Singapore $350 million, HK$3,874 million and Brazilian Real 2,227 million.
In the first half of 2007, we repaid all of the outstanding amounts previously borrowed from foreign financial institutions and as of June 30, 2007, we had no outstanding borrowings from foreign financial institutions.
As of June 30, 2007, our total paid-in capital amounted to (Won)3,306 billion, and the Government, The Bank of Korea and the Korea Development Bank owned 60.1%, 35.2% and 4.7%, respectively, of our paid-in capital.
As of June 30, 2007, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), (Won)13,683 billion, was equal to 10.8% of the authorized amount of (Won)126,570 billion.
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Debt
Debt Repayment Schedule
The following table sets out the principal repayment schedule for our debt outstanding as of June 30, 2007:
Debt Principal Repayment Schedule
| Maturing on or before December 31, | |||||||||||||||
Currency(1) | 2008 | 2009 | 2010 | 2011 | Thereafter | ||||||||||
| (billions of won) | |||||||||||||||
Won | (Won) | 790 | (Won) | 80 | (Won) | 130 | (Won) | — | (Won) | — | |||||
Foreign | 1,785 | 2,116 | 834 | 1,205 | 3,416 | ||||||||||
Total Won Equivalent | (Won) | 2,575 | (Won) | 2,196 | (Won) | 964 | (Won) | 1,205 | (Won) | 3,416 | |||||
| (1) | Borrowings in foreign currency have been translated into Won at the market average exchange rates on June 30, 2007, as announced by the Seoul Money Brokerage Services Ltd. |
As of June 30, 2007, our foreign currency assets maturing within three months, six months and one year exceeded our foreign currency liabilities coming due within such periods by US$850 million, US$1,023 million and US$1,314 million, respectively. As of June 30, 2007, our total foreign currency liabilities exceeded our total foreign currency assets by US$21 million.
Capital Adequacy
As of June 30, 2007, our capital adequacy ratio was 10.81%, a decrease from 11.88% as of December 31, 2006, which was primarily the result of an increase in guarantees.
The following table sets forth our capital base and capital adequacy ratios reported as of June 30, 2007:
| June 30, 2007 | ||||
(millions of Won, except for percentages) | ||||
Tier I | (Won) | 4,217,604 | ||
Paid-in Capital | 3,305,755 | |||
Retained Earnings | 915,977 | |||
Deductions from Tier I Capital | 4,128 | |||
Capital Adjustments | — | |||
Deferred Tax Asset | (201 | ) | ||
Others | (3,927 | ) | ||
Tier II (General Loan Loss Reserves) | 888,914 | |||
Deductions from all capital | — | |||
Total Capital | 5,106,518 | |||
Risk Adjusted Assets | 47,250,711 | |||
Capital Adequacy Ratios | ||||
Tier I | 8.93 | % | ||
Tier I and Tier II | 10.81 | % | ||
Source: Internal accounting records.
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Overseas Operations
The table below sets forth information regarding our subsidiaries as of June 30, 2007:
Principal Place of Business | Type of Business | Our Holding | Book Value | |||||||
| (%) | (billions of Won) | |||||||||
Kexim Bank (UK) Ltd. | United Kingdom | Commercial Banking | 100.0 | % | (Won) | 43.0 | ||||
KEXIM (Asia) Ltd. | Hong Kong | Commercial Banking | 100.0 | 29.3 | ||||||
P.T. Koexim Mandiri Finance | Indonesia | Leasing and Factoring | 85.0 | 11.7 | ||||||
Kexim Vietnam Leasing Co., Ltd. | Vietnam | Leasing and Guarantees | 100.0 | 6.8 | ||||||
Management and Employees
Management
The members of the Board of Executive Directors are currently as follows:
Name | Age | Executive Director Since | Position | |||
Cheon-Sik Yang | 57 | September 11, 2006 | Chairman and President | |||
Jung-Jun Kim | 58 | October 3, 2007 | Deputy President | |||
Sung-Uk Hong | 58 | May 20, 2005 | Executive Director | |||
Tae-Sung Chung | 58 | May 20, 2005 | Executive Director | |||
Yong-An Choi | 57 | May 20, 2005 | Executive Director | |||
Jung-Ha Choi | 56 | December 29, 2006 | Executive Director | |||
Doo-Hwan Kwon | 56 | October 3, 2007 | Executive Director |
The members of the Operations Committee are currently as follows:
Name | Age | Member Since | Position | |||
Cheon-Sik Yang | 56 | September 11, 2006 | Chairman and President of KEXIM | |||
Sung-Jin Kim | 56 | September 1, 2005 | Deputy Minister, Ministry of Finance and Economy | |||
Tae-Yeol Cho | 52 | January 16, 2007 | Deputy Minister, Ministry of Foreign Affairs and Trade | |||
Suk-Woo Hong | 54 | March 19, 2007 | Deputy Minister, Ministry of Commerce, Industry and Energy | |||
Dae-Dong Park | 56 | March 28, 2007 | Standing Commissioner, Financial Supervisory Commission | |||
Han-Keun Yoon | 54 | May 8, 2006 | Assistant Governor, The Bank of Korea | |||
Jang-Soo Kim | 62 | February 27, 2006 | Vice Chairman, The Korea Federation of Banks | |||
Chang-Moo Yoo | 56 | May 11, 2006 | Executive Vice Chairman, Korea International Trade Association | |||
Sung-Bum Park | 57 | May 31, 2004 | Deputy President, Korea Export Insurance Corporation |
Employees
As of June 30, 2007, we had 656 employees. As of June 30, 2007, 343 employees were members of our labor union. We have never experienced a work stoppage of a serious nature.
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THE EXPORT-IMPORT BANK OF KOREA
NON-CONSOLIDATED BALANCE SHEETS
As of June 30, 2007 and December 31, 2006
| Korean Won | ||||||||
| 2007 | 2006 | |||||||
| (In millions) | ||||||||
ASSETS | ||||||||
Due from banks (Notes 3, 15, 19 and 22) | (Won) | 77,281 | (Won) | 134,494 | ||||
Securities (Notes 4, 15 and 19) | 2,589,174 | 2,557,857 | ||||||
Loans (Notes 5, 6, 15, 19 and 21) | 17,379,740 | 15,050,506 | ||||||
Adjustment on loans in foreign currencies (Note 5) | (33,465 | ) | (8,314 | ) | ||||
Allowance for possible loan losses (Note 6) | (686,799 | ) | (643,400 | ) | ||||
Tangible assets (Note 7) | 37,712 | 39,010 | ||||||
Other assets (Notes 8 and 14) | 468,121 | 318,320 | ||||||
| (Won) | 19,831,767 | (Won) | 17,448,473 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
LIABILITIES: | ||||||||
Borrowings (Notes 9, 15, 19 and 21) | (Won) | 13,682,905 | (Won) | 11,798,737 | ||||
Other liabilities (Notes 2, 10, 11, 12, 14 and 18) | 1,278,364 | 889,802 | ||||||
| 14,961,269 | 12,688,539 | |||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Capital stock (Note 13) | 3,305,755 | 3,305,755 | ||||||
Accumulated other comprehensive income (Note 4) | 651,503 | 612,607 | ||||||
Retained earnings (Note 13) | 913,240 | 841,572 | ||||||
| 4,870,498 | 4,759,934 | |||||||
| (Won) | 19,831,767 | (Won) | 17,448,473 | |||||
See accompanying notes to non-consolidated financial statements.
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THE EXPORT-IMPORT BANK OF KOREA
NON-CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended June 30, 2007
| Korean Won | ||||||
| Three months | Six months | |||||
| (In millions) | ||||||
OPERATING REVENUES: | ||||||
Interest income (Notes 15 and 21): | ||||||
Interest on due from banks | (Won) | 1,965 | (Won) | 3,693 | ||
Interest on securities | 185 | 378 | ||||
Interest on loans | 234,834 | 461,939 | ||||
| 236,984 | 466,010 | |||||
Gain on disposal of available-for-sale securities (Note 4): | 35,758 | 55,555 | ||||
Gain on disposal of loans | — | 575 | ||||
Foreign exchange trading income | — | 23,226 | ||||
Derivative instrument: | ||||||
Gain on financial derivatives trading | 38,352 | 63,693 | ||||
Gain on valuation of financial derivatives (Note 14) | 88,765 | 154,169 | ||||
Gain on valuation of fair value hedged items | 21,955 | 56,124 | ||||
| 149,072 | 273,986 | |||||
Commission income (Note 21) | 31,635 | 63,233 | ||||
Dividend on available-for-sale securities | 48,513 | 52,152 | ||||
Total operating revenues | 501,962 | 934,737 | ||||
OPERATING EXPENSES: | ||||||
Interest expenses (Notes 15 and 21): | ||||||
Interest on call money | 5,766 | 12,974 | ||||
Interest on borrowings | 15,219 | 29,427 | ||||
Interest on debentures | 142,686 | 284,083 | ||||
Other interest expenses | 12 | 12 | ||||
| 163,683 | 326,496 | |||||
Provision for possible loan losses (Note 6) | 27,878 | 48,730 | ||||
Foreign exchange trading losses | 68,601 | 133,910 | ||||
Derivative instrument: | ||||||
Loss on financial derivatives trading | 41,145 | 79,911 | ||||
Loss on valuation of financial derivatives (Note 14) | 12,317 | 47,530 | ||||
Loss on valuation of fair value hedged items | 25,670 | 47,260 | ||||
| 79,132 | 174,701 | |||||
Commission expenses | 362 | 613 | ||||
General and administrative expenses (Note 16) | 30,316 | 49,523 | ||||
Other operating expenses: | ||||||
Provision for acceptance and guarantee losses (Note 11) | 55,439 | 84,025 | ||||
Provision for unused credit line of loan commitments (Note 11) | 651 | 2,519 | ||||
Other operating expenses | 74 | 752 | ||||
| 56,164 | 87,296 | |||||
Total operating expenses | 426,136 | 821,269 | ||||
OPERATING INCOME | (Won) | 75,826 | (Won) | 113,468 | ||
NON-OPERATING INCOME (Notes 4 and 17) | 2,413 | 3,394 | ||||
NON-OPERATING EXPENSES (Note 17) | 465 | 635 | ||||
NET INCOME BEFORE INCOME TAX | 77,774 | 116,227 | ||||
INCOME TAX EXPENSE (Note 18) | 17,153 | 27,728 | ||||
NET INCOME | (Won) | 60,621 | (Won) | 88,499 | ||
See accompanying notes to non-consolidated financial statements.
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THE EXPORT-IMPORT BANK OF KOREA
NON-CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 2007
| Korean Won | ||||
| 2007 | ||||
| (In millions) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net income | (Won) | 88,499 | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Amortization of bond discounts | 21,884 | |||
Provision for possible loan losses | 48,730 | |||
Foreign exchange trading losses | 133,910 | |||
Loss on financial derivatives trading | 79,911 | |||
Loss on valuation of financial derivatives | 47,530 | |||
Loss on valuation of fair value hedged items | 47,260 | |||
Provision for acceptance and guarantee losses | 84,025 | |||
Provision for unused credit line of loan commitments | 2,519 | |||
Depreciation | 1,724 | |||
Amortization | 990 | |||
Provision for severance benefits | 1,907 | |||
Loss on disposal of tangible assets | 1 | |||
Dividends on securities using the equity method | 196 | |||
Amortization of present value discount | (2,591 | ) | ||
Amortization of bond premium | (532 | ) | ||
Gain on disposal of available-for-sale securities | (55,555 | ) | ||
Gain on disposal of loans | (575 | ) | ||
Foreign exchange trading income | (23,226 | ) | ||
Gain on financial derivatives trading | (63,693 | ) | ||
Gain on valuation of financial derivatives | (154,169 | ) | ||
Gain on valuation of fair value hedged items | (56,124 | ) | ||
Gain on disposal of tangible assets | (657 | ) | ||
Gain on valuation of securities using the equity method | (2,300 | ) | ||
| 111,165 | ||||
Changes in assets and liabilities resulting from operations: | ||||
Net decrease in available-for-sale securities | 85,158 | |||
Net increase in loans | (2,423,187 | ) | ||
Net increase in accrued income | (51,613 | ) | ||
Net increase in financial derivatives assets | (11,180 | ) | ||
Net increase in unpaid foreign exchange liabilities | 179,367 | |||
Net increase in payables | 2,018 | |||
Net increase in accrued expenses | 92,107 | |||
Net decrease in deferred income tax liabilities | (7,375 | ) | ||
Net decrease in deferred revenue | (2,427 | ) | ||
Net increase in financial derivatives liabilities | 17,001 | |||
Payment of severance benefits | (1,723 | ) | ||
Others, net | 21,374 | |||
| (2,100,480 | ) | |||
Net cash used in operating activities | (1,900,816 | ) | ||
(Continued)
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THE EXPORT-IMPORT BANK OF KOREA
NON-CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
For the six months ended June 30, 2007
| Korean Won | ||||
| 2007 | ||||
| (In millions) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Disposal of tangible assets | (Won) | 29 | ||
Purchase of tangible assets | (429 | ) | ||
Purchase of intangible assets | (361 | ) | ||
Disposal of non-business use properties | 670 | |||
Purchase of non-business use properties | (730 | ) | ||
Net increase in other assets | (1,568 | ) | ||
Net cash used in investing activities | (2,389 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Net increase in foreign borrowings | 70,257 | |||
Net decrease in call money | (356,670 | ) | ||
Net increase in debentures | 511,412 | |||
Net increase in foreign debentures | 1,637,816 | |||
Payment of dividends | (16,831 | ) | ||
Net cash provided by financing activities | 1,845,984 | |||
NET DECREASE IN DUE FROM BANKS | (57,221 | ) | ||
DUE FROM BANKS, BEGINNING OF THE PERIOD | 132,034 | |||
DUE FROM BANKS, END OF THE PERIOD (Note 22) | (Won) | 74,813 | ||
See accompanying notes to non-consolidated financial statements.
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THE EXPORT-IMPORT BANK OF KOREA
NON-CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the six months ended June 30, 2007
Capital Stock | Accumulated other income | Retained earnings | Total | ||||||||||||
| (In millions) | |||||||||||||||
January 1, 2007 | (Won) | 3,305,755 | (Won) | 612,607 | (Won) | 841,572 | (Won) | 4,759,934 | |||||||
Dividends | — | — | (16,831 | ) | (16,831 | ) | |||||||||
Retained earnings after appropriations | — | — | 824,741 | — | |||||||||||
Net income | — | — | 88,499 | 88,499 | |||||||||||
Gains on valuation of available-for-sale securities | — | 39,587 | — | 39,587 | |||||||||||
Gains on valuation of securities using equity method | — | (691 | ) | — | (691 | ) | |||||||||
June 30, 2007 | (Won) | 3,305,755 | (Won) | 651,503 | (Won) | 913,240 | (Won) | 4,870,498 | |||||||
See accompanying notes to non-consolidated financial statements.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
For the three months and six months ended June 30, 2007
1. General:
The Export-Import Bank of Korea (the “Bank”) was established in 1976 as a special financial institution under the Export-Import Bank of Korea Act (the “EXIM Bank Act”) to engage in facilitating export and import transactions, overseas investments and overseas resources development through the extension of loans and other financial facilities. The Bank has eleven domestic branches, four overseas subsidiaries and twelve overseas offices as of June 30, 2007.
The Bank has (Won)4,000,000 million of authorized capital and as of June 30, 2007, its paid-in capital is (Won)3,305,755 million through several capital increases. The Bank is owned by the Government of the Republic of Korea (the “Government”), the Bank of Korea (“BOK”) and Korea Development Bank with 60.11%, 35.24% and 4.65% shareholding, respectively, as of June 30, 2007.
The Bank, as an agent of the Government, has managed The Economic Development Cooperation Fund and the Inter-Korean Cooperation Fund (the “Funds”) since June 1987 and March 1991, respectively. The Funds are managed under separate accounts from the Bank’s own accounts and not included in the accompanying non-consolidated financial statements. The related management commissions are received from the Government.
2. Summary of Significant Accounting Policies:
Basis of Non-consolidated Financial Statement Presentation
The Bank 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 and banking accounting standards generally accepted in the Republic of Korea. Certain accounting principles and banking accounting standards applied by the Bank that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles and banking accounting practices in other countries. Accordingly, these non-consolidated 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 non-consolidated financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Bank’s financial position, results of operations or cash flows, is not presented in the accompanying financial statements.
The significant accounting policies followed by the Bank in preparing the accompanying financial statements are summarized below.
Interest Income Recognition
The Bank applies the accrual basis in recognizing interest income related to deposits, loans and securities, except for non-secured uncollectible receivables. Interest on loans, whose principal or interest is past due at the balance sheet date, is generally not accrued, with the exception of interest on certain loans secured by guarantee of governments or government agencies, or collateralized by bank deposits. When a loan is placed on non-accrual status, previously accrued interest is generally reversed and deducted from current interest income; and future interest income is recognized on cash basis in accordance with the accounting standards of the banking industry. As of June 30, 2007 and December 31, 2006, the accrued interest income not recognized in the accompanying financial statements based on the above criteria, amounted to (Won)48,664 million and (Won)16,373 million, respectively.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
Classification of Securities
At acquisition, the Bank classifies securities into one of the following categories: trading, available-for-sale, held-to-maturity and securities using the equity method, depending on marketability, acquisition purpose and ability to hold. Debt and equity securities that are bought and held for the purpose of selling them in the near term and actively traded over-the-counter are classified as trading securities. Debt securities with fixed and determinable payments and fixed maturity that an enterprise has the positive intent and ability to hold to maturity are classified as held-to-maturity securities. Securities that should be valuated with the equity method are classified as securities using the equity method. Debt and equity securities not classified as the above are categorized as available-for-sale securities.
If the objective and ability to hold securities of the Bank change, available-for-sale securities can be reclassified as held-to-maturity securities and vice-versa. However, if the Bank sells held-to-maturity securities or requires the issuer to redeem the securities early in the current year and the proceeding two years, or if it reclassifies held-to-maturity securities as available-for-sale securities, all debt securities that are owned or purchased cannot be classified as held-to-maturity securities. On the other hand, trading securities cannot be re-categorized as available-for-sale or held-to-maturity securities and the other categories cannot be reclassified as trading securities. Nevertheless, trading securities can be reclassified as available-for-sale securities only when the fair value of the trading securities cannot be readily determinable.
