HANA FINANCIAL GROUP ANNUAL REPORT 2005 HANA FINANCIAL GROUP ANNUAL REPORT 2005 18th Fl., DI&S Bldg. 27-3 Yeouido-dong, Yeongdeungpo-gu, Seoul 150-705 TEL : (82-2) 2002-1110 Home Page : http://www.hanafn.com NEW START TO BE A 1LEADING FINANCIAL GROUP Contents 05 Financial Highlights 09 Shareholders Information 12 Letter to Shareholders 16 Corporate Timeline 20 Establishment of Hana Financial Group Inc. 22 Hana Financial Group at a Glance 24 Vision & Mission 26 Synergy 28 Business Portfolio | Commercial Banking | Private Banking | Brokerage | Asset Management | Investment Banking | Insurance | Credit Card 40 Commitment to Community 43 Recognition 44 Corporate Governance 45 Board of Directors 48 Leadership 50 Corporate Information 51 Financial Section 2 Financial Highlights 1. Business Volume 2. Earnings INNOVATION 3. Profitability 4 5 4. Asset Quality 5. Capital Adequacy ACHIEVEMENT 6 7 7 Shareholders Information Major Shareholders as of December 31, 2005 Name No. of Shares % Name No. of Shares % Goldman Sachs 19,077,762 9.34 NTC-GOVSPORE 3,341,326 1.64 TEMASEK 18,500,000 9.06 Dongbu Insurance Co., Ltd. 3,225,200 1.58 Templeton 16,607,231 8.13 Mirae Asset Securities Co., Ltd. 3,166,068 1.55 Allianz 9,894,000 4.84 CAPITALWORLDGROWTHAND 3,125,000 1.53 National Pension Fund 6,959,100 3.41 SSB-ARTISAN 2,864,480 1.40 POSCO 6,515,450 3.19 MSIL-SRINV(L)LTD 2,689,117 1.32 Korea Investment & Securities Co. 6,372,475 3.12 BONY-MATHEWS 2,341,231 1.15 MSIL-TOSCA 5,269,110 2.58 Korea Life Insurance Co., Ltd. 2,136,350 1.05 Composition of Shareholders as of December 31, 2005 Type of Shareholders No. of Shareholders No. of Shares Owned % Banks and Custodians 268 19,159,036 9.38 Securities Companies 41 4,461,074 2.18 Insurance Companies 10 5,396,560 2.64 HARMONY Investment Trusts 67 1,227,767 0.60 Individual Shareholders 18,847 7,815,486 3.83 Foreign Shareholders 890 147,613,841 72.27 Others 207 18,582,479 9.10 Total* 20,330 204,256,243 100.00 * Total Number of Shares Owned includes 3,565,780 shares of treasury stocks. Share Data as of December 31, 2005 Type Shares Authorized Shares Issued Treasury Stocks Shares Outstanding Registered Common Share 800,000,000 204,256,243 3,565,780 200,690,463 * As of December 1, 2005, total equity stakes of subsidiaries were transferred for the common shares of Hana Financial Group Inc. in accordance with the all-inclusive stock transfer plan, applying the exchange ratio that was determined by relevant laws and regulations of Republic of Korea. As a result, two of subsidiaries, Hana Bank and Hana Securities, were entitled to some equity ownership of their parent company, Hana Financial Group Inc. In accordance with Korean Financial Accounting Standards, consolidated financial statements of Hana Financial Group Inc. and its affiliates recorded 3,565,780 shares as treasury stocks. During 2006, additional 2,568,050 shares of the Company were disposed of. As end of March, 2006, the Company and its affiliates are accounting for 997,730 shares of treasury stocks. 8 9 8 Stock Price Performance HFG Hana Bank KOSPI Per Share Data 2001 2002 2003 2004 2005 Dividends Per Share (Cash - In KRW) 200 500 500 750 400 (Stock - Shares) 0.04 - - - 0.01 EPS (In KRW) 2,457 2,304 3,167 7,728 4,658 BPS (In KRW) 12,692 15,863 19,155 27,656 30,940 Share Price (High - In KRW) 17,050 22,450 24,100 29,900 50,100 Share Price (Low - In KRW) 5,550 14,350 7,700 20,150 24,150 PBR (Times) 0.4 ~ 1.3 0.9 ~ 1.4 0.4 ~ 1.3 0.7 ~ 1.1 0.8 ~ 1.6 PER (Times) 2.3 ~ 6.9 6.2 ~ 9.7 2.4 ~ 7.6 2.6 ~ 3.9 5.2 ~ 10.8 * The figures from 2001 to 2004 represents per share data of Hana Bank. Cash dividend declared per share for 2005 includes Hana Bank's interim dividend of 350 won per share. The interim dividend was declared by the resolution of Hana Bank's BOD meeting dated July 29, 2005. Stock Listing Korea Exchange : Common Stock Registrar and Transfer Agent Hana Bank : Registrar & Transfer Agency Services Dept., 43-2 Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea TEL : (822) 368 - 5800 COOPERATION 10 Letter to Shareholders Dear Shareholders, The recent consolidation and globalization of financial institutions have intensified the competition among financial institutions; as such, we anticipate that Korea’s financial institutions will face a stiffer challenge from other types of network, including the telecommunication network, which is based on wire/wireless communications and the distribution network, which is centered on convenience stores and outlets. Recent developments in the information and telecommunication sectors have triggered the diversification of customer demand for financial products and shortened product development cycles. Furthermore, as low interest rate takes root and the financial needs of customers become more diverse, funds