THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-111608
SUBJECT TO COMPLETION, DATED FEBRUARY 23, 2004
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 7, 2004)
(KDB LOGO)
US$
THE KOREA DEVELOPMENT BANK
% NOTES DUE 20
Our US$ aggregate principal amount of % notes due 20 (the
"Notes") will mature on March , 20 . Our Notes will bear interest at the rate
of % per year. Interest on the Notes is payable on March and September
of each year, beginning on September , 20 . The Notes will be issued in
denominations of US$100,000 principal amount and integral multiples of US$1,000
in excess thereof. The Notes will be represented by one or more global
securities registered in the name of a nominee of The Depository Trust Company,
as depositary.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<Table>
<Caption>
PER NOTE TOTAL
-------- --------------
Public Offering Price.................................... % US$
Underwriting Discounts................................... % US$
Proceeds To Us (before deduction of expenses)............ % US$
</Table>
In addition to the initial public offering price, you will have to pay for
accrued interest, if any, from and including March , 2004.
We have applied to the Luxembourg Stock Exchange for listing of the Notes.
There can be no assurance that such listing will be obtained for the Notes.
Currently, there is no public market for the Notes.
The underwriters will deliver the Notes to investors through the book-entry
facilities of The Depository Trust Company on or about March , 2004.
------------------------
JOINT BOOKRUNNERS
ABN AMRO CITIGROUP DEUTSCHE BANK SECURITIES
------------------------
FEBRUARY , 2004
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<Table>
<Caption>
PAGE
----
Summary of the Offering..................................... S-5
Recent Developments......................................... S-7
Description of the Notes.................................... S-11
Clearance and Settlement.................................... S-13
Underwriting................................................ S-16
Legal Matters............................................... S-19
Official Statements and Documents........................... S-19
General Information......................................... S-19
</Table>
PROSPECTUS
<Table>
<Caption>
PAGE
----
Certain Defined Terms and Conventions....................... 3
Use of Proceeds............................................. 3
The Korea Development Bank.................................. 4
Overview............................................... 4
Capitalization......................................... 5
Business............................................... 6
Selected Financial Statement Data...................... 8
Operations............................................. 12
Sources of Funds....................................... 20
Debt................................................... 21
Overseas Operations.................................... 22
Property............................................... 22
Directors and Management; Employees.................... 22
Financial Statements and the Auditors.................. 23
The Republic of Korea....................................... 105
Land and History....................................... 105
Government and Politics................................ 106
The Economy............................................ 108
Gross Domestic Product and Major Financial
Indicators............................................ 124
Balance of Payments and Foreign Trade.................. 133
The Financial System................................... 138
Monetary Policy........................................ 142
Government Finance..................................... 145
Debt................................................... 147
Tables and Supplementary Information................... 150
</Table>
S-2
<Table>
<Caption>
PAGE
----
Description of the Securities............................... 153
Description of Debt Securities......................... 153
Description of Warrants................................ 159
Terms Applicable to Debt Securities and Warrants....... 160
Description of Guarantees.............................. 161
Limitations on Issuance of Bearer Debt Securities and Bearer
Warrants.................................................. 162
Taxation.................................................... 163
Korean Taxation........................................ 163
United States Tax Considerations....................... 165
Plan of Distribution........................................ 172
Legal Matters............................................... 173
Authorized Representatives in the United States............. 173
Official Statements and Documents........................... 173
Experts..................................................... 173
Forward-Looking Statements.................................. 173
Further Information......................................... 175
</Table>
S-3
CERTAIN DEFINED TERMS
All references to "we" or "us" mean The Korea Development Bank. All
references to "Korea" or the "Republic" contained in this prospectus supplement
mean the Republic of Korea. All references to the "Government" mean the
government of Korea. Terms used but not defined in this prospectus supplement
shall have the same meanings given to them in the accompanying prospectus.
ADDITIONAL INFORMATION
The information in this prospectus supplement is in addition to the
information contained in our prospectus dated January 7, 2004. The accompanying
prospectus contains information regarding ourselves and Korea, as well as a
description of some terms of the Notes. You can find further information
regarding us, Korea, and the Notes in registration statement no. 333-111608, as
amended, relating to our debt securities, with or without warrants, and
guarantees, which is on file with the U.S. Securities and Exchange Commission.
WE ARE RESPONSIBLE FOR THE ACCURACY OF THE INFORMATION IN THIS DOCUMENT
We are responsible for the accuracy of the information in this document and
confirm that to the best of our knowledge we have included all facts that should
be included not to mislead potential investors.
The Luxembourg Stock Exchange takes no responsibility for the contents of
this prospectus supplement and the accompanying prospectus, and makes no
representation as to liability whatsoever for any loss howsoever arising from or
in reliance upon the whole or any part of the contents of this prospectus
supplement and the accompanying prospectus.
NOT AN OFFER IF PROHIBITED BY LAW
The distribution of this prospectus supplement and the accompanying
prospectus, and the offer of the Notes, may be legally restricted in some
countries. If you wish to distribute this prospectus supplement or the
accompanying prospectus, you should observe any restrictions. This prospectus
supplement and the accompanying prospectus should not be considered an offer and
it is prohibited to use them to make an offer, in any state or country which
prohibits the offering.
THE NOTES MAY NOT BE OFFERED OR SOLD IN KOREA, DIRECTLY OR INDIRECTLY, OR
TO ANY RESIDENT OF KOREA, EXCEPT AS PERMITTED BY KOREAN LAW. FOR MORE
INFORMATION, SEE "UNDERWRITING--FOREIGN SELLING RESTRICTIONS" ON PAGE S-17.
INFORMATION PRESENTED ACCURATE AS OF DATE OF DOCUMENT
This prospectus supplement and the accompanying prospectus are the only
documents on which you should rely for information about the offering. We have
authorized no one to provide you with different information. You should not
assume that the information in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of each
document.