Valuation of Securities
(1) Valuation of Trading Securities
Trading equity and debt securities are initially recognized at acquisition cost plus incidental expenses determined by the individual method. When the face value of trading debt securities differs from its acquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. After initial recognition, trading securities are valued at fair value if the fair value of trading securities differs from its acquisition cost. The carrying value is adjusted to the fair value and the resulting valuation gain or loss is charged to current operations.
(2) Valuation of Held-to-maturity Securities
Held-to-maturity securities are initially recognized at acquisition cost plus incidental expenses, determined by the individual method. When the face value of held-to-maturity securities differs from its acquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. If collectible value is below the amortized cost and the pervasive evidence of impairment exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations.
(3) Valuation of Available-for-sale Securities
Available-for-sale securities are initially recognized at acquisition cost plus incidental expenses, determined by the individual method. The effective interest method is applied to amortize the difference between the face value and the acquisition cost over the remaining term of the debt security. After initial recognition, available-for-sale securities are stated at fair value, with the net unrealized gain or loss presented as gain or loss on valuation of available-for-sale securities in accumulated other comprehensive income. Accumulated other comprehensive income of securities are charged to current operations in a lump sum at the time of
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
disposal or impairment recognition. Non-marketable equity securities are stated at acquisition cost on the financial statements if the fair value of the securities is not reliably determinable.
If the fair value of equity securities (net asset fair value in case of non-marketable equity securities stated at acquisition cost) is below the acquisition cost and the pervasive evidence of impairment exists, the carrying value is adjusted to fair value and the resulting valuation loss is charged to current operations. If the collectible value of debt securities is below the amortized cost and the pervasive evidence of impairment exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations. With respect to impaired securities, any unrealized valuation gain or loss of securities previously included in the accumulated other comprehensive income is reversed.
(4) Valuation of Securities Using the Equity Method
Equity securities held for investment in companies in which the Bank is able to exercise significant influence over the investees are accounted for using the equity method. The Bank’s share in net income or net loss of investees is included in current operations. Changes in the retained earnings of investee are reflected in the retained earnings. Changes in the capital surplus, capital adjustments or accumulated other comprehensive income of investee are reflected as gain or loss on valuation of securities accounted for using the equity method in accumulated other comprehensive income.
(5) Recovery of Loss on Impairment of Available-for-Sale Securities and Held-to-Maturity Securities
If the reasons for impairment losses on available-for-sale securities no longer exist, the recovery is recorded in current operations under operating revenue up to amount of the previously recognized impairment loss as reversal of impairment loss on available-for-sale securities and any excess is included in accumulated other comprehensive income as gain on valuation of available-for-sale securities. However, if the increases in the fair value of the impaired securities are not regarded as the recovery of the impairment, the increases in the fair value are recorded as gain on valuation of available-for-sale securities in accumulated other comprehensive income. For non-marketable equity securities, which were impaired based on the net asset fair value, the recovery is recorded up to their acquisition cost.
(6) Reclassification of Securities
When held-to-maturity securities are reclassified to available-for-sale securities, those securities are accounted for at fair value on the reclassification date and the difference between the fair value and book value is reported in accumulated other comprehensive income as gain or loss on valuation of available-for-sale securities. When available-for-sale securities are reclassified to held-to-maturity securities, gain or loss on valuation of available-for-sale securities, which had been recorded until the reclassification date, continue to be included in accumulated other comprehensive income and be amortized using the effective interest rate method and the amortized amount is charged to interest income until maturity. The difference between the fair value at the reclassification date and face value of the reclassified securities to held-to-maturity securities is amortized using effective interest rate method and the amortized amount is charged to interest income. In addition, when certain trading securities lose their marketability, such securities are reclassified as available-for-sale securities at fair market value as of reclassification date.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
Allowance for Loan Losses
The Supervisory Regulation of Banking Business (the “Supervisory Regulation”) legislated by the Financial Supervisory Commission (FSC) requires the Bank to classify all credits into five categories as normal, precautionary, substandard, doubtful, or estimated loss based on borrowers’ repayment capability using Forward Looking Criteria (the “FLC”) as well as past due period and status of any bankruptcy proceedings. The Supervisory Regulation also requires the Bank to provide the minimum rate of loan loss provision for each category balance using the prescribed minimum percentages. Based on the standards, the Bank generates the credit ratings considering the borrowers’ industry risk, individual credit risk and financial risk based on the FLC as follows:
Classification | Credit ratings | Provision rates | ||
Normal | P1~ P6 | 0.70% or more | ||
Precautionary | SM | 15% or more | ||
Substandard | S | 40% or more | ||
Doubtful | D | 90% or more | ||
Estimated loss | F | 100% |
Provisions are applied to all loans excluding call loans and inter-bank loans, which are classified as ‘normal’.
Loans classified as normal have been subdivided into domestic loans and overseas loans. The former was again subdivided into small and medium-sized business loans and big enterprise loans. The allowance was assessed based on the rate of basic provision and default risk by maturity (the variation of accumulated average bankruptcy rates for periods assessed by domestic credit rating agencies). The rate of basic allowance for small and medium-sized business loans was computed using the historical loss experience rate based on the loss experience for the past seven years. However, the domestic banks’ average provision rate for normal loans is applied to the allowance for big enterprise loans due to the lack of statistical significance of the difference between the historical loss experience rate and actual rate of losses on credits. The allowance for overseas normal loans is assessed based on the sovereign credit ratings and type of borrowers (public or private). The provisions are the differences between the discounted value of the sovereign loans and the present value of the risk-free loan with the same conditions. The applied rate for private business is one grade lower than the rate for the public business with the same credit risk. In addition, the Bank provided additional allowance for the top 5 businesses loan and for the 5 sovereign loans in terms of its balance whose credit ratings are lower than C1 in regards with sovereignty considering the credit centralization risk in terms of borrowers’ sovereignty and business.
Pursuant to the Supervisory Regulation of Banking Business, the Bank has provided the allowance for possible losses on acceptances and guarantees to unconfirmed acceptances and guarantees and unused credit line of loan commitments based on the credit classification and minimum rate of loss provision prescribed by the Financial Supervisory Service and the cash conversion factor of the respective exposures.
Restructuring of Loans
The equity interest in the debtors, net of real estates and/or other assets received as full or partial satisfaction of the Bank’s loans, collected through reorganization proceedings, court mediation or debt restructuring agreements of parties concerned, is recorded at fair value at the time of the restructuring. In cases where the fair value of the assets received are less than the book value of the loan (book value before allowances), the Bank offsets first the book value against allowances for loans and then recognizes provisions for loans. Impairment
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
losses for loans that were restructured in a troubled debt restructuring involving a modification of terms are computed by the difference between the present value of future cash flows under debt restructuring agreements discounted at effective interest rates at the time when loans are originated and the book value before allowances for loans. If the amount of allowances already established is less than the impairment losses under the workout plans, the Bank establishes additional allowances for the difference. Otherwise, the Bank reverses the allowances for loan losses.
Valuation of Receivables and Payables at Present Value
Receivables and payables incurred through long-term installment transactions, long-term borrowing and lending transactions, and other similar transactions are stated at the present value of expected future cash flows, unless the difference between nominal value and present value is immaterial. Present value discount or premium is amortized using the effective interest rate method and credited or charged to interest income or interest expense.
Valuation and Depreciation of Tangible Assets
Tangible assets are stated at acquisition cost or production cost including the incidental expenses and capital expenditures, except for assets revalued upward in accordance with the Asset Revaluation Law of Korea. Routine maintenance and repairs are expensed as incurred. Expenditures that result in the enhancement of the value or extension of the useful lives of the facilities involved are capitalized as additions to tangible assets.
Depreciation is computed using the declining-balance method (straight-line method for buildings purchased since January 1, 1995 and leasehold improvements) based on the estimated useful lives of the assets as prescribed by the Corporate Income Tax Law of Korea as follows:
| Years | ||
Buildings | 10~60 | |
Vehicles | 4 | |
Furniture and fixtures | 4~20 |
Valuation and Amortization of Intangible Assets
Intangible assets included in other assets are recorded at the production cost or purchase cost, plus incidental expenses and capital expenditures, and deducted by purchase discount, if any. Expenditures incurred in conjunction with the development of new products or technology and others, in which the elements of costs can be individually identified and future economic benefits expected, are capitalized as development costs under intangible assets. Intangible assets are amortized using the reasonable amortization method over the reasonable useful life under 5 years for development costs and other intangible assets.
Recognition of Asset Impairment
When the book value of assets (other than securities and assets valued at present value) exceeds the collective value of the assets due to obsolescence, physical damage or a sharp decrease in market value and the difference is material, the book value are adjusted to collective value in the balance sheet and the resulting impairment loss is charged to current operations. If the collective value of the assets increases in subsequent years, the increase in value is credited to operations as gain until the collective value equals the book value of
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
assets that would have been determined had no impairment loss been recognized. The Bank assessed the collective value based on expected selling price or appraisal value.
Amortization of Discount (Premium) on Debentures
Discount or premium on debentures issued is amortized over the period from issuance to maturity using the effective interest rate method. Amortization of discount or premium is recognized as interest expense or interest income on the debentures.
Contingent Liabilities
A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank is recognized as contingent liabilities when it is probable that an outflow of resources embodying economic benefits required and the amount of the obligation can be measured with sufficient reliability. Where the effect of the time value of money is material, the amount of the liabilities is the present value of the expenditures expected to be required to settle the obligation. In addition, as some or all expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized as separate assets in the balance sheet and related income may be offset against expense in the income statement.
Accrued Severance Benefits
Employees and directors with more than one year of employment are entitled to receive a lump-sum payment upon termination of their employment with the Bank, based on their length of employment and rate of pay at the time of termination. The Bank had deposited the partial amount of future estimated severance benefits in National Pension Fund in accordance with the former National Pension Law. These are recorded as contra accounts of accrued severance benefits of the Bank.
Accounting for Financial Derivative Instruments
The Bank accounts for financial derivative instruments pursuant to the Interpretations on Financial Accounting Standards 53-70 on accounting for financial derivative instruments. Financial derivative instruments are classified as used for trading activities or for hedging activities according to their transaction purpose. All derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or a liability. If the derivative instrument is not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in current operations.
The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of the transaction and on meeting the specified criteria for hedge accounting differs depending on whether the transaction is a fair value hedge or a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument designated as hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment (hedged item) that is attributable to a particular risk. The gain or loss both on the hedging derivative instruments and on the hedged item attributable to the hedged risk is reflected in current operations. Cash flow hedge accounting is applied to a derivative instrument designated as hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as accumulated other comprehensive income and the ineffective portion is recorded in current operations. The
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
effective portion of gain or loss recorded as accumulated other comprehensive income is reclassified to current earnings in the same period during which the hedged forecasted transaction affects earnings.
Income Tax Expense
Income tax expense is the amount currently payable for the period added to or deducted from the changes in deferred income taxes. However, deferred income tax assets are recognized only if the future tax benefits from accumulated temporary differences and any tax loss carryforwards are realizable. The difference between the amount currently payable for the period and income tax expense is accounted for as deferred income tax assets or liabilities, which will be charged or credited to income tax expense in the period each temporary difference reverses in the future. Deferred income tax assets or liabilities are calculated based on the expected tax rate to be applied at the reversal period of the related assets or liabilities. Tax payable and deferred income tax assets or liabilities with regards to certain items are charged or credited directly to related components of shareholders’ equity.
Accounting for Foreign Currency Transactions and Translation
The Bank maintains its accounts in Korean Won. Transactions in foreign currencies are recorded in Korean Won based on the prevailing rate of exchange on the transaction date. The Korean Won equivalent of assets and liabilities denominated in foreign currencies are translated in these financial statements based on the basic rate ((Won)926.80 and (Won)929.60 to USD 1.00 at June 30, 2007 and December 31, 2006, respectively) announced by Seoul Money Brokerage Service, Ltd. or cross rates for other currencies other than U.S. Dollars at the balance sheet dates. Translation gains and losses are credited or charged to operations. Financial statements of overseas branches are translated based on the basic rate at the balances sheet dates.
Discontinued Operation
A discontinued operation refers to a component of the Bank that is capable of being distinguished operationally for financial reporting purposes and is capable of being identified as a major line of business or geographical area of operations, and that the Bank, pursuant to a single plan of discontinuance, substantially disposes in its entirety, such as by selling it in a single transaction; sells off its assets and settles its liabilities individually or in small groups; or terminates it through abandonment. The income (loss) from continuing operation and discontinued operation was not distinguished and separately presented as there was no discontinued operation in the prior year and current period.
Application of the Statement of Korea Accounting Standards
The Korea Accounting Standard Board (KASB) under the Korea Accounting Institute (KAI) issued the Statements of Korea Accounting Standards (SKAS) for achieving a set of Korean accounting standards that should be internationally acceptable and comparable based on SKAS Act 92. The Bank adopted SKAS No.1 (Accounting Changes and Error Corrections) through SKAS No.20 (Related Party Disclosures) (excluding SKAS No.11 and No.14) as of or before December 31, 2006, and SKAS No.11 (Discontinued Operation) and SKAS No.21 (Preparation and Presentation of Financial Statements) through SKAS No.25 (Consolidated Financial Statements) have been adopted since January 1, 2007.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
With the adoption of SKAS No.21 (Preparation and Presentation of Financial Statements) and SKAS No.24 (Preparation and Presentation of Financial Statements [Financial Industry]), the Bank included the statement of changes in shareholders’ equity in the financial statements, and reclassified the components of the balance sheets as follows:
Classification | Before | After | ||
Assets | - Due from banks | - Due from banks | ||
- Securities | - Securities | |||
- Loans | - Loans | |||
- Fixed assets | - Tangible assets | |||
- Other assets | - Other assets | |||
Liabilities | - Borrowings | - Borrowings | ||
- Debentures | - Other liabilities | |||
- Other liabilities | ||||
Shareholders’ Equity | - Common stock | - Common stock | ||
- Retained earnings | - Retained earnings | |||
- Capital adjustments | - Accumulated other comprehensive incomes | |||
In addition, a discontinued operation is separately presented in the income statements and extraordinary items are no longer reported separately. The Bank has reclassified the components of the income statements; such as, gains or losses relating to available-for-sale securities and sale of loans that were presented under non-operating revenue (expenses) are currently presented under operating revenue (expenses). The effect of the changes in the classification of the income statement for the six months ended June 30, 2007 is as follows (Unit: In millions):
Classification | Before | After | Effect | |||||||
Operating Revenue | (Won) | 878,607 | (Won) | 934,737 | (Won) | 56,130 | ||||
Operating Expenses | 821,269 | 821,269 | — | |||||||
Operating Income | 57,338 | 113,468 | 56,130 | |||||||
Non-operating Revenue | 59,524 | 3,394 | (56,130 | ) | ||||||
Non-operating Expenses | 635 | 635 | — | |||||||
Income before Income Tax | 116,227 | 116,227 | — | |||||||
Income Tax Expense | 27,728 | 27,728 | — | |||||||
Net Income | (Won) | 88,499 | (Won) | 88,499 | (Won) | — | ||||
| (*) | Income from continuing operation was not separately presented as there was no gain (loss) from discontinued operation. |
In addition, the Bank has reclassified the components of the cash flows; such as, changes in available-for-sale securities, held-to-maturity securities and loans that were presented under cash flows from investing activities are currently presented under cash flows from operating activities.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
With earlier adoption of amended SKAS No.2 (Interim Financial Reporting), the Bank presented the statements of cash flows and changes in shareholders’ equity for year-to-date period of the current fiscal year.
Earning Per Share
Earning per share is not computed because the capital of the Bank does not stem from stock issuance.
Reclassification
Certain accounts of the prior period were reclassified to conform to the current period’s presentation for comparative purposes; however, reclassifications had no effect on the previously reported prior period net income or shareholders’ equity of the Bank.