in the traditional bank products have started to gradually flow into indirect investment products, with the asset management market offering an ample growth potential. To proactively deal with changing market environment, we established the financial holding company, Hana Financial Group Inc. (“HFG”) in December 2005. With the holding company at the heart of the Group serving as the strategic architect, Hana Financial Group overlooks approximately 700 branches of Hana Bank and DI&S, as well as product development engines such as Hana Securities Co., Ltd., Hana Life Insurance Co., Ltd., Hana Capital Co., Ltd., and Daehan Investment Trust & Management Co., Ltd. (“DIMCO”), in addition to the think tank and IT Investment Banking Financial Network Securities (Bank, Securities, Insurance) Bank Firm Bancassurance Asset Insurance Telecommunication Distribution Network Management Network (Department Store, Bank Securities Insurance Asset ManagementNon-Financial Company (Internet, Wired/Wireless) Discount Store, Travel) Left) Right) Kyo-Joong Yoon Seung-Yu Kim Private Banking President & Chief Executive Officer Chairman & Chief Executive Officer Past Present Future Segmentation Universal Banking Network Competition 12 13 service provider such as Hana Institute of Finance and Hana I&S. loyalty - but will also carry on Hana Bank’s corporate culture, which values people, efficiency, and innovation, and further develop it as an integral part of affinity and unity, which will be shared by all In 2006, Hana Financial Group will do its best to establish a desirable group operation model, facilitate executives and staff members of the Group. On another front, The Group will strive to earn the respect harmonious collaboration among affiliated companies, and generate synergies in order to improve the of the local community by faithfully fulfilling our corporate social responsibilities. This year, we will value of the Group as a whole. More specifically, we will develop a Customer Relationship Management contribute to the local community through volunteer activities that would be more systematically (CRM) system at the Group level and closely link it to our product sales channel in order to meet organized with the establishment of Hana Financial Group Foundation. diversified customer needs. Furthermore, we will redefine our channel strategy and, for example, expand Hana Financial Plaza, which combines branches of banks and securities. With its establishment on December 1, 2005, HFG had a short fiscal year in 2005. In accordance with Korean GAAP, HFG and its affiliates reflected the operating results for the period from October 1, 2005 The Group also plans to generate synergies through combined marketing across various business to December 31, 2005 in the consolidated financial statements, posting net income of 216.0 billion won. sectors by applying matrix organizations to each market: corporate banking, retail banking, and private 2006 is HFG’s first full year of business. In the upcoming year, we are confident that we will achieve banking for high net worth individuals, etc. In particular, we expect to see great synergies in terms of even better results with the solid synergy effect as well as improved management efficiency by full- new product development, channel strategy, and the establishment of investment policy. As per cost fledged operation of HFG. synergy, we intend to create synergies through the bundle procurement of IT and disposables at the Group level, the integration of securities systems, and the elimination of overlapping functions within the We firmly believe that our meaningful efforts to establish a most desirable role model as a comprehensive Group. financial group will lead to fruitful results for our shareholders in the future. We ask for your unwavering support as well as your suggestions to make Hana Financial Group a financial group that represents not We believe that establishing a desirable corporate culture and fulfilling corporate social responsibility for only Korea but all of East Asia. the local community are essential in sustaining growth and enhancing the brand value of the Group. Hana Financial Group will not only inherit the traditional values of the financial industry - such as honesty and Thank you. Entrance of Global Players Trends of Low Growth Implementation of Basel II Environmental Changes - Saturated market - Slowdown in banking - Preference on asset soundness - Fiercer competition - Diversified market needs - Stagnant profitability Seung-Yu Kim Kyo-Joong Yoon Strategic Chairman & Chief Executive Officer President & Chief Executive Officer Needs Need for New Growth Engine Consolidation Universalization Alternatives (Economy of Scale) (Economy of Scope) Expand Non-Banking Sector Asset Management