S-4
SUMMARY OF THE OFFERING
This summary highlights selected information from this prospectus
supplement and the accompanying prospectus and may not contain all of the
information that is important to you. To understand the terms of our Notes, you
should carefully read this prospectus supplement and the accompanying
prospectus.
THE NOTES
We are offering US$ aggregate principal amount of % notes
due March , 20 (the "Notes").
The Notes pay % interest each year. Interest on the Notes will be paid
twice each year on March and September , beginning on September ,
2004. Interest on the Notes will accrue from March , 2004. Interest on the
Notes will be computed based on a 360-day year consisting of twelve 30-day
months.
The Notes will be issued in denominations of US$100,000 principal amount
and integral multiples of US$1,000 in excess thereof. The Notes will be
represented by one or more global securities registered in the name of a nominee
of The Depository Trust Company ("DTC"), as depositary.
We do not have any right to redeem the Notes prior to maturity.
For sale in
The Notes will be offered for sale in the countries in the Americas, Europe
and Asia where it is legal to make such offers.
Listing
We have applied through our listing agent to list the Notes on the
Luxembourg Stock Exchange. We cannot give assurance that the application to the
Luxembourg Stock Exchange for the Notes will be approved. Settlement of the
Notes is not conditioned on obtaining the listing.
We may at any time transfer the listing of the Notes to a non-EU stock
exchange if maintaining the listing on the Luxembourg Stock Exchange becomes, or
would become, unduly burdensome on implementation of the EU Transparency
Obligations Directive.
Form and settlement
We will issue the Notes in the form of one or more fully registered global
notes, registered in the name of a nominee of DTC. Except as described in the
accompanying prospectus under "Description of the Securities--Description of
Debt Securities--Global Securities," the global notes will not be exchangeable
for Notes in definitive registered form, and will not be issued in definitive
registered form. Financial institutions, acting as direct and indirect
participants in DTC, will represent your beneficial interests in the global
notes. These financial institutions will record the ownership and transfer of
your beneficial interest through book-entry accounts. You may hold your
beneficial interests in the Notes through Euroclear System ("Euroclear") or
Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") if you are a
participant in such systems, or indirectly through organizations that are
participants in such systems. Any secondary market trading of book-entry
interests in the Notes will take place through DTC participants, including
Euroclear and Clearstream, Luxembourg. See "Clearance and Settlement--Transfers
Within and Between DTC, Euroclear and Clearstream, Luxembourg".
Further Issues
We may from time to time, without the consent of the holders of the Notes,
create and issue additional debt securities with the same terms and conditions
as the Notes in all respects so that such further issue shall be consolidated
and form a single series with the Notes.
S-5
Delivery of the Notes
We will make delivery of the Notes, against payment in same-day funds on or
about March , 2004, which will be the fifth business day following the date of
this prospectus supplement, referred to as "T+5". You should note that initial
trading of the Notes may be affected by the T+5 settlement. See
"Underwriting--Delivery of the Notes".
S-6
RECENT DEVELOPMENTS
This section provides information that supplements the information about
our bank and the Republic included under the headings corresponding to the
headings below in the accompanying prospectus dated January 7, 2004. Defined
terms used in this section have the meanings given to them in the accompanying
prospectus. If the information in this section differs from the information in
the accompanying prospectus, you should rely on the information in this section.
THE KOREA DEVELOPMENT BANK
OVERVIEW
As of September 30, 2003, we had W47,182.2 billion of loans outstanding
(net of provision for possible loan losses and present value discount), total
assets of W87,083.9 billion and total equity of W7,476.1 billion, as compared to
W44,917.2 billion of loans outstanding (net of provision for possible loan
losses and present value discount), W78,782.3 billion of total assets and
W6,940.6 billion of total equity as of December 31, 2002. For the nine months
ended September 30, 2003, we recorded interest income of W2,057.6 billion,
interest expense of W2,033.6 billion and net loss of W62.7 billion, as compared
to W2,518.6 billion of interest income, W2,437.0 billion of interest expense and
W168.5 billion of net income for the nine months ended September 30, 2002.
CAPITALIZATION
As of September 30, 2003, our authorized capital was W10,000 billion and
capitalization was as follows:
<Table>
<Caption>
SEPTEMBER 30, 2003(1)
---------------------
(BILLIONS OF WON)
Long-term debt(2)(3):
Won currency borrowings................................... W 3,770.3
Industrial finance bonds.................................. 21,022.9
Foreign currency borrowings............................... 8,319.0
---------
Total long-term debt................................... 33,112.2
---------
Capital:
Paid-in capital........................................... W 7,241.8
Capital surplus........................................... 44.4
Retained earnings......................................... 232.6
Capital adjustments....................................... (42.6)
---------
Total capital.......................................... 7,476.2
---------
Total capitalization........................................ W40,588.4
=========
</Table>
- ------------
(1) Since September 30, 2003 to the date of this prospectus supplement, there
has been no material change in our capitalization.
(2) We have translated borrowings in foreign currencies into Won at the rate of
W1,150.2 to US$1.00, which was the market average exchange rate, as
announced by the Seoul Money Brokerage Services Ltd., on September 30, 2003.
(3) As of September 30, 2003, we had contingent liabilities totaling W10,841.8
billion under outstanding guarantees issued on behalf of our clients.