3. Due from Banks:
| (1) | Due from banks in local currency and foreign currencies as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| Financial institution | Interest (%) | 2007 | 2006 | |||||||
Local currency: | ||||||||||
Due from BOK | BOK | — | (Won) | 13 | (Won) | 53 | ||||
Current deposits | KEB and others | — | 1,160 | 937 | ||||||
Time deposits | Woori Bank | 5.00 | 2,000 | 2,000 | ||||||
Others | SC First Bank and others | 3.60~4.43 | 14,068 | 64,860 | ||||||
| 17,241 | 67,850 | |||||||||
Foreign currency: | ||||||||||
Current deposits | KEB | — | 5,332 | 7,618 | ||||||
Time deposits | KEB | 5.36 | 37,072 | 37,184 | ||||||
Demand deposits | Bank of New York and others | 3.00~5.00 | 15,876 | 18,191 | ||||||
Off-shore due from banks on demand | JP Morgan Chase Bank, N.A., New York and others | — | 1,760 | 3,651 | ||||||
| 60,040 | 66,644 | |||||||||
| (Won) | 77,281 | (Won) | 134,494 | |||||||
| (2) | Restricted due from banks as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| Financial institution | Interest (%) | 2007 | 2006 | |||||||
Due from bank in local currency(*): | ||||||||||
Time deposits | Woori Bank | 5.00 | (Won) | 2,000 | (Won) | 2,000 | ||||
Others | Industrial Bank of Korea | 3.60 | 468 | 460 | ||||||
| (Won) | 2,468 | (Won) | 2,460 | |||||||
| (*) | The deposit in Won is the amount remaining after settling the principal of the Daewoo Poland FSO loan with the proceeds from the sale of the related collateral (shares of Doosan Infracore Co., Ltd). This deposit is restricted for the settlement of additional incidental costs (legal costs and others) arising from the aforementioned loan. |
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (3) | Due from banks by financial institution as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||||||||
Local currency | Foreign currencies | Total | Local currency | Foreign currencies | Total | |||||||||||||
Banks | (Won) | 17,241 | (Won) | 60,040 | (Won) | 77,281 | (Won) | 67,850 | (Won) | 66,625 | (Won) | 134,475 | ||||||
Others | — | — | — | — | 19 | 19 | ||||||||||||
| (Won) | 17,241 | (Won) | 60,040 | (Won) | 77,281 | (Won) | 67,850 | (Won) | 66,644 | (Won) | 134,494 | |||||||
| (4) | The maturities of due from banks as of June 30, 2007 were as follows (Won in millions): |
Due in 3 months or less | Due after 3 months to 6 months | Due after 6 months | Total | |||||||||
Due from bank in local currency | (Won) | 15,241 | (Won) | — | (Won) | 2,000 | (Won) | 17,241 | ||||
Due from bank in foreign currencies | 22,968 | — | 37,072 | 60,040 | ||||||||
| (Won) | 38,209 | (Won) | — | (Won) | 39,072 | (Won) | 77,281 | |||||
4. Securities:
| (1) | Securities as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Available-for-sale securities: | ||||||
Marketable equity securities | (Won) | 1,403,174 | (Won) | 1,349,646 | ||
Unlisted equity securities | 1,082,271 | 1,106,046 | ||||
Equity investments | 1,276 | 1,276 | ||||
Government and public bonds | 1 | 1 | ||||
Securities in foreign currencies | 10,208 | 10,332 | ||||
| 2,496,930 | 2,467,301 | |||||
Securities using the equity method | 92,244 | 90,556 | ||||
| (Won) | 2,589,174 | (Won) | 2,557,857 | |||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Marketable equity securities as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
| No. of shares | Ownership (%) | Book value before adjustment | Fair value (Book value) | |||||||
KEB | 40,314,387 | 6.25 | (Won) | 518,040 | (Won) | 554,323 | ||||
Daewoo International Corporation(*1) | 10,996,400 | 11.58 | 369,006 | 404,261 | ||||||
SK Networks Co., Ltd.(*1) | 11,218,220 | 4.69 | 258,490 | 259,713 | ||||||
Industrial Bank of Korea | 8,501,153 | 2.10 | 145,795 | 160,247 | ||||||
Hyundai Corporation(*1) | 1,031,600 | 4.62 | 19,695 | 21,567 | ||||||
Hyundai IT Corporation(*1) | 2,337,955 | 9.06 | 4,660 | 2,928 | ||||||
DKME Co., Ltd.(*1) | 6,200 | 0.11 | 73 | 135 | ||||||
| (Won) | 1,315,759 | (Won) | 1,403,174 | |||||||
| (*1) | The securities (except 260,820 shares of SK Networks Co., Ltd) were restricted to sale as of June 30, 2007. |
For the six months ended June 30, 2007, 1,672,880 shares of common stock and 469,932 shares of callable preferred stock of SK Networks Co., Ltd. released from lock-up were disposed for (Won)85,157 million and its gain on disposal of available-for-sale securities amounting to (Won)55,555 million was recorded in operating revenues.
2006
| No. of shares | Ownership (%) | Book value before adjustment | Fair value (Book value) | |||||||
KEB | 40,314,387 | 6.25 | (Won) | 568,433 | (Won) | 518,040 | ||||
Daewoo International Corporation(*1) | 10,996,400 | 11.58 | 420,612 | 369,006 | ||||||
SK Networks Co., Ltd.(*1) | 12,891,100 | 5.39 | 131,206 | 297,037 | ||||||
Industrial Bank of Korea | 8,501,153 | 2.10 | 149,195 | 145,795 | ||||||
Hyundai Corporation(*1) | 1,031,600 | 4.62 | 18,940 | 19,695 | ||||||
DKME Co., Ltd.(*1) | 6,200 | 0.11 | 95 | 73 | ||||||
| (Won) | 1,288,481 | (Won) | 1,349,646 | |||||||
| (*1) | The securities were restricted to sale as of December 31, 2006. |
In 2006, 49,485,973 shares of 5 companies including 49,134,208 shares of KEB were disposed for (Won)443,737 million and its gain on disposal of available-for-sale securities amounting to (Won)184,369 million was recorded in non-operating income.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (3) | Unlisted equity securities as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
| No. of shares | Ownership (%) | Book value before adjustment | Fair value (Book value) | |||||||
Korea Highway Corp. | 95,000,000 | 4.82 | (Won) | 950,000 | (Won) | 950,000 | ||||
Industrial Bank of Korea (Preferred stock) | 6,210,000 | 11.69 | 101,179 | 105,353 | ||||||
SK Networks Co., Ltd. (Preferred stock) | 317,501 | 9.64 | 21,500 | 25,483 | ||||||
Korea Ship Finance | 254,000 | 14.99 | 1,270 | 1,270 | ||||||
Daewoo Electronics Corp. | 224,580 | 0.21 | 263 | 152 | ||||||
Others | 4,959 | — | 13 | 13 | ||||||
| (Won) | 1,074,225 | (Won) | 1,082,271 | |||||||
As of June 30, 2007, the Bank valuated the shares of Industrial Bank of Korea (Preferred stock), SK Networks Co., Ltd. (Preferred stock) and Daewoo Electronics Corp. at fair value based on the report of external evaluation agencies. The remaining shares were recorded at acquisition costs since the fair value was difficult to assess. The shares of SK Networks Co., Ltd. (Preferred stock) and Daewoo Electronics Corp. are restricted to sale as of June 30, 2007.
2006
| No. of shares | Ownership (%) | Book value before adjustment | Fair value (Book value) | |||||||
Korea Highway Corp. | 95,000,000 | 5.20 | (Won) | 950,000 | (Won) | 950,000 | ||||
Industrial Bank of Korea (Preferred stock) | 6,210,000 | 11.69 | 103,539 | 101,179 | ||||||
SK Networks Co., Ltd. (Preferred stock) | 787,433 | 9.64 | 49,465 | 53,321 | ||||||
Korea Ship Finance | 254,000 | 14.99 | 1,270 | 1,270 | ||||||
Daewoo Electronics Corp. | 224,580 | 0.21 | 791 | 263 | ||||||
Others | 4,959 | — | 4 | 13 | ||||||
| (Won) | 1,105,069 | (Won) | 1,106,046 | |||||||
As of December 31, 2006, the Bank valuated the shares of Industrial Bank of Korea (Preferred stock), SK Networks Co., Ltd. (Preferred stock) and Daewoo Electronics Corp. at fair value based on the report of external evaluation agencies. The remaining shares were recorded at acquisition costs since the fair value was difficult to assess. The shares of SK Networks Co., Ltd. (Preferred stock) and Daewoo Electronics Corp. are restricted to sale as of December 31, 2006.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Equity investments as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Ownership (%) | Book value before adjustment | Fair value (Book value) | ||||||
Korea Asset Management Corporation | 0.47 | (Won) | 1,220 | (Won) | 1,220 | |||
Korea Money Broker Corporation | 0.56 | 56 | 56 | |||||
| (Won) | 1,276 | (Won) | 1,276 | |||||
2006
Ownership (%) | Book value before adjustment | Fair value (Book value) | ||||||
Korea Asset Management Corporation | 0.47 | (Won) | 1,220 | (Won) | 1,220 | |||
Korea Money Broker Corporation | 0.56 | 56 | 56 | |||||
| (Won) | 1,276 | (Won) | 1,276 | |||||
| (5) | Government and public bonds as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
| Acquisition cost | Fair value | Book value | |||||||
Government and public bonds | (Won) | 1 | (Won) | 1 | (Won) | 1 | |||
2006 | |||||||||
| Acquisition cost | Fair value | Book value | |||||||
Government and public bonds | (Won) | 1 | (Won) | 1 | (Won) | 1 | |||
| (6) | Securities in foreign currencies as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||
| Acquisition cost | Book value | Acquisition cost | Book value | |||||||||
Foreign securities | (Won) | 10,152 | (Won) | 10,208 | (Won) | 10,183 | (Won) | 10,332 | ||||
The acquisition cost of securities in foreign currencies as of June 30, 2007 and December 31, 2006 were translated in these financial statements based on the basic rate ((Won)926.80 and (Won)929.60 to USD 1.00 at June 30, 2007 and December 31, 2006, respectively). The book values of securities in foreign currencies as of June 30, 2007 and December 31, 2006 were assessed by applying base prices per bond announced on a recent trading day by securities valuation agencies or by using a rate of return presented by experienced bond dealers.
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Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (7) | Securities using the equity method as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Balance sheet date | Ownership (%) | Acquisition cost | Net asset value | Book value | |||||||||
KEXIM Bank UK Limited | 2007.6.30 | 100.00 | (Won) | 37,106 | (Won) | 44,605 | (Won) | 44,605 | |||||
KEXIM Vietnam Leasing Co. | 2007.6.30 | 100.00 | 12,048 | 7,033 | 7,033 | ||||||||
PT. KOEXIM Mandiri Finance | 2007.6.30 | 85.00 | 4,513 | 11,688 | 11,510 | ||||||||
KEXIM Asia Limited | 2007.6.30 | 100.00 | 27,804 | 29,096 | 29,096 | ||||||||
| (Won) | 81,471 | (Won) | 92,422 | (Won) | 92,244 | ||||||||
As of June 30, 2007, (Won)2,300 million of the valuation gain on securities using the equity method and (Won)691 million of the loss on valuation of securities using the equity method was recognized in accumulated other comprehensive income. The difference between the book value of the securities using the equity method and the net asset value of PT. KOEXIM Mandiri Finance, amounting to (Won)(178) million is the outstanding balance of negative goodwill as of June 30, 2007.
2006
Balance sheet date | Ownership (%) | Acquisition cost | Net asset value | Book value | |||||||||
KEXIM Bank UK Limited | 2006.12.31 | 100.00 | (Won) | 36,482 | (Won) | 43,029 | (Won) | 43,029 | |||||
KEXIM Vietnam Leasing Co. | 2006.12.31 | 100.00 | 12,085 | 6,777 | 6,777 | ||||||||
PT. KOEXIM Mandiri Finance | 2006.12.31 | 85.00 | 4,548 | 11,693 | 11,477 | ||||||||
KEXIM Asia Limited | 2006.12.31 | 100.00 | 27,888 | 29,265 | 29,273 | ||||||||
| (Won) | 81,003 | (Won) | 90,764 | (Won) | 90,556 | ||||||||
As of December 31, 2006, (Won)4,564 million of the valuation gain on securities using the equity method and (Won)3 million of the loss on valuation of securities using the equity method was recognized in accumulated other comprehensive income. The difference between the book value of the securities using the equity method and the net asset value of PT. KOEXIM Mandiri Finance, amounting to (Won)(216) million is the outstanding balance of negative goodwill as of December 31, 2006. The difference between the book value of the securities using the equity method and the net asset value of KEXIM Asia Limited amounted to (Won)8 million, which was unrealized gain from inter-company transactions as of December 31, 2006.
| (8) | Available-for-sale securities not recorded at fair value as of June 30, 2007 were as follows (Won in millions): |
| Book value | Reason | ||||
Unlisted equity securities | (Won) | 951,283 | Difficulty in calculation of the fair value | ||
Equity investment | 1,276 | Difficulty in calculation of the fair value | |||
| (Won) | 952,559 | ||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (9) | The securities portfolio, by country, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Available -for-sale securities | Securities using the equity method | Total | Ratio (%) | ||||||||
Securities in local currency | |||||||||||
Korea | (Won) | 2,486,722 | (Won) | — | (Won) | 2,486,722 | 96.05 | ||||
Securities in foreign currencies | |||||||||||
UK | — | 44,605 | 44,605 | 1.72 | |||||||
Hong Kong | 2,782 | 29,096 | 31,878 | 1.23 | |||||||
Indonesia | — | 11,510 | 11,510 | 0.44 | |||||||
Vietnam | — | 7,033 | 7,033 | 0.27 | |||||||
India | 4,644 | — | 4,644 | 0.18 | |||||||
Korea | 2,782 | — | 2,782 | 0.11 | |||||||
| 10,208 | 92,244 | 102,452 | 3.95 | ||||||||
| (Won) | 2,496,930 | (Won) | 92,244 | (Won) | 2,589,174 | 100.00 | |||||
2006 | |||||||||||
Available -for-sale securities | Securities using the equity method | Total | Ratio (%) | ||||||||
Securities in local currency | |||||||||||
Korea | (Won) | 2,456,969 | (Won) | — | (Won) | 2,456,969 | 96.06 | ||||
Securities in foreign currencies | |||||||||||
UK | — | 43,029 | 43,029 | 1.68 | |||||||
Hong Kong | 2,811 | 29,273 | 32,084 | 1.26 | |||||||
Indonesia | — | 11,477 | 11,477 | 0.45 | |||||||
Vietnam | — | 6,777 | 6,777 | 0.26 | |||||||
India | 4,704 | — | 4,704 | 0.18 | |||||||
Korea | 2,817 | — | 2,817 | 0.11 | |||||||
| 10,332 | 90,556 | 100,888 | 3.94 | ||||||||
| (Won) | 2,467,301 | (Won) | 90,556 | (Won) | 2,557,857 | 100.00 | |||||
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Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (10) | Securities as of June 30, 2007 and December 31, 2006 were classified as follows (Won in millions): |
2007
Available -for-sale securities | Securities using the equity method | Total | Ratio (%) | ||||||||
Stock and equity investment | (Won) | 2,486,721 | (Won) | 92,244 | (Won) | 2,578,965 | 99.61 | ||||
Fixed interest rate bonds | 10,209 | — | 10,209 | 0.39 | |||||||
| (Won) | 2,496,930 | (Won) | 92,244 | (Won) | 2,589,174 | 100.00 | |||||
2006 | |||||||||||
Available -for-sale securities | Securities using the equity method | Total | Ratio (%) | ||||||||
Stock and equity investment | (Won) | 2,456,968 | (Won) | 90,556 | (Won) | 2,547,524 | 99.60 | ||||
Fixed interest rate bonds | 10,333 | — | 10,333 | 0.40 | |||||||
| (Won) | 2,467,301 | (Won) | 90,556 | (Won) | 2,557,857 | 100.00 | |||||
| (11) | Term structure of debt securities among available-for-sale securities as of June 30, 2007 was as follows (Won in millions): |
Due in 1 year or | Due after 1 year to 5 years | Total | |||||||
Available-for-sale securities | (Won) | 10,208 | (Won) | 1 | (Won) | 10,209 | |||
| (12) | Changes in accumulated other comprehensive income for the six months ended June 30, 2007 were as follows (Won in millions): |
Beginning balance | Increase (decrease) | Disposal (Realization) | Ending balance | ||||||||||||
Securities using the equity method | (Won) | (31 | ) | (Won) | (691 | ) | (Won) | — | (Won) | (722 | ) | ||||
Available-for-sale securities: | |||||||||||||||
Equity securities | 612,252 | 69,209 | 29,548 | 651,913 | |||||||||||
Debt securities | 386 | (74 | ) | — | 312 | ||||||||||
| 612,638 | 69,135 | 29,548 | 652,225 | ||||||||||||
| (Won) | 612,607 | (Won) | 68,444 | (Won) | 29,548 | (Won) | 651,503 | ||||||||
S-39
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
5. Loans:
| (1) | Loans as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||
Loans in local currency: | ||||||||
Loans for export | (Won) | 2,596,920 | (Won) | 2,101,265 | ||||
Loans for overseas investment | 65,171 | 64,266 | ||||||
Loans for import | 730,090 | 700,011 | ||||||
Others | 254,230 | 216,982 | ||||||
Privately placed bonds | 1,251 | 1,801 | ||||||
Debt for equity swap(*1) | 115 | — | ||||||
| 3,647,777 | 3,084,325 | |||||||
Loans in foreign currencies: | ||||||||
Loans for export | 6,541,122 | 5,521,867 | ||||||
Loans for overseas investment | 3,501,140 | 3,157,163 | ||||||
Trading note rediscount loans | 956,378 | 776,828 | ||||||
Loans for import | 841,349 | 599,988 | ||||||
Overseas funding loans | 659,181 | 662,562 | ||||||
Domestic usance bills | 88,567 | 108,720 | ||||||
Privately placed bonds | 16,794 | 27,070 | ||||||
Inter-bank loans | 19,959 | 41,091 | ||||||
Others | 136 | 152 | ||||||
| 12,624,626 | 10,895,441 | |||||||
Valuation adjustment of loans in foreign currencies(*2) | (33,465 | ) | (8,314 | ) | ||||
| 12,591,161 | 10,887,127 | |||||||
Bills bought in local currency | 95,514 | 113,637 | ||||||
Bills bought in foreign currencies | 664,689 | 616,029 | ||||||
Advances for customers | 771 | 3,520 | ||||||
Call loans: | ||||||||
Call loans in local currency | — | 160,000 | ||||||
Call loans in foreign currencies | 346,366 | 177,554 | ||||||
| 346,366 | 337,554 | |||||||
Allowance for loan losses | (686,799 | ) | (643,400 | ) | ||||
| (Won) | 16,659,479 | (Won) | 14,398,792 | |||||
| (*1) | Loans are expected to be swapped for equity based on the agreement of related parties. The loans are recognized at the lower of the book value of the loans or the fair value of the equities to be converted, and the difference in the values is recognized as allowances for loan losses. |
| (*2) | Interest rate swap was contracted to hedge the changes in the fair value of loan commitment in foreign currencies resulting from the volatility in the interest rate. The loss on valuation of loan commitment, which was confirmed, was recognized as valuation adjustment of loans in foreign currencies. |
S-40
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Loans in local currency and foreign currencies, by customer, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Loans in local currency | Loans in foreign currencies | Total | Ratio (%) | ||||||||
Large corporations | (Won) | 2,522,635 | (Won) | 3,832,563 | (Won) | 6,355,198 | 39.06 | ||||
Small and medium-sized company(*) | 1,125,142 | 784,353 | 1,909,495 | 11.73 | |||||||
Public and others | — | 8,007,710 | 8,007,710 | 49.21 | |||||||
| (Won) | 3,647,777 | (Won) | 12,624,626 | (Won) | 16,272,403 | 100.00 | |||||
2006
Loans in local currency | Loans in foreign currencies | Total | Ratio (%) | ||||||||
Large corporations | (Won) | 2,114,949 | (Won) | 3,561,675 | (Won) | 5,676,624 | 40.60 | ||||
Small and medium-sized company(*) | 969,376 | 749,886 | 1,719,262 | 12.30 | |||||||
Public and others | — | 6,583,880 | 6,583,880 | 47.10 | |||||||
| (Won) | 3,084,325 | (Won) | 10,895,441 | (Won) | 13,979,766 | 100.00 | |||||
| (*) | Small and medium-sized company is described in Paragraph 1 of Article 2 of the Small and Medium-sized Company Law. |
The amount of loans in foreign currencies excluded valuation adjustment of loans in foreign currencies.
| (3) | Loans, by industry, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||
Manufacturing | (Won) | 3,066,384 | (Won) | 4,051,649 | (Won) | 409,160 | (Won) | 7,527,193 | 43.31 | |||||
Transportation | 58,580 | 4,498,098 | 38,151 | 4,594,829 | 26.44 | |||||||||
Finance and insurance | 1,251 | 2,197,238 | 600,127 | 2,798,616 | 16.10 | |||||||||
Wholesale and retail | 273,889 | 363,689 | 47,388 | 684,966 | 3.94 | |||||||||
Real estate, renting and the related business | 210,960 | 57,666 | — | 268,626 | 1.55 | |||||||||
Construction | — | 45,691 | — | 45,691 | 0.26 | |||||||||
Public and others | 36,713 | 1,410,595 | 12,514 | 1,459,822 | 8.40 | |||||||||
| (Won) | 3,647,777 | (Won) | 12,624,626 | (Won) | 1,107,340 | (Won) | 17,379,743 | 100.00 | ||||||
S-41
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
2006
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||
Manufacturing | (Won) | 2,671,405 | (Won) | 3,580,334 | (Won) | 338,190 | (Won) | 6,589,929 | 43.79 | |||||
Transportation | 46,680 | 3,550,697 | 48,804 | 3,646,181 | 24.23 | |||||||||
Finance and insurance | 1,801 | 2,005,727 | 286,072 | 2,293,600 | 15.24 | |||||||||
Wholesale and retail | 263,568 | 388,569 | 39,321 | 691,458 | 4.59 | |||||||||
Real estate, renting and the related business | — | 58,082 | — | 58,082 | 0.39 | |||||||||
Construction | 70,486 | 122,750 | — | 193,236 | 1.28 | |||||||||
Public and others | 30,385 | 1,189,282 | 358,353 | 1,578,020 | 10.48 | |||||||||
| (Won) | 3,084,325 | (Won) | 10,895,441 | (Won) | 1,070,740 | (Won) | 15,050,506 | 100.00 | ||||||
The amount of loans in foreign currencies excluded valuation adjustment of loans in foreign currencies.
