WF LISTED NYSE 03 ANNUAL REPORT WOORI FINANCIAL GROUP Value Creation Part I. The Group at a Glance Woori Financial Group at a Glance _ 06 Financial Highlights _ 08 Shareholder Information _ 09 Part II. New Leadership CEO Message _ 12 Our Top Management & Board of Directors _ 16 Part III. Value Creation Maximizing Shareholder Value _ 20 Overview of 2003 _ 22 Corporate Governance _ 23 Realizing Our Synergies _ 26 Measuring up to Global Standards _ 27 Priority on Customer Value _ 28 Our Corporate Clients _ 30 Our Retail Clients _ 34 Our Investor Clients _ 36 Contribution to Community Value _ 38 Empowering Our People _ 40 Corporate Citizenship _ 42 Part IV. Financial Report Management’s Discussion & Analysis _ 47 Independent Auditors’ Report (Non-Consolidated) _ 68 Non-Consolidated Financial Statements & Notes _ 70 Independent Auditors’ Report (Consolidated) _ 104 Consolidated Financial Statements & Notes _ 106 Part V. Additional Information Organization Chart (Holding Company) _ 154 Organization Chart (The Group’s Subsidiaries) _ 155 Investor Information _ 156 2003 ANNUAL REPORT WOORI FINANCIAL GROUP Gearing towards a world-class financial group 1 “ Value Creat MAXIMIZING SHAREHOLDER VALUE 20 2 CONTRIBUTION TO 38 t ion” COMMUNITY VALUE 28 PRIORITY ON CUSTOMER VALUE 3 PART 4 THE GROUP AT A GLANCEGLANCE A AT GROUP THE 5 WOORI Financial Group at a Glance Business Summary Woori Bank Woori Bank (formerly Hanvit Bank until 2002) has its origins in two of Korea’s oldest commercial banks, Hanil Bank and Commercial Bank of Korea, which dates back over 100 years. One of Korea’s largest commercial banks by total assets, Woori Bank offers an (billion won) 2003 2002 extensive range of banking and other financial products and services to its 13 million customers through 692 domestic branches. Mergers with Woori Investment Bank in 2003 Operating Income 1,279.8 602.9 and Woori Credit Card in 2004 have further broadened the bank’s business scope. Net Income 1,332.2 779.7 Total Assets 103,309.7 87,477.4 BIS Ratio 11.2% 11.6% www.wooribank.com Kyongnam Bank Serving the southeastern region of the nation since its incorporation in 1970, Kyongnam Bank is a regional bank offering customers commercial banking, trust, and foreign exchange services. With a geographic base including the major industrial cities of Ulsan, (billion won) 2003 2002 Masan, and Changwon, Kyongnam Bank is a trusted name among large companies, SMEs, and households in its region, operating 131 branches and offices nationwide as of Operating Income 93.9 107.4 year-end 2003. Net Income 85.2 82.5 Total Assets 10,986.1 9,975.8 BIS Ratio 11.7% 11.3% www.kyongnambank.co.kr Kwangju Bank One of the Group’s two regional banking subsidiaries, Kwangju Bank is headquartered in the southwestern provincial capital of Kwangju, Jeollanam-do, where it has based its commercial banking operations since its inception in 1968. Through its 115 branches and (billion won) 2003 2002 offices, Kwangju Bank is a reliable partner for its 2 million retail and corporate customers. Operating Income 40.7 86.0 Net Income 57.1 74.8 Total Assets 8,777.6 8,046.9 BIS Ratio 10.7% 11.0% www.kjbank.com 6 Business Summary Woori Securities Since 1954, Woori Securities has been engaged in the trading, agency, brokerage, and underwriting of securities. It became a direct subsidiary of Woori Finance Holdings and changed its name from Hanvit Securities to the current one in 2002. As of the end of (billion won) 2003 2002 2003, the subsidiary had 73 branches and offices in Korea, including 23 brokerage outlets located within the premises of Woori Bank branches. Operating Income 3.4 41.8 Net Income -13.1 29.3 Total Assets 603.7 627.1 Capital Adequacy Ratio 756.3% 620.7% www.woorisec.com Woori Investment Trust Woori Investment Trust Management (WITM, formerly Hanvit Investment Trust Management Management) was established in 1988 and is engaged in the investment trust business. Its ownership was transferred to the holding company in 2002, when it also changed its (billion won) 2003 2002 name. WITM manages investment trusts and market-related products including benefi- ciary certificates and mutual funds for retail and institutional customers. Operating Income 1.7 2.8 Net Income 1.3 2.0 Equity-to-Risk Ratio 719.3% 524.4% www.woorifgitm.com Woori F&I Woori F&I (WF&I, formerly Woori Asset Management) was established in 2001 to function as a vehicle for the management, operation, and disposition of distressed assets held by the Group’s other subsidiaries. Woori Capital Advisors Asset Management, spun (billion won) 2003 2002 off by the company in 2002 through a joint venture with Lehman Brothers, took on the task of managing the Group’s bad assets. Woori