Republic Of Korea POS AM Prospectus update (post-effective amendment)

As filed with the Securities and Exchange Commission on June 22, 2011

Registration Statement No. 333-172648

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

POST-EFFECTIVE AMENDMENT NO. 1

TO

REGISTRATION STATEMENT

UNDER

SCHEDULE B

OF

THE SECURITIES ACT OF 1933

THE EXPORT-IMPORT BANK OF KOREA

(Name of Registrant)

THE REPUBLIC OF KOREA

(Co-Registrant and Guarantor)

Names and Addresses of Authorized Representatives:

Seung-hyun Yoo Or Yeong-hee Lee Duly Authorized Representatives in the United States of the Export-Import Bank of Korea 460 Park Avenue, 8^th Floor New York, New York 10022 Byeong Sun Song Duly Authorized Representative in the United States of The Republic of Korea 335 East 45th Street New York, New York 10017

Copies to:

Jinduk Han, Esq.

Cleary Gottlieb Steen & Hamilton LLP

39th Floor, Bank of China Tower

One Garden Road

Hong Kong

The securities registered hereby will be offered on a delayed or continuous basis pursuant to the procedures set forth in Securities Act Release Nos. 33-6240 and 33-6424.

EXPLANATORY NOTE

This registration statement relates to US$5,000,000,000 aggregate amount of (i) debt securities (with or without warrants) of The Export-Import Bank of Korea to be offered from time to time as separate issues on terms and in the manner to be specified in a prospectus supplement to be delivered in connection with each such offering and (ii) guarantees that may be issued by The Republic of Korea in respect of debt securities of The Export-Import Bank of Korea on terms and in the manner to be specified in a prospectus supplement to be delivered in connection with each such issuance. The prospectus constituting a part of this registration statement relates to (i) the debt securities (with or without warrants) registered hereunder, (ii) guarantees that may be issued by The Republic of Korea, registered hereunder and (iii) US$3,757,248,627 aggregate principal amount of debt securities (with or without warrants) registered under Registration Statement No.333-156218 (including an aggregate principal amount of US$640,000,000 of debt securities that may be sold by us from time to time in a continuous offering designated Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”)). Among such securities, The Export-Import Bank of Korea has sold US$700,000,000 aggregate principal amount of 3.75% Notes due 2016, and US$8,057,248,627 aggregate amount of securities remain unsold.

This registration statement contains a form of prospectus supplement filed as Exhibit K to this registration statement to be used in connection with the sale by us of the MTNs in a continuous offering.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 22, 2011

PROSPECTUS

$5,000,000,000

The Export-Import Bank of Korea

Debt Securities

Warrants to Purchase Debt Securities

The Republic of Korea

Guarantees

We will provide the specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated                 , 2011

TABLE OF CONTENTS

	Page
Certain Defined Terms and Conventions		1
Use of Proceeds		2
The Export-Import Bank of Korea		3
Overview		3
Capitalization		4
Business		4
Selected Financial Statement Data		7
Operations		9
Description of Assets and Liabilities		15
Debt		24
Credit Policies, Credit Approval and Risk Management		26
Capital Adequacy		27
Overseas Operations		28
Property		29
Management and Employees		29
Tables and Supplementary Information		31
Financial Statements and the Auditors		37
The Republic of Korea		91
Land and History		91
Government and Politics		92
The Economy		96
Principal Sectors of the Economy		104
The Financial System		109
Monetary Policy		114
Balance of Payments and Foreign Trade		118
Government Finance		125
Debt		128
Tables and Supplementary Information		129
Description of the Securities		135
Description of Debt Securities		135
Description of Warrants		141
Terms Applicable to Debt Securities and Warrants		142
Description of Guarantees		143
Limitations on Issuance of Bearer Debt Securities and Bearer Warrants		144
Taxation		145
Korean Taxation		145
United States Tax Considerations		147
Plan of Distribution		154
Legal Matters		155
Authorized Representatives in the United States		155
Official Statements and Documents		155
Experts		155
Forward-Looking Statements		156
Further Information		157

CERTAIN DEFINED TERMS AND CONVENTIONS

All references to the “Bank”, “we”, “our” or “us” mean The Export-Import Bank of Korea. All references to “Korea” or the “Republic” contained in this prospectus mean The Republic of Korea. All references to the “Government” mean the government of Korea.

Unless otherwise indicated, all references to “won”, “Won” or “(Won)” contained in this prospectus are to the currency of Korea, references to “U.S. dollars”, “Dollars”, “USD”, “$” or “US$” are to the currency of the United States of America, references to “Euro”, “EUR” or “ €” are to the currency of the European Union, references to “Japanese Yen”, “JPY” or “¥” are to the currency of Japan, references to “Chinese Renminbi” or “CNY” are to the currency of the People’s Republic of China, references to “Swiss franc” or “CHF” are to the currency of Switzerland, references to “pound sterling” or “GBP” are to the currency of the United Kingdom, references to “Hong Kong dollar” or “HKD” are to the currency of Hong Kong, S.A.R., references to “Singapore dollar” or “SGD” are to the currency of Singapore, references to “Turkish Lira” or “TRY” are to the currency of Turkey, references to “Malaysia Ringgit” or “MYR” are to the currency of Malaysia, references to “Brazilian Real” or “BRL” are to the currency of Federative Republic of Brazil, references to “Mexican Peso” or “MXN” are to the currency of the United Mexican States, references to “Thai Baht” or “THB” are to the currency of Thailand, references to “Australian dollar” or “AUD” are to the currency of Australia, references to “Indian Rupee” or “INR” are to the currency of India, references to “Indonesian Rupiah” or “IDR” are to the currency of Indonesia, references to “Philippine Peso” or “PHP” are to the currency of the Republic of the Philippines and references to “Peruvian nuevo sol” or “PEN” are to the currency of Peru.

In this prospectus, where information has been prepared in thousands, millions or billions of units, amounts may have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. All discrepancies in any table between totals and the sums of the amounts listed are 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.

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USE OF PROCEEDS

Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities for our general operations.

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THE EXPORT-IMPORT BANK OF KOREA

Overview

We were established in 1976 as a special governmental financial institution pursuant to the Export-Import Bank of Korea Act, as amended (the “KEXIM Act”). Since our establishment, we have been promoting the export and competitiveness of Korean goods and services in international markets. To this end, we have introduced financing facilities and implemented lending policies that are responsive to the needs of Korean exporters.

Our primary purpose, as stated in the KEXIM Act, is to “promote the sound development of the national economy and economic cooperation with foreign countries by extending the financial aid required for export and import transactions, overseas investment and the development of natural resources abroad.” Over the years, we have developed various financing facilities and lending policies that are consistent with the Government’s overall economic policies. In the latter part of the 1980s, as a result of changing trade conditions and the increased internationalization of the Korean economy, overseas investment credits and import credits were promoted and began to constitute an important portion of our business. In recent years, we have focused on the development of new financing facilities, including structured financing for ships and project financing for the construction of industrial plants and the development of natural resources abroad.

As of December 31, 2010, we had (Won)41,230 billion of outstanding loans, including (Won)23,073 billion of outstanding export credits, (Won)13,727 billion of outstanding overseas investment credits and (Won)2,501 billion of outstanding import credits, as compared to (Won)37,423 billion of outstanding loans, including (Won)22,410 billion of outstanding export credits, (Won)10,395 billion of outstanding overseas investment credits and (Won)2,464 billion of outstanding import credits as of December 31, 2009.

Although our management has control of our day-to-day operations, our operations are subject to the close supervision of the Government. The Government’s determination each fiscal year regarding the amount of financial support to extend to us, in the form of loans, contributions to capital or transfers of our income to reserves, plays an important role in determining our lending capacity. The Government has the power to appoint or dismiss our President, Deputy President, Executive Directors and Auditor. Moreover, the Minister of Strategy and Finance (formerly the Minister of Finance and Economy) of the Republic has, on behalf of the Republic, signed the registration statement of which this Prospectus forms a part.

The Government supports our operations pursuant to Article 37 of the KEXIM Act. Article 37 of the KEXIM Act provides that “the annual net losses of the Export-Import Bank of Korea shall be offset each year by the reserve, and if the reserve be insufficient, the Government shall provide funds to cover the deficit.” As a result of the KEXIM Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserves, consisting of our surplus and capital surplus items, are insufficient to cover any of our annual net losses. In light of the above, if we have insufficient funds to make any payment under any of our obligations, including the debt securities covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 37 do not, however, constitute a direct guarantee by the Government of our obligations, and the provisions of the KEXIM Act, including Article 37, may be amended at any time by action of the National Assembly.

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Capitalization

As of December 31, 2010, our authorized capital was (Won)8,000 billion and capitalization was as follows:

	December 31, 2010  (1)
	(billions of Won)
Long-Term Debt (2)(3)(4)(5):
Borrowings in Korean Won	(Won)	—
Borrowings in Foreign Currencies		833
Export-Import Financing Debentures		21,989
Total Long-term Debt	(Won)	22,822
Capital and Reserves:
Paid-in Capital (6)	(Won)	5,159
Legal Reserve (7)		271
Voluntary Reserve (7)		828
Unappropriated Retained Earnings		67
Accumulated Other Comprehensive Income		198
Total Capital and Reserve	(Won)	6,523
Total Capitalization (7)	(Won)	29,345

(1) Except as described in this prospectus, there has been no material adverse change in our capitalization since December 31, 2010.

(2) We have translated borrowings in foreign currencies as of December 31, 2010 into Won at the rate of (Won)1,138.9 to US$1.00, which was the market average exchange rate as announced by the Seoul Monetary Brokerage Services Ltd., on December 31, 2010.

(3) As of December 31, 2010, we had contingent liabilities totaling (Won)68,149 billion, which consisted of (Won)44,176 billion under outstanding guarantees and acceptances and (Won)23,973 billion under contingent guarantees and acceptances issued on behalf of our clients.For further information relating to our contingent liabilities under outstanding guarantees as of December 31, 2010, see “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 11”. See also “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 14” for a description of our commitments and contingencies as of December 31, 2010.

(4) As of December 31, 2010, we had entered into 102 interest rate related derivative contracts with a notional amount of (Won)11,523 billion and 140 currency related derivative contracts with a notional amount of (Won)10,182 billion in accordance with our policy to hedge interest rate and currency risks. See “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 15”.

(5) See “Sources of Funding” for an explanation of these sources of funds. All the borrowings of the Bank, whether domestic or international, are unsecured and unguaranteed.

(6) As of December 31, 2010, authorized ordinary share capital is (Won)8,000 billion and issued fully-paid ordinary share capital is (Won)5,159 billion. In January 2011, the Government contributed (Won)50 billion in cash to our capital, and in April 2011, the Government contributed, indirectly through Korea Finance Corporation, (Won)1,000 billion in the form of shares of common stock of Korea Expressway Corporation to our capital. See “Government Support and Supervision.”

(7) See “Government Support and Supervision” 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.

Business

Purpose and Authority

We were established in 1976 as a special governmental financial institution pursuant to the KEXIM Act. The KEXIM Act, the Enforcement Decree of the KEXIM Act (the “KEXIM Decree”) and our Articles of Incorporation (the “By-laws”) define and regulate our powers and authority. We are treated as a special juridical entity under Korean law and are not subject to certain of the laws regulating activities of commercial banks.

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We were established, as stated in the KEXIM Act, to “promote the sound development of the national economy and economic cooperation with foreign countries by extending the financial aid required for export and import transactions, overseas investment and the development of natural resources abroad.” As an instrument in serving the Government’s public policy objectives, we do not seek to maximize our profits. We do, however, strive to maintain an adequate level of profitability to strengthen our equity base in order to support the growth in the volume of our business.

Our primary purpose has been the provision of loans to facilitate Korean exports of capital and non-capital goods and technical services. Most of our activities have been carried out pursuant to this authority and we characterize such loans as export credits. In January 2008, the Government amended the KEXIM Act and KEXIM Decree to expand the types of goods and services eligible for export credits that we may extend to include intangible goods and non-technical services.

We have the authority to undertake a range of other financial activities. These fall into three principal categories:

• overseas investment credits;

• import credits; and

• guarantee facilities.

Overseas investment credits consist of loans to finance Korean overseas investments and projects. Import credits include the extension of loans to finance Korean imports of essential materials and natural resources. Guarantee facilities are made available to support the obligations of Korean exporters and importers.

We also have the authority to administer, on behalf of the Government, the Government’s Economic Development Cooperation Fund and the Inter-Korea Cooperation Fund, formerly known as South and North Korea Co-operation Fund.

We may also undertake other business activities incidental to the foregoing, including currency and interest rate swap transactions. We have engaged in such swap transactions for hedging purposes only.

Government Support and Supervision

The Government’s determination each fiscal year, regarding the amount of financial support to extend to us, plays an important role in determining our lending capacity. Such support has included contributions to capital, loans and transfers of our income to reserves.

Our authorized capital was (Won)30 billion when the Government enacted the KEXIM Act in 1969. The National Assembly amended the KEXIM Act and increased our authorized capital to (Won)150 billion in 1974, (Won)500 billion in 1977, (Won)1,000 billion in 1986, (Won)2,000 billion in January 1998 and (Won)4,000 billion in September 1998. In January 2009, the Government further increased our authorized capital to (Won)8,000 billion.

As of December 31, 1996, the capital contribution from the Government was approximately (Won)686 billion, all in cash. Since 1997, the Government has made capital contributions not only in cash but also in the form of shares of common stock of Government-affiliated entities. In 1997, the Government contributed (Won)185 billion in cash and in the form of shares of common stock of KT&G (formerly known as Korea Tobacco & Ginseng). In 1998, the Government contributed (Won)805 billion in cash and in the form of shares of common stock of KT&G, Korea Electric Power Corporation and Korea Expressway Corporation (formerly known as Korea Highway Corporation). From 1999 to 2004, the Government contributed (Won)1,100 billion in cash to our capital, directly and indirectly through The Bank of Korea and the Korea Development Bank.

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In April 2005, the Government contributed (Won)500 billion in the form of shares of common stock of Korea Expressway Corporation owned by the Government and (Won)20 billion in cash to our capital to further support our lending to Korean manufacturers and exporters, in accordance with the Government policy to promote the Republic’s exports by providing such entities with the funds required for the construction and export of capital goods (such as industrial plants, industrial machinery, natural resource development, information infrastructure and overseas construction projects). In July 2007, the Government contributed (Won)3 billion in cash to our capital. In December 2008, the Government contributed (Won)650 billion in the form of shares of common stock of Kyobo Life Insurance Co., Ltd. and Korea Expressway Corporation to our capital. The Government contributed to our capital (Won)300 billion in cash in January 2009, (Won)500 billion in the form of shares of common stock of Korea Expressway Corporation in March 2009 and (Won)250 billion in cash in May 2009, in order to support our lending to Korean exporters, including small and medium-sized enterprises. Taking into account these capital contributions, as of December 31, 2009, our total paid-in capital was (Won)5,009 billion. In January 2010 and January 2011, the Government further contributed (Won)150 billion and (Won)50 billion, respectively, in cash to our capital. In April 2011, the Government contributed, indirectly through Korea Finance Corporation, (Won)1,000 billion in the form of shares of common stock of Korea Expressway Corporation to our capital in order to enhance our capability to undertake large-scale overseas project financings. As of the date of this prospectus, our paid-in capital was (Won)6,209 billion.

Pursuant to the KEXIM Act, only the Government, The Bank of Korea, Korea Finance Corporation, certain designated domestic banking institutions, exporters’ associations and international financial organizations may contribute to our paid-in capital. As of December 31, 2010, the Government directly owned 74.4% of our paid-in capital and indirectly owned, through The Bank of Korea and Korea Finance Corporation, 22.6% and 3.0%, respectively, of our paid-in capital. As of the date of this prospectus, the Government directly owned 62.7% of our paid-in capital and indirectly owned, through The Bank of Korea and Korea Finance Corporation, 18.7% and 18.6%, respectively, of our paid-in capital. See “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 1”.

In addition to contributions to our capital, the Government provides funding for our financing activities. The Government has made loans available to us for our lending activities. See “Description of Assets and Liabilities—Sources of Funding.”

The Government also supports our operation pursuant to Articles 36 and 37 of the KEXIM Act. Article 36 of the KEXIM Act and the By-laws provide that we shall apply our net income earned during each fiscal year, after deduction of depreciation expense for such fiscal year, in the following manner and in order of priority:

• first, 20% of such net income is transferred to our legal reserve until the total amount of our legal reserve equals the total amount of our paid-in capital;

• second, if the Minister of Strategy and Finance approves such distribution, the balance of any such net income, after such transfer to the legal reserve, is distributed to the institutions, other than the Government, that have contributed to our capital (up to a maximum 15% annual dividend rate); and

• third, the remaining balance of any such net income is distributed in whatever manner our Operations Committee determines and the Minister of Strategy and Finance approves, such as additions to our voluntary reserve. As of December 31, 2010, we had a legal reserve of (Won)271 billion and a voluntary reserve of (Won)828 billion.

Article 37 of the KEXIM Act provides that “the annual net losses of the Export-Import Bank of Korea shall be offset each year by the reserve, and if the reserve be insufficient, the Government shall provide funds to cover the deficit.” As a result of the KEXIM Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserves are insufficient to cover any of our annual net losses. In light of this provision, if we have insufficient funds to make any payment under any of our obligations, the Government would take appropriate steps by making a capital contribution, by allocating funds or by taking other action to enable us to make such payment when due. The provisions of Article 37 do not, however, constitute a direct guarantee by the Government of our obligations, and the provisions of the KEXIM Act, including Article 37, may be amended at any time by action of the National Assembly.

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The Government closely supervises our operations including in the following ways:

• the President of the Republic appoints our President upon the recommendation of the Minister of Strategy and Finance;

• the Minister of Strategy and Finance appoints our Deputy President and Executive Directors upon the recommendation of our President;

• the Minister of Strategy and Finance appoints our Auditor;

• one month prior to the beginning of each fiscal year, we must submit our proposed program of operations and budget for the fiscal year to the Minister of Strategy and Finance for his approval;

• the Minister of Strategy and Finance must approve our operating manual, which sets out guidelines for all principal operating matters, including the range of permitted financings;

• the Board of Audit and Inspection, a Government department, examines our settlement of accounts annually;

• each of the Minister of Strategy and Finance and the Financial Services Commission has broad authority to require reports from us on any matter and to examine our books, records and other documents. On the basis of the reports and examinations, the Minister of Strategy and Finance may issue any orders it deems necessary to enforce the KEXIM Act or delegate examinations to the Financial Services Commission;

• the Financial Services Commission may supervise our operations to ensure managerial soundness based upon the KEXIM Decree and the Supervisory Regulations of Banking Business legislated by the Financial Services Commission and may issue orders deemed necessary for such supervision;

• we must submit our annual report to the Ministry of Strategy and Finance (formerly, the Ministry of Finance and Economy) within two months after the end of each fiscal year and to the National Assembly within nine months after the end of each fiscal year outlining our operations and analyzing our activities during the relevant fiscal year; and

• we may amend our By-laws and operating manual only with the approval of the Minister of Strategy and Finance.

Selected Financial Statement Data

You should read the following financial statement data together with our non-consolidated financial statements and notes included in this prospectus:

	Year Ended December 31,
	2006 (1)			2007 (1)			2008			2009			2010
	(billions of Won)
Income Statement Data
Total Interest Income	(Won)	742		(Won)	1,042		(Won)	1,448		(Won)	1,445		(Won)	1,327
Total Interest Expense		489			804			1,107			1,224			946
Net Interest Income		253			238			342			221			381
Total Revenues		1,279			2,123			5,122			3,960			4,095
Total Expenses		1,047			1,874			4,927			3,926			3,997
Income before Income Taxes		232			249			196			34			98
Income Tax Benefit (expense)		(63	)		(64	)		(102	)		(8	)		31
Net Income		168			184			94			26			67

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	As of December 31,
	2006		2007		2008		2009		2010
	(billions of Won)
Balance Sheet Data
Total Loans (2)	(Won)	15,051	(Won)	20,739	(Won)	32,390	(Won)	37,423	(Won)	41,230
Total Borrowings (3)		11,799		17,412		27,771		33,302		37,217
Total Assets		17,449		23,639		35,982		42,028		46,689
Total Liabilities		12,689		18,704		30,892		35,565		40,167
Total Shareholders’ Equity (4)		4,760		4,936		5,090		6,463		6,523

(1) Effective January 1, 2008, we record “amount received (paid) on currency interest swaps” as “interest revenue (expense)” in our Statements of Income; prior to the change, such amount was accounted for as “gain (loss) on derivatives”. In connection with the change, our income statement data for the year ended December 31, 2007 have been reclassified to conform with the presentation of our financial information for the years ended December 31, 2008, 2009 and 2010 for comparative purposes but our income statement data for the year ended December 31, 2006 have not reflected such change.

(2) Gross amount, including bills bought, foreign exchange bought, call loans, inter-bank loans in foreign currency and others and before deducting valuation adjustment of loans in foreign currencies, deferred loan origination fees and allowance for loan losses. See “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 5.”

(3) Includes debentures.

(4) Includes unappropriated retained earnings.

2010

We had net income of (Won)67 billion in 2010 compared to net income of (Won)26 billion in 2009.

The principal factors for the increase in net income in 2010 compared to 2009 included:

• an increase in gain on sale of available-for-sale securities to (Won)454 billion in 2010 from (Won)25 billion in 2009, primarily due to gain from the sale of our equity interest in Daewoo International Corporation; and

• an increase in net interest income to (Won)381 billion in 2010 from (Won)221 billion in 2009, primarily due to decreased funding costs for foreign currency borrowings.

The above factors were partially offset by (1) an increase in provision for acceptance and guarantee losses to (Won)413 billion in 2010 from (Won)56 billion in 2009, primarily due to downgrades in the classification of certain of our guarantees from normal to precautionary and (2) an increase in provision for loan losses to (Won)469 billion in 2010 from (Won)339 billion in 2009, primarily due to downgrades in the classification of certain of our loans from normal to precautionary.

As of December 31, 2010, our total assets increased by 11% to (Won)46,689 billion from (Won)42,028 billion as of December 31, 2009, primarily due to a 10% increase in loans to (Won)41,230 billion as of December 31, 2010 from (Won)37,423 billion as of December 31, 2009.

As of December 31, 2010, our total liabilities increased by 13% to (Won)40,167 billion from (Won)35,565 billion as of December 31, 2009. The increase in liabilities was primarily due to a 12% increase in borrowings and debentures to (Won)37,217 billion as of December 31, 2010 from (Won)33,301 billion as of December 31, 2009.

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 U.S. dollar as of December 31, 2010 compared to December 31, 2009 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.

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As of December 31, 2010, our total shareholders’ equity increased by 1% to (Won)6,523 billion from (Won)6,463 billion as of December 31, 2009, primarily due to the Government’s (Won)150 billion contribution to our capital in January 2010.

2009

We had net income of (Won)26 billion in 2009 compared to net income of (Won)94 billion in 2008.

The principal factors for the decrease in net income in 2009 compared to 2008 included:

• net loss on foreign currency translations of (Won)352 billion in 2009 compared to net gain of (Won)1,095 billion in 2008, primarily due to the appreciation of the Won against the U.S. dollar in 2009;

• an increase in provision for loan losses to (Won)339 billion in 2009 from (Won)93 billion in 2008, primarily due to increased non-performing loans; and

• a decrease in net interest income to (Won)221 billion in 2009 from (Won)342 billion in 2008, primarily due to (i) losses on currency and interest rate swaps resulting from fluctuations in exchange and interest rates during 2009 and (ii) increased funding costs for foreign currency borrowings as a result of adverse global credit market conditions during 2009.

The above factors were partially offset by (1) net gain on valuation of derivatives of (Won)480 billion in 2009 compared to net loss of (Won)738 billion in 2008 and (2) net gain on derivative transactions of (Won)224 billion in 2009 compared to net losses of (Won)547 billion in 2008.

As of December 31, 2009, our total assets increased by 17% to (Won)42,028 billion from (Won)35,982 billion as of December 31, 2008, primarily due to a 16% increase in loans to (Won)37,423 billion as of December 31, 2009 from (Won)32,390 billion as of December 31, 2008.

As of December 31, 2009, our total liabilities increased by 15% to (Won)35,565 billion from (Won)30,892 billion as of December 31, 2008. The increase in liabilities was primarily due to a 34% increase in debentures to (Won)30,406 billion as of December 31, 2009 from (Won)22,747 billion as of December 31, 2008 which more than offset a 42% decrease in borrowings to (Won)2,896 billion as of December 31, 2009 from (Won)5,024 billion as of December 31, 2008.

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 in 2009 compared to 2008 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 December 31, 2009, our total shareholders’ equity increased by 27% to (Won)6,463 billion from (Won)5,090 billion as of December 31, 2008, primarily due to the Government’s (Won)1,050 billion capital injection in 2009.

Operations

Loan Operations

Our primary objective since our establishment has been to promote the export and competitiveness of Korean goods and services in international markets. To this end, we have introduced various financing facilities and implemented lending policies that are responsive to the needs of Korean exporters and foreign importers. Over the years, we have also developed financing facilities and lending policies that are consistent with the Government’s overall economic policies. In the latter part of the 1980s, as a result of changing trade conditions and the increased internationalization of the Korean economy, overseas investment credits and import credits were promoted and began to constitute an important portion of our business. Our lending programs include

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(1) export credits to Korean exporters or foreign buyers of Korean goods and services, (2) overseas investment credits to Korean firms and (3) import credits to Korean importers.

Before approving a credit, we consider:

• economic benefits to the Republic;

• the industry’s rank in the order of priorities established by the Government’s export-import policy;

• credit risk associated with the loans to be extended; and

• the goal of diversifying our lending activities.

The KEXIM Act and the By-laws provide that we may extend credit only where repayment “is considered probable.” Accordingly, we carefully investigate the financial position of each prospective borrower and the technical and financial aspects of the project to be financed, and a loan is made only if we believe there is reasonable assurance of repayment. See “Credit Policies, Credit Approval and Risk Management—Credit Approval”.

We are currently required by the KEXIM Act and the KEXIM Decree to make loans with original maturities of not more than 30 years. The overall average life of our loans is approximately 3 years.

In 2010, we provided total loans of (Won)38,767 billion, an increase of 18% from the previous year, while our loan commitments amounted to (Won)47,341 billion, an increase of 31% from the previous year. The increase in loan disbursements was attributable mainly to an increase in disbursements of overseas investment credits. The increase in overseas investment credits was primarily due to an increase in overseas natural resources development projects undertaken by Korean companies.

The following table sets out the total amounts of our outstanding loans, categorized by type of credit:

	As of December 31,						As % of 2010 Total
	2008		2009		2010
	(billions of Won)
Export Credits (1)
Ships	(Won)	7,938	(Won)	10,550	(Won)	9,164		22	%
Industrial Plants		4,350		4,785		5,249		13
Machinery		410		722		902		2
Foreign Exchange Bought		473		560		867		2
Trade Bill Rediscount		569		—		1,551		4
Others (2)		3,897		5,794		5,340		13
Sub-total		17,637		22,410		23,073		56
Overseas Investment Credits		9,866		10,395		13,727		33
Import Credits		2,326		2,464		2,501		6
Others (3)		1,142		271		289		1
Call Loans and Inter-bank Loans in Foreign Currency		1,417		1,884		1,640		4
Total	(Won)	32,390	(Won)	37,423	(Won)	41,230		100.0	%

(1) Includes bills bought.

(2) Includes interbank export loans, offshore loans, etc.

(3) Includes domestic usance, loans for debt-equity swap, advances for customers, etc.

Source:Internal accounting records

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The following table sets out our new loan commitments, categorized by type of credit:

New Loan Commitments by Type of Credit

	Year Ended December 31,						As % of 2010 Total
	2008		2009		2010
	(billions of Won)
Export Credits (1)
Ships	(Won)	2,307	(Won)	6,904	(Won)	6,225		13	%
Industrial Plants		3,173		2,772		5,674		12
Machinery		1,417		2,129		2,364		5
Foreign Exchange Bought		2,824		560		4,823		10
Trade Bill Rediscount		3,457		—		5,715		12
Others (2)		6,444		16,106		10,740		23
Sub-total		19,622		28,471		35,541		75
Overseas Investment Credits		4,098		4,080		7,652		16
Import Credits		3,495		3,707		4,148		9
Total	(Won)	27,215	(Won)	36,258	(Won)	47,341		100	%

(1) Includes bills bought.

(2) Includes interbank export loans, offshore loans, etc.

Source:Internal accounting records

Export Credits

We offer export credits to either domestic suppliers or foreign buyers to finance export transactions.

Export Credits to domestic suppliers include:

• export loans to Korean exporters that export capital goods such as ships, industrial plants and machinery;

• pre-shipment credit to Korean exporters or manufacturers producing export products;

• technical service credit to Korean companies that export technical services abroad, including overseas construction projects;

• short-term trade financing to Korean exporters that manufacture export goods under short-term export contracts;

• small business export credit to small and medium-sized enterprises that manufacture export goods or supply materials needed by their primary exporters;

• rediscount on trade bills to domestic commercial banks for exporters;

• forfeiting to Korean exporters by discounting trade bills under the usance line of credit from export transactions on a non-recourse basis; and

• export factoring to Korean exporters by discounting trade receivables that occurs from open account export transactions on credit on a non-recourse basis.

Export credits to foreign buyers include:

• direct loans to foreign buyers that purchase Korean goods and services;

• project finance to foreign companies that intend to import industrial plants, facilities and technical services from Korea for large-scale projects, of which the cash flows from such projects are the main source for repayment;

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• structured finance to foreign shipping companies that purchase ships from Korean shipyards, of which the repayment usually depends on the cash flows generated by the operation of ships; and

• interbank export loans to creditworthy banks in foreign countries to help foreign buyers obtain credit for the purchase of goods and services of Korean origin.

As of December 31, 2010, export credits in the amount of (Won)23,073 billion represented 56% of our total outstanding loans. Our disbursements and commitments of export credits in 2010 amounted to (Won)27,004 billion and (Won)35,541 billion, respectively, an increase of 7% and 25%, respectively, over the previous year. This increase in disbursements and new commitments for export credits was primarily due to increased volume of foreign exchange bought and trade bill rediscount, as Korean companies demanded more trade finance in line with increased export volume, as well as an increase in export credits for construction of industrial plants.

We offer export credits to Korean manufacturers and exporters in order to provide them with the funds required for the construction and export of Korean capital goods and technical services designated in our operating manual. Capital goods eligible for export credit financings currently include ships, industrial plants, industrial machinery and overseas construction projects. With respect to eligible items supported by our export credits, ships have traditionally had the largest share of our export credit operations. In September 1998, the Government amended the KEXIM Act to expand the types of goods eligible for our export credits to include non-capital goods.

We offer export loans and technical service credits to domestic suppliers at fixed (no less than the Commercial Interest Reference Rate) or floating rates of interest with maturities of up to twelve years for ships and maturities of varying terms, from two to 18 years, for financings of other eligible items. We typically require a minimum down payment of 20% of the contract amount for ship export financings and a minimum down payment of 15% for financings of other eligible items. When the credit rating of a prospective borrower does not meet our internal rating criteria, these export credits are secured by promissory notes issued in connection with the relevant transaction, or letters of guarantees or letters of credit issued or confirmed by a creditworthy international bank or the importer’s government or central bank. Other terms and conditions under such export credit facilities must be in accordance with the Arrangement on Guidelines for Officially Supported Export Credits by the Organization for Economic Cooperation and Development. We offer direct loans to foreign buyers, project finance to project companies and structured finance for ships to foreign shipping companies under similar terms and conditions as export credit financings to domestic suppliers. We offer interbank export loans to overseas banks to facilitate imports by foreign importers of Korean manufactured goods. Interbank export loans are offered at fixed or floating rates of interest with maturities of up to ten years.

Overseas Investment Credits

We extend overseas investment credits to either Korean companies or foreign companies in which a Korean company has an equity share, to finance investments in eligible overseas businesses and projects. Such financing programs include:

• overseas investment credit to Korean companies that invest abroad in the form of capital subscription, acquisition of stocks and long-term credit;

• overseas project credit to Korean companies or their overseas subsidiaries engaging in businesses outside Korea;

• major resources development credit to Korean companies for development of natural resources and acquisition of mining rights abroad; and

• overseas business credit to foreign companies in which Korean companies have an equity stake, in the form of funds for purchasing equipment or working capital.

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As of December 31, 2010, overseas investment credits amounted to (Won)13,727 billion, representing 33% of our total outstanding loans. Our disbursements and commitments of overseas investment credits in 2010 increased by 32% to (Won)10,395 billion and increased by 88% to (Won)7,652 billion, respectively, over the previous year, primarily due to an increase in overseas natural resources development projects undertaken by Korean companies. Most of the overseas investment credits were loans to foreign companies in which a Korean company has an equity share.

Proposals for overseas investment credits to finance the acquisition of important materials or the development of natural resources for the Korean economy, as determined by the Government, are given priority, together with projects that promote the export of Korean goods and services. As a result, projects financed by our overseas investment credit program have been mainly in the fields of manufacturing or development of natural resources.

We offer overseas investment credits at either fixed or floating rates of interest with maturities up to 30 years (with a maximum five-year grace period on repayment). Such facilities may require security in the form of a bank guarantee, pledge or mortgage on the borrower’s local assets. Depending upon the size of the borrower, we will provide up to 100% of the financing required for the overseas investment project.

Import Credits

We offer import credits to Korean companies that directly import essential materials, natural resources and high-technology materials whose stable and timely supply is required for the national economy, or to Korean companies that import such items after developing them overseas. Import credits are extended for importation of eligible items, including nuclear fuels, aircraft, mineral ores, crude oil, lumber, wood pulp, grains, cotton, sugar, and equipment and machinery for research and development, and for use in advanced technological industries.

As of December 31, 2010, import credits in the amount of (Won)2,501 billion represented 6% of our total outstanding loans. Disbursements and new commitments of import credits amounted to (Won)4,211 billion and (Won)4,148 billion, respectively, in 2010, an increase of 16% and 12%, respectively, over the previous year.

We offer import credits at either fixed or floating rates of interest with maturities up to ten years for equipment and machinery and shorter maturities of up to two years for other items, which may require security in the form of a bank guarantee, pledge or mortgage on the borrower’s local assets. We generally provide up to 80% of the import contract amount, but provide up to 90% of the import contract amount in the case of small and medium-sized enterprises and up to 100% for transactions with a letter of credit opened by a bank.

Guarantee Operations

We provide guarantees in favor of Korean commercial banks and foreign banks or foreign importers in respect of the obligations of Korean exporters in order to facilitate export and import financings. Such guarantee programs for Korean exporters and importers include (1) financial guarantees to co-financing banks that provide loans for transactions that satisfy our eligibility requirements and (2) project-related guarantees to foreign importers for the performance of Korean exporters on eligible projects in the form of bid bonds, advance payment bonds, performance bonds and retention bonds. Guarantee commitments as of December 31, 2010 decreased to (Won)68,148 billion from (Won)75,869 billion as of December 31, 2009. Guarantees we had confirmed as of December 31, 2010 decreased to (Won)44,176 billion from (Won)45,165 billion as of December 31, 2009.

We mainly issue project-related guarantees, which include:

• advance payment guarantees that are issued to overseas importers of Korean goods and services to support obligations to refund down payments made to Korean exporters in the event of a failure to deliver the goods to be exported; and

• performance guarantees that are issued to foreign importers to support the performance by Korean exporters of their contractual obligations.

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In 2010, we issued project-related confirmed guarantees in the amount of (Won)25,574 billion, an increase of 11% from the previous year, which was mainly due to an increase in advance payment guarantees resulting from increased overseas plant construction activities in 2010.

We also issue letters of credit to foreign exporters to assist in the financing of projects approved in connection with import credit loans, and to Korean exporters to assist in the financing of projects approved in connection with export credit loans.

For further information regarding our guarantee and letter of credit operations, see “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 11”.

Government Account Operations

Economic Development Cooperation Fund

In 1987, the Government established the Economic Development Cooperation Fund (the “EDCF”) to provide loans, at concessional interest rates, to governments or agencies of developing countries for projects that contribute to industrial development or economic stabilization of such countries. We administer the EDCF on behalf of the Government and are responsible for project appraisal, documentation and administrative work relating to the EDCF Loans. The EDCF business accounts are maintained separately from our own account on behalf of the Government, and we derive no separate income or expenditures from our operation of the EDCF business. Government contributions constitute the primary funding source of the EDCF. Loan disbursements by the EDCF in 2010 amounted to (Won)411 billion for 63 projects in 21 countries, an increase of 31% from the previous year. As of December 31, 2010, the total outstanding loans extended by the EDCF was (Won)2,364 billion, an increase of 18% from the previous year.

Inter-Korea Cooperation Fund

In 1991, the Government established the Inter-Korea Cooperation Fund (the “IKCF”) to promote mutual exchanges and cooperation between the Republic and North Korea by engaging in funding and financing activities to support family reunions, cultural events, academic seminars, trade and economic cooperation between the two countries. We administer the IKCF under the initiative and policy coordination of the Ministry of Unification. The IKCF accounts are maintained separately from our own account on behalf of the Government. Government contributions are the major funding source of the IKCF. The IKCF disbursements during 2010 amounted to (Won)86 billion for 234 projects, and cumulative total disbursements as of December 31, 2010 were (Won)5,597 billion, an increase of 1.6% from (Won)5,510 billion as of December 31, 2009.

Other Operations

We engage in various other activities related to our financing activities.

Activities in which we currently engage include:

• country information services performed by the Overseas Economic Research Institute, which conducts country studies and country risk evaluation to assist in the efficient utilization of our financial resources;

• export credit advisory services, which are aimed at bringing about a larger share of overseas bidding by giving Korean exporters a wide range of knowledge on the country, industry, market and financial situation of the importing country in the early stage of the tendering process or contract negotiations;

• consulting services by in-house professionals including lawyers, accountants and regional experts who consult on international transactions; and

• management of Korea’s foreign direct investment database.

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Description of Assets and Liabilities

Except where expressly indicated otherwise, loans in Won and loans in foreign currencies are collectively referred to as the “Loans”. Bills bought, foreign exchange bought and advances for customers are collectively referred to as the “Other Loans”. Loans and Other Loans are collectively referred to as the “Loan Credits”. Confirmed guarantees and acceptances are collectively referred to as the “Guarantees”. Loan Credits and Guarantees are collectively referred to as the “Credit Exposure”.

Total Credit Exposure

We extend credits to support export and import transactions, overseas investment projects and other relevant products in various forms including loans and guarantees.

The following table sets out our Credit Exposure as of December 31, 2008, 2009 and 2010, categorized by type of exposure extended:

		As of December 31,
		2008					2009					2010
		(billions of Won, except for percentages)
A	Loans in Won	(Won)	6,070		8	%	(Won)	9,710		12	%	(Won)	9,090		11	%
B	Loans in Foreign Currencies		24,353		30			25,108		31			29,548		35
C	Loans (A+B)		30,423		38			34,818		43			38,638		46
D	Other Loans		550		1			721		1			952		1
E	Call Loans and Inter-bank Loans in Foreign Currency		1,417		2			1,884		2			1,640		2
F	Loan Credits (C+D+E)		32,390		40			37,423		46			41,230		49
G	Allowances for Loan Losses		(922	)	(1	)		(1,182	)	(1	)		(1,448	)	1
H	Present Value Discount (PVD)		(45	)	(—	)		(42	)	(—	)		(25	)	(—	)
I	Loan Credits including PVD (F-G-H)		31,423		39			36,199		45			39,757		47
J	Guarantees		48,635		61			45,165		55			44,176		53
K	Credit Exposure (I+J)		80,058		100			81,364		100			83,933		100

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 December 31, 2008, 2009 and 2010, categorized by geographic area ⁽¹⁾:

	As of December 31 (1)(2),						As % of 2010 Total
	2008		2009		2010
	(billions of Won)
Asia	(Won)	24,755	(Won)	30,958	(Won)	34,716		84	%
Europe		6,073		5,352		5,287		13
America		1,201		1,100		1,203		3
Africa		298		12		24		0
Oceania		63		1		—		—
Total	(Won)	32,390	(Won)	37,423	(Won)	41,230		100	%

(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.

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We engage in business related to Iran, including transactions involving as counterparties Iranian banks that may be indirectly owned or controlled by the Iranian government. The U.S. State Department has designated Iran as a state sponsor of terrorism, and U.S. law generally prohibits U.S. persons from doing business in Iran. We are a Korean bank and our activities with respect to Iran have not involved any U.S. person in either a managerial or operational role and have been subject to policies and procedures designed to ensure compliance with applicable Korean laws and regulations. We believe that our activities related to Iran are not subject to the mandatory sanctions under Section 104 of the U.S. Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and the Iran Financial Sanctions Regulations issued by the U.S. Secretary of the Treasury thereunder (the “IFSR”).

Our business related to Iran consists solely of extensions of credit and financing provided in connection with exports of Korean goods and services to Iran and our disbursements of Iran-related credits are made directly to Korean suppliers or exporters except certain credits made to Iranian banks. Such activities have involved export-related credits to finance the export contracts of Korean exporters supplying goods and services to Iranian companies, credit line extensions to Iranian banks to finance consumer products exports by Korean exporters, extensions of credit through non-recourse discounting of export trade bills, and purchases of promissory notes securing export transactions. Our Loans to Iran represented 3%, 2% and 1% of our total assets as of December 31, 2008, December 31, 2009 and December 31, 2010, respectively, and also represented 3%, 2% and 2% of our Loan Credits, respectively, as of the above dates. Our Loans to Iran, categorized by country that has the final redemption risk of loans, represented 3% and 3% of our total assets and 4% and 3% of our Loan Credits as of December 31, 2009 and December 31, 2010, respectively. Our total revenues from transactions with Iran in 2008, 2009 and 2010 represented 2%, 2% and 1% of our total revenues, respectively, in those periods.

We are aware, through press reports and other means, of initiatives by governmental entities in the U.S. and by U.S. institutions such as universities and pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran, including CISADA and IFSR. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers or as investors in our debt securities. In addition, our reputation may suffer due to our association with Iran. Such a result could have significant adverse effects on our business or the price of our debt securities.

Individual Exposure

The KEXIM Decree imposes limits on our aggregate credits extended to a single person or business group. As of the date hereof, we are in compliance with such requirements.

As of December 31, 2010, our largest Credit Exposure was to Daewoo Shipbuilding & Marine Engineering in the amount of (Won)8,925 billion. As of December 31, 2010, our second largest and third largest Credit Exposures respectively were to Samsung Heavy Industries in the amount of (Won)6,726 billion and to Hyundai Heavy Industries in the amount of (Won)5,791 billion.

The following table sets out our five largest Credit Exposures as of December 31, 2010 ⁽¹⁾:

Rank	Name of Borrower	Loans		Guarantees		Total
		(billions of Won)
1	Daewoo Shipbuilding & Marine Engineering	(Won)	374	(Won)	8,551	(Won)	8,925
2	Samsung Heavy Industries		385		6,341		6,726
3	Hyundai Heavy Industries		102		5,689		5,791
4	Sungdong Shipbuilding		757		1,364		2,121
5	STX Shipbuilding & Marine Engineering		175		1,767		1,942

(1) Includes loans and guarantees extended to affiliates.

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Asset Quality

The Supervisory Regulation of Banking Business (“Supervisory Regulation”) legislated by the Financial Services Commission requires banks, including us, to analyze and classify their credits into one of five categories as normal, precautionary, substandard, doubtful or estimated loss by taking into account borrowers’ repayment capacity as well as a number of other factors including the financial position, profitability, transaction history of the relevant borrower and the value of any collateral or guarantee taken as security for the extension of credit. Categorizations are applied to all loans except call loans and interbank loans, which are classified as normal. The Supervisory Regulation also requires banks, including us, to provide the minimum rate of loan loss provision for each category. Credit categorizations and minimum reserve ratios are as follows:

Normal	Credits extended to customers which, in consideration of their business and operations, financial conditions and future cash flows, do not raise concerns regarding their ability to repay the credits. 0.85% or more reserves required (for companies in certain industries 0.9% or more).
Precautionary	Credits extended to customers (1) which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have potential risks with respect to their ability to repay the credits in the future, although there have not occurred any immediate risks of default in repayment; or (2) which are in arrears for one month or more but less than three months. 7.0% or more reserves required.
Substandard	(1) Credits extended to customers, which in consideration of their business and operations, financial conditions and future cash flows, are judged to have incurred considerable risks for default in repayment as the customers’ ability to repay has deteriorated; or (2) that portion which is expected to be collected of total credits (a) extended to customers which have been in arrears for three months or more, (b) extended to customers which are judged to have incurred serious risks due to the occurrence of final refusal to pay their promissory notes, liquidation or bankruptcy proceedings, or closure of their businesses or (c) of “Doubtful Customers” or “Estimated-loss Customers” (each as defined below). 20% or more reserves required.
Doubtful	That portion of credits in excess of the amount expected to be collected of total credits extended to (1) customers (“Doubtful Customers”) which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have incurred serious risks of default in repayment due to noticeable deterioration in their ability to repay; or (2) customers which have been in arrears for three months or more but less than twelve months. 50% or more reserves required.
Estimated Loss	That portion of credits in excess of the amount expected to be collected of total credits extended to (1) customers (“Estimated-loss Customers”), which, in consideration of their business and operations, financial conditions and future cash flows, are judged to have to be accounted as a loss as the inability to repay became certain due to serious deterioration in their ability to repay; (2) customers which have been in arrears for twelve months or more; or (3) customers which are judged to have incurred serious risks of default in repayment due to the occurrence of final refusal to pay their promissory notes, liquidation or bankruptcy proceedings, or closure of their businesses. 100% reserves required.