S-42
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Loans, by country of borrower, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||
Asia: | ||||||||||||||
Korea | (Won) | 3,647,777 | (Won) | 3,530,234 | (Won) | 501,677 | (Won) | 7,679,688 | 44.19 | |||||
Iran | — | 869,943 | 145,237 | 1,015,180 | 5.84 | |||||||||
China | — | 611,742 | 149,691 | 761,433 | 4.38 | |||||||||
Indonesia | — | 514,199 | — | 514,199 | 2.96 | |||||||||
Singapore | — | 388,125 | 20,584 | 408,709 | 2.35 | |||||||||
India | — | 393,448 | 344 | 393,792 | 2.27 | |||||||||
Saudi Arabia | — | 250,488 | 3,751 | 254,239 | 1.46 | |||||||||
Others | — | 728,680 | 157,023 | 885,703 | 5.10 | |||||||||
| 3,647,777 | 7,286,859 | 978,307 | 11,912,943 | 68.55 | ||||||||||
Europe: | ||||||||||||||
Netherlands | — | 330,739 | — | 330,739 | 1.90 | |||||||||
France | — | 320,802 | 278 | 321,080 | 1.85 | |||||||||
Belgium | — | 320,036 | 943 | 320,979 | 1.85 | |||||||||
Russia | — | 292,835 | 2,171 | 295,006 | 1.70 | |||||||||
Others | — | 1,460,877 | 90,081 | 1,550,958 | 8.92 | |||||||||
| — | 2,725,289 | 93,473 | 2,818,762 | 16.22 | ||||||||||
America: | ||||||||||||||
USA | — | 325,042 | 32,681 | 357,723 | 2.06 | |||||||||
Mexico | — | 130,238 | — | 130,238 | 0.75 | |||||||||
Brazil | — | 92,247 | — | 92,247 | 0.53 | |||||||||
Others | — | 912,944 | 63 | 913,007 | 5.25 | |||||||||
| — | 1,460,471 | 32,744 | 1,493,215 | 8.59 | ||||||||||
Africa: | ||||||||||||||
South Africa | — | 3,707 | 1,924 | 5,631 | 0.03 | |||||||||
Others | — | 414,884 | 59 | 414,943 | 2.39 | |||||||||
| — | 418,591 | 1,983 | 420,574 | 2.42 | ||||||||||
Oceania: | ||||||||||||||
Australia and others | — | 733,416 | 833 | 734,249 | 4.22 | |||||||||
| (Won) | 3,647,777 | (Won) | 12,624,626 | (Won) | 1,107,340 | (Won) | 17,379,743 | 100.00 | ||||||
The amount of loans in foreign currencies excluded valuation adjustment of loans in foreign currencies.
S-43
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
2006
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||
Asia: | ||||||||||||||
Korea | (Won) | 3,084,325 | (Won) | 3,218,125 | (Won) | 528,074 | (Won) | 6,830,524 | 45.38 | |||||
Iran | — | 824,278 | 180,702 | 1,004,980 | 6.68 | |||||||||
China | — | 659,177 | 133,591 | 792,768 | 5.27 | |||||||||
Indonesia | — | 500,603 | 85 | 500,688 | 3.33 | |||||||||
India | — | 326,536 | 1,259 | 327,795 | 2.18 | |||||||||
Vietnam | — | 162,517 | 10,504 | 173,021 | 1.15 | |||||||||
Qatar | — | 95,005 | — | 95,005 | 0.63 | |||||||||
Others | — | 378,672 | 73,659 | 452,331 | 3.00 | |||||||||
| 3,084,325 | 6,164,913 | 927,874 | 10,177,112 | 67.62 | ||||||||||
Europe: | ||||||||||||||
France | — | 334,745 | 36 | 334,781 | 2.23 | |||||||||
Russia | — | 323,694 | 6,140 | 329,834 | 2.19 | |||||||||
Netherlands | — | 302,338 | — | 302,338 | 2.01 | |||||||||
Belgium | — | 262,712 | 510 | 263,222 | 1.75 | |||||||||
Others | — | 1,365,142 | 95,135 | 1,460,277 | 9.70 | |||||||||
| — | 2,588,631 | 101,821 | 2,690,452 | 17.88 | ||||||||||
America: | ||||||||||||||
USA | — | 346,195 | 33,947 | 380,142 | 2.52 | |||||||||
Mexico | — | 163,608 | — | 163,608 | 1.09 | |||||||||
Brazil | — | 86,669 | — | 86,669 | 0.57 | |||||||||
Others | — | 735,895 | 3,956 | 739,851 | 4.92 | |||||||||
| — | 1,332,367 | 37,903 | 1,370,270 | 9.10 | ||||||||||
Africa: | ||||||||||||||
Liberia | — | 330,168 | 350 | 330,518 | 2.20 | |||||||||
South Africa | — | 3,718 | 1,512 | 5,230 | 0.03 | |||||||||
| — | 333,886 | 1,862 | 335,748 | 2.23 | ||||||||||
Oceania: | ||||||||||||||
Australia and others | — | 475,644 | 1,280 | 476,924 | 3.17 | |||||||||
| (Won) | 3,084,325 | (Won) | 10,895,441 | (Won) | 1,070,740 | (Won) | 15,050,506 | 100.00 | ||||||
The amount of loans in foreign currencies excluded valuation adjustment of loans in foreign currencies.
S-44
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (5) | The loans that were restructured due to court receiverships and compositions as of June 30, 2007 were as follows (Won in millions): |
Company | Amount | Allowances | ||||||
Court receiverships and composition | Choongnam Spinning Co., Ltd. and 4 other companies | (Won) | 5,769 | (Won) | 3,425 | |||
Individual agreements | Financial loan to Russia and 3 other companies | 237,431 | 36,604 | |||||
| (Won) | 243,200 | (Won) | 40,029 | |||||
| (6) | Changes in the present value discounts relating to the restructured loans for the six months ended June 30, 2007 were as follows (Won in millions): |
Discount rate (%) | Term (year) | Beginning balance | Increase | Decrease | Ending balance | |||||||||||
Court receiverships and composition | 1.30~4.99 | 2~10 | (Won) | 657 | (Won) | 1,071 | (Won) | 158 | (Won) | 1,570 | ||||||
Individual agreements(*1) | 4.24~5.30 | 6~18 | 43,181 | — | 3,593 | 39,588 | ||||||||||
| (Won) | 43,838 | (Won) | 1,071 | (Won) | 3,751 | (Won) | 41,158 | |||||||||
| (*1) | The overdue financial loans to Russia amount to USD 422 million (the principal and interest amounting to USD 262 million and USD 160 million, respectively). In accordance with the bilateral agreement between the Government and Russia, the Bank restructured the remaining loan balances of USD 299 million after exempting the interest of the relevant loans amounting to USD 123 million. As of June 30, 2007, the amounts of restructured financial loans to Russia and their present value discounts are (Won)182,299 million and (Won)32,871 million, respectively. |
| (7) | Term structure of loans as of June 30, 2007 was as follows (Won in millions): |
Loans in local currency | Loans in foreign currencies | Others | Total | Ratio (%) | ||||||||||
Due in 3 months or less | (Won) | 644,492 | (Won) | 1,707,688 | (Won) | 870,480 | (Won) | 3,222,660 | 18.54 | |||||
Due after 3 months to 6 months | 1,025,159 | 1,034,047 | 112,372 | 2,171,578 | 12.49 | |||||||||
Due after 6 months to 1 year | 1,594,434 | 886,504 | 29,965 | 2,510,903 | 14.45 | |||||||||
Due after 1 year to 2 years | 100,768 | 506,355 | 26,332 | 633,455 | 3.64 | |||||||||
Due after 2 years to 3 years | 11,886 | 906,771 | 7,022 | 925,679 | 5.33 | |||||||||
Due after 3 years to 4 years | 7,300 | 491,471 | — | 498,771 | 2.87 | |||||||||
Due after 4 years to 5 years | 49,248 | 589,177 | 9,425 | 647,850 | 3.73 | |||||||||
Due after 5 years | 214,490 | 6,502,613 | 51,744 | 6,768,847 | 38.95 | |||||||||
| (Won) | 3,647,777 | (Won) | 12,624,626 | (Won) | 1,107,340 | (Won) | 17,379,743 | 100.00 | ||||||
The amount of loans in foreign currencies excluded valuation adjustment of loans in foreign currencies.
S-45
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
6. Allowances for Loan Losses:
| (1) | The allowances for loan losses as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Loans in local currency | (Won) | 92,426 | (Won) | 87,506 | ||
Loans in foreign currencies | 552,119 | 504,808 | ||||
Bills bought in local currency and foreign currencies | 42,247 | 50,621 | ||||
Advances for customers | 7 | 465 | ||||
| (Won) | 686,799 | (Won) | 643,400 | |||
| (2) | As of June 30, 2007 and December 31, 2006, loan balances and allowances for loan losses by credit risk classification were as follows (Won in millions): |
2007
| Loan balance classification | ||||||||||||||||||
| Normal | Pre- cautionary | Substandard | Doubtful | Estimated loss | Total | |||||||||||||
Loans in local currency | (Won) | 3,579,574 | (Won) | 13,001 | (Won) | 44,343 | (Won) | 5,570 | (Won) | 5,289 | (Won) | 3,647,777 | ||||||
Loans in foreign currencies | 12,332,508 | 243,128 | 13,289 | 6,773 | 8,969 | 12,604,667 | ||||||||||||
Bills bought in local currency and foreign currencies | 653,770 | 102,634 | 440 | 3,359 | — | 760,203 | ||||||||||||
Advances for customers | 771 | — | — | — | — | 771 | ||||||||||||
| (Won) | 16,566,623 | (Won) | 358,763 | (Won) | 58,072 | (Won) | 15,702 | (Won) | 14,258 | (Won) | 17,013,418 | |||||||
The present value discounts were not reflected to the amount of loans stated above. Inter-bank loans of (Won)19,959 million and call loans of (Won)346,366 million were excluded because these were classified as normal. The valuation adjustment of loans in foreign currencies of (Won)(33,465) million was also excluded.
| Allowance for loan losses classification | ||||||||||||||||||
| Normal | Pre- cautionary | Substandard | Doubtful | Estimated loss | Total | |||||||||||||
Loans in local currency | (Won) | 60,107 | (Won) | 2,562 | (Won) | 19,200 | (Won) | 5,268 | (Won) | 5,289 | (Won) | 92,426 | ||||||
Loans in foreign currencies | 459,032 | 71,685 | 6,011 | 6,422 | 8,969 | 552,119 | ||||||||||||
Bills bought in local currency and foreign currencies | 16,104 | 22,732 | 190 | 3,221 | — | 42,247 | ||||||||||||
Advances for customers | 7 | — | — | — | — | 7 | ||||||||||||
| (Won) | 535,250 | (Won) | 96,979 | (Won) | 25,401 | (Won) | 14,911 | (Won) | 14,258 | (Won) | 686,799 | |||||||
S-46
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
2006
| Loan balance classification | ||||||||||||||||||
| Normal | Pre- cautionary | Substandard | Doubtful | Estimated loss | Total | |||||||||||||
Loans in local currency | (Won) | 2,834,348 | (Won) | 241,792 | (Won) | — | (Won) | 3,732 | (Won) | 4,453 | (Won) | 3,084,325 | ||||||
Loans in foreign currencies | 10,597,422 | 235,979 | 3,716 | 8,606 | 8,627 | 10,854,350 | ||||||||||||
Bills bought in local currency and foreign currencies | 649,252 | 60,104 | 11,163 | 9,147 | — | 729,666 | ||||||||||||
Advances for customers | 773 | 2,747 | — | — | — | 3,520 | ||||||||||||
| (Won) | 14,081,795 | (Won) | 540,622 | (Won) | 14,879 | (Won) | 21,485 | (Won) | 13,080 | (Won) | 14,671,861 | |||||||
The present value discounts were not reflected to the amount of loans stated above. Inter-bank loans of (Won)41,091 million and call loans of (Won)337,554 million were excluded because these were classified as normal. The valuation adjustment of loans in foreign currencies of (Won)(8,314) million was also excluded.
| Allowance for loan losses classification | ||||||||||||||||||
| Normal | Pre- cautionary | Substandard | Doubtful | Estimated loss | Total | |||||||||||||
Loans in local currency | (Won) | 42,366 | (Won) | 37,156 | (Won) | — | (Won) | 3,531 | (Won) | 4,453 | (Won) | 87,506 | ||||||
Loans in foreign currencies | 414,390 | 71,948 | 1,645 | 8,198 | 8,627 | 504,808 | ||||||||||||
Bills bought in local currency and foreign currencies | 20,812 | 16,350 | 4,834 | 8,625 | — | 50,621 | ||||||||||||
Advances for customers | 5 | 460 | — | — | — | 465 | ||||||||||||
| (Won) | 477,573 | (Won) | 125,914 | (Won) | 6,479 | (Won) | 20,354 | (Won) | 13,080 | (Won) | 643,400 | |||||||
| (3) | Changes in allowances for loan losses for the six months ended June 30, 2007 and for the year ended December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||
Beginning balance | (Won) | 643,400 | (Won) | 570,161 | ||||
Provision for possible loan losses | 48,730 | 123,430 | ||||||
Write-off | — | (4,699 | ) | |||||
Debt for equity swap | (1,668 | ) | (485 | ) | ||||
Decrease in present value discounts | (2,680 | ) | (9,631 | ) | ||||
Changes in exchange rates and others(*) | (983 | ) | (35,376 | ) | ||||
Ending balance | (Won) | 686,799 | (Won) | 643,400 | ||||
| (*) | Changes in exchange rates and others were mainly derived from the movements in foreign currency translation on allowances for loan losses and recovery of written-off loans. |
S-47
Table of Contents
THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Percentage of the allowance for loan losses to loans subject to allowance for loan losses as of June 30, 2007 and for the previous 2 years were as follows (Won in millions): |
| 2007.6.30 | 2006.12.31 | 2005.12.31 | |||||||
Loans subject to allowance for possible loan losses | (Won) | 17,013,418 | (Won) | 14,671,861 | (Won) | 11,837,894 | |||
Allowances for loan losses | 686,799 | 643,400 | 570,161 | ||||||
Percentage (%) | 4.04 | 4.39 | 4.82 | ||||||
7. Tangible Assets:
| (1) | Tangible assets and the related accumulated depreciation as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||||||||
| Acquisition cost | Accumulated depreciation | Book value | Acquisition cost | Accumulated depreciation | Book value | |||||||||||||
Land | (Won) | 4,484 | (Won) | — | (Won) | 4,484 | (Won) | 4,484 | (Won) | — | (Won) | 4,484 | ||||||
Buildings | 43,633 | 13,546 | 30,087 | 43,633 | 12,800 | 30,833 | ||||||||||||
Vehicles | 1,730 | 1,324 | 406 | 1,689 | 1,274 | 415 | ||||||||||||
Equipments | 14,120 | 11,385 | 2,735 | 13,868 | 10,590 | 3,278 | ||||||||||||
| (Won) | 63,967 | (Won) | 26,255 | (Won) | 37,712 | (Won) | 63,674 | (Won) | 24,664 | (Won) | 39,010 | |||||||
| (2) | The published value of land was (Won)94,674 million and (Won)81,246 million as of June 30, 2007 and December 31, 2006, respectively, based on the Laws on Disclosure of Land Price and Valuation of Land. |
| (3) | Changes in book value of tangible assets for the six months ended June 30, 2007 were as follows (Won in millions): |
Beginning balance | Acquisition | Disposal | Depreciation | Ending balance | |||||||||||
Land | (Won) | 4,484 | (Won) | — | (Won) | — | (Won) | — | (Won) | 4,484 | |||||
Buildings | 30,833 | — | — | 746 | 30,087 | ||||||||||
Vehicles | 415 | 126 | 2 | 133 | 406 | ||||||||||
Equipments | 3,278 | 303 | 1 | 845 | 2,735 | ||||||||||
| (Won) | 39,010 | (Won) | 429 | (Won) | 3 | (Won) | 1,724 | (Won) | 37,712 | ||||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Tangible assets, which have been insured as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||||
| Insurance company | Book value | Insured amount | Book value | Insured amount | ||||||||||
Buildings | LIG Insurance Co., Ltd. and others | (Won) | 30,087 | (Won) | 27,489 | (Won) | 30,833 | (Won) | 27,489 | |||||
Equipments | LIG Insurance Co., Ltd. and others | 2,735 | 3,103 | 3,278 | 2,866 | |||||||||
| (Won) | 32,822 | (Won) | 30,592 | (Won) | 34,111 | (Won) | 30,355 | |||||||
In addition to the above, the Company carries manufacturing liability insurance ((Won)80 million coverage per accidental death and maximum coverage of (Won)300 million per accident), gas liability insurance and comprehensive auto insurance.