S-7
SELECTED FINANCIAL STATEMENT DATA
RESULTS OF OPERATIONS
The following tables present financial information as of September 30, 2003
and December 31, 2002, and for the nine months ended September 30, 2003 and
2002:
THE KOREA DEVELOPMENT BANK
NON-CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
<Table>
<Caption>
IN MILLIONS OF KOREAN WON
--------------------------------------
SEPTEMBER 30, 2003 DECEMBER 31, 2002
------------------ -----------------
ASSETS
Cash and due from banks..................................... W 1,758,096 W 1,970,664
Securities.................................................. 27,550,728 26,378,326
Loans, net of provision for possible loan losses of
W1,510,785 million in 2003 and W1,089,983 million in 2002
and present value discount of W105,503 million in 2003 and
W126,955 million in 2002.................................. 47,182,218 44,917,231
Premises and equipment, net................................. 718,599 681,952
Derivative financial instruments............................ 1,931,519 1,645,161
Other assets................................................ 7,942,749 3,189,010
----------- -----------
Total assets........................................... W87,083,909 W78,782,344
=========== ===========
LIABILITIES AND EQUITY
Deposits.................................................... W 8,660,559 W 8,745,304
Borrowings.................................................. 23,390,403 24,459,085
Industrial finance bonds, gross of premium of bonds of
W22,011 million in 2003 and W16,396 million in 2002 and
net of discount on bonds of W44,696 million in 2003 and
W52,460 million in 2002................................... 37,456,054 33,600,020
Provision for possible guarantee losses..................... 6,437 63,223
Accrued severance benefits.................................. 24,335 14,685
Derivative financial instruments............................ 1,942,610 1,424,200
Other liabilities........................................... 8,127,313 3,535,222
----------- -----------
Total liabilities...................................... W79,607,711 W71,841,739
----------- -----------
Equity:
Paid-in capital........................................... 7,241,861 7,161,861
Capital surplus........................................... 44,373 44,373
Retained earnings......................................... 232,638 294,103
Capital adjustments....................................... (42,674) (559,732)
----------- -----------
Total equity........................................... 7,476,198 6,940,605
----------- -----------
Total liabilities and equity........................... W87,083,909 W78,782,344
=========== ===========
</Table>
S-8
THE KOREA DEVELOPMENT BANK
NON-CONSOLIDATED INCOME STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
<Table>
<Caption>
IN MILLIONS OF KOREAN WON
---------------------------
FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30,
---------------------------
2003 2002
------------ ------------
Interest income:
Interest on loans......................................... W1,555,584 W1,930,636
Interest on due from banks................................ 21,614 49,939
Interest on trading securities............................ 36,139 52,254
Interest on investment securities......................... 425,131 459,591
Other interest income..................................... 19,223 26,266
---------- ----------
2,057,691 2,518,686
---------- ----------
Interest expense:
Interest on deposits...................................... 272,855 297,855
Interest on borrowings.................................... 409,241 502,128
Interest on bonds payable................................. 1,337,768 1,572,645
Other interest expenses................................... 13,831 64,384
---------- ----------
2,033,695 2,437,012
---------- ----------
Net interest income (loss).................................. 23,996 81,674
---------- ----------
Non-interest revenue:
Fees and commissions...................................... 261,841 194,714
Gain from trading securities.............................. 33,889 76,587
Gain from derivative financial instruments................ 2,824,411 3,718,896
Others.................................................... 520,393 317,718
---------- ----------
3,640,534 4,307,915
---------- ----------
Non-interest expense:
Fees and commissions...................................... 102,855 25,615
Loss from trading securities.............................. 27,043 45,647
Loss from derivative financial instruments................ 2,866,234 3,590,905
General and administrative expenses....................... 203,601 179,357
Others.................................................... 869,899 1,020,359
---------- ----------
4,069,632 4,861,883
---------- ----------
Operating income (loss)..................................... (405,102) (472,294)
Non-operating income (expense), net......................... 342,691 641,241
Income (loss) before income taxes........................... (62,411) 168,947
Income taxes................................................ 371 349
---------- ----------
Net income (loss)........................................... W (62,782) W 168,598
========== ==========
</Table>
S-9
For the nine months ended September 30, 2003, we had a net loss of W62.8
billion compared to net income of W168.6 billion for the nine months ended
September 30, 2002.
Principal factors for the net loss for the nine months ended September 30,
2003 included:
- additional loan loss reserves of W450.8 billion primarily due to the
deterioration of the financial condition of companies in our loan
portfolio such as SK Networks (formerly known as SK Global); and
- impairment losses of W385.7 billion primarily due to valuation losses on
the stock of Hyundai Engineering and Construction and Hynix
Semiconductor resulting from changes in accounting regulations with
respect to companies subject to the Corporate Restructuring Promotion
Act. As a result of such changes, beginning on January 1, 2003, our
equity interests in companies subject to the Corporate Restructuring
Promotion Act were recorded at prevailing market prices instead of at
acquisition cost.
The above factors were partially offset by gains on equity method investees
of W560.9 billion including gains from investments in KEPCO and Daewoo
Shipbuilding & Marine Engineering.
LOANS TO FINANCIALLY TROUBLED COMPANIES
After the failure to auction LG Card to a buyer in December 2003, the
principal creditors of LG Card agreed to a rescue plan in January 2004 in which
we would acquire a 25.0% (subsequently adjusted to 26.0%) interest in LG Card
and the other creditors would collectively acquire a 74.3% (subsequently
adjusted to 73.3%) ownership interest following a debt-for-equity swap, as
described below.
In accordance with the normalization plan presented by us as main creditor
bank on January 9, 2004, four major creditor institutions (including us) have
formed a normalization steering committee for LG Card to oversee LG Card's
business operations. It is anticipated that an extraordinary shareholders
meeting will be held in March 2004 to elect a new CEO and directors nominated by
the committee.
Meanwhile, LG Card's existing creditors exchanged indebtedness of W953.9
billion for shares constituting 54.8% of the outstanding share capital of the
company in February 2004 and will extend an additional loan in the amount of
W1.59 trillion by the end of April 2004. A 43.5-to-1 capital write-down is
planned in April 2004. Following the capital write-down, LG Card's creditors
will exchange a further W953.9 billion of indebtedness into equity of the
company. Upon completion of the foregoing transactions, LG Card's creditors will
hold a combined 99.3% stake in the company.