In November 2004, the Financial Services Commission announced loan loss provisioning guidelines for banks, which include a requirement that banks take into account “expected loss” based on their own “historical loss” with respect to credits in establishing their allowance for loan losses, instead of establishing such allowances based on the classification of credits under the current asset classification criteria.

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Based on the guidelines, we established new loan loss provisioning levels taking into account a borrower’s industry risk, individual credit risk and financial risk based on our system for evaluating “expected loss”. In 2005, we also modified our loan loss provisioning methodology with respect to normal loans. Loans classified as normal were categorized either as domestic loans or overseas loans. Domestic loans were further subdivided into small and medium-sized business loans and big enterprise loans. Our loan loss provisioning level for domestic loans was established based on a basic loan loss provisioning rate and default risk level according to the term of such loan (i.e., the year of maturity). The basic loan loss provisioning rate for small and medium-sized business loans was calculated based on our system for evaluating “historical loss”. With respect to the basic loan loss provisioning rate for big enterprise loans, we did not have enough statistical data for historical loan losses with respect to such loans so we applied an average rate of other Korean banks’ provisioning levels for normal loans. Our loan loss allowance for overseas normal loans was calculated based on sovereign credit ratings and on whether a borrower was a public or private enterprise. In addition, we changed our reserve policies for confirmed acceptances and guarantees pursuant to the amended Supervisory Regulation of Banking Business. We have also established reserves for unconfirmed acceptances and guarantees as well as commitments since January 1, 2005. In January 2008, we further modified our loan loss provisioning methodology with respect to normal loans and established loan loss provisioning levels using the expected loss method. The expected loss method analyzes factors of expected loss based on probability of default, or “PD”, and loss given default, or “LGD”, based on a loan credit rating classification. This credit rating model considers the industry risk, the individual risk and the financial risk of a borrower and classifies the borrower’s credit risk within 6 rating categories (in the case of domestic loans), 14 rating categories (in the case of overseas loans for a private enterprise) or 4 rating categories (in the case of overseas loans for a sovereign or a public enterprise) to assess the PD based on historical data for the past years. The 5 rating categories of LGD are determined by the type of loan and collateral and based on Basel II guidelines. The provision rate is calculated by multiplying the PD and LGD.

Asset Classifications

The following table provides information on our loan loss reserves:

	As of December 31, 2008							As of December 31, 2009							As of December 31, 2010
	Loan Amount (1)		Minimum Reserve Ratio			Loan Loss Reserve  (2)		Loan Amount  (1)		Minimum Reserve Ratio			Loan Loss Reserve  (2)		Loan Amount  (1)		Minimum Reserve Ratio			Loan Loss Reserve  (2)
	(in billions of Won, except percentages)
Normal	(Won)	120,463		0.85	% (3)	(Won)	1,164	(Won)	77,908		0.85	% (3)	(Won)	1,032	(Won)	78,128		0.85	% (3)	(Won)	1,174
Precautionary		1,197		7.0	%		96		2,327		7.0	%		236		4,963		7.0	%		586
Sub-standard		43		20.0	%		19		192		20.0	%		84		318		20.0	%		139
Doubtful		52		50.0	%		46		103		50.0	%		98		49		50.0	%		46
Estimated Loss		103		100.0	%		103		132		100.0	%		132		274		100.0	%		241
Total	(Won)	121,858				(Won)	1,428	(Won)	80,662				(Won)	1,581	(Won)	83,732				(Won)	2,185

(1) These figures include loans (excluding interbank loans and call loans), domestic usance, bills bought, foreign exchange bought, advances for customers, confirmed and unconfirmed acceptances and guarantees.

(2) These figures include present value discount.

(3) 0.9% for companies in certain industries.

Reserves for Credit Losses

Non-performing assets (“NPA”) are (i) assets classified as doubtful and estimated loss, (ii) assets in delinquency of repayments of principal or interest more than three months, or (iii) assets exempted from interest payments due to restructuring or rescheduling.

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The following table sets out our 10 largest non-performing assets as of December 31, 2010:

Borrower	Loans		Guarantees		Total
	(billions of Won)
Sekwang Heavy Industries	(Won)	205	(Won)	267	(Won)	472
Islamic Republic of Iran Shipping Lines		133		—		133
Keangnam Enterprise		—		41		41
Keumho Tires Co., Ltd.		25		12		37
Daehan Shipbuilding Co., Ltd		—		29		29
Taesan LCD Co., Ltd.		20		—		20
Hongwon Paper Mtg. Co., Ltd		16		—		16
Motia Compagna Di Navigazione S.P.A.		11		—		11
Young Kwang Stainless Co., Ltd.		10		—		10
Taesan LCD(Suzhou) Co., Ltd.		7		—		7
Total	(Won)	427	(Won)	349	(Won)	776

In the early 1990’s, at the direction of the Government, we extended a commodity loan in the aggregate amount of US$466 million to Vnesheconombank, the Bank for Foreign Economic Affairs of the former Soviet Union, which was guaranteed by the government of the former Soviet Union, as part of the Government’s policy to enhance economic cooperation between the two countries. Since the dissolution of the Soviet Union, the Government has been negotiating repayment terms with the government of the Russian Federation, which has agreed to assume the guarantee of the former Soviet Union in respect of the obligations of Vnesheconombank under such loan. In 1995, the two governments came to an agreement on a repayment schedule in respect of approximately half of the loan. Since the agreement was made, US$229 million of the principal was repaid.

In June 2003, the two governments reached an agreement as to the rescheduling of the remaining portion of the loan and the change of the borrower from Vnesheconombank to the government of the Russian Federation. As a result, in September 2003, we upgraded the classification of the outstanding (Won)258 billion (including accrued and unpaid interest) of our exposure to the government of the Russian Federation from estimated loss to doubtful in terms of asset quality and established a 70% provisioning level for that credit exposure. In June 2004, we further upgraded the classification of our exposure to the government of the Russian Federation from doubtful to precautionary in terms of asset quality, following the continued repayment of the loan by the government of the Russian Federation in accordance with the agreed payment schedule. As of December 31, 2010, our exposure to the government of the Russian Federation amounted to (Won)181 billion and we established a 4.3% 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 its borrowers (including its largest borrowers as described above) is not currently facing, or in the future will not face, material financial difficulties.

As of December 31, 2010, the amount of our non-performing assets was (Won)854 billion, an increase of 106% from (Won)414 billion as of December 31, 2009. As of December 31, 2010, our non-performing asset ratio was 1.0%, compared to 0.5% as of December 31, 2009.

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The following table sets forth our reserves for possible credit losses as of December 31, 2009 and 2010:

	As of December 31,
	2009			2010
	(billions of Won, except for percentages)
Loan Loss Reserve (A)	(Won)	1,581		(Won)	2,185
NPA (B) (1)		414			854
Total Equity (C)		6,463			6,523
Reserve to NPA (A/B)		382	%		256	%
Equity at Risk (B-A)/C		—			—

(1) Non-performing assets, which are defined as (a) assets classified as doubtful and estimated loss, (b) assets in delinquency of repayments of principles or interests more than 3 months or (c) assets exempted from interest payments due to restructuring or rescheduling.

Source: Internal accounting records.

The following table sets forth our actual loan loss reserve ratios under the Financial Services Commission guidelines as of December 31, 2009 and 2010:

Classification of Loans	Financial Services Commission Guidelines			Actual Reserve Coverage (as of December 31, 2009)			Actual Reserve Coverage (as of December 31, 2010)
Normal		More than 0.85	%		1.3	%		2.0	%
Precautionary		More than 7.0	%		10.1	%		16.3	%
Substandard		More than 20.0	%		43.5	%		43.5	%
Doubtful		More than 50.0	%		94.7	%		94.7	%
Estimated Loss		100.0	%		100.0	%		100.0	%

Investments

Under the KEXIM Decree, we are not allowed to hold stocks or securities of more than three years’ maturity in excess of 60% of our equity capital. However, investment in the following securities is not subject to this restriction:

• Government bonds;

• BOK currency stabilization bonds;

• securities acquired via Government investment; and

• securities acquired through investment approved by the Government, for research related to our operations, for our financing or pursuant to Korean statutes.

As of December 31, 2010, our total investment in securities amounted to (Won)3,205 billion, representing 7% of our total assets. Our securities portfolio consists primarily of available-for-sale securities. Available-for-sale securities mainly comprise equity securities in Korea Exchange Bank and Industrial Bank of Korea which were recapitalized by the Government through us and equity securities in Korea Expressway Corporation which were in-kind contributions made by the Government to us. In October 2005, we sold 32,000,000 shares of common stock, which represented 79% of our holding of common stock in Industrial Bank of Korea, for (Won)421 billion. In May 2006, we sold 49,134,208 shares of common stock, which represented 55% of our holding of common stock in Korea Exchange Bank, for (Won)417 billion. In 2007, we sold 2,376,495 shares of common stock, which represented 18% of our holding of common stock in SK Networks, and 469,932 shares of preferred stock, which represented 60% of our holding of preferred stock in SK Networks, for (Won)103 billion. In 2008, we sold 317,510 shares of preferred stock, which represented all of our holding of preferred stock in SK Networks, for (Won)28 billion. In 2009, we sold 628,445 shares of common stock, which represented 18% of our holding of common stock in SK Networks, for (Won)7 billion and 300,000 shares of common stock, which represented 3% of our

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holding of common stock in Daewoo International Corporation, for (Won)10.5 billion. In 2010, we sold 11,326,292 shares of common stock, which represented all of our holding of common stock in Daewoo International, for (Won)508 billion and acquired 7,197,800 shares of common stock of Kumho Tires, representing 8% of its total outstanding shares, in connection with Kumho Group’s debt restructuring.

The following table sets out the composition of our securities as of December 31, 2009 and December 31, 2010:

	As of December 31, 2009					As of December 31, 2010
Type of Investment Securities	Amount		%			Amount		%
	(billions of Won)					(billions of Won)
Available-for-sale Securities	(Won)	3,163		96	%	(Won)	2,970		93	%
Held-to-maturity Securities		—		—			—		—
Investments in Associates		115		4	%		235		7	%
Total	(Won)	3,278		100.0	%	(Won)	3,205		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 December 31, 2010 and 2009—Note 2”.

Guarantees and Acceptances and Contingent Liabilities

We have credit risk factors that are not reflected on the balance sheet, which include risks associated with guarantees and acceptances. Guarantees and acceptances do not appear on the balance sheet, but rather are recorded as an off-balance sheet item in the notes to the financial statements. Guarantees and acceptances include financial guarantees, project related guarantees, such as bid bond, advance payment bond, performance bond or retention bond, and acceptances and advances relating to trade financings such as letters of credit or import freight. Contingent liabilities, for which the guaranteed amounts were not finalized, appear as unconfirmed guarantees and acceptance items in the notes to the financial statements as off-balance sheet items.

As of December 31, 2010, we had issued a total amount of (Won)44,176 billion in confirmed guarantees and acceptances, of which (Won)40,907 billion, representing 92.6% of the total amount, was classified as normal, (Won)3,175 billion, representing 7.2% of the total amount, was classified as precautionary or doubtful and (Won)94 billion, representing 0.2% of the total amount, was classified as estimated loss.

Derivatives

The objective in our strategy and policies on derivatives is to actively manage and minimize our foreign exchange and interest rate risks. We do not take proprietary derivative positions. It is our policy to hedge all currency and interest rate risks wherever possible (taking into consideration the cost of hedging). We use various hedging instruments, including foreign exchange forwards and options, interest rate swaps, and cross currency swaps.

Under our internal trading rules that have been submitted to the Financial Supervisory Service, our policy is to engage in derivative transactions mainly for hedging our own position. As part of our total exposure management system, we monitor our exposure to derivatives and may make real-time inquiries, which enables our Risk Management Department to check our exposure on a regular basis. Under the guidelines set by the Financial Supervisory Service, we are required to submit reports on our derivatives exposure to the Financial Supervisory Service on a quarterly basis. As a measure to reduce the risk of intentional manipulation or error, we have separated responsibility for different functions such as initiation, authorization, approval, recording, monitoring and reporting to the Financial Supervisory Service. The Risk Management Department conducts regular reviews of derivative transactions to monitor any breach of compliance with the relevant regulatory requirements.

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As of December 31, 2010, our outstanding loans made at floating rates of interest totaled approximately (Won)26,696 billion, whereas our outstanding borrowings made at floating rates of interest totaled approximately (Won)23,655 billion, including those raised in Japanese Yen, Swiss franc, Singapore dollar, Hong Kong dollar, Mexican Peso and Euro and swapped into U.S. dollar floating rate borrowings. As a result, we are exposed to possible interest rate risks to the extent that the amount of our loans made at floating rates of interest exceeds the amount of our borrowings made at floating rates of interest. Foreign exchange risk arises because a majority of our assets and liabilities are denominated in non-Won currencies. In order to match our currency and interest rate structure, we generally enter into swap transactions.

The following table shows the unsettled notional amounts and estimated fair values of derivatives we held as of the dates indicated.

	As of December 31,
	2008						2009						2010
	Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities		Unsettled Notional Amount		Fair Value of Assets		Fair Value of Liabilities
	(in billions of Won)
Currency forwards	(Won)	951	(Won)	10	(Won)	65	(Won)	1,639	(Won)	20	(Won)	29	(Won)	721	(Won)	11	(Won)	5
Currency swaps		8,373		453		625		8,882		554		195		9,461		820		214
Interest rate swaps		7,143		165		570		11,900		136		286		11,523		263		420
Total	(Won)	16,468	(Won)	628	(Won)	1,259	(Won)	22,421	(Won)	710	(Won)	510	(Won)	21,705	(Won)	1,094	(Won)	638

As of December 31, 2010, we had entered into 140 currency related derivative contracts with a notional amount of (Won)10,182 billion and valuation for BIS capital ratio purposes of (Won)194 billion and had entered into 102 interest rate related derivative contracts with a notional amount of (Won)11,523 billion and valuation for BIS capital ratio purposes of (Won)11 billion. In connection with our currency forwards and currency swaps, we had net valuation gain of (Won)377 billion in 2010 compared to net valuation gain of (Won)254 billion in 2009, primarily due to the depreciation of the U.S. dollar against other currencies in 2010, which resulted in a decrease in the value of our obligations denominated in U.S. dollars. In connection with our interest rate swaps, we recorded net valuation loss of (Won)7 billion in 2010 compared to net valuation gain of (Won)225 billion in 2009, primarily due to a decrease in benchmark interest rates, such as LIBOR, in 2010, which resulted in a decrease in the value of our floating-for-fixed interest rate swaps. See “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 15”.

Sources of Funding

We obtain funds primarily through borrowings from the Government or governmental agencies, the issuance of bonds in both domestic and international capital markets, borrowings from domestic and foreign financial institutions, capital contributions and internally generated funds. Internally generated funds result from various activities we carried on and include principal and interest payments on our loans, fees from guarantee operations and other services, and income from marketable securities we hold.

We raised a net total of (Won)40,678 billion (new borrowings plus loan repayments by our clients less repayment of our existing debt) during 2010, a 17% increase compared with the previous year’s (Won)34,711 billion. The total loan repayments, including prepayments by our clients, during 2010 amounted to (Won)34,360 billion, an increase of 25% from (Won)27,405 billion during 2009.

Since our establishment, borrowings from the Government have provided a substantial portion of our financial resources. As of December 31, 2003, the outstanding amount of our borrowings from the Government was (Won)1,188 billion, which consisted of (Won)110 billion in Won and (Won)1,078 billion in foreign currencies. In 2004, we repaid all of the amounts borrowed from the Government. The Government provided us with loans in the

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amount of US$2,595 million in 2008 and US$383 million in the first quarter of 2009 to support our lending to Korean exporters and provide U.S. dollar liquidity to us. In 2009, we repaid all of the amounts borrowed from the Government and as of December 31, 2010, we had no outstanding borrowings from the Government. We also issued Won-denominated domestic bonds in the aggregate amount of (Won)3,250 billion, (Won)8,150 billion and (Won)8,920 billion during 2008, 2009 and 2010, respectively.

We have diversified our funding sources by borrowing from various overseas sources and issuing long-term floating-rate notes and fixed-rate debentures in the international capital markets. These issues were in foreign currencies, including the U.S. dollar, pound sterling, Thai Baht, Malaysia Ringgit, Japanese Yen, Australian Dollar, Euro, Hong Kong dollar, Singapore dollar, Swiss franc, Brazilian Real, Turkish Lira and Mexican Peso, Peruvian sol,Indian rupee, Indonesian Rupiah, Chinese Yuan, Philippine Peso and have original maturities ranging from one to ten years.

During 2010, we issued eurobonds in the aggregate principal amount of US$3,406 million in various types of currencies under our existing Euro medium term notes program (the “EMTN Program”), a 27% decrease from US$4,670 million in 2009. These bond issues consisted of offerings of US$1,009 million, HKD 5,062 million, SGD 322 million, BRL 1,201 million, AUD 38 million, PEN 61 million, INR 9,835 million, IDR 1,725,000 million, CNY 200 million, PHP 11,350 million and JPY 6,000 million. In addition, we issued global bonds during 2010 in the aggregate amount of US$3,250 million under our U.S. shelf registration statement (the “U.S. Shelf Program”) compared with US$3,500 million in 2009. We also issued MYR 1,080 million of bonds under our Islamic medium term notes program. As of December 31, 2010, the outstanding amounts of our notes and debentures were US$14,579 million, AUD 63 million, JPY 110,000 million, CHF 1,100 million, EUR 1,885 million, SGD 598 million, HKD 8,668 million, MXN 3,300 million, MYR 2,975 million, THB 7,500 million, PEN 61 million, INR 9,835 million, IDR 1,725,000 million, CNY 200 million, PHP 11,350 million and BRL1,201 million.

We also borrow from foreign financial institutions in the form of loans that are principally made by syndicates of commercial banks at floating or fixed interest rates and in foreign currencies, with original maturities ranging from one to three years. As of December 31, 2010, the outstanding amount of such borrowings from foreign financial institutions was US$1,012 million.

Our paid-in capital has increased from time to time since our establishment. From January 1998 to December 2010, the Government contributed (Won)3,349 billion to our capital. As of December 31, 2010, our total paid-in capital amounted to (Won)5,159 billion, and the Government, The Bank of Korea and Korea Finance Corporation owned 74.4%, 22.6% and 3.0%, respectively, of our paid-in capital. In January 2011, the Government contributed (Won)50 billion in cash to our capital, and in April 2011, the Government contributed, indirectly through Korea Finance Corporation, (Won)1,000 billion in the form of shares of common stock of Korea Expressway Corporation to our capital. As of the date of this prospectus, our paid-in capital was (Won)6,209 billion, and the Government, The Bank of Korea and Korea Finance Corporation owned 62.7%, 18.7% and 18.6%, respectively, of our paid-in capital.

In connection with our fund raising activities, we have from time to time sold third parties promissory notes, including related guarantees, acquired as collateral in connection with export credit financings.

The KEXIM Act provides that the aggregate outstanding principal amount of all of our borrowings, including the total outstanding export-import financing debentures we issued in accordance with the KEXIM Decree, may not exceed an amount equal to thirty times the sum of our paid-in capital plus our reserves. As of December 31, 2010, the aggregate outstanding principal amount of our borrowings (including export-import financing debentures), which was (Won)37,217 billion, was equal to 20% of the authorized amount of (Won)187,740 billion.

We are not permitted to accept demand or time deposits.

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Each year we must submit to the Government for its approval an operating plan which includes our target levels for different types of funding. The following table is the part of the operating plan dealing with fund-raising for 2011:

Sources of Fund	(billions of Won)
Capital Contribution	(Won)	100
Borrowings		17,120
Collection of Loans		34,309
Repayment of Debts		12,479
Net Collection of Loans		21,830
Others		1,950
Total	(Won)	41,000

Debt

Debt Repayment Schedule

The following table sets out the principal repayment schedule for our debt outstanding as of December 31, 2010:

Debt Principal Repayment Schedule

	Maturing on or before December 31,
Currency (1)	2011		2012		2013		2014		Thereafter
	(billions of won)
Won	(Won)	5,640	(Won)	200	(Won)	190	(Won)	90	(Won)	200
Foreign		8,148		5,176		4,319		3,126		9,257
Total Won Equivalent	(Won)	13,788	(Won)	5,376	(Won)	4,509	(Won)	3,216	(Won)	9,457

(1) Borrowings in foreign currency have been translated into Won at the market average exchange rates on December 31, 2010, as announced by the Seoul Money Brokerage Services Ltd.

Normally we determine the level of our foreign currency reserves based upon an estimate, at any given time, of aggregate loan disbursements to be made over the next two to three months. Our average foreign currency reserves in 2009 and 2010 were approximately US$2,071 million and US$1,620 million, respectively. Although we currently believe that such reserves, together with additional borrowings available under our uncommitted short-term backup credit facilities and commercial paper programs, will be sufficient to repay our outstanding debt as it becomes due, there can be no assurance that we will continue to be able to borrow under such credit facilities, or that the devaluation of the Won will not adversely affect our ability to access funds sufficient to repay our foreign currency denominated indebtedness in the future. In addition to maintaining sufficient foreign currency reserves, we monitor the maturity profile of our foreign currency assets and liabilities to ensure that there are sufficient maturing assets to meet our liabilities as they become due. As of December 31, 2010, our foreign currency assets maturing within three months exceeded our foreign currency liabilities coming due within the same period by US$2,417 million, and our foreign currency liabilities coming due within six months and one year exceeded our foreign currency assets maturing within such periods by US$3,393 million and US$4,137 million, respectively. As of December 31, 2010, our total foreign currency liabilities exceeded our total foreign currency assets by US$807 million.

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Internal and External Debt of the Bank

The following table summarizes, as of December 31 of the years indicated, the outstanding internal debt of the Bank:

Internal Debt of the Bank

	(billions of Won)
2006		980
2007		1,639
2008		3,686
2009		7,030
2010		6,320

The following table sets out, by currency and the equivalent amount in U.S. Dollars, the outstanding external debt of the Bank as of December 31, 2010:

External Debt of the Bank

	Amount in Original Currency		Equivalent Amount in U.S. Dollars(1)
	(billions)
US$	US$	16.5	US	$ 16.5
Japanese yen (¥)	¥	132.4		1.6
Euro (EUR)	EUR	2.1		2.8
Singapore dollar (SGD)	SGD	0.6		0.5
Hong Kong dollar (HKD)	HKD	10.6		1.4
Philippine peso (PHP)	PHP	11.3		0.3
Swiss franc (CHF)	CHF	1.1		1.2
Malaysian Ringgit (MYR)	MYR	3.0		1.0
Australian Dollars (AUD)	AUD	0.1		0.1
Indonesian rupiah (IDR)	IDR	1,725.2		0.2
Indian Rupee (INR)	INR	9.8		0.2
Thai Bhat (THB)	THB	7.5		0.2
Mexican Peso (MXN)	MXN	3.3 M		0.3
Brazilian real (BRL)	BRL	1.2		0.7
			US$	26.9

(1) Amounts expressed in currencies other than US$ are converted to US$ at the exchange rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 31, 2010 or the prevailing market rate on December 31, 2010.

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The following table summarizes, as of December 31 of the years indicated, the outstanding external debt of the Bank:

External Debt of the Bank

	(billions of Won)
2006		10,955
2007		15,884
2008		23,895
2009		26,050
2010		30,668

For further information on the outstanding indebtedness of the Bank, see “—Tables and Supplementary Information.”

Debt Record

We have never defaulted in the payment of principal of, or interest on, any of our obligations.

Credit Policies, Credit Approval and Risk Management

Credit Policies

The Credit Policy Department functions as our centralized policy-making and planning division with respect to our lending activities. The Credit Policy Department formulates and revises our internal regulations on loan programs, sets basic lending guidelines on a country basis and gathers data from our various operating groups and produces various internal and external reports.

Credit Approval

We have multiple levels of loan approval authority, depending on the loan amount and other factors such as the nature of the credit, the conditions of the transaction, and whether the loan is secured. Our Executive Board of Directors can approve loans of any amount. The Chief Executive Committee, Credit Committee, Loan Officer Committee, Director Generals and Directors (Team Heads) each have authority to approve loans up to a specified amount. The amount differs depending on the type of loan and certain other factors, for example, whether a loan is collateralized or guaranteed.

At each level of authority, loan applications are reviewed on the basis of the feasibility of the project from a technical, financial and economic point of view in addition to evaluating the probability of recovery. In conducting such a review, the following factors are considered:

• eligibility of the transaction under our financing criteria;

• country risk of the country of the borrower and the country in which the related project is located;

• credit risk of the borrower;

• a supplier’s ability to perform under the related supply contract;

• legal disputes over the related project and supply contract; and

• availability of collateral.

When the credit rating of a prospective borrower does not meet our internal rating criteria, our policy is to ensure that the loans are either guaranteed by leading international banks or governments or made on a partially

26

or fully secured basis. Guarantees are required if the credit rating of a prospective borrower does not meet our internal rating criteria. As of December 31, 2010, approximately 4.7% of our total outstanding loans were guaranteed by banks or governments and made on a partially or fully secured basis.

Risk Management

Our overall risk management policy is set by the Risk Management Committee, which meets on a quarterly basis and from time to time to establish tolerance limits for various exposures, whereas the overall risk management is overseen by the Risk Management Department, which is responsible for monitoring risk exposure.

The Risk Management Department reports our loan portfolio to the Financial Supervisory Service on a quarterly basis. The Risk Management Department also monitors our operating groups’ compliance with internal guidelines and procedures. To manage liquidity risk, we review the strategy for the sources and uses of funds, with each division submitting projected sources and uses to the Treasury Department. The Risk Management Department and the Treasury Department continually monitor our overall liquidity and the Treasury Department prepares both weekly and monthly cash flow forecasts. Our policy is to maintain a liquidity level, which can cover loan disbursements for a period of two to three months going forward. We protect ourselves from potential liquidity squeezes by maintaining sufficient amount of liquid assets with additional back-up of short-term credit lines.

Our core lending activities expose us to market risk, mostly in the form of interest rate and foreign currency risks. The Risk Management Department reports six-month projections of our interest rate and foreign exchange gap positions to the Risk Management Committee on a quarterly basis. We also monitor changes in, and matches of, foreign currency assets and liabilities in order to reduce exposure to currency fluctuations.

One of the key components of our risk management policy, which also affects our fund-raising efforts, is to monitor matches of asset maturities and liability maturities. The average maturity as of December 31, 2010 for our Won- and foreign currency-denominated loans was 15 months and 36 months, respectively, and for Won- and foreign currency-denominated liabilities was eight months and 36 months, respectively.

We follow an overall risk management process where we:

• determine the risk management objectives;

• identify key exposures;

• measure key risks; and

• monitor risk management results.

Our risk management system is a continuous system that is frequently evaluated and updated on an ongoing basis.

Capital Adequacy

Under the Financial Supervisory Service’s guidelines on risk-adjusted capital which were introduced in consideration of the standards set by the Bank for International Settlements, all banks in Korea, including us, are required to maintain a capital adequacy ratio (Tier I and Tier II) of at least 8% on a consolidated basis. To the extent that we fail to maintain this ratio, the Korean regulatory authorities may require corrective measures ranging from management improvement recommendations to emergency measures such as disposal of assets. Beginning on January 1, 2008, the Financial Services Commission implemented the new Basel Capital Accord, referred to as Basel II, in Korea, substantially affecting the way risk is measured among Korean financial institutions, including us. Building upon the initial Basel Capital Accord of 1988, which focused primarily on credit risk, market risk, capital adequacy and asset soundness as a measure of risk, Basel II expands this approach

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to contemplate additional areas of risk such as operations risk. Basel II also institutes new measures that require us to take into account individual borrower credit risk and operations risk when calculating risk-weighted assets. As of December 31, 2010, our capital adequacy ratio was 10.8%, a decrease from 11.3% as of December 31, 2009, which was primarily due to an increase in risk adjusted assets.

The following table sets forth our capital base and capital adequacy ratios reported as of December 31, 2008, 2009 and 2010:

	As of December 31,
	2008			2009			2010
	(billions of Won, except for percentages)
Tier I	(Won)	4,696		(Won)	5,858		(Won)	5,930
Paid-in Capital		3,959			5,009			5,159
Retained Earnings		1,086			1,108			1,170
Deductions from Tier I Capital		(349	)		(261	)		(399	)
Capital Adjustments		(138	)		(140	)		(93	)
Deferred Tax Asset		(209	)		(118	)		(302	)
Others		(2	)		(3	)		(4	)
Tier II (General Loan Loss Reserves)		865			966			914
Deductions from all capital		—			—			—
Total Capital		5,561			6,822			6,844
Risk Adjusted Assets		63,893			60,632			63,498
Capital Adequacy Ratios
Tier I		7.3	%		9.7	%		9.3	%
Tier I and Tier II		8.7	%		11.3	%		10.8	%

Source:Internal accounting records.

Overseas Operations

We maintain an international presence through 12 overseas representative offices, which are located in New York, Tokyo, Beijing, Sâo Paolo, Paris, Washington D.C., Shanghai, New Delhi, Dubai, Moscow, Mexico City, and Tashkent.

We also have three wholly-owned subsidiaries, KEXIM Bank (UK) Ltd., London, KEXIM (Asia) Ltd., Hong Kong, and KEXIM Vietnam Leasing Co., Ltd., Ho Chi Minh City. These subsidiaries are engaged in the merchant banking and lease financing businesses, and assist us in raising overseas financing. We also own 85% of P.T. Koexim Mandiri Finance, a subsidiary in Jakarta, which is primarily engaged in the business of lease financing.

The table below sets forth brief details of our subsidiaries as of December 31, 2010:

	Principal Place of Business	Type of Business	Book Value		Bank’s Holding
			(billions of Won)		(%)
Kexim Bank (UK) Ltd.	United Kingdom	Commercial Banking	(Won)	47		100	%
KEXIM (Asia) Ltd.	Hong Kong	Commercial Banking		44		100
P.T. Koexim Mandiri Finance	Indonesia	Leasing and Factoring		22		85
Kexim Vietnam Leasing Co., Ltd.	Vietnam	Leasing and Guarantees		9		100

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Property

Our head office is located at 16-1 Yoido-dong, Youngdeungpo-gu, Seoul 150-996, Korea, a 34,820 square meter building completed in 1985 on a site of 9,110 square meters and owned by us. In addition to the head office, we own a staff training center located near Seoul on a site of 47,881 square meters. We also maintain 10 branches in Busan, Gwangju, Daegu, Changwon, Daejeon, Suwon, Inchon, Ulsan, Chungju and Jeonju. Our domestic branch offices and overseas representative offices are located in facilities held under long-term leases.

Management and Employees

Management

Our governance and management is the responsibility of our Board of Directors, which has authority to decide important matters relating to our business. The Board of Directors is chaired by our President and is comprised of five Directors consisting of the President, the Deputy President, one Executive Director and two Non-executive Directors. The President of Korea appoints our President upon the recommendation of the Minister of Strategy and Finance. The Minister of Strategy and Finance appoints the Deputy President and all the other Directors upon the recommendation of our President. All Board members serve for three years and are eligible for re-appointment for successive terms of office.

The members of the Board of Directors are currently as follows:

Name	Age		Executive Director Since		Position
Yong-hwan Kim		59		February 7, 2011		Chairman and President
Dong-soo Park		57		December 29, 2009		Deputy President
Jin-kyung Kim		57		August 27, 2008		Executive Director
Seung-ho Choi		65		February 1, 2010		Non-executive Director
Woo-kyu Park		62		February 1, 2010		Non-executive Director

Our basic policy guidelines for activities are established by the Operations Committee. According to the By-laws, the Operations Committee is composed of officials nominated as follows:

• President of KEXIM;

• official of the Ministry of Strategy and Finance, nominated by the Minister of Strategy and Finance;

• official of the Ministry of Foreign Affairs and Trade, nominated by the Minister of Foreign Affairs and Trade;

• official of the Ministry of Knowledge Economy, nominated by the Minister of Knowledge Economy;

• official of the Ministry of Land, Transport and Maritime Affairs, nominated by the Minister of Land, Transport and Maritime Affairs;

• official of the Financial Services Commission, nominated by the Chairman of the Financial Services Commission;

• executive director of The Bank of Korea, nominated by the Governor of The Bank of Korea;

• executive director of the Korea Federation of Banks, nominated by the Chairman of the Korea Federation of Banks;

• representative of an exporters’ association (Korea International Trade Association), nominated by the Minister of Strategy and Finance after consultation with the Minister of Knowledge Economy;

• executive director of the Korea Export Insurance Corporation established under the Export Insurance Act, nominated by the Chairman and President of the Korea Export Insurance Corporation; and

29

• up to two persons who have extensive knowledge and experience in international economic cooperation work, recommended by our Chairman and President and appointed by the Minister of Strategy and Finance.

The members of the Operations Committee are currently as follows:

Name	Age		Member Since	Position
Yong-hwan Kim		59	February 7, 2011	Chairman and President of KEXIM
Je-yoon Shin		53	March 13, 2008	Deputy Minister for International Affairs, Ministry of Strategy and Finance
Si-hyung Lee		54	February 9, 2011	Deputy Minister for Trade, Ministry of Foreign Affairs and Trade
Kyung-sik Kim		55	February 22, 2010	Deputy Minister for Trade and Investment Policy, Ministry of Knowledge Economy
Tae-ho Doh		51	January 25, 2010	Director General for Construction Policy, Ministry of Land, Transport and Maritime Affairs
Joo-hyun Kim		53	December 7, 2009	Secretary General, Financial Services Commission
Kwang-june Lee		59	April 26, 2009	Deputy Governor, The Bank of Korea
Tae-Sik Roh		57	March 16, 2009	Vice Chairman, Korea Federation of Banks
Young-Ho Oh		59	February 25, 2009	Executive Vice Chairman, Korea International Trade Association
Kye-ryoong Cho		57	July 19, 2010	Deputy President, Korea Export Insurance Corporation
Seung-Hun Chun (Private Sector)		65	November 24, 2008	President, Korea Institute for Development Strategy
Tai-kyoo Kim (Private Sector)		55	November 24, 2010	Hannam University

30

Employees

As of December 31, 2010, we had 755 employees, among which 506 employees were members of our labor union. We have never experienced a work stoppage of a serious nature. Every year during the fourth quarter, the management and union negotiate and enter into a collective bargaining agreement that has a one-year duration. The most recent collective bargaining agreement was entered into in December 2010.

Tables and Supplementary Information

A. External Debt of the Bank

(1) External Bonds of the Bank

Currency	Original Principal Amount		Interest Rate (%)	Issue Date		Maturity Date		Principal Amount Outstanding as of December 31, 2010
USD		500,000,000	5.25		February 10, 2004		February 10, 2014		500,000,000
USD		200,000,000	5.25		April 23, 2004		February 10, 2014		200,000,000
USD		45,000,000	5.20		April 30, 2004		April 30, 2014		45,000,000
USD		600,000,000	5.125		March 16, 2005		March 16, 2015		600,000,000
USD		600,000,000	5.125		February 14, 2006		February 14, 2011		600,000,000
USD		300,000,000	5.375		October 4, 2006		October 4, 2016		300,000,000
USD		500,000,000	3M USD Libor + 0.22		October 4, 2006		October 4, 2011		500,000,000
USD		50,000,000	3M USD Libor + 0.19		November 8, 2006		November 8, 2011		50,000,000
USD		50,000,000	3M USD Libor + 0.19		November 9, 2006		November 9, 2011		50,000,000
USD		100,000,000	3M USD Libor + 0.20		November 28, 2006		November 28, 2011		100,000,000
USD		50,000,000	3M USD Libor + 0.16		June 12, 2007		June 12, 2012		50,000,000
USD		50,000,000	3M USD Libor + 0.16		June 12, 2007		June 12, 2012		50,000,000
USD		1,500,000,000	5.50		October 17, 2007		October 17, 2012		1,500,000,000
USD		50,000,000	3M USD Libor + 0.45		October 22, 2007		October 22, 2012		50,000,000
USD		15,000,000	3M USD Libor + 0.45		October 23, 2007		October 23, 2012		15,000,000
USD		40,000,000	3M USD Libor + 0.45		October 24, 2007		October 24, 2012		40,000,000
USD		100,000,000	3M USD Libor + 0.95		February 27, 2008		February 27, 2013		100,000,000
USD		30,000,000	3M USD Libor + 0.74		March 13, 2008		March 13, 2011		30,000,000
USD		50,000,000	3M USD Libor + 0.75		April 2, 2008		April 4, 2011		50,000,000
USD		50,000,000	3M USD Libor + 0.75		April 3, 2008		April 4, 2011		50,000,000
USD		50,000,000	3M USD Libor + 0.98		May 16, 2008		May 14, 2012		50,000,000
USD		10,000,000	3M USD Libor + 1.375		August 5, 2008		August 5, 2011		10,000,000
USD		20,000,000	3M USD Libor + 1.45		August 26, 2008		August 26, 2013		20,000,000
USD		50,000,000	3M USD Libor + 0.98		October 9, 2008		September 25, 2013		50,000,000
USD		30,000,000	7.04		December 19, 2008		December 19, 2013		30,000,000
USD		2,000,000,000	8.125		January 20, 2009		January 21, 2014		2,000,000,000
USD		50,000,000	7.80		April 27, 2009		April 27, 2019		50,000,000
USD		49,992,455	3.20		May 8, 2009		November 8, 2011		49,992,455
USD		19,500,000	5.75		May 12, 2009		April 9, 2012		19,500,000
USD		50,000,000	6.40		May 19, 2009		May 19, 2016		50,000,000
USD		50,000,000	3M USD Libor + 2.90		June 1, 2009		June 1, 2011		50,000,000
USD		1,500,000,000	5.875		July 14, 2009		January 14, 2015		1,500,000,000
USD		20,000,000	4.15		August 11, 2009		May 11, 2012		20,000,000
USD		25,000,000	3M USD Libor + 1.85		August 11, 2009		August 11, 2011		9,000,000
USD		20,000,000	4.20		August 11, 2009		May 11, 2012		20,000,000
USD		25,000,000	3M USD Libor + 1.45		September 29, 2009		March 29, 2011		25,000,000
USD		50,000,000	3M USD Libor + 1.25		November 9 ,2009		November 9 ,2009		50,000,000
USD		50,000,000	3M USD Libor + 1.40		November 12 ,2009		November 12 ,2012		50,000,000
USD		5,000,000	3M USD Libor + 1.05		November 23, 2009		November 23, 2011		5,000,000
USD		50,000,000	3M USD Libor + 1.38		December 7, 2009		December 7, 2012		50,000,000
USD		20,000,000	3M USD Libor + 1.15		December 21, 2009		December 21, 2011		20,000,000
USD		30,000,000	3M USD Libor + 1.27		December 24, 2009		December 24, 2012		30,000,000
USD		50,000,000	3M USD Libor + 0.80		February 5, 2010		February 5, 2012		50,000,000
USD		130,000,000	3M USD Libor + 0.65		February 8, 2010		February 8, 2011		130,000,000
USD		20,000,000	3M USD Libor + 0.65		February 11, 2010		February 11, 2011		20,000,000
USD		1,000,000,000	4.125		March 9, 2010		September 9, 2015		1,000,000,000
USD		49,000,000	3M USD Libor + 0.15		April 14, 2010		April 14, 2011		49,000,000

31

Currency	Original Principal Amount		Interest Rate (%)	Issue Date		Maturity Date		Principal Amount Outstanding as of December 31, 2010
USD		50,000,000	3M USD Libor + 0.95		June 10, 2010		March 14, 2010		50,000,000
USD		270,000,000	2.65		June 23, 2010		December 23, 2013		270,000,000
USD		1,250,000,000	5.125		June 29, 2010		June 29, 2020		1,250,000,000
USD		20,000,000	1.60		July 12, 2010		July 12, 2011		20,000,000
USD		40,000,000	3M USD Libor + 0.95		July 15, 2010		July 15, 2011		40,000,000
USD		500,000,000	3M USD Libor + 1.05		September 13, 2010		March 13, 2012		500,000,000
USD		25,000,000	3M USD Libor + 0.93		September 20, 2010		September 20, 2011		25,000,000
USD		20,000,000	3M USD Libor + 0.93		September 20, 2010		September 20, 2011		20,000,000
USD		35,000,000	1.74		October 4, 2010		October 4, 2012		35,000,000
USD		20,000,000	3M USD Libor + 0.85		October 13, 2010		October 13, 2011		20,000,000
USD		1,000,000,000	4.00		October 20, 2010		January 29, 2021		1,000,000,000
USD		50,000,000	3M USD Libor + 1.19		November 26, 2010		November 26, 2013		50,000,000
			Subtotal in Original Currency					USD	13,567,492,455
			Subtotal in Equivalent Amount of Won(1)					(Won)	15,452,017,157,124
SGD		70,000,000	2.80		November 4, 2009		May 4, 2012		70,000,000
SGD		50,000,000	2.10		December 2, 2009		December 2, 2011		50,000,000
SGD		56,000,000	2.40		December 4, 2009		December 4, 2012		56,000,000
SGD		50,000,000	2.00		December 14, 2009		June 14, 2011		50,000,000
SGD		50,000,000	2.00		December 14, 2009		June 14, 2011		50,000,000
SGD		28,000,000	1.35		April 9, 2010		April 9, 2011		28,000,000
SGD		30,000,000	1.24		April 29, 2010		April 29, 2011		30,000,000
SGD		68,000,000	2.07		May 7, 2010		May 7, 2013		68,000,000
SGD		31,000,000	1.57		May 24, 2010		May 24, 2012		31,000,000
SGD		65,000,000	1.25		October 18, 2010		October 18, 2011		65,000,000
SGD		50,000,000	1.15		November 4,2010		November 4, 2011		50,000,000
SGD		50,000,000	1.51		November 18, 2010		November 16, 2012		50,000,000
			Subtotal in Original Currency					SGD	598,000,000
			Subtotal in Equivalent Amount of Won(2)					(Won)	528,632,000,000
JPY		35,000,000,000	1.84		June 26, 2007		June 26, 2012		35,000,000,000
JPY		1,000,000,000	6M USD Libor + 0.86		February 14, 2008		February 14, 2013		1,000,000,000
JPY		15,000,000,000	3.24		June 20, 2008		June 20, 2018		15,000,000,000
JPY		20,000,000,000	3M ¥ Libor + 0.85		July 7, 2008		July 7, 2011		20,000,000,000
JPY		3,000,000,000	3M USD Libor + 1.20		August 18, 2008		August 19, 2011		3,000,000,000
JPY		5,000,000,000	2.60		September 4, 2008		September 4, 2013		5,000,000,000
JPY		5,000,000,000	2.50		December 29, 2009		December 27, 2019		5,000,000,000
JPY		2,000,000,000	0.70		May 20, 2010		May 20, 2011		2,000,000,000
JPY		20,000,000,000	3M USD Libor + 0.60		October 8, 2010		October 7, 2011		20,000,000,000
JPY		4,000,000,000	1.00		December 7, 2010		December 7, 2015		4,000,000,000
			Subtotal in Original Currency					JPY	110,000,000,000
			Subtotal in Equivalent Amount of Won(3)					(Won)	1,536,788,000,000
HKD		375,000,000	3.84		February 1, 2008		February 1,2015		375,000,000
HKD		200,000,000	3M Hibor + 0.68		May 16, 2008		May 16, 2011		200,000,000
HKD		180,000,000	4.60		June 27, 2008		June 27, 2011		180,000,000
HKD		100,000,000	3.90		June 8, 2009		June 8, 2011		100,000,000
HKD		168,000,000	4.25		June 15, 2009		June 15, 2012		168,000,000
HKD		205,000,000	3.34		August 7, 2009		August 7, 2011		205,000,000
HKD		230,000,000	4.05		September 9, 2009		September 9, 2013		230,000,000
HKD		100,000,000	3M Hibor + 1.30		September 22, 2009		September 22, 2011		100,000,000
HKD		100,000,000	1.95		October 5, 2009		April 6, 2011		100,000,000
HKD		245,000,000	1.90		October 15, 2009		April 15, 2011		245,000,000
HKD		150,000,000	3.07		October 15, 2009		October 15, 2012		150,000,000
HKD		200,000,000	2.42		November 3, 2009		November 3, 2011		200,000,000
HKD		166,000,000	3.30		November 5, 2009		November 5, 2012		166,000,000
HKD		300,000,000	2.30		November 9, 2009		November 9, 2011		300,000,000
HKD		150,000,000	2.30		November 9, 2009		November 9, 2011		150,000,000
HKD		150,000,000	3M Hibor + 0.96		November 25, 2009		November 25, 2011		150,000,000
HKD		387,000,000	3M Hibor + 1.00		November 27, 2009		November 28, 2011		387,000,000