8. Other Assets:
| (1) | Other assets as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Guarantee deposits | (Won) | 21,772 | (Won) | 20,212 | ||
Accounts receivable | 47 | 47 | ||||
Accrued income | 240,100 | 188,487 | ||||
Prepaid expenses | 20,500 | 34,604 | ||||
Advance payments | 4 | — | ||||
Financial derivative assets (Note 14) | 166,117 | 55,652 | ||||
Intangible assets | 3,751 | 4,380 | ||||
Sundry assets | 15,830 | 14,938 | ||||
| (Won) | 468,121 | (Won) | 318,320 | |||
| (2) | Intangible assets as of June 30, 2007 were as follows (Won in millions): |
| Book value | |||
Acquisition cost | (Won) | 10,525 | |
Accumulated amortization | 6,774 | ||
| (Won) | 3,751 | ||
| (3) | Changes in intangible assets for the six months ended June 30, 2007 were as follows (Won in millions): |
| Book value | |||
Beginning balance | (Won) | 4,380 | |
Increase | 361 | ||
Amortization | 990 | ||
Ending balance | (Won) | 3,751 | |
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Sundry assets as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Other loans | (Won) | 8,405 | (Won) | 8,557 | ||
Other suspense payments | 1,274 | 1,002 | ||||
Suspense payments on credit | 5 | 5 | ||||
Others | 6,146 | 5,374 | ||||
| (Won) | 15,830 | (Won) | 14,938 | |||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
9. Borrowings:
| (1) | Borrowings as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| Financial institution | Interest rate (%) | 2007 | 2006 | |||||||||
Call money: | ||||||||||||
Local currency | Woori CSAM and others | 4.42~4.44 | (Won) | 40,000 | (Won) | 300,000 | ||||||
Foreign currencies | Sumitomo Mitsui Bank | Libor + 0.74 | 122,591 | 219,260 | ||||||||
| 162,591 | 519,260 | |||||||||||
Borrowings in foreign currencies: | ||||||||||||
Borrowings from banks | Sumitomo Mitsui Bank | Libor + 0.77 | 3,762 | 224,034 | ||||||||
CP | UBS AG and others | 0.80~5.85 | 1,245,644 | 902,130 | ||||||||
Off-shore borrowings | Bank of China and others | 2.88~5.45 | — | 32,751 | ||||||||
Other borrowings | Overseas banks | 0.08~0.80 | 88,567 | 108,720 | ||||||||
| 1,337,973 | 1,267,635 | |||||||||||
Gain on valuation of fair value hedged items (current year portion) | — | (667 | ) | |||||||||
Loss on valuation of fair value hedged items (prior year portion) | — | 748 | ||||||||||
| 1,337,973 | 1,267,716 | |||||||||||
Debentures: | ||||||||||||
Local currency: | ||||||||||||
Fixed rate debentures in local currency | 4.63~5.44 | 1,230,000 | 680,000 | |||||||||
Discount on debentures | (36,674 | ) | (14,827 | ) | ||||||||
| 1,193,326 | 665,173 | |||||||||||
Foreign currencies: | ||||||||||||
Floating rates debentures in foreign currencies | Libor3M+0.04 and others | 2,861,432 | 6,095,087 | |||||||||
Fixed rates debentures in foreign currencies | 1.84~12.61 | 8,281,290 | 3,372,732 | |||||||||
| 11,142,722 | 9,467,819 | |||||||||||
Gain (Loss) on valuation of fair value hedged items (current year portion) | (33,827 | ) | 11,527 | |||||||||
Gain on valuation of fair value hedged items (prior year portion) | (70,466 | ) | (84,040 | ) | ||||||||
| 11,038,429 | 9,935,306 | |||||||||||
Premiums on debentures | 406 | 939 | ||||||||||
Discounts on debentures | (49,820 | ) | (49,657 | ) | ||||||||
| 10,989,015 | 9,346,588 | |||||||||||
| 12,182,341 | 10,011,761 | |||||||||||
| (Won) | 13,682,905 | (Won) | 11,798,737 | |||||||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Call money and borrowings in foreign currencies from financial institutions as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||||||||
| Call money | Borrowings in foreign currencies | Total | Call money | Borrowings in foreign currencies | Total | |||||||||||||
Banks | (Won) | 162,591 | (Won) | 1,249,406 | (Won) | 1,411,997 | (Won) | 519,260 | (Won) | 1,158,915 | (Won) | 1,678,175 | ||||||
Others | — | 88,567 | 88,567 | — | 108,720 | 108,720 | ||||||||||||
| (Won) | 162,591 | (Won) | 1,337,973 | (Won) | 1,500,564 | (Won) | 519,260 | (Won) | 1,267,635 | (Won) | 1,786,895 | |||||||
| (3) | Term structure of borrowings as of June 30, 2007 was as follows (Won in millions): |
Due in 3 months | Due after 3 months to 6 months | Due after 6 months to 1 year | Due after 1 year to 3 years | Due after 3 years | Total | |||||||||||||
Call money in local currency | (Won) | 40,000 | (Won) | — | (Won) | — | (Won) | — | (Won) | — | (Won) | 40,000 | ||||||
Call money in foreign currencies | 122,591 | — | — | — | — | 122,591 | ||||||||||||
Borrowings in foreign currencies | 1,176,227 | 119,500 | 42,246 | — | — | 1,337,973 | ||||||||||||
Debentures in local currency | — | 230,000 | 790,000 | 210,000 | — | 1,230,000 | ||||||||||||
Debentures in foreign currencies | 473,728 | 1,038,016 | 774,533 | 3,574,837 | 5,281,608 | 11,142,722 | ||||||||||||
| (Won) | 1,812,546 | (Won) | 1,387,516 | (Won) | 1,606,779 | (Won) | 3,784,837 | (Won) | 5,281,608 | (Won) | 13,873,286 | |||||||
10. Other Liabilities:
| (1) | Other liabilities as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||
Accrued severance benefits (Notes 2 and 12) | (Won) | 27,692 | (Won) | 27,509 | ||||
Less: Transfer to National Pension (Note 12) | (9 | ) | (10 | ) | ||||
Allowance for possible losses on acceptances and guarantees (Note 11) | 336,481 | 253,543 | ||||||
Allowance for unused credit line of loan commitments (Note 11) | 28,246 | 25,814 | ||||||
Foreign exchange settlement account-credit | 194,497 | 15,130 | ||||||
Accounts payable | 6,724 | 4,706 | ||||||
Accrued expenses | 297,756 | 205,649 | ||||||
Deferred income tax liabilities (Note 18) | 84,674 | 77,295 | ||||||
Unearned revenues | 148,407 | 150,834 | ||||||
Guarantees deposits received | 133 | 100 | ||||||
Financial derivatives liabilities (Note 14) | 104,469 | 87,468 | ||||||
Sundry liabilities | 49,294 | 41,764 | ||||||
| (Won) | 1,278,364 | (Won) | 889,802 | |||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Sundry liabilities as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Suspense receipts | (Won) | 48,109 | (Won) | 39,194 | ||
Taxes withheld | 1,146 | 2,504 | ||||
Others | 39 | 66 | ||||
| (Won) | 49,294 | (Won) | 41,764 | |||
11. Acceptances and Guarantees and Allowance for Possible Losses:
| (1) | Acceptances and guarantees as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Confirmed acceptances and guarantees: | ||||||
Local currency: | ||||||
Guarantees for performance of contracts | (Won) | 19,965 | (Won) | 24,432 | ||
Guarantees for repayment of advances | 31,459 | 40,625 | ||||
Others | 58,634 | 1,264 | ||||
| 110,058 | 66,321 | |||||
Foreign currencies: | ||||||
Guarantees for performance of contracts | 2,395,346 | 2,179,230 | ||||
Guarantees for repayment of advances | 22,032,499 | 18,957,040 | ||||
Acceptances for letters of guarantee for importers letter | 11,844 | 6,161 | ||||
Acceptances on import credit memorandum | 26,517 | 75,097 | ||||
Others | 1,114,866 | 1,029,793 | ||||
| 25,581,072 | 22,247,321 | |||||
| 25,691,130 | 22,313,642 | |||||
Unconfirmed acceptances and guarantees: | ||||||
Letters of credit | 124,455 | 123,688 | ||||
Others | 27,101,236 | 23,270,464 | ||||
| 27,225,691 | 23,394,152 | |||||
| (Won) | 52,916,821 | (Won) | 45,707,794 | |||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Confirmed and unconfirmed acceptances and guarantees by classification and allowances for possible losses on confirmed and unconfirmed acceptances and guarantees as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||||||||||
Acceptances guarantees | Allowance | Ratio (%) | Acceptances guarantees | Allowance | Ratio (%) | |||||||||||
Confirmed acceptances and guarantees: | ||||||||||||||||
Normal | (Won) | 25,688,976 | (Won) | 212,294 | 0.83 | (Won) | 22,311,455 | (Won) | 168,821 | 0.76 | ||||||
Precautionary | 2,154 | 168 | 7.78 | 2,187 | 172 | 7.86 | ||||||||||
| 25,691,130 | 212,462 | 0.83 | 22,313,642 | 168,993 | 0.76 | |||||||||||
Unconfirmed acceptances and guarantees(*): | ||||||||||||||||
Normal | 27,225,662 | 124,016 | 0.46 | 23,394,094 | 84,545 | 0.36 | ||||||||||
Precautionary | 29 | 3 | 10.34 | 58 | 5 | 8.62 | ||||||||||
| 27,225,691 | 124,019 | 0.46 | 23,394,152 | 84,550 | 0.36 | |||||||||||
| (Won) | 52,916,821 | (Won) | 336,481 | 0.64 | (Won) | 45,707,794 | (Won) | 253,543 | 0.55 | |||||||
| (*) | In 2005, the Bank started to provide allowance for possible losses on unconfirmed acceptances and guarantees at the same rate of allowance for loan losses applicable to the related borrowers, also considering the credit adjustment rates to off-balance sheet items announced by FSS (See Note 2). |
| (3) | Changes in allowances for possible losses on confirmed and unconfirmed acceptances and guarantees for the six months ended June 30, 2007 and for the year ended December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||
Beginning balance | (Won) | 253,543 | (Won) | 227,670 | ||||
Provision of allowance for possible losses | 84,025 | 45,026 | ||||||
Changes in foreign exchange rates and others | (1,087 | ) | (19,153 | ) | ||||
Ending balance | (Won) | 336,481 | (Won) | 253,543 | ||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Acceptances and guarantees, by industry, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
| Confirmed | Unconfirmed | Total | |||||||||||||
Acceptances guarantees | Ratio (%) | Acceptances guarantees | Ratio (%) | Acceptances guarantees | Ratio (%) | ||||||||||
Manufacturing | (Won) | 23,415,896 | 91.14 | (Won) | 27,054,509 | 99.37 | (Won) | 50,470,405 | 95.38 | ||||||
Construction | 1,540,525 | 6.00 | 27,444 | 0.10 | 1,567,969 | 2.96 | |||||||||
Finance and insurance | 490,745 | 1.91 | 11,452 | 0.04 | 502,197 | 0.95 | |||||||||
Wholesale and retail | 128,950 | 0.50 | 39,771 | 0.15 | 168,721 | 0.32 | |||||||||
Services | 18,157 | 0.07 | 18,577 | 0.07 | 36,734 | 0.07 | |||||||||
Others | 96,857 | 0.38 | 73,938 | 0.27 | 170,795 | 0.32 | |||||||||
| (Won) | 25,691,130 | 100.00 | (Won) | 27,225,691 | 100.00 | (Won) | 52,916,821 | 100.00 | |||||||
2006
| Confirmed | Unconfirmed | Total | |||||||||||||
Acceptances guarantees | Ratio (%) | Acceptances guarantees | Ratio (%) | Acceptances guarantees | Ratio (%) | ||||||||||
Manufacturing | (Won) | 20,248,696 | 90.75 | (Won) | 23,212,911 | 99.23 | (Won) | 43,461,607 | 95.09 | ||||||
Construction | 1,454,143 | 6.51 | 20,973 | 0.09 | 1,475,116 | 3.23 | |||||||||
Finance and insurance | 365,404 | 1.64 | 36,946 | 0.16 | 402,350 | 0.88 | |||||||||
Wholesale and retail | 128,576 | 0.58 | 17,107 | 0.07 | 145,683 | 0.32 | |||||||||
Services | 33,525 | 0.15 | 18,011 | 0.07 | 51,536 | 0.11 | |||||||||
Others | 83,298 | 0.37 | 88,204 | 0.38 | 171,502 | 0.37 | |||||||||
| (Won) | 22,313,642 | 100.00 | (Won) | 23,394,152 | 100.00 | (Won) | 45,707,794 | 100.00 | |||||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (5) | Acceptances and guarantees, by country of borrower, as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
2007
| Confirmed | Unconfirmed | Total | |||||||||||||
Acceptances and guarantees | Ratio (%) | Acceptances and guarantees | Ratio (%) | Acceptances and guarantees | Ratio (%) | ||||||||||
Asia: | |||||||||||||||
Korea | (Won) | 25,072,000 | 97.59 | (Won) | 27,141,868 | 99.69 | (Won) | 52,213,868 | 98.67 | ||||||
India | 91,789 | 0.36 | 72,372 | 0.27 | 164,161 | 0.31 | |||||||||
Hong Kong | 55,608 | 0.21 | — | — | 55,608 | 0.11 | |||||||||
Iran | 38,041 | 0.15 | 126 | 0.00 | 38,167 | 0.07 | |||||||||
Japan | 18,265 | 0.07 | — | — | 18,265 | 0.03 | |||||||||
Vietnam | — | — | 316 | 0.00 | 316 | 0.00 | |||||||||
| 25,275,703 | 98.38 | 27,214,682 | 99.96 | 52,490,385 | 99.19 | ||||||||||
America: | |||||||||||||||
USA | 178,531 | 0.69 | 3,102 | 0.01 | 181,633 | 0.34 | |||||||||
Mexico | 35,270 | 0.14 | — | — | 35,270 | 0.07 | |||||||||
Dominican Rep. | 1,326 | 0.01 | — | — | 1,326 | 0.00 | |||||||||
| 215,127 | 0.84 | 3,102 | 0.01 | 218,229 | 0.41 | ||||||||||
Europe: | |||||||||||||||
UK | 124,589 | 0.49 | 1,360 | 0.01 | 125,949 | 0.24 | |||||||||
France | 75,711 | 0.29 | 6,547 | 0.02 | 82,258 | 0.16 | |||||||||
| 200,300 | 0.78 | 7,907 | 0.03 | 208,207 | 0.40 | ||||||||||
| (Won) | 25,691,130 | 100.00 | (Won) | 27,225,691 | 100.00 | (Won) | 52,916,821 | 100.00 | |||||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
2006
| Confirmed | Unconfirmed | Total | |||||||||||||
Acceptances and guarantees | Ratio (%) | Acceptances and guarantees | Ratio (%) | Acceptances and guarantees | Ratio (%) | ||||||||||
Asia: | |||||||||||||||
Korea | (Won) | 21,790,047 | 97.66 | (Won) | 23,269,002 | 99.47 | (Won) | 45,059,049 | 98.58 | ||||||
India | 76,453 | 0.34 | 88,204 | 0.38 | 164,657 | 0.36 | |||||||||
Iran | 40,881 | 0.18 | 126 | 0.00 | 41,007 | 0.09 | |||||||||
Japan | 19,776 | 0.09 | — | — | 19,776 | 0.04 | |||||||||
Vietnam | — | — | 397 | 0.00 | 397 | 0.00 | |||||||||
| 21,927,157 | 98.27 | 23,357,729 | 99.85 | 45,284,886 | 99.07 | ||||||||||
America: | |||||||||||||||
USA | 127,960 | 0.58 | 3,112 | 0.01 | 131,072 | 0.29 | |||||||||
Mexico | 58,665 | 0.26 | — | — | 58,665 | 0.13 | |||||||||
Dominican Rep. | 2,660 | 0.01 | — | — | 2,660 | 0.01 | |||||||||
| 189,285 | 0.85 | 3,112 | 0.01 | 192,397 | 0.43 | ||||||||||
Europe: | |||||||||||||||
UK | 126,227 | 0.56 | 1,364 | 0.01 | 127,591 | 0.28 | |||||||||
France | 50,559 | 0.23 | 31,947 | 0.13 | 82,506 | 0.18 | |||||||||
Poland | 20,414 | 0.09 | — | — | 20,414 | 0.04 | |||||||||
| 197,200 | 0.88 | 33,311 | 0.14 | 230,511 | 0.50 | ||||||||||
| (Won) | 22,313,642 | 100.00 | (Won) | 23,394,152 | 100.00 | (Won) | 45,707,794 | 100.00 | |||||||
| (6) | Percentages of allowances for possible losses to acceptances and guarantees subject to allowances for possible losses as of June 30, 2007 and for the previous 2 years were as follows (Won in millions): |
| 2007.6.30 | 2006.12.31 | 2005.12.31 | |||||||
Acceptances and guarantees subject to allowances for possible losses | (Won) | 52,916,821 | (Won) | 45,707,794 | (Won) | 36,538,422 | |||
Allowances | 336,481 | 253,543 | 227,670 | ||||||
Percentage (%) | 0.64 | 0.55 | 0.62 | ||||||
| (7) | Unused credit line of loan commitments and allowances for on credit line of loan commitments as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Unused credit line of loan commitments | (Won) | 6,315,115 | (Won) | 6,827,643 | ||
Allowances | 28,246 | 25,814 | ||||
Percentage (%) | 0.45 | 0.38 | ||||
The Bank started to apply the rate of allowances for possible losses on loans, which is classified as normal and of which maturity is less than 1 year to unused credit line of loan commitments pursuant to the
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
guideline of allowances for possible losses to off-balance sheets items in 2005. The allowances for possible losses were recognized considering the credit adjustment rates to off-balance sheet items announced by the FSS and recorded as allowance for unused credit line of loan commitments.
| (8) | Changes in allowances for on credit line of loan commitments for the six months ended June 30, 2007 and for the year ended December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||||
Beginning balance | (Won) | 25,814 | (Won) | 27,597 | ||||
Provision for allowance | 2,519 | 256 | ||||||
Changes in exchange rates and others | (87 | ) | (2,039 | ) | ||||
Ending balance | (Won) | 28,246 | (Won) | 25,814 | ||||
12. Accrued Severance Benefits:
Changes in accrued severance benefits for the six months ended June 30, 2007 and for the year ended December 31, 2006 were as follows (Won in millions):
2007
Beginning balance | Provision | Payment | Ending balance | ||||||||||||
Accrued severance benefits | (Won) | 27,509 | (Won) | 1,907 | (Won) | 1,724 | (Won) | 27,692 | |||||||
National Pension | (10 | ) | — | (1 | ) | (9 | ) | ||||||||
| (Won) | 27,499 | (Won) | 1,907 | (Won) | 1,723 | (Won) | 27,683 | ||||||||
2006
Beginning balance | Provision | Payment | Ending balance | |||||||||||
Accrued severance benefits | (Won) | 22,950 | (Won) | 6,337 | (Won) | 1,778 | (Won) | 27,509 | ||||||
National Pension | (10 | ) | — | — | (10 | ) | ||||||||
| (Won) | 22,940 | (Won) | 6,337 | (Won) | 1,778 | (Won) | 27,499 | |||||||
13. Shareholders’ Equity:
| (1) | Capital stock |
The authorized capital stock of the Bank as of June 30, 2007 was (Won)4,000,000 million and the capital stock amounted to (Won)3,305,755 million and (Won)3,305,755 million as of June 30, 2007 and December 31, 2006, respectively. The Bank increased its capital stock by (Won)10,000 million from the Government on July 3, 2006. The Bank does not issue share certificates.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Retained earnings |
1) Legal reserve
In accordance with the EXIM Bank Act, the Bank reserves 20 percent of unappropriated retained earnings as the legal reserve, until the accumulated reserve equals to its capital stock.