Our contribution to LG Card consists of W205.9 billion in the form of
debt-for-equity exchange (W102.95 billion in February 2004 and the remaining
W102.95 billion by the end of April 2004) and an additional loan of W567.4
billion, raising our total equity stake in the company to 26.0%.
In addition, if LG Card requires additional financing in the future, the LG
Group and we have committed to provide up to W375 billion and W125 billion,
respectively.
We do not plan to dispose of the shares of LG Card until the company
regains its fair value after a successful normalization. However, if LG Card
were to face additional liquidity problems in the future, we may be asked to
contemplate making further contributions during the company's normalization
process. We cannot, therefore, provide any assurance that our exposure to LG
Card will not increase in the future, whether through additional loans, equity
investments or otherwise.
S-10
DESCRIPTION OF THE NOTES
The following is a description of some of the terms of the Notes we are
offering. Since it is only a summary, we urge you to read the fiscal agency
agreement described below and the forms of global note before deciding whether
to invest in the Notes. We have filed a copy of these documents with the United
States Securities and Exchange Commission as exhibits to the registration
statement.
The general terms of our Notes are described in the accompanying
prospectus. The description in this prospectus supplement further adds to that
description or, to the extent inconsistent with that description, replaces it.
GOVERNED BY FISCAL AGENCY AGREEMENT
We will issue the Notes under the fiscal agency agreement, dated as of
February 15, 1991, between us and The Bank of New York, as fiscal agent. The
fiscal agent will maintain a register for the Notes.
PAYMENT OF PRINCIPAL AND INTEREST
The Notes are initially limited to US$ aggregate principal amount and
will mature on March , 20 . The Notes will bear interest at the rate of
% per annum. Interest on the Notes is payable semi-annually on March
and September of each year, beginning on September , 2004. Interest on
the Notes will accrue from March , 2004. We will pay interest to the person
who is registered as the owner of a Note at the close of business on the
fifteenth day (whether or not a business day) next preceding such interest
payment date. Interest on the Notes will be computed based on a 360-day year
consisting of twelve 30-day months. We will make principal and interest payments
on the Notes in immediately available funds in U.S. dollars.
DENOMINATION
The Notes will be issued in denominations of US$100,000 principal amount
and integral multiples of US$1,000 in excess thereof.
REDEMPTION
We may not redeem the Notes prior to maturity. At maturity, we will redeem
the Notes at par.
FORM AND REGISTRATION
We will issue the Notes in the form of one or more fully registered global
notes, registered in the name of a nominee of and deposited with the custodian
for DTC. Except as described in the accompanying prospectus under "Description
of the Securities--Description of Debt Securities--Global Securities", the
global notes will not be exchangeable for Notes in definitive registered form,
and will not be issued in definitive registered form. Financial institutions,
acting as direct and indirect participants in DTC, will represent your
beneficial interests in the global notes. These financial institutions will
record the ownership and transfer of your beneficial interest through book-entry
accounts. You may hold your beneficial interests in the Notes through Euroclear
or Clearstream, Luxembourg if you are a participant in such systems, or
indirectly through organizations that are participants in such systems. Any
secondary market trading of book-entry interests in the Notes will take place
through DTC participants, including Euroclear and Clearstream, Luxembourg. See
"Clearance and Settlement--Transfers Within and Between DTC, Euroclear and
Clearstream, Luxembourg".
The fiscal agent will not charge you any fees for the Notes, other than
reasonable fees for the replacement of lost, stolen, mutilated or destroyed
Notes. However, you may incur fees for the maintenance and operation of the
book-entry accounts with the clearing systems in which your beneficial interests
are held.
S-11
NOTICES
All notices regarding the Notes will be published in London in the
Financial Times, in New York in The Wall Street Journal (U.S. Edition), and, for
as long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of the Luxembourg Stock Exchange so require, in a newspaper of general
circulation in Luxembourg, expected to be the Luxemburger Wort. If we cannot,
for any reason, publish notice in any of those newspapers, we will choose an
appropriate alternate English language newspaper of general circulation, and
notice in that newspaper will be considered valid notice. Notice will be
considered made on the first date of its publication.
S-12
CLEARANCE AND SETTLEMENT
We have obtained the information in this section from sources we believe to
be reliable, including DTC, Euroclear and Clearstream, Luxembourg. We accept
responsibility only for accurately extracting information from such sources.
DTC, Euroclear and Clearstream, Luxembourg are under no obligation to perform or
continue to perform the procedures described below, and they may modify or
discontinue them at any time. Neither we nor the registrar will be responsible
for DTC's, Euroclear's or Clearstream, Luxembourg's performance of their
obligations under their rules and procedures. Nor will we or the registrar be
responsible for the performance by direct or indirect participants of their
obligations under their rules and procedures.
INTRODUCTION
THE DEPOSITORY TRUST COMPANY
DTC is:
- a limited-purpose trust company organized under the New York Banking
Law;
- a "banking organization" under the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" under the New York Uniform Commercial Code; and
- a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934.
DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between its participants. It
does this through electronic book-entry changes in the accounts of its direct
participants, eliminating the need for physical movement of securities
certificates. DTC is owned by a number of its direct participants and by the New
York Stock Exchange Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers Inc.
EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
Like DTC, Euroclear and Clearstream, Luxembourg hold securities for their
participants and facilitate the clearance and settlement of securities
transactions between their participants through electronic book-entry changes in
their accounts. Euroclear and Clearstream, Luxembourg provide various services
to their participants, including the safekeeping, administration, clearance and
settlement and lending and borrowing of internationally traded securities.
Participants in Euroclear and Clearstream, Luxembourg are financial institutions
such as underwriters, securities brokers and dealers, banks and trust companies.
Some of the underwriters participating in this offering are participants in
Euroclear or Clearstream, Luxembourg. Other banks, brokers, dealers and trust
companies have indirect access to Euroclear or Clearstream, Luxembourg by
clearing through or maintaining a custodial relationship with a Euroclear or
Clearstream, Luxembourg participant.