32

Currency	Original Principal Amount		Interest Rate (%)	Issue Date		Maturity Date		Principal Amount Outstanding as of December 31, 2010
HKD		200,000,000	1.75		December 10, 2009		December 10, 2011		200,000,000
HKD		160,000,000	1.01		January 15, 2010		January 18, 2011		160,000,000
HKD		200,000,000	2.55		January 15, 2010		January 15, 2013		200,000,000
HKD		185,000,000	2.32		January 25, 2010		January 25, 2013		185,000,000
HKD		151,000,000	2.33		February 1, 2010		February 1, 2013		151,000,000
HKD		100,000,000	0.92		February 3, 2010		February 7, 2011		100,000,000
HKD		156,000,000	2.33		February 25, 2010		February 25, 2013		156,000,000
HKD		160,000,000	2.46		February 26, 2010		February 26, 2013		160,000,000
HKD		300,000,000	3M Hibor + 0.65		March 22, 2010		December 22, 2011		300,000,000
HKD		200,000,000	3M Hibor + 0.65		March 22, 2010		December 22, 2011		200,000,000
HKD		150,000,000	0.94		March 25, 2010		March 25, 2011		150,000,000
HKD		160,000,000	1.00		April 1, 2010		April 1, 2011		160,000,000
HKD		380,000,000	1.77		May 27, 2010		May 27, 2012		380,000,000
HKD		120,000,000	1.77		May 27, 2010		May 27, 2012		120,000,000
HKD		252,000,000	4.05		June 24, 2010		June 24, 2020		252,000,000
HKD		100,000,000	2.35		June 24, 2010		June 24, 2013		100,000,000
HKD		156,000,000	1.90		July 2, 2011		July 2, 2012		156,000,000
HKD		100,000,000	3M Hibor + 0.81		July 9, 2010		July 11, 2011		100,000,000
HKD		150,000,000	1.08		August 31, 2010		August 31, 2011		150,000,000
HKD		130,000,000	1.07		August 31, 2010		August 31, 2011		130,000,000
HKD		201,000,000	2.72		September 7, 2010		September 8, 2015		201,000,000
HKD		194,000,000	2.00		September 13, 2010		September 13, 2013		194,000,000
HKD		500,000,000	1.12		September 14, 2010		September 13, 2011		500,000,000
HKD		155,000,000	1.145		September 20, 2010		September 20, 2011		155,000,000
HKD		155,000,000	3M Hibor + 0.80		October 29, 2010		October 29, 2012		155,000,000
HKD		387,000,000	1.73		November 19, 2010		November 19, 2013		387,000,000
HKD		160,000,000	0.9150		November 23, 2010		November 23, 2011		160,000,000
			Subtotal in Original Currency					HKD	8,668,000,000
			Subtotal in Equivalent Amount of Won(4)					(Won)	1,268,561,800,000
MYR		500,000,000	4.08		March 12, 2008		March 12, 2013		500,000,000
MYR		500,000,000	4.50		March 12, 2008		March 12, 2018		500,000,000
MYR		220,000,000	4.75		February 18, 2009		February 17. 2012		220,000,000
MYR		500,000,000	4.10		September 9, 2009		September 7, 2012		500,000,000
MYR		175,000,000	4.10		September 15, 2009		September 14, 2012		175,000,000
MYR		230,000,000	4.50		March 10, 2010		March 10, 2015		230,000,000
MYR		150,000,000	4.00		July 1, 2010		July 1, 2013		150,000,000
MYR		400,000,000	4.50		July 1, 2010		July 1, 2015		400,000,000
MYR		150,000,000	4.00		July 1, 2010		July, 1, 2013		150,000,000
MYR		150,000,000	4.00		July 15, 2010		July 15, 2013		150,000,000
			Subtotal in Original Currency					MYR	2,975,000,000
			Subtotal in Equivalent Amount of Won(5)					(Won)	1,098,816,250,000
BRL		370,000,000	9.80		February 22, 2010		February 22, 2011		370,000,000
BRL		352,640,000	10.75		April 16, 2010		December 23, 2011		352,640,000
BRL		367,240,000	10.85		June 7, 2010		June 7, 2011		367,240,000
BRL		39,000,000	9.30		August 26, 2010		December 28, 2011		39,000,000
BRL		43,000,000	9.30		September 10, 2010		September 10, 2012		43,000,000
BRL		29,000,000	8.45		November 19, 2010		May 19, 2012		29,000,000
			Subtotal in Original Currency					BRL	1,200,880,000
			Subtotal in Equivalent Amount of Won(6)					(Won)	823,899,750,400
EUR		325,000,000	3M Euribor + 0.24		February 14, 2006		February 14, 2013		325,000,000
EUR		750,000,000	4.625		February 20, 2007		February 20, 2017		750,000,000
EUR		750,000,000	5.75		May 22, 2008		May 22, 2013		750,000,000
EUR		60,000,000	3M Euribor + 1.45		July 9, 2008		July 9, 2013		60,000,000
			Subtotal in Original Currency					EUR	1,885,000,000
			Subtotal in Equivalent Amount of Won(7)					(Won)	2,853,136,000,000

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Currency	Original Principal Amount		Interest Rate (%)	Issue Date		Maturity Date		Principal Amount Outstanding as of December 31, 2010
MXN		1,000,000,000	8.61		October 11, 2007		October 11, 2017		1,000,000,000
MXN		1,200,000,000	1M TIIE + 0.30		January 28, 2008		January 28, 2013		1,200,000,000
MXN		800,000,000	8.61		April 29, 2008		October 11, 2017		800,000,000
MXN		300,000,000	8.61		May 6, 2008		October 11, 2017		300,000,000
			Subtotal in Original Currency					MXN	3,300,000,000
			Subtotal in Equivalent Amount of Won(8)					(Won)	303,171,000,000
THB		1,500,000,000	6.28		August 7, 2008		August 7, 2018		1,500,000,000
THB		2,000,000,000	5.39		August 7, 2008		August 7, 2011		2,000,000,000
THB		1,000,000,000	2.80		June 28, 2010		June 28, 2013		1,000,000,000
THB		3,000,000,000	3.95		June 28, 2010		June 28, 2020		3,000,000,000
			Subtotal in Original Currency					THB	7,500,000,000
			Subtotal in Equivalent Amount of Won(9)					(Won)	283,350,000,000
CHF		350,000,000	2.75		January 18, 2007		January 18, 2012		350,000,000
CHF		250,000,000	3.875		May 23, 2008		May 23, 2011		250,000,000
CHF		500,000,000	2.50		October 26, 2012		October 26, 2009		500,000,000
			Subtotal in Original Currency					CHF	1,100,000,000
			Subtotal in Equivalent Amount of Won(10)					(Won)	1,339,811,000,000
AUD		25,000,000	6.50		December 1, 2009		December 1, 2011		25,000,000
AUD		38,000,000	7.30		July 12, 2010		July 12, 2015		38,000,000
			Subtotal in Original Currency					AUD	63,000,000
			Subtotal in Equivalent Amount of Won(11)					(Won)	72,948,960,000
INR		2,235,000,000	5.50		October 22, 2010		October 22, 2013		2,235,000,000
INR		7,600,000,000	5.10		October 29, 2010		October 29, 2013		7,600,000,000
			Subtotal in Original Currency					INR	9,835,000,000
			Subtotal in Equivalent Amount of Won(12)					(Won)	249,809,000,000
CNY		200,000,000	0.75		November 15, 2010		November 15, 2015		200,000,000
			Subtotal in Original Currency					CNY	200,000,000
			Subtotal in Equivalent Amount of Won(13)					(Won)	34,500,000,000
IDR		1,725,000,000,0	6.60		November 4, 2010		November 4, 2013		1,725,000,000,000
			Subtotal in Original Currency					IDR	1,725,000,000,000
			Subtotal in Equivalent Amount of Won(14)					(Won)	218,385,000,000
PEN		61,000,000	6.875		September 7, 2010		September 7, 2022		61,000,000
			Subtotal in Original Currency					PEN	61,000,000
			Subtotal in Equivalent Amount of Won(15)					(Won)	24,753,800,000
PHP		11,350,000,000	4.00		November 26, 2010		November 26, 2015		11,350,000,000
			Subtotal in Original Currency					PHP	11,350,000,000
			Subtotal in Equivalent Amount of Won(16)					(Won)	294,986,500,000
		Total External Bonds of the Bank in Equivalent Amount of Won						(Won)	26,383,566,217,534

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to Won 1,138.90, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(2) Singapore dollar amounts are converted to Won amounts at the rate of SGD1.00 to Won 884.00, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(3) Japanese yen amounts are converted to Won amounts at the rate of JPY100.00 to Won 1,397.08, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

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(4) Hong Kong dollar amounts are converted to Won amounts at the rate of HKD1.00 to Won 146.35, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(5) Malaysia ringgit amounts are converted to Won amounts at the rate of MYR1.00 to Won 369.35, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(6) Brazilian real amounts are converted to Won amounts at the rate of BRL1.00 to Won 686.08, the prevailing market rate on December 31, 2010.

(7) Euro amounts are converted to Won amounts at the rate of EUR1.00 to Won 1,513.60, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(8) Mexican pesos amounts are converted to Won amounts at the rate of MXN1.00 to Won 91.87, the prevailing market rate on December 31, 2010.

(9) Thai baht amounts are converted to Won amounts at the rate of THB1.00 to Won 37.78, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(10) Swiss franc amounts are converted to Won amounts at the rate of CHF1.00 to Won 1,218.01, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(11) Australian dollar amounts are converted to Won amounts at the rate of AUD1.00 to Won 1,157.92, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(12) Indian Rupee amounts are converted to Won amounts at the rate of INR1.00 to Won 25.40, the prevailing market rate on December 31, 2010.

(13) Chinese yuan amounts are converted to Won amounts at the rate of CNY1.00 to Won 172.5, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(14) Indonesian rupiah amounts are converted to Won amounts at the rate of IDR100.00 to Won 12.66, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

(15) Peru nuevo sol amounts are converted to Won amounts at the rate of PEN1.00 to Won 405.80, the prevailing market rate on December 31, 2010.

(16) Philippine pesos amounts are converted to Won amounts at the rate of PHP1.00 to Won 25.99, the prevailing market rate on December 31, 2010.

35

(2) External Borrowings of the Bank

Lender	Classifications		Range of Interest Rates		Range of Years of Issue		Range of Years of Maturity		Principal Amount Outstanding as of December 31, 2010(1)(2)
			(%)						(millions of Won)
Bank of Tokyo-Mitsubishi UFJ, LTD		Borrowings from BMTU		3M Libor + 3.70		2009		2012	(Won)	214,558
Bank of Tokyo-Mitsubishi UFJ, LTD		Borrowings from BMTU		3M Libor + 3.50		2009		2011		56,788
Sumitomo Mitsui Banking Corporation		Borrowings from SMBC		3M Libor + 0.60		2010		2011		113,890
Mizuho Corporate Bank, LTD		Borrowing from Mizuho		1M~6M Libor +0.63		2010		2012		113,362
Mizuho Corporate Bank, Hong Kong		Borrowing from Mizuho		1M~6M Libor +0.77		2010		2013		113,160
Toronto Dominion Bank, Singapore BR.		Borrowing from TDB		3M Libor + 1.10		2010		2012		34,167
UBS Securities Japan LTD.		Borrowing from UBS		3M Libor + 0.40		2010		2011		113,452
UBS Securities Japan LTD		Borrowing from UBS		3M Libor + 0.75		2010		2013		11,254
Deutsche Bank AG, Seoul		Borrowing from TCB		3M Libor + 1.0		2010		2013		296,320
UBS Securities Japan LTD.		Borrowing from UBS		3M Libor + 0.75		2010		2013		22,512
Banco Bilbao Vizcaya Argentaria SA.		Off-shore long- term borrowings		3M Libor + 1.40		2009		2011		28,473
Banco Bilbao Vizcaya Argentaria SA.		Off-shore long- term borrowings		3M Libor + 1.60		2009		2012		28,473
Long-term Borrowings									(Won)	1,146,407
Foreign Currency CP				0.38 ~ 1.71		2010		2011	(Won)	1,397,136
Off-Shore Foreign Currency CP				1.13 ~ 1.33		2010		2011	(Won)	62,640
									(Won)	1,459,776
Short-term borrowings and Others(3)		Libor 3 month + 0.00 ~ Libor 1 year + 2.49, 0.62 ~ 0.925							(Won)	668,128
Foreign Currency Call Money				0.51 ~ 0.9		2010		2011	(Won)	785,841
Other Borrowings									(Won)	224,698
Total External Borrowings of the Bank									(Won)	4,284,850

(1) Converted to Won amounts at the relevant market average exchange rates in effect on December 31, 2010 as announced by Seoul Money Brokerage Services, Ltd.

(2) Amount after amortizing present value discount

(3) Domestic Import Usance included

36

B. Internal Debt of the Bank

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2010
	(%)						(millions of Won)
Bonds
Short-term Industrial Finance Bonds		2.54~3.19		2010		2011	(Won)	3,580,000
Long-term Industrial Finance Bonds		2.59~5.17		2009~2010		2011~2015		2,740,000
Total Bonds		2.54~5.17		2009~2010		2011~2015		6,320,000
Total Internal Debt							(Won)	6,320,000

Financial Statements and the Auditors

The Minister of Strategy and Finance appoints our Auditor who is responsible for examining our financial operations and auditing our financial statements and records. The present Auditor is Sun-Young Bae, who was appointed for a three-year term on April 13, 2011.

We prepare our financial statements annually for submission to the Minister of Strategy and Finance, accompanied by an opinion of the Auditor. Although we are not legally required to have financial statements audited by external auditors, an independent public accounting firm has audited our non-consolidated financial statements commencing with such non-consolidated financial statements as of and for the year ended December 31, 1983 and consolidated financial statements commencing with such financial statements as of and for the year ended December 31, 1998. As of the date of this prospectus, our external auditor is KPMG Samjong Accounting Corp., located at 10^th Floor, Gangnam Finance Center, 737 Yeoksam-dong, Gangnam-gu, Seoul, Korea, which has audited our financial statements as of and for the years ended December 31, 2010 and 2009 included in this prospectus.

Our financial statements appearing in this prospectus were prepared in conformity with Korean law and in accordance with generally accepted accounting principles in the Republic, summarized in “Notes to Non-Consolidated Financial Statements of December 31, 2010 and 2009—Note 2”. These principles and procedures differ in certain material respects from generally accepted accounting principles in the United States.

We recognize interest income on loans and debt securities on an accrual basis. However, interest income on delinquent and dishonored loans and debt securities, other than those collateralized with security deposits or guaranteed by financial institutions, is recognized on a cash basis. Interest expense is recorded on an accrual basis.

We classify securities that are actively and frequently bought and sold as trading securities. We classify debt securities with fixed or determinable payments and fixed maturities, and which we intend to hold to maturity, as held-to-maturity securities. We classify investments that are categorized as neither trading securities nor held-to-maturity securities as available-for-sale securities. We record our trading and available-for-sale securities, except for non-marketable equity securities classified as available-for-sale securities, at market value. We record our non-marketable equity securities classified as available-for-sale securities at the cost of acquisition. We record held-to-maturity securities at amortized cost. We recognize impairment losses on securities in current operations when the recoverable amounts are less than the acquisition cost of equity securities or amortized cost of debt securities.

We record debenture issuance costs as discounts on debentures and amortize them over the maturity period of the debentures using the effective interest method.

37

We record our equity investments in companies in which we exercise significant control or influence by using the equity method, pursuant to which we account for adjustments in the value of our investments resulting from changes to the investee’s net asset value.

We record the value of our premises and equipment on our balance sheet on the basis of a revaluation conducted as of July 1, 1998. The Minister of Strategy and Finance approved the revaluation in accordance with applicable Korean law. We value additions to premises and equipment since such date at cost.

38

Independent Auditors’ Report

The Board of Directors and Stockholders

The Export-Import Bank of Korea:

We have audited the accompanying non-consolidated statements of financial position of The Export-Import Bank of Korea (the “Bank”) as of December 31, 2010 and 2009 and the related non-consolidated statements of income, appropriation of retained earnings, changes in equity and cash flows for the years then ended. These non-consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits.

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

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Bank as of December 31, 2010 and 2009 and the results of its operations, the appropriation of its retained earnings, the changes in its equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.

Without qualifying our opinion, we draw attention to the following:

As discussed in note 2(a) to the non-consolidated financial statements, accounting principles and auditing standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting principles and auditing standards and their application in practice.

/s/    KPMG Samjong Accounting Corp.

KPMG Samjong Accounting Corp.

Seoul, Korea

February 28, 2011

39

THE EXPORT-IMPORT BANK OF KOREA

Non-Consolidated Statements of Financial Position

As of December 31, 2010 and 2009

	Note		2010		2009
			(In millions of Won)
Assets
Due from banks		3,19,23	(Won)	1,610,027		873,768
Securities		4,19		3,205,255		3,278,036
Loans, net		5, 6,19,22		39,907,922		36,346,505
Property and equipment		7		33,493		34,868
Other assets		8,15		1,932,785		1,494,640
Total assets			(Won)	46,689,482		42,027,817
Liabilities
Borrowings and debentures		9,19,22	(Won)	37,216,945		33,301,792
Other liabilities		10,11,12,15		2,949,651		2,262,670
Total liabilities				40,166,596		35,564,462
Stockholders’ equity
Common stock		13		5,158,755		5,008,755
Accumulated other comprehensive income		4,20		197,740		350,392
Retained earnings		13		1,166,391		1,104,208
Total stockholders’ equity				6,522,886		6,463,355
Total liabilities and stockholders’ equity			(Won)	46,689,482		42,027,817

See accompanying notes to non-consolidated financial statements.

40

THE EXPORT-IMPORT BANK OF KOREA

Non-Consolidated Statements of Income

For the years ended December 31, 2010 and 2009

	Note		2010			2009
			(In millions of Won)
Interest income		16, 22
Interest on due from banks			(Won)	24,819			17,804
Interest and dividends on securities				38,596			9,214
Interest on loans				1,263,668			1,418,051
				1,327,083			1,445,069
Interest expense		16, 22
Interest on call money				6,898			10,216
Interest on borrowings				46,089			137,746
Interest on debentures				893,528			1,075,981
				946,515			1,223,943
Net interest income				380,568			221,126
Provision for loan losses		6		469,058			338,837
Net interest income after provision for loan losses				(88,490	)		(117,711	)
Non-interest income:
Fee and commission income		22		269,781			247,002
Gain on sale of available-for-sale securities		4		453,494			24,791
Gain from equity method accounted investment securities		4		8,881			7,162
Gain on foreign currency transactions				851,707			959,997
Gain on derivatives transactions				264,311			517,540
Gain on valuation of derivatives		15		702,963			640,340
Gain on valuation of fair value hedged items				210,264			110,856
Other				6,830			7,477
			(Won)	2,768,231			2,515,165
Non-interest expense:
Fee and commission expense			(Won)	2,903			3,972
General and administrative expense		17		117,258			113,600
Impairment loss on available-for-sale securities				22			—
Loss from equity method accounted investment securities				—			80
Loss on foreign currency transactions				1,301,802			1,311,613
Loss on derivatives transactions				180,573			294,031
Loss on valuation of derivatives		15		333,101			160,753
Loss on valuation of fair value hedged items				214,692			381,748
Contribution to fund				6,396			4,402
Provision for acceptances and guarantees losses		11		412,613			56,158
Provision for unused loan commitments		11		4,120			33,311
Other				7,958			3,717
				2,581,438			2,363,385
Net non-interest income				186,793			151,780
Income before income taxes				98,303			34,069
Income taxes		18		31,600			8,240
Net income			(Won)	66,703			25,829

See accompanying notes to non-consolidated financial statements.

41

THE EXPORT-IMPORT BANK OF KOREA

Non-Consolidated Statements of Appropriation of Retained Earnings

For the years ended December 31, 2010 and 2009

Date of Appropriation for 2010: February 28, 2011

Date of Appropriation for 2009: February 25, 2010

	Note		2010		2009
			(In millions of Won)
Unappropriated retained earnings
Balance at beginning of year			(Won)	—		—
Net income				66,703		25,829
Balance at end of year before appropriation				66,703		25,829
Appropriation of retained earnings
Legal reserve				13,341		5,166
Other reserve				41,022		16,143
Dividends		21		12,340		4,520
Unappropriated retained earnings to be carried over to subsequent year			(Won)	—		—

See accompanying notes to non-consolidated financial statements.

42

THE EXPORT-IMPORT BANK OF KOREA

Non-Consolidated Statements of Changes in Equity

For the years ended December 31, 2010 and 2009

	Note		Common stock		Accumulated other comprehensive income			Retained earnings			Total stockholders’ equity
			(In millions of Won)
Balance at January 1, 2009			(Won)	3,958,755		53,220			1,078,379			5,090,354
Issuance of common stock				1,050,000		—			—			1,050,000
Net income				—		—			25,829			25,829
Change in fair value of available-for-sale securities, net of tax		20		—		292,108			—			292,108
Adjustment of equity of equity method investees		20		—		5,064			—			5,064
Balance at December 31, 2009			(Won)	5,008,755		350,392			1,104,208			6,463,355
Balance at January 1, 2010			(Won)	5,008,755		350,392			1,104,208			6,463,355
Dividends		21		—		—			(4,520	)		(4,520	)
Issuance of common stock				150,000		—			—			150,000
Net income				—		—			66,703			66,703
Change in fair value of available-for-sale securities, net of tax		20		—		(153,786	)		—			(153,786	)
Adjustment of equity of equity method investees		20		—		1,134			—			1,134
Balance at December 31, 2010			(Won)	5,158,755		197,740			1,166,391			6,522,886

See accompanying notes to non-consolidated financial statements.

43

THE EXPORT-IMPORT BANK OF KOREA

Non-Consolidated Statements of Cash Flows

For the years ended December 31, 2010 and 2009

	2010			2009
	(In millions of Won)
Cash flows from operating activities:
Net income	(Won)	66,703			25,829
Adjustments for:
Amortization of discounts on debentures		112,778			185,447
Provision for loan losses		469,058			338,837
Loss on foreign currency transactions		1,301,802			1,311,613
Depreciation		3,309			3,388
Amortization		1,122			1,019
Loss from equity method accounted investments		—			80
Provision for severance benefits		6,176			5,166
Loss on disposal of property and equipment		2			165
Provision for acceptances and guarantees losses		412,613			56,158
Provision for unused loan commitments		4,120			33,311
Loss on valuation of derivatives		333,101			160,753
Loss on valuation of fair value hedged items		214,692			381,748
Amortization of present value discount		(7,131	)		(2,420,000	)
Gain on foreign currency transactions		(851,707	)		(959,997	)
Gain on disposal of property and equipment		(95	)		(275	)
Gain from equity method accounted investments		(8,881	)		(7,162	)
Gain on valuation of derivatives		(702,963	)		(640,340	)
Gain on valuation of fair value hedged items		(210,264	)		(110,856	)
Others, net		756			46
		1,078,488			(1,660,899	)
Changes in assets and liabilities:
Decrease in available-for-sale securities, net		32,763			16,004
Increase in loans, net		(4,948,106	)		(4,843,052	)
Decrease in other assets, net		312,043			474,322
Decrease in other liabilities, net		(37,949	)		(963,237	)
Payment of severance benefits		(1,637	)		(15,339	)
		(4,642,886	)		(5,331,302	)
Net cash used in operating activities	(Won)	(3,497,695	)		(6,966,372	)
Cash flows from investing activities:
Decrease in equity method accounted investments	(Won)	—			83
Proceeds from sale of property and equipment		94			134
Proceeds from sale of other assets		—			4,773
Increase in equity method accounted investments		(116,561	)		—
Acquisition of property and equipment		(1,936	)		(2,132	)
Acquisition of intangible assets		(1,427	)		(2,526	)
Acquisition of other assets		(4,494	)		(2,248	)
Net cash used in investing activities		(124,324	)		(1,916	)
Cash flows from financing activities:
Proceeds from borrowings		1,454,359			—
Proceeds from debentures		3,535,024			9,119,116
Proceeds from issuance of common stock		150,000			550,000
Repayment of borrowings		—			(2,058,739	)
Repayment of debentures		(776,585	)		—
Dividends paid		(4,520	)		—
Net cash provided by financing activities		4,358,278			7,610,377
Net increase in cash and due from banks		736,259			642,089
Cash and due from banks at beginning of period		873,768			231,679
Cash and due from banks at end of period (note 23)	(Won)	1,610,027			873,768

See accompanying notes to non-consolidated financial statements.

44

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements

December 31, 2010 and 2009

1. Organization and Description of Business

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 grant financial facilities for overseas trade (i.e. import and export), investments and resources development activities. As of December 31, 2010, the Bank operates 10 domestic branches, 4 overseas subsidiaries and 12 overseas offices.

The Bank’s authorized capital is (Won)8,000,000 million, and, through numerous capital increases since the establishment, its paid-in capital is (Won)5,158,755 million as of December 31, 2010. The Government of the Republic of Korea (the “Government”), the Bank of Korea (the “BOK”) and Korea Finance Corporation hold 74.44%, 22.58% and 2.98% of the ownership of the Bank, respectively, as of December 31, 2010.

The Bank, as a trustee of the Government, has managed the Economic Development Cooperation Fund, the Inter-Korean Cooperation Fund since June 1987, March 1991, respectively. The Funds are accounted independently and not included in the Bank’s financial statements. The Bank receives a fee from the Government for the trustee service.

2. Basis of Presenting Financial Statements and Summary of Significant Accounting Policies

(a) Basis of Presenting Financial Statements

The Bank maintains its accounting records in Korean Won and prepares non-consolidated financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea. Certain accounting principles 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 in other countries. Accordingly, these financial statements are intended solely for use by those who are informed about Korean accounting principles and practices. The accompanying non-consolidated financial statements have been condensed, restructured and translated into English from the Korean language non-consolidated financial statements.

Certain information attached to the Korean language non-consolidated financial statements, but not required for a fair presentation of the Bank’s financial position, results of operations, cash flows or changes in equity is not presented in the accompanying non-consolidated financial statements.

(b) Revenue Recognition

The Bank recognizes interest income from deposits, loans and securities on an accrual basis. However, the Bank recognizes interest income when payments are received for the loans which principal or interest payments are overdue without guarantee of payment by financial institutions and of which repayment is significantly uncertain. The interest is accrued but not recognized on such loans amounted to (Won)32,235 million and (Won)26,698 million, respectively, as of December 31, 2010 and 2009. Any uncollected interest previously accrued on such loans is reversed and recorded as deduction of current period’s interest income.

(c) Investments in Securities (Excluding Investments in Associates and Subsidiaries)

Classification

Upon acquisition, the Bank classifies debt and equity securities (excluding investments in subsidiaries, associates and joint ventures) into the following categories: held-to-maturity, available-for-sale or trading securities.

45

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

Investments in debt securities where the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.

Initial recognition

Investments in securities (excluding investments in subsidiaries, associates and joint ventures) are initially recognized at cost.

Subsequent measurement and income recognition

Trading securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of trading securities are included in the income statement in the period in which they arise. Available-for-sale securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income, net of tax, directly in equity. Investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost less impairment, if any. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the income statement using the effective interest method.

Fair value information

The fair value of marketable securities is determined using quoted market prices as of the period end. Non-marketable debt securities are fair valued by discounting cash flows using the prevailing market rates for debt with a similar credit risk and remaining maturity. Credit risk is determined using the Bank’s credit rating as announced by accredited credit rating agencies in Korea. The fair value of investments in money market funds is determined by investment management companies.

Impairment

The Bank reviews investments in securities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and it is not obviously evidenced that impairment is unnecessary.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized and a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized in the asset in prior years.

(d) Investments in Associates and Subsidiaries

Associates are entities of the Bank and its subsidiaries that have the ability to significantly influence the financial and operating policies. It is presumed to have significant influence if the Bank holds directly or indirectly 15 percent or more of the voting power unless it can be clearly demonstrated that this is not the case. Subsidiaries are entities controlled by the Bank.

Investments in associates and subsidiaries are accounted for using the equity method of accounting and are initially recognized at cost.

46

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

The Bank’s investments in associates and subsidiaries include goodwill identified on the acquisition date (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate or subsidiary over the Bank’s share of the fair value of the identifiable net assets acquired. Goodwill is amortized using the straight-line method over its estimated useful life. Amortization of goodwill is recorded together with equity income (losses).

When events or circumstances indicate that the carrying value of goodwill may not be recoverable, the Bank reviews goodwill for impairment and records any impairment loss immediately in the statement of income.

The Bank’s share of its post-acquisition profits or losses in investments in associates and subsidiaries is recognized in the income statement, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate or subsidiary are recognized when the associate or subsidiary declares the dividend. When the Bank’s share of losses in an associate or subsidiary equals or exceeds its interest in the associate or subsidiary, including preferred stock or other long term loans and receivables issued by the associate or subsidiary, the Bank does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or subsidiary.

If an associate or a subsidiary uses accounting policies or estimates other than those of the Bank for like transactions and events in similar circumstances, the Bank makes appropriate adjustments to conform the associate’s accounting policies to those of the Bank when the associate’s financial statements are used by the Bank in applying the equity method. However, under the revised SKAS No. 15Equity Method of Accounting, in the event that accounting policies and estimates differ due to the application of Exceptions to Accounting for Small and Medium-Sized Entities or K-IFRS, no adjustments are made.

If the investee is a subsidiary, net income and net assets of the parent company’s separate financial statements should agree with the parent company’s share in the net income and net assets of the consolidated financial statements, except when the Company discontinues the application of the equity method due to its investment in a subsidiary being reduced to zero.

Unrealized gains on transactions between the Bank and its associates or subsidiaries are eliminated to the extent of the Bank’s interest in each associate or subsidiary.

(e) Allowance for Loan Losses

Based on future loan repayment capacity of the borrower and past repayment history, the Bank classifies loans into five categories, “normal”, “precautionary”, “substandard”, “doubtful” and “estimated loss”, in accordance with the banking regulation in the Republic of Korea. Except for call loans and inter-bank loans with “normal” classification, the Bank provides allowance by each loan classification with the amount greater of using the expected loss method or the prescribed minimum levels of reserves in accordance with the Financial Supervisory Service Guideline (“FSS Guideline”).

i) Expected Loss Method

The allowance for normal loans is calculated by multiplying each outstanding loan balance by probability of default (“PD”) and loss given default (“LGD”). The Bank provides additional allowance for considering risks associated with a certain industry and country concentration. The allowances for loans classified other than “normal” are estimated based on expected future cash flows.

47

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

ii) FSS Guideline

The prescribed minimum levels of reserves in the Regulations for the Supervision of Banks guide are as follows:

Normal (*)	0.85	%
Precautionary	7	%
Substandard	20	%
Doubtful	50	%
Estimated loss	100	%

(*) 0.9% for market sensitive sectors including construction, real estate and rental services, retail and wholesale, lodging and restaurant

(f) Troubled Debt Restructuring

Loans with modified contract terms by a trouble debt restructuring program are accounted for at the present value of the rescheduled future cash flow expected, of which the discount rate is same as the effective rate of the original loan. The excess of the carrying amount over the present value of expected cash flows is recorded in allowance for loan loss in the current period. The present value discounts are recorded in allowance for loan loss and reflected as a deduction from the nominal value of the loans. If the previously recognized allowance for loan loss is greater than the present value discount, the difference is recorded as reversal of allowance for loan loss.

(g) Deferred Loan Origination Fees

Certain fees associated with lending activities, which meet specified criteria, are deferred and amortized over the life of the loan as an adjustment to the carrying amount of the loan using the effective yield method and recognized as interest income.

(h) Property and Equipment

Property and equipment are stated at cost, except in the case of revaluations made in accordance with the Asset Revaluation Law, which allowed for asset revaluation prior to the Law being revoked on December 31, 2000. Assets acquired through investment in kind or donation are recorded at their fair value upon acquisition. For assets acquired in exchange for a non-monetary asset, the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident.

Significant additions or improvements extending the useful life of assets are capitalized. Normal maintenance and repairs are charged to expense as incurred.

Property and equipment are depreciated over the estimated useful lives of the assets using the following methods:

	Useful lives (years)	Depreciation method
Buildings	10~60		Straight-line (*)
Vehicles	4		Declining balance
Equipment	4~20		Declining balance

(*) Buildings acquired and related improvements made prior to January 1, 1995 are depreciated using the declining-balance method.

48

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

The Bank reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the expected estimated undiscounted future net cash flows from the use of the asset and its eventual disposal are less than its carrying amount.

(i) Intangible Assets

Intangible assets are stated at the production or purchase cost, plus incidental expenses and capital expenditures. Amortization is computed using the straight-line method over five years, and directly reduced from intangible assets.

Intangible assets are subject to an impairment review if there are events or changes in circumstances which indicate that the carrying amount may not be recoverable. An impairment loss is recognized by reducing the carrying amount to the recoverable amount.

(j) Discount (Premium) on Debentures

Discount (premium) on debentures issued, which represents the difference between the face value and issuance price of debentures, is amortized (accreted) using the effective interest rate method over the life of the debentures. The amount amortized (accreted) is included in interest expense.

(k) Retirement and Severance Benefits

Employees who have been with the Bank for more than one year are entitled to lump-sum payments based on salary rates and length of service at the time they leave the Bank. The Bank’s estimated liability under the plan, which would be payable if all employees left at the end of the reporting period, is accrued in the accompanying non-consolidated statements of financial position.

Through March 1999, under the National Pension Scheme of Korea, the Bank transferred a certain portion of retirement allowances for employees to the National Pension Fund. The amount transferred reduced the retirement and severance benefit amount to be paid to the employees when they leave the Bank and is accordingly reflected in the accompanying non-consolidated financial statements as a reduction of the retirement and severance benefits liability. However, due to regulation effective April 1999, such transfers to the National Pension Fund are no longer required.

(l) Allowance for Acceptances and Guarantees

The Bank provides allowance for outstanding acceptances and guarantees, the amount after considering the credit conversion factors (CCF), using the same allowance methodology used for estimating allowance for loan loss. However, the Bank does not provide additional allowance for risks associated with a certain industry and country concentration for unconfirmed acceptances and guarantees.

(m) Allowance for Unused Loan Commitments

The Bank provides allowance for unused loan commitments, the amount after considering the credit conversion factors (CCF), using the same allowance methodology used for estimating allowance for loan loss. However, the Bank does not provide the additional allowance for risks associated with a certain industry and country concentration for unused loan commitments.

49

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(n) Provisions

Provisions are recognized when all of the following are met: (1) the Bank has a present obligation as a result of a past event, (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and (3) a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, a provision is recorded at the present value of the expenditures expected to be required to settle the obligation.

Where the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Bank settles the obligation. The expense generated by the provision is presented net of the amount of expected reimbursement.

(o) Derivatives and Hedge Accounting

The Bank holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Attributable transaction costs are recognized in profit or loss when incurred.

Hedge accounting

Where a derivative, which meets certain criteria, is used for hedging the exposure to changes in the fair value of a recognized asset, liability or firm commitment, it is designated as a fair value hedge. Where a derivative, which meets certain criteria, is used for hedging the exposure to the variability of the future cash flows of a forecasted transaction it is designated as a cash flow hedge.

The Bank documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Bank also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in fair values or cash flows of hedged items.

Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

Derivatives that do not qualify for hedge accounting

Changes in the fair value of derivative instruments that are not designated as fair value hedges are recognized immediately in the statement of income.

50

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(p) Income Taxes

Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted.

Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.

A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax assets and liabilities are classified as current or non-current based on the classification of the related asset or liability for financial reporting or the expected reversal date of the temporary difference for those with no related asset or liability such as loss carryforwards and tax credit carryforwards. The deferred tax amounts are presented as a net current asset or liability and a net non-current asset or liability.

Changes in deferred taxes due to a change in the tax rate except for those related to items initially recognized outside profit or loss (either in other comprehensive income or directly in equity) are recognized as income in the current year.

(q) Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the foreign exchange rate on the end of the reporting period, with the resulting gains or losses recognized in the income statement. Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at (Won)1,138.9 and (Won)1,167.6 to USD 1 based on the basic exchange rate and the cross exchange rate announced by the Seoul Monetary Brokerage Services Ltd. on December 31, 2010 and 2009. Financial statements of foreign-based operations, branches and companies accounted for using the equity method, are translated at the rate of exchange on the end if the reporting period.

(r) Use of Estimates

The preparation of non-consolidated financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the non-consolidated financial statements and related notes to non-consolidated financial statements. Actual results could differ from those estimates.

(s) Reclassification

Certain reclassifications have been made to the prior year non-consolidated financial statements to conform to the 2010 presentation.

51

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

3. Due from banks

(a) Due from banks as of December 31, 2010 and 2009 are as follows:

	Financial institution	Interest (%)		2010		2009
				(in millions of Won)
Due from banks in local currency:	Reserve deposit		—	(Won)	35		1
	Demand deposits		—		2,216		837
	Time deposits		2.7~3.6		1,223,000		620,000
	Certificate of deposits		2.8~3.3		44,177		—
	Others		1.9~3.3		296,200		226,400
					1,565,628		847,238
Due from banks in foreign currency:	Demand deposits		—		23,405		16,925
	Others		FFR-0.18 and others		20,994		9,605
					44,399		26,530
				(Won)	1,610,027		873,768

(b) As of December 31, 2010 and 2009, the Bank does not have the restricted deposits.

(c) Due from banks by financial institution as of December 31, 2010 and 2009 are as follows:

	2010						2009
	Due from banks in local currency		Due from banks in foreign currencies		Total		Due from banks in local currency		Due from banks in foreign currencies		Total
	(in millions of Won)
BOK	(Won)	35		—		35		1		—		1
Banks		1,315,593		43,902		1,359,495		847,237		26,407		873,644
Others		250,000		497		250,497		—		123		123
	(Won)	1,565,628		44,399		1,610,027		847,238		26,530		873,768

(d) The maturities of due from banks as of December 31, 2010 and 2009 are as follows:

	2010
	Due in 3 months or less		Due after 3 months to 6 months		Due after 6 months to 12 months		Total
	(in millions of Won)
Due from banks in local currency	(Won)	1,033,015		319,881		212,732		1,565,628
Due from banks in foreign currencies		44,399		—		—		44,399
	(Won)	1,077,414		319,881		212,732		1,610,027

52

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Due in 3 months or less		Due after 3 months to 6 months		Due after 6 months to 12 months		Total
	(in millions of Won)
Due from banks in local currency	(Won)	732,238		115,000		—		847,238
Due from banks in foreign currencies		26,530		—		—		26,530
	(Won)	758,768		115,000		—		873,768

4. Securities

(a) Securities as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Equity securities
Marketable equity securities	(Won)	807,977		1,132,414
Non-marketable equity securities		2,137,418		2,029,038
Beneficiary certificates		5,606		31
Equity investment		2,112		1,459
		2,953,113		3,162,942
Debt securities
Other securities in foreign currencies		16,701		—
Equity method accounted investments		235,441		115,094
	(Won)	3,205,255		3,278,036

(b) Debt securities as of December 31, 2010 are as follows:

	Face amount		Acquisition costs		Amortized costs (*1)		Fair value (*2)		Book value
	(in millions of Won)
Other securities in foreign currencies	(Won)	41,359		16,019		16,019		16,701		16,701

(*1) The difference between face value and acquisition cost is amortized using the effective interest rate method.

(*2) Fair value of debt securities in foreign currency was calculated by using standard price for the latest transaction date presented by Euroclear, a securities and depository clearing house.

(c) The maturities of debt securities as of December 31, 2010 are as follows:

	Due in 1 year or less		Due after 1 year to 5 years		Due after 5 years to 10 years		Due after 10 years		Total
	(in millions of Won)
Other securities in foreign currencies	(Won)	—		—		1,100		15,601		16,701

53

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(d) Marketable equity securities as of December 31, 2010 and 2009 are as follows:

	2010
	No. of shares		Ownership (%)		Book value before fair value adjustment		Fair value (book value)
	(in millions of Won)
Korea Exchange Bank (“KEB”)		40,314,387		6.25	(Won)	584,559		475,710
Industrial Bank of Korea		8,501,153		1.56		119,016		159,396
Keumho Tires Co., Inc. (*)		7,197,800		7.93		36,191		40,891
SK Networks Co., Ltd. (*)		9,886,160		3.98		116,904		131,980
					(Won)	856,670		807,977

(*) Shares of Keumho Tires Co., Inc. are restricted for sale as of December 31, 2010. The Bank recorded the fair value of these securities restricted for sale by using the fair value information from the external pricing agency, the Korea Asset Pricing (“KAP”). The restriction on sale for shares of SK Networks was lifted.

	2009
	No. of shares		Ownership (%)		Book value before fair value adjustment		Fair value (book value)
	(in millions of Won)
KEB		40,314,387		6.25	(Won)	255,190		584,559
Industrial Bank of Korea		8,501,153		1.56		65,374		119,016
Daewoo International Corporation (*)		10,996,400		11.24		225,096		311,935
SK Networks Co., Ltd. (*)		9,886,160		4.07		80,041		116,904
					(Won)	625,701		1,132,414

(*) These shares, except for 2,820,909 shares of SK Networks Co., Ltd., are restricted for sale as of December 31, 2009. The Bank recorded the fair value of these shares restricted for sale by using the fair value information from the external pricing agency, KAP.

54

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(e) Non-marketable equity securities as of December 31, 2010 and 2009 are as follows:

	2010
	No. of shares		Ownership (%)		Book value before fair value adjustment		Book value (*)
	(in millions of Won)
Korea Expressway Corp.		180,580,254		8.03	(Won)	1,634,071		1,695,829
Kyobo Life Insurance Co., Ltd.		1,199,001		5.85		288,659		307,704
Industrial Bank of Korea (preferred stock)		6,210,000		6.34		78,246		104,794
Korea Ship Finance		254,000		14.99		1,496		1,528
Daewoo Electronics Corp.		224,580		0.21		175		194
Pantech Co., Ltd.		58,713,052		3.56		24,425		23,837
SB Telcom		420,984		3.29		210		210
Hanchang Paper Co., Ltd		1,293,600		2.85		675		653
Korea Data Systems Co., Ltd		320		0.24		2		1
Others		1,055,014		—		1,704		2,668
					(Won)	2,029,663		2,137,418

(*) As of December 31, 2010, the Bank recorded the fair value of the shares of Korea Expressway Corp., Kyobo Life Insurance Co., Ltd., Industrial Bank of Korea (preferred stock), Korea Ship Finance, Daewoo Electronics Corp., Pantech Co., Ltd., Hanchang Paper Co., Ltd. and Korea Data Systems Co., Ltd. by using the fair value information from KAP. The other securities were recorded at the acquisition costs since the fair value was not readily determinable. The shares of Daewoo Electronics Corp., Pantech Co., Ltd., SB Telcom, Hanchang Paper Co., Ltd. and Korea Data Systems Co., Ltd. are restricted for sale as of December 31, 2010.

	2009
	No. of shares		Ownership (%)		Book value before fair value adjustment		Book value (*)
	(in millions of Won)
Korea Expressway Corp.		180,580,254		8.03	(Won)	1,311,341		1,634,071
Kyobo Life Insurance Co., Ltd.		1,199,001		5.85		288,659		288,659
Industrial Bank of Korea (preferred stock)		6,210,000		6.34		42,979		78,246
Korea Ship Finance		254,000		14.99		1,270		1,496
Daewoo Electronics Corp.		224,580		0.21		157		175
Pantech Co., Ltd.		58,713,052		3.56		419		24,425
SB Telcom		420,984		3.29		210		210
Hanchang Paper Co., Ltd		1,848,000		4.84		—		965
Korea Data Systems Co., Ltd		320		0.24		2		2
Others		105,786		—		789		789
					(Won)	1,645,826		2,029,038

(*) As of December 31, 2009, the Bank recorded the fair value of the shares of Korea Expressway Corp., Industrial Bank of Korea (preferred stock), Korea Ship Finance, Daewoo Electronics Corp., Pantech Co., Ltd., Hanchang Paper Co., Ltd. and Korea Data Systems Co., Ltd. by using the fair value information from KAP. The other securities were recorded at the acquisition costs since the fair value was not readily determinable. The shares of Daewoo Electronics Corp., Pantech Co., Ltd., SB Telcom, Hanchang Paper Co., Ltd. and Korea Data Systems Co., Ltd. are restricted for sale as of December 31, 2009.