2) Voluntary reserve
The Bank appropriates the remaining balance, net of legal reserve and dividend payments, to voluntary reserve.
14. Contingencies and Commitments:
| (1) | Other commitments as of June 30, 2007 and December 31, 2006 were as follows (Won in millions): |
| 2007 | 2006 | |||||
Unused credit line of loan commitments | (Won) | 6,315,115 | (Won) | 6,827,643 | ||
Written-off loans | 135,029 | 136,002 | ||||
| (Won) | 6,450,144 | (Won) | 6,963,645 | |||
| (2) | Pending litigations. |
Ten lawsuits were filed by the Bank with aggregate claims of (Won)195,000 million and 2 lawsuits were filed against the Bank involving aggregate damages of (Won)200 million; they are all pending as of June 30, 2007.
The management of the Bank believes that the ultimate liability from the lawsuits, if any, will not materially affect the financial position of the Bank.
The aforementioned pending litigations (the first trial is currently underway) have been filed by Jaesoon, Park claiming revocation of provisional attachment relating to the debt guarantees of Chungnam Spinning Co., Ltd. and by Kibo Technology Fund claiming action of cancellation of creditors on obliteration of mortgage.
| (3) | Sales of the shares of Korea Exchange Bank (“KEB”). |
The Bank sold 30,865,792 shares of Korea Exchange Bank (“KEB”) to LSF-KEB Holdings, SCA (“LSF”) on October 30, 2003 at (Won)5,400 per share. LSF exercised its call option, which was issued by the Bank in relation to the aforementioned sales transaction, and additionally purchased 49,134,208 shares of KEB at (Won)8,487.50 per share in the current fiscal year (refer to Note 4 (2) to the financial statements).
In addition to the above, if certain conditions in the mutual agreement between the Bank and LSF are met when LSF sells its KEB shares; then, the Bank has the right to ask LSF to sell the remaining shares of KEB for the same conditions and LSF also has the right to ask the Bank to sell the remaining shares (when LSF sells theirs) for the same conditions.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (4) | Details of transactions of derivatives instruments were as follows as of and for the six months ended June 30, 2007 and the year ended December 31, 2006 (Won in millions): |
2007
| Outstanding contract amount | Gain (loss) on valuation (S/I) | Gain (loss) Valuation | |||||||||||||||||||||||
| Total | Hedging Purpose | Hedge Accounting | Total | Hedging Purpose | Hedge Accounting | ||||||||||||||||||||
Currency forwards | (Won) | 327,340 | (Won) | 327,340 | (Won) | — | (Won)
| 653 (1,604 | ) | (Won)
| 653 (1,604 | ) | (Won)
| — — |
| (Won)
| 653 (1,604 | ) | |||||||
Currency swaps | 3,802,090 | 2,040,077 | 1,762,013 |
| 98,614 (20,095 | ) |
| 45,404 (2,141 | ) |
| 53,210 (17,954 | ) |
| 116,188 (19,306 | ) | ||||||||||
Interest rate swaps | 6,045,512 | 790,282 | 5,255,230 |
| 54,650 (25,831 | ) |
| 5,745 (391 | ) |
| 48,905 (25,440 | ) |
| 47,314 (83,559 | ) | ||||||||||
Stock option | 7,500 | 7,500 | — | 252 | 252 | — | 1,962 | ||||||||||||||||||
| (Won) | 10,182,442 | (Won) | 3,165,199 | (Won) | 7,017,243 | (Won)
| 154,169 (47,530 | ) | (Won)
| 52,054 (4,136 | ) | (Won)
| 102,115 (43,394 | ) | (Won)
| 166,117 (104,469 | ) | ||||||||
2006
| Outstanding contract amount | Gain (loss) on valuation (S/I) | Gain (loss) Valuation | |||||||||||||||||||||||
| Total | Hedging Purpose | Hedge Accounting | Total | Hedging Purpose | Hedge Accounting | ||||||||||||||||||||
Currency forwards | (Won) | 501,498 | (Won) | 501,498 | (Won) | — | (Won)
| 1,304 (2,102 | ) | (Won)
| 1,304 (2,102 | ) | (Won)
| — — |
| (Won)
| 1,304 (2,102 | ) | |||||||
Currency swaps | 1,533,542 | 1,510,087 | 23,455 |
| 67,436 (1,820 | ) |
| 67,436 (971 | ) |
| — (849 | ) |
| 36,074 (1,511 | ) | ||||||||||
Interest rate swaps | 5,451,828 | 737,619 | 4,714,209 |
| 26,636 (12,697 | ) |
| 2,350 (1,472 | ) |
| 24,286 (11,225 | ) |
| 16,564 (83,855 | ) | ||||||||||
Stock option | 7,500 | 7,500 | — | 1,710 | 1,710 | — | 1,710 | ||||||||||||||||||
| (Won) | 7,494,368 | (Won) | 2,756,704 | (Won) | 4,737,664 | (Won)
| 97,086 (16,619 | ) | (Won)
| 72,800 (4,545 | ) | (Won)
| 24,286 (12,074 | ) | (Won)
| 55,652 (87,468 | ) | ||||||||
The Bank holds derivative instruments for its trading activities and hedging activities, to manage the interest rate risk and foreign currencies exchange risk derived from loans, debentures and borrowings. Outstanding contractual amount and gain (loss) on valuation relating to hedge accounting resulted from derivative instruments accounted for using hedge accounting methods pursuant to the Interpretations on Financial Accounting Standards 53-70.
Hedged items consist of loans and debentures to which fair value hedge accounting is applied. Loss on the hedged item attributable to the hedged risk amounting to (Won)24,963 million for loans and gain amounting to (Won)33,827 million for debentures have been recognized for the six months ended June 30, 2007.
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
15. Interest Income and Interest Expenses:
The average balance of the interest bearing assets and liabilities, and the related interest income and expenses as of and for the six months ended June 30, 2007 was as follows (Won in millions):
| 2007 | ||||||
| Average balance | Interest incomes/expenses | |||||
Interest income bearing assets | ||||||
Loans | (Won) | 16,486,121 | (Won) | 461,939 | ||
Due from banks | 77,259 | 3,693 | ||||
Securities | 10,388 | 378 | ||||
| (Won) | 16,573,768 | (Won) | 466,010 | |||
Interest expense bearing liabilities | ||||||
Borrowings | (Won) | 1,946,636 | (Won) | 42,401 | ||
Debentures | 11,109,294 | 284,083 | ||||
| (Won) | 13,055,930 | (Won) | 326,484 | |||
Loans included call loans and borrowings included call money.
16. General and Administrative Expenses:
General and administrative expenses for the six months ended June 30, 2007 were as follows (Won in millions):
| 2007 | |||
Financial management expenses: | |||
Salaries and wages | (Won) | 27,042 | |
Others | 13,640 | ||
| 40,682 | |||
Economic cooperation management expenses | 414 | ||
Other general and administrative expenses: | |||
Severance benefits (Note 12) | 1,907 | ||
Depreciation (Note 7) | 1,724 | ||
Amortization expense of intangible assets (Note 8) | 990 | ||
Taxes and dues | 183 | ||
Fund contributions | 3,623 | ||
| 8,427 | |||
| (Won) | 49,523 | ||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
17. Non-operating Income and Expenses:
Non-operating income and expenses for the six months ended June 30, 2007 were as follows (Won in millions):
| 2007 | |||
Non-operating income: | |||
Gain on disposal of tangible assets | (Won) | 657 | |
Rental income | 10 | ||
Gain on valuation of securities using the equity method (Note 4) | 2,300 | ||
Others | 427 | ||
| (Won) | 3,394 | ||
Non-operating expenses: | |||
Loss on disposal of tangible assets | (Won) | 1 | |
Others | 634 | ||
| (Won) | 635 | ||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
18. Income Tax Expense:
| (1) | The differences between net income before income tax and taxable income pursuant to Korean Corporate Income Tax Law for the six months June 30, 2007 were as follows (Won in millions): |
| Amount | ||||
I. Net income before income tax | (Won) | 116,227 | ||
II. Non temporary differences: | ||||
(1) Entertainment expenses | 2 | |||
(2) Undesignated donations | 38 | |||
(3) Interest paid | 157 | |||
(4) Sundry profits | (150 | ) | ||
(5) Dividend earned | (15,203 | ) | ||
| (15,156 | ) | |||
III. Temporary differences: | ||||
1. Additions: | ||||
(1) Loss (gain) on fair value hedges | 64,118 | |||
(2) Gain on valuation of derivative instruments (prior period) | 43,119 | |||
(3) Loss on valuation of derivative instruments (current period) | 83,559 | |||
(4) Allowance for loan losses (current period) | 306,197 | |||
(5) Allowance for possible losses of confirmed and unconfirmed acceptances and guarantees (current period) | 336,481 | |||
(6) Unused credit line of loan commitments (current period) | 28,246 | |||
(7) Allowance for severance benefits | 1,475 | |||
(8) Depreciation | 753 | |||
(9) Debt-to-equity swap | 1,668 | |||
(10) Others | 8,624 | |||
| 874,240 | ||||
2. Deductions: | ||||
(1) Gain (loss) on fair value hedges | 70,828 | |||
(2) Loss on valuation of derivative instruments (prior period) | 86,751 | |||
(3) Gain on valuation of derivative instruments (current period) | 62,756 | |||
(4) Allowance for loan losses (prior period) | 308,016 | |||
(5) Allowance for possible losses of confirmed acceptances and guarantees (prior period) | 253,543 | |||
(6) Unused credit line of loan commitments (prior period) | 25,814 | |||
(7) Depreciation | 186 | |||
(8) Gain on valuation of securities using the equity method | 2,300 | |||
(9) Debt-to-equity swap | 25,972 | |||
(10) Others | 12,087 | |||
| 848,253 | ||||
IV. Taxable income | (Won) | 127,058 | ||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (2) | Changes in accumulated temporary difference for the six months ended June 30, 2007 were as follows (Won in millions): |
| Beginning(*) | Decrease | Increase | Ending | |||||||||||||
Loss (gain) on fair value hedges | (Won) | (64,118 | ) | (Won) | (64,118 | ) | (Won) | (70,828 | ) | (Won) | (70,828 | ) | ||||
Depreciation | 2,162 | 186 | 753 | 2,729 | ||||||||||||
Allowance for severance benefits | 16,259 | — | 1,475 | 17,734 | ||||||||||||
Allowance for loan losses | 308,016 | 308,016 | 306,197 | 306,197 | ||||||||||||
Gain on valuation of securities using the equity method | (18,675 | ) | — | (2,300 | ) | (20,975 | ) | |||||||||
Loss on valuation of derivative instruments | 86,751 | 86,751 | 83,559 | 83,559 | ||||||||||||
Gain on valuation of derivative instruments | (43,119 | ) | (43,119 | ) | (62,756 | ) | (62,756 | ) | ||||||||
Available-for-sale securities (KEB) | (114,692 | ) | — | — | (114,692 | ) | ||||||||||
Convertible stock | 96,924 | 25,972 | 1,668 | 72,620 | ||||||||||||
Allowance for possible losses of confirmed and unconfirmed acceptances and guarantees | 253,543 | 253,543 | 336,481 | 336,481 | ||||||||||||
Unused credit line of loan commitments | 25,814 | 25,814 | 28,246 | 28,246 | ||||||||||||
Others | 15,527 | 12,087 | 8,624 | 12,064 | ||||||||||||
| 564,392 | 605,132 | 631,119 | 590,379 | |||||||||||||
Statutory tax rate | 27.5 | % | 27.5 | % | ||||||||||||
Tax effect | 155,209 | 162,354 | ||||||||||||||
Deferred tax effect from available-for-sale securities | (232,370 | ) | (247,028 | ) | ||||||||||||
Deferred tax liabilities | (Won) | (77,161 | ) | (Won) | (84,674 | ) | ||||||||||
Difference amounting to (Won)134 million between closing statements and statement of tax reconciliation in 2006 was reflected in the current period. The beginning balance of accumulated temporary difference was adjusted on the prior-period final income tax.
| (3) | Income tax expense for the six months ended June 30, 2007 and for the year ended December 31, 2006 was as follows (Won in millions): |
| 2007 | 2006 | |||||||
Income tax currently payable | (Won) | 34,926 | (Won) | 34,767 | ||||
Changes in deferred tax assets (liabilities) | 7,513 | (78,670 | ) | |||||
Changes due to adjustment for the prior-period final income tax | (53 | ) | (83 | ) | ||||
Income tax expense charged to capital | (14,658 | ) | 107,343 | |||||
| (Won) | 27,728 | (Won) | 63,357 | |||||
| (4) | The statutory income tax rate applicable to the Bank is 27.5% for the six months ended June 30, 2007 and for the year ended December 31, 2006. However, due to tax adjustments, the effective tax rates for the six months ended June 30, 2007 and for the year ended December 31, 2006 were 23.9% and 27.3%, respectively. |
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
19. Assets and Liabilities Denominated in Foreign Currencies:
| (1) | Significant assets denominated in foreign currencies as of June 30, 2007 and December 31, 2006 were as follows: |
| 2007 | 2006 | |||||||||||
USD in thousands | Korean won in millions | USD in thousands | Korean won in millions | |||||||||
Due from banks | USD | 64,782 | (Won) | 60,040 | USD | 71,690 | (Won) | 66,644 | ||||
Available-for-sale securities | 11,014 | 10,208 | 11,115 | 10,332 | ||||||||
Securities using the equity method | 99,530 | 92,244 | 97,413 | 90,556 | ||||||||
Call loans | 373,722 | 346,366 | 191,000 | 177,554 | ||||||||
Bills bought in foreign currencies | 717,187 | 664,689 | 662,682 | 616,029 | ||||||||
Loans | 13,621,737 | 12,624,626 | 11,720,570 | 10,895,441 | ||||||||
Advance for customers | 832 | 771 | 3,787 | 3,520 | ||||||||
| USD | 14,888,804 | (Won) | 13,798,944 | USD | 12,758,257 | (Won) | 11,860,076 | |||||
| (2) | Significant liabilities denominated in foreign currencies as of June 30, 2007 and December 31, 2006 were as follows: |
| 2007 | 2006 | |||||||||||
USD in thousands | Korean won in millions | USD in thousands | Korean won in millions | |||||||||
Call money | USD | 132,274 | (Won) | 122,591 | USD | 235,865 | (Won) | 219,260 | ||||
Borrowings | 1,443,648 | 1,337,973 | 1,363,635 | 1,267,635 | ||||||||
Debentures | 12,022,790 | 11,142,722 | 10,184,831 | 9,467,819 | ||||||||
| USD | 13,598,712 | (Won) | 12,603,286 | USD | 11,784,331 | (Won) | 10,954,714 | |||||
Foreign currencies other than U.S. Dollar were translated into U.S. dollar amounts at the exchange rates announced by Seoul Money Brokerage Services, Ltd. (See Note 2).