OWNERSHIP OF NOTES THROUGH DTC, EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
We will issue the Notes in the form of one or more fully registered global
notes, registered in the name of a nominee of DTC. Financial institutions,
acting as direct and indirect participants in DTC, will represent your
beneficial interests in the Notes. These financial institutions will record the
ownership and transfer of your beneficial interests through book-entry accounts.
You may also hold your beneficial interests in the Notes through Euroclear or
Clearstream, Luxembourg, if you are a participant in such systems, or indirectly
through organizations that are participants in such systems. Euroclear and
Clearstream, Luxembourg will hold their participants' beneficial interests in
the global notes in their customers' securities accounts with their
depositaries. These depositaries of Euroclear and Clearstream, Luxembourg in
turn will hold such interests in their customers' securities accounts with DTC.
S-13
We and the fiscal agent generally will treat the registered holder of the
Notes, initially Cede & Co., as the absolute owner of the Notes for all
purposes. Once we and the fiscal agent make payments to the registered holder,
we and the fiscal agent will no longer be liable on the Notes for the amounts so
paid. Accordingly, if you own a beneficial interest in the global notes, you
must rely on the procedures of the institutions through which you hold your
interests in the Notes, including DTC, Euroclear, Clearstream, Luxembourg and
their respective participants, to exercise any of the rights granted to holders
of Notes. Under existing industry practice, if you desire to take any action
that Cede & Co., as the holder of the global notes, is entitled to take, then
Cede & Co. would authorize the DTC participant through which you own your
beneficial interest to take such action. The participant would then either
authorize you to take the action or act for you on your instructions.
DTC may grant proxies or authorize its participants, or persons holding
beneficial interests in the Notes through such participants, to exercise any
rights of a holder or take any actions that a holder is entitled to take under
the fiscal agency agreement or the Notes. Euroclear's or Clearstream,
Luxembourg's ability to take actions as holder under the Notes or the fiscal
agency agreement will be limited by the ability of their respective depositaries
to carry out such actions for them through DTC. Euroclear and Clearstream,
Luxembourg will take such actions only in accordance with their respective rules
and procedures.
TRANSFERS WITHIN AND BETWEEN DTC, EUROCLEAR AND CLEARSTREAM, LUXEMBOURG
TRADING BETWEEN DTC PURCHASERS AND SELLERS
DTC participants will transfer interests in the Notes among themselves in
the ordinary way according to DTC rules. Participants will pay for such
transfers by wire transfer. The laws of some states require certain purchasers
of securities to take physical delivery of the securities in definitive form.
These laws may impair your ability to transfer beneficial interests in the
global notes to such purchasers. DTC can act only on behalf of its direct
participants, who in turn act on behalf of indirect participants and certain
banks. Thus, your ability to pledge a beneficial interest in the global notes to
persons that do not participate in the DTC system, and to take other actions,
may be limited because you will not possess a physical certificate that
represents your interest.
TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG PARTICIPANTS
Participants in Euroclear and Clearstream, Luxembourg will transfer
interests in the Notes among themselves according to the rules and operating
procedures of Euroclear and Clearstream, Luxembourg.
TRADING BETWEEN A DTC SELLER AND A EUROCLEAR OR CLEARSTREAM, LUXEMBOURG
PURCHASER
When the Notes are to be transferred from the account of a DTC participant
to the account of a Euroclear or Clearstream, Luxembourg participant, the
purchaser must first send instructions to Euroclear or Clearstream, Luxembourg
through a participant at least one business day prior to the settlement date.
Euroclear or Clearstream, Luxembourg will then instruct its depositary to
receive the Notes and make payment for them. On the settlement date, the
depositary will make payment to the DTC participant's account and the Notes will
be credited to the depositary's account. After settlement has been completed,
DTC will credit the Notes to Euroclear or Clearstream, Luxembourg, Euroclear or
Clearstream, Luxembourg will credit the Notes, in accordance with its usual
procedures, to the participant's account, and the participant will then credit
the purchaser's account. These securities credits will appear the next day
(European time) after the settlement date. The cash debit from the account of
Euroclear or Clearstream, Luxembourg will be back-valued to the value date,
which will be the preceding day if settlement occurs in New York. If settlement
is not completed on the intended value date (i.e., the trade fails), the cash
debit will instead be valued at the actual settlement date.
Participants in Euroclear and Clearstream, Luxembourg will need to make
funds available to Euroclear or Clearstream, Luxembourg to pay for the Notes by
wire transfer on the value date. The most direct way of doing this is to
pre-position funds (i.e., have funds in place at Euroclear or Clearstream,
S-14
Luxembourg before the value date), either from cash on hand or existing lines of
credit. Under this approach, however, participants may take on credit exposure
to Euroclear and Clearstream, Luxembourg until the Notes are credited to their
accounts one day later.
As an alternative, if Euroclear or Clearstream, Luxembourg has extended a
line of credit to a participant, the participant may decide not to pre-position
funds, but to allow Euroclear or Clearstream, Luxembourg to draw on the line of
credit to finance settlement for the Notes. Under this procedure, Euroclear or
Clearstream, Luxembourg would charge the participant overdraft charges for one
day, assuming that the overdraft would be cleared when the Notes were credited
to the participant's account. However, interest on the Notes would accrue from
the value date. Therefore, in many cases the interest income on Notes which the
participant earns during that one-day period will substantially reduce or offset
the amount of the participant's overdraft charges. Of course, this result will
depend on the cost of funds (i.e., the interest rate that Euroclear or
Clearstream, Luxembourg charges) to each participant.
Since the settlement will occur during New York business hours, a DTC
participant selling an interest in the Notes can use its usual procedures for
transferring global securities to the depositories of Euroclear or Clearstream,
Luxembourg for the benefit of Euroclear or Clearstream, Luxembourg participants.