55

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(f) Beneficiary certificates as of December 31, 2010 and 2009 are as follows:

	2010
	Ownership (%)		Book value before fair value adjustment		Book value
	(in millions of Won)
KEXIM Carbon Fund		14.97	(Won)	5,749		5,606
	2009
	Ownership (%)		Book value before adjustment		Book value
	(in millions of Won)
KEXIM Carbon Fund		15.00	(Won)	31		31

(g) Equity investments as of December 31, 2010 and 2009 are as follows:

	2010
	Ownership (%)		Book value before fair value adjustment		Book value
	(in millions of Won)
Korea Asset Management Corporation		0.14	(Won)	1,220		1,220
Korea Money Brokerage Corporation		0.56		239		323
KEXIM Resource Development Fund 1		9.16		484		484
KEXIM Resource Development Fund 2		7.46		85		85
			(Won)	2,028		2,112

	2009
	Ownership (%)		Book value before adjustment		Book value
	(in millions of Won)
Korea Asset Management Corporation		0.14	(Won)	1,220		1,220
Korea Money Brokerage Corporation		0.56		56		239
			(Won)	1,276		1,459

(h) Disposal of securities for the years ended December 31, 2010 and December 31, 2009, respectively, were as follows:

	2010
	No. of shares		Disposal price		Acquisition costs		Realized gain
	(in millions of Won)
Daewoo International Corporation		11,326,292	(Won)	508,447		54,982		453,465
Hanchang Paper Co., Ltd		554,400		306		277		29
			(Won)	508,753		55,259		453,494

56

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	No. of shares		Disposal price		Acquisition costs		Realized gain
	(in millions of Won)
SK Networks Co., Ltd.		628,445	(Won)	10,403		3,111		7,292
Hyundai Corporation		1,031,600		19,736		12,829		6,907
Daewoo International Corporation		329,892		10,539		—		10,539
SG Global Corporation		18,903		148		95		53
			(Won)	40,826		16,035		24,791

(i) Details of equity method accounted investments securities as of December 31, 2010 and 2009 are as follows:

	Ownership (%)		Acquisition costs		Book value
					2010		2009
	(in millions of Won)
KEXIM Bank UK Limited		100.00	(Won)	41,590		46,705		46,590
KEXIM Vietnam Leasing Co.		100.00		13,564		8,783		8,781
PT. KOEXIM Mandiri Finance		85.00		5,003		22,332		20,035
KEXIM Asia Limited		100.00		31,302		43,731		39,688
Credit Guarantee and Investment Fund(“CGIF”)		14.00		116,710		113,890		—
			(Won)	208,169		235,441		115,094

(j) As of December 31, 2010 and 2009, the valuation gain and loss on equity method accounted investment securities are as follows:

	2010
	Beginning balances		Dividend			Gain (loss)		Accumulated other comprehensive income		Others			Ending balances
	(in millions of Won)
KEXIM Bank UK Limited	(Won)	46,590		(37	)		3,130		—		(2,978	)		46,705
KEXIM Vietnam Leasing Co.		8,781		—			217		—		(215	)		8,783
PT. KOEXIM Mandiri Finance		20,035		(49	)		1,891		—		455			22,332
KEXIM Asia Limited		39,688		(67	)		3,643		1,455		(988	)		43,731
CGIF		116,710		—			—		—		(2,820	)		113,890
	(Won)	231,804		(153	)		8,881		1,455		(6,546	)		235,441

	2009
	Beginning balances		Dividend			Gain (loss)			Accumulated other comprehensive income		Others			Ending balances
	(in millions of Won)
KEXIM Bank UK Limited	(Won)	44,708		—			407			—		1,475			46,590
KEXIM Vietnam Leasing Co.		9,543		—			(80	)		—		(682	)		8,781
PT. KOEXIM Mandiri Finance		14,474		(51	)		4,085			432		1,095			20,035
KEXIM Asia Limited		33,341		(32	)		2,670			6,060		(2,351	)		39,688
	(Won)	102,066		(83	)		7,082			6,492		(463	)		115,094

57

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

Due to the time lag in obtaining audited or reviewed financial statements of the investees for the preparation of the Bank’s financial statements, the financial statements prepared by the investees’ management have been used for equity method accounting. The Bank performed additional procedures to review the reliability of those financial statements prepared by the investees’ management. According to an agreement of ASEAN Finance Minister Conference in May 2010, the Bank, on behalf of Korea Government, made an equity investment in CGIF in December 2010. During the current period, there were no operating activities. Therefore, equity method was not applied to the related investments in the current period.

(k) The summary of financial positions and operation results of the entities in equity method accounted investment securities as of December 31, 2010 and 2009 are as follows:

	2010
	Assets		Liabilities		Stockholders’ equity		Net income
	(in millions of Won)
KEXIM Bank UK Limited	(Won)	423,828		380,091		43,737		1,472
KEXIM Vietnam Leasing Co		96,205		88,428		7,777		200
PT. KOEXIM Mandiri Finance		161,188		139,620		21,568		1,658
KEXIM Asia Limited		352,389		310,506		41,883		3,064
CGIF		797,230		—		797,230		—
	(Won)	1,830,840		918,645		912,195		6,394

	2009
	Assets		Liabilities		Stockholders’ equity		Net income
	(in millions of Won)
KEXIM Bank UK Limited	(Won)	410,639		365,488		45,151		783
KEXIM Vietnam Leasing Co		84,030		76,139		7,891		(969	)
PT. KOEXIM Mandiri Finance		140,935		121,406		19,529		1,125
KEXIM Asia Limited		330,439		292,032		38,400		1,376
	(Won)	966,043		855,072		110,971		2,315

(l) Changes in valuation gain (loss) on available-for-sale securities and equity method accounted investment securities recorded in other comprehensive income for the years ended December 31, 2010 and December 31, 2009, respectively, were as follows:

	2010
	Beginning balance			Unrealized gain		Disposition			Ending balance
	(in millions of Won)
Equity method accounted investments	(Won)	(747	)		1,134		—			387
Available-for-sale securities:
Equity securities		351,139			46,648		(200,434	)		197,353
	(Won)	350,392			47,782		(200,434	)		197,740

58

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Beginning balance			Unrealized gain		Disposition			Ending balance
	(in millions of Won)
Equity method accounted investments	(Won)	(5,811	)		5,064		—			(747	)
Available-for-sale securities:
Equity securities		59,031			294,826		(2,718	)		351,139
	(Won)	53,220			299,890		(2,718	)		350,392

5. Loans

(a) Loans outstanding as of December 31, 2010 and 2009 are as follows:

	2010			2009
	(in millions of Won)
Loans in local currency:
Loans for export	(Won)	6,419,344			8,280,528
Loans for overseas investment		1,306,227			138,163
Loans for import		1,342,216			1,275,609
Others		22,091			16,178
		9,089,878			9,710,478
Loans in foreign currencies:
Loans for export		13,457,453			12,815,378
Loans for overseas investment		12,398,219			10,256,463
Trading note rediscount loans		1,551,182			—
Loans for import		1,158,907			1,188,196
Overseas funding loans		735,268			703,052
Domestic usance bills		224,698			144,581
Inter-bank loans		158,957			141,280
Others		22,778			118
		29,707,462			25,249,068
Changes in fair values of loans in foreign currencies (*)		286,596			242,542
Deferred loan origination fees		(126,523	)		(94,946	)
		29,867,535			25,396,664
Bills bought in local currency		42,213			51,720
Bills bought in foreign currencies		867,119			559,591
Advances for customers		42,249			109,860
Call loans in foreign currencies		1,480,890			1,742,598
Total loans before allowances for loan losses		41,389,884			37,570,911
Allowance for loan losses		(1,481,962	)		(1,224,406	)
Loans, net of allowance for loan losses	(Won)	39,907,922			36,346,505

(*) Interest rate swap was contracted to hedge the changes in the fair value of loan commitment in foreign currencies resulting from the volatility in interest rates. The gain on valuation of loan commitment, which was confirmed, was recognized as changes in fair values of loans in foreign currencies.

59

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(b) Loans classified by customer as of December 31, 2010 and 2009 are as follows:

	2010
	Loans in local currency		Loans in foreign currencies (*2)		Total		Ratio (%)
	(in millions of Won)
Large corporations	(Won)	6,546,068		12,362,787		18,908,855		48.74
Small and medium company (*1)		2,526,910		2,698,817		5,225,727		13.47
Public sector and others		16,900		14,645,858		14,662,758		37.79
	(Won)	9,089,878		29,707,462		38,797,340		100.00

	2009
	Loans in local currency		Loans in foreign currencies (*2)		Total		Ratio (%)
	(in millions of Won)
Large corporations	(Won)	7,532,120		9,099,527		16,631,647		47.57
Small and medium company (*1)		2,178,358		2,010,546		4,188,904		11.98
Public sector and others		—		14,138,995		14,138,995		40.45
	(Won)	9,710,478		25,249,068		34,959,546		100.00

(*1) Small and medium company is defined in Paragraph 1 of Article 2 of the Small and Medium Company Law.

(*2) The amounts of loans in foreign currencies in the above table exclude deferred loan origination fees and changes in fair values of loans in foreign currencies.

(c) Loans to other financial institutions as of December 31, 2010 and 2009 are as follows:

	2010
	Other banks		Others		Total
	(in millions of Won)
Loans in local currency	(Won)	—		350,000		350,000
Loans in foreign currencies		158,957		3,661,705		3,820,662
Other		1,480,890		477,247		1,958,137
	(Won)	1,639,847		4,488,952		6,128,799
	2009
	Other banks		Others		Total
	(in millions of Won)
Loans in local currency	(Won)	—		451,500		451,500
Loans in foreign currencies		141,280		2,439,325		2,580,605
Other		1,742,598		231,041		1,973,639
	(Won)	1,883,878		3,121,866		5,005,744

60

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(d) Loans classified by industry as of December 31, 2010 and 2009 are as follows:

	2010
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Manufacturing	(Won)	6,903,805		10,367,590		275,896		17,547,291		42.56
Transportation		181,990		7,857,902		—		8,039,892		19.50
Finance and insurance		350,000		3,820,662		1,958,138		6,128,800		14.86
Wholesale and retail		714,964		1,046,779		80,254		1,841,997		4.47
Real estate		—		21,070		—		21,070		0.05
Construction		834,967		911,146		—		1,746,113		4.24
Public sector and others		104,152		5,682,313		118,183		5,904,648		14.32
	(Won)	9,089,878		29,707,462		2,432,471		41,229,811		100.00

	2009
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Manufacturing	(Won)	8,171,704		8,551,178		380,397		17,103,279		45.70
Transportation		180,690		8,453,389		1,072		8,635,151		23.07
Finance and insurance		451,500		2,580,605		1,973,639		5,005,744		13.38
Wholesale and retail		149,544		951,228		81,598		1,182,370		3.16
Real estate		—		36,312		—		36,312		0.10
Construction		698,433		132,928		—		831,361		2.22
Public sector and others		58,607		4,543,428		27,063		4,629,098		12.37
	(Won)	9,710,478		25,249,068		2,463,769		37,423,315		100.00

(*) The amounts of loans in foreign currencies in the above table exclude deferred loan origination fees and changes in fair values of loans in foreign currencies.

61

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(e) Loans classified by risk-possessive country as of December 31, 2010 and 2009 are as follows:

	2010
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Asia:
Korea	(Won)	9,089,878		16,898,068		1,654,180		27,642,126		67.04
Saudi Arabia		—		1,685,814		62		1,685,876		4.09
Iran		—		1,180,086		59,176		1,239,262		3.00
Qatar		—		971,058		971		972,029		2.36
Singapore		—		682,114		30,864		712,978		1.73
Yemen		—		253,820		131		253,951		0.62
India		—		662,430		37,683		700,113		1.70
Indonesia		—		362,712		6,362		369,074		0.89
Others		—		927,008		213,449		1,140,457		2.77
		9,089,878		23,623,110		2,002,878		34,715,866		84.2
Europe:
England		—		1,471,991		21,500		1,493,491		3.62
France		—		392,005		7,951		399,956		0.97
Sweden		—		578,941		—		578,941		1.41
Ireland		—		470,833		—		470,833		1.14
Belgium		—		372,793		7,893		380,686		0.92
Netherlands		—		217,960		56,945		274,905		0.67
Others		—		1,529,761		158,032		1,687,793		4.09
		—		5,034,284		252,321		5,286,605		12.82
America:
Canada		—		319,404		41		319,445		0.77
Brazil		—		162,863		5,023		167,886		0.41
Peru		—		187,919		—		187,919		0.46
United States		—		164,823		156,346		321,169		0.78
Others		—		202,235		4,152		206,387		0.50
		—		1,037,244		165,562		1,202,806		2.92
Africa:
Nigeria		—		12,824		—		12,824		0.03
Others		—		—		11,710		11,710		0.03
		—		12,824		11,710		24,534		0.06
	(Won)	9,089,878		29,707,462		2,432,471		41,229,811		100.00

62

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Asia:
Korea	(Won)	9,710,478		12,079,955		1,463,862		23,254,295		62.14
Saudi Arabia		—		1,734,636		409		1,735,045		4.64
Iran		—��		1,411,680		28,035		1,439,715		3.85
Qatar				1,100,148		497		1,100,645		2.94
Singapore		—		778,325		21,910		800,235		2.14
Oman		—		583,800		1,129		584,929		1.56
India		—		491,242		24,522		515,764		1.38
Indonesia		—		350,027		7,615		357,642		0.96
Others		—		931,402		238,261		1,169,663		3.12
		9,710,478		19,461,215		1,786,240		30,957,933		82.73
Europe:
England		—		1,003,427		184,814		1,188,241		3.18
France		—		440,645		226,000		666,645		1.74
Sweden		—		652,494		—		652,494		1.29
Ireland		—		482,811		—		482,811		1.78
Others		—		2,171,089		190,297		2,361,386		6.31
		—		4,750,466		601,111		5,351,577		14.30
America:
Canada		—		400,028		297		400,325		1.07
Brazil		—		185,648		—		185,648		0.50
Peru		—		156,593		—		156,593		0.42
United States		—		87,439		62,259		149,698		0.40
Others		—		207,679		175		207,854		0.55
		—		1,037,387		62,731		1,100,118		2.94
Africa:
Algeria		—		—		11,804		11,804		0.03
Others		—		—		594		594		0.00
		—		—		12,398		12,398		0.03
Oceania:
Australia and others		—		—		1,289		1,289		0.00
	(Won)	9,710,478		25,249,068		2,463,769		37,423,315		100.00

(*) The amounts of loans in foreign currencies in the above table exclude deferred loan origination fees and changes in fair values of loans in foreign currencies.

63

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(f) The restructured loans as of December 31, 2010 are as follows:

	Company	Loan Amount		Allowances (*)
		(in millions of Won)
Restoration procedure and rearrangement	Hanam Electronics Co., Ltd. and other 19 companies	(Won)	15,235		11,661
Individual agreements	Financial loan to Russia and other two companies		222,949		13,170
		(Won)	238,184		24,831

(*) Present value discounts relating to the restructured loans are excluded from these allowances.

(g) Changes in present value discounts relating to the restructured loans for the years ended December 31, 2010 and December 31, 2009 were as follows:

	2010
	Discount rate (%)		Term (years)		Beginning balance		Addition		Amortization			Changes in exchange rate			Ending balance
	(in millions of Won)
Work-out process and rearrangement		9.04~13.85		3~10	(Won)	5,585		3,212		(5,800	)		(33	)		2,964
Individual agreements (*)		4.12~5.30		9~18		36,819		—		(4,543	)		(818	)		31,458
					(Won)	42,404		3,212		(10,343	)		(851	)		34,422

	2009
	Discount rate (%)		Term (years)		Beginning balance		Addition		Amortization			Changes in exchange rate			Ending balance
	(in millions of Won)
Work-out process and rearrangement		4.22~4.99		9~10	(Won)	159		7,085		(1,656	)		(3	)		5,585
Individual agreements (*)		4.12~5.30		9~18		44,865		—		(5,110	)		(2,936	)		36,819
					(Won)	45,024		7,085		(6,766	)		(2,939	)		42,404

(*) As of February 20, 2004, the Bank restructured the remaining loan balance of USD299 million overdue loan to Russia (USD422 million—the principal and interest amounting to USD262 million and USD160 million, respectively at the time of restructuring) after the reduction of unpaid interest of USD123 million in accordance with the bilateral agreement between the Korean Government and Russian Government. As of December 31, 2010, the balance of restructured loan to Russia was (Won)180,670 million and the balance of present value discounts was (Won)27,773 million.

(h) For the year ended December 31, 2010, the Bank converted (Won)38,832 million of loans to five borrowers including Keumho Tires Co., Inc. to equity, and recognized (Won)2,011 million as provision for loan losses.

64

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(i) The maturities of loans as of December 31, 2010 and 2009 are as follows:

	2010
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Due in 3 months or less	(Won)	1,483,544		4,471,776		2,245,581		8,200,901		19.89
Due after 3 months to 6 months		3,916,327		2,561,752		83,021		6,561,100		15.91
Due after 6 months to 1 year		700,156		3,595,668		21,981		4,317,805		10.47
Due after 1 year to 2 years		453,035		1,661,078		—		2,114,113		5.13
Due after 2 years to 3 years		872,534		2,412,046		—		3,284,580		7.97
Due after 3 years to 4 years		482,793		2,804,285		39,639		3,326,717		8.07
Due after 4 years to 5 years		603,979		5,397,044		—		6,001,023		14.56
Due after 5 years		577,510		6,803,813		42,249		7,423,572		18.00
	(Won)	9,089,878		29,707,462		2,432,471		41,229,811		100.00

	2009
	Loans in local currency		Loans in foreign currencies (*)		Others		Total		Ratio (%)
	(in millions of Won)
Due in 3 months or less	(Won)	3,012,086		2,613,575		2,203,636		7,829,297		20.92
Due after 3 months to 6 months		4,789,660		1,874,803		86,627		6,751,090		18.04
Due after 6 months to 1 year		1,025,934		1,920,469		13,283		2,959,686		7.91
Due after 1 year to 2 years		272,548		1,603,274		5,760		1,881,582		5.03
Due after 2 years to 3 years		160,841		1,305,902		—		1,466,743		3.92	��
Due after 3 years to 4 years		116,621		610,479		—		727,100		1.94
Due after 4 years to 5 years		22,638		1,570,408		—		1,593,046		4.26
Due after 5 years		310,150		13,750,158		154,463		14,214,771		37.98
	(Won)	9,710,478		25,249,068		2,463,769		37,423,315		100.00

(*) The amounts of loans in foreign currencies in the above table exclude deferred loan origination fees and changes in fair values of loans in foreign currencies.

6. Allowances for Loan Losses

(a) The allowances for loan losses as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Loans in local currency	(Won)	469,407		292,390
Loans in foreign currencies		950,967		814,162
Other loans		61,588		117,854
	(Won)	1,481,962		1,224,406

65

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(b) As of December 31, 2010 and 2009, loan balances and allowances for loan losses by credit risk classification are as follows:

		2010
		Balance (*)		Allowance		Provision ratio (%)
		(in millions of Won)
Loans in local currency	Normal	(Won)	7,620,754		117,324		1.54
	Precautionary		1,300,684		243,823		18.75
	Substandard		103,577		45,108		43.55
	Doubtful		33,991		32,280		94.97
	Estimated loss		30,872		30,872		100.00
			9,089,878		469,407		5.16
Loans in foreign currencies	Normal		28,750,584		700,433		2.44
	Precautionary		512,139		51,209		10.00
	Substandard		151,615		66,028		43.55
	Doubtful		16,890		16,020		94.85
	Estimated loss		117,277		117,277		100.00
			29,548,505		950,967		3.22
Other	Normal		877,144		18,224		2.08
	Precautionary		39,639		9,756		24.61
	Substandard		2,198		957		43.55
	Doubtful		5		5		94.65
	Estimated loss		32,646		32,646		100.00
			951,632		61,588		6.47
		(Won)	39,590,015		1,481,962		3.74

(*) The loan balances in the above table do not include the present value discounts. Inter-bank loans of (Won)158,957 million and call loans of (Won)1,480,890 million, which were classified as normal, are excluded from the loan balances in the above table, while suspense payments on credit of (Won)51 million are included. Changes in fair values of loans in foreign currencies of (Won)286,596 million and deferred loan origination fees of (Won)(126,523) million are not included.

66

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

		2009
		Balance (*)		Allowance		Provision ratio (%)
		(in millions of Won)
Loans in local currency	Normal	(Won)	9,329,278		127,926		1.37
	Precautionary		199,356		34,630		17.37
	Substandard		86,511		37,677		43.55
	Doubtful		63,010		59,834		94.96
	Estimated loss		32,323		32,323		100.00
			9,710,478		292,390		3.01
Loans in foreign currencies	Normal		23,818,555		620,643		2.61
	Precautionary		1,162,912		111,747		9.61
	Substandard		75,369		32,830		43.56
	Doubtful		38,022		36,012		94.71
	Estimated loss		12,930		12,930		100.00
			25,107,788		814,162		3.24
Other	Normal		567,074		9,759		1.72
	Precautionary		59,938		14,168		23.64
	Substandard		—		—		—
	Doubtful		6,665		6,320		97.83
	Estimated loss		87,607		87,607		100.00
			721,284		117,854		16.33
		(Won)	35,539,550		1,224,406		3.45

(*) The loan balances in the above table do not include the present value discounts. Inter-bank loans of (Won)141,280 million and call loans of (Won)1,742,598 million, which were classified as normal, are excluded from the loan balances in the above table, while suspense payments on credit of (Won)113 million are included. Changes in fair values of loans in foreign currencies of (Won)242,542 million and deferred loan origination fees of (Won)(94,946) million are not included.

(c) Changes in allowances for loan losses for the years ended December 31, 2010 and 2009, respectively, were as follows:

	2010			2009
	(in millions of Won)
Beginning balance	(Won)	1,224,406			966,948
Provision for loan losses		469,058			338,837
Write-off		(155,007	)		(12,650	)
Debt to equity swap		(2,011	)		(3,594	)
Decrease in present value discounts		(10,343	)		(6,766	)
Changes in exchange rates and others		(44,141	)		(58,369	)
Ending balance	(Won)	1,481,962			1,224,406

67

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(d) The ratio of allowances to loans for the previous three periods were as follows:

	2010.12.31		2009.12.31		2008.12.31
	(in millions of Won)
Loans subject to allowance for loan losses	(Won)	39,590,015		35,539,550		30,972,233
Allowances for loan losses		1,481,962		1,224,406		966,948
Ratio (%)		3.74		3.45		3.12

7. Property and Equipment

(a) Property and equipment and the related accumulated depreciation as of December 31, 2010 and 2009 were as follows:

	2010						2009
	Acquisition cost		Accumulated depreciation		Book value		Acquisition cost		Accumulated depreciation		Book value
	(in millions of Won)
Land	(Won)	4,484		—		4,484		4,484		—		4,484
Buildings		44,612		18,794		25,818		44,612		17,292		27,320
Vehicles		2,452		1,738		714		2,302		1,521		781
Equipment		16,083		13,606		2,477		16,132		13,849		2,283
	(Won)	67,631		34,138		33,493		67,530		32,662		34,868

(b) The officially declared value of land at December 31, 2010 and December 31, 2009, as announced by the Ministry of Land, Transport and Maritime Affairs, was (Won)103,096 million and (Won)101,069 million, respectively. The officially declared value, which is used for government purposes, is not intended to represent fair value.

(c) Changes in book value of property and equipment for the years ended December 31, 2010 and 2009, respectively, were as follows:

	2010
	Beginning balances		Acquisitions		Disposals		Depreciation		Ending balances
	(in millions of Won)
Land	(Won)	4,484		—		—		—		4,484
Buildings		27,320		—		—		1,502		25,818
Vehicles		781		499		—		566		714
Equipment		2,283		1,437		2		1,241		2,477
	(Won)	34,868		1,936		2		3,309		33,493

	2009
	Beginning balances		Acquisitions		Disposals		Depreciation		Ending balances
	(in millions of Won)
Land	(Won)	4,484		—		—		—		4,484
Buildings		28,656		172		—		1,508		27,320
Vehicles		584		695		—		498		781
Equipment		2,403		1,265		3		1,382		2,283
	(Won)	36,127		2,132		3		3,388		34,868

68

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(d) Insured assets as of December 31, 2010 and 2009 are as follows:

		2010				2009
	Insurance company	Book value		Insured amount		Book value		Insured amount
		(in millions of Won)
Buildings	Lotte Insurance Co., Ltd. and others	(Won)	25,818		22,854		27,320		24,217
Equipment	LIG Insurance Co., Ltd. and others		2,477		2,198		2,283		2,283
		(Won)	28,295		25,052		29,603		26,500

In addition to the above, the Bank carries a commercial liability package, and gas liability insurance with a maximum coverage of (Won)80 million per accidental death and of (Won)300 million per accidental property damage. All vehicles are covered by comprehensive auto insurance.

8. Other Assets

(a) Details of other assets as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Security deposits	(Won)	25,199		20,536
Accounts Receivable		44,756		242
Accrued income		371,933		506,180
Prepaid expenses		76,314		123,929
Deferred tax assets (note 18)		301,717		115,993
Derivative assets (note 15)		1,094,491		710,476
Intangible assets		3,675		3,370
Sundry assets
Other loans		7,601		6,750
Other suspense payments		939		918
Suspense payments on credit		51		113
Membership certificates		6,098		6,122
Others		11		11
	(Won)	1,932,785		1,494,640

(b) Changes in intangible assets for the years ended December 31, 2010 and 2009, were as follows:

	2010			2009
	(in millions of Won)
Beginning balance	(Won)	3,370			1,863
Increase		1,427			2,526
Amortization		(1,122	)		(1,019	)
Ending balance	(Won)	3,675			3,370

69

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

9. Borrowings and Debentures

(a) Borrowings and debentures as of December 31, 2010 and 2009 consist of the following:

	2010		2009
	(in millions of Won)
Borrowings	(Won)	4,284,850		2,895,877
Debentures in local currency		6,251,042		6,977,349
Debentures in foreign currencies		26,681,053		23,428,566
	(Won)	37,216,945		33,301,792

(b) Details of borrowings of December 31, 2010 and 2009 are as follows:

	Interest rate (%)		2010		2009
			(in millions of Won)
Borrowings:
Call money:
Foreign currencies		Libor 1M + 0.34 and others	(Won)	785,841		1,168
				785,841		1,168
Borrowings in foreign currencies:
Borrowings from banks		Libor 3M + 0.39 and others		1,814,535		740,798
Commercial papers		0.38~1.71		1,397,136		1,971,163
Off-shore commercial papers		1.13~1.33		62,640		38,168
Other borrowings		0.79~3.91		224,698		144,580
				3,499,009		2,894,709
			(Won)	4,284,850		2,895,877

70

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(c) Details of debentures of December 31, 2010 and 2009 are as follows:

	Interest rate (%)		2010			2009
			(in millions of Won)
Debentures:
Local currency:
Floating rate debentures in local currency		CD + 0.14 and others	(Won)	200,000			—
Fixed rate debentures in local currency		2.54~5.17		6,120,000			7,030,000
Discount on debentures				(68,958	)		(52,651	)
			(Won)	6,251,042			6,977,349
Foreign currencies:
Floating rate debentures in foreign currencies		Libor 3M + 0.95 and others	(Won)	4,397,046			4,374,265
Fixed rate debentures in foreign currencies		0.7~10.85		21,986,520			18,779,566
				26,383,566			23,153,831
Gain on valuation of fair value hedged items, net				378,090			337,423
				26,761,656			23,491,254
Discounts on debentures, net				(80,603	)		(62,688	)
			(Won)	26,681,053			23,428,566

(d) Call money and borrowings in foreign currencies from financial institution as of December 31, 2010 and 2009 are as follows:

	2010						2009
	Call money		Borrowings in foreign currencies		Total		Call money		Borrowings in foreign currencies		Total
	(in millions of Won)
Banks	(Won)	785,841		3,274,311		4,060,152		1,168		2,750,130		2,751,298
Others		—		224,698		224,698		—		144,579		144,579
	(Won)	785,841		3,499,009		4,284,850		1,168		2,894,709		2,895,877

71

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(e) The maturities of borrowings and debentures by remaining period as of December 31, 2010 and 2009 are as follows:

	2010
	Due in 3 months or less		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
	(in millions of Won)
Borrowings:
Call money	(Won)	785,841		—		—		—		—		785,841
Borrowings in foreign currencies		1,995,361		483,696		186,743		833,209		—		3,499,009
	(Won)	2,781,202		483,696		186,743		833,209		—		4,284,850
Debentures:
Debentures in local currency	(Won)	1,630,000		1,800,000		2,210,000		390,000		290,000		6,320,000
Debentures in foreign currencies		1,042,874		1,096,007		2,935,924		8,521,915		12,786,846		26,383,566
	(Won)	2,672,874		2,896,007		5,145,924		8,911,915		13,076,846		32,703,566

	2009
	Due in 3 months or less		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
	(in millions of Won)
Borrowings:
Call money	(Won)	1,168		—		—		—		—		1,168
Borrowings in foreign currencies		1,463,180		1,085,037		346,492		—		—		2,894,709
	(Won)	1,464,348		1,085,037		346,492		—		—		2,895,877
Debentures:
Debentures in local currency	(Won)	2,690,000		2,330,000		1,670,000		250,000		90,000		7,030,000
Debentures in foreign currencies		1,880,571		698,186		2,686,013		7,151,644		10,737,417		23,153,831
	(Won)	4,570,571		3,028,186		4,356,013		7,401,644		10,827,417		30,183,831

72

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

10. Other Liability

(a) Details of other liabilities as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Accrued retirement and severance benefits (notes 12)	(Won)	25,302		20,763
Allowance for acceptances and guarantees (note 11)		874,080		476,522
Allowance for unused loan commitments (note 11)		69,055		67,121
Allowance for others		46,582		1,724
Foreign exchange settlement account-credit		346,179		99,836
Accounts payable		159,621		8,649
Accrued expenses		435,378		655,197
Unearned revenues		268,194		302,315
Guarantees deposits received		109		109
Derivative liabilities (note 15)		638,479		510,220
Sundry liabilities		86,672		120,214
	(Won)	2,949,651		2,262,670

(b) Details of sundry liabilities as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Suspense receipts	(Won)	85,826		118,808
Taxes withheld		840		1,405
Others		6		1
	(Won)	86,672		120,214

73

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

11. Acceptances, Guarantees and Loan Commitments

(a) Details of acceptances and guarantees as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Confirmed acceptances and guarantees:
Local currency:
Guarantees for performance of contracts	(Won)	101,845		60,874
Guarantees for repayment of advances		159,658		105,811
Others		176,300		168,338
		437,803		335,023
Foreign currencies:
Guarantees for performance of contracts		7,379,960		5,116,030
Guarantees for repayment of advances		32,396,456		36,333,463
Acceptances for letters of guarantee for importers letter		—		950
Acceptances on import credit memorandum		191,545		166,631
Others		3,770,143		3,212,973
		43,738,104		44,830,047
	(Won)	44,175,907		45,165,070
Unconfirmed acceptances and guarantees:
Letters of credit	(Won)	112,000		215,318
Guarantees for repayment of advances		22,514,736		28,906,179
Others		1,345,786		1,582,657
	(Won)	23,972,522		30,704,154

74

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(b) As of December 31, 2010 and 2009, details of allowance for acceptances and guarantees outstanding are as follows:

	2010						2009
	Acceptances and guarantees		Allowance (*)		Ratio (%)		Acceptances and guarantees		Allowance (*)		Ratio (%)
	(in millions of Won)
Confirmed acceptances and guarantees:
Normal	(Won)	40,907,098		365,676		0.89		44,225,154		305,269		0.69
Precautionary		3,114,102		284,954		9.15		909,633		80,326		8.83
Substandard		60,873		26,510		43.55		30,283		13,188		43.55
Doubtful		36		17		47.32		—		—		—
Estimated loss		93,798		60,680		64.69		—		—		—
		44,175,907		737,837		1.67		45,165,070		398,783		0.88
Unconfirmed acceptances and guarantees:
Normal		21,508,124		39,069		0.18		30,058,127		53,720		0.18
Precautionary		2,436,931		92,147		3.78		645,591		23,925		3.71
Substandard		5,499		634		11.52		416		91		21.77
Doubtful		—		—		—		20		3		15.00
Estimated loss		21,968		4,393		20.00		—		—		—
		23,972,522		136,243		0.57		30,704,154		77,739		0.25
	(Won)	68,148,429		874,080		1.28		75,869,224		476,522		0.63

(*) The Bank estimated allowance for the estimated losses on acceptances and guarantees considering the credit conversion factor by Financial Services Commission by applying the same methodology that was used to determine the allowance for loan losses.

(c) Changes in allowance for acceptances and guarantees for the years ended December 31, 2010 and December 31, 2009, were as follows:

	2010			2009
	(in millions of Won)
Beginning balance	(Won)	476,522			461,376
Provision for allowance for possible losses		412,613			56,158
Changes in foreign exchange rates and others		(15,055	)		(41,012	)
Ending balance	(Won)	874,080			476,522

75

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(d) Acceptances and guarantees classified by industry as of December 31, 2010 and 2009 are as follows:

	2010
	Confirmed				Unconfirmed				Total
	Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)
	(in millions of Won)
Manufacturing	(Won)	32,723,505		74.08		22,426,256		93.55		55,149,761		80.93
Construction		5,652,164		12.79		473,121		1.97		6,125,284		8.99
Service		2,778,246		6.29		56,408		0.24		2,834,654		4.16
Finance and insurance		933,221		2.11		32,952		0.14		966,174		1.42
Wholesale and retail		469,497		1.06		37,953		0.16		507,450		0.74
Others		1,619,274		3.67		945,832		3.94		2,565,106		3.76
	(Won)	44,175,907		100.00		23,972,522		100.00		68,148,429		100.00

	2009
	Confirmed				Unconfirmed				Total
	Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)
	(in millions of Won)
Manufacturing	(Won)	37,119,303		82.19		29,060,616		94.65		66,179,919		87.23
Construction		4,403,157		9.75		298,610		0.97		4,701,767		6.20
Finance and insurance		730,448		1.62		6,299		0.02		736,747		0.97
Wholesale and retail		286,577		0.63		78,019		0.25		364,596		0.48
Service		1,406,569		3.11		47,915		0.16		1,454,484		1.92
Others		1,219,016		2.70		1,212,695		3.95		2,431,711		3.20
	(Won)	45,165,070		100.00		30,704,154		100.00		75,869,224		100.00

76

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(e) Acceptances and guarantees classified by risk-possessive country as of December 31, 2010 and 2009 are as follows:

	2010
	Confirmed				Unconfirmed				Total
	Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)
	(in millions of Won)
Asia:
Korea	(Won)	42,485,310		96.18		22,632,669		94.41		65,117,979		95.55
India		304,708		0.69		89,044		0.37		393,752		0.58
Yemen		169,213		0.38		—		—		169,213		0.25
Jordan		86,406		0.20		22,131		0.09		108,537		0.16
Japan		85,707		0.19		—		—		85,707		0.13
Hong Kong		68,334		0.15		—		—		68,334		0.10
Indonesia		71,809		0.16		36,614		0.15		108,423		0.16
Saudi Arabia		—		—		280,161		1.17		280,161		0.41
Others		141,891		0.32		32,579		0.14		174,470		0.25
		43,413,378		98.27		23,093,198		96.33		66,506,576		97.59
Europe:
France		116,832		0.26		294,141		1.23		410,973		0.60
Greece		20,471		0.05		93,419		0.39		113,890		0.17
England		81,687		0.19		—		—		81,687		0.12
Russia		—		—		94,684		0.39		94,684		0.14
		218,990		0.50		482,244		2.01		701,234		1.03
America:
Mexico		197,222		0.45		82,963		0.35		280,185		0.41
Peru		153,752		0.34		—		—		153,752		0.23
Canada		—		—		79,595		0.33		79,595		0.11
		350,974		0.79		162,558		0.68		513,532		0.75
Africa:
Madagascar		192,565		0.44		29,520		0.12		222,085		0.33
Egypt		—		—		205,002		0.86		205,002		0.30
		192,565		0.44		234,522		0.98		427,087		0.63
	(Won)	44,175,907		100.00		23,972,522		100.00		68,148,429		100.00

77

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Confirmed				Unconfirmed				Total
	Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)		Acceptances and guarantees		Ratio (%)
	(in millions of Won)
Asia:
Korea	(Won)	43,660,178		96.67		29,322,783		95.50		72,982,961		96.20
India		223,528		0.49		196,179		0.64		419,707		0.55
Yemen		186,807		0.41		9		0.00		186,816		0.25
Jordan		35,957		0.08		75,316		0.25		111,273		0.15
Japan		78,261		0.17		—		0.00		78,261		0.10
Hong Kong		70,056		0.16		—		0.00		70,056		0.09
Others		94,243		0.21		50,634		0.16		144,877		0.19
		44,349,030		98.19		29,644,921		96.55		73,993,951		97.53
Europe:
France		121,980		0.27		397,029		1.29		519,009		0.69
Luxemburg		153,865		0.34		—		0.00		153,865		0.21
Greece		19,922		0.04		96,838		0.32		116,760		0.15
England		48,717		0.11		—		0.00		48,717		0.06
Russia		—		0.00		26,062		0.08		26,062		0.03
		344,484		0.76		519,929		1.69		864,413		1.14
America:
Mexico		109,976		0.24		182,924		0.60		292,900		0.39
Brazil		61,196		0.14		189,855		0.62		251,051		0.33
Peru		127,556		0.28		30,070		0.10		157,626		0.21
Canada		—		0.00		81,601		0.26		81,601		0.10
		298,728		0.66		484,450		1.58		783,178		1.03
Africa:
Madagascar		172,828		0.39		54,854		0.18		227,682		0.30
	(Won)	45,165,070		100.00		30,704,154		100.00		75,869,224		100.00

(f) The ratio of allowance for acceptances and guarantees for the recent three years are as follows:

	2010.12.31		2009.12.31		2008.12.31
	(in millions of Won)
Acceptances and guarantees subject to allowances	(Won)	68,148,429		75,869,224		90,885,384
Allowances		874,080		476,522		461,376
Ratio (%)		1.28		0.63		0.51

78

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(g) Details of unused loan commitments and related allowances as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Unused line of credit for unused loan commitments	(Won)	11,343,105		8,288,933
Allowances (*)		69,055		67,121
Ratio (%)		0.61		0.81

(*) The Bank estimated allowance for the estimated losses on loan commitments considering the credit conversion factor by Financial Services Commission by applying the same methodology that was used to determine the allowance for loan losses.

(h) Changes in allowances for unused loan commitments for years ended December 31, 2010 and December 31, 2009, were as follows:

	2010			2009
	(in millions of Won)
Beginning balance	(Won)	67,121			35,572
Provision for allowances for unused loan commitments		4,120			33,311
Changes in foreign exchange rates and others		(2,186	)		(1,762	)
Ending balance	(Won)	69,055			67,121

12. Retirement and Severance Benefits

Changes in retirement and severance benefits for years ended December 31, 2010 and December 31, 2009, respectively, were as follows:

	2010
	Beginning balance		Provision		Payment		Ending balance
	(in millions of Won)
Retirement and severance benefits	(Won)	20,763		6,176		1,637		25,302
	(Won)	20,763		6,176		1,637		25,302

	2009
	Beginning balance			Provision		Payment			Ending balance
	(in millions of Won)
Retirement and severance benefits	(Won)	30,936			5,166		15,339			20,763
National Pension Fund		(5	)		—		(5	)		—
	(Won)	30,931			5,166		15,334			20,763

79

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

13. Stockholders’ Equity

(a) Capital Stock

As of December 31, 2010, the authorized capital and paid-in capital of the Bank are (Won)8,000,000 million and (Won)5,158,755 million, respectively. The Bank’s capital has increased by (Won)150,000 million due to the Government’s contributions on January 28, 2010. The Bank does not issue share certificates.

(b) Retained Earnings

i) Legal Reserve

Pursuant to the EXIM Bank Act, the Bank appropriates twenty percent of net earnings for each accounting period as legal reserve until the accumulated reserve equals to its paid-in capital.

ii) Voluntary Reserve

The Bank appropriates the remaining balance of net earnings, after the appropriation of legal reserve and declaration of dividends, to voluntary reserve.

14. Commitments and Contingencies

(a) Details of other commitments as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Confirmed acceptances and guarantees	(Won)	44,175,907		45,165,070
Unconfirmed acceptances and guarantees		23,972,522		30,704,154
Unused loan commitments		10,835,255		7,789,095
Other commitments		507,850		499,838
Written-off loans		326,341		176,275
	(Won)	79,817,875		84,334,432

(b) Litigations

As of December 31, 2010, five lawsuits were filed by the Bank. The Bank’s management is unable to estimate the impact from these lawsuits and the Bank’s financial position and result of operation do not include the potential impact, if any from these lawsuits.

(c) Sale of the Shares of KEB

The Bank sold 30,865,792 shares of 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 before the prior fiscal year.

In addition to the above transactions, under the mutual agreement between the Bank and LSF, the Bank has the right to ask LSF (Tag) or be asked by LSF (Drag) for selling the Bank’s remaining holding shares of KEB to a counterparty at the same condition of LSF’s sale.

80

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

On February 10, 2011, assuming that transactions under ‘Sale and Purchase Agreement between Hana Financial Group and LSF (“LSF SPA”)’ would be consummated, the Bank agreed to acquire put options for its KEB shares from Hana Financial Group instead of exercising Tag (a right to ask for selling the Bank’s remaining holding shares of KEB), and Hana Financial Group acquired call options for the Bank’s KEB shares. The exercise period of the put options is six months from the next day of six months from the completion date of sales of KEB shares held by LSF. The exercise period of the call options is four months from the next day of eight months from the completion date of sales of KEB shares held by LSF. When options are exercised, the price per KEB share held by the Bank is sum of an actual price per KEB share paid to LSF under LSF SPA and interests with annual interest rate of 7% (or the highest guaranteed rate of return if Hana Financial Group guarantees over 7% rate of return to financial and strategic investors for funding of LSF’s shares settlement). The Bank still holds rights to its holding shares of KEB as a shareholder after the agreement between the Bank and Hana Financial Group.

(d) MTN and CP programs

The Bank established a USD15 billon Global Medium Term Note Program (the “GMTN”) on November 6, 1997, and USD4 billion and USD2 billion Commercial Paper programs on May 14, 1997 and May 16, 1997, respectively.

15. Derivative Instruments and Hedge Accounting

Details of derivative transactions as of, and for the years ended December 31, 2010 and December 31, 2009, are as follows:

	2010
	Unsettled notional amount						Valuation gain (loss) - (I/S)									Fair value (B/S) - assets (liabilities)
	Total		Hedging purpose		Hedge accounting purpose		Total			Hedging purpose			Hedge accounting purpose
	(in millions of Won)
Currency forwards	(Won)	720,952		720,952		—		11,470 (5,203	)		11,470 (5,203	)		—   —			11,470 (5,203	)
Currency swaps		9,461,112		1,240,476		8,220,636		546,304 (175,924	)		102,514 (7,905	)		443,790 (168,019	)		819,877 (213,527	)
Interest rate swaps		11,522,693		430,076		11,092,617		145,189 (151,974	)		691 (9,635	)		144,498 (142,339	)		263,144 (419,749	)
	(Won)	21,704,757		2,391,504		19,313,253		702,963 (333,101	)		114,675 (22,743	)		588,288 (310,358	)		1,094,491 (638,479	)

81

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Unsettled notional amount						Valuation gain (loss) - (I/S)									Fair value (B/S) - assets (liabilities)
	Total		Hedging purpose		Hedge accounting purpose		Total			Hedging purpose			Hedge accounting purpose
	(in millions of Won)
Currency forwards	(Won)	1,639,368		1,639,368		—		19,967 (28,993	)		19,967 (28,993	)		—   —			19,967 (28,993	)
Currency swaps		8,882,054		1,564,046		7,318,008		338,947 (75,492	)		30,808 (15,666	)		308,139 (59,826	)		554,441 (195,018	)
Interest rate swaps		11,899,584		500,856		11,398,728		281,426 (56,268	)		30,002 (1,505	)		251,424 (54,763	)		136,068 (286,209	)
	(Won)	22,421,006		3,704,270		18,716,736		640,340 (160,753	)		80,777 (46,164	)		559,563 (114,589	)		710,476 (510,220	)

The Bank holds derivative instruments to hedge the interest rate and foreign exchange risks derived from its loan, debentures and borrowing activities. The notional amounts of unsettled derivative contracts and valuation gain or loss for hedge accounting purpose in the above table represent the derivative instruments accounted for using hedge accounting pursuant to the Interpretations on Financial Accounting Standards 53-70 “Accounting for Derivatives.”