20. Comprehensive Income:
Comprehensive income for the six months ended June 30, 2007 was as follows (Unit: In millions):
| 2007 | ||||
Net income | (Won) | 88,499 | ||
Other comprehensive income: | ||||
Gain on valuation of available-for-sale securities | 39,587 | |||
Loss on valuation of securities using the equity method | (691 | ) | ||
| (Won) | 127,395 | |||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
21. Related Party Transactions:
| (1) | Related parties (all subsidiaries listed below are included in consolidation) as of June 30, 2007 were as follows (Won in millions): |
| Capital | No. of shares | Ownership (%) | |||||
KEXIM Bank UK Limited | (Won) | 37,106 | 149,999 | 100.00 | |||
KEXIM Vietnam Leasing Co. | 12,048 | 400,000 | 100.00 | ||||
PT. KOEXIM Mandiri Finance | 4,513 | Limited company | 85.00 | ||||
KEXIM Asia Limited | 27,804 | Limited company | 100.00 | ||||
| (2) | Significant balances of assets and liabilities, and income and expenses from significant transactions with related parties as of and for the six months ended June 30, 2007 were as follows (Won in millions): |
(Assets)
Loans in foreign currencies | Call loans | Total | |||||||
KEXIM Bank UK Limited | (Won) | 71,806 | (Won) | 42,633 | (Won) | 114,439 | |||
KEXIM Vietnam Leasing Co. | 49,584 | — | 49,584 | ||||||
PT. KOEXIM Mandiri Finance | 75,720 | — | 75,720 | ||||||
KEXIM Asia Limited | 45,468 | 9,268 | 54,736 | ||||||
| (Won) | 242,578 | (Won) | 51,901 | (Won) | 294,479 | ||||
(Liabilities)
Debentures in foreign currencies | |||
KEXIM Bank UK Limited | (Won) | 4,634 | |
(Transactions)
Interest income | Interest expenses | Commission income | |||||||
KEXIM Bank UK Limited | (Won) | 3,079 | (Won) | 265 | (Won) | 15 | |||
KEXIM Vietnam Leasing Co. | 1,281 | — | 3 | ||||||
PT. KOEXIM Mandiri Finance | 2,086 | — | — | ||||||
KEXIM Asia Limited | 1,435 | — | 1 | ||||||
| (Won) | 7,881 | (Won) | 265 | (Won) | 19 | ||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (3) | Related parties (all subsidiaries listed below are included in consolidation) as of December 31, 2006 were as follows (Won in millions): |
Related parties | Capital | No. of shares | Ownership (%) | ||||
KEXIM Bank UK Limited | (Won) | 36,482 | 149,999 | 100.00 | |||
KEXIM Vietnam Leasing Co. | 12,085 | 400,000 | 100.00 | ||||
PT. KOEXIM Mandiri Finance | 4,548 | Limited company | 85.00 | ||||
KEXIM Asia Limited | 27,888 | Limited company | 100.00 | ||||
| (4) | Significant balances of assets and liabilities with related parties as of December 31, 2006 were as follows (Won in millions): |
(Assets)
Loans in foreign currencies | Call loans | Total | |||||||
KEXIM Bank UK Limited | (Won) | 106,164 | (Won) | 5,578 | (Won) | 111,742 | |||
KEXIM Vietnam Leasing Co. | 46,945 | — | 46,945 | ||||||
PT. KOEXIM Mandiri Finance | 76,227 | — | 76,227 | ||||||
KEXIM Asia Limited | 32,536 | — | 32,536 | ||||||
| (Won) | 261,872 | (Won) | 5,578 | (Won) | 267,450 | ||||
(Liabilities)
Debentures in foreign currencies | |||
KEXIM Bank UK Limited | (Won) | 4,648 | |
22. Statements of Cash Flows:
| (1) | The statements of cash flows for the Bank are presented by the indirect method. Cash flows from the Bank’s major business including loans on credit and security transactions are classified as cash flows from operating activities and those from the receipts and borrowings are classified as cash flows from financing activities. Other cash flows are included in cash flows from operating activities. |
| (2) | Due from banks in the statements of cash flows for the six months ended June 30, 2007 and for the year ended December 31, 2006 were as follows (won in millions): |
| 2007 | 2006 | |||||||
Due from banks in local currency | (Won) | 17,241 | (Won) | 67,850 | ||||
Restricted due from banks | (2,468 | ) | (2,460 | ) | ||||
Due from banks in foreign currencies | 60,040 | 66,644 | ||||||
| (Won) | 74,813 | (Won) | 132,034 | |||||
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THE EXPORT-IMPORT BANK OF KOREA
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three months and six months ended June 30, 2007
| (3) | Significant transactions not involving cash inflows and outflows for the six months ended June 30, 2007 were as follows (Won in millions): |
| 2007 | ||||
Increase in gain on valuation of available-for-sale securities | (Won) | 54,603 | ||
Recognition of deferred income tax liabilities due to valuation of the securities using the equity method | (691 | ) | ||
Increase in available-for-sale securities resulting from the debt for equity swap | 4,659 | |||
| (Won) | 58,571 | |||
23. Employee Welfare:
The Bank extends housing loans and operates in-house cafeteria, scholarship, medical insurance, workmen’s compensation, physical training facilities and recreational facilities, in order to enhance the employee welfare. Employee welfare expenses for the six months ended June 30, 2007 were as follows (Won in millions):
| 2007 | |||
Meal expenses | (Won) | 39 | |
Medical expenses | 23 | ||
Fringe benefits | 2,944 | ||
Healthcare expenses | 116 | ||
| (Won) | 3,122 | ||
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THE REPUBLIC OF KOREA
The Economy
Gross Domestic Product
The following table sets out the composition of the Republic’s GDP at current and constant 2000 market prices and the annual average increase in the Republic’s GDP.
Gross Domestic Product(1)
| 2005 | 2006(2) | As % of GDP 2006(2) | |||||||
| (billions of won) | |||||||||
Gross Domestic Product at Current Market Prices: | |||||||||
Private | 426,690.6 | 453,870.4 | 53.5 | ||||||
Government | 114,838.2 | 125,526.8 | 14.8 | ||||||
Gross Capital Formation | 243,659.5 | 252,536.9 | 29.8 | ||||||
Change in Inventories | 6,420.0 | 6,345.4 | 0.7 | ||||||
Exports of Goods and Services | 342,588.0 | 366,502.8 | 43.2 | ||||||
Less Imports of Goods and Services | (323,466.8 | ) | (357,154.9 | ) | (42.1 | ) | |||
Statistical Discrepancy | 6,206.3 | 6,594.4 | 0.8 | ||||||
Expenditures on Gross Domestic Product | 810,515.9 | 847,876.4 | 100.0 | ||||||
Net Factor Income from the Rest of the World | (1,216.1 | ) | (15.2 | ) | (0.0 | ) | |||
Gross National Product(1) | 809,299.8 | 847,861.3 | 100.0 | ||||||
Gross Domestic Product at Constant 2000 Market Prices: | |||||||||
Private | 360,720.6 | 375,901.7 | 49.5 | ||||||
Government | 88,120.6 | 93,267.9 | 12.3 | ||||||
Gross Capital Formation | 208,076.6 | 214,224.9 | 28.2 | ||||||
Change in Inventories | 21.8 | (399.8 | ) | (0.1 | ) | ||||
Exports of Goods and Services | 390,443.5 | 438,805.2 | 57.8 | ||||||
Less Imports of Goods and Services | (323,604.7 | ) | (360,331.3 | ) | (47.5 | ) | |||
Statistical Discrepancy | (629.8 | ) | (2,634.0 | ) | 0.3 | ||||
Expenditures on Gross Domestic Product | 723,126.8 | 759,234.4 | 100.0 | ||||||
Net Factor Income from the Rest of the World in the Terms of Trade | (1,030.3 | ) | (29.5 | ) | (0.0 | ) | |||
Trading Gains and Losses from Changes | (46,437.8 | ) | (68,118.2 | ) | (9.0 | ) | |||
Gross National Income(3) | 675,658.7 | 691,086.7 | 91.0 | ||||||
Percentage Increase (Decrease) of GDP over Previous Year | |||||||||
At Current Prices | 4.0 | 4.6 | |||||||
At Constant 2000 Market Prices | 4.2 | 5.0 | |||||||
| (1) | GDP plus net factor income from the rest of the world is equal to the Republic’s gross national product. |
| (2) | Preliminary. |
| (3) | GDP plus net factor income from the rest of the world and trading gains and losses from changes in the terms of trade is equal to the Republic’s gross national income. |
| Source: | National Accounts Year 2006; The Bank of Korea. |
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The following tables set out the Republic’s GDP by economic sector at current and constant 2000 market prices:
Gross Domestic Product by Economic Sector
(at current market prices)
| 2005 | 2006(1) | As % of GDP 2006(1) | |||||||
| (billions of won) | |||||||||
Industrial Sectors: | |||||||||
Agriculture, Forestry and Fisheries | 24,631.4 | 24,473.3 | 2.9 | ||||||
Mining and Manufacturing | 207,327.2 | 212,503.3 | 25.1 | ||||||
Mining and Quarrying | 2,626.2 | 2,667.9 | 0.3 | ||||||
Manufacturing | 204,701.0 | 209,835.4 | 24.7 | ||||||
Electricity, Gas and Water | 16,838.7 | 17,558.9 | 2.1 | ||||||
Construction | 66,375.0 | 68,434.3 | 8.1 | ||||||
Services: | 406,301.6 | 430,832.0 | 50.8 | ||||||
Wholesale and Retail Trade, Restaurants and Hotels | 67,862.2 | 70,945.9 | 8.4 | ||||||
Transportation, Storage and Communication | 52,429.5 | 54,194.3 | 6.4 | ||||||
Financial Intermediation | 60,483.5 | 63,697.4 | 7.5 | ||||||
Real Estate, Renting and Business Activities | 90,482.4 | 96,427.5 | 11.4 | ||||||
Public Administration and Defense: | |||||||||
Compulsory Social Security | 45,429.4 | 49,018.4 | 5.8 | ||||||
Education | 41,569.8 | 44,427.9 | 5.2 | ||||||
Health and Social Work | 23,069.3 | 25,683.6 | 3.0 | ||||||
Other Service Activities | 24,975.6 | 26,437.0 | 3.1 | ||||||
Taxes less subsidies on products | 89,041.7 | 94,074.6 | 11.1 | ||||||
Gross Domestic Product at Current Prices | 810,515.9 | 847,876.4 | 100.0 | ||||||
Net Factor Income from the Rest of the World | (1,216.1 | ) | (15.2 | ) | (0.0 | ) | |||
Gross National Income at Current Price | 809,299.8 | 847,861.3 | 100.0 | ||||||
| (1) | Preliminary. |
Source: National Accounts Year 2006; The Bank of Korea.
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Gross Domestic Product by Economic Sector
(at constant 2000 market prices)
| 2005 | 2006(1) | As % of GDP 2006(1) | ||||
| (billions of won) | ||||||
Industrial Sectors: | ||||||
Agriculture, Forestry and Fisheries | 25,446.6 | 24,785.3 | 3.3 | |||
Mining and Manufacturing | 210,587.0 | 228,153.8 | 30.1 | |||
Mining and Quarrying | 1,913.7 | 1,965.8 | 0.3 | |||
Manufacturing | 208,673.3 | 226,188.0 | 29.8 | |||
Electricity, Gas and Water | 18,360.7 | 19,005.6 | 2.5 | |||
Construction | 51,413.0 | 51,360.9 | 6.8 | |||
Services: | 338,176.8 | 353,131.5 | 46.5 | |||
Wholesale and Retail Trade, Restaurants and Hotels | 60,687.0 | 62,792.5 | 8.3 | |||
Transportation, Storage and Communication | 53,254.2 | 55,748.9 | 7.3 | |||
Financial Intermediation | 48,392.3 | 50,683.5 | 6.7 | |||
Real Estate, Renting and Business Activities | 77,247.9 | 80,800.7 | 10.6 | |||
Public Administration and Defense: | ||||||
Compulsory Social Security | 32,662.5 | 33,642.7 | 4.4 | |||
Education | 30,174.2 | 30,983.4 | 4.1 | |||
Health and Social Work | 14,752.8 | 15,811.5 | 2.1 | |||
Other Service Activities | 21,006.9 | 21,768.3 | 2.9 | |||
Taxes less subsidies on products | 79,141.8 | 83,697.4 | 11.0 | |||
Gross Domestic Product at Market Prices | 723,126.8 | 759,234.4 | 100.0 | |||
| (1) | Preliminary. |
Source:National Accounts Year 2006; The Bank of Korea.
GDP growth in 2005 was 4.2% at constant market prices, as aggregate private and general government consumption expenditures increased by 3.9% and gross domestic fixed capital formation increased by 2.4%, each compared with 2004.
Based on preliminary data, GDP growth in 2006 was 5.0% at constant market prices, as aggregate private and general government consumption expenditures increased by 4.5% and gross domestic fixed capital formation increased by 3.2%, each compared with 2005.
Based on preliminary data, GDP growth in the first quarter of 2007 was 4.0% at constant market prices, as aggregate private and general government consumption expenditures increased by 4.3% and gross domestic fixed capital formation increased by 7.0%, each compared with the same period of 2006. Based on preliminary data, GDP growth in the second quarter of 2007 was 5.0% at constant market prices, as aggregate private and general government consumption expenditures increased by 4.5% and gross domestic fixed capital formation increased by 6.7%, each compared with the same period of 2006.
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Principal Sectors of the Economy
Industrial Sectors
The following table sets out production indices for the principal industrial products of the Republic and their relative contribution to total industrial production:
Industrial Production
| 2000 Index Weight(1) | 2000 | 2005 | 2006 | |||||
Mining | 36.2 | 100.0 | 93.8 | 92.5 | ||||
Coal | 4.7 | 100.0 | 88.5 | 91.1 | ||||
Metal Ores | 0.8 | 100.0 | 107.1 | 121.3 | ||||
Others | 30.7 | 100.0 | 94.2 | 91.9 | ||||
Manufacturing | 9,362.9 | 100.0 | 134.0 | 148.1 | ||||
Food Products and Beverages | 658.8 | 100.0 | 108.3 | 108.8 | ||||
Tobacco Products | 53.4 | 100.0 | 113.5 | 126.9 | ||||
Textiles | 472.7 | 100.0 | 63.5 | 58.2 | ||||
Apparel and Fur Articles | 210.3 | 100.0 | 86.6 | 93.7 | ||||
Tanning and Dressing of Leather | 97.6 | 100.0 | 58.8 | 58.6 | ||||
Wood and Wood and Cork Products | 62.2 | 100.0 | 104.4 | 111.7 | ||||
Pulp, Paper and Paper Products | 193.2 | 100.0 | 109.3 | 109.4 | ||||
Publishing, Printing and Reproduction of Record Media | 226.8 | 100.0 | 92.6 | 92.6 | ||||
Coke, Refined Petroleum Products and Nuclear Fuel | 309.9 | 100.0 | 97.0 | 98.2 | ||||
Chemicals and Chemical Products | 856.9 | 100.0 | 122.7 | 127.0 | ||||
Rubber and Plastic Products | 429.9 | 100.0 | 118.0 | 124.4 | ||||
Non-Metallic Mineral Products | 331.5 | 100.0 | 101.3 | 101.9 | ||||
Basic Metals | 566.2 | 100.0 | 118.0 | 121.3 | ||||
Fabricated Metal Products | 414.8 | 100.0 | 98.4 | 101.7 | ||||
Machinery and Equipment | 812.5 | 100.0 | 123.0 | 131.3 | ||||
Office, Accounting and Computing Machinery | 330.8 | 100.0 | 78.0 | 77.9 | ||||
Electrical Machinery and Apparatus and Others | 379.8 | 100.0 | 120.1 | 128.7 | ||||
Radio, Television and Communication Equipment | 1,481.0 | 100.0 | 258.1 | 323.1 | ||||
Medical Precision and Optical Instrument, Watches | 105.0 | 100.0 | 98.9 | 97.2 | ||||
Motor Vehicles, Trailers and Semitrailers | 916.1 | 100.0 | 138.3 | 150.2 | ||||
Other Transport Equipment | 274.6 | 100.0 | 156.3 | 173.8 | ||||
Furniture and Other Manufactured Goods | 178.9 | 100.0 | 78.0 | 73.4 | ||||
Electricity and Gas | 600.9 | 100.0 | 137.5 | 143.5 | ||||
All Items | 10,000.0 | 100.0 | 134.1 | 147.6 | ||||
Percentage Increase (Decrease) of All Items Over Previous Year | 16.8 | 6.3 | 10.1 |
| (1) | Index weights were established on the basis of an industrial census in 2000 and reflect the average annual value added by production in each of the classifications shown, expressed as a percentage of total value added in the mining, manufacturing and electricity and gas industries in that year. |
Source: The Bank of Korea.
Industrial production increased by 10.1% in 2006 primarily due to strong exports and increased domestic consumption.
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Manufacturing
In 2006, the manufacturing sector increased production by 10.5%. In 2006, light industry recorded a 1.1% production increase due to increased production of wood, apparel and leather products.
Automobiles. In 2006, automobile production increased by 3.8%, domestic sales recorded an increase of 1.8% and exports recorded an increase of 2.3%, compared with 2005.
Electronics. In 2006, electronics production increased by 10.0%, based on preliminary data, and exports increased by 11.7%, each compared with 2005 primarily due to continued growth in exports of semiconductor memory chips and global information technology products. In 2006, export sales of semiconductor memory chips constituted approximately 11.5% of the Republic’s total exports.
Iron and Steel. In 2006, crude steel production totaled 48.4 million tons, an increase of 1.2% from 2005. Domestic sales increased by 5.3% and exports increased by 14.2%.
Shipbuilding. In 2006, the Republic’s shipbuilding orders amounted to 19.6 million compensated gross tons, an increase of 44.1% compared to 2005.
Agriculture, Forestry and Fisheries
Based on preliminary data, in 2006, production in the agriculture, forestry and fisheries industry decreased by 2.6% compared to 2005 primarily due to decreased production of rice, fruits and corns.
Construction
Based on preliminary data, in 2006, production in the construction industry decreased by 0.1% compared to 2005 primarily due to a slight decrease in residential and commercial construction.
Electricity and Gas
The following table sets out the Republic’s dependence on imports for energy consumption:
Dependence on Imports for Energy Consumption
| Total Energy Consumption | Imports | Imports Dependence Ratio | ||||
| (millions of tons of oil equivalents, except ratios) | ||||||
2005 | 228.6 | 221.1 | 96.7 | |||
2006 | 231.5 | 224.0 | 96.8 | |||
Source: Korea Energy Economics Institute.
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The following table sets out the principal primary sources of energy consumed in the Republic, expressed in oil equivalents and as a percentage of total energy consumption.