The DTC seller will receive the sale proceeds on the settlement date. Thus, to
the DTC seller, a cross-market sale will settle no differently than a trade
between two DTC participants.
Finally, day traders who use Euroclear or Clearstream, Luxembourg and who
purchase Notes from DTC participants for credit to Euroclear participants or
Clearstream, Luxembourg participants should note that these trades will
automatically fail unless one of three steps is taken:
- borrowing through Euroclear or Clearstream, Luxembourg for one day,
until the purchase side of the day trade is reflected in the day
trader's Euroclear or Clearstream, Luxembourg account, in accordance
with the clearing system's customary procedures;
- borrowing the Notes in the United States from DTC participants no later
than one day prior to settlement, which would allow sufficient time for
the Notes to be reflected in the Euroclear or Clearstream, Luxembourg
account in order to settle the sale side of the trade; or
- staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the Euroclear or
Clearstream, Luxembourg participant.
TRADING BETWEEN A EUROCLEAR OR CLEARSTREAM, LUXEMBOURG SELLER AND A DTC
PURCHASER
Due to time-zone differences in their favor, Euroclear and Clearstream,
Luxembourg participants can use their usual procedures to transfer Notes through
their depositaries to a DTC participant. The seller must first send instructions
to Euroclear or Clearstream, Luxembourg through a participant at least one
business day prior to the settlement date. Euroclear or Clearstream, Luxembourg
will then instruct its depositary to credit the Notes to the DTC participant's
account and receive payment. The payment will be credited in the account of the
Euroclear or Clearstream, Luxembourg participant on the following day, but the
receipt of the cash proceeds will be back-valued to the value date, which will
be the preceding day if settlement occurs in New York. If settlement is not
completed on the intended value date (i.e., the trade fails), the receipt of the
cash proceeds will instead be valued at the actual settlement date.
If the Euroclear or Clearstream, Luxembourg participant selling the Notes
has a line of credit with Euroclear or Clearstream, Luxembourg and elects to be
in debit for the Notes until it receives the sale proceeds in its account, then
the back-valuation may substantially reduce or offset any overdraft charges that
the participant incurs over that period.
Settlement in other currencies between DTC and Euroclear and Clearstream,
Luxembourg is possible using free-of-payment transfers to move the Notes, but
funds movement will take place separately.
S-15
UNDERWRITING
RELATIONSHIP WITH THE UNDERWRITERS
We and the underwriters named below (the "Underwriters") have entered into
a Terms Agreement dated February , 2004 (the "Terms Agreement") with respect
to the Notes relating to the Underwriting Agreement--Standard Terms (together
with the Terms Agreement, the "Underwriting Agreement") filed as an exhibit to
the registration statement. ABN AMRO Incorporated, Citigroup Global Markets Inc.
and Deutsche Bank Securities Inc. are acting as representatives of the
Underwriters. Subject to the terms and conditions set forth in the Underwriting
Agreement, we have agreed to sell to each of the Underwriters, severally, and
each of the Underwriters has severally agreed to purchase, the following
principal amount of the Notes set out opposite its name below:
<Table>
<Caption>
PRINCIPAL AMOUNT
NAME OF UNDERWRITERS OF THE NOTES
- -------------------- ----------------
ABN AMRO Incorporated....................................... US$
Citigroup Global Markets Inc. ..............................
Deutsche Bank Securities Inc. ..............................
--------------
Total..................................................... US$
==============
</Table>
Under the terms and conditions of the Underwriting Agreement, if the
Underwriters take any of the Notes, then the Underwriters are obligated to take
and pay for all of the Notes.
The Underwriters initially propose to offer the Notes directly to the
public at the offering price described on the cover page and may offer a portion
to certain dealers at a price that represents a concession not in excess of
% of the principal amount with respect to the Notes. Any Underwriter may
allow, and any such dealer may reallow, a concession not in excess of % of
the principal amount of the Notes to certain other dealers. After the initial
offering of the Notes, the Underwriters may from time to time vary the offering
price and other selling terms.
The Notes are new classes of securities with no established trading market.
We have applied to the Luxembourg Stock Exchange for listing of, and permission
to deal in, the Notes. There can be no assurance that such listing will be
obtained. The Underwriters have advised us that they intend to make a market in
the Notes. However, they are not obligated to do so and they may discontinue any
marketmaking activities with respect to the Notes at any time without notice.
Accordingly, we cannot assure you as to the liquidity of any trading market for
the Notes.
The EU Transparency Obligations Directive may be implemented in a manner
which is unduly burdensome for us. In particular, we may be required to prepare
our financial statements in accordance with International Financial Reporting
Standards for accounting periods beginning on or after 1 January, 2005. Pursuant
to the Underwriting Agreement in those circumstances, we would be entitled to
seek an alternative listing for the Notes on a stock exchange outside the
European Union.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments which the Underwriters may be required to make in respect
of any such liabilities.
In connection with this offering, (the "Stabilizing Manager") or
any person acting for it, on behalf of the Underwriters, may purchase and sell
Notes in the open market. These transactions may include over-allotment,
covering transactions and stabilizing transactions. Over-allotment involves
sales of Notes in excess of the principal amount of Notes to be purchased by the
Underwriters in this offering,
S-16
which creates a short position for the Underwriters. Covering transactions
involve purchases of the Notes in the open market after the distribution has
been completed in order to cover short positions. Stabilizing transactions
consist of certain bids or purchases of Notes made for the purpose of preventing
or retarding a decline in the market price of the Notes while the offering is in
progress. Any of these activities may have the effect of preventing or retarding
a decline in the market price of the Notes. They may also cause the price of the
Notes to be higher than the price that otherwise would exist in the open market
in the absence of these transactions. The Stabilizing Manager may conduct these
transactions in the over-the-counter market or otherwise. If the Stabilizing
Manager commences any of these transactions, it may discontinue them at any
time, and must discontinue them after a limited period.