Hedged items, for fair value hedge accounting purpose, consist of loans, debentures and borrowings. The Bank recognized gain of (Won)49,836 million from the hedged item of loans and loss of (Won)54,264 million from the hedged item of debentures, in the income statement, respectively, for the year ended December 31, 2010.

16. Interest Income and Expense

Average balances of the interest bearing assets and liabilities, and the related interest income and expenses as of and for years ended December 31, 2010 and 2009, are as follows:

	2010				2009
	Average balance		Interest income / expense		Average balance		Interest income / expense
	(in millions of Won)
Interest bearing assets:
Loans	(Won)	38,797,577		1,263,668		37,266,058		1,418,051
Due from banks		1,063,527		24,819		629,366		17,804
	(Won)	39,861,104		1,288,487		37,895,424		1,435,855
Interest bearing liabilities:
Borrowings	(Won)	4,127,227		52,987		4,373,335		147,962
Debentures		30,772,404		893,528		29,077,879		1,075,981
	(Won)	34,899,631		946,515		33,451,214		1,223,943

82

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

17. General and Administrative Expense

Details of general and administrative expense for the years ended December 31, 2010 and December 31, 2009, are as follows:

	2010		2009
	(in millions of Won)
Financial management expenses:
Salaries and wages	(Won)	62,711		59,897
Others		34,277		33,259
		96,988		93,156
Fund management expenses		1,051		757
Other general and administrative expenses:
Retirement and severance benefits (note 12)		6,176		5,166
Depreciation (note 7)		3,309		3,388
Amortization of intangible assets (note 8)		1,122		1,019
Taxes and dues		8,612		5,591
Fund contributions		—		4,523
		19,219		19,687
	(Won)	117,258		113,600

18. Income Taxes

(a) The Bank is subject to income taxes on taxable income at the following normal tax rates.

Taxable income	2010			2011			2012			2013 and Thereafter
Up to (Won)200 million		11	%		11	%		11	%		11	%
Over (Won)200 million		24.2	%		24.2	%		22	%		22	%

(b) The components of income tax expense for the years ended December 31, 2010 and 2009 are as follows:

	2010			2009
	(in millions of Won)
Income tax	(Won)	174,270			1,011
Changes in deferred tax arising from temporary differences		(222,527	)		127,850
Deferred income tax on tax loss carryforwards		36,803			(36,803	)
Deferred tax effects directly charged to equity		43,054			(83,818	)
Income tax expense	(Won)	31,600			8,240

83

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

(c) The income tax expense calculated by applying statutory tax rates to the Bank’s income before income taxes for the year differs from the actual tax expense in the non-consolidated statement of income for the years ended December 31, 2010 and 2009 for the following reasons:

	2010			2009
	(in millions of Won)
Income before income taxes	(Won)	98,303			34,069
Income taxes at normal tax rates		23,763			8,220
Adjustment
Tax-exempt benefits		(2,147	)		(10	)
Non-deduction expense		236			1,140
Tax effects of tax rate change		9,647			(1,144	)
Others		101			34
Income tax expense	(Won)	31,600			8,240
Effective tax rate		32.15	%		24.19

(d) Deferred tax assets have been recognized as the Bank has determined it is probable that future profits will be available against which the Bank can utilize the related benefit.

(e) Changes in significant accumulated temporary differences and tax effects for the years ended December 31, 2010 and 2009 are as follows:

	2010
	Beginning balance			Decrease			Increase			Ending balance
	(in millions of Won)
Temporary differences:
Loss on fair value hedges	(Won)	94,882			44,054			40,666			91,494
Depreciation		5,633			—			(1,140	)		4,493
Retirement and severance benefits		24,846			—			(3,955	)		20,891
Allowance for loan losses		470,989			—			185,439			656,428
Gain on valuation of equity method accounted investments		(31,398	)		—			(8,881	)		(40,279	)
Loss on valuation of derivatives		(52,884	)		(453,961	)		—			401,077
Gain on valuation of derivatives		(200,254	)		255,759			—			(456,013	)
Available-for-sale securities (KEB)		(118,985	)		—			—			(118,985	)
Debt-to-equity swap		65,880			12,992			—			52,888
Allowance for acceptances and guarantees		476,523			—			397,557			874,080
Allowance for unused loan commitments		68,195			—			860			69,055
Others		(3,647	)		1,632			34,806			29,527
Total temporary differences	(Won)	799,780			(139,524	)		645,352			1,584,656
Tax effects of temporary differences											357,491
Tax effects of tax loss carryforwards											—
The deferred tax effects that were directly charged to equity											(55,774	)
Deferred income tax assets										(Won)	301,717

84

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	2009
	Beginning balance			Decrease			Increase			Ending balance
	(in millions of Won)
Temporary differences:
Loss (gain) on fair value hedges	(Won)	(217,313	)		(279,074	)		33,121			94,882
Depreciation		4,018			—			1,615			5,633
Retirement and severance benefits		21,557			—			3,289			24,846
Allowance for loan losses		303,380			—			167,609			470,989
Gain on valuation of equity method accounted investments		(24,316	)		—			(7,082	)		(31,398	)
Loss on valuation of derivatives		630,843			683,727			—			(52,884	)
Gain on valuation of derivatives		(256,923	)		(56,669	)		—			(200,254	)
Available-for-sale securities (KEB)		(118,985	)		—			—			(118,985	)
Debt-to-equity swap		68,603			2,723			—			65,880
Allowance for acceptances and guarantees		461,375			—			15,148			476,523
Allowance for unused loan commitments		35,572			—			32,623			68,195
Others		78,265			39,085			(42,827	)		(3,647	)
Total temporary differences	(Won)	986,076			389,792			203,496			799,780
Tax effects of temporary differences											178,019
Tax effects of tax loss carryforwards											36,803
The deferred tax effects that were directly charged to equity											(98,829	)
Deferred income tax assets										(Won)	115,993

(f) Deferred tax assets and liabilities that were directly charged or credited to accumulated other comprehensive income as of December 31, 2010 and 2009 are as follows:

	2010						2009
	Temporary differences			Deferred tax assets (liabilities)			Temporary differences		Deferred tax assets (liabilities)
	(In millions of Won)
Valuation gain(loss) on available-for-sale securities	(Won)	(197,162	)		43,375			374,498		(82,390	)
Valuation gain on equity for the equity method accounted securities		1,455			(321	)		6,492		(1,428	)
	(Won)	(195,707	)		43,054			380,990		(83,818	)

85

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

19. Foreign Currency Denominated Assets and Liabilities

(a) Details of assets denominated in foreign currencies as of December 31, 2010 and 2009 are as follows:

	2010				2009
	In foreign currency (USD)		In local currency (Won)		In foreign currency (USD)		In local currency (Won)
	(In thousands of USD and in millions of Won)
Due from banks	$	38,984	(Won)	44,399	$	22,722	(Won)	26,530
Available-for-sale securities		15,334		17,463		—		—
Equity method accounted investments		206,727		235,441		98,573		115,094
Call loans		1,300,281		1,480,890		1,492,461		1,742,598
Bills bought		761,365		867,119		479,266		559,591
Loans		26,084,346		29,707,462		21,624,759		25,249,068
Advance for customers		37,096		42,249		94,090		109,860
	$	28,444,133	(Won)	32,395,023	$	23,811,871	(Won)	27,802,741

(b) Details of liabilities denominated in foreign currencies as of December 31, 2010 and 2009 are as follows:

	2010				2009
	In foreign currency (USD)		In local currency (Won)		In foreign currency (USD)		In local currency (Won)
	(In thousands of USD and in millions of Won)
Call money	$	690,000	(Won)	785,841	$	1,000	(Won)	1,168
Borrowings		3,077,679		3,505,169		2,479,196		2,894,709
Debentures		23,165,832		26,383,566		19,830,277		23,153,831
	$	26,933,511	(Won)	30,674,576	$	22,310,473	(Won)	26,049,708

Foreign currencies other than U.S. Dollar are translated into U.S. dollar equivalent amounts at the exchange rates published by Seoul Money Brokerage Services, Ltd. (see note 2).

20. Comprehensive Income

Comprehensive income for the years ended December 31, 2010 and 2009 was as follows:

	2010			2009
	(in millions of Won)
Net income	(Won)	66,703			25,829
Change in fair value of available-for-sale securities, net of tax effect of (Won)43,375		(153,786	)		292,108
Adjustment of equity of equity method investees, net of tax effect of (Won)(321)		1,134			5,064
Comprehensive income	(Won)	(85,949)			323,001

86

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

21. Dividends

(a) Details of dividends for the years ended December 31, 2010 and 2009 were as follows:

	2010		2009
	(in millions of Won)
Government of Korea	(Won)	9,186		3,330
The Bank of Korea		2,787		1,051
Korea Finance Corporation		367		139
	(Won)	12,340		4,520

(b) Dividends as a percentage of net income for the years ended December 31, 2010 and 2009 were as follows:

	2010			2009
	(in millions of Won)
Dividend amount	(Won)	12,340			4,520
Net income		66,703			25,829
Dividends as a percentage of net income		18.50	%		17.50

22. Transactions and Balances with Related Parties

(a) The Bank has the following related parties as of December 31, 2010 and 2009.

					Capital
	No. of shares		Ownership (%)		2010		2009
					(in millions of Won)
KEXIM Bank UK Limited		20,000,000		100.00	(Won)	35,154		37,555
KEXIM Vietnam Leasing Co. (*)		—		100.00		14,806		15,179
PT. KOEXIM Mandiri Finance		442		85.00		6,583		6,438
KEXIM Asia Limited		30,000,000		100.00		34,167		35,028
Credit Guarantee and Investment Fund (*)		—		14.00		113,890		—

(*) This entity does not issue share certificates.

(b) Significant balances and transactions with the related parties as of and for the year ended December 31, 2010 are as follows:

	Loans in foreign currencies		Call loans		Total
	(in millions of Won)
Assets
KEXIM Bank UK Limited	(Won)	187,919		3,784		191,703
KEXIM Vietnam Leasing Co.		82,001		—		82,001
PT. KOEXIM Mandiri Finance		138,946		—		138,946
KEXIM Asia Limited		74,029		22,289		96,318
	(Won)	482,895		26,073		508,968

87

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

	Borrowing in foreign currencies		Debentures in foreign currencies		Total
	(in millions of Won)
Liabilities
KEXIM Bank UK Limited	(Won)	—		5,695		5,695

	Interest income			Interest expenses		Commission income
	(in millions of Won)
Transactions
KEXIM Bank UK Limited	(Won)	2,607	��		155		10
KEXIM Vietnam Leasing Co.		648			—		3
PT. KOEXIM Mandiri Finance		1,169			—		—
KEXIM Asia Limited		1,400			—		35
	(Won)	5,824			155		48

(c) Significant balances and transactions with the related parties as of and for the year ended December 31, 2009 are as follows:

	Loans in foreign currencies		Call loans		Total
	(in millions of Won)
Assets
KEXIM Bank UK Limited	(Won)	87,570		183,313		270,883
KEXIM Vietnam Leasing Co.		72,391		—		72,391
PT. KOEXIM Mandiri Finance		120,496		—		120,496
KEXIM Asia Limited		52,542		86,968		139,510
	(Won)	332,999		270,281		603,280
	Borrowing in foreign currencies		Debentures in foreign currencies		Total
	(in millions of Won)
Liabilities
KEXIM Bank UK Limited	(Won)	—		5,838		5,838
	Interest income		Interest expenses		Commission income
	(in millions of Won)
Transactions
KEXIM Bank UK Limited	(Won)	2,931		333		—
KEXIM Vietnam Leasing Co.		1,380		—		2
PT. KOEXIM Mandiri Finance		3,013		—		—
KEXIM Asia Limited		3,865		252		16
	(Won)	11,189		585		18

88

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

23. Statements of Cash Flows

(a) Due from banks in the statements of cash flows as of December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Due from banks in local currency	(Won)	1,565,628		847,238
Due from banks in foreign currencies		44,399		26,530
	(Won)	1,610,027		873,768

(b) Significant transactions not involving cash inflows or outflows for the years ended December 31, 2010 and 2009 were as follows:

	2010			2009
	(in millions of Won)
Change in gain on valuation of available-for-sale securities	(Won)	(153,786	)		292,108
Adjustment of equity of equity method investees		1,134			5,064
Debt-to-equity swap		36,820			10,052
Acquisition of securities through investment in kind		—			500,000

24. Employee Welfare

The Bank provides employee welfare programs including housing loans, cafeteria, scholarship, medical insurance, worker’s compensation, gym and recreational facilities. The Bank’s expenses on the employee welfare programs for the years ended December 31, 2010 and 2009 were as follows:

	2010		2009
	(in millions of Won)
Meal expenses	(Won)	108		123
Medical expenses		391		308
Fringe benefits		5,834		6,375
Healthcare expenses		371		371
	(Won)	6,704		7,177

25. Value Added Information

Details of accounts included in the computation of value added for the years ended December 31, 2010 and 2009 are as follows:

	2010		2009
	(in millions of Won)
Salaries and wages	(Won)	62,711		59,897
Rent		550		670
Depreciation		3,309		3,388
Amortization of intangible assets		1,122		1,019
Taxes and dues		8,612		5,591
	(Won)	76,304		70,565

89

THE EXPORT-IMPORT BANK OF KOREA

Notes to Non-Consolidated Financial Statements—(Continued)

December 31, 2010 and 2009

26. Date of Authorization for Issue

The 2010 financial statements were authorized for issue on February 28, 2011, at the Operation Committee of the Bank.

27. Planning and Adoption of K-IFRS (International Financing Reporting Standards)

The Financial Services Commission announced roadmap for the adoption of K-IFRS in March 2007, and the Bank plans to issue financial statements prepared in accordance with K-IFRS in the future. In August 2007 the Bank organized a Task Force Team to conduct internal training, and in August of 2009 the Bank engaged external advisors to analyze the main differences between the current GAAP and K-IFRS. The areas of accounting under the current financial statements for which the application of K-IFRS is expected to give rise to significant differences include loss provisions, financial instruments, property and equipment, intangible assets and employee benefits, among others.

90

THE REPUBLIC OF KOREA

Land and History

Territory and Population

Located generally south of the 38th parallel on the Korean peninsula, The Republic of Korea covers about 38,000 square miles, approximately one-fourth of which is arable. The Republic has a population of approximately 48 million people. The country’s largest city and capital, Seoul, has a population of about 11 million people.

Map of the Republic of Korea

Political History

Dr. Rhee Seungman, who was elected President in each of 1948, 1952, 1956 and 1960, dominated the years after the Republic’s founding in 1948. Shortly after President Rhee’s resignation in 1960 in response to student-led demonstrations, a group of military leaders headed by Park Chung Hee assumed power by coup. The military leaders established a civilian government, and the country elected Mr. Park as President in October 1963. President Park served as President until his assassination in 1979 following a period of increasing strife between the Government and its critics. The Government declared martial law and formed an interim

91

government under Prime Minister Choi Kyu Hah, who became the next President. After clashes between the Government and its critics, President Choi resigned, and General Chun Doo Hwan, who took control of the Korean army, became President in 1980.

In late 1980, the country approved, by national referendum, a new Constitution, providing for indirect election of the President by an electoral college and for certain democratic reforms, and shortly thereafter, in early 1981, re-elected President Chun.

Responding to public demonstrations in 1987, the legislature revised the Constitution to provide for direct election of the President. In December 1987, Roh Tae Woo won the Presidency by a narrow plurality, after opposition parties led by Kim Young Sam and Kim Dae Jung failed to unite behind a single candidate. In February 1990, two opposition political parties, including the one led by Kim Young Sam, merged into President Roh’s ruling Democratic Liberal Party.

In December 1992, the country elected Kim Young Sam as President. The election of a civilian and former opposition party leader considerably lessened the controversy concerning the legitimacy of the political regime. President Kim’s administration reformed the political sector and deregulated and internationalized the Korean economy.

In December 1997, the country elected Kim Dae Jung as President. President Kim’s party, the Millennium Democratic Party (formerly known as the National Congress for New Politics), formed a coalition with the United Liberal Democrats led by Kim Jong Pil, with Kim Jong Pil becoming the first prime minister in President Kim’s administration. The coalition, which temporarily ended before the election held in April 2000, continued with the appointment of Lee Han Dong of the United Liberal Democrats as the Prime Minister in June 2000. The coalition again ended in September 2001.

In December 2002, the country elected Roh Moo Hyun as President. President Roh and his supporters left the Millennium Democratic Party in 2003 and formed a new party, the Uri Party, in November 2003. On August 15, 2007, 85 members of the National Assembly, previously belonging to the Uri Party, or the Democratic Party, formed the United New Democratic Party (the “UNDP”). The Uri Party merged into the UNDP in August 20, 2007.

In December 2007, the country elected Lee Myung-Bak as President. He commenced his term on February 25, 2008. The Lee administration’s key policy priorities include:

• pursuing a lively market economy through deregulation, free trade and the attraction of foreign investment;

• establishing an efficient government by reorganizing government functions and privatizing state-owned enterprises;

• taking initiatives on the denuclearization of North Korea;

• seeking a productive welfare system based on customized welfare benefits and job training; and

• strengthening the competitiveness of Korea’s education system.

Government and Politics

Government and Administrative Structure

Governmental authority in the Republic is centralized and concentrated in a strong Presidency. The President is elected by popular vote and can only serve one term of five years. The President chairs the State Council, which consists of the prime minister, the deputy prime ministers, the respective heads of Government

92

ministries and the ministers of state. The President can select the members of the State Council and appoint or remove all other Government officials, except for elected local officials.

The President can veto new legislation and take emergency measures in cases of natural disaster, serious fiscal or economic crisis, state of war or other similar circumstances. The President must promptly seek the concurrence of the National Assembly for any emergency measures taken and failing to do so automatically invalidates the emergency measures. In the case of martial law, the President may declare martial law without the consent of the National Assembly; provided, however, that the National Assembly may request the President to rescind such martial law.

The National Assembly exercises the country’s legislative power. The Constitution and the Election for Public Offices Act provide for the direct election of about 82% of the members of the National Assembly and the distribution of the remaining seats proportionately among parties winning more than 5 seats in the direct election or receiving over 3% of the popular vote. National Assembly members serve four-year terms. The National Assembly enacts laws, ratifies treaties and approves the national budget. The executive branch drafts most legislation and submits it to the National Assembly for approval.

The country’s judicial branch comprises the Supreme Court, the Constitutional Court and lower courts of various levels. The President appoints the Chief Justice of the Supreme Court and appoints the other Justices of the Supreme Court upon the recommendation of the Chief Justice. All appointments to the Supreme Court require the consent of the National Assembly. The Chief Justice, with the consent of the conference of Supreme Court Justices, appoints all the other judges in Korea. Supreme Court Justices serve for six years and all other judges serve for ten years. Other than the Chief Justice, justices and judges may be reappointed to successive terms.

The President formally appoints all nine judges of the Constitutional Court, but three judges must be designated by the National Assembly and three by the Chief Justice of the Supreme Court. Constitutional Court judges serve for six years and may be reappointed to successive terms.

Administratively, the Republic comprises nine provinces and seven cities with provincial status: Seoul, Busan, Daegu, Incheon, Gwangju, Daejon and Ulsan. From 1961 to 1995, the national government controlled the provinces and the President appointed provincial officials. Local autonomy, including the election of provincial officials, was reintroduced in June 1995.

Political Organizations

Currently, there are two major political parties, the Grand National Party, or GNP, and the Democratic Party, or DP. The 18th legislative general election was held on April 9, 2008 and the term of the National Assembly members elected in the 18th legislative general election commenced on May 30, 2008.

As of June 17, 2011, the parties control the following number of seats in the National Assembly:

	GNP		DP		Others		Total
Number of Seats		169		87		41		297

Relations with North Korea

Relations between the Republic and North Korea have been tense over most of the Republic’s history. The Korean War, which took place between 1950 and 1953 began with the invasion of the Republic by communist forces from North Korea and, following a military stalemate, an armistice was reached establishing a demilitarized zone monitored by the United Nations in the vicinity of the 38th parallel.

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North Korea maintains a regular military force estimated at more than 1,000,000 troops, mostly concentrated near the northern border of the demilitarized zone. The Republic’s military forces, composed of approximately 650,000 regular troops and almost 3.0 million reserves, maintain a state of military preparedness along the southern border of the demilitarized zone. In addition, the United States has historically maintained its military presence in the Republic. In October 2004, the United States and the Republic agreed to a three-phase withdrawal of approximately one-third of the 37,500 troops stationed in the Republic by the end of 2008. By the end of 2004, 5,000 U.S. troops departed the Republic in the first phase of such withdrawal and in the plan’s second phase, the United States removed 5,000 troops by the end of 2006. In the final phase, another 2,500 U.S. troops were scheduled to depart by the end of 2008. In April 2008, however, the United States and the Republic decided not to proceed with the final phase of withdrawal and agreed to maintain 28,500 U.S. troops in the Republic. In February 2007, the United States and the Republic agreed to dissolve their joint command structure by 2012, which would allow the Republic to assume the command of its own armed forces in the event of war on the Korean peninsula.

The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapons and long-range missile programs and increased uncertainty regarding North Korea’s actions and possible responses from the international community. In December 2002, North Korea removed the seals and surveillance equipment from its Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic Energy Agency. In January 2003, North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty. Since the renouncement, the Republic, the United States, North Korea, China, Japan and Russia have held numerous rounds of six party multi-lateral talks in an effort to resolve issues relating to North Korea’s nuclear weapons program.

In addition to conducting test flights of long-range missiles, North Korea announced in October 2006 that it had successfully conducted a nuclear test, which increased tensions in the region and elicited strong objections worldwide. In response, the United Nations Security Council passed a resolution that prohibits any United Nations member state from conducting transactions with North Korea in connection with any large scale arms and material or technology related to missile development or weapons of mass destruction and from providing luxury goods to North Korea, imposes an asset freeze and travel ban on persons associated with North Korea’s weapons program, and calls upon all United Nations member states to take cooperative action, including thorough inspection of cargo to or from North Korea. In response, North Korea agreed in February 2007 at the six-party talks to shut down and seal the Yongbyon nuclear facility, including the reprocessing facility, and readmit international inspectors to conduct all necessary monitoring and verifications.

In April 2009, North Korea launched a long-range rocket over the Pacific Ocean. The Republic, Japan and the United States responded that the launch poses a threat to neighboring nations and that it was in violation of the United Nations Security Council resolution adopted in 2006 against nuclear tests by North Korea, and the United Nations Security Council unanimously passed a presidential statement that condemned North Korea for the launch and decided to tighten sanctions against North Korea. Subsequently, North Korea announced that it would permanently pull out of the six-party talks and restart its nuclear program, and the International Atomic Energy Agency reported that its inspectors had been ordered to remove surveillance devices and other equipment at the Yongbyon nuclear power plant and to leave North Korea. In May 2009, North Korea announced that it had successfully conducted a second nuclear test and test-fired three short-range, surface-to-air missiles. In response, the United Nations Security Council unanimously passed a resolution that condemned North Korea for the nuclear test and decided to expand and tighten sanctions against North Korea. In March 2010, a Korean warship was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking in May 2010. North Korea has denied responsibility for the sinking and has threatened retaliation for any attempt to punish it for the act. On November 23, 2010, North Korean forces fired more than one hundred artillery shells targeting Yeonpyeong Island located near the maritime border between the Republic and North Korea on the west coast of the Korean peninsula, killing two Korean soldiers

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and two civilians as well as causing substantial property damage. The Republic responded by firing approximately 80 artillery shells and putting the military on its highest alert level. The Government condemned North Korea for the act and vowed stern retaliation should there be further provocation.

There recently has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for economic and political stability in the region. In June 2009, U.S. and Korean officials announced that Kim Jong-il, the North Korean ruler who reportedly suffered a stroke in August 2008, designated his third son, Kim Jong-eun, who is reportedly in his twenties, to become his successor. In September 2010, Kim Jong-eun was made a general in the North Korean army, named the vice chairman of the Central Military Commission and appointed to the Central Committee of the Workers’ Party in a series of measures widely believed to be part of the succession plan. In addition, North Korea’s economy faces severe challenges. For example, in November 2009, the North Korean government redenominated its currency at a ratio of 100 to 1 as part of a currency reform undertaken in an attempt to control inflation and reduce income gaps. In tandem with the currency redenomination, the North Korean government banned the use or possession of foreign currency by its residents and closed down privately run markets, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensions within North Korea.

There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that such escalation will not have a material adverse impact on the Republic’s economy or its ability to obtain future funding. Any further increase in tension, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between the Republic and North Korea break down or military hostilities occur, could have a material adverse effect on the Republic’s economy.

Over the longer term, reunification of the two Koreas could occur. Reunification may entail a significant economic commitment by the Republic. In President Lee’s national address on August 15, 2010, he suggested the possible adoption of a reunification tax as a potential means of alleviating the potential long-term economic burden associated with reunification. Such discussions on reunification are very preliminary, and it has not been decided whether or when such a reunification tax would be implemented. If a reunification tax is implemented, depending on how it is structured, it may lead to a decrease in domestic consumption, which in turn may have a material adverse effect on the Republic’s economy.

Foreign Relations and International Organizations

The Republic maintains diplomatic relations with most nations of the world, most importantly with the United States with which it entered into a mutual defense treaty and several economic agreements. The Republic also has important relationships with Japan and China, its largest trading partners together with the United States.

The Republic belongs to a number of supranational organizations, including:

• the International Monetary Fund, or the IMF;

• the World Bank;

• the Asian Development Bank, or ADB;

• the Multilateral Investment Guarantee Agency;

• the International Finance Corporation;

• the International Development Association;

• the African Development Bank;

• the European Bank for Reconstruction and Development;

• the Bank for International Settlements;

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• the World Trade Organization, or WTO; and

• the Inter-American Development Bank, or IDB.

In September 1991, the Republic and North Korea became members of the United Nations. During the 1996 and 1997 sessions, the Republic served as a non-permanent member of the United Nations Security Council.

In March 1995, the Republic applied for admission to the Organization for Economic Cooperation and Development, or the OECD, which the Republic officially joined as the twenty-ninth regular member in December 1996.

The Economy

Current Worldwide Economic and Financial Difficulties

Recent difficulties affecting the U.S. and global financial sectors, adverse conditions and volatility in the U.S. and worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the U.S. and global economy during the second half of 2008 and first half of 2009 increased the uncertainty of global economic prospects in general and adversely affected, and may continue to adversely affect, the Korean economy. During the second and third quarter of 2007, credit markets in the United States started to experience difficult conditions and volatility that in turn have affected worldwide financial markets. In particular, in late July and early August 2007, market uncertainty in the U.S. sub-prime mortgage sector increased dramatically and further expanded to other markets such as those for leveraged finance, collateralized debt obligations and other structured products. In September and October 2008, liquidity and credit concerns and volatility in the global credit and financial markets increased significantly with the bankruptcy or acquisition of, and government assistance to, several major U.S. and European financial institutions. These developments resulted in reduced liquidity, greater volatility, widening of credit spreads and a lack of price transparency in the United States and global credit and financial markets.

As liquidity and credit concerns and volatility in the global financial markets increased significantly since September 2008, the value of the Won relative to the U.S. dollar depreciated at an accelerated rate during the fourth quarter of 2008 and first half of 2009. See “Monetary Policy—Foreign Exchange.” Such depreciation of the Won increased the cost of imported goods and services and the Won revenue needed by Korean companies to service foreign currency-denominated debt. Furthermore, as a result of adverse global and Korean economic conditions, there was a significant overall decline and continuing volatility in the stock prices of Korean companies. The Korea Composite Stock Price Index declined by 27.8% from 1,852.0 on May 30, 2008 to 1,336.7 on April 16, 2009. See “The Financial System—Securities Markets”. Further declines in the Korea Composite Stock Price Index and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may continue to adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies to raise capital. In addition, increases in credit spreads, as well as limitations on the availability of credit resulting from heightened concerns about the stability of the markets generally and the strength of counterparties specifically that led many lenders and institutional investors to reduce or cease funding to borrowers, adversely affected Korean banks’ ability to borrow, particularly with respect to foreign currency funding, during the fourth quarter of 2008 and first half of 2009. Moreover, GDP in the first quarter of 2009 contracted by 4.3% at chained 2005 year prices compared with the same period in 2008, and exports in the first quarter of 2009 decreased by 24.8% to US$74.7 billion from US$99.4 billion in the same period in 2008. In the event that such difficult conditions in the global credit markets continue or the global economy deteriorates in the future, the Korean economy could be adversely affected and Korean banks, including us, may be forced to fund their operations at a higher cost or may be unable to raise as much funding as they need to support their lending and other activities.

In response to these developments, legislators and financial regulators in the United States and other jurisdictions, including Korea, implemented a number of policy measures designed to add stability to the

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financial markets, including the provision of direct and indirect assistance to distressed financial institutions. In particular, the Government has implemented or announced, among other things, the following measures during the fourth quarter of 2008 and in 2009:

• in October 2008, the Government implemented a guarantee program to guarantee foreign currency- denominated debt incurred by Korean banks and their overseas branches between October 20, 2008 and June 30, 2009 (subsequently extended to December 31, 2009), up to an aggregate amount of US$100 billion, for a period of three years (subsequently extended to five years) from the date such debt was incurred;

• in October 2008, The Bank of Korea established a temporary reciprocal currency swap arrangement with the Federal Reserve Board of the United States for up to US$30 billion, effective until April 30, 2009 (subsequently extended to October 30, 2009). The Bank of Korea provided U.S. dollar liquidity, through competitive auction facilities, to financial institutions established in Korea, using funds from the swap line;

• in December 2008, a (Won)10 trillion bond market stabilization fund was established to purchase financial and corporate bonds and debentures in order to provide liquidity to companies and financial institutions;

• in December 2008, The Bank of Korea agreed with the People’s Bank of China to establish a bilateral currency swap arrangement for up to (Won)38 trillion, effective for three years, and agreed with the Bank of Japan to increase the maximum amount of their bilateral swap arrangement from US$3 billion to US$20 billion, effective until April 30, 2009;

• in December 2008 and March 2009, the Government, through Korea Asset Management Corporation, purchased non-performing loans held by savings banks in the amount of approximately (Won)1.7 trillion;

• in February 2009, the Government announced its plan to contribute capital to Korean banks through a (Won)20 trillion bank recapitalization fund and received applications from 14 banks;

• during the first quarter of 2009, the Government, through the Bank of Korea and the Korea Development Bank, purchased from Korean banks hybrid securities and subordinated bonds in the amount of approximately (Won)4 trillion;

• during the fourth quarter of 2008 and the first quarter of 2009, The Bank of Korea decreased the policy rate by a total of 3.25% points to 2.00% in order to address financial market instability and to help combat the slowdown of the domestic economy;

• in April 2009, the National Assembly authorized the expansion of the 2009 national budget by (Won)28.4 trillion to provide stimulus for the Korean economy. The stimulus plan includes (Won)17.2 trillion to be used for cash handouts, low-interest loans, infrastructure spending and job training, as well as (Won)11.2 trillion in various tax incentives; and

• in December 2009, the Government, together with the member countries of the Association of Southeast Asian Nations, China and Japan, signed the Chiang Mai Initiative Multilateralization Agreement to address balance-of-payments and short-term liquidity difficulties in the region and to supplement the existing international financial arrangements.

However, the overall impact of these legislative and regulatory efforts on the financial markets is uncertain, and they may not have the intended stabilizing effects.

While the rate of deterioration of the global economy slowed in the second half of 2009 and into 2010, with some signs of stabilization and possible improvement, the overall prospects for the Korean and global economy in 2010 and beyond remain uncertain. For example, in November 2009, the Dubai government announced a moratorium on the outstanding debt of Dubai World, a government-affiliated investment company.

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In addition, many governments in Europe are showing increasing signs of fiscal stress and may experience difficulties in meeting their debt service requirements. For example, in November 2008, the Icelandic government, facing mounting debt problems, reached an agreement with the IMF to receive loans in the amount of US$2.1 billion over a two-year period. In addition, in May 2010, the Greek government reached an agreement with the IMF and the European Union to receive loans in the amount of Euro 115 billion over a three-year period. Any of these or other developments could potentially trigger another financial and economic crisis, which could have a material adverse effect on the Korean economy and financial markets (including depreciation of the value of the Won, decline and volatility in the stock prices of Korean companies, increases in credit spreads and funding costs and decreases in exports) and our financial conditions and results of operations.

Furthermore, while many governments worldwide are considering or are in the process of implementing “exit strategies”, in the form of reduced government spending, higher interest rates or otherwise, with respect to the economic stimulus measures adopted in response to the global financial crisis, such strategies may, for reasons related to timing, magnitude or other factors, have the unintended consequence of prolonging or worsening global economic and financial difficulties.

Moreover, the catastrophic earthquake and tsunami that struck Japan in March 2011 and the nuclear crisis that resulted may adversely affect the Korean economy by causing a decline in exports to Japan and a decrease in foreign direct investment in the Republic, reducing demand in the retail and tourism industry and disrupting supplies to certain manufacturers that depend on components made in Japan, which in turn may have a material adverse effect on our financial condition and results of operations. In addition, the price of oil has increased recently due to, among others, political unrest and military conflict in North Africa and Middle East, which could have a material adverse effect on the global and Korean economies.

In light of the high level of interdependence of the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets.

Gross Domestic Product

Gross domestic product, or GDP, measures the market value of all final goods and services produced within a country for a given period and reveals whether a country’s productive output rises or falls over time. Economists present GDP in both current market prices and “real” or “inflation-adjusted” terms. In March 2009, the Republic adopted a method known as the “chain-linked” measure of GDP, replacing the previous fixed-base, or “constant” measure of GDP, to show the real growth of the aggregate economic activity, as recommended by the System of National Accounts 1993. GDP at current market prices values a country’s output using the actual prices of each year, whereas the “chain-linked” measure of GDP is compiled by using “chained indices” linking volume growth between consecutive time periods.

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The following table sets out the composition of the Republic’s GDP at current and chained 2005 year prices and the annual average increase in the Republic’s GDP.

Gross Domestic Product

	2006			2007			2008			2009			2010(1)			As % of GDP 2010(1)
	(billions of Won)
Gross Domestic Product at Current Market Prices:
Private		494,917.6			530,264.1			561,627.5			575,970.2			615,406.9			52.5
Government		131,900.7			143,262.2			156,944.1			170,324.7			180,053.8			15.4
Gross Capital Formation		269,187.8			286,917.6			320,368.8			279,858.1			341,902.8			29.2
Exports of Goods and Services		360,625.3			408,754.1			544,110.7			529,645.1			614,451.0			52.4
Less Imports of Goods and Services		(348,022.9	)		(394,026.2	)		(556,197.9	)		(490,188.3	)		(581,735.8	)		(49.6	)
Statistical Discrepancy		135.3			(158.9	)		(401.4	)		(573.0	)		2,724.6			0.2
Expenditures on Gross Domestic Product		908,743.8			975,013.0			1,026,451.8			1,065,036.8			1,172,803.4			100.0
Net Factor Income from the Rest of the World		1,390.3			1,800.9			7,663.6			4,746.2			320.0			0.0
Gross National Income(2)		910,134.2			976,813.9			1,034,115.4			1,069,783.1			1,173,123.4			100.0
Gross Domestic Product at Chained 2005 Year Prices:
Private		487,439.0			512,094.8			518,820.8			518,776.0			540,254.7			51.8
Government		127,908.9			134,806.9			140,633.6			148,471.7			152,948.6			14.7
Gross Capital Formation		268,215.8			277,729.0			277,772.8			240,411.7			277,460.4			26.6
Exports of Goods and Services		378,374.7			426,070.6			454,248.9			448,813.8			514,032.7			49.3
Less Imports of Goods and Services		(352,087.7	)		(393,207.1	)		(410,567.7	)		(377,795.8	)		(441,692.8	)		(42.4	)
Statistical Discrepancy		198.3			91.3			(323.6	)		(528.1	)		(1,028.7	)		(0.1	)
Expenditures on Gross Domestic Product(3)		910,048.9			956,514.5			978,498.8			981,625.1			1,042,111.3			100.0
Net Factor Income from the Rest of the World in the Terms of Trade		1,341.6			1,622.9			6,776.2			4,055.5			114.9			0.0
Trading Gains and Losses from Changes in the Terms of Trade		(13,196.4	)		(16,827.8	)		(50,031.9	)		(35,622.1	)		(39,741.5	)		(3.8	)
Gross National Income(4)		898,194.2			941,317.3			935,248.8			950,041.1			1,002,473.2			96.2
Percentage Increase (Decrease) of GDP over Previous Year At Current Prices		5.0			7.3			5.3			3.8			10.1			—
At Chained 2005 Year Prices		5.2			5.1			2.3			0.3			6.2			—

(1) Preliminary.

(2) GDP plus net factor income from the rest of the world is equal to the Republic’s gross national product.

(3) Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add to the total GDP.

(4) Under the “chain-linked” measure of Gross National Income, the components of Gross National Income will not necessarily add to the total Gross National Income.

Source: The Bank of Korea.

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The following table sets out the Republic’s GDP by economic sector at current prices:

Gross Domestic Product by Economic Sector

(at current market prices)

	2006		2007		2008		2009		2010(1)		As % of GDP 2010 (1)
	(billions of Won)
Industrial Sectors:
Agriculture, Forestry and Fisheries		25,751.2		25,208.8		24,686.0		26,615.0		27,018.7		2.3
Mining and Manufacturing		222,865.9		240,612.1		258,545.4		268,798.7		325,287.2		27.7
Mining and Quarrying		1,925.8		2,001.2		2,336.0		2,220.5		2,237.3		0.2
Manufacturing		220,940.1		238,610.9		256,209.4		266,578.2		323,049.9		27.6
Electricity, Gas and Water		18,546.9		19,155.3		12,298.6		17,258.2		21,044.6		1.8
Construction		61,359.3		64,979.0		64,612.2		66,576.6		68,800.8		5.9
Services:		486,162.9		524,826.9		559,545.8		579,587.5		614,860.2		52.4
Wholesale and Retail Trade, Restaurants and Hotels		87,320.8		93,405.5		100,419.3		103,994.8		114,245.4		9.7
Transportation, Storage and Communication		36,424.2		40,070.5		41,613.1		40,162.5		42,909.6		3.7
Financial Intermediation		55,234.7		61,114.0		65,132.2		65,035.5		72,476.6		6.2
Real Estate, Renting and Business Activities		65,534.7		69,435.7		71,886.2		74,361.1		74,773.1		6.4
Information, Communication		37,969.9		39,198.1		39,666.8		41,225.0		43,159.5		3.7
Business Activities		41,292.3		45,056.0		49,905.7		51,001.9		53,956.6		4.6
Public Administration and Defense; Compulsory Social Security		52,262.6		55,515.9		59,396.8		63,706.6		66,031.0		5.6
Education		51,036.7		55,554.4		60,940.1		63,448.7		65,139.4		5.6
Health and Social Work		31,617.7		35,451.6		38,452.1		43,092.1		47,332.0		4.0
Recreational, Cultural and Sporting		10,859.2		12,209.1		13,048.9		13,693.8		14,056.9		1.2
Other Service Activities		16,610.1		17,816.1		19,084.6		19,865.5		20,780.1		1.8
Taxes less subsidies on products		94,057.8		100,231.0		106,763.8		106,200.8		115,791.6		9.9
Gross Domestic Product at Current Prices		908,743.8		975,013.0		1,026,451.8		1,065,036.8		1,172,803.4		100.0
Net Factor Income from the Rest of the World		1,390.3		1,800.9		7,663.6		4,746.2		320.0		0.0
Gross National Income at Current Price		910,134.2		976,813.9		1,034,115.4		1,069,783.1		1,173,123.4		100.0

(1) Preliminary.

Source: The Bank of Korea.

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The following table sets out the Republic’s GDP per capita:

Gross Domestic Product per capita

(at current market prices)

	2006		2007		2008		2009		2010 (1)
GDP per capita (thousands of Won)		18,820		20,120		21,120		21,848		23,996
GDP per capita (U.S. dollar)		19,692		21,655		19,153		17,117		20,753
Average Exchange Rate (in Won per U.S. dollar)		955.5		929.2		1,102.6		1,276.4		1,156.3

(1) Preliminary.

Source : The Bank of Korea.

The following table sets out the Republic’s Gross National Income, or GNI, per capita:

Gross National Income per capita

(at current market prices)

	2006		2007		2008		2009		2010 (1)
GNI per capita (thousands of Won)		18,840		20,160		21,280		21,946		24,003
GNI per capita (U.S. dollar)		19,772		21,695		19,296		17,193		20,759
Average Exchange Rate (in Won per U.S. dollar)		955.5		929.2		1,102.6		1,276.4		1,156.3

(1) Preliminary.

Source : The Bank of Korea.

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The following table sets out the Republic’s GDP by economic sector at chained 2005 year prices:

Gross Domestic Product by Economic Sector

(at chained 2005 year prices)

	2006		2007		2008		2009		2010(1)		As % of GDP 2010(1)
	(billions of Won)
Industrial Sectors:
Agriculture, Forestry and Fisheries		26,240.2		27,294.0		28,826.9		29,759.2		28,475.4		2.7
Mining and Manufacturing		232,884.5		249,317.9		254,658.8		252,473.7		289,358.3		27.8
Mining and Quarrying		1,991.9		1,909.8		1,922.1		1,906.0		1,758.2		0.2
Manufacturing		230,892.6		247,408.1		254,466.7		250,567.7		287,600.1		27.6
Electricity, Gas and Water		18,332.9		19,026.2		20,199.0		21,023.6		22,020.4		2.1
Construction		60,564.4		62,134.9		60,611.1		61,716.0		61,681.6		5.9
Services:		477,658.0		502,050.0		515,983.6		521,915.10		540,293.60		51.9
Wholesale and Retail Trade, Restaurants and Hotels		85,792.6		90,291.3		91,512.4		90,725.7		96,878.5		9.3
Transportation and Storage		37,082.6		39,136.8		41,033.4		38,666.2		42,367.1		4.1
Financial Intermediation		55,611.7		61,614.4		64,612.2		67,425.2		69,080.2		6.6
Real Estate, Renting and Business Activities		64,603.9		65,524.8		66,491.6		66,368.7		66,570.8		6.4
Information and Communication		38,238.7		39,664.7		41,024.7		41,933.8		43,473.1		4.2
Business Activities		39,720.8		41,800.2		42,990.6		42,727.5		43,211.9		4.2
Public Administration and Defense: Compulsory Social Security		50,520.8		52,183.9		52,903.0		54,887.7		55,821.1		5.4
Education		48,532.9		49,971.2		51,619.6		52,135.1		52,658.8		5.1
Health and Social Work		30,389.3		32,905.8		34,197.6		36,897.6		39,509.6		3.8
Culture and Entertainment Services		10,744.2		11,781.1		12,175.8		12,477.2		12,562.3		1.2
Other Service Activities		16,420.5		17,175.8		17,422.7		17,670.4		18,160.2		1.7
Taxes less subsidies on products		94,368.8		96,992.4		97,090.1		95,514.0		101,396.0		9.7
Gross Domestic Product at Market Prices(2)		910,048.9		956,514.5		978,498.8		981,625.1		1,042,111.3		100.0

(1) Preliminary.

(2) Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add to the total GDP.

Source : The Bank of Korea.

GDP growth in 2006 was 5.2% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 5.1% and gross domestic fixed capital formation increased by 3.4%, each compared with 2005.

GDP growth in 2007 was 5.1% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 5.1% and gross domestic fixed capital formation increased by 4.2%, each compared with 2006.

GDP growth in 2008 was 2.3% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 2.0% and gross domestic fixed capital formation decreased by 1.9%, each compared with 2007.

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GDP growth in 2009 was 0.3% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 1.2% but gross domestic fixed capital formation decreased by 1.0%, each compared with 2008.

Based on preliminary data, GDP growth in 2010 was 6.2% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 3.9% and gross domestic fixed capital formation increased by 7.0%, each compared with 2009.

Based on preliminary data, GDP growth in the first quarter of 2011 was 4.2% at chained 2005 year prices, as aggregate private and general government consumption expenditures increased by 2.7% and exports of goods and services increased by 16.8%, which more than offset a 2.2% decrease in gross domestic fixed capital formation, each compared with the corresponding period of 2010.