Consumption of Energy by Source
| Coal | Petroleum | Nuclear | Others | Total | ||||||||||||||||
| Quantity | % | Quantity | % | Quantity | % | Quantity | % | Quantity | % | |||||||||||
| (millions of tons of oil equivalents, except percentages) | ||||||||||||||||||||
2005 | 54.8 | 24.0 | 101.5 | 44.4 | 36.7 | 16.1 | 35.6 | 15.5 | 228.6 | 100.0 | ||||||||||
2006 | 56.7 | 24.5 | 101.4 | 43.8 | 37.2 | 16.1 | 36.2 | 15.6 | 231.5 | 100.0 | ||||||||||
Source: Korea Energy Economics Institute.
Services Sector
Based on preliminary data, in 2006, the output of the transportation, storage and communications sector increased by 4.7%. Based on preliminary data, in 2006, the output of the financing, real estate and business service subsector increased by 4.2% compared to 2005.
Prices, Wages and Employment
The inflation rate, on an annualized basis, was 2.1% in the first quarter of 2007 and 2.4% in the second quarter of 2007. The unemployment rate was 3.6% in the first quarter of 2006 and 3.2% in the second quarter of 2007.
The Financial System
Structure of the Financial Sector
In July 2007, the Korean National Assembly passed the Act on Capital Markets and Financial Investment Business, or ACMFIB, under which various industry-based capital markets regulatory systems currently in place will be consolidated into a single regulatory system. The ACMFIB, which will become effective in February 2009, will expand the scope of permitted investment-related financial products and activities through expansive definitions of financial instruments and function-based regulations that allow financial investment companies to offer a wider range of financial services, as well as strengthening investor protection and disclosure requirements.
Securities Markets
The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated.
March 31, 2007 | 1,452.6 | |
April 30, 2007 | 1,542.2 | |
May 31, 2007 | 1,700.9 | |
June 30, 2007 | 1,743.6 | |
July 31, 2007 | 1,933.3 | |
August 31, 2007 | 1,873.2 | |
September 28, 2007 | 1,946.5 |
The Korea Composite Stock Price Index was 2,012.8 on October 8, 2007.
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Monetary Policy
Interest Rates
On July 12, 2007, the Bank of Korea raised the benchmark call rate to 4.75% from 4.5%, which was further raised to 5.0% on August 9, 2007.
Foreign Exchange
The following table sets forth the market average exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Service Ltd. on each of the dates indicated.
Exchange Rates
March 31, 2007 | 940.3 | |
April 30, 2007 | 929.4 | |
May 31, 2007 | 929.9 | |
June 30, 2007 | 926.8 | |
July 31, 2007 | 923.2 | |
August 31, 2007 | 939.9 | |
September 28, 2007 | 920.7 |
The market average exchange rate was 916.0 to US$1.00 on October 8, 2007.
Balance of Payments and Foreign Trade
Balance of Payments
Based on preliminary data, the Republic recorded a current account deficit of approximately US$1.4 billion in the first half of 2007 compared with a current account deficit of US$0.4 billion in the same period of 2006, primarily due to an increase in deficit from the service account from US$8.9 billion to US$10.6 billion, which was partially offset by an increase in surplus from the goods account from US$12.6 billion to US$13.2 billion.
Trade Balance
Based on preliminary data, the Republic recorded a trade surplus of US$0.8 billion in the first half 2007. Exports increased by 14.5% to US$177.9 billion and imports increased by 13.8% to US$169.9 billion from US$155.4 billion of exports and US$149.3 billion of imports, respectively, in the same period of 2006.
In April 2007, the Republic and the United States reached an agreement on a bilateral free trade agreement, or FTA, which was subsequently signed by both nations in June 2007. The FTA was submitted for ratification to the Korean National Assembly in September 2007. The FTA is scheduled to be submitted for ratification to the U.S. Congress in the second half of 2007 or the first half of 2008.
Foreign Currency Reserves
The Government’s foreign currency reserves amounted to US$255.3 billion as of August 31, 2007.
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Government Finance
The following table shows consolidated Government revenues and expenditures for the periods indicated:
Consolidated Central Government Revenues and Expenditures
| 2005 | 2006(1) | |||
| (billions of won) | ||||
Total Revenues | 191,467 | 207,517 | ||
Current Revenues | 190,166 | 206,084 | ||
Total Tax Revenues | 127,466 | 165,359 | ||
Income Profits and Capital Gains | 54,456 | 60,367 | ||
Tax on Property | 4,683 | 6,281 | ||
Tax on Goods and Services | 53,401 | 54,996 | ||
Customs Duties | 6,318 | 6,858 | ||
Others | 8,608 | 8,954 | ||
Social Security Contribution | 24,906 | 27,315 | ||
Non-Tax Revenues | 37,795 | 40,725 | ||
Capital Revenues | 1,282 | 1,433 | ||
Total Expenditures and Net Lending | 187,946 | 202,880 | ||
Total Expenditures | 184,922 | 197,134 | ||
Current Expenditures | 160,274 | 171,134 | ||
Goods and Services | 36,165 | 38,987 | ||
Interest Payments | 10,094 | 12,150 | ||
Subsidies and Other Transfers(2) | 111,448 | 119,997 | ||
Subsidies | 724 | 764 | ||
Other Transfers(2) | 110,724 | 119,233 | ||
Non-Financial Public Enterprises Expenditures | 2,566 | 2,554 | ||
Capital Expenditures | 24,648 | 26,000 | ||
Net Lending | 3,024 | 5,746 | ||
| (1) | Preliminary. |
| (2) | Includes transfers to local governments, non-profit institutions, households and abroad. |
Source: Ministry of Finance and Economy; Korea National Statistical Office.
Based on preliminary data, in 2006, revenues increased by approximately 8.4% compared to 2005, which represented 27.3% of the Republic’s GDP, principally due to higher tax revenues. Tax revenues increased principally as a result of the country’s export growth and the accompanying increase in corporate income. The Republic had a fiscal surplus of (Won)4.6 trillion in 2006.
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The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the form of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the U.S. Securities and Exchange Commission as exhibits to the registration statement no. 333-136378.
The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.
Governed by Fiscal Agency Agreement
We will issue the Notes under the fiscal agency agreement, dated as of August 1, 1991, between us and The Bank of New York (formerly JPMorgan Chase Bank, N.A.), as fiscal agent, as amended or supplemented from time to time (the “Fiscal Agency Agreement”). The fiscal agent will maintain a register for the Notes.
Payment of Principal and Interest
The Notes are initially limited to US$1,500,000,000 aggregate principal amount and will mature on October 17, 2012 (the “Maturity Date”). The Notes will bear interest at the rate of 5.50% per annum, payable semi-annually in arrears on April 17 and October 17 of each year (each an “Interest Payment Date”), beginning on April 17, 2008. Interest on the Notes will accrue from October 17, 2007. If any Interest Payment Date or the Maturity Date falls on a day that is not a business day (as defined below), then payment will not be made on such date but will be made on the next succeeding day that is a business day, with the same force and effect as if made on the Interest Payment Date or the Maturity Date (as the case may be), and no interest shall be payable in respect of such delay. The term “business day” as used herein means a day other than a Saturday, a Sunday, or any other day on which banking institutions in The City of New York or Seoul are authorized or required by law or executive order to remain closed.
We will pay interest to the person who is registered as the owner of a Note at the close of business on the fifteenth day (whether or not a business day) preceding such Interest Payment Date. Interest on the Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the Notes in immediately available funds in U.S. dollars.
Denomination
The Notes will be issued in minimum denominations of US$100,000 principal amount and integral multiples of US$1,000 in excess thereof.
Redemption
We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.
Form and Registration
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of and deposited with the custodian for DTC. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest
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through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./N.V. (“Euroclear”) or Clearstream Banking,société anonyme (“Clearstream”) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream”.
The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.
For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, we will appoint and maintain a paying and transfer agent in Singapore, where the certificates representing Notes may be presented or surrendered for payment or redemption (if required), in the event that we issue the Notes in definitive form in the limited circumstances set forth in the accompanying prospectus. In addition, an announcement of such issue will be made through the SGX-ST. Such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying and transfer agent in Singapore.
Notices
All notices regarding the Notes will be published in London in theFinancial Timesand in New York inThe Wall Street Journal(U.S. Edition). If we cannot, for any reason, publish notice in any of those newspapers, we will choose an appropriate alternate English language newspaper of general circulation, and notice in that newspaper will be considered valid notice. Notice will be considered made on the first date of its publication.
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We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.
Introduction
The Depository Trust Company
DTC is:
| • | a limited-purpose trust company organized under the New York Banking Law; |
| • | a “banking organization” under the New York Banking Law; |
| • | a member of the Federal Reserve System; |
| • | a “clearing corporation” under the New York Uniform Commercial Code; and |
| • | a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934. |
DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates. DTC is owned by a number of its direct participants and by the New York Stock Exchange Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers Inc.
Euroclear and Clearstream
Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.
Ownership of Notes through DTC, Euroclear and Clearstream
We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the Notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may also hold your beneficial interests in the Notes through Euroclear or Clearstream, if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold their participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.
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We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The participant would then either authorize you to take the action or act for you on your instructions.
DTC may grant proxies or authorize its participants, or persons holding beneficial interests in the Notes through such participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the fiscal agency agreement or the Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the Notes or the fiscal agency agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.
Transfers Within and Between DTC, Euroclear and Clearstream
Trading Between DTC Purchasers and Sellers
DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.
Trading Between Euroclear and/or Clearstream Participants
Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.
Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser
When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account and the Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.
Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the Notes are credited to their accounts one day later.
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As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participant’s account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on Notes which the participant earns during that one-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.
Since the settlement will occur during New York business hours, a DTC participant selling an interest in the Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.
Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:
| • | borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day trader’s Euroclear or Clearstream account, in accordance with the clearing system’s customary procedures; |
| • | borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or |
| • | staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant. |
Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser
Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the Notes to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.
If the Euroclear or Clearstream participant selling the Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.
Settlement in other currencies between DTC and Euroclear and Clearstream is possible using free-of-payment transfers to move the Notes, but funds movement will take place separately.
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UNITED STATES TAX CONSIDERATIONS
Stated interest on the Notes will be treated as qualified stated interest for U.S. federal income tax purposes. For a discussion of certain U.S. federal income tax considerations that may be relevant to you if you invest in the Notes and are a U.S. holder, see “Taxation—United States Tax Considerations” in the accompanying prospectus.
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Relationship with the Underwriter
We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated October 10, 2007 (the “Terms Agreement”) with respect to the Notes relating to the Underwriting Agreement—Standard Terms (together with the Terms Agreement, the “Underwriting Agreement”) filed as an exhibit to the registration statement. ABN AMRO Incorporated, BNP Paribas Securities Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. International plc are acting as representatives of the Underwriters. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally, and each of the Underwriters has severally agreed to purchase, the following principal amount of the Notes set out opposite its name below:
Name of the Underwriters | Principal Amount of the Notes | ||
ABN AMRO Incorporated | US$ | 375,000,000 | |
BNP Paribas Securities Corp. | 375,000,000 | ||
Merrill Lynch, Pierece, Fenner & Smith | 375,000,000 | ||
Morgan Stanley & Co. International plc | 375,000,000 | ||
Total | US$ | 1,500,000,000 | |
Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any of the Notes, then the Underwriters are obligated to take and pay for all of the Notes.
The Underwriters initially propose to offer the Notes directly to the public at the offering price described on the cover page. After the initial offering of the Notes, the Underwriters may from time to time vary the offering price and other selling terms.
The Notes are a new class of securities with no established trading market. We have applied to the SGX-ST for listing of, and permission to deal in, the Notes. There can be no assurance that such listing will be obtained. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.
We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.
In connection with this offering, BNP Paribas Securities Corp. (the “Stabilizing Manager”) or any person acting on its behalf, on behalf of the Underwriters may purchase and sell Notes in the open market. These transactions may include over-allotment, covering transactions and stabilizing transactions. Over-allotment involves sales of Notes in excess of the principal amount of Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Stabilizing transactions consist of certain bids or purchases of Notes made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Manager may conduct these transactions in the over-the-counter market or otherwise. If the Stabilizing Manager commences any of these transactions, it may discontinue them at any time, and must discontinue them after a limited period.
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The amount of net proceeds is US$1,497,135,000 after deducting underwriting discounts but not estimated expenses. Expenses associated with this offering are estimated to be US$150,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the Notes.
In the ordinary course of their respective businesses, some of the Underwriters and their affiliates have engaged, and may in the future engage, in commercial banking and/or investment banking transactions and other related services with us and our affiliates for which the Underwriters and/or their affiliates have received or may receive customary fees and reimbursement of out-of-pocket expenses.
Delivery of the Notes
We expect to make delivery of the Notes, against payment in same-day funds on or about October 17, 2007, which we expect will be the fifth business day following the date of this prospectus supplement. Under Rule 15c6-l promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in three business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on the date of this prospectus supplement or the next succeeding business day, because the Notes will initially settle in T+5, you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.
Foreign Selling Restrictions
Each Underwriter has agreed to the following selling restrictions in connection with the offering with respect to the following jurisdictions:
Korea
Each Underwriter has represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea or to, or for the account or benefit of, any resident of Korea, except as permitted by applicable Korean laws and regulations; and (ii) any securities dealer to whom it sells Notes will agree that it will not offer any Notes, directly or indirectly, in Korea or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any dealer who does not so represent and agree.
United Kingdom
Each Underwriter has represented and agreed that (i) it has not offered or sold and, prior to the expiry of a period of six months from the closing date, will not offer or sell, any Notes to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of The Public Offers of Securities Regulations 1995 (as amended); (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of The Financial Services and Markets Act of 2000 (“FSMA”)) received by it in connection with the issue or sale of any of the Notes in circumstances in which section 21(1) of the FSMA does not apply to us; and (iii) it has complied, and will comply with, all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes, from or otherwise involving the United Kingdom.
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The Netherlands
Each Underwriter has represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell in the Netherlands any Notes other than to persons who trade or invest in securities in the conduct of a profession or business (which includes banks, stockbrokers, insurance companies, pension funds, other institutional investors and finance companies and treasury departments of large enterprises).
Japan
Each Underwriter has represented and agreed that the Notes have not been and will not be registered under the Securities and Exchange Law of Japan; it will not offer or sell, directly or indirectly, any of the Notes in Japan or to, or for the account or benefit of, any resident of Japan or to, or for the account or benefit of, any resident for reoffering or resale, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan except (i) pursuant to an exemption from the registration requirements of, or otherwise in compliance with, the Securities and Exchange Law of Japan and (ii) in compliance with the other relevant laws and regulations of Japan.
Hong Kong
Each Underwriter has represented and agreed that:
| • | it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than to (i) “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and |
| • | it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are or are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance. |
Singapore
Each Underwriter represents and agrees that this prospectus supplement and the accompanying prospectus have not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289 of Singapore) (the “SFA”). Accordingly, each Underwriter represents, warrants and agrees that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or the accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
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Each Underwriter further represents, warrants and agrees to notify (whether through the distribution of this prospectus supplement and the accompanying prospectus or otherwise) each of the following relevant persons specified in Section 275 of the SFA which has subscribed or purchased Notes from or through that Underwriter, namely a person which is:
(a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor,
that shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the Notes under Section 275 of the SFA except:
(1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA;
(2) where no consideration is given for the transfer; or
(3) by operation of law.
Italy
No solicitations in connection with the offering of the Notes will be made in Italy by any party, including the Underwriters. No copies of this prospectus supplement, the accompanying prospectus or any other documents relating to the Notes will be distributed in Italy. No Notes will be offered, sold or delivered in Italy.
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The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Shin & Kim, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Davis Polk & Wardwell may rely as to matters of Korean law upon the opinion of Shin & Kim and Shin & Kim may rely as to matters of New York law upon the opinion of Cleary Gottlieb Steen & Hamilton LLP.
OFFICIAL STATEMENTS AND DOCUMENTS
Our Chairman and President, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Export-Import Bank of Korea.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.
We were established in 1976 as a special governmental financial institution pursuant to the Export-Import Bank of Korea Act, as amended. Our corporate registry number is 11235-0000158. Our authorized share capital is (Won)4,000 billion. As of June 30, 2007, our paid-in capital was (Won)3,305.8 billion.
Our board of directors can be reached at the address of our registered office: c/o 16-1, Youido- dong, Yongdeungpo-ku, Seoul 150-996, The Republic of Korea.
The issue of the Notes has been authorized by our Chairman and President on October 10, 2007. On October 5, 2007, we filed our report on the proposed issuance of the Notes with the Ministry of Finance and Economy of Korea.
Except as disclosed in this prospectus supplement and the accompanying prospectus, since December 31, 2006, there has been no material adverse change in our financial condition. In addition, except as disclosed in this prospectus supplement and the accompanying prospectus, since June 30, 2007, there has been no material adverse change in our capitalization as described in the table appearing on page S-9 of this prospectus supplement which is material in the context of the issue of the Notes.
We are not involved in any litigation, arbitration or administrative proceedings that are material in the context of the issue of the Notes and are not aware of any such litigation, arbitration or administrative proceedings whether pending or threatened.
The registration statement with respect to us and the Notes has been filed with the Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, USA.
The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:
| CUSIP | Common Code | ISIN | ||
| 302154AS8 | 032620540 | US302154AS85 |
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HEAD OFFICE OF THE BANK
16-1, Youido-dong,
Yongdeungpo-ku
Seoul 150-996
Korea
FISCAL AGENT AND PRINCIPAL PAYING AGENT
The Bank of New York
Global Finance Americas
101 Barclay St, 4E
New York, NY 10286
LEGAL ADVISORS TO THE BANK
| as to Korean law | as to U.S. law | |
| Shin & Kim | Cleary Gottlieb Steen & Hamilton LLP | |
Ace Tower, 4th Floor 1-170, Soonhwa-dong, Chung-ku Seoul 100-712 Korea | 39th Floor Bank of China Tower One Garden Road Hong Kong | |
LEGAL ADVISOR TO THE UNDERWRITERS
as to U.S. law
Davis Polk & Wardwell
18th Floor
The Hong Kong Club Building
3A Chater Road
Hong Kong
AUDITOR OF THE BANK
Deloitte Anjin LLC
14F, Hanwha Securities Bldg.
23-5 Youido-dong
Youngdeungpo-ku, Seoul
Korea
SINGAPORE LISTING AGENT
Allen & Overy Shook Lin & Bok
1 Robinson Road
#18-00 AIA Tower
Singapore 048542
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