The amount of net proceeds is US$ after deducting underwriting
discounts but not estimated expenses. Expenses associated with this offering, to
be paid by us, are estimated to be US$ . We have agreed to reimburse
the Underwriters for certain of their out-of-pocket expenses incurred in
connection with the offering of the Notes.
In the ordinary course of their respective businesses, some of the
Underwriters and their affiliates have engaged, and may in the future engage, in
commercial banking and/or investment banking transactions with us and our
affiliates.
DELIVERY OF THE NOTES
We will make delivery of the Notes, against payment in same-day funds on or
about March , 2004, which will be the fifth business day following the date of
this prospectus supplement. Under Rule 15c6-1 promulgated under the Securities
Exchange Act of 1934, as amended, U.S. purchasers are generally required to
settle trades in the secondary market in three business days, unless they and
the other parties to any such trade expressly agree otherwise. Accordingly, if
you wish to trade in the Notes on the date of this prospectus supplement or the
next succeeding business day, because the Notes will initially settle in T+5,
you may be required to specify an alternate settlement cycle at the time of your
trade to prevent a failed settlement. Purchasers in other countries should
consult with their own advisors.
FOREIGN SELLING RESTRICTIONS
Each Underwriter has agreed to the following selling restrictions in
connection with the offering with respect to the following jurisdictions:
KOREA
Each Underwriter has severally represented and agreed that (i) it has not
offered, sold or delivered and will not offer, sell or deliver, directly or
indirectly, any Notes in Korea or to, or for the account or benefit of, any
resident of Korea, except as permitted by applicable Korean laws and
regulations; and (ii) any securities dealer to whom it sells Notes will agree
that it will not offer any Notes, directly or indirectly, in Korea or to any
resident of Korea, except as permitted by applicable Korean laws and
regulations, or to any dealer who does not so represent and agree.
UNITED KINGDOM
Each Underwriter has severally represented and agreed that (i) it has not
offered or sold and, prior to the expiry of a period of six months from the
closing date, will not offer or sell, any Notes to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of The Public Offers of Securities Regulations 1995 (as
amended); (ii) it has only communicated or caused to be communicated and will
only communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of section 21 of The Financial
Services and Markets Act of 2000 ("FSMA")) received by it in connection with the
issue or sale of any of the Notes in circumstances in which section 21(1) of the
FSMA does not
S-17
apply to us; and (iii) it has complied, and will comply with, all applicable
provisions of the FSMA with respect to anything done by it in relation to the
Notes, from or otherwise involving the United Kingdom.
THE NETHERLANDS
Each Underwriter has represented and agreed that it has not, directly or
indirectly, offered or sold and will not, directly or indirectly, offer or sell
in the Netherlands any Notes other than to persons who trade or invest in
securities in the conduct of a profession or business (which includes banks,
stockbrokers, insurance companies, pension funds, other institutional investors
and finance companies and treasury departments of large enterprises).
JAPAN
Each Underwriter has severally represented and agreed that the Notes have
not been and will not be registered under the Securities and Exchange Law of
Japan; it will not offer or sell, directly or indirectly, any of the Notes in
Japan or to, or for the account or benefit of, any resident of Japan or to, or
for the account or benefit of, any resident for reoffering or resale, directly
or indirectly, in Japan or to, or for the account or benefit of, any resident of
Japan except (i) pursuant to an exemption from the registration requirements of,
or otherwise in compliance with, the Securities and Exchange Law of Japan and
(ii) in compliance with the other relevant laws and regulations of Japan.
HONG KONG
Each Underwriter has severally represented and agreed that (i) it has not
offered or sold and will not offer or sell in Hong Kong, by means of any
document, any Notes other than to persons whose ordinary business is to buy or
sell shares or debentures, whether as principal or agent, or in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Ordinance (Cap. 32 of the Laws of Hong Kong) and (ii) it has not
issued and will not issue any advertisement, invitation or document relating to
the Notes, whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are or are likely to be accessed or read by, the public in
Hong Kong (except if permitted to do so under securities laws of Hong Kong)
other than with respect to Notes which are or are intended to be disposed of to
persons outside Hong Kong or only to "professional investors" within the meaning
of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules
made thereunder.
SINGAPORE
Each Underwriter represents and agrees that this prospectus supplement and
the accompanying prospectus have not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus supplement and the
accompanying prospectus and any other document or material in connection with
the offer or sale, or invitation for subscription or purchase, of the Notes may
not be circulated or distributed, nor may the Notes be offered or sold, or be
made the subject of an invitation for subscription or purchase, whether directly
or indirectly, to the public or any member of the public in Singapore other than
(i) to an institutional investor or other person specified in Section 274 of the
Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a
sophisticated investor, and in accordance with the conditions, specified in
Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA.
ITALY
No solicitations in connection with the offering of the Notes will be made
in Italy by any party, including the Underwriters. No copies of this prospectus
supplement, the accompanying prospectus or any other documents relating to the
Notes will be distributed in Italy. No Notes will be offered, sold or delivered
in Italy.
S-18
LEGAL MATTERS
The validity of the Notes is being passed upon for us by Cleary, Gottlieb,
Steen & Hamilton, New York, New York, and by Lee & Ko, Seoul, Korea. Certain
legal matters will also be passed upon for the Underwriters by Davis Polk &
Wardwell, New York, New York and by Kim & Chang, Seoul, Korea. In giving their
opinions, Cleary, Gottlieb, Steen & Hamilton and Davis Polk & Wardwell may rely
as to matters of Korean law upon the opinions of Lee & Ko and Kim & Chang,
respectively, and Lee & Ko and Kim & Chang may rely as to the matters of New
York law upon the opinions of Cleary, Gottlieb, Steen & Hamilton and Davis Polk
& Wardwell, respectively.
OFFICIAL STATEMENTS AND DOCUMENTS
Our Governor and Chairman of the Board of Directors, in his official
capacity, has supplied the information set forth in this prospectus supplement
under "Recent Developments--The Korea Development Bank". Such information is
stated on his authority. The documents identified in the portion of this
prospectus supplement captioned "Recent Developments--The Republic of Korea" as
the sources of financial or statistical data are derived from official public
documents of the Republic and of its agencies and instrumentalities.
GENERAL INFORMATION
Our authorized share capital is W10,000 billion. As of September 30, 2003,
our paid-in capital, which was fully subscribed to by the Government of Korea,
was W7,241.8 billion.
Our board of directors can be reached at the address of our registered
office: c/o 16-3, Youidodong, Yongdeungpo-ku, Seoul 150-973, The Republic of
Korea.
The issue of the Notes has been authorized by a resolution of our Board of
Directors passed on November 21, 2003, and a decision of our Governor dated
January 12, 2004. On January 13, 2004, we filed our report on the proposed
issuance of the Notes with the Ministry of Finance and Economy of Korea.
Except as disclosed in this prospectus supplement and the accompanying
prospectus, since September 30, 2003, there has been no material adverse change
in our financial condition. In addition, except as disclosed in this prospectus
supplement and the accompanying prospectus, since September 30, 2003, there has
been no material adverse change in our capitalization as described in the table
appearing on page S-7 of this prospectus supplement which is material in the
context of the issue of the Notes.
We are not involved in any litigation, arbitration or administrative
proceedings that are material in the context of the issue of the Notes and are
not aware of any such litigation, arbitration or administrative proceedings
whether pending or threatened.
We have not appointed a Luxembourg paying or transfer agent with respect to
the Notes. We have agreed to appoint such an agent in Luxembourg if Notes in
definitive form are issued in the limited circumstances set forth in the
accompanying prospectus under "Description of the Securities--Description of
Debt Securities--Global Securities" and in such an event, publication of such
appointment will be made as set forth herein under "Description of the
Notes--Notices." Pending such appointment, The Bank of New York (Luxembourg),
S.A., our Luxembourg listing agent, will act as intermediary in Luxembourg
between holders of Notes and us. The payment and transfer procedures of Notes in
definitive form will be published together with the name of the paying and
transfer agent.
The registration statement with respect to us and the Notes has been filed
with the Securities and Exchange Commission in Washington, D.C. under the
Securities Act of 1933, as amended. Additional information concerning us and the
Notes is contained in the registration statement and post-effective amendments
to such registration statement, including their various exhibits, which may be
inspected at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024,
S-19
450 Fifth Street N.W., Washington, D.C. 20549. The documents mentioned in this
paragraph are available at the office of the Luxembourg listing agent.
Copies of the registration statement, including amendments thereto referred
to under "Further Information" in the accompanying prospectus, will be available
for inspection at, and copies of our annual reports as well as our audited
non-consolidated annual and unaudited non-consolidated semiannual financial
statements may be obtained from, the offices of The Bank of New York
(Luxembourg), S.A. in Luxembourg during normal business hours on any weekday for
so long as the Notes are listed on the Luxembourg Stock Exchange. In addition,
copies of the following documents will be available for inspection, and may be
obtained, at the offices of The Bank of New York (Luxembourg), S.A. during
normal business hours:
- the Korea Development Bank Act;
- our By-Laws;
- the resolutions of our Board of Directors;
- the Enforcement Decree of The Korea Development Bank Act;
- the decision of our Governor with respect to the offering of the Notes;
- the fiscal agency agreement;
- a specimen of the Notes; and
- the Underwriting Agreement.
Our By-Laws and a legal notice relating to the issuance of the Notes will
be deposited prior to listing with the Registre de Commerce et des Societes in
Luxembourg, and copies thereof may be obtained upon request at the offices of
The Bank of New York (Luxembourg), S.A.
The Notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg (Common Code: ; ISIN: ; CUSIP:
).
S-20
HEAD OFFICE OF THE BANK
16-3, YOUIDO-DONG
YONGDEUNGPO-KU
SEOUL 150-973
REPUBLIC OF KOREA
FISCAL AGENT AND PRINCIPAL PAYING AGENT
THE BANK OF NEW YORK
101 BARCLAY STREET
21ST FLOOR WEST
NEW YORK, NY 10286
U.S.A.
LEGAL ADVISORS TO THE BANK
<Table>
as to Korean law as to US law
LEE & KO CLEARY, GOTTLIEB, STEEN & HAMILTON
18TH FL., MARINE CENTER MAIN BLDG. 39TH FLOOR, BANK OF CHINA TOWER
118, 2-KA, NAMDAEMUN-RO ONE GARDEN ROAD
CHUNG-KU HONG KONG
SEOUL
THE REPUBLIC OF KOREA
</Table>
LEGAL ADVISORS TO THE UNDERWRITERS
<Table>
as to Korean law as to US law
KIM & CHANG DAVIS POLK & WARDWELL
SEYANG BUILDING 18TH FLOOR
223 NAEJA-DONG THE HONG KONG CLUB BUILDING
CHONGRO-GU 3A CHATER ROAD
SEOUL 110-720 HONG KONG
THE REPUBLIC OF KOREA
</Table>
AUDITOR OF THE BANK
SAMIL ACCOUNTING CORPORATION
HANIL GROUP BUILDING
191, HANKANG-RO, 2-KA
YONGSAN-GU
SEOUL 140-172
THE REPUBLIC OF KOREA
LUXEMBOURG LISTING AGENT
THE BANK OF NEW YORK (LUXEMBOURG), S.A.
AEROGOLF CENTER
1A, HOEHENHOF
L-1736 SENNINGERBERG
LUXEMBOURG
(KDB LOGO)