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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

(2005 = 100)

	Index Weight (1)		2006		2007		2008		2009		2010 (2)
All Industries		10,000.0		108.4		115.9		119.4		119.0		138.7
Mining and Manufacturing		9,458.5		108.6		116.3		119.7		119.1		139.4
Mining		36.5		95.8		91.5		8-0.9		87.0		80.6
Petroleum, Crude Petroleum and Natural Gas		8.7		93.4		82.1		65.7		89.1		87.3
Metal Ores		0.5		113.2		171.0		154.8		122.2		221.5
Non-metallic Minerals		27.3		96.3		93.0		84.4		85.6		75.9
Manufacturing		9,422.0		108.7		116.4		119.9		119.2		139.6
Food Products		479.2		101.7		101.8		100.5		99.1		104.0
Beverage Products		159.0		99.4		101.7		104.7		99.7		104.1
Tobacco Products		55.1		111.9		116.2		120.8		120.3		116.2
Textiles		226.0		100.2		98.9		91.2		85.5		95.1
Wearing Apparel, Clothing Accessories and Fur Articles		174.6		109.6		116.3		117.2		112.5		116.7
Tanning and Dressing of Leather, Luggage and Footwear		47.9		102.5		100.5		95.7		86.0		83.0
Wood and Products of Wood and Cork (Except Furniture)		46.7		109.6		107.1		100.0		87.2		88.2
Pulp, Paper and Paper Products		145.0		102.1		104.8		103.3		100.2		106.6
Printing and Reproduction of Recorded Media		77.0		102.0		101.8		110.6		100.1		114.1
Coke, hard-coal and lignite fuel briquettes and Refined Petroleum Products		315.2		101.3		102.5		103.2		102.0		105.4
Chemicals and Chemical Products		772.2		102.5		109.6		110.4		116.3		123.3
Pharmaceuticals, Medicinal Chemicals and Botanical Products		187.1		111.2		120.6		130.3		134.7		140.8
Rubber and Plastic Products		434.2		106.8		113.0		109.2		100.5		112.7
Non-metallic Minerals		309.9		106.1		112.2		113.4		111.4		116.1
Basic Metals		753.2		103.7		108.4		109.1		100.3		120.4
Fabricated Metal Products		490.8		106.3		112.0		116.0		106.5		115.9
Electronic Components, Computer, Radio, Television and Communication Equipment and Apparatuses		1,970.4		122.3		138.9		152.0		163.5		204.1
Medical, Precision and Optical Instruments, Watches and Clocks		102.8		107.3		112.5		116.9		118.5		135.9
Electrical Equipment		449.5		100.3		104.8		111.5		114.4		130.3
Other Machinery and Equipment		737.5		109.5		120.4		119.8		107.3		151.4
Motor Vehicles, Trailers and Semitrailers		1,101.2		108.0		114.8		110.6		103.4		131.7
Other Transport Equipment		254.3		108.3		115.9		145.1		160.3		148.7
Furniture		79.0		101.4		100.6		96.6		91.7		95.9
Other Products		54.2		94.8		93.9		78.3		74.7		84.4
Electricity, Gas		541.5		104.1		108.8		114.6		116.4		126.9
Publishing activities		109.3		101.2		96.0		94.8		91.2		91.6
Total Index (including Publishing Activities)		10,109.3		108.3		115.7		119.2		118.7		138.2

(1) Index weights were established on the basis of an industrial census in 2005 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.

(2) Preliminary

Source: The Bank of Korea; Korea National Statistical Office.

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Industrial production increased by 8.4% in 2006, primarily due to increased exports and domestic consumption. Industrial production increased by 6.9% in 2007, primarily due to solid export growth and domestic consumption. Industrial production growth was only 3.4% in 2008, primarily due to a slowdown in growth of exports and domestic consumption as a result of adverse global and Korean economic conditions beginning in the second half of 2008. Industrial production decreased by 0.8% in 2009, primarily due to decreased exports as a result of adverse global economic conditions. Based on preliminary data, industrial production increased by 16.7% in 2010, primarily due to increased exports and domestic consumption.

Manufacturing

The manufacturing sector increased production by 6.3% in 2005, 8.7% in 2006, 7.1% in 2007 and 2.9% in 2008. In 2009, the manufacturing sector decreased production by 1.5%. Based on preliminary data, in 2010, the manufacturing sector increased production by 14.8%.

Automobiles. In 2006, automobile production increased by 3.8%, domestic sales volume recorded an increase of 1.9% and export sales volume recorded an increase of 2.4%, compared with 2005. In 2006, export sales of automobiles constituted approximately 9.4% of the Republic’s total exports. In 2007, automobile production increased by 6.4%, domestic sales volume recorded an increase of 4.7% and export sales volume recorded an increase of 7.5%, compared with 2006. In 2007, export sales of automobiles constituted approximately 9.3% of the Republic’s total exports. In 2008, automobile production decreased by 6.4%, domestic sales volume recorded a decrease of 5.3% and export sales volume recorded a decrease of 5.7%, compared with 2007, primarily due to a decrease in the domestic and global demand for automobiles as a result of adverse global and Korean economic conditions. In 2008, export sales of automobiles constituted approximately 7.4% of the Republic’s total exports. In 2009, automobile production decreased by 8.2%, domestic sales volume recorded an increase of 20.7% and export sales volume recorded a decrease of 19.9%, compared with 2008, primarily due to the continued decrease in global demand for automobiles. In 2009, export sales of automobiles constituted approximately 6.2% of the Republic’s total exports. The automobile stimulus programs of a number of governments, including those in the United States and Europe, encouraged demand for automobiles in the relevant countries for the first nine months of 2009, the effect of which partially offset the decrease in global demand for Korean automobiles during the duration of such stimulus programs. In the fourth quarter of 2009, export sales of automobiles increased compared to previous quarters of 2009, primarily due to the recovery of global demand for automobiles, the effect of which more than offset the negative impact of termination of most of such governments’ automobile stimulus programs in the second half of 2009. Based on preliminary data, in 2010, automobile production increased by 21.6%, domestic sales volume recorded an increase of 5.1% and export sales volume recorded an increase of 29.0%, compared with 2009.

Electronics. In 2006, electronics production increased by 22.3% and exports increased by 18.6%, each compared with 2005. In 2006, export sales of semiconductor memory chips constituted approximately 11.5% of the Republic’s total exports. In 2007, electronics production increased by 13.6% and exports increased by 13.7%, each compared with 2006. In 2007, export sales of semiconductor memory chips constituted approximately 10.5% of the Republic’s total exports. In 2008, electronics production increased by 9.4% and exports increased by 8.9%, each compared with 2007. In 2008, export sales of semiconductor memory chips constituted approximately 7.8% of the Republic’s total exports. In 2009, electronics production increased by 0.8% and exports increased by 5.5%, each compared with 2008. In 2009, export sales of semiconductor memory chips constituted approximately 8.5% of the Republic’s total exports.

Iron and Steel. In 2006, crude steel production totaled 48.5 million tons, an increase of 1.3% from 2005. Domestic sales volume increased by 5.7% and export sales volume increased by 11.9%. In 2007, crude steel production totaled 51.5 million tons, an increase of 6.3% from 2006. Domestic sales volume increased by 10.8% and export sales volume increased by 5.2%. In 2008, crude steel production totaled 53.3 million tons, an increase of 3.8% from 2007. Domestic sales volume increased by 6.2% and export sales volume increased by 8.6%. In 2009, crude steel production totaled 48.6 million tons, a decrease of 8.9% from 2008. Domestic sales volume and

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export sales volume decreased by 22.5% and 1.2%, respectively. Based on preliminary data, in 2010, crude steel production totaled 58.4 million tons, an increase of 20.2% from 2009. Domestic sales volume and export sales volume increased by 14.3% and 21.1%, respectively.

Shipbuilding. In 2006, the Republic’s shipbuilding orders amounted to 20.6 million compensated gross tons, an increase of 68.9% compared to 2005. In 2007, the Republic’s shipbuilding orders amounted to 33.0 million compensated gross tons, an increase of 60.2% compared to 2006. In 2008, the Republic’s shipbuilding orders amounted to 14.0 million compensated gross tons, a decrease of 57.6% compared to 2007. In 2009, the Republic’s shipbuilding orders amounted to 1.9 million compensated gross tons, a decrease of 86.4% compared to 2008 as a result of a decrease in ship orders due to adverse global economic conditions. In the first nine months of 2010, the Republic’s ship building orders amounted to 7.0 million compensated gross tons.

Agriculture, Forestry and Fisheries

The Government’s agricultural policy has traditionally focused on:

• grain production;

• development of irrigation systems;

• land consolidation and reclamation;

• seed improvement;

• mechanization measures to combat drought and flood damage; and

• increasing agricultural incomes.

Recently, however, the Government has increased emphasis on cultivating profitable crops and strengthening international competitiveness in anticipation of opening the domestic agricultural market.

In 2006, rice production decreased 2.1% from 2005 to 4.7 million tons. In 2007, rice production decreased 6.4% from 2006 to 4.4 million tons. In 2008, rice production increased 9.1% from 2007 to 4.8 million tons. Based on preliminary data, in 2009, rice production increased 2.1% from 2008 to 4.9 million tons. Based on preliminary data, in 2010, rice production decreased 12.6% from 2009 to 4.3 million tons. Due to limited crop yields resulting from geographical and physical constraints, the Republic depends on imports for certain basic foodstuffs.

The Government is seeking to develop the fishing industry by encouraging the building of large fishing vessels and modernizing fishing equipment, marketing techniques and distribution outlets.

In 2006, the agriculture, forestry and fisheries industry increased by 1.5% compared to 2005 primarily due to an increase in the cultivation and livestock industry. In 2007, the agriculture, forestry and fisheries industry increased by 4.0% compared to 2006 primarily due to an increase in fishing catch which offset a decrease in the production of rice. In 2008, the agriculture, forestry and fisheries industry increased by 5.6% compared to 2007. In 2009, the agriculture, forestry and fisheries industry increased by 3.2% compared to 2008. Based on preliminary data, in 2010, the agriculture, forestry and fisheries industry decreased by 4.3% compared to 2009.

Construction

In 2006, the construction industry increased by 2.2% compared to 2005 primarily due to an increase in the construction of residential and commercial buildings. In 2007, the construction industry increased by 2.6% compared to 2006 primarily due to an increase in the construction of commercial buildings which offset a slight decrease in the construction of residential buildings. In 2008, the construction industry decreased by 2.4% compared to 2007 primarily due to a significant decrease in the construction of commercial and residential

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buildings. In 2009, the construction industry increased by 1.8% compared to 2008. Based on preliminary data, in 2010, the construction industry decreased by 0.1% compared to 2009. The construction industry has experienced a significant downturn since the second half of 2009, due to excessive investment in recent years in residential property development projects, stagnation of real property prices and reduced demand for residential property, especially in areas outside of Seoul, as a result of deteriorating conditions in the Korean economy in the second half of 2009 and into 2010. The Government has taken measures to support the Korean construction industry, including a (Won)5 trillion program to buy unsold housing units and land from construction companies. However, the effect of these measures is uncertain and the construction industry may continue to experience adverse conditions.

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)
2006		233.4		225.2		96.5
2007		236.5		228.3		96.5
2008		240.8		232.2		96.4
2009		243.3		234.7		96.5
2010(1)		260.5		251.2		96.4

(1) Preliminary

Source: Korea Energy Economics Institute.

Korea has almost no domestic oil or gas production and depends on imported oil and gas to meet its energy requirements. Accordingly, the international prices of oil and gas significantly affect the Korean economy. Any significant long-term increase in the prices of oil and gas will increase inflationary pressures in Korea and adversely affect the Republic’s balance of trade.

To reduce its dependence on oil and gas imports, the Government has encouraged energy conservation and energy source diversification emphasizing nuclear energy. 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(1)				Total
	Quantity		%		Quantity		%		Quantity		%		Quantity		%		Quantity		%
2006		56.7		24.3		101.8		43.6		37.2		15.9		37.7		16.2		233.4		100.0
2007		59.7		25.2		105.5		44.6		30.7		13.0		40.6		17.2		236.5		100.0
2008		66.1		27.5		100.2		41.6		32.5		13.5		42.0		17.4		240.8		100.0
2009		68.6		28.2		102.3		42.1		31.8		13.1		40.6		16.7		243.3		100.0
2010(2)		76.0		29.2		104.3		40.1		31.7		12.3		48.4		18.6		260.5		100.0

(1) Includes natural gas, hydroelectric power and renewable energy.

(2) Preliminary

Source: Korea Energy Economics Institute.

The Republic’s first nuclear power plant went into full operation in 1978 with a rated generating capacity of 587 megawatts. Construction of an additional 18 nuclear power plants was completed by July 2004, adding

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16,129 megawatts of generating capacity. The Republic’s total nuclear power generating capacity is estimated to be 17,716 megawatts as of December 31, 2008.

Services Sector

In 2006, the transportation and storage sector increased by 5.1%, the financial intermediation sector increased by 4.2% and the real estate, renting and business activities sector increased by 2.2%, each compared with 2005. In 2007, the transportation and storage sector increased by 5.5%, the financial intermediation sector increased by 10.8% and the real estate, renting and business activities sector increased by 1.4%, each compared with 2006. In 2008, the transportation and storage sector increased by 4.8%, the financial intermediation sector increased by 4.9% and the real estate, renting and business service sector increased by 1.5%, each compared with 2007. In 2009, the transportation and storage sector decreased by 5.8%, the financial intermediation sector increased by 4.4% and the real estate, renting and business activities sector decreased by 0.2%, each compared with 2008. Based on preliminary data, in 2010, the transportation and storage sector increased by 9.6%, the financial intermediation sector increased by 2.5% and the real estate, renting and business activities sector increased by 0.3%, each compared with 2009.

Prices, Wages and Employment

The following table shows selected price and wage indices and unemployment rates:

	Producer Price Index (1)		Increase Over Previous Year			Consumer Price Index  (1)		Increase Over Previous Year		Wage Index (1) (2)			Increase Over Previous Year			Unemployment Rate (1) (3)
	(2005=100)		(%)			(2005=100)		(%)		(2005=100)			(%)			(%)
2006		100.9		0.9			102.2		2.2		105.7			5.7			3.5
2007		102.3		1.4			104.8		2.5		106.5			0.7			3.2
2008		111.1		8.6			109.7		4.7		109.9			3.1			3.2
2009		110.9		(0.2	)		112.8		2.8		109.1			(0.7	)		3.6
2010		115.1		3.8			116.1		2.9		N/A	(4)		N/A	(4)		3.7

(1) Average for year.

(2) Nominal wage index of earnings in all industries.

(3) Expressed as a percentage of the economically active population.

(4) Not available.

Source: The Bank of Korea; Korea National Statistical Office.

The inflation rate, on an annualized basis, was 2.2% in 2006, 2.5% in 2007, 4.7% in 2008, 2.8% in 2009 and 2.9% in 2010. The inflation rate was 4.5% in the first quarter of 2011, compared to the same period of 2010.

The unemployment rate was 3.5% in 2006, 3.2% in 2007, 3.2% in 2008, 3.6% in 2009 and 3.7% in 2010. The unemployment rate was 4.2% in the first quarter of 2011.

From 1992 to 2009, the economically active population of the Republic increased by approximately 24.8% to 24.3 million, while the number of employees increased by approximately 23.7% to 23.5 million. The economically active population over 15 years old as a percentage of the total over-15 population has remained between 60% and 63% over the past decade. Literacy among workers under 50 is almost universal. As of December 31, 2010, the economically active population of the Republic was 24.8 million and the number of employees was 23.8 million.

As of July 1, 2004, the Republic adopted a five-day workweek for large corporations with over 1,000 employees, publicly-owned (state-run) companies, banks and insurance companies, reducing working hours from 44 to 40 hours a week. The adoption of the five-day workweek has been extended to companies with over 300

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employees and to government employees as of July 1, 2005 and to companies with over 100 employees as of July 1, 2006. Companies with more than 50 employees adopted the five-day workweek as of July 1, 2007 and those with over 20 adopted the five-day workweek as of July 1, 2008. Companies with less than 20 employees are also scheduled to adopt the five-day workweek by July 1, 2011.

Approximately 10.5% of the Republic’s workers were unionized as of December 31, 2008. In the early 2000s, the labor unions of several of the Republic’s largest commercial banks, including Kookmin Bank, Chohung Bank (which was later acquired by Shinhan Bank) and Citibank Korea Inc. (formerly KorAm Bank), staged strikes in response to consolidation in the banking industry. In addition, in the summer of 2004 and 2005, respectively, unionized workers of GS Caltex Corporation and Asiana Airlines staged strikes demanding better compensation and working conditions. In the fall of 2005, unionized workers at Hyundai Motor Company and Kia Motors Corp. went on strikes during annual contract talks. In December 2005, Korean Air’s unionized pilots also staged strikes demanding a higher wage increase. In the summer of 2006, unionized workers of Hyundai Motor Company and Kia Motors Corp. went on partial strikes demanding better compensation and working conditions, and unionized workers of Ssangyong Motor Company went on strike in response to the company’s proposed layoff plans. In July 2006, unionized workers of POSCO’s subcontractors initiated a sit-in strike at POSCO’s headquarters in Pohang demanding better wages and working conditions, disrupting POSCO’s operations for nine days. In June 2007, unionized workers of Hyundai Motor Company went on partial strikes demanding a higher bonus increase. Also, in May 2009, unionized workers of Ssangyong Motor Company went on full-scale strike and illegally occupied the company’s factory premises in Pyungtaek opposing the company’s reorganization plan. Actions such as these by labor unions may hinder implementation of the labor reform measures and disrupt the Government’s plans to create a more flexible labor market. Although much effort is being expended to resolve labor disputes in a peaceful manner, there can be no assurance that further labor unrest will not occur in the future. Continued labor unrest in key industries of the Republic may have an adverse effect on the economy.

In 1997, the Korean Confederation of Trade Unions organized a political alliance, which led to the formation of the Democratic Labor Party in January 2000. The Democratic Labor Party, which seeks to represent the interests of workers, controls five seats in the National Assembly from May 30, 2008 as a result of the 18th legislative general election held on April 9, 2008.

The Financial System

Structure of the Financial Sector

The Republic’s financial sector includes the following categories of financial institutions:

• The Bank of Korea;

• banking institutions;

• non-bank financial institutions; and

• other financial entities, including:

• financial investment companies;

• credit guarantee institutions;

• venture capital companies; and

• miscellaneous others.

To increase transparency in financial transactions and enhance the integrity and efficiency of the financial markets, Korean law requires that financial institutions confirm that their clients use their real names when transacting business. To ease the liquidity crisis, the Government altered the real-name financial transactions

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system during 1998, to allow the sale or deposit of foreign currencies through domestic financial institutions and the purchase of certain bonds, including Government bonds, without identification. The Government also strengthened confidentiality protection for private financial transactions.

In July 2007, the Korean National Assembly passed the Financial Investment Services and Capital Markets Act or FSCMA, under which various industry-based capital markets regulatory systems currently were consolidated into a single regulatory system. The FSCMA, which became effective in February 2009, expands 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. The Enforcement Decree of the FSCMA classifies the financial investment companies into a total of 77 categories depending on the types of (i) financial investment services, (ii) financial investment products, and (iii) investors.

Prior to the effective date of the Financial Investment Services and Capital Markets Act, separate laws regulated various types of financial institutions depending on the type of the financial institution (for example, securities companies, futures companies, trust business companies and asset management companies) and subjected financial institutions to different licensing and ongoing regulatory requirements (for example, under the Securities and Exchange Act, the Futures Business Act and the Indirect Investment Asset Management Business Act). By applying one uniform set of rules to financial businesses having the same economic function, the Financial Investment Services and Capital Markets Act attempts to improve and address issues caused by the previous regulatory system under which the same economic function relating to capital markets-related business were governed by multiple regulations. To this end, the Financial Investment Services and Capital Markets Act categorizes capital markets-related businesses into six different functions, as follows:

• investment dealing (trading and underwriting of financial investment products);

• investment brokerage (brokerage of financial investment products);

• collective investment (establishment of collective investment schemes and the management thereof);

• investment advice;

• discretionary investment management; and

• trusts (together with the five businesses set forth above, “Financial Investment Businesses”).

Accordingly, all financial businesses relating to financial investment products are reclassified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Businesses, irrespective of what type of financial institution it is. For example, under the Financial Investment Services and Capital Markets Act, derivative businesses conducted by securities companies and future companies will be subject to the same regulations under the Financial Investment Services and Capital Markets Act, at least in principle.

The banking business and the insurance business are not subject to the Financial Investment Services and Capital Markets Act and will continue to be regulated under separate laws; provided, however, that they are subject to the Financial Investment Services and Capital Markets Act if their activities involve any Financial Investment Businesses requiring a license based on the Financial Investment Services and Capital Markets Act.

Banking Industry

The banking industry comprises commercial banks and specialized banks. Commercial banks serve the general public and corporate sectors. They include nationwide banks, regional banks and branches of foreign banks. Regional banks provide services similar to nationwide banks, but operate in a geographically restricted region. Branches of foreign banks have operated in the Republic since 1967 but provide a relatively small proportion of the country’s banking services. As of December 31, 2010, commercial banks consisted of seven

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nationwide banks, all of which have branch networks throughout the Republic, six regional banks and 53 branches of 37 foreign banks operating in the country. Nationwide and regional banks had, in the aggregate, 5,531 domestic branches and offices, 41 overseas branches, 17 overseas representative offices and 32 overseas subsidiaries as of December 31, 2010.

Specialized banks meet the needs of specific sectors of the economy in accordance with Government policy; they are organized under, or chartered by, special laws. Specialized banks include:

• The Korea Development Bank;

• The Export-Import Bank of Korea;

• The Industrial Bank of Korea;

• National Agricultural Cooperative Federation (which merged with the National Livestock Cooperative Federation in July 2000); and

• National Federation of Fisheries Cooperatives.

The economic difficulties in 1997 and 1998 caused an increase in Korean banks’ non-performing assets and a decline in capital adequacy ratios of Korean banks. From 1998 through 2002, the Financial Services Commission amended banking regulations several times to adopt more stringent criteria for non-performing loans that more closely followed international standards. The new criteria increased the level of non-performing loans held by banks and other financial institutions. The following table sets out the total loans and discounts and non-performing assets of the banking sector.

	Total Loans		Non-Performing Assets(1)		Percentage of Total
	(trillions of won)				(percentage)
December 31, 2006		930.2		7.8		0.8
December 31, 2007		1,073.8		7.7		0.7
December 31, 2008		1,288.1		14.7		1.1
December 31, 2009		1,285.8		16.0		1.2
December 31, 2010		1,308.9		24.6		1.9

(1) Assets classified as substandard, doubtful and estimated loss in accordance with the Republic’s banking regulations.

Source : Financial Supervisory Service.

Most of the growth in total loans since the end of 2002 has been attributable to loans to the retail sector, accounting for 38.1% of total loans as of December 31, 2010, compared to 34.3% as of December 31, 1999.

In 2006, a group of the Republic’s banks, including seven nationwide commercial banks, six regional commercial banks and five special banks, posted an aggregate net profit of (Won)13.6 trillion. In 2007, these banks posted an aggregate net profit of (Won)15.0 trillion. In 2008, these banks posted an aggregate net profit of (Won)7.7 trillion, compared to an aggregate net profit of (Won)15.0 trillion in 2007, primarily due to increased loan loss provisions. In 2009, these banks posted an aggregate net profit of (Won)6.9 trillion, compared to an aggregate net profit of (Won)7.7 trillion in 2008, primarily due to increased non-performing loans. Based on preliminary data, in 2010, these banks posted an aggregate net profit of (Won)9.4 trillion, compared to an aggregate net profit of (Won)6.9 trillion, primarily due to increased net interest income.

Non-Bank Financial Institutions

Non-bank financial institutions include:

• savings institutions, including trust accounts of banks, mutual savings banks, credit unions, mutual credit facilities, community credit cooperatives and postal savings;

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• life insurance institutions; and

• credit card companies.

The country had 105 mutual savings banks as of December 31, 2010, with assets totaling (Won)86.9 trillion.

As of December 31, 2010, 13 domestic life insurance institutions, two joint venture life insurance institutions and nine wholly-owned subsidiaries of foreign life insurance companies, with assets totaling approximately (Won)408.5 trillion as of December 31, 2010, were operating in the Republic.

As of December 31, 2010, six credit card companies operated in the country with loans totaling approximately (Won)54.5 trillion.

Money Markets

In the Republic, the money markets consist of the call market and markets for a wide range of other short- term financial instruments, including treasury bills, monetary stabilization bonds, negotiable certificates of deposits, repurchase agreements and commercial paper.

Securities Markets

On January 27, 2005, the Korea Exchange was established pursuant to the now repealed Korea Securities and Futures Exchange Act by consolidating the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or the KOSDAQ, and the KOSDAQ Committee of the Korea Securities Dealers Association, which had formerly managed the KOSDAQ. There are three different markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, and the KRX Derivatives Market. The Korea Exchange has two trading floors located in Seoul, one for the KRX KOSPI Market and one for the KRX KOSDAQ Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a limited liability company, the shares of which are held by (i) financial investment companies that were formerly members of the Korea Futures Exchange or the Korea Stock Exchange and (ii) the stockholders of the KOSDAQ. Currently, the Korea Exchange is the only stock exchange in Korea and is operated by membership, having as its members Korean financial investment companies and some Korean branches of foreign financial investment companies.

The Korea Exchange publishes the Korea Composite Stock Price Index every ten seconds, which is an index of all equity securities listed on the Korea Exchange. The Korea Composite Stock Price Index is computed using the aggregate value method, whereby the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

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The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:

December 29, 2005	1,379.4
January 31, 2006	1,399.8
February 28, 2006	1,371.6
March 31, 2006	1,359.6
April 28, 2006	1,419.7
May 30, 2006	1,317.7
June 30, 2006	1,295.2
July 31, 2006	1,297.8
August 31, 2006	1,352.7
September 29, 2006	1,371.4
October 31, 2006	1,364.6
November 30, 2006	1,432.2
December 28, 2006	1,434.5
January 31, 2007	1,360.2
February 28, 2007	1,417.3
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
October 31, 2007	2,064.9
November 30, 2007	1,906.0
December 28, 2007	1,897.1
January 31, 2008	1,624.7
February 29, 2008	1,711.6
March 31, 2008	1,704.0
April 30, 2008	1,825.5
May 30, 2008	1,852.0
June 30, 2008	1,674.9
July 31, 2008	1,594.7
August 29, 2008	1,474.2

September 30, 2008	1,448.1
October 31, 2008	1,113.1
November 28, 2008	1,076.1
December 31, 2008	1,124.5
January 30, 2009	1,162.1
February 27, 2009	1,063.0
March 31, 2009	1,206.3
April 30, 2009	1,369.4
May 29, 2009	1,395.9
June 30, 2009	1,390.1
July 31, 2009	1,557.3
August 31, 2009	1,591.9
September 30, 2009	1,673.1
October 31, 2009	1,580.7
November 30, 2009	1,555.6
December 31, 2009	1,682.8
January 29, 2010	1,602.4
February 26, 2010	1,594.6
March 31, 2010	1,692.9
April 30, 2010	1,741.6
May 31, 2010	1,641.3
June 30, 2010	1,698.3
July 30, 2010	1,759.3
August 31, 2010	1,742.8
September 30, 2010	1,872.8
October 29, 2010	1,883.0
November 30, 2010	1,904.6
December 31, 2010	2,051.0
January 31, 2011	2,069.7
February 28, 2011	1,939.3
March 31, 2011	2,106.7
April 30, 2011	2,192.4
May 31, 2011	2,142.5

On December 27, 1997, the last day of trading in 1997, the index stood at 376.3, a sharp decline from 647.1 on September 30, 1997. The fall resulted from growing concerns about the Republic’s weakening financial and corporate sectors, the Republic’s falling foreign currency reserves, the sharp depreciation of the Won against the U.S. Dollar and other external factors, such as a sharp decline in stock prices in Hong Kong on October 24, 1997 and financial turmoil in Southeast Asian countries. The Korea Composite Stock Price Index recovered to reach a high of 2,064.9 in late 2007 but since then the index declined. As liquidity and credit concerns and volatility in the global financial markets increased significantly since September 2008, there was a significant overall decline and continuing volatility in the stock prices of Korean companies during the fourth quarter of 2008 and first half of 2009. The index was 2,063.9 on June 22, 2011.

Supervision System

The Office of Bank Supervision, the Securities Supervisory Board, the Insurance Supervisory Board and all other financial sector regulatory bodies merged in January 1999 to form the Financial Services Commission. The Financial Services Commission acts as the executive body over the Financial Supervisory Service. The Financial Services Commission reports to, but operates independently of, the Prime Minister’s office.

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The Ministry of Strategy and Finance (formerly the Ministry of Finance and Economy) focuses on financial policy and foreign currency regulations. The Bank of Korea manages monetary policy focusing on price stabilization.

Deposit Insurance System

The Republic’s deposit insurance system insures amounts on deposit with banks, non-bank financial institutions, securities companies and life insurance companies.

Since January 2001, deposits at any single financial institution are insured only up to (Won)50 million regardless of the amount deposited.

The Government recently excluded certain deposits, such as repurchase agreements, from the insurance scheme, expanded the definition of unsound financial institutions to which the insurance scheme would apply and increased the insurance premiums payable by insured financial institutions.

Monetary Policy

The Bank of Korea

The Bank of Korea was established in 1950 as Korea’s central bank and the country’s sole currency issuing bank. A seven-member Monetary Policy Committee, chaired by the Governor of The Bank of Korea, formulates and controls monetary and credit policies.

Inflation targeting is the basic system of operation for Korean monetary policy. The consumer price index is used as The Bank of Korea’s target indicator. To achieve its established inflation target, the Monetary Policy Committee of The Bank of Korea determines and announces the “Bank of Korea Base Rate,” the reference rate applied in transactions such as repurchase agreements between The Bank of Korea and its financial institution counterparts. The Bank of Korea uses open market operations as its primary instrument to keep the call rate in line with the Monetary Policy Committee’s target rate. In addition, The Bank of Korea is able to establish policies regarding its lending to banks in Korea and their reserve requirements.

Interest Rates

On October 11, 2005, The Bank of Korea raised the policy rate from 3.25% to 3.5%, which was further raised to 3.75% on December 8, 2005, to 4.0% on February 9, 2006, to 4.25% on June 8, 2006 and to 4.50% on August 10, 2006, in response to the increasing side-effects of a low interest rate environment including inflationary pressures coupled with signs of recovery of the real economy. On July 12, 2007, The Bank of Korea raised the policy rate to 4.75% from 4.5%, and raised it further to 5.0% on August 9, 2007. The rationale for this change was the concern that the ample market liquidity might put upside pressure on inflation in the medium to long term as the economic upswing continued. On August 7, 2008, The Bank of Korea raised the policy rate to 5.25% from 5.0%, taking the view that inflation in consumer prices had picked up its pace, due to the direct and indirect effects of high oil prices, at a time when domestic economic activity had slackened. On October 9, 2008, The Bank of Korea cut its policy rate to 5.0% from 5.25%, and continued to lower it further to 4.25% on October 27, 2008, 4.0% on November 7, 2008, 3.0% on December 11, 2008, 2.5% on January 9, 2009 and 2.0% on February 12, 2009, in order to address financial market instability and to help combat the slowdown of the domestic economy. On July 9, 2010, The Bank of Korea raised the policy rate to 2.25% from 2.0%, which was further raised to 2.5% on November 16, 2010, in response to signs of inflationary pressures and the continued growth of domestic economy. On January 13, 2011, The Bank of Korea raised the policy rate to 2.75%, which was further raised to 3.0% on March 10, 2011 and 3.25% on June 10, 2011, in response to inflationary pressures driven mainly by rises in the prices of petroleum products and farm products.

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With the deregulation of interest rates on banks’ demand deposits on February 2, 2004, The Bank of Korea completed the interest rate deregulation based upon the “Four-Stage Interest Rate Liberalization Plan” announced in 1991. The prohibition on the payment of interest on ordinary checking accounts was, however, maintained.

Money Supply

The following table shows the volume of the Republic’s money supply:

	December 31,
	2006			2007			2008			2009			2010
	(billions of Won)
Money Supply (M1)(1)		371,087.6			316,382.7			330,623.7			389,394.5			427,791.6
Quasi-money(2)		778,174.5			957,229.2			1,095,263.8			1,177,455.5			1,232,738.4
Money Supply (M2)(3)		1,149,262.1			1,273,611.9			1,425,887.5			1,566,850.0			1,660,530.0
Percentage Increase Over Previous Year		12.5	%		10.8	%		12.0	%		9.9	%		6.0	%

(1) Consists of currency in circulation and demand and instant access savings deposits at financial institutions.

(2) Includes time and installment savings deposits, marketable instruments, yield-based dividend instruments and financial debentures, excluding financial instruments with a maturity of more than two years.

(3) Money Supply (M2) is the sum of Money Supply (M1) and quasi-money.

Source: The Bank of Korea.

Exchange Controls

Authorized foreign exchange banks, as registered with the Ministry of Strategy and Finance, handle foreign exchange transactions. The ministry has designated other types of financial institutions to handle foreign exchange transactions on a limited basis.

Korean laws and regulations generally require a report to either the Ministry of Strategy and Finance, The Bank of Korea or authorized foreign exchange banks, as applicable, for issuances of international bonds and other instruments, overseas investments and certain other transactions involving foreign exchange payments.

In 1994 and 1995, the Government relaxed regulations of foreign exchange position ceilings and foreign exchange transaction documentation and created free Won accounts which may be opened by non-residents at Korean foreign exchange banks. The Won funds deposited into the free Won accounts may be converted into foreign currencies and remitted outside Korea without any governmental approval. In December 1996, after joining the OECD, the Republic freed the repatriation of investment funds, dividends and profits, as well as loan repayments and interest payments. The Government continues to reduce exchange controls in response to changes in the world economy, including the new trade regime under the WTO, anticipating that such foreign exchange reform will improve the Republic’s competitiveness and encourage strategic alliances between domestic and foreign entities.

In September 1998, the National Assembly passed the Foreign Exchange Transactions Act, which became effective in April 1999 and was subsequently amended in October 2000, December 2000, December 2005, October 2006, January 2007, August 2007, February 2008, January 2009 and April 2009. In principle, most currency and capital transactions, including, among others, the following transactions, have been liberalized:

• the investment in real property located overseas by Korean companies and financial institutions;

• the establishment of overseas branches and subsidiaries by Korean companies and financial institutions;

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• the investment by non-residents in deposits and trust products having more than one year maturities; and

• the issuance of debentures by non-residents in the Korean market.

To minimize the adverse effects from further opening of the Korean capital markets, the Ministry of Strategy and Finance is authorized to introduce a variable deposit requirement system to restrict the influx of short-term speculative funds.

The Government has also embarked on a second set of liberalization initiatives starting in January 2001, under which ceilings on international payments for Korean residents have been eliminated, including overseas travel expenses, overseas inheritance remittances and emigration expenses. Overseas deposits, trusts, acquisitions of foreign securities and other foreign capital transactions made by residents and the making of deposits in Korean currency by non-residents have also been liberalized. In line with the foregoing liberalization, measures will also be adopted to curb illegal foreign exchange transactions and to stabilize the foreign exchange market.

Effective as of January 1, 2006, the Government liberalized the regulations governing “capital transactions.” The regulations provide that no regulatory approvals are required for any capital transactions. The capital transactions previously subject to approval requirements are now subject only to reporting requirements.

In January 2010, the Financial Supervisory Services releasedFX Derivative Transactions Risk Management Guideline to prevent over-hedging of foreign exchange risk by corporate investors. According to the guideline, if a corporate investor, other than a financial institution or a public enterprise, wishes to enter into a foreign exchange forward, option or swap agreement with a bank, the bank is required to verify whether the corporate investor’s assets, liabilities or contracts face foreign exchange risks that could be mitigated by a foreign exchange forward, option or swap agreement. In addition, the bank is required to ensure that the corporate investor’s risk hedge ratio, which is the ratio of the aggregate notional amount to the aggregate amount of risk, does not exceed 100%.

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Foreign Exchange

The following table shows the exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Services, Ltd. as of the dates indicated:

Exchange Rates

	Won/U.S. Dollar Exchange Rate
December 30, 2005		1,013.0
January 31, 2006		971.0
February 28, 2006		969.0
March 31, 2006		975.9
April 28, 2006		945.7
May 30, 2006		947.4
June 30, 2006		960.3
July 31, 2006		953.1
August 31, 2006		959.6
September 29, 2006		945.2
October 31, 2006		944.2
November 30, 2006		929.9
December 29, 2006		929.6
January 31, 2007		940.9
February 28, 2007		938.3
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
October 31, 2007		907.4
November 30, 2007		929.6
December 31, 2007		938.2
January 31, 2008		943.9
February 29, 2008		937.3
March 31, 2008		991.7
April 30, 2008		999.7
May 31, 2008		1,031.4
June 30, 2008		1,043.4
July 31, 2008		1,008.5
August 29, 2008		1,081.8

	Won/U.S. Dollar Exchange Rate
September 30, 2008		1,187.7
October 31, 2008		1,291.4
November 28, 2008		1,482.7
December 31, 2008		1,257.5
January 31, 2009		1,368.5
February 27, 2009		1,516.4
March 31, 2009		1,377.1
April 30, 2009		1,348.0
May 29, 2009		1,272.9
June 30, 2009		1,284.7
July 31, 2009		1,240.5
August 31, 2009		1,244.9
September 30, 2009		1,188.7
October 31, 2009		1,200.6
November 30, 2009		1,167.4
December 31, 2009		1,167.6
January 29, 2010		1,156.5
February 26, 2010		1,158.4
March 31, 2010		1,130.8
April 30, 2010		1,115.5
May 31, 2010		1,200.2
June 30, 2010		1,210.3
July 30, 2010		1,187.2
August 31, 2010		1,189.1
September 30, 2010		1,142.0
October 29, 2010		1,126.6
November 30, 2010		1,157.3
December 31, 2010		1,138.9
January 31, 2011		1,114.3
February 28, 2011		1,127.9
March 31, 2011		1,107.2
April 30, 2011		1,072.3
May 31, 2011		1,080.6

Prior to November 1997, the Government permitted exchange rates to float within a daily range of 2.25%. In response to the substantial downward pressures on the Won caused by the Republic’s economic difficulties in late 1997, in November 1997, the Government expanded the range of permitted daily exchange rate fluctuations to 10%. The Government eliminated the daily exchange rate band in December 1997, and the Won now floats according to market forces. The value of the Won relative to the U.S. dollar depreciated from (Won)888.1 to US$1.00 on June 30, 1997 to (Won)1,964.8 to US$1.00 on December 24, 1997. Due to improved economic conditions and increases in trade surplus, the Won has generally appreciated against the U.S. dollar, although the trend reversed in March 2008. During the period from January 2, 2008 through April 16, 2009, the value of the Won relative to the U.S. dollar declined by approximately 29.9%, due primarily to adverse economic conditions

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resulting from liquidity and credit concerns and volatility in the global credit and financial markets and repatriations by foreign investors of their investments in the Korean stock market. The market average exchange rate was (Won)1,081.7 to US$1.00 on June 22, 2011.

Balance of Payments and Foreign Trade

Balance of Payments

Balance of payments figures measure the relative flow of goods, services and capital into and out of the country as represented in the current balance and the capital balance. The current balance tracks a country’s trade in goods and services and transfer payments and measures whether a country is living within its income from trading and investments. The capital balance covers all transactions involving the transfer of capital into and out of the country, including loans and investments. The overall balance represents the sum of the current and capital balances. An overall balance surplus indicates a net inflow of foreign currencies, thereby increasing demand for and strengthening the local currency. An overall balance deficit indicates a net outflow of foreign currencies, thereby decreasing demand for and weakening the local currency. The financial account mirrors the overall balance. If the overall balance is positive, the surplus, which represents the nation’s savings, finances the overall deficit of the country’s trading partners. Accordingly, the financial account will indicate cash outflows equal to the overall surplus. If, however, the overall balance is negative, the nation has an international deficit which must be financed. Accordingly, the financial account will indicate cash inflows equal to the overall deficit.

The following table sets out certain information with respect to the Republic’s balance of payments:

Balance of Payments⁽¹⁾

Classification	2006			2007			2008			2009			2010(4)
	(millions of dollars)
Current Account		14,083.2			21,769.7			3,197.5			32,790.5			28,213.6
Goods		31,433.4			37,129.1			5,170.1			37,866.0			41,904.0
Exports(2)		336,494.4			389,568.5			434,651.5			358,189.7			464,286.9
Imports(2)		305,061.0			352,439.4			429,481.4			320,323.7			422,383.1
Services		(13,331.8	)		(11,967.3	)		(5,734.1	)		(6,640.5	)		(11,229.4	)
Income		74.5			135.0			4,435.4			2,276.7			768.4
Current Transfers		(4,092.9	)		(3,527.1	)		(673.9	)		(711.7	)		(3,229.4	)
Capital and Financial Account		(14,151.4	)		(23,876.6	)		(1,154.0	)		(34,651.2	)		(25,331.5	)
Financial Account(3)		(3,126.1	)		(2,387.5	)		109.3			289.6			(174.2	)
Capital Account		(11,025.3	)		(21,489.1	)		(1,263.3	)		(34,940.7	)		(25,157.3	)
Net Errors and Omissions		68.2			2,106.9			(2,043.5	)		1,860.7			(2,882.1	)

(1) Figures are prepared based on the sixth edition of Balance of Payment Manual, or BPM6, published by International Monetary Fund in December 2008 and implemented by the Government in December 2010.

(2) These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(3) Includes borrowings from the IMF, syndicated bank loans and short-term borrowings.

(4) Preliminary.

Source: The Bank of Korea.

The Republic recorded a current account surplus of approximately US$32.8 billion in 2009 compared with a current account surplus of US$3.2 billion in 2008, primarily due to a significant increase in surplus from the goods account.

Based on preliminary data, the Republic recorded a current account surplus of approximately US$28.2 billion in 2010. The current account surplus in 2010 decreased from the current account surplus of US$32.8

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billion in 2009, primarily due to an increase in deficit from the services account which more than offset an increase in surplus from the goods account.

Based on preliminary data, the Republic recorded a current account surplus of approximately US$2.7 billion in the first quarter of 2011. The current account surplus in the first quarter of 2011 increased from the current account surplus of US$0.3 billion in the corresponding period of 2010, primarily due to a decrease in deficit from the services account and an increase in surplus from the goods account.

Foreign Direct Investment

Since 1960, the Government has adopted a broad range of related laws, administrative rules and regulations, providing a framework for the conduct and regulation of foreign investment activities. In September 1998, the Government promulgated the Foreign Investment Promotion Act (the “FIPA”), which replaced previous foreign direct investment related laws, rules and regulations, to promote inbound foreign investments by providing incentives to, and facilitating investment activities in the Republic by, foreign nationals. The FIPA prescribes, among others, procedural requirements for inbound foreign investments, incentives for foreign investments such as tax reductions, and requirements relating to designation and development of foreign investment target regions. The Government believes that providing a stable and receptive environment for foreign direct investment will accelerate the inflow of foreign capital, technology and management techniques.

The following table sets forth information regarding annual foreign direct investment in the Republic for the periods indicated.

Foreign Direct Investment

	2006		2007		2008		2009		2010
	(billions of dollars)
Contracted and Reported Investment
Greenfield Investment (1)		6.9		8.0		7.3		8.1		11.1
Merger & Acquisition		4.3		2.5		4.4		3.4		2.0
Total		11.2		10.5		11.7		11.5		13.1
Actual Investment		9.1		7.8		8.4		6.7		5.3

(1) Includes building new factories and operational facilities.

Source: Ministry of Knowledge Economy

In 2010, the contracted and reported amount of foreign direct investment in the Republic increased to US$13.1 billion from US$11.5 billion in 2009, primarily due to an increase in foreign investment in the manufacturing sector to US$6.7 billion in 2010 from US$3.7 billion in 2009, which was partially offset by a decrease in foreign investment in the service sector to US$6.3 billion in 2010 from US$7.6 billion in 2009.

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The following table sets forth information regarding the source of foreign direct investment by region and country for the periods indicated:

Foreign Direct Investment by Region and Country

	2006		2007		2008		2009		2010
	(billions of dollars)
North America
U.S.A		1.7		2.3		1.3		1.5		2.0
Others		0.2		0.9		0.6		0.7		0.7
		1.9		3.2		1.9		2.2		2.7
Asia
Japan		2.1		1.0		1.4		1.9		2.1
Hong Kong		0.2		0.1		0.2		0.8		0.1
Singapore		0.6		0.5		0.9		0.4		0.8
China		0.0		0.4		0.4		0.2		0.4
Others		1.1		0.3		0.4		0.4		3.5
		4.0		2.3		3.3		3.7		6.9
European Union
England		0.7		0.3		1.2		2.0		0.6
Netherlands		0.8		2.0		1.2		1.9		1.2
Germany		0.5		0.4		0.7		0.6		0.3
France		1.2		0.4		0.5		0.1		0.2
Others		1.8		1.2		2.7		0.7		1.0
		5.0		4.3		6.3		5.3		3.3
Others regions and countries		0.3		0.7		0.2		0.3		0.2
Total		11.2		10.5		11.7		11.5		13.1

Source:Ministry of Knowledge Economy

Trade Balance

Trade balance figures measure the difference between a country’s exports and imports. If exports exceed imports the country has a trade balance surplus while if imports exceed exports the country has a deficit. A deficit, indicating that a country’s receipts from abroad fall short of its payments to foreigners, must be financed, rendering the country a debtor nation. A surplus, indicating that a country’s receipts exceed its payments to foreigners, allows the country to finance its trading partners’ net deficit to the extent of the surplus, rendering the country a creditor nation.