F&I also established joint-venture Operating Income 31.2 10.3 special-purpose companies (JV-SPCs) to purchase part of the Group’s non-performing Net Income 16.9 7.3 loans. WF&I is solely owned by Woori Finance Holdings. Total Assets 171.8 54.8 Woori Finance Information Woori Finance Information System (WFIS, formerly Hanviteun System) was established in System 1989 and became a wholly-owned subsidiary of Woori Financial Group in 2001. It currently handles all IT-related operations on an outsourcing basis for the Group and its (billion won) 2003 2002 subsidiaries, and is responsible for fulfilling IT management and development needs of the Group. Operating Income 20.9 4.4 Net Income 4.0 -2.2 Total Assets 280.2 242.0 www.woorifis.com 7 FINANCIAL HIGHLIGHTS *1) Selected Financial Data As of Years ended Dec. 31, 2003 and 2002 (billion won, except where indicated otherwise) 2003 2002 % Change INCOME STATEMENT KEY FIGURES Operating Revenue 10,336.5 9,325.2 10.8 Operating Expense 7,582.0 6,904.5 9.8 Loan Loss Provisions 2,737.5 1,705.4 60.5 Operating Income 142.3 715.3 -80.1 Net Income 56.3 591.6 -90.5 KEY BALANCE SHEET FIGURES Total Assets 128,767.7 114,843.5 12.1 Shareholders' Equity 5,698.3 5,314.8 7.2 MARKET CAPITALIZATION 5,288.9 3,263.2 PROFITABILITY RATIOS Return on Average Assets-Banking *2) (%) 1.3 1.0 - Return on Average Equity-Banking *2) (%) 24.4 20.7 - Cost/Income Ratio (%) 41.7 43.6 - ASSET QUALITY RATIOS Loan Loss Reserves/NPLs*3) (%) 91.1 103.3 - NPLs*3) /Total Credit (%) 2.8 3.3 - *2) BIS CAPITAL RATIOS Tier I (%) 6.8 6.6 - Total BIS (%) 11.3 11.5 - EMPLOYEES (FULL-TIME EQUIVALENTS) 14,326 14,422 -0.7 Notes : *1) Based on Korean Generally Accepted Accounting Principles *2) For Woori Bank, Kyongnam Bank, and Kwangju Bank combined *3) Substandard and below credits 8 SHAREHOLDER INFORMATION Stock Information As of Years ended Dec. 31, 2003 and 2002 (won, except where indicated otherwise) 2003 2002 Common Shares Outstanding (Shares) 775,504,910 767,814,797 Book Value Per Share 7,095 6,603 Dividend Per Share 100 250 Dividend Payout Ratio (%) 38.3 9.7 Share Price High *1) 7,750 7,050 Share Price Low *2) 3,900 3,902 Notes : *1)*2) Closing Price Per Common Stock Shareholder Composition (%) As of Year ended Dec. 31, 2003 2003 Korea Deposit Insurance Corporation (KDIC) 86.8 Foreigners 4.5 Individuals 4.2 Domestic Financial Institutions 2.7 Others 1.8 Share Price Ratio Share Price of Dec. 30, 2002 = 100 (%) 200 2003. 12. 26 6,820 Won 160 2002. 12. 30 4,250 Won 120 80 Woori Bank Industry Average 40 Jan. 2003 Feb. 2003 Apr. 2003 May 2003 Jul. 2003 Aug. 2003 Oct. 2003 Nov. 2003 Dec. 2003 9 PART 10 NEW LEADER- SHIP W LEADERSHIP W NE 11 CEO Message 12 2003 ANNUAL REPORT WOORI FINANCIAL GROUP To Our Shareholders “The past three years have been a period of rebuilding and rehabilitation. Going forward, we plan to re- direct our efforts to achieve our new goals of realizing group synergies and enhancing value for our shareholders, customers, and community. ” am honored and pleased to I present my first annual report as your new chairman and chief execu- tive officer. As we all know, the Group has faced a number of daunting challenges in the past three years since its establishment as the first 2003 in Review financial holding company in Korea. Until now, efforts were focused on By virtually any measure, Korea’s reorganizing our group business economic climate in 2003 was platform, cleaning up our asset base, unfavorable for business in general, and the advancement of operational and especially unforgiving for financial capabilities, which has enabled Woori institutions. The pace of the economy Financial Group to establish a strong slowed to a 3.1% GDP growth after a growth engine for the future. With solid 6.2% in 2002, with continued these tasks largely completed, it is sluggish domestic demand being the time for us to set new targets in order main culprit. to enhance the value of Woori Financial Group for our shareholders, Consequently, the financial industry customers, and community. continued to grapple in 2003 with familiar problems, along with a few Going forward, our goal is to build newly emerging ones. Events involving Woori Financial Group into Korea’s specific well-known corporate entities, leading integrated financial services namely, SK Global and LG Card, also provider, a vision we embrace whole- brought about new hardships. In heartedly. There still remains consider- addition, broader trends of mounting able work to be done, but we will push credit card and consumer loan delin- hard as we build on our core compe- quencies amid lethargic domestic tences and realize our Group-wide consumption hit hard on the financial synergies.