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The following table summarizes the Republic’s trade balance for the periods indicated:

Trade Balance

	Exports(1)		Imports(2)		Balance of Trade			Exports as % of Imports
	(millions of dollars, except percentages)
2006		325,464.9		309,382.7		16,082.2			105.2
2007		371,489.0		356,845.7		14,643.3			104.1
2008		422,007.3		435,274.7		(13,267.4	)		97.0
2009		363,533.6		323,084.5		40,449.1			112.5
2010(3)		466,383.8		425,212.2		41,171.6			109.7

(1) These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(2) These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods include insurance and freight cost.

(3) Preliminary.

Source: The Bank of Korea.

Overall exports increased during the period from 2005 to 2008 primarily due to the continued increase in global demand (including strong demand in China) for electronics products (including semiconductors and information technology products), iron and steel products and machinery and precision equipment. Overall exports decreased in 2009 compared to 2008 due to the effects of the global financial crisis on global demand for goods in general.

The Republic, due to its lack of natural resources, relies on extensive trading activity for growth. The country meets virtually all domestic requirements for petroleum, wood and rubber with imports, as well as much of its coal and iron needs. Exports consistently represent a high percentage of GDP and, accordingly, the international economic environment is of crucial importance to the Republic’s economy.

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The following tables give information regarding the Republic’s exports and imports by major commodity groups:

Exports by Major Commodity Groups (F.O.B.)⁽¹⁾

	2006		As % of Total		2007		As % of Total		2008		As % of Total		2009		As % of Total		2010(2)		As % of Total(2)
	(billions of dollars, except percentages)
Foods & Consumer Goods		3.2		1.0		3.5		1.0		4.1		1.0		4.3		1.2		5.4		1.2
Raw Materials and Fuels		25.1		7.7		29.4		7.9		44.1		10.5		27.9		7.7		38.5		8.3
Petroleum & Derivatives		20.6		6.3		24.2		6.5		37.8		9.0		23.2		6.4		31.9		6.8
Light Industrial Products		26.9		8.3		27.5		7.4		29.4		7.0		27.5		7.6		32.7		7.0
Heavy & Chemical Industrial Products		270.4		83.1		311.0		83.7		344.4		81.6		303.9		83.6		389.9		83.6
Electronic & Electronic Products		115.7		35.6		126.9		34.2		127.2		30.0		121.2		33.3		154.2		33.1
Chemicals & Chemical Products		31.2		9.6		36.8		9.9		41.9		9.9		36.6		10.1		47.5		10.2
Metal Goods		27.2		8.3		31.6		8.5		38.1		9.0		29.9		8.2		37.7		8.1
Machinery & Precision Equipment		29.0		8.9		36.2		9.7		42.9		10.3		32.8		9.0		44.0		9.4
Passenger Cars		30.5		9.4		34.5		9.3		31.3		7.4		22.4		6.2		31.8		6.8
Ship & Boat		21.7		6.7		26.9		7.2		41.3		9.8		42.8		11.8		47.1		10.1
Total		325.5		100.0		371.5		100.0		422.0		100.0		363.5		100.0		466.4		100.0

(1) These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(2) Preliminary

Source: The Bank of Korea.

Imports by Major Commodity Groups (C.I.F.) ⁽¹⁾

	2006		As % of Total		2007		As % of Total		2008		As % of Total		2009		As % of Total		2010(2)		As %  of Total(2)
	(billions of dollars, except percentages)
Industrial Materials and Fuels		173.9		56.2		201.7		56.5		269.0		61.8		184.4		57.1		247.2		58.1
Crude Petroleum		55.9		18.1		60.3		16.9		85.9		19.7		50.8		15.7		68.7		16.2
Mineral		13.0		4.2		16.0		4.5		19.6		4.5		13.7		4.2		21.4		5.0
Chemicals		25.2		8.1		29.2		8.8		33.1		7.6		28.7		8.9		37.7		8.9
Iron & Steel Products		17.7		5.7		24.1		6.7		37.1		8.5		21.6		6.7		27.3		6.4
Non-ferrous Metal		12.3		4.0		14.3		4.0		13.4		3.1		9.1		2.8		12.6		0.0
Capital Goods		105.1		34.0		118.1		33.1		124.1		28.5		104.5		32.4		135.7		31.9
Machinery & Precision Equipment		35.4		11.5		39.3		11.0		40.0		9.2		33.6		10.4		47.7		11.2
Electric & Electronic Machines		60.1		19.4		67.0		18.7		70.4		16.2		59.8		18.5		73.3		17.2
Transport Equipment		8.0		2.6		10.0		2.8		11.7		2.7		9.5		3.0		12.9		3.0
Consumer Goods		30.4		9.8		37.0		10.4		42.1		9.7		34.1		10.6		42.3		9.9
Cereals		3.5		1.1		4.7		1.3		7.4		1.7		5.3		1.6		5.9		1.4
Goods for Direct Consumption		8.3		2.7		9.7		2.7		10.2		2.3		8.9		2.7		11.0		2.6
Consumer Durable Goods		11.8		3.8		14.6		4.1		16.4		3.8		12.9		4.0		16.2		3.8
Consumer Nondurable Goods		6.8		2.2		8.0		2.2		8.2		1.9		7.1		2.2		9.2		2.2
Total		309.4		100.0		356.8		100.0		435.3		100.0		323.1		100.0		425.2		100.0

(1) These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2) Preliminary

Source: The Bank of Korea.

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In 2005, the Republic recorded a trade surplus of US$23.2 billion. Exports increased by 12.0% to US$284.4 billion and imports increased by 16.4% to US$261.2 billion from US$253.8 billion of exports and US$224.5 billion of imports, respectively, in 2004.

In 2006, the Republic recorded a trade surplus of US$16.1 billion. Exports increased by 14.5% to US$325.5 billion and imports increased by 18.5% to US$309.4 billion from US$284.4 billion of exports and US$261.2 billion of imports, respectively, in 2005.

In 2007, the Republic recorded a trade surplus of US$14.6 billion. Exports increased by 14.1% to US$371.5 billion and imports increased by 15.3% to US$356.8 billion from US$325.5 billion of exports and US$309.4 billion of imports, respectively, in 2006.

In 2008, the Republic recorded a trade deficit of US$13.3 billion. Exports increased by 13.6% to US$422.0 billion and imports increased by 22.0% to US$435.3 billion from US$371.5 billion of exports and US$356.8 billion of imports, respectively, in 2007.

In 2009, the Republic recorded a trade surplus of US$40.4 billion. Exports decreased by 13.9% to US$363.5 billion and imports decreased by 25.8% to US$323.1 billion from US$422.0 billion of exports and US$435.3 billion of imports, respectively, in 2008.

Based on preliminary data, the Republic recorded a trade surplus of US$41.2 billion in 2010. Exports increased by 28.3% to US$466.4 billion and imports increased by 31.6% to US$425.2 billion from US$363.5 billion of exports and US$323.1 billion of imports, respectively, in 2009.

Based on preliminary data, the Republic recorded a trade surplus of US$8.0 billion in the first quarter of 2011. Exports increased by 29.9% to US$131.3 billion and imports increased by 25.6% to US$123.3 billion from US$101.1 billion of exports and US$98.2 billion of imports, respectively, in the corresponding period of 2010.

On October 6, 2010, the Republic and the EU signed a FTA, which is expected to come into effect on July 1, 2011.

The following table sets forth the Republic’s exports trading partners:

Exports

	2006		As % of 2006 Total		2007		As % of 2007 Total		2008		As % of 2008 Total		2009		As % of 2009 Total		2010(1)		As % of 2010 Total (1)
	(millions of dollars, except percentages)
China		69,459.2		21.3		81,985.2		22.1		91,388.9		21.7		86,703.2		23.9		116,837.8		32.1
United States		43,183.5		13.3		45,766.1		12.3		46,376.6		11.0		37,649.9		10.4		49,816.1		13.7
Japan		26,534.0		8.2		26,370.2		7.1		28,252.5		6.7		21,770.8		6.0		28,176.3		7.8
Hong Kong		18,978.9		5.8		18,654.5		5.0		19,771.9		4.7		19,661.1		5.4		25,294.3		7.0
Singapore		9,489.3		2.9		11,949.5		3.2		16,293.0		3.9		13,617.0		3.7		15,244.2		4.2
Taiwan		12,995.7		4.0		13,027.1		3.5		11,462.0		2.7		9,501.1		2.6		14,830.5		4.1
Germany		10,056.2		3.1		11,542.5		3.1		10,522.7		2.5		8,820.9		2.4		10,702.2		2.9
India		5,532.8		1.7		6,600.0		1.8		8,977.1		2.1		8,013.3		2.2		11,434.6		3.2
Russia		5,179.2		1.6		8,087.7		2.2		9,748.0		2.3		4,194.1		1.2		7,759.8		2.1
Indonesia		4,873.5		1.5		5,770.6		1.6		7,933.6		1.9		5,999.9		1.7		8,897.3		2.5
Others(2)		119,182.5		36.6		141,735.7		38.2		171,281.0		40.6		147,602.3		40.6		74,540.5		20.4
Total		325,464.8		100.0		371,489.1		100.0		422,007.3		100.0		363,533.6		100.0		363,533.6		100.0

(1) Preliminary

(2) Includes more than 200 countries and regions with lower exports levels than those shown above.

Source : The Bank of Korea.

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The following table sets forth the Republic’s imports trading partners:

Imports

	2006		As % of 2006 Total		2007		As % of 2007 Total		2008		As % of 2008 Total		2009		As % of 2009 Total		2010(1)		As % of 2010 Total (1)
	(millions of dollars, except percentages)
China		48,556.7		15.7		63,027.8		17.7		76,930.3		17.7		54,246.1		16.8		71,573.6		16.8
Japan		51,926.3		16.8		56,250.1		15.8		60,956.4		14.0		49,427.5		15.3		64,296.1		15.1
United States		33,654.2		10.9		37,219.3		10.4		38,364.8		8.8		29,039.5		9.0		40,402.7		9.5
Saudi Arabia		20,552.1		6.6		21,163.5		5.9		33,781.5		7.8		19,736.8		6.1		26,820.0		6.3
Australia		11,309.4		3.7		13,232.5		3.7		18,000.3		4.1		14,756.1		4.6		20,456.2		4.8
Germany		11,364.6		3.7		13,534.3		3.8		14,769.1		3.4		12,298.5		3.8		14,304.9		3.4
Taiwan		9,287.5		3.0		9,966.5		2.8		10,642.9		2.4		9,851.4		3.0		13,647.1		3.2
United Arab Emirates		12,930.9		4.2		12,656.2		3.5		19,248.5		4.4		9,310.0		2.9		12,170.1		2.9
Indonesia		8,848.6		2.9		9,113.8		2.6		11,320.3		2.6		9,264.1		2.9		13,985.8		3.3
Malaysia		7,242.5		2.3		8,442.2		2.4		9,909.1		2.3		7,574.1		2.3		9,531.0		2.2
Others(2)		93,709.9		30.3		112,239.5		31.4		141,351.5		32.5		107,580.4		33.3		138,024.7		32.5
Total		309,382.7		100.0		356,845.7		100.0		435,274.7		100.0		323,084.5		100.0		425,212.2		100.0

(1) Preliminary

(2) Includes more than 200 countries and regions with lower imports levels than those shown above.

Source : The Bank of Korea.

In 2003, the outbreak of severe acute respiratory syndrome, or SARS, and the avian influenza in Asia (including China) and other parts of the world increased uncertainty about prospects for international trade and economic growth for affected countries, as well as world economic prospects in general. The avian influenza carried by migrating wild birds spread to several Asian countries, Russia, Romania and Turkey. In response to these outbreaks of avian influenza, the Government issued an advisory on disease prevention as of October 14, 2005 and conducted special monitoring of poultry farms. In addition, the Government continued to cooperate with regional and international efforts to develop and implement additional measures to contain and prevent SARS, the avian influenza and other diseases. Another outbreak of SARS, the avian influenza or similar incidents in the future may have an adverse effect on Korean and world economies and on international trade.

In April 2007, the Republic and the United States reached an agreement on a bilateral free trade agreement, or FTA, which was subsequently renegotiated and signed by both nations in December 2010. As of April 6, 2011, the FTA has not been ratified by the Korean National Assembly nor the U.S. Congress.

Non-Commodities Trade Balance

The non-commodities trade deficit was US$17.4 billion in 2006, US$15.4 billion in 2007, US$2.0 billion in 2008, US$5.8 billion in 2009 and US$13.7 billion in 2010.

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Foreign Currency Reserves

The following table shows the Republic’s total official foreign currency reserves:

Total Official Reserves

	December 31,
	2006		2007		2008		2009		2010
	(millions of dollars)
Gold (1)	$	74.2	$	74.3	$	75.7	$	79.0	$	79.6
Foreign Exchange		238,387.9		261,770.7		200,479.1		265,202.3		286,926.4
Total Gold and Foreign Exchange		238,462.1		261,845.0		200,554.8		265,281.3		287,006.0
Reserve Position at IMF		440.0		310.5		582.6		981.6		1,024.7
Special Drawing Rights		54.0		68.6		86.0		3,731.8		3,539.9
Total Official Reserves	$	238,956.1	$	262,224.1	$	201,223.4	$	269,994.7	$	291,570.7

(1) For this purpose, domestically-owned gold is valued at US$42.22 per troy ounce (31.1035 grams) and gold deposited overseas is calculated at cost of purchase.

Source: The Bank of Korea.

The Government’s foreign currency reserves increased to US$262.2 billion as of December 31, 2007 from US$8.9 billion as of December 31, 1997, primarily due to continued balance of trade surpluses and capital inflows. In 2008, the Government’s foreign currency reserves decreased, falling to US$201.2 billion as of December 31, 2008, partially as a result of the Government’s use of the foreign currency reserve to provide foreign currency liquidity to Korean financial institutions and to defend the value of the Won against depreciation. The Government’s foreign currency reserves increased in 2009 and 2010, due among others to the retrieval of the foreign currency reserve previously used to provide foreign currency liquidity to Korean financial institutions, as well as gains on investment. The amount of the Government’s foreign currency reserve was US$305.1 billion as of May 31, 2011.

Government Finance

The Ministry of Strategy and Finance prepares the Government budget and administers the Government’s finances.

The Government’s fiscal year commences on January 1. The Government must submit the budget, which is drafted by the Minister of Strategy and Finance and approved by the President of the Republic, to the National Assembly not later than 90 days prior to the start of the fiscal year and may submit supplementary budgets revising the original budget at any time during the fiscal year.

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The following table shows consolidated Government revenues and expenditures:

Consolidated Central Government Revenues and Expenditures

	December 31,
	2004		2005		2006		2007		2008		2009 (1)
	(billions of Won)
Total Revenues		178,784		191,446		209,573		243,633		250,713		255,252
Current Revenues		177,453		190,165		208,091		241,693		248,809		252,720
Total Tax Revenues		117,796		127,466		138,044		161,459		167,306		164,542
Income Profits and Capital Gains		48,112		54,456		60,367		74,273		75,510		69,675
Tax on Property		2,996		4,683		6,281		8,725		7,694		7,171
Tax on Goods and Services		51,800		53,401		54,996		59,835		63,060		63,496
Customs Duties		6,796		6,318		6,858		7,411		8,776		9,169
Others		8,090		8,608		9,542		11,216		12,267		15,031
Social Security Contribution		22,848		24,905		27,315		29,739		32,896		33,896
Non-Tax Revenues		36,788		37,795		42,733		50,495		48,607		54,283
Capital Revenues		1,331		1,281		1,482		1,940		1,904		2,532
Total Expenditures and Net Lending		173,538		187,946		205,928		209,810		238,834		272,873
Total Expenditures		172,140		184,922		200,181		202,703		233,354		254,823
Current Expenditures		144,148		160,274		173,688		169,658		196,879		209,689
Goods and Services		33,869		36,165		38,987		34,496		37,375		N/A	(2)
Interest Payments		8,710		10,094		12,150		13,444		14,356		N/A	(2)
Subsidies and Other Transfers (3)		99,537		111,448		119,997		119,565		142,782		N/A	(2)
Subsidies		748		724		764		680		730		N/A	(2)
Other Transfers(3)		98,789		110,724		119,233		118,885		142,052		N/A	(2)
Non-Financial Public Enterprises Expenditures		3,031		2,566		2,554		2,153		2,366		N/A	(2)
Capital Expenditures		26,992		24,648		26,493		33,045		36,475		45,134
Net Lending		1,398		3,024		5,746		7,107		5,480		18,049

(1) Preliminary.

(2) Not available.

(3) Includes transfers to local governments, non-profit institutions, households and abroad.

Source: Ministry of Strategy and Finance; Korea National Statistical Office.

The consolidated Government account consists of a General Account, Special Accounts (including a non-financial public enterprise special account) and Public Funds. The Government segregates the accounts of certain functions of the Government into Special Accounts and Public Funds for more effective administration and fiscal control. The Special Accounts and Public Funds relate to business type activities, such as economic development, road and railway construction and maintenance, monopolies, and communications developments and the administration of loans received from official international financial organizations and foreign governments.

Revenues derive mainly from national taxes and non-tax revenues. Taxes in Korea can be roughly classified into the following types:

• income tax and capital gains tax,

• property tax,

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• value-added tax,

• customs duty tax, and

• other taxes.

Income tax and capital gains tax are imposed on income derived from labor, business operation and ownership of assets and profits derived from capital appreciation. Income tax and capital gains tax, depending on the type of taxpayer, can be further classified into corporate income tax and individual income tax. Property tax is imposed on exchange or ownership of property and includes inheritance tax and gift tax. Value-added tax is imposed on value added to goods and services. Customs duty tax is imposed on imported goods. Other taxes include tax on certain securities transactions and a stamp tax for certain documents.

Expenditures include general administration, national defense, community service, education, health, social security, certain annuities and pensions and local finance, which involves the transfer of tax revenues to local governments.

For 2005, revenues increased by approximately 7.1%, which represented 23.6% 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)3.5 trillion in 2005.

For 2006, revenues increased by approximately 9.5%, which represented 24.7% 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)3.6 trillion in 2006.

For 2007, revenues increased by approximately 16.3%, which represented 27.0% 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)33.8 trillion in 2007.

For 2008, revenues increased by approximately 2.9% 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)11.9 trillion in 2008.

Based on preliminary data, the Republic recorded total revenues of (Won)255.3 trillion and total expenditures and net lending of (Won)272.9 trillion in 2009. The Republic had a fiscal deficit of (Won)17.6 trillion in 2009.

Based on preliminary data, the Republic recorded total revenues of (Won)232.1 trillion and total expenditures and net lending of (Won)216.6 trillion in the first ten months of 2010. The Republic had a fiscal surplus of (Won)15.5 trillion in the first ten months of 2010.

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Debt

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2010 amounted to approximately (Won)405.5 trillion, an increase of 8.8% over the previous year.

External and Internal Debt of the Government

The following table sets out, by currency and the equivalent amount in U.S. Dollars, the estimated outstanding direct external debt of the Government as of December 31, 2010:

Direct External Debt of the Government

	Amount in Original Currency		Equivalent Amount in U.S. Dollars (1)
	(millions)
US$	US$	7,401.7	US$	7,401.7
Japanese Yen (¥)	¥	10,963.1		134.5
Euro (EUR)		EUR     876.6		1,165.0
Total			US$	8,701.2

(1) Amounts expressed in currencies other than US$ are converted to US$ at the arbitrage rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 31, 2010.

The following table summarizes, as of December 31 of the years indicated, the outstanding direct internal debt of the Republic:

Direct Internal Debt of the Government

	(billions of Won)
2006		262,380.6
2007		278,800.8
2008		288,719.8
2009		331,904.1
2010		360,804.5

The following table sets out all outstanding guarantees by the Government of indebtedness of others:

Guarantees by the Government

	December 31,
	2006		2007		2008		2009		2010
	(billions of Won)
Domestic		36,436.6		33,031.1		28,112.8		28,292.4		33,291.7
External(1)		73.4		31.8		—		1,508.4		1,508.3
Total		36,510.1		33,062.9		28,112.8		29,800.8		34,800.0

(1) Converted to Won at foreign exchange banks’ telegraphed transfer selling rates to customers or the market average exchange rates in effect on December 31 of each year.

For further information on the outstanding indebtedness, including guarantees, of the Republic, see “—Tables and Supplementary Information”.

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External Debt

The following tables set out certain information regarding the Republic’s external debt calculated under the criteria based on the sixth edition of Balance of Payment Manual, or BPM6, published by the International Monetary Fund in December 2008 and implemented by the Government in December 2010. Under BPM6, in particular, prepayments received in connection with the construction of ships are excluded from external debt.

	December 31,
	2006		2007		2008		2009		2010
	(billions of dollars)
Long-term Debt		111.5		173.2		167.5		196.2		225.0
General Government		10.3		31.7		21.1		27.8		44.2
Monetary Authorities		5.7		12.3		13.1		28.3		25.3
Banks		40.4		58.9		59.0		64.6		72.4
Other Sectors		55.0		70.2		74.2		75.5		83.1
Short-term Debt		113.7		160.2		149.9		149.2		135.0
Monetary Authorities		3.9		9.6		18.3		11.7		10.3
Banks		96.1		134.0		110.4		115.7		101.3
Other Sectors		13.7		16.7		21.2		21.8		23.4
Total External Liabilities		225.2		333.4		317.4		345.4		360.0

Debt Record

The Government has always paid when due the full amount of principal of, interest on, and amortization of sinking fund requirements of, all of its indebtedness.

Tables and Supplementary Information

A. External Debt of the Government

(1) External Bonds of the Government

Series	Issue Date	Maturity Date	Interest Rate (%)		Currency		Original Principal Amount		Principal Amount Outstanding as of December 31, 2010
2003-001	June 3, 2003	June 1, 2013		4.25		USD		1,000,000,000		1,000,000,000
2004-001	September 22, 2004	September 22, 2014		4.875		USD		1,000,000,000		1,000,000,000
2005-001	November 2, 2005	November 3, 2025		5.625		USD		400,000,000		400,000,000
2005-002	November 2, 2005	November 2, 2015		3.625		EUR		500,000,000		500,000,000
2006-001	December 7, 2006	December 7, 2016		5.125		USD		500,000,000		500,000,000
2006-002	December 7, 2006	December 7, 2021		4.25		EUR		375,000,000		375,000,000
2009-001	April 16, 2009	April 16, 2014		5.75		USD		1,500,000,000		1,500,000,000
2009-002	April 16, 2009	April 16, 2019		7.125		USD		1,500,000,000		1,500,000,000
Total External Bonds in Original Currencies										USD 5,900,000,000
										EUR    875,000,000
Total External Bonds in Equivalent Amount of Won(1)										(Won)8,043,910,000,000

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to (Won)1,138.9, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd. Euro amounts are converted to Won amounts at the rate of EUR1.00 to (Won)1,513.6, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

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(2) External Borrowings of the Government

a. Borrowings in U.S. Dollars

Date of Borrowing	Original Maturity (Years)		Interest Rate (%)		Original Principal Amount (USD)		Principal Amount Outstanding as of December 31, 2010 (USD)
February 26, 1969		42		3		5,000,000		132,538
March 20, 1970		40		3		4,000,000		119,629
June 3, 1970		41		3		10,000,000		214,773
January 29, 1971		40		3		29,300,000		943,903
January 29, 1971		41		3		29,200,000		1,878,810
March 6, 1971		40		3		35,000,000		788,451
April 12, 1971		40		3		29,600,000		895,449
April 12, 1971		30		3		400,000		21,777
June 24, 1971		40		3		14,000,000		1,024,817
August 31, 1971		41		3		6,000,000		433,064
January 20, 1972		41		3		2,000,000		264,311
February 14, 1972		41		3		40,000,000		3,460,416
February 14, 1972		40		3		162,200,000		10,064,083
March 16, 1972		41		3		17,000,000		2,043,685
June 27, 1972		40		3		5,000,000		467,668
September 13, 1972		41		3		2,500,000		286,646
February 28, 1973		40		3		25,000,000		3,458,373
April 12, 1973		42		3		96,300,000		15,042,830
April 12, 1973		43		3		5,300,000		991,249
April 12, 1973		40		3		25,200,000		2,367,574
January 28, 1974		40		3		5,000,000		649,508
April 19, 1974		40		3		2,800,000		473,686
September 11, 1974		41		3		25,700,000		5,400,863
September 13, 1975		41		3		5,000,000		982,945
September 13, 1975		41		3		5,000,000		981,867
September 13, 1975		41		3		5,000,000		1,358,594
February 18, 1976		40		3		11,900,000		1,862,543
February 18, 1976		40		3		27,900,000		4,644,194
February 18, 1976		40		3		23,400,000		5,829,298
February 18, 1976		40		3		90,800,000		16,528,863
July 21, 1977		41		3		59,500,000		14,349,380
July 21, 1977		40		3		43,800,000		9,268,853
June 7, 1979		30		3		40,000,000		10,882,277
January 25, 1980		40		3		30,000,000		9,068,823
May 18, 1981		40		3		27,000,000		8,789,239
October 12, 1994		20		6.25		1,640,370,000		489,108,316
March 27, 1998		15		LIBOR+0.75		2,000,000,000		268,856,448
September 14, 1998		16		LIBOR+0.5		48,000,000		7,813,369
October 23, 1998		15		LIBOR+0.75		2,000,000,000		600,000,000
Subtotal in Original Currency								USD 1,501,749,112
Subtotal in Equivalent Amount of Won (1)							(Won)	1,710,342,064,040

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to (Won)1,138.9, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

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b. Borrowings in Euro

Date of Borrowing	Original Maturity (Years)		Interest Rate (%)		Original Principal Amount (EUR)		Principal Amount Outstanding as of December 31, 2010 (EUR)
April 19, 1982		39		2		7,029,215		957,624
March 27, 1985		30		2		2,039,087		658,088
Subtotal in Original Currency								EUR 1,615,712
Subtotal in Equivalent Amount of Won(1)							(Won)	2,445,541,350

(1) Euro amounts are converted to Won amounts at the rate of EUR1.00 to (Won)1,513.6, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

c. Borrowings in Japanese Yen

Date of Borrowing	Original Maturity (Years)		Interest Rate (%)		Original Principal Amount (JPY)		Principal Amount Outstanding as of December 31, 2010 (JPY)
August 18, 1987		25		4.25		7,750,000,000		837,836,000
August 18, 1987		25		4.25		12,911,000,000		1,307,244,000
May 24, 1988		24		Floating		7,567,732,075		694,717,775
June 22, 1988		25		4.25		2,679,000,000		357,325,000
June 22, 1988		25		4.25		5,920,000,000		777,375,000
June 22, 1988		25		4.25		5,254,000,000		518,585,000
June 22, 1988		25		4.25		4,440,000,000		599,125,000
December 13, 1989		25		Floating		8,745,658,966		3,562,106,766
October 31, 1990		25		4		4,320,000,000		1,126,610,000
October 31, 1990		25		4		5,414,000,000		598,740,000
October 31, 1990		25		4		2,160,000,000		583,390,000
Subtotal in Original Currency								JPY 10,963,054,541
Subtotal in Equivalent Amount of Won(1)							(Won)	153,162,642,380
Total ExternalBorrowings in Equivalent Amount of Won							(Won)	1,865,950,247,770

(1) Japanese yen amounts are converted to Won amounts at the rate of JPY100.00 to (Won)1,397.08, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

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B. External Guaranteed Debt of the Government

Borrower

Issue Date

Maturity Date

Interest Rate (%)

Currency

Original Principal Amount

Principal Amount Outstanding as of December 31, 2010

Hana Bank

April 9, 2009

April 9, 2012

6.5

USD

1,000,000,000

1,000,000,000

Hana Bank

June 30, 2009

December 30, 2011

4.8

MYR

710,000,000

710,000,000

Hana Bank

June 30, 2009

June 29, 2012

4.85

MYR

290,000,000

290,000,000

Total External Guaranteed Debt in Original Currencies

USD 1,000,000,000

MYR 1,000,000,000

Total External Guaranteed Debt in Equivalent Amount of Won(1)

(Won)

1,508,250,000,000

(1) U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to (Won)1,138.9, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd. Malaysian ringgit amounts are converted to Won amounts at the rate of MYR1.00 to (Won)369.35, the market average exchange rate in effect on December 31, 2010, as announced by Seoul Money Brokerage Services, Ltd.

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C. Internal Debt of the Government

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2010
	(%)						(billions of Won)
1. Bonds
Interest-Bearing Treasury Bond for Treasury Bond Management Fund		2.75-7.65		2001-2010		2011-2030		310,076.7
Interest-Bearing Treasury Bond for National Housing I		3.0		2001-2010		2006-2015		44,067.0
Interest-Bearing Treasury Bond for National Housing II		0.0-3.0		1986-2010		2006-2030		4,383.1
Interest-Bearing Treasury Bond for National Housing III		0		2005		2015		594.2
Non-interest-Bearing Treasury Bond for Contribution to International Organizations (1)		—		1967-1985		—		11.3
Total Bonds								359,132.3
2. Borrowings
Borrowings from The Bank of Korea		2.24		2010		2011		1,117.2
Borrowings from the Sports Promotion Fund		3.64-5.0		2009-2010		2012-2015		400.0
Borrowings from the Private School Teachers’ Pension Fund		5.17-5.27		2006		2011		65.0
Borrowings from the Korea Foundation Fund		4.31		2009		2012		30.0
Borrowings from the Government Employees’ Pension Fund		2.8		2009		2012		10.0
Borrowings from the Film Industry Development Fund		3.04-3.85		2010		2013		30.0
Borrowings from the Culture and Arts Promotion Fund		3.29		2010		2013		20.0
Total Borrowings								1,672.2
Total Internal Funded Debt								360,804.5

(1) Interest Rates and Years of Maturity not applicable.

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D. Internal Guaranteed Debt of the Government

Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2010
	(%)						(billions of Won)
1. Bonds of Government-Affiliated Corporations
Korea Deposit Insurance Corporation		4.09-6.32		2006-2010		2011-2015		26,690.0
KAMCO		Floating-5.27		2009-2010		2012-2014		3,969.1
Korea Student Aid Foundation		Floating-5.26		2010		2012-2020		2,510.0
Total Bonds								33,169.1
2. Borrowings of Government-Affiliated Corporations
Rural Development Corporation and Federation of Farmland		5.5		1989		2023		122.6
Total Borrowings								122.6
Total Internal Guaranteed Debt								33,291.7

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DESCRIPTION OF THE SECURITIES

Description of Debt Securities

We will issue debt securities under a fiscal agency agreement or agreements. The description below summarizes the material provisions of the debt securities and the fiscal agency agreement. Since it is only a summary, the description may not contain all of the information that may be important to you as a potential investor in the debt securities. Therefore, we urge you to read the form of fiscal agency agreement and the form of global debt security before deciding whether to invest in the debt securities. We have filed a copy of these documents with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part. You should refer to such exhibits for more complete information.

The financial terms and other specific terms of your debt securities will be described in the prospectus supplement relating to your debt securities. The description in the prospectus supplement will supplement this description or, to the extent inconsistent with this description, replace it.

We will appoint a fiscal agent or agents in connection with debt securities whose duties will be governed by the fiscal agency agreement. We may replace the fiscal agent or appoint different fiscal agents for different series of debt securities.

General Terms of the Debt Securities

We may issue debt securities in separate series at various times. The Republic may irrevocably guarantee the payment of principal of, and interest on, one or more series of debt securities. The prospectus supplement that relates to your debt securities will specify some or all of the following terms:

• the aggregate principal amount;

• the currency of denomination and payment;

• any limitation on principal amount and authorized denominations;

• the percentage of their principal amount at which the debt securities will be issued;

• the maturity date or dates;

• the interest rate for the debt securities and, if variable, the method by which the interest rate will be calculated;

• whether any amount payable in respect of the debt securities will be determined based on an index or formula, and how any such amount will be determined;

• the dates from which interest, if any, will accrue for payment of interest and the record dates for any such interest payments;

• where and how we will pay principal and interest;

• whether and in what circumstances the debt securities may be redeemed before maturity;

• any sinking fund or similar provision;

• whether any part or all of the debt securities will be in the form of a global security and the circumstances in which a global security is exchangeable for certificated securities;

• if issued in certificated form, whether the debt securities will be in bearer form with interest coupons, if any, or in registered form without interest coupons, or both forms, and any restrictions on exchanges from one form to the other;

• whether any of the terms set out herein will differ for the debt securities

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• whether the Republic will irrevocably guarantee the payment of principal of, and interest on, the debt securities; and

• other specific provisions.

Depending on the terms of the debt securities we issue, the prospectus supplement relating to the debt securities may also describe applicable U.S. federal income tax and other considerations additional to the disclosure in this prospectus.

Unless otherwise specified in the applicable prospectus supplement, we will maintain at an office in the Borough of Manhattan, The City of New York, a register for the registration of transfers of debt securities issued in registered form.

Payments of Principal, Premium and Interest

On every payment date specified in the relevant prospectus supplement, we will pay the principal, premium and/or interest due on that date to the registered holder of the relevant debt security at the close of business on the related record date. We will make all payments at the place and in the currency set out in the prospectus supplement. Unless otherwise specified in the relevant prospectus supplement or the debt securities, we will make payments in U.S. dollars at the New York office of the fiscal agent or, outside the United States, at the office of any paying agent. Unless otherwise specified in the applicable prospectus supplement or debt securities, we will pay interest by check, payable to the registered holder.

We will make any payments on debt securities in bearer form at the offices and agencies of the fiscal agent or any other paying agent outside the United States as we may designate. At the option of the holder of the bearer debt securities, we will make such payments by check or by transfer to an account maintained by the holder with a bank located outside of the United States. We will not make payments on bearer debt securities at the corporate trust office of the fiscal agent in the United States or at any other paying agency in the United States. In addition, we will not make any payment by mail to an address in the United States or by transfer to an account maintained by a holder of bearer debt securities with a bank in the United States. Nevertheless, we will make payments on a bearer debt security denominated and payable in U.S. dollars at an office or agency in the United States if:

• payment outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions; and

• the payment is then permitted under United States law, without material adverse consequences to us.

If we issue bearer debt securities, we will designate the offices of at least one paying agent outside the United States as the location for payment.

Repayment of Funds; Prescription

If no one claims money paid by us to the fiscal agent for the payment of principal or interest in respect of any series of debt securities for two years after the payment was due and payable, the fiscal agent or paying agent will repay the money to us. After such repayment, the fiscal agent or paying agent will not be liable with respect to the amounts so repaid, and you may look only to us for any payment under the debt securities.

Under Korea law, you will not be permitted to file a claim against us for payment of principal or interest on any series of debt securities unless you do so within five years, in the case of principal, and three years, in the case of interest, from the date on which payment was due.

Global Securities

The prospectus supplement relating to a series of debt securities will indicate whether any of that series of debt securities will be represented by a global security. The prospectus supplement will also describe any unique

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specific terms of the depositary arrangement with respect to that series. Unless otherwise specified in the prospectus supplement, we anticipate that the following provisions will apply to depositary arrangements.

Registered Ownership of the Global Security

The global security will be registered in the name of a depositary identified in the prospectus supplement, or its nominee, and will be deposited with the depositary, its nominee or a custodian. The depositary, or its nominee, will therefore be considered the sole owner or holder of debt securities represented by the global security for all purposes under the fiscal agency agreement. Except as specified below or in the applicable prospectus supplement, beneficial owners:

• will not be entitled to have any of the debt securities represented by the global security registered in their names;

• will not receive physical delivery of any debt securities in definitive form;

• will not be considered the owners or holders of the debt securities;

• must rely on the procedures of the depositary and, if applicable, any participants (institutions that have accounts with the depositary or a nominee of the depositary, such as securities brokers and dealers) to exercise any rights of a holder; and

• will receive payments of principal and interest from the depositary or its participants rather than directly from us.

We understand that, under existing industry practice, the depositary and participants will allow beneficial owners to take all actions required of, and exercise all rights granted to, the registered holders of the debt securities.

We will register debt securities in the name of a person other than the depositary or its nominee only if:

• the depositary for a series of debt securities is unwilling or unable to continue as depositary; or

• we determine, in our sole discretion, not to have a series of debt securities represented by a global security.

In either such instance, an owner of a beneficial interest in a global security will be entitled to registration of a principal amount of debt securities equal to its beneficial interest in its name and to physical delivery of the debt securities in definitive form.

Beneficial Interests in and Payments on a Global Security

Only participants, and persons that may hold beneficial interests through participants, can own a beneficial interest in the global security. The depositary keeps records of the ownership and transfer of beneficial interests in the global security by its participants. In turn, participants keep records of the ownership and transfer of beneficial interests in the global security by other persons (such as their customers). No other records of the ownership and transfer of beneficial interests in the global security will be kept.

All payments on a global security will be made to the depositary or its nominee. When the depositary receives payment of principal or interest on the global security, we expect the depositary to credit its participants’ accounts with amounts that correspond to their respective beneficial interests in the global security. We also expect that, after the participants’ accounts are credited, the participants will credit the accounts of the owners of beneficial interests in the global security with amounts that correspond to the owners’ respective beneficial interests in the global security.

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The depositary and its participants establish policies and procedures governing payments, transfers, exchanges and other important matters that affect owners of beneficial interests in a global security. The depositary and its participants may change these policies and procedures from time to time. We have no responsibility or liability for the records of ownership of beneficial interests in the global security, or for payments made or not made to owners of such beneficial interests. We also have no responsibility or liability for any aspect of the relationship between the depositary and its participants or for any aspect of the relationship between participants and owners of beneficial interests in the global security.

Bearer Securities

We may issue debt securities in a series in the form of one or more bearer global debt securities deposited with a common depositary for the Euroclear and Clearstream, or with a nominee identified in the applicable prospectus supplement. The specific terms and procedures, including the specific terms of the depositary arrangement, with respect to any portion of a series of debt securities to be represented by a global security will be described in the applicable prospectus supplement.

Additional Amounts

We will make all payments of principal of, and premium and interest, if any, on the debt securities, without withholding or deducting any present or future taxes imposed by the Republic or any of its political subdivisions, unless required by law. If Korean law requires us to deduct or withhold taxes, we will pay additional amounts as necessary to ensure that you receive the same amount as you would have received without such withholding or deduction.

We will not pay, however, any additional amounts if you are liable for Korean tax because:

• you are connected with the Republic other than by merely owning the debt security or receiving income or payments on the debt security;

• you failed to complete and submit a declaration of your status as a non-resident of the Republic after we or the relevant tax authority requested you to do so; or

• you failed to present your debt security for payment within 30 days of when the payment is due or, if the fiscal agent did not receive the money prior to the due date, the date notice is given to holders that the fiscal agent has received the full amount due to holders. Nevertheless, we will pay additional amounts to the extent you would have been entitled to such amounts had you presented your debt security for payment on the last day of the 30-day period.

We will not pay any additional amounts for taxes on the debt securities except for taxes payable through deduction or withholding from payments of principal, premium or interest. Examples of the types of taxes for which we will not pay additional amounts include the following: estate or inheritance taxes, gift taxes, sales or transfer taxes, personal property or related taxes, assessments or other governmental charges. We will pay stamp or other similar taxes that may be imposed by the Republic, the United States or any political subdivision or taxing authority in one of those two countries on the fiscal agency agreement or be payable in connection with the issuance of the debt securities.

Status of Debt Securities

The debt securities will:

• constitute our direct, unconditional, unsecured and unsubordinated obligations;

• rank at least equally in right of payment among themselves, regardless of when issued or currency of payment; and

• rank at least equally in right of payment with all of our other unsecured and unsubordinated obligations, subject to certain statutory exceptions under Korean law.

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Negative Pledge Covenant

If any debt securities are outstanding, we will not create or permit any security interests on our assets as security for any of our Long-Term External Indebtedness or guarantees issued by us, unless the security interest also secures our obligations under the debt securities. “Long-Term External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic and which has a final maturity of one year or more from its date of issuance.

We may, however, create or permit a security interest:

• in favor of the Government or The Bank of Korea or any other agency or instrumentality of or controlled by the Government;

• arising from, or any deposit or other arrangement made or entered into in connection with, the sale, assignment or other disposition or the discounting of any of our notes or receivables, or any other transaction in the ordinary course of our business; or

• on any asset (or documents of title to such asset) incurred when the asset was purchased or improved to secure payment of the cost of the activity.

Events of Default

Each of the following constitutes an event of default with respect to any series of debt securities:

1. Non-Payment: we do not pay principal or interest or premium or deposit any sinking fund payment on any debt securities of the series when due and such failure to pay continues for 30 days.

2. Breach of Other Obligations: we fail to observe or perform any of the covenants in the series of debt securities (other than non-payment) for 60 days after written notice of the default is delivered to us at the corporate trust office of the fiscal agent in New York City by holders representing at least 10% of the aggregate principal amount of the debt securities of the series.

3. Cross Default and Cross Acceleration:

• we default on any External Indebtedness, and, as a result, becomes obligated to pay an amount equal to or greater than US$10,000,000 in aggregate principal amount prior to its due date; or

• we fail to pay when due, including any grace period, any of our External Indebtedness in aggregate principal amount equal to or greater than US$10,000,000 or we fail to pay when requested and required by the terms thereof any guarantee for External Indebtedness of another person equal to or greater than US$10,000,000 in aggregate principal amount, except in any such case where such External Indebtedness or guarantee is being contested in good faith by appropriate proceedings.

4. Moratorium/Default:

• we declare a general moratorium on the payment of our External Indebtedness, including obligations under guarantees;

• the Republic declares a general moratorium on the payment of its External Indebtedness, including obligations under guarantees;

• the Republic becomes liable to repay prior to maturity any amount of External Indebtedness, including obligations under guarantees, as a result of a default under such External Indebtedness or obligations; or

• the international monetary reserves of the Republic become subject to a security interest or segregation or other preferential arrangement for the benefit of any creditors.

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5. Bankruptcy:

• we are declared bankrupt or insolvent by any court or administrative agency with jurisdiction over us;

• we pass a resolution to apply for bankruptcy or to request the appointment of a receiver or trustee or similar official in insolvency;

• a substantial part of our assets are liquidated; or

• we cease to conduct the banking business.

6. Failure of Support: the Republic fails to provide financial support for us as required under Article 37 of the KEXIM Act as of the date of the debt securities of such series.

7. Control of Assets: the Republic ceases to control us (directly or indirectly).

8. IMF Membership/World Bank Membership: the Republic ceases to be a member of the IMF or the International Bank for Reconstruction and Development (World Bank).

For purposes of the foregoing, “External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic.

If an event of default occurs, any holder may declare the principal amount of debt securities that it holds to be immediately due and payable by written notice to us and the fiscal agent.

You should note that:

• despite the procedure described above, no debt securities may be declared due and payable if we cure the applicable event of default before we receive the written notice from the debt security holder;

• we are not required to provide periodic evidence of the absence of defaults; and

• the fiscal agency agreement does not require us to notify holders of the debt securities of an event of default or grant any debt security holder a right to examine the security register.

Modifications and Amendments; Debt Securityholders’ Meetings

Each holder of a series of debt securities must consent to any amendment or modification of the terms of that series of debt securities or the fiscal agency agreement that would, among other things:

• change the stated maturity of the principal of the debt securities or any installment of interest;

• reduce the principal amount of such series of debt securities or the portion of the principal amount payable upon acceleration of such debt securities;

• change the debt security’s interest rate or premium payable;

• change the currency of payment of principal, interest or premium;

• amend either the procedures provided for a redemption event or the definition of a redemption event;

• shorten the period during which we are not allowed to redeem the debt securities or grant us a right to redeem the debt securities which we previously did not have; or

• reduce the percentage of the outstanding principal amount needed to modify or amend the fiscal agency agreement or the terms of such series of debt securities.

We may, with the exception of the above changes, with the consent of the holders of at least 66 ²/3 % in principal amount of the debt securities of a series that are outstanding, modify and amend other terms of that series of debt securities.

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The fiscal agency agreement and a series of debt securities may be modified or amended, without the consent of the holders of the debt securities, to:

• add covenants made by us that benefit holders of the debt securities;

• surrender any right or power given to us;

• secure the debt securities;

• permit registered securities to be exchanged for bearer securities or relax or eliminate restrictions on the payment of principal, premium or interest on bearer securities to the extent permitted under United States Department of Treasury regulations, provided that holders of the debt securities do not suffer any adverse tax consequences as a result; and

• cure any ambiguity or correct or supplement any defective provision in the fiscal agency agreement or the debt securities, without materially and adversely affecting the interests of the holders of the debt securities.

Fiscal Agent

The fiscal agency agreement governs the duties of each fiscal agent. We may maintain bank accounts and a banking relationship with each fiscal agent. The fiscal agent is our agent and does not act as a trustee for the holders of the debt securities.

Further Issues of Debt Securities

We may, without the consent of the holders of the debt securities, create and issue additional debt securities with the same terms and conditions as any series of debt securities (or that are the same except for the amount of the first interest payment and for the interest paid on the series of debt securities prior to the issuance of the additional debt securities). We may consolidate such additional debt securities with the outstanding debt securities to form a single series.

We may offer additional debt securities with original issue discount (“OID”) for U.S. federal income tax purposes as part of a further issue. Purchasers of debt securities after the date of any further issue will not be able to differentiate between debt securities sold as part of the further issue and previously issued debt securities of the same series. If we were to issue further debt securities with OID, purchasers of debt securities after such further issue may be required to accrue OID (or greater amounts of OID that they would otherwise have accrued) with respect to their debt securities. This may affect the price of outstanding debt securities following a further issue. Purchasers are advised to consult legal counsel with respect to the implications of any future decision by us to undertake a further issue of debt securities with OID.

Description of Warrants

The description below summarizes some of the provisions of warrants for the purchase of debt securities that we may issue from time to time and of the warrant agreement. Copies of the forms of warrants and the warrant agreement are or will be filed as exhibits to the registration statement of which this prospectus is a part. Since it is only a summary, the description may not contain all of the information that is important to you as a potential investor in the warrants.

The description of the warrants that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

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General Terms of the Warrants

Each series of warrants will be issued under a warrant agreement to be entered into between us and a bank or trust company, as warrant agent. The prospectus supplement relating to the series of warrants will describe:

• the terms of the debt securities purchasable upon exercise of the warrants, as described above under “Description of the Securities—Description of Debt Securities—General Terms of the Debt Securities”;

• the principal amount of debt securities purchasable upon exercise of one warrant and the exercise price;

• the procedures and conditions for the exercise of the warrants;

• the dates on which the right to exercise the warrants begins and expires;

• whether and under what conditions the warrants may be terminated or canceled by us;

• whether and under what conditions the warrants and any debt securities issued with the warrants will be separately transferable;

• whether the warrants will be issued in bearer or registered form;

• whether the warrants will be exchangeable between registered and bearer form, and, if issued in registered form, where they may be transferred and registered; and

• other specific provisions.

Terms Applicable to Debt Securities and Warrants

Governing Law

The fiscal agency agreement, any warrant agreement and the debt securities and any warrants will be governed by the laws of the State of New York without regard to any principles of New York law requiring the application of the laws of another jurisdiction. Nevertheless, all matters governing our authorization, execution and delivery of the debt securities and the fiscal agency agreement and any warrants and warrant agreement by us will be governed by the laws of the Republic.

Jurisdiction and Consent to Service

We are owned by a foreign sovereign government and all of our directors and executive officers and some of the experts named in this prospectus are residents of Korea. In addition, all or most our assets and the assets of the people named in the preceding sentence are located outside of the United States. For that reason, you may have difficultly serving process on us or the individuals described above in the United States or enforcing in a U.S. court a U.S.-court judgment based on the U.S. federal securities laws. Our Korean counsel has informed us that there is doubt regarding the enforceability in Korea, either in original actions or in actions for the enforcement of U.S.-court judgments, of civil liabilities based on the U.S. federal securities laws.

We have appointed the Chief Representative of our New York Representative Office, Mr. Seung-hyun Yoo, and a Senior Representative of our New York Representative Office, Mr. Yeong-hee Lee, and each of their successors in the future, as our authorized agents to receive service of process in any suit which a holder of any series of debt securities or warrants may bring in any state or federal court in New York City and we have accepted the jurisdiction of those courts for those actions. Our New York Representative Office is located at 460 Park Avenue, 8^th Floor, New York, New York 10022. These appointments are irrevocable as long as any amounts of principal, premium or interest remain payable by us to the Fiscal Agent under any series of debt securities or any warrants have not expired or otherwise terminated under their terms. If for any reason either of these two men ceases to act as our authorized agent or ceases to have an address in Manhattan, we shall appoint a

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replacement. The appointment of agents for receipt of service of process and the acceptance of jurisdiction of state or federal courts in New York City do not, however, apply to actions brought under the United States federal securities laws. We may also be sued in courts having jurisdiction over us located in the Republic.

We will irrevocably consent to any relief and process in connection with a suit against us in relation to the debt securities or warrants, including the enforcement or execution of any order or judgment of the court. To the extent permitted by law, we will waive irrevocably any immunity from jurisdiction to which we might otherwise be entitled in any suit based on any series of debt securities or warrants.

Foreign Exchange Controls

Before we may issue debt securities outside the Republic, the Minister of Strategy and Finance of Korea must receive a report with respect to the issuance by us of debt securities in accordance with the Foreign Exchange Transaction Act and Regulation of Korea. After issuance of debt securities outside the Republic, we are required to notify the Minister of Strategy and Finance of such issuance. No further approval or authorization is required for us to pay principal of or interest on the debt securities.

Description of Guarantees

The description below summarizes some of the provisions of the guarantees that the Republic may issue from time to time to guarantee our debt securities. Since it is only a summary, the description may not contain all of the information that is important to you as a potential beneficiary of a guarantee.

The prospectus supplement relating to a guarantee to be issued by the Republic will specify other specific provisions. The description of a guarantee to be issued by the Republic that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Guarantees

Each guarantee will be issued by the Republic as guarantor. The prospectus supplement relating to a guarantee will specify:

• the relevant obligor and the obligations guaranteed under the guarantee;

• the nature and scope of the guarantee, including whether or not it is irrevocable and unconditional;

• the status of the guarantee in relation to the Republic’s other obligations;

• the governing law of the guarantee; and

• other relevant provisions of the guarantee.

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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS

Bearer securities will not be offered, sold or delivered in the United States or its possessions or to a United States person; except in certain circumstances permitted by United States tax regulations. Bearer securities will initially be represented by temporary global securities, without interest coupons, deposited with a common depositary in London for Euroclear and Clearstream for credit to designated accounts. Unless otherwise indicated in the prospectus supplement:

• each temporary global security will be exchangeable for definitive bearer securities on or after the date that is 40 days after issuance only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations, provided that no bearer security will be mailed or otherwise delivered to any location in the United States in connection with the exchange; and

• any interest payable on any portion of a temporary global security with respect to any interest payment date occurring prior to the issuance of definitive bearer securities will be paid only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations.

Bearer securities, other than temporary global debt securities, and any related coupons will bear the following legend: “Any United States person who holds this obligation will be subject to limitations under the United States federal income tax laws, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code.” The sections referred to in the legend provide that, with certain exceptions, a United States person who holds a bearer security or coupon will not be allowed to deduct any loss realized on the disposition of the bearer security, and any gain, which might otherwise be characterized as capital gain, recognized on the disposition will be treated as ordinary income.

For purposes of this section, “United States person” means:

• a citizen or resident of the United States;

• a corporation, partnership or other entity created or organized in or under the laws of the United States of any political subdivision thereof; or

• an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

For purposes of this section, “United States” means the United States of America, including each state and the District of Columbia, its territories, possessions and other areas subject to its jurisdiction.

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TAXATION

The following discussion summarizes certain Korean and U.S. federal income tax considerations that may be relevant to you if you invest in debt securities. This summary is based on laws, regulations, rulings and decisions in effect as of the date of this Prospectus. These laws, regulations, rulings and/or decisions may change; any such change could apply retroactively and could affect the continued validity of this summary.

This summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. You should consult your tax adviser about the tax consequences of holding the debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Korean Taxation

The following summary of Korean tax considerations applies to you so long as you are not:

• a citizen of Korea;

• a resident of Korea;

• a corporation organized under Korean law;

• a corporation of which the place of management is located in Korea; or

• engaging in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Tax on Interest Payments

Under the Special Tax Treatment Control Law (the “STTCL”), when we make payments of interest to you on the debt securities, no amount will be withheld from such payments for, or on account of, taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein; provided that the debt securities are deemed to be foreign currency denominated bonds for the purpose of the STTCL.

Tax on Capital Gains

You will not be subject to any Korean income or withholding taxes in connection with the sale, exchange or other disposition of a debt security, provided that the disposition does not involve a transfer of the debt security to a resident of Korea (or the Korean permanent establishment of a non-resident). In addition, the STTCL exempts you from Korean taxation on any capital gains that you earn from the transfer of the debt securities outside of Korea; provided that the offering of the debt securities is deemed to be an overseas issuance for the purpose of the STTCL. If you sell or otherwise dispose of debt securities to a Korean resident and such disposition or sale is made within Korea, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates at the lower of 22% (including local income surtax) of net gain (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs) or 11% (including local income surtax) of gross sale proceeds with respect to transactions, unless an exemption is available under an applicable income tax treaty. For example, if you are a resident of the United States for the purposes of the income tax treaty currently in force between Korea and the United States, you are generally entitled to an exemption from Korean taxation in respect of any gain realized on a disposition of a debt security, regardless of whether the disposition is to a Korean resident. For more information regarding tax treaties, please refer to the heading “Tax Treaties” below.

With respect to computing the above-mentioned 22% withholding taxes (including local income surtax) on net gain, please note that there is no provision under relevant Korean law for offsetting gains and losses or

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otherwise aggregating transactions for the purpose of computing the net gain attributable to sales of the debt securities. The purchaser of the debt securities or, in the case of the sale of the debt securities through a securities company in Korea, the securities company through which such sale is effected, is required under Korean law to withhold the applicable amount of Korean tax and make payment thereof to the relevant Korean tax authority. Unless you, as the seller, can either claim the benefit of an exemption or a reduced rate of tax under an applicable tax treaty or produce satisfactory evidence of your acquisition cost and certain direct transaction costs in relation to the debt securities being sold, the purchaser or the securities company, as applicable, must withhold an amount equal to 11% of the gross sale proceeds. Any withheld tax must be paid no later than the tenth day of the month following the month in which the payment for the purchase of the relevant debt securities occurred. Failure to timely transmit the withheld tax to the Korean tax authorities technically subjects the purchaser or the securities company to penalties under Korean tax laws.

Inheritance Tax and Gift Tax

If you die while domiciled in Korea, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities, wherever located, that you own at the time of death. Furthermore, regardless of where you are domiciled when you die, Korean inheritance tax will be imposed upon the transfer by succession of any of the debt securities you own that are located in Korea at the time of death. Similarly, if you give the debt securities as a gift to any other person, the donee will be subject to Korean gift tax, based on where you are domiciled or where the debt securities are located at the time that you make the gift. The amount, if any, of the applicable inheritance or gift tax imposed in specific cases depends on the value of the debt securities (or other property) and the identities of the parties involved.

Under Korean inheritance and gift tax laws, debt securities issued by Korean corporations are deemed to be located in Korea irrespective of where they are physically located or by whom they are owned.

Stamp Duty

You will not be subject to any Korean stamp duty, registration duty or similar documentary tax in respect of or in connection with a transfer of any debt securities or in connection with the exercise of exchange rights or conversion rights that may be acquired with the debt securities.

Guarantees

Although there are no Korean tax laws, regulations or rulings specific to the payment under the guarantee herein, we believe any payments of interest on and principal amount of the debt securities (or the issued price if the debt securities were originally issued at a discount) by the Republic under the Republic’s guarantee on the debt securities denominated in a foreign currency and issued by us are not subject to withholding tax. Further details of the tax consequences of the holders of our debt securities guaranteed by the Republic may be provided in the relevant prospectus supplement.

Tax Treaties

At the date of this prospectus, Korea has tax treaties with, among others, Australia, Austria, Bangladesh, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Mongolia, the Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Republic of Fiji, Romania, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, the United Kingdom, the United States of America and Vietnam under which the rate of withholding tax on interest and dividends is reduced, generally to between 5% and 16.5%, and the tax on capital gains is often eliminated.

With respect to any gains subject to Korean withholding tax, as described under the heading “Tax on Capital Gains” above, you should inquire for yourself whether you are entitled to the benefit of a tax treaty with Korea. It

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will be your responsibility to claim the benefits of any tax treaty that may exist between your country and Korea in respect of capital gains, and to provide to the purchaser of the debt securities, or the relevant securities company through which the transfer of the debt securities is effected, as applicable, a certificate as to your country of tax residence. In the absence of sufficient proof, the purchaser, or the relevant securities company, as the case may be, must withhold tax at normal rates.

In addition, subject to certain exceptions, in order to receive the benefit of a tax exemption available under any applicable tax treaty, you may also be required to submit to the payer of such Korean source income an application for tax exemption under a tax treaty, together with a certificate as to your country of tax residence. The payer of such Korean source income, in turn, will be required to submit such exemption application to the relevant district tax office in Korea by the ninth day of the month following the date of the first payment of such income.

At present, Korea has not entered into any tax treaties regarding inheritance or gift tax.

United States Tax Considerations

The following discussion summarizes certain U.S. federal income tax considerations that may be relevant to you if you invest in debt securities and are a U.S. holder. You will be a U.S. holder if you are an individual who is a citizen or resident of the United States, a U.S. domestic corporation, or any other person that is subject to U.S. federal income tax on a net income basis in respect of its investment in a debt security. This summary deals only with U.S. holders that hold debt securities as capital assets for tax purposes. This summary does not apply to you if you are an investor that is subject to special tax rules, such as:

• a bank or thrift;

• a real estate investment trust;

• a regulated investment company;

• an insurance company;

• a dealer in securities or currencies;

• a trader in securities or commodities that elects mark-to-market treatment;

• a person that will hold debt securities as a hedge against currency risk or as a position in a straddle or conversion transaction for tax purposes;

• a tax exempt organization; or

• a person whose functional currency for tax purposes is not the U.S. dollar.

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

Any special U.S. federal income tax considerations relevant to a particular issuance of debt securities will be discussed in the applicable prospectus supplement. You should consult your tax adviser about the tax consequences of holding debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Payments or Accruals of Interest

Payments or accruals of “qualified stated interest” (as defined below) on a debt security will be taxable to you as ordinary interest income at the time that you receive or accrue such amounts, in accordance with your

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regular method of tax accounting. If you use the cash method of tax accounting and you receive payments of interest pursuant to the terms of a debt security in a currency other than U.S. dollars (a “foreign currency”), the amount of interest income you will realize will be the U.S. dollar value of the foreign currency payment based on the exchange rate in effect on the date you receive the payment regardless of whether you convert the payment into U.S. dollars. If you are an accrual-basis U.S. holder, the amount of interest income you will realize will be based on the average exchange rate in effect during the interest accrual period or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for the partial period within the taxable year. Alternatively, as an accrual-basis U.S. holder you may elect to translate all interest income on foreign currency-denominated debt securities at the spot rate on the last day of the accrual period (or the last day of the taxable year, in the case of an accrual period that spans more than one taxable year), or on the date that you receive the interest payment if that date is within five business days of the end of the accrual period. If you make this election you must apply it consistently to all debt instruments from year to year and you cannot change the election without the consent of the Internal Revenue Service. If you use the accrual method of accounting for tax purposes you will recognize foreign currency gain or loss on the receipt of a foreign currency interest payment if the exchange rate in effect on the date the payment is received differs from the rate applicable to a previous accrual of that interest income. This foreign currency gain or loss will be treated as ordinary income or loss, but generally will not be treated as an adjustment to interest income received on the debt security.

Purchase, Sale and Retirement of Notes

Initially, your tax basis in a debt security generally will equal the cost of the debt security to you. Your basis will increase by any amounts that you are required to include in income under the rules governing original issue discount and market discount, and will decrease by the amount of any amortized premium and any payments other than qualified stated interest made on the debt security. The rules for determining these amounts are discussed below. If you purchase a debt security that is denominated in a foreign currency, the cost to you, and therefore generally your initial tax basis, will be the U.S. dollar value of the foreign currency purchase price on the date of purchase calculated at the exchange rate in effect on that date. If the foreign currency-denominated debt security is traded on an established securities market and you are a cash-basis taxpayer, or if you are an accrual-basis taxpayer that makes a special election, then you will determine the U.S. dollar value of the cost of the debt security by translating the amount of the foreign currency that you paid for the debt security at the spot rate of exchange on the settlement date of your purchase. The amount of any subsequent adjustments to your tax basis in a foreign currency-denominated debt security in respect of original issue discount, market discount and premium will be determined in the manner described below. If you convert U.S. dollars into a foreign currency and then immediately use that foreign currency to purchase a debt security, you generally will not have any taxable gain or loss as a result of the purchase.

When you sell or exchange a debt security, or if a debt security is retired, you generally will recognize gain or loss equal to the difference between the amount you realize on the transaction, less any accrued qualified stated interest, which will be subject to tax in the manner described above, and your tax basis in the debt security. If you sell or exchange a debt security for a foreign currency, or receive foreign currency on the retirement of a debt security, the amount you will realize for U.S. tax purposes generally will be the dollar value of the foreign currency that you receive calculated at the exchange rate in effect on the date the foreign currency debt security is disposed of or retired. If you dispose of a foreign currency debt security that is traded on an established securities market and you are a cash-basis U.S. holder, or if you are an accrual-basis holder that makes a special election, then you will determine the U.S. dollar value of the amount realized by translating the amount at the spot rate of exchange on the settlement date of the sale, exchange or retirement.

The special election available to you if you are an accrual-basis taxpayer in respect of the purchase and sale of foreign currency debt securities traded on an established securities market, which is discussed in the two preceding paragraphs, must be applied consistently to all debt instruments from year to year and cannot be changed without the consent of the Internal Revenue Service.

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Except as discussed below with respect to market discount, short-term debt securities and foreign currency gain or loss, the gain or loss that you recognize on the sale, exchange or retirement of a debt security generally will be long-term capital gain or loss if you have held the debt security for more than one year. The Code provides preferential treatment under certain circumstances for net long-term capital gains recognized by individual investors. The ability of U.S. holders to offset capital losses against ordinary income is limited.

The gain or loss that you recognize on the sale, exchange or retirement of a foreign currency debt security generally will be treated as ordinary income or loss to the extent that the gain or loss is attributable to changes in exchange rates during the period in which you held the debt security. This foreign currency gain or loss will not be treated as an adjustment to interest income that you receive on the debt security.

Original Issue Discount

If we issue debt securities at a discount from their stated redemption price at maturity, and the discount is equal to or more than the product of one-fourth of one percent (0.25%) of the stated redemption price at maturity of the debt securities multiplied by the number of whole years to their maturity, the debt securities will be “Original Issue Discount Debt Securities.” The difference between the issue price and their stated redemption price at maturity will be the “original issue discount.” The “issue price” of the debt securities will be the first price at which a substantial amount of the debt securities are sold to the public (i.e., excluding sales of debt securities to underwriters, placement agents, wholesalers, or similar persons). The “stated redemption price at maturity” will include all payments under the debt securities other than payments of qualified stated interest. The term “qualified stated interest” generally means stated interest that is unconditionally payable in cash or property, other than debt instruments issued by the Company, at least annually during the entire term of a debt security at a single fixed interest rate or, subject to certain conditions, based on one or more interest indices.

If you invest in Original Issue Discount Debt Securities you generally will be subject to the special tax accounting rules for original issue discount obligations provided by the Internal Revenue Code and certain Treasury regulations (the “OID regulations”). You should be aware that, as described in greater detail below, if you invest in an Original Issue Discount Debt Security you generally will be required to include original issue discount in ordinary gross income for U.S. federal income tax purposes as it accrues, before you receive the cash attributable to that income.

In general, and regardless of whether you use the cash or the accrual method of tax accounting, if you are the holder of an Original Issue Discount Debt Security with a maturity greater than one year, you will be required to include in ordinary gross income the sum of the “daily portions” of original issue discount on that debt security for all days during the taxable year that you own the debt security. The daily portions of original issue discount on an Original Issue Discount Debt Security are determined by allocating to each day in any accrual period a ratable portion of the original issue discount allocable to that period. Accrual periods may be any length and may vary in length over the term of an Original Issue Discount Debt Security, so long as no accrual period is longer than one year and each scheduled payment of principal or interest occurs on the first or last day of an accrual period. If you are the initial holder of the debt security, the amount of original issue discount on an Original Issue Discount Debt Security allocable to each accrual period is determined by:

(i) multiplying the “adjusted issue price” (as defined below) of the debt security at the beginning of the accrual period by a fraction, the numerator of which is the annual yield to maturity of the debt security and the denominator of which is the number of accrual periods in a year; and

(ii) subtracting from that product the amount, if any, payable as qualified stated interest allocable to that accrual period.

In the case of an Original Issue Discount Debt Security that is a floating rate debt security, both the “annual yield to maturity” and the qualified stated interest will be determined for these purposes as though the debt

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security had borne interest in all periods at a fixed rate generally equal to the rate that would be applicable to interest payments on the debt security on its date of issue or, in the case of some floating rate debt securities, the rate that reflects the yield that is reasonably expected for the debt security. Additional rules may apply if interest on a floating rate debt security is based on more than one interest index. The “adjusted issue price” of an Original Issue Discount Debt Security at the beginning of any accrual period will generally be the sum of its issue price, including any accrued interest, and the amount of original issue discount allocable to all prior accrual periods, reduced by the amount of all payments other than any qualified stated interest payments on the debt security in all prior accrual periods. All payments on an Original Issue Discount Debt Security, other than qualified stated interest, will generally be viewed first as payments of previously accrued original issue discount, to the extent of the previously accrued discount, with payments considered made from the earliest accrual periods first, and then as a payment of principal. The “annual yield to maturity” of a debt security is the discount rate, appropriately adjusted to reflect the length of accrual periods, that causes the present value on the issue date of all payments on the debt security to equal the issue price. As a result of this “constant yield” method of including original issue discount income, the amounts you will be required to include in your gross income if you invest in an Original Issue Discount Debt Security denominated in U.S. dollars will generally be less in the early years and greater in the later years than amounts that would be includible on a straight-line basis.

You generally may make an irrevocable election to include in income your entire return on a debt security (i.e., the excess of all remaining payments to be received on the debt security, including payments of qualified stated interest, over the amount you paid for the debt security) under the constant yield method described above. For debt securities purchased at a premium or bearing market discount in your hands, if you make this election you will also be deemed to have made the election (discussed below under “Premium and Market Discount”) to amortize premium or to accrue market discount in income currently on a constant yield basis.

In the case of an Original Issue Discount Debt Security that is also a foreign currency-denominated debt security, you should determine the U.S. dollar amount includible as original issue discount for each accrual period by (i) calculating the amount of original issue discount allocable to each accrual period in the foreign currency using the constant yield method, and (ii) translating the foreign currency amount so determined at the average exchange rate in effect during that accrual period (or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for each partial period). Alternatively, you may translate the foreign currency amount so determined at the spot rate of exchange on the last day of the accrual period (or the last day of the taxable year, for an accrual period that spans two taxable years), or at the spot rate of exchange on the date of receipt, if that date is within five business days of the last day of the accrual period, provided that you have made the election described under the caption “Payments or Accruals of Interest” above. Because exchange rates may fluctuate, if you are the holder of an Original Issue Discount Debt Security that is also a foreign currency debt security you may recognize a different amount of original issue discount income in each accrual period than would be the case if you were the holder of an otherwise similar Original Issue Discount Debt Security denominated in U.S. dollars. Upon the receipt of an amount attributable to original issue discount, whether in connection with a payment of an amount that is not qualified stated interest or the sale or retirement of the Original Issue Discount Debt Security, you will recognize ordinary income or loss measured by the difference between the amount received, translated into U.S. dollars at the exchange rate in effect on the date of receipt or on the date of disposition of the Original Issue Discount Debt Security, as the case may be, and the amount accrued, using the exchange rate applicable to such previous accrual.

If you purchase an Original Issue Discount Debt Security outside of the initial offering at a cost less than its “remaining redemption amount”, or if you purchase an Original Issue Discount Debt Security in the initial offering at a price other than the debt security’s issue price, you will also generally be required to include in gross income the daily portions of original issue discount, calculated as described above. However, if you acquire an Original Issue Discount Debt Security at a price greater than its adjusted issue price, you will be entitled to reduce your periodic inclusions of original issue discount to reflect the premium paid over the adjusted issue price. The remaining redemption amount for an Original Issue Discount Debt Security is the total of all future payments to be made on the debt security other than qualified stated interest.

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Floating rate debt securities generally will be treated as “variable rate debt instruments” under the OID regulations. Accordingly, the stated interest on a floating rate debt security generally will be treated as qualified stated interest, and such a debt security will not have original issue discount solely as a result of the fact that it provides for interest at a variable rate. A floating rate debt security that does not qualify as a variable rate debt instrument will be subject to special rules (the “contingent payment regulations”) that govern the tax treatment of debt obligations that provide for contingent payments (“contingent debt obligations”). A detailed description of the tax considerations relevant to U.S. holders of any such debt securities will be provided in the applicable prospectus supplement.

Certain debt securities may be redeemed prior to maturity, either at our option or at the option of the holder, or may have special repayment or interest rate reset features as indicated in the prospectus supplement. Original Issue Discount Debt Securities containing these features may be subject to rules that differ from the general rules discussed above. If you purchase Original Issue Discount Debt Securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about their treatment since the tax consequences with respect to original issue discount will depend, in part, on the particular terms and features of the debt securities.

Short-Term Debt Securities

The rules described above will also generally apply to Original Issue Discount Debt Securities with maturities of one year or less (“short-term debt securities”), but with some modifications.

First, the original issue discount rules treat none of the interest on a short-term debt security as qualified stated interest, but treat a short-term debt security as having original issue discount. Thus, all short-term debt securities will be Original Issue Discount Debt Securities. Except as noted below, if you are a cash-basis holder of a short-term debt security and you do not identify the short-term debt security as part of a hedging transaction you will generally not be required to accrue original issue discount currently, but you will be required to treat any gain realized on a sale, exchange or retirement of the debt security as ordinary income to the extent such gain does not exceed the original issue discount accrued with respect to the debt security during the period you held the debt security. You may not be allowed to deduct all of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a short-term debt security until the maturity of the debt security or its earlier disposition in a taxable transaction. Notwithstanding the foregoing, if you are a cash-basis U.S. holder of a short-term debt security you may elect to accrue original issue discount on a current basis, in which case the limitation on the deductibility of interest described above will not apply. A U.S. holder using the accrual method of tax accounting and some cash method holders, including banks, securities dealers, regulated investment companies and certain trust funds, generally will be required to include original issue discount on a short-term debt security in gross income on a current basis. Original issue discount will be treated as accruing for these purposes on a ratable basis or, at the election of the holder, on a constant yield basis based on daily compounding.

Second, regardless of whether you are a cash- or accrual-basis holder, if you are the holder of a short-term debt security you can elect to accrue any “acquisition discount” with respect to the debt security on a current basis. Acquisition discount is the excess of the remaining redemption amount of the debt security at the time of acquisition over the purchase price. Acquisition discount will be treated as accruing ratably or, at the election of the holder, under a constant yield method based on daily compounding. If you elect to accrue acquisition discount, the original issue discount rules will not apply.

Finally, the market discount rules described below will not apply to short-term debt securities.

As described above, certain of the debt securities may be subject to special redemption features. These features may affect the determination of whether a debt security has a maturity of one year or less and thus is a short-term debt security. If you purchase debt securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about these features.

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Premium and Market Discount

If you purchase a debt security at a cost greater than the debt security’s remaining redemption amount, you will be considered to have purchased the debt security at a premium, and you may elect to amortize the premium as an offset to interest income, using a constant yield method, over the remaining term of the debt security. If you make this election, it generally will apply to all debt instruments that you hold at the time of the election, as well as any debt instruments that you subsequently acquire. In addition, you may not revoke the election without the consent of the Internal Revenue Service. If you elect to amortize the premium you will be required to reduce your tax basis in the debt security by the amount of the premium amortized during your holding period. Original Issue Discount Debt Securities purchased at a premium will not be subject to the original issue discount rules described above. In the case of premium on a foreign currency debt security, you should calculate the amortization of the premium in the foreign currency. Amortization deductions attributable to a period reduce interest payments in respect of that period, and therefore are translated into U.S. dollars at the rate that you use for those interest payments. Exchange gain or loss will be realized with respect to amortized premium on a foreign currency debt security based on the difference between the exchange rate computed on the date or dates the premium is amortized against interest payments on the debt security and the exchange rate on the date when the holder acquired the debt security. For a U.S. holder that does not elect to amortize premium, the amount of premium will be included in your tax basis when the debt security matures or is disposed of. Therefore, if you do not elect to amortize premium and you hold the debt security to maturity, you generally will be required to treat the premium as capital loss when the debt security matures.

If you purchase a debt security at a price that is lower than the debt security’s remaining redemption amount, or in the case of an Original Issue Discount Debt Security, the debt security’s adjusted issue price, by 0.25% or more of the remaining redemption amount, or adjusted issue price, multiplied by the number of remaining whole years to maturity, the debt security will be considered to bear “market discount” in your hands. In this case, any gain that you realize on the disposition of the debt security generally will be treated as ordinary interest income to the extent of the market discount that accrued on the debt security during your holding period. In addition, you could be required to defer the deduction of a portion of the interest paid on any indebtedness that you incurred or continued to purchase or carry the debt security. In general, market discount will be treated as accruing ratably over the term of the debt security, or, at your election, under a constant yield method. You must accrue market discount on a foreign currency debt security in the specified currency. The amount that you will be required to include in income in respect of accrued market discount will be the U.S. dollar value of the accrued amount, generally calculated at the exchange rate in effect on the date that you dispose of the debt security.

You may elect to include market discount in gross income currently as it accrues (on either a ratable or constant yield basis), in lieu of treating a portion of any gain realized on a sale of the debt security as ordinary income. If you elect to include market discount on a current basis, the interest deduction deferral rule described above will not apply. If you do make such an election, it will apply to all market discount debt instruments that you acquire on or after the first day of the first taxable year to which the election applies. The election may not be revoked without the consent of the Internal Revenue Service. Any accrued market discount on a foreign currency debt security that is currently includible in income will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within the holder’s taxable year).

Warrants

A description of the tax consequences of an investment in warrants will be provided in the applicable prospectus supplement.

Indexed Notes and Other Notes Providing for Contingent Payments

The contingent payment regulations generally require accrual of interest income on a constant yield basis in respect of contingent debt obligations at a yield determined at the time of issuance of the obligation, and may

152

require adjustments to these accruals when any contingent payments are made. In addition, special rules may apply to floating rate debt securities if the interest payable on the debt securities is based on more than one interest index. We will provide a detailed description of the tax considerations relevant to U.S. holders of any debt securities that are subject to the special rules discussed in this paragraph in the relevant prospectus supplement.

Information Reporting and Backup Withholding

The paying agent must file information returns with the United States Internal Revenue Service in connection with debt security payments made to certain United States persons. If you are a United States person, you generally will not be subject to United States backup withholding tax on such payments if you provide your taxpayer identification number to the paying agent. You may also be subject to information reporting and backup withholding tax requirements with respect to the proceeds from a sale of the debt securities. If you are not a United States person, in order to avoid information reporting and backup withholding tax requirements you may have to comply with certification procedures to establish that you are not a United States person.

In addition, a United States Holder should be aware that recently enacted legislation imposes new reporting requirements with respect to the holding of certain foreign financial assets, including debt of foreign issuers, if the aggregate value of all of such assets exceeds $50,000. A United States Holder should consult its own tax advisor regarding the application of the information reporting rules to our Notes and the application of the recently enacted legislation to its particular situation.

153

PLAN OF DISTRIBUTION

We and the Republic, if a guarantee by the Republic is furnished, may sell or issue the debt securities or warrants or guarantees in any of three ways:

• through underwriters or dealers;

• directly to one or more purchasers; or

• through agents.

The prospectus supplement relating to a particular series of debt securities or warrants or guarantees will state:

• the names of any underwriters;

• the purchase price of the securities;

• the proceeds to us from the sale;

• any underwriting discounts and other compensation;

• the initial public offering price;

• any discounts or concessions allowed or paid to dealers; and

• any securities exchanges on which the securities will be listed.

Any underwriter involved in the sale of securities will acquire the securities for its own account. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale. The securities may be offered to the public either by underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless the prospectus supplement states otherwise, certain conditions must be satisfied before the underwriters become obligated to purchase securities from us and the Republic, if applicable, and they will be obligated to purchase all of the securities if any are purchased. The underwriters may change any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

If we and the Republic, if a guarantee by the Republic is furnished, sell any securities through agents, the prospectus supplement will identify the agent and indicate any commissions payable by us and the Republic, if applicable. Unless the prospectus supplement states otherwise, all agents will act on a best efforts basis and will not acquire the securities for their own account.

We and the Republic, if a guarantee by the Republic is furnished, may authorize agents, underwriters or dealers to solicit offers by certain specified entities to purchase the securities from us and the Republic, if applicable, at the public offering price set forth in a prospectus supplement pursuant to delayed delivery contracts. The prospectus supplement will set out the conditions of the delayed delivery contracts and the commission receivable by the agents, underwriters or dealers for soliciting the contracts.

We and the Republic, if a guarantee by the Republic is furnished, may offer debt securities as consideration for the purchase of other of our debt securities, either in connection with a publicly announced tender offer or in privately negotiated transactions. The offer may be in addition to or in lieu of sales of debt securities directly or through underwriters or agents.

Agents and underwriters may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribution from us with respect to certain payments which the agents or underwriters may be required to make. Agents and underwriters may be customers of, engage in transactions with, or perform services (including commercial and investment banking services) for, us and the Republic in the ordinary course of business.

154

LEGAL MATTERS

The validity of any particular series of debt securities or warrants issued with debt securities will be passed upon for us and any underwriters or agents by United States and Korean counsel identified in the related prospectus supplement.

AUTHORIZED REPRESENTATIVES IN THE UNITED STATES

Our authorized agents in the United States are Mr. Seung-hyun Yoo, Chief Representative of our New York Representative Office, or Mr. Yeong-hee Lee, Senior Representative of our New York Representative Office. The address of our New York Representative Office is 460 Park Avenue, 8^th Floor, New York, New York 10022. The authorized representative of the Republic in the United States is Mr. Byeong Sun Song, Financial Attaché, Korean Consulate General in New York, located at 335 East 45th Street, New York, New York 10017.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chairman and President, in his official capacity, has supplied the information set forth under “The Export-Import Bank of Korea” (except for the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision”). Such information is stated on his authority.

The Minister of Strategy and Finance of The Republic of Korea, in his official capacity, has supplied the information set out under “The Export-Import Bank of Korea—Business—Government Support and Supervision” and “The Republic of Korea”. Such information is stated on his authority. The documents identified in the portion of this prospectus captioned “The Republic of Korea” as the sources of financial or statistical data are official public documents of the Republic or its agencies and instrumentalities.

EXPERTS

Our non-consolidated financial statements as of and for the years ended December 31, 2010 and 2009 have been included in this prospectus in reliance upon the report of KPMG Samjong Accounting Corp., an independent accounting firm, appearing elsewhere herein, and upon the authority of such firm as experts in accounting and auditing.

The audit report covering the December 31, 2010 and 2009 non-consolidated financial statements contains an emphasis paragraph that states the financial statements are not intended to present the financial position, results of operations, changes in equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, the report and accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting principles and auditing standards and their application in practice.

155

FORWARD-LOOKING STATEMENTS

This prospectus includes future expectations, projections or “forward-looking statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “estimate”, “project” and similar words identify forward-looking statements. In addition, all statements other than statements of historical facts included in this prospectus are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. This prospectus discloses important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”). All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Factors that could adversely affect the future performance of the Korean economy include:

• continuing difficulties in the housing and financial sectors in the United States and elsewhere and the resulting adverse effects on the global financial markets;

• adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar or Japanese Yen exchange rates or revaluation of the Chinese Renminbi), interest rates and stock markets;

• substantial decreases in the market prices of Korean real estate;

• increasing delinquencies and credit defaults by consumer and small and medium sized enterprise borrowers;

• declines in consumer confidence and a slowdown in consumer spending;

• adverse developments in the economies of countries that are important export markets for the Republic, such as the United States, Japan and China, or in emerging market economies in Asia or elsewhere;

• the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from the Republic to China);

• social and labor unrest;

• a decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs that, together, would lead to an increased government budget deficit;

• financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

• loss of investor confidence arising from corporate accounting irregularities and corporate governance issues at certain Korean conglomerates;

• the economic impact of any pending or future free trade agreements;

• geo-political uncertainty and risk of further attacks by terrorist groups around the world;

• the recurrence of severe acute respiratory syndrome, or SARS, or an outbreak of swine or avian flu in Asia and other parts of the world;

• deterioration in economic or diplomatic relations between the Republic and its trading partners or allies, including deterioration resulting from trade disputes or disagreements in foreign policy;

• political uncertainty or increasing strife among or within political parties in the Republic;

• hostilities or unrest involving oil producing countries in the Middle East and Northern Africa and any material disruption in the supply of oil or increase in the price of oil; 

• the occurrence of severe earthquakes, tsunamis or other natural disasters in Korea and other parts of the world, particularly in trading partners (such as the March 2011 earthquake in Japan, which also resulted in the release of radioactive materials from a nuclear plant that had been damaged by the earthquake); and

• an increase in the level of tension or an outbreak of hostilities between North Korea and the Republic or the United States.

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FURTHER INFORMATION

We filed a registration statement with respect to the securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and its related rules and regulations. You can find additional information concerning ourselves and the securities in the registration statement and any pre- or post-effective amendment, including its various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. These filings are also available to the public from the Securities and Exchange Commission’s website at http://www.sec.gov.

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PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 11. Estimated Expenses.*

It is estimated that our expenses in connection with the sale of the debt securities, warrants and guarantees hereunder, exclusive of compensation payable to underwriters and agents, will be as follows:

SEC Registration Fee	US$	580,500
Printing Costs		250,000
Legal Fees and Expenses		450,000
Fiscal Agent Fees and Expenses		50,000
Blue Sky Fees and Expenses		50,000
Rating Agencies’ Fees		350,000
Miscellaneous (including amounts to be paid to underwriters in lieu of reimbursement of certain expenses)		600,000
Total	US$	2,330,500

* Based on three underwritten offerings of the debt securities.

II-1

UNDERTAKINGS

The Registrants hereby undertake:

(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereto) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and

(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(d) That, for purposes of determining liability under the Securities Act of 1933 to any purchaser:

each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(e) That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrants undertake that in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser;

(i) Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

II-2

CONTENTS

This Registration Statement is comprised of:

	(1)	Facing Sheet.
	(2)	Explanatory Note.
	(3)	Part I, consisting of the Prospectus.
	(4)	Part II, consisting of pages II-1 to II-9.
	(5)	The following Exhibits:
A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Executive Director and Member of Board of Directors of The Export-Import Bank of Korea (included on page II-5).
D-2	-	Power of Attorney of the Executive Director and Member of Board of Directors of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Strategy and Finance of The Republic of Korea (included on Page II-6).
E-2	-	Power of Attorney of the Minister of Strategy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2).
H	-	The Export-Import Bank of Korea Act.*
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act.*
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*

II-3

K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”), incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, 39th Floor, Bank of China Tower, One Garden Road, Hong Kong, United States counsel to the Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*
M-2	-	Opinion (including consent) of Shin & Kim, Ace Tower, 4th Floor, 1-1/0 Soonhwa-dong, Chung-ku, Seoul 100-712, The Republic of Korea, Korean counsel to the Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).

* Previously filed.

** May be filed by amendment.

II-4

SIGNATURE OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Export-Import Bank of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Seoul, The Republic of Korea, on the 22nd day of June, 2011.

THE EXPORT-IMPORT BANK OF KOREA
By:	YOON-YUNG KIM*†
	Executive Director and Member of Board of Directors
†By:	/S/    HEE-SUNG YOON
	Hee-Sung Yoon (Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-5

SIGNATURE OF THE REPUBLIC OF KOREA

Pursuant to the requirements of the Securities Act of 1933, as amended, The Republic of Korea has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in The City of New York, New York, on the 22nd day of June, 2011.

THE REPUBLIC OF KOREA
By:	JAE-WAN BAHK*†
	Minister of Strategy and Finance
†By:	/S/    BYEONG SUN SONG
	Byeong Sun Song
	(Attorney-in-fact)

* Consent is hereby given to use of his name in connection with the information specified in this Registration Statement or amendment thereto to have been supplied by him and stated on his authority.

II-6

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 22nd day of June, 2011.

†By:	/S/    SEUNG-HYUN YOO
	Seung-hyun Yoo
	New York Representative Office
	The Export-Import Bank of Korea

II-7

SIGNATURE OF AUTHORIZED REPRESENTATIVE

OF THE EXPORT-IMPORT BANK OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Export-Import Bank of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 22nd day of June, 2011.

†By:	/S/    YEONG-HEE LEE
	Yeong-hee Lee
	New York Representative Office
	The Export-Import Bank of Korea

II-8

SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REPUBLIC OF KOREA

Pursuant to the Securities Act of 1933, as amended, the undersigned, a duly authorized representative in the United States of The Republic of Korea, has signed this Registration Statement or amendment thereto in The City of New York, New York, on the 22nd day of June, 2011.

†By:	/S/    BYEONG SUN SONG
	Byeong Sun Song
	Financial Attaché
	Korean Consulate General in New York

II-9

EXHIBIT INDEX

A-1	-	Form of Underwriting Agreement Standard Terms, incorporated herein by reference to Exhibit A-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-1	-	Form of Fiscal Agency Agreement, including forms of Debt Securities, incorporated herein by reference to Exhibit B-1 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-2	-	Form of global Debt Security that bears interest at a fixed rate, incorporated herein by reference to Exhibit B-2 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-3	-	Letter of successor Fiscal Agent, incorporated herein by reference to Exhibit B-3 to the Registration Statement of The Export-Import Bank of Korea (No. 33-41654).
B-4	-	Letter of 2nd successor Fiscal Agent, incorporated herein by reference to Exhibit B-4 to the Registration Statement of The Export-Import Bank of Korea (No. 333-9564).
B-5	-	Letter of 3rd successor Fiscal Agent, incorporated herein by reference to Exhibit B-5 to the Registration Statement of The Export-Import Bank of Korea (No. 333-136378).
B-6	-	Form of Guarantee to be issued by The Republic of Korea.**
C	-	Form of Warrant Agreement, including form of Warrants.**
D-1	-	Consent of the Executive Director and Member of Board of Directors of The Export-Import Bank of Korea (included on page II-5).
D-2	-	Power of Attorney of the Executive Director and Member of Board of Directors of The Export-Import Bank of Korea.*
E-1	-	Consent of the Minister of Strategy and Finance of The Republic of Korea (included on Page II-6).
E-2	-	Power of Attorney of the Minister of Strategy and Finance of The Republic of Korea, incorporated herein by reference to Exhibit E-2 to the Registration Statement of The Export-Import Bank of Korea (No. 333-156218).
F	-	Consent of KPMG Samjong Accounting Corp.
G-1	-	Letter appointing certain persons as authorized agents of The Export-Import Bank of Korea in the United States.*
G-2	-	Letter appointing Authorized Agents of The Republic of Korea in the United States (included in Exhibit E-2).
H	-	The Export-Import Bank of Korea Act.*
I	-	The Enforcement Decree of The Export-Import Bank of Korea Act.*
J	-	The Articles of Incorporation of The Export-Import Bank of Korea.*
K	-	Form of Prospectus Supplement relating to The Export-Import Bank of Korea’s Medium-Term Notes, Series A, Due Not Less Than Nine Months From Date of Issue (the “MTNs”), incorporated herein by reference to Exhibit K to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
L	-	Form of Distribution Agreement between The Export-Import Bank of Korea and the Agents named therein relating to the offer and sale from time to time of the MTNs, incorporated herein by reference to Exhibit L to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
M-1	-	Opinion (including consent) of Cleary Gottlieb Steen & Hamilton LLP, 39th Floor, Bank of China Tower, One Garden Road, Hong Kong, United States counsel to the Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants).*

M-2	-	Opinion (including consent) of Shin & Kim, Ace Tower, 4th Floor, 1-1/0 Soonhwa-dong, Chung-ku, Seoul 100-712, The Republic of Korea, Korean counsel to the Export-Import Bank of Korea, in respect of the legality of the Debt Securities (with or without Warrants) and the Guarantees to be issued by The Republic of Korea.*
N-1	-	Form of the MTNs that bears interest at a fixed rate, incorporated herein by reference to Exhibit N-1 to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
N-2	-	Form of the MTNs that bears interest at a floating rate, incorporated herein by reference to Exhibit N-2 to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).
O	-	Form of Calculation Agency Agreement between The Export-Import Bank of Korea and the calculation agent named therein relating to the MTNs that bear interest at a floating rate, incorporated herein by reference to Exhibit O to the Registration Statement of The Export-Import Bank of Korea (No.33-41654).

* Previously filed.

** May be filed by